RITE AID CORP – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Net loss for the thirteen week period ended June 2, 2012 was $28.1 million compared to the net loss of $63.1 million for the thirteen week period ended May 28, 2011. The decrease in net loss was primarily driven by increased sales volume, higher gross margin and lower lease termination and impairment charges and loss on debt retirements, partially offset by higher selling, general and administrative expenses ("SG&A"). Revenues were higher in the current quarter with growth in both pharmacy and front end same store sales, partially offset by store closings. The increase in gross margin was mainly due to new generics, partially offset by lower pharmacy reimbursement rates and higher markdowns associated with our wellness+ customer loyalty program. The increase in SG&A is due to the reversal of the tax indemnification asset, litigation charges and a shift in the Memorial Day holiday.

Results of Operations

       Revenues and Other Operating Data                                                        Thirteen Week Period Ended                                                         June 2,          May 28,                                                          2012             2011                                                         (dollars in thousands)  Revenues                                            $    6,468,287    $ 6,390,793  Revenue growth (decline)                                       1.2 %         (0.1 )%  Same store sales growth                                        2.5 %          0.8 %  Pharmacy sales growth                                          1.7 %          0.6 %  Same store prescription count increase                         3.0 %          0.4 %  Same store pharmacy sales growth                               2.4 %          1.1 %  Pharmacy sales as a % of total sales                          68.4 %         68.7 %  Third party sales as a % of total pharmacy sales              96.6 %         96.5 %  Front-end sales growth (decline)                               2.0 %         (1.3 )%  Same store front-end sales growth                              2.7 %            -  Front-end sales as a % of total sales                         31.6 %         31.3 % 

Store data:

  Total stores beginning of period                             4,667          4,714  Closed stores                                                  (15 )          (10 )  Total stores end of period                                   4,652          4,704  Relocated stores                                                 2              6  Remodeled stores                                               143              3        Revenues 

Revenue increased 1.2% for the thirteen week period ended June 2, 2012 compared to the thirteen week period ended May 28, 2011, primarily driven by an increase in same store sales. The increase in same store sales was driven by incremental prescriptions from the Walgreens / Express Scripts dispute, the positive impact of our wellness+ loyalty program, and initiatives to increase sales and prescriptions. These increases were partially offset by lower pharmacy reimbursement rates and by operating 52 fewer stores than in the same period last year. Same store sales increased 2.5% during the quarter reflecting the positive impact of wellness+ and positive script count.

Pharmacy same store sales increased by 2.4% in the thirteen week period ended June 2, 2012 compared to the thirteen week period ended May 28, 2011. The increase was primarily driven by a same store prescription increase of 3.0% driven by the Walgreens / Express Scripts dispute, our wellness+ loyalty program and other initiatives to increase prescription sales, partially offset by an

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approximate 3.3% negative impact from new generic introductions and continued lower reimbursement rates from pharmacy benefit managers and government payors. We expect recent and future generic introductions and lower reimbursement rates to continue to have additional negative impact on our revenues.

Front-end same store sales increased by 2.7% in the thirteen week period ended June 2, 2012 compared to the thirteen week period ended May 28, 2011 reflecting the continued positive impact from our wellness+ loyalty program and other initiatives to increase sales in the front end. Active wellness+ members, defined as those who have used their cards at least twice during the last 26 weeks, reached 25 million as of June 2, 2012. This represented an 11% increase over the same period a year ago.

We include in same store sales all stores that have been open at least one year. Stores in liquidation are considered closed. Relocation stores are not included in the same store sales until one year has lapsed.

