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Rite Aid announces quarterly financials following Brooks/Eckerd acquisition

BY Michael Johnsen

CAMP HILL, Pa. Rite Aid Thursday morning announced revenues of $6.6 billion for the 13-week period ending Sept. 1, representing a 53.9 percent increase and including sales from the chain’s newly acquired Brooks and Eckerd store base.

“We had a strong second quarter,” stated Mary Sammons, Rite Aid chairman, president and chief executive officer. “We grew our business, improved the gross margin rate and controlled expenses. Our integration of Brooks Eckerd is off to an excellent start, and we’re seeing more cost-saving synergies from the acquisition than we initially expected,” she said. “At the same time we’re converting the acquired stores to Rite Aid, we’re also continuing our organic store growth and remain on target to open 125 new and relocated stores this year.”

Same-store sales (which does not yet include the Brooks and Eckerd stores) increased 1.1 percent during the second quarter as compared to the year-ago like period, consisting of a 1.4 percent pharmacy same-store sales increase and a 0.6 percent increase in front-end same-store sales. The number of prescriptions filled in same-stores increased 0.4 percent. Prescription sales accounted for 67.4 percent of total sales, and third party prescription sales represented 95.9 percent of pharmacy sales.

Net loss for the quarter was $69.6 million or $.10 per diluted share compared to last year’s second quarter net loss of $0.3 million or $.02 per diluted share. Increases in adjusted EBITDA of $106.8 million and an income tax benefit of $36.1 million were exceeded by the increase in expenses resulting from the Brooks Eckerd acquisition, Rite Aid stated, which included an increase in depreciation and amortization of $65.2 million, additional interest expense of $55.1 million, integration expense of $52.1 million, a one-time financing commitment charge of $12.9 million and an increase in stock-based compensation expense of $6.7 million.

Adjusted EBITDA was $261.5 million or 4 percent of revenues for the second quarter compared to $154.7 million or 3.6 percent of revenues for last year’s second quarter. The $106.8 million increase in adjusted EBITDA was due to the increase in revenues, which came primarily from acquired Brooks Eckerd stores, along with an improvement in gross margin rate.

Rite Aid confirmed its fiscal 2008 guidance for adjusted EBITDA, integration expenses and capital expenditures and increased its guidance for acquisition-related cost savings. The company now expects acquisition-related cost savings for fiscal 2008 to be approximately $200 million, as compared to the previous guidance of approximately $155 million, which are expected to come primarily from the areas of merchandising, purchasing, advertising, distribution and administration.

As a result of current sales trends, the company noted, Rite Aid revised its guidance for sales and same-store sales—sales are expected to fall between $24.5 billion and $25.1 billion. Same-store sales, which will not include the acquired stores until one year after close, are expected to improve 1.3 percent to 3.3 percent over fiscal 2007. This compares to previous fiscal 2008 sales guidance of between $25.3 billion and $26 billion, with same-store sales improving 3.8 percent to 5.8 percent over fiscal 2007.

Based primarily on recent market changes in interest rates and an increase in amortization expense related to acquired intangible assets, net loss for fiscal 2008 is expected to be between $78 million and $161 million or a loss per diluted share of $.15 to $.27. This compares to previous fiscal 2008 net loss guidance of $47 million to $129 million or a loss per diluted share of $.11 to $.23.

Rite Aid also increased its guidance for acquisition-related cost savings for fiscal 2009 to $300 million as compared to previous guidance of $225 million, which are expected to come primarily from the areas of merchandising, purchasing, advertising, distribution and administration. Accretion related to the Brooks Eckerd acquisition in fiscal 2009 is now expected to be $.12 to $.14 per diluted share as a result of delay in the timing of closed store charges. Previously the company expected the acquisition to be accretive in fiscal 2009 by $.18 to $.20 per diluted share.

In the second quarter, the company acquired 1,854 Brooks Eckerd stores, opened 11 stores, relocated 8 stores, acquired one other store and closed or sold 56 stores, which include the 23 divestitures of Eckerd locations required by the Federal Trade Commission. Stores in operation at the end of the quarter totaled 5,142.

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Harry Potter DVD giftset to be released for holiday season

BY Allison Cerra

BURBANK, Calif. Warner Home Video will be releasing the Harry Potter Limited Edition DVD Giftset for the holiday season, the company announced last week.

The Giftset, which will be released in limited supply, includes 12 discs, including all of the franchise movies, including this year’s release of “Harry Potter and the Order of the Pheonix.” The films have become the top-grossing motion picture franchise in history. All DVDs are available in either standard definition form or Blu-Ray format.

The Giftset will also offer several additions, including interactive DVD games, collectibles, including bookmarks and trading cards. The HD DVD and Blu-ray giftsets will sell for $149.99 SRP; $119.97 SRP for the Standard Definition set.

“We’re thrilled to be introducing this collection to Harry Potter fans everywhere,” said WHV’s Jeff Baker, Senior Vice President and General Manager, Theatrical Catalog and Domestic Sales, “The franchise’s success has allowed us to package these distinctive elements and create a stunning collection for consumers to enjoy at a great rate.”

“Pottermania” continues as the Harry Potter films 1­4 are offered for the first time in HD DVD and Blu-ray ($29.99 SRP). The High Definition versions will include all the extra content of the Giftset’s two-disc versions and, for a limited time only, both versions will contain a set of four trading cards specific to the title purchased. The Harry Potter films 1-3 will be available individually in Standard Definition also with the trading cards, at a new low price (each $14.97 SRP). Harry Potter and the Goblet of Fire is only available at this price for 60 days, after which it will sell for $19.97 SRP. Orders for all are due November 6.

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Breathe easier with Ableware’s tank holder

BY Allison Cerra

PEQUANNOCK, N.J. Maddak, creator of Albeware/Bath Safe products, has developed a safe and convenient way to carry oxygen cylinders.

The company, which is hailed as the largest manufacturer of assistive devices, clinical modalities, home healthcare and rehabilitation products, has developed a product called the Ableware Mini Tank Holder.

The carrier, which is made of heavy-duty waterproof black nylon, attaches to the handles and frame of a wheelchair, and automatically positions the tank so as to not interfere with the user’s head or back. It can be used for carrying two M6 cylinders or one cylinder and miscellaneous oxygen supplies such as tubing.

The holder also has two pockets, which measure 6 1/4” (16 cm) wide x 11 1/2” (29 cm) high. Suggested retail price is $22.50.

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