Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 28, 2016 | Jun. 21, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | RITE AID CORP | |
Entity Central Index Key | 84,129 | |
Document Type | 10-Q | |
Document Period End Date | May 28, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-25 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,048,962,007 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May 28, 2016 | Feb. 27, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 144,840 | $ 124,471 |
Accounts receivable, net | 1,679,166 | 1,601,008 |
Inventories, net of LIFO reserve of $1,020,147 and $1,006,396 | 2,623,886 | 2,697,104 |
Prepaid expenses and other current assets | 107,293 | 128,144 |
Total current assets | 4,555,185 | 4,550,727 |
Property, plant and equipment, net | 2,257,795 | 2,255,398 |
Goodwill | 1,713,475 | 1,713,475 |
Other intangibles, net | 964,709 | 1,004,379 |
Deferred tax assets | 1,544,890 | 1,539,141 |
Other assets | 218,893 | 213,890 |
Total assets | 11,254,947 | 11,277,010 |
Current liabilities: | ||
Current maturities of long-term debt and lease financing obligations | 25,640 | 26,848 |
Accounts payable | 1,663,436 | 1,542,797 |
Accrued salaries, wages and other current liabilities | 1,290,693 | 1,427,250 |
Total current liabilities | 2,979,769 | 2,996,895 |
Long-term debt, less current maturities | 6,899,025 | 6,914,393 |
Lease financing obligations, less current maturities | 49,737 | 52,895 |
Other noncurrent liabilities | 734,912 | 731,399 |
Total liabilities | 10,663,443 | 10,695,582 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $1 per share; 1,500,000 shares authorized; shares issued and outstanding 1,048,768 and 1,047,754 | 1,048,768 | 1,047,754 |
Additional paid-in capital | 4,835,634 | 4,822,665 |
Accumulated deficit | (5,245,798) | (5,241,210) |
Accumulated other comprehensive loss | (47,100) | (47,781) |
Total stockholders' equity | 591,504 | 581,428 |
Total liabilities and stockholders' equity | $ 11,254,947 | $ 11,277,010 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | May 28, 2016 | Feb. 27, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventories, LIFO reserve (in dollars) | $ 1,020,147 | $ 1,006,396 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 1,500,000 | 1,500,000 |
Common stock, shares issued | 1,048,768 | 1,047,754 |
Common stock, shares outstanding | 1,048,768 | 1,047,754 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 8,184,181 | $ 6,647,561 |
Costs and expenses: | ||
Cost of revenues | 6,289,881 | 4,788,031 |
Selling, general and administrative expenses | 1,793,247 | 1,699,585 |
Lease termination and impairment charges | 5,781 | 5,022 |
Interest expense | 105,113 | 123,607 |
Loss on sale of assets, net | 1,056 | 39 |
Total costs and expenses | 8,195,078 | 6,616,284 |
(Loss) income before income taxes | (10,897) | 31,277 |
Income tax (benefit) expense | (6,309) | 12,441 |
Net (loss) income | (4,588) | 18,836 |
Computation of (loss) income attributable to common stockholders: | ||
(Loss) income attributable to common stockholders-basic | (4,588) | 18,836 |
(Loss) income attributable to common stockholders-diluted | $ (4,588) | $ 18,836 |
Basic and diluted (loss) income per share (in dollars per share) | $ 0 | $ 0.02 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
Net (loss) income | $ (4,588) | $ 18,836 |
Defined benefit pension plans: | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $451 and $398 tax expense | 681 | 597 |
Total other comprehensive income | 681 | 597 |
Comprehensive (loss) income | $ (3,907) | $ 19,433 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, tax expense | $ 451 | $ 398 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Operating activities: | ||
Net (loss) income | $ (4,588) | $ 18,836 |
Adjustments to reconcile to net cash provided by operating activities: | ||
Depreciation and amortization | 138,788 | 109,649 |
Lease termination and impairment charges | 5,781 | 5,022 |
LIFO charge | 13,751 | 5,987 |
Loss on sale of assets, net | 1,056 | 39 |
Stock-based compensation expense | 11,144 | 7,370 |
Changes in deferred taxes | (5,749) | 9,540 |
Excess tax benefit on stock options and restricted stock | (883) | (2,820) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (74,530) | 11,027 |
Inventories | 59,440 | 56,204 |
Accounts payable | 115,646 | 79,715 |
Other assets and liabilities, net | (99,912) | 67,266 |
Net cash provided by operating activities | 159,944 | 367,835 |
Investing activities: | ||
Payments for property, plant and equipment | (106,077) | (141,037) |
Intangible assets acquired | (16,381) | (14,293) |
Proceeds from dispositions of assets and investments | 3,088 | 2,838 |
Net cash used in investing activities | (119,370) | (152,492) |
Financing activities: | ||
