Exhibit 99.4
ADDITIONAL HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Summary Historical and Pro Forma Consolidated Financial Data of Rite Aid
Our summary historical financial data is based on our audited financial statements for fiscal years 2005 through 2007. We derived the following summary unaudited pro forma combined financial data for the fiscal year ended March 3, 2007 by combining the audited consolidated financial statements of Rite Aid as of and for the fiscal year ended March 3, 2007 with the unaudited financial statements of Jean Coutu USA as of and for the 53 week period ended March 3, 2007. This information is only a summary. The data set forth in the table below should be read in conjunction with, and is qualified in its entirety by the information contained in our annual report on Form 10-K for the fiscal year ended March 3, 2007, the unaudited pro forma combined financial statements of Rite Aid Corporation and Jean Coutu USA included as Exhibit 99.1 of this current report on Form 8-K, Jean Coutu USA’s audited consolidated financial statements and the accompanying notes contained in our Definitive Proxy Statement, which we filed with the SEC on November 30, 2006 and have incorporated by reference in this offering memorandum, and Jean Coutu USA’s unaudited consolidated condensed financial statements and the accompanying notes included as Exhibits 99.2 and 99.3 of this current report on Form 8-K.
| | Fiscal Year Ended | |
| | Mar. 3, 2007
Pro Forma for
the Acquisition | | Mar. 3, 2007
(52 weeks) | | Mar. 4, 2006
(53 weeks) | | Feb. 26, 2005
(52 weeks) | |
| | (Dollars in thousands) | |
Summary of Operations: | | | | | | | | | |
Revenues | | $ | 27,315,600 | | $ | 17,507,719 | | $ | 17,270,968 | | $ | 16,816,439 | |
Costs and expenses: | | | | | | | | | |
Cost of goods sold | | 20,216,600 | | 12,791,597 | | 12,571,860 | | 12,202,894 | |
Selling, general and administrative expenses(1) | | 6,688,700 | | 4,370,481 | | 4,307,421 | | 4,127,536 | |
Store closing and impairment charges | | 65,900 | | 49,317 | | 68,692 | | 35,655 | |
Interest expense | | 480,200 | | 275,219 | | 277,017 | | 294,871 | |
Loss on debt modifications and retirements, net | | 18,700 | | 18,662 | | 9,186 | | 19,229 | |
(Gain) loss on sale of assets and investments, net | | (11,900 | ) | (11,139 | ) | (6,462 | ) | 2,247 | |
Total costs and expenses | | 27,458,200 | | 17,494,137 | | 17,227,714 | | 16,682,432 | |
Income (loss) before income taxes | | (142,600 | ) | 13,582 | | 43,254 | | 134,007 | |
Income tax benefit | | (72,200 | ) | (13,244 | ) | (1,229,752 | ) | (168,471 | ) |
Net income (loss) | | $ | (70,400 | ) | $ | 26,826 | | $ | 1,273,006 | | $ | 302,478 | |
Financial Position: | | | | | | | | | |
Working capital | | $ | 2,433,900 | | $ | 1,363,063 | | $ | 741,488 | | $ | 1,335,017 | |
Property, plant and equipment, net | | 2,843,800 | | 1,743,104 | | 1,717,022 | | 1,733,694 | |
Total assets | | 11,918,000 | | 7,091,024 | | 6,988,371 | | 5,932,583 | |
Total debt(2) | | 5,528,131 | | 3,100,288 | | 3,051,446 | | 3,311,336 | |
Redeemable preferred stock(3) | | 20,072 | | 20,072 | | 19,970 | | 19,868 | |
Stockholders’ equity | | 2,744,700 | | 1,662,846 | | 1,606,921 | | 322,934 | |
Other Data: | | | | | | | | | |
Adjusted EBITDA(4) | | $ | 1,052,765 | | $ | 696,910 | | $ | 675,596 | | $ | 725,950 | |
Cash flows provided by (used in): | | | | | | | | | |
Operating activities | | — | | 309,145 | | 417,165 | | 518,446 | |
Investing activities | | — | | (312,780 | ) | (231,084 | ) | (118,985 | ) |
Financing activities | | — | | 33,716 | | (272,835 | ) | (571,395 | ) |
Capital expenditures | | — | | 363,728 | | 341,349 | | 222,417 | |
Number of retail drug stores | | — | | 3,333 | | 3,323 | | 3,356 | |
Number of associates | | — | | 69,700 | | 70,200 | | 71,200 | |
(1) Includes stock based compensation expense. Stock based compensation expense for the fiscal year ended March 3, 2007, was determined using the fair value method set forth in SFAS No. 123(R), “Share Based Payment.” Stock based compensation expense for the fiscal years ended March 4, 2006 and February 26, 2005 was determined using the fair value method set forth in SFAS No. 123(R), “Accounting for Stock-Based Compensation.”
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(2) Total debt included capital lease obligations of $217.5 million, on a pro forma basis as of March 3, 2007, and $189.7 million, $178.2 million and $168.3 million, as of March 3, 2007, March 4, 2006 and February 26, 2005, respectively.