      Costs and Expenses                                                           Thirteen Week Period Ended                                                            June 2,          May 28,                                                             2012             2011                                                            (dollars in thousands) Cost of goods sold                                      $    4,719,516    $ 4,699,874 Gross profit                                                 1,748,771      1,690,919 Gross margin                                                      27.0 %         26.5 % Selling, general and administrative expenses                 1,688,066      1,586,236 Selling, general and administrative expenses as a percentage of revenues                                            26.1 %         24.8 % Lease termination and impairment charges                        12,143         17,090 Interest expense                                               130,588        130,760        Cost of Goods Sold 

Gross profit increased $57.9 million due to overall revenue growth and generic introductions. Pharmacy gross profit was higher due to increased prescription volume and cost reductions relating to recent generic introductions including generic Lipitor and Plavix and increases in generic penetration, partially offset by continued pressure on pharmacy benefit manager and governmental reimbursement rates. Front end gross profit was higher due to higher same store sales reflecting the continued positive impact of our wellness+ loyalty program.

Gross margin was 27.0% of sales for the thirteen week period ended June 2, 2012 compared to 26.5% of sales for the thirteen week period ended May 28, 2011. The improvement in gross margin was primarily due to cost reductions on existing generic products and new generic introductions, partially offset by increased tier discounts from our wellness+ customer loyalty program and continued pressure on pharmacy benefit manager and governmental reimbursement rates.

We use the last-in, first-out (LIFO) method of inventory valuation, which is estimated on a quarterly basis and is finalized at year end when inflation rates and inventory levels are final. Therefore, LIFO costs for interim period financial statements are estimated. The LIFO charges were $18.8 million for the thirteen week period ended June 2, 2012 compared to LIFO charges of $20.0 million for the thirteen week period ended May 28, 2011.

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  Table of Contents       Selling, General and Administrative Expenses 

SG&A as a percentage of revenues was 26.1% in the thirteen week period ended June 2, 2012 compared to 24.8% in the thirteen week period ended May 28, 2011. The increase in SG&A as a percentage of revenues was due primarily to the reversal of $60.2 million of tax indemnification asset resulting from our settlement with the Internal Revenue Service associated with a pre-acquisition Brooks Eckerd tax audit, which is completely offset by an income tax benefit as noted below, litigation charges relating to the settlement of certain labor related actions , increased salaries and benefit costs for wage increases and to support our increased sales volume and increased salaries relating to the Memorial Day holiday occurring in the first quarter this year compared to the second quarter last year. These amounts are partially offset by lower depreciation and amortization. We expect to see continued SG&A increases as a percentage of revenues relative to the prior year due to the continued impact of new generic introductions and reimbursement rate pressures on our pharmacy sales.

      Lease termination and Impairment Charges      Lease termination and impairment charges consist of amounts as follows:                                                    Thirteen Week                                                   Period Ended                                                June 2,    May 28,                                                  2012       2011                    Impairment charges          $    495   $    734                    Lease termination charges     11,648     16,356                                                 $ 12,143   $ 17,090   

Impairment Charges: These amounts include the write-down of long-lived assets at locations that were assessed for impairment because of management's intention to relocate or close the location, or because of changes in circumstances that indicated the carrying value of an asset may not be recoverable.

Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Impairment Charges" included in our fiscal 2012 10-K for a detailed description of our impairment methodology.

Lease Termination Charges: Charges to close a store, which principally consist of continuing lease obligations, are recorded at the time the store is closed and all inventory is liquidated, pursuant to the guidance set forth in ASC 420, "Exit or Disposal Cost Obligations." We calculate our liability for closed stores on a store-by-store basis. The calculation includes the discounted effect of future minimum lease payments and related ancillary costs, from the date of closure to the end of the remaining lease term, net of estimated cost recoveries that may be achieved through subletting properties or through favorable lease terminations. We evaluate these assumptions each quarter and adjust the liability accordingly. As part of our ongoing business activities, we assess stores and distribution centers for potential closure and relocation. Decisions to close or relocate stores or distribution centers in future periods would result in charges for lease exit costs and liquidation of inventory, as well as impairment of assets at these locations.

Interest Expense

Interest expense was $130.6 million for the thirteen week period ended June 2, 2012, compared to $130.8 million for the thirteen week period ended May 28, 2011. The weighted average interest rates on our indebtedness for the thirteen week periods ended June 2, 2012 and May 28, 2011 were 7.4% and 7.4% respectively.