Proceeds from issuance of long-term debt | 1,800,000 | |
Net payments to revolver | (20,000) | (141,000) |
Principal payments on long-term debt | (5,721) | (5,577) |
Change in zero balance cash accounts | 2,262 | (34,275) |
Net proceeds from issuance of common stock | 2,371 | 3,378 |
Excess tax benefit on stock options and restricted stock | 883 | 2,820 |
Deferred financing costs paid | (34,459) | |
Net cash (used in) provided by financing activities | (20,205) | 1,590,887 |
Increase in cash and cash equivalents | 20,369 | 1,806,230 |
Cash and cash equivalents, beginning of period | 124,471 | 115,899 |
Cash and cash equivalents, end of period | 144,840 | 1,922,129 |
Supplementary cash flow data: | ||
Cash paid for interest (net of capitalized amounts of $56 and $42, respectively) | 71,434 | 72,194 |
Cash payments of income taxes, net of refunds | 3,869 | 992 |
Equipment financed under capital leases | 1,553 | 800 |
Equipment received for noncash consideration | 632 | 545 |
Conversion of the 8.5% convertible notes to common stock | 64,089 | |
Gross borrowings from revolver | 867,000 | 915,000 |
Gross payments to revolver | $ 887,000 | $ 1,056,000 |
CONDENSED CONSOLIDATED STATEME8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Cash paid for interest, capitalized amounts | $ 56 | $ 42 |
8.5% convertible notes due May 2015 | ||
Debt instrument, stated interest rate (as a percent) | 8.50% | 8.50% |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
May 28, 2016 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended May 28, 2016 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation (“Rite Aid”) and Subsidiaries (together with Rite Aid, the “Company”) Fiscal 2016 10-K. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2014-09 on its financial position, results of operations and cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842) , which is intended to improve financial reporting around leasing transactions. The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment. This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019. The Company is in process of assessing the impact of the adoption of ASU No. 2016-02 on its financial position, results of operations and cash flows. |
Acquisition
Acquisition | 3 Months Ended |
May 28, 2016 | |
Acquisition | |
Acquisition | 2. Acquisition On June 24, 2015, the Company completed its previously announced acquisition of TPG VI Envision BL, LLC and Envision Topco Holdings, LLC (“EnvisionRx”), pursuant to the terms of an agreement (“Agreement”) dated February 10, 2015. EnvisionRx, which was a portfolio company of TPG Capital L.P. prior to its acquisition by the Company, is a full-service pharmacy services provider. EnvisionRx provides both transparent and traditional pharmacy benefit manager (“PBM”) service options through its EnvisionRx and MedTrak PBMs, respectively. EnvisionRx also offers fully integrated mail-order and specialty pharmacy services through Orchard Pharmaceutical Services; access to the nation’s largest cash pay infertility discount drug program via Design Rx; an innovative claims adjudication software platform in Laker Software; and a national Medicare Part D prescription drug plan through Envision Insurance Company’s (“EIC”) EnvisionRx Plus Silver product for the low income auto-assign market and its Clear Choice product for the chooser market. EnvisionRx is headquartered in Twinsburg, Ohio and operates as a 100 percent owned subsidiary of the Company. Pursuant to the terms of the Agreement, as consideration for the Acquisition, the Company paid $1,882,211 in cash and issued 27,754 shares of Rite Aid common stock. The Company financed the cash portion of the Acquisition with borrowings under its Amended and Restated Senior Secured Revolving Credit Facility, and the net proceeds from the April 2, 2015 issuance of $1,800,000 aggregate principal amount of 6.125% senior notes due 2023 (the “6.125% Notes”). The consideration associated with the common stock was $240,907 based on a stock price of $8.68 per share, representing the closing price of the Company’s common stock on the closing date of the Acquisition. The closing balance sheet has not yet been finalized, as the Company is still in process of finalizing certain transactional taxes and other tax related issues, and therefore, the final purchase price allocation of the Acquisition is subject to change. The Company’s condensed consolidated financial statements for the thirteen weeks ended May 28, 2016 includes EnvisionRx results of operations (please see Note 13 Segment Reporting for the Pharmacy Services segment results included within the condensed consolidated financial statements for the thirteen week period ended May 28, 2016, which reflects the results of EnvisionