Y2K? Rite Aid refuses to file quarterly report

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Tuesday January 11, 7:35 pm Eastern Time Rite Aid To Delay Financial Reports CAMP HILL, Pa. (AP) -- Rite Aid Corp. said Tuesday it would delay release of several scheduled financial reports until July, as the company seeks to regroup from a year of accounting questions and a new management team.

The nation's third largest pharmacy chain said it had reached agreement with its lenders on the delay and planned to seek extensions on Securities and Exchange Commission filings for the remaining quarterly and annual reports for fiscal year 2000.

Rite Aid's third quarter report for the period ending Nov. 27 was due Tuesday.

``We believe it's a responsible action to take,'' said vice president Karen Rugen. ``We've had a new management team for a month, we've had new auditors for just a few weeks, and with all the delays with the reaudit of '97, '98 and '99, we realized we didn't have enough time.''

The company has been trying to recover after financial woes sent the company's stock tumbling by more than 80 percent in a year. Former top executive Martin L. Grass was ousted in October, and a new team led by CEO Robert Miller has pledged to improve profitability with stricter financial controls and strategic marketing.

Rite Aid also has switched auditing firms and a restatement of its earnings for the past three years was expected to result in a $500 million reduction.

Still, Rite Aid's move Tuesday was met with some skepticism by analysts.

``The move tells me that the problems run pretty deep and that there is no easy solution to remedying the problems with Rite Aid's former internal accounting methodologies,'' said Steven Valiquette of Warburg Dillon Read.

``It takes the wind out of their sails in the short term, to the extent the company had some momentum after announcement of its new management team,'' he said.

John Ransom of Raymond James & Associates agreed, citing figures on Rite Aid's same-store sales released Tuesday showing a 5.9 percent increase, a poor performance compared to the double-digit growth of Walgreen's and CVS, he said. Same-store comparisons measure sales growth excluding the impact of newly opened stores.

``I think the double whammy of weak December sales and a likely black hole of information doesn't help,'' he said. ``I doubt any investors are betting on a quick and easy turnaround.''

Rite Aid's announcement came late Tuesday, after the close of markets. Rite Aid's shares were trading at $10.62 1/2, down 1 percent from Wednesday.

-- Bill P (porterwn@one.net), January 11, 2000


I know Terry, a computer programmer, who bought Rite Aid stock last year because he thought it was a good long term investment. But when I ask him how his stock is doing, he checks the market updates and usually replies, "Down!" And yet he won't sell because he's a bull (headed person?). I told him he should sell it and jump in the NASDAQ for a ride.

-- dinosaur (dinosaur@williams-net.com), January 11, 2000.

Is the this chain that was mentioned in a previous thread. Looking through the archives now.

-- mike in houston (mmorris67@hotmail.com), January 11, 2000.

Yes, thisis the chain. Tie Aid was reported as having problems filling prescriptions either in mid-late December, or earlier this month ... or maybe both. If my recollection serves this was chain- wide, but maybe not a persistent problem.


-- Squirrel Hunter (nuts@upa.tree), January 11, 2000.

I've got to say this . . . I worked for a company that took an 80% hit to its stock price over a six-month period in 1996, and THEY delayed earnings reports, too. They are only just now climbing out of the mire of stockholder lawsuits, but their stock price is lousy. They had to do a reverse split (a 3-for-1) in order to get the price up a couple of months ago. If they hadn't, they would have been delisted by NASDAQ.

Maybe Rite Aid is having Y2K problems, but I've seen a situation like this before. I don't feel confident with labeling this a Y2K problem.

-- Ed Trilling (etrilling@alol.com), January 11, 2000.

I think it was reported that some of Rite Aid's computers were down shortly after the rollover.

-- Cin (Cinlooo@aol.com), January 11, 2000.

The nation's third largest pharmacy chain said it had reached agreement with its lenders on the delay and planned to seek extensions on Securities and Exchange Commission filings for the remaining quarterly and annual reports for fiscal year 2000. end snip..... Hey all....This is not some little mom and pop pharmacy. Somethings a-muck You don't go from the third largest pharmacy chain to sh*t for failing to pay the light bil

-- kevin (innnxxs@yahoo.com), January 11, 2000.

Rite Aid swallowed a few large regional chains this past year. This could be ONE of the problems. Also they are having problems keeping stores open as they MUST (it are the law) have a registered pharmacist in the store when it is open. Some staphing problems, at least here in Ohio.