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  Table of Contents       Income Taxes 

We recorded an income tax benefit of $61.7 million and an income tax expense of $2.3 million for the thirteen week periods ended June 2, 2012 and May 28, 2011, respectively. The income tax benefit for the thirteen week period ended June 2, 2012 is primarily attributable to the recognition of previously unrecognized tax benefits resulting from the appellate settlement of the Brooks Eckerd Internal Revenue Service (IRS) Audit for the periods leading up to the acquisition which include fiscal years 2004 - 2007. This amount was completely offset by a reversal of the related tax indemnification asset which was recorded in selling, general and administrative expenses. The income tax expense for the thirteen week period ended May 28, 2011 is primarily attributable to the accrual of state and local taxes and adjustments to unrecognized tax benefits.

In the first quarter of FY 2013 we reached an agreement with the IRS Appellate Division settling the examination of the Brooks Eckerd periods 2004-2007. The IRS settlement did not impact our net financial position, results of operations or cash flows. Furthermore, the IRS settlement results in the resolution of tax contingencies associated with these tax years which will impact the effective rate by decreasing tax expense in the first quarter by $61.5 million.

We recognize tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

Over the next 12 months, we believe that it is reasonably possible that the amount of unrecognized tax positions including interest and penalties could decrease tax liabilities by approximately $51.9 million which would impact the effective tax rate if our tax positions are sustained upon audit or the controlling statute of limitations expires. The primary driver of the decrease is contingent upon the statute of limitations expiring and the conclusion of the pre-acquisition period's state audits for Brooks Eckerd. The corresponding tax indemnification asset will reverse concurrently in selling, general and administrative expenses.

We evaluate our deferred tax assets on a regular basis to determine if a valuation allowance against the net deferred tax assets is required. A cumulative loss in recent years is significant negative evidence in considering whether deferred tax assets are realizable. Based on the negative evidence, we are precluded from relying on projections of future taxable income to support the recognition of deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the existence of sufficient taxable income generated in the carryforward periods.

Liquidity and Capital Resources

General

We have three primary sources of liquidity: (i) cash and cash equivalents, (ii) cash provided by operating activities and (iii) borrowings under the revolving credit facility of our senior secured credit facility. Our principal uses of cash are to provide working capital for operations, to service our obligations to pay interest and principal on debt and to fund capital expenditures. Total liquidity as of June 2, 2012 was $1,151.8 million, which consisted of revolver borrowing capacity of $1,049.8 million and invested cash of $102.0 million.

Credit Facility

Our senior secured credit facility consists of a $1.175 billion revolving credit facility and two term loans. Borrowings under the revolving credit facility bear interest at a rate per annum between LIBOR plus 3.25% and LIBOR plus 3.75%, if we choose to make LIBOR borrowings, or between Citibank's

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base rate plus 2.25% and Citibank's base rate plus 2.75% in each case based upon the amount of revolver availability as defined in the senior secured credit facility. We are required to pay fees between 0.50% and 0.75% per annum on the daily unused amount of the revolver, depending on the amount of revolver availability. Amounts drawn under the revolver become due and payable on August 19, 2015, provided that such maturity date shall instead be April 18, 2014 in the event that on or prior to April 18, 2014 we do not repay, refinance or otherwise extend the maturity date of our Tranche 2 Term Loan (as defined below) to a date that is at least 90 days after August 19, 2015 and, in the case of a repayment or refinancing, we must have at least $500.0 million of availability under the revolver.

Our ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At June 2, 2012, we had no borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $125.2 million, which resulted in additional borrowing capacity of $1,049.8 million.

The credit facility also includes our $1.044 billion senior secured term loan (the "Tranche 2 Term Loan"). The Tranche 2 Term Loan will mature on June 4, 2014 and currently bears interest at a rate per annum equal to LIBOR plus 1.75%, if we choose to make LIBOR borrowings, or at Citibank's base rate plus 0.75%. We must make mandatory prepayments of the Tranche 2 Term Loan with the proceeds of certain asset dispositions and casualty events (subject to certain limitations), with a portion of any excess cash flow generated by us (as defined in the senior secured credit facility) and with the proceeds of certain issuances of equity and debt (subject to certain exceptions). If at any time there is a shortfall in our borrowing base under our senior secured credit facility, prepayment of the Tranche 2 Term Loan may also be required.