(3) Redeemable preferred stock was included in “Other non-current liabilities” on a pro forma basis as of March 3, 2007 and as of March 3, 2007 and March 4, 2006 and February 26, 2005, on a historical basis, respectively.
(4) Adjusted EBITDA represents net income (loss) from operations excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments, charges or credits for store closing and impairment, inventory write-downs related to closed stores, stock-based compensation expense, debt modifications and retirements, litigation proceeds, litigation expense, expense of the defense against litigation related to prior management’s business practices and the defense of prior management, incremental costs related to the proposed acquisition, sales of assets and investments, and non-recurring items. We reference this non-GAAP financial measure frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors’ historical operating performance. In addition, incentive compensation is based on Adjusted EBITDA and we base our forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. We include this non-GAAP financial measure in our earnings announcement in order to provide transparency to investors and enable investors to compare our operating performance with the operating performance of our competitors. The calculation of Adjusted EBITDA is shown below:
| | Fiscal Year Ended | |
| | Mar. 3, 2007
Pro Forma for
the Acquisition | | Mar. 3, 2007
(52 weeks) | | Mar. 4, 2006
(53 weeks) | | Feb. 26, 2005
(52 weeks) | |
| | (Dollars in thousands) | |
Reconciliation of net income (loss) to adjusted EBITDA: | | | | | | | | | |
Net income (loss) | | $ | (70,381 | ) | $ | 26,826 | | $ | 1,273,006 | | $ | 302,478 | |
Adjustments: | | | | | | | | | |
Interest expense | | 480,219 | | 275,219 | | 277,017 | | 294,871 | |
Recurring income tax (benefit) expense | | (72,244 | ) | (13,244 | ) | 9,177 | | 11,029 | |
Income tax benefit from valuation allowance reductions and favorable tax settlement | | — | | — | | (1,238,929 | ) | (179,500 | ) |
Depreciation and amortization | | 514,707 | | 270,307 | | 249,755 | | 246,742 | |
LIFO charges (credits)(a) | | 77,906 | | 43,006 | | 32,191 | | (18,919 | ) |
Store closing and impairment charges | | 66,017 | | 49,317 | | 68,692 | | 35,655 | |
Stock-based compensation expense | | 22,331 | | 22,331 | | 20,261 | | 19,018 | |
(Gain) loss on sale of assets and investments, net | | (11,939 | ) | (11,139 | ) | (6,462 | ) | 2,247 | |
Loss on debt modifications and retirements, net(b) | | 18,662 | | 18,662 | | 9,186 | | 19,229 | |
Litigation settlements, net(c) | | (1,294 | ) | (1,294 | ) | (32,444 | ) | (26,241 | ) |
Legal and accounting expenses(d) | | 1,016 | | 1,016 | | 1,415 | | 8,891 | |
Incremental acquisition costs(e) | | 3,566 | | 3,566 | | — | | — | |
Closed store liquidation expense(f) | | 8,628 | | 8,628 | | 10,236 | | 8,446 | |
Other Income | | (7,671 | ) | — | | — | | — | |
Jean Coutu USA non-recurring expenses | | 19,533 | | — | | — | | — | |
Other | | 3,709 | | 3,709 | | 2,495 | | 2,004 | |
Adjusted EBITDA(g) | | $ | 1,052,765 | | $ | 696,910 | | $ | 675,596 | | $ | 725,950 | |
Notes:
(a) Represents non-cash charges to value our inventories under the last-in first-out (“LIFO”) method.
(b) Represents loss related to debt modifications and retirements, net.
(c) Represents net impact of non-recurring litigation.
(d) Charges consist primarily of fees paid for legal services related to defending against litigation related to prior management’s business practices and to defend prior management.
(e) Represents incremental costs related to the proposed acquisition.
(f) Represents costs to liquidate inventory at stores that are in the process of closing.
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(g) Pro-forma Adjusted EBITDA for the fiscal year ended March 3, 2007 includes a fifty-third week for Jean Coutu USA, which contributed approximately $9.0 million of additional Adjusted EBITDA. Adjusted EBITDA for the fiscal year ended March 4, 2006 includes a fifty-third week, which contributed approximately $15.0 million of additional Adjusted EBITDA.