-- Chuck, a night driver (rienzoo@en.com), January 11, 2000.

All I could find in the archives was anecdotal reports.

I was in Rite-Aid yesterday, and there were signs when you came in written in bad handwriting. They said," due to computer problems we cannot accept credit cards or atm and must do price checks on all your purchases because our scanner is not working" I stepped back a second and re-read it. Yep that's what it said. I came home to our small town, and we have a Rite-Aid so I decided to go and see if it was a "network" or local problem. They had the same problems. I asked the manager about it and he said "we lost our satelite link"

-- sam (silverpixie@earthlink.net), January 03, 2000

A friend who works at the rite aide store in central washington state said they're computers have been down since 10:00 a.m. this morning. they are having to look up prices by hand and do all the purchases "the old- fashioned way". not just a local problem, also at the yakima stores and the tri- cities stores. it is now 4;50 as i type this, pacific time, and they are still down. thought this might be interesting!-- dory

-- dory (crtwheel@eburg.com), January 02, 2000

This is not only in WA. The Rite Aid in Grass Valley, CA was having a similar problem. All sale items were being rung up at the non-sale prices and the checker was having to look up the sales prices for items. The checker called the manager over to verify that this was a problem and they spoke of a third woman who had been called in to deal with the problem. It was slow going checking out with long lines at all the registers. End of the world? No, just another paper cut.

-- DB Cooper (dbcooper@somewhere.else), January 02, 2000.

-- (RUOK@yesiaam.com), January 12, 2000.

Rite Aid was (is?) a poorly run company trying to COA. Problems are way deeper than Y2K. Having said that, it wouldn't surprise me to learn that they ignored remediation. I, too, have noticed that certain analysts have them listed as a "buy". I'd have to know who their saviour is and what the plans are before I could drop a penny into this turkey. Sloppy, sloppy company.

-- margie mason (mar3mike@aol.com), January 12, 2000.

Problems that any Rite Aid store was having were localized problems and not chain-wide. My wife works at Rite Aid in Ohio (for 11 years) and they had no problems during the rollover - no computers down, no problems filling prescriptions, nothing.

Part of the problem with Rite Aid was that they were buying up some smaller drug store chains and at the same time opening up alot of newer stores too fast. With the new CEO in charge and a new audit team in place, it is logical that they would want to delay filing while they review the situation. It is common practice with many companies. They are not refusing to file a quarterly report, they are only delaying it, with agreement from their lenders.

-- Steve (sron123@aol.com), January 12, 2000.

Last month my Dr.'s secretary called a prescription in to the Rite Aid Store in The BAY HILLS SHOPPING CTR. ARNOLD, MD. then called me back to say that they were out of it. I went there for something else and questioned the SPANISH-ACCENTED PHARMACIST about transferring the script to another store since she had taken the call and her store was out of it. She said that they WEREN'T out of it. She said she wouldn't fill it because of something about the DR. not knowing the correct dose. (huh?) She wouldn't call another store so the DR. ordered it elsewhere. Who is the lier here and why? They SUCK no doubt about it.

Dec. 30 '99. Same store would not refill anything for anybody. They were only taking in orders and running around all frazled. Got it elsewhere. They SUCK BIGTIME!

-- Charli (claypool@belatlantic.net), January 12, 2000.

"No problem! Nothing to do with Y2K. Really! The dog ate the report. Bad dog! Bad dog!"


-- Wildweasel (vtmldm@epix.net), January 12, 2000.

Rite Aid has been falling apart for quite some time. As noted above, it's simply a badly-run company. Took on way too much debt during an acquisitions binge (in the process, they ruined Payless Pharmacies, of which I had been a satisfied customer), then they couldn't meet the debt obligations, and the sharks began to circle.

Have a look at the article below. It takes some doing to have your auditor drop you like a bad transmission...

Rite Aid Says SEC Has Begun Investigating the Drugstore Chain's Finances, By Kevin Max (TheStreet.com/NYTimes.com Staff Reporter)

11/18/99 7:31 PM ET

Rite Aid (RAD:NYSE) said Thursday that the Securities and Exchange Commission has begun a formal investigation of the company and its past financial statements.

The ailing company hinted earlier this week that an investigation "may be anticipated."

At the same time, Rite Aid, the No. 3 drug retailer, disclosed in a filing with the SEC that KPMG resigned as the drugstore chain's auditor last week "because they were unable to continue to rely on management's representations."