On March 3, 2011, we refinanced the Tranche 3 Term Loan with a $331.9 million senior secured term loan (the "Tranche 5 Term Loan"). The Tranche 5 Term Loan matures on March 3, 2018. The Tranche 5 Term Loan bears interest at a rate per annum equal to LIBOR plus 3.25% with a 1.25% LIBOR floor. We must make mandatory prepayments of the Tranche 5 Term Loan with the proceeds of asset dispositions and casualty events (subject to certain limitations), with a portion of any excess cash flow generated by us (as defined in the senior secured credit facility) and with the proceeds of certain issuances of equity and debt (subject to certain exceptions). If at any time there is a shortfall in our borrowing base under our senior secured credit facility, prepayment of the Tranche 5 Term Loan may also be required.

The senior secured credit facility also restricts us and the subsidiary guarantors from accumulating cash on hand in excess of $200.0 million at any time when revolving loans are outstanding (not including cash located in our store deposit accounts, cash necessary to cover our current liabilities and certain other exceptions) and from accumulating cash on hand with revolver borrowings in excess of $100.0 million over three consecutive business days. The senior secured credit facility also states that if at any time (other than following the exercise of remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority debt) either (a) an event of default exists under our senior secured credit facility or (b) the sum of revolver availability under our senior secured credit facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $100.0 million for three consecutive business days (a "cash sweep period"), the funds in our deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the senior secured credit facility, and then held as Collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of our senior secured credit facility.

The senior secured credit facility allows us to have outstanding, at any time, up to $1.5 billion in secured second priority debt and unsecured debt in addition to borrowings under the senior secured credit facility and existing indebtedness, provided that not in excess of $750.0 million of such secured

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second priority debt and unsecured debt shall mature or require scheduled payments of principal prior to three months after June 4, 2014. The senior secured credit facility allows us to incur an unlimited amount of unsecured debt with a maturity beyond three months after June 4, 2014; however, other outstanding indebtedness limits the amount of unsecured debt that can be incurred if certain interest coverage levels are not met at the time of incurrence of said debt. The senior secured credit facility also contains certain restrictions on the amount of secured first priority debt we are able to incur. The senior secured facility also allows, so long as the senior secured credit facility is not in default, for the repurchase of any debt with a maturity on or before June 4, 2014, for the voluntary repurchase of debt with a maturity after June 4, 2014 and the mandatory repurchase of our 8.5% convertible notes due 2015 if we maintain availability on the revolving credit facility of more than $100.0 million.

Our senior secured credit facility contains covenants which place restrictions on the incurrence of debt beyond the restrictions described above, the payment of dividends, sale of assets, mergers and acquisitions and the granting of liens. Our credit facility also has one financial covenant, which is the maintenance of a fixed charge coverage ratio. The covenant requires that, if availability on the revolving credit facility is less than $150.0 million, we maintain a minimum fixed charge coverage ratio of 1.05 to 1.00. As of June 2, 2012, we were in compliance with this financial covenant.

The senior secured credit facility provides for customary events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if we fail to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of such debt to accelerate the maturity or require the repurchase of such debt. The August 2010 amendments to the senior secured credit facility exclude the mandatory repurchase of the 8.5% convertible notes due 2015 from this event of default.

The indentures that govern our secured and guaranteed unsecured notes contain restrictions on the amount of additional secured and unsecured debt that can be incurred by us. As of June 2, 2012, the amount of additional secured debt that could be incurred under these indentures was approximately $1.142 billion (which amount does not include the ability to enter into certain sale and leaseback transactions). However, effective February 27, 2010, we could not incur any additional secured debt assuming a fully drawn revolver and the outstanding letters of credit. The ability to issue additional unsecured debt under these indentures is governed by an interest coverage ratio test.

