Rite Aid Corp (NYSE:RAD)

CAPS Rating: 3 out of 5

The Company is a Delaware corporation and through its wholly-owned subsidiaries, operates retail drugstores in the United States of America.


Player Avatar njf735 (77.11) Submitted: 1/16/2012 12:34:09 PM : Underperform Start Price: $1.31 RAD Score: -138.61

From their annual report:

"Our earnings were insufficient to cover fixed charges and preferred stock dividends for
fiscal 2011, 2010, 2009, 2008 and 2007 by $564.8 million, $498.4 million, $2.6 billion, $340.6 million and
$50.8 million, respectively.

Our high level of indebtedness will continue to restrict our operations. Among other things, our
indebtedness will:

• limit our flexibility in planning for, or reacting to, changes in the markets in which we compete;
• place us at a competitive disadvantage relative to our competitors with less indebtedness;
• render us more vulnerable to general adverse economic, regulatory and industry conditions; and
• require us to dedicate a substantial portion of our cash flow to service our debt."

By the way -- the word 'debt' occurs 193 times in their 119 page annual report.

Interest coverage = 0.2x
Quick ratio = 0.4x

Operating income hardly exceeds interest payments. How do you compete against WAG and CVS when you are barely scraping by after servicing debt?

Additionally, options and warrants available equal 14% of current shares outstanding... even if it does rebound shareholders will continue to experience further dilution.

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