Rite Aid had expected KPMG to re-audit its past financial statements connected to a $500 million restatement of its earnings over the last three years. KPMG left abruptly, saying it would be "not be available" to fulfill that duty, Rite Aid said in a statement.

"We know that our change in auditors and the investigation by the SEC have raised concerns," said Leonard Green, who was appointed chairman of Rite Aid last week. "We understand those concerns and we certainly know that this company not only has to substantially improve its performance but also needs to enhance its financial controls and discipline. We have been working diligently on this front and will intensify our efforts going forward."

Rite Aid shares lost 1/8, or 2%, to 6 7/8 ahead of the expected release. The stock has fallen about 86% this year, losing $11.2 billion in market value.

Rite Aid has been in turmoil for more than a month. Last week, the company canceled a conference call with analysts and cautioned investors "not to rely on earnings guidance provided at its analyst meeting on Oct. 11, 1999," by Martin Grass, then its chairman and chief executive. Grass was ousted a week after the Oct. 11 projections.

Green said Thursday that the company hoped to conclude its search for a permanent chief executive and a chief financial officer by year's end. Timothy Noonan is currently serving as interim chief executive.

Also last week, the Camp Hill, Pa.-based company said it was attempting to sell hundreds of its West Coast stores, although not all of them. Analysts said a flurry of buyouts under Glass left them scrambling for cash to meet a debt-refinancing deadline on Feb. 15, 2000.

Green, who became chairman on Monday, heads the investment firm Leonard Green & Partners. He helped rescue the Thrifty drugstore chain, merging it with Payless. ThriftyPayless was acquired by Rite Aid in 1997.

In October, an affiliate of Green's firm invested $300 million in Rite Aid convertible preferred stock, and he joined the company's board.

The chief financial office has been empty since this summer when long-time officer Frank Bergonzi retired.

In the statement released Thursday, Green asserted that "Rite Aid is one of the top three drugstore chains in the U.S. and is fundamentally a very solid company."

Also Thursday, a class-action lawsuit was filed in federal district court in Philadelphia against Rite Aid on behalf of its corporate bond holders. The suit, brought by the law offices of Steven E. Cauley, based in Little Rock, Ark., contends that the company "and certain of its officers and directors violated the federal securities laws by making misrepresentations about Rite Aid's financial condition and filing false financial statements with the Securities and Exchange Commission." The law firm did not return calls for comment...

-- DeeEmBee (macbeth1@pacbell.net), January 12, 2000.

And it looks like another drugstore stock may have been supported using some "smoke and mirrors". Must be something going around 8-}...

From TheStreet.com

Did CVS Resort to Tricks to Boost Its Earnings? (By Herb Greenberg, Senior Columnist)

1/13/00 6:30 AM ET

CVS (CVS:NYSE - news), the drugstore chain, hasn't reported fourth-quarter earnings yet, but when it does on Feb. 8, some analysts will be looking extra closely at whether the company just meets or exceeds its forecast of 43 cents per share. The difference is crucial, considering that CVS quietly added a week to its December monthly sales reporting period. Rather than covering five weeks, which has been the case in December in prior years, the monthly data were boosted to six weeks. (Likewise, the year was stretched to 53 weeks from 52 weeks.)

What's more, the sales period ended Jan. 1, a day after CVS' fiscal year usually ends.

It's almost always a red flag when companies expand their sales reporting period because it suggests they're pulling out all the stops to goose the quarter. This year it's especially curious because the last week of the year was unusually strong for pharmacies, as people stocked up on prescriptions over Y2K fears.

CVS, though, says that isn't the case. A spokesman explained that, like other retailers, CVS typically has five weeks in the December quarter and that the quarter ends on the Saturday closest to Dec. 31. As a result, he says, every five years the company picks up six weeks.

However (and this is an important one, folks, so stay with me), a look back at disclosures by CVS, which has only been a standalone company since 1996, shows that the sales period ended on Dec. 27 in 1997 and Dec. 26 in 1998. However, in each of those years, the closest Saturday to Dec. 31 was in January, and according to the company's own SEC filings, its fiscal year officially ends Dec. 31. (Confused? So am I.)

Why did CVS extend the reporting period into January this year, when Saturday days in January were closer than Saturdays in December last year and the year before? (Based on the prior years' schedule, this year's cutoff should've been Dec. 25!) A spokesman didn't know and couldn't find any execs to answer the question. (If they do, I'll forward those responses along in an "Extra" today.)...

-- DeeEmBee (macbeth1@pacbell.net), January 13, 2000.

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