Other Transactions

In February 2012, we issued $481.0 million of our 9.25% senior notes due March 2020 and in May 2012, we issued an additional $421.0 million of our 9.25% senior notes due 2020. The proceeds of the notes, together with available cash, were used to repurchase and repay the 8.625% senior notes due March 2015 and the 9.375% senior notes due December 2015, respectively. These notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in right of payment with all other unsubordinated indebtedness. Our obligations under the notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured unsubordinated basis, by all of our subsidiaries that guarantee our obligations under our senior secured credit facility and our outstanding 8.00% senior secured notes due 2020, 9.75% senior secured notes due 2016, 10.375% senior secured notes due 2016, 7.5% senior secured notes due 2017, 10.25% senior secured notes due 2019 and 9.5% senior notes due 2017.

In February 2012, $404.8 million aggregate principal amount of the outstanding 8.625% notes were tendered and repurchased by us. We redeemed the remaining 8.625% notes in March 2012 for $55.6 million which included the call premium and interest through the redemption date. The refinancing resulted in an aggregate loss on debt retirement of $16.1 million recorded in the fourth quarter of fiscal 2012.

In May 2012, $296.3 million aggregate principal amount of the outstanding 9.375% notes were tendered and repurchased by us. We redeemed the remaining 9.375% notes in June 2012 for $108.7 million. The refinancing resulted in an aggregate loss on debt retirement of $17.8 million.

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  Table of Contents       Net Cash Provided by/Used in Operating, Investing and Financing Activities 

Cash provided by operating activities was $363.6 million in the thirteen week period ended June 2, 2012. Operating cash flow was positively impacted by reductions in inventory due to management initiatives and generic price reductions, and reductions of accounts receivable. These sources of cash were partially offset by a decrease in accounts payable due to the timing of payments in the prior year.

Cash used in investing activities in the thirteen week period ended June 2, 2012 was $75.7 million. Cash used for the purchase of property, plant, equipment and prescription files as well as proceeds from the sale of assets were higher compared to the prior year.

Cash used in financing activities was $235.4 million for the thirteen week period ended June 2, 2012 due to the reduction of borrowings on our revolving credit facility and zero balance cash accounts. Additionally, included in financing activities is the refinancing of our 9.375% senior notes due December 2015 with the proceeds from our 9.25% senior notes due March 2020 as well as the repayment of $54.2 million of our 8.625% senior notes due 2015 that were not redeemed with our February 2012 tender offer.

Capital Expenditures

During the thirteen week period ended June 2, 2012, we spent $87.0 million on capital expenditures, consisting of $51.9 million related to new store construction, store relocation and store remodel projects, $26.1 million related to technology enhancements, improvements to distribution centers and other corporate requirements, and $9.0 million related to the purchase of prescription files from other retail pharmacies. We plan on making total capital expenditures of approximately $300.0 million during fiscal 2013, consisting of approximately 58% related to store relocations and remodels and new store construction, 25% related to infrastructure and maintenance requirements and 17% related to prescription file purchases. Management expects that these capital expenditures will be financed primarily with cash flow from operating activities.

Future Liquidity

We are highly leveraged. Our high level of indebtedness: (i) limits our ability to obtain additional financing; (ii) limits our flexibility in planning for, or reacting to, changes in our business and the industry; (iii) places us at a competitive disadvantage relative to our competitors with less debt; (iv) renders us more vulnerable to general adverse economic and industry conditions; and (v) requires us to dedicate a substantial portion of our cash flow to service our debt. Based upon our current levels of operations, we believe that cash flow from operations together with available borrowings under the senior secured credit facility and other sources of liquidity will be adequate to meet our requirements for working capital, debt service and capital expenditures at least for the next twelve months. Based on our liquidity position, which we expect to remain strong throughout the year, we do not expect the restriction on our credit facility, that could result if we fail to meet the fixed charge covenant in our senior secured credit facility, to impact our business in the next twelve months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in light of our operating performance, and other relevant circumstances. Should we determine, at any time, that it is necessary to obtain additional short-term liquidity, we will evaluate our alternatives and take appropriate steps to obtain sufficient additional funds. There can be no assurance that any such supplemental funding, if sought, could be obtained or if obtained, would be on terms acceptable to us. From time to time, we may seek deleveraging transactions, including entering into transactions to exchange debt for shares of common stock, issuance of equity, repurchase outstanding indebtedness, or seek to refinance our outstanding debt or may otherwise seek transactions to reduce interest expense and extend debt maturities. Any of these transactions could impact our financial results.