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Jean Coutu USA Adjusted EBITDA
The following sets forth a calculation of Adjusted EBITDA for Jean Coutu USA for the twelve months and forty weeks ended March 3, 2007, respectively, the thirty-nine weeks ended February 25, 2006 and the fiscal year ended May 28, 2006:
| | Twelve
Months Ended
March 3,
2007 | | Forty Weeks
Ended March 3,
2007 | | Thirty-Nine
Weeks Ended
February 25,
2006 | | Fiscal Year
Ended May 28,
2006 | |
| | (Dollars in millions) | |
| | | | | | | | | |
Reported operating income before amortization | | $ | 320 | | $ | 233 | | $ | 244 | | $ | 332 | |
| | | | | | | | | |
Adjustments: | | | | | | | | | |
Closed stores and impairment charges | | 17 | | 1 | | 8 | | 25 | |
Non-cash asset write-offs | | 0 | | 0 | | 9 | | 9 | |
Non-recurring professional fees | | 0 | | 0 | | 4 | | 4 | |
Non-recurring wage and bonus expense | | 27 | | 27 | | 0 | | 0 | |
Other non-recurring adjustments, net | | (8 | ) | (1 | ) | 8 | | (1 | ) |
Adjusted EBITDA | | $ | 356 | | $ | 260 | | $ | 273 | | $ | 369 | |
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Capitalization
The following table sets forth our unaudited consolidated cash and cash equivalents and our capitalization as of March 3, 2007 (i) on an actual basis, and (ii) on a pro forma as adjusted basis to give pro forma effect to the proposed acquisition as if it had occurred on that date. The data set forth in the table below should be read in conjunction with, and is qualified in its entirety by the information contained in our annual report on Form 10-K for the fiscal year ended March 3, 2007, the unaudited pro forma combined financial statements of Rite Aid Corporation and Jean Coutu USA included as Exhibit 99.1 of this current report on Form 8-K, Jean Coutu USA’s audited consolidated financial statements and the accompanying notes contained in our Definitive Proxy Statement, which we filed with the SEC on November 30, 2006 and have incorporated by reference in this offering memorandum, and Jean Coutu USA’s unaudited consolidated condensed financial statements and the accompanying notes included as Exhibits 99.2 and 99.3 of this current report on Form 8-K.
| | March 3, 2007 | |
| | Actual | | Pro Forma As
Adjusted for the
Acquisition | |
| | (Dollars in thousands) | |
Cash and cash equivalents | | $ | 106,148 | | $ | 184,304 | |
Secured Debt: | | | | | |
Senior secured revolving credit facility | | $ | 300,000 | | $ | 375,000 | |
Tranche 1 Term Loan | | 145,000 | | 145,000 | |
Tranche 2 Term Loan | | — | | 1,105,000 | |
8.125% senior secured notes due 2010 | | 357,833 | | 357,833 | |
7.5% senior secured notes due 2015 | | 200,000 | | 200,000 | |
7.5% senior secured notes due 2017 | | 500,000 | | 500,000 | |
Other | | 1,521 | | 1,521 | |
| | 1,504,354 | | 2,684,354 | |
| | | | | |
Lease Financing Obligations | | 189,662 | | 217,505 | |
Unsecured Debt: | | | | | |
6.125% fixed rate senior notes due 2008 | | 150,000 | | 150,000 | |
9.25% senior notes due 2013 | | 148,499 | | 148,499 | |
6.875% senior debentures due 2013 | | 184,773 | | 184,773 | |
8.625% senior notes due 2015 | | 500,000 | | 500,000 | |
7.7% notes due 2027 | | 295,000 | | 295,000 | |
6.875% fixed rate senior notes due 2028 | | 128,000 | | 128,000 | |
Senior Notes | | — | | 1,220,000 | |
| | 1,406,272 | | 2,626,272 | |
| | | | | |
Total debt | | $ | 3,100,288 | | $ | 5,528,131 | |
Stockholders’ equity | | 1,662,846 | | 2,744,746 | |
Total capitalization | | $ | 4,763,134 | | $ | 8,272,877 | |
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Sources and Uses of Funds
The following table sets forth the estimated sources and uses of funds upon completion of the proposed acquisition of Jean Coutu USA:
Sources | | Amount
(in thousands) | | Uses | | Amount
(in thousands) | |
Existing Senior Secured Credit Revolving
Facility | | $ | 75,000 | | Cash Portion of Purchase Price | | $ | 2,300,000 | |
Tranche 2 Term Loan Facility | | 1,105,000 | | Equity Portion of Purchase Price | | 1,090,000 | (1) |
Senior Unsecured Notes | | 1,220,000 | | Estimated fees and expenses | | 100,000 | |
Equity Consideration | | 1,090,000 | (1) | | | | |
Total | | $ | 3,490,000 | | Total | | $ | 3,490,000 | |
| | | | | | | | | | | |
(1) Based on the issuance of 250 million shares of our common stock with a market value of $1,090.0 million based on a stock price of $4.36 per share, representing the average closing price of our common stock beginning two days prior to the announcement of the proposed acquisition on August 24, 2006 and ending two days after the announcement. The closing price of our common stock on May 7, 2007 was $6.21.
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Additional Historical and Pro Forma Information
· In fiscal 2007, prescription drug sales accounted for 63.7% of total sales and approximately 67% of total sales, giving pro forma effect to the proposed acquisition.
· The Company currently offers approximately 26,000 front-end products, which in fiscal 2007 accounted for 36.3% of Rite Aid’s total sales and approximately 33% of total sales, giving pro forma effect to the proposed acquisition.
· The overall average size of each store in the Company’s chain is approximately 12,800 square feet and, after giving pro forma effect to the proposed acquisition, will be approximately 12,000 square feet. The average size of Rite Aid stores is larger in the western United States.
· Upon consummation of the proposed acquisition, approximately 55% of the Company’s stores will be freestanding, approximately 45% of stores will include a drive-thru pharmacy and approximately 65% will include one-hour photo shops
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