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Critical Accounting Policies and Estimates

For a description of the critical accounting policies that require the use of significant judgments and estimates by management, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" included in our Fiscal 2012 10-K.

Factors Affecting Our Future Prospects

For a discussion of risks related to our financial condition, operations and industry, refer to "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Fiscal 2012 10-K.

Adjusted EBITDA

In addition to net income determined in accordance with GAAP, we use certain non-GAAP measures, such as "Adjusted EBITDA", in assessing our operating performance. We believe the non-GAAP measures serve as an appropriate measure to be used in evaluating the performance of our business. We define Adjusted EBITDA as net income (loss) excluding the impact of income taxes (and any corresponding reduction of tax indemnification asset), interest expense, depreciation and amortization, LIFO adjustments, charges or credits for facility closing and impairment, inventory write-downs related to store closings, stock-based compensation expense, debt modifications and retirements, sale of assets and investments, revenue deferrals related to customer loyalty programs and other items. We reference this particular non-GAAP financial measure frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the 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 certain of 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.

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The following is a reconciliation of adjusted EBITDA to our net loss for the thirteen week periods ended June 2, 2012 and May 28, 2011:

                                                       Thirteen Week Period Ended                                                     June 2, 2012      May 28, 2011                                                         (dollars in thousands)  Net loss                                           $     (28,088 )   $     (63,082 )  Interest expense                                         130,588           130,760  Income tax (benefit) expense                             (61,729 )           2,273  Reduction of tax indemnification asset(1)                 60,237                 -  Depreciation and amortization expense                    106,371           117,090  LIFO charges                                              18,750            20,001  Lease termination and impairment charges                  12,143            17,090  Stock-based compensation expense                           3,958             3,571  Gain on sale of assets, net                              (10,051 )          (4,792 )  Loss on debt modifications and retirements, net           17,842            22,434  Closed facility liquidation expense                        1,456             2,647  Severance costs                                                -               (49 )  Customer loyalty card programs revenue deferral           23,180            21,866  Other                                                       (492 )          (6,955 )   Adjusted EBITDA                                    $     274,165     $     262,854   

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   º (1)    º Note: The income tax benefit from the IRS settlement described in Footnote      4 in the notes to our condensed consolidated financial statements and the      corresponding reduction of the tax indemnification asset had no net effect      on Adjusted EBITDA. 

In addition to Adjusted EBITDA, we occasionally refer to several other Non-GAAP measures, on a less frequent basis, in order to describe certain components of our business and how we utilize them to describe our results. These measures include but are not limited to Adjusted EBITDA Gross Margin and Gross Profit (gross margin/gross profit adjusted for non-EBITDA items), Adjusted EBITDA SG&A (SG&A expenses adjusted for non-EBITDA items), FIFO Gross Margin (gross margin before LIFO charges) and Free Cash Flow (Adjusted EBITDA less cash paid for interest, rent on closed stores, capital expenditures and the change in working capital).

We include these non-GAAP financial measures in our earnings announcements and guidance in order to provide transparency to our investors and enable investors to better compare our operating performance with the operating performance of our competitors including with those of our competitors having different capital structures. Adjusted EBITDA or other non-GAAP measures should not be considered in isolation from, and are not intended to represent an alternative measure of, operating results or of cash flows from operating activities, as determined in accordance with GAAP. Our definition of these non-GAAP measures may not be comparable to similarly titled measurements reported by other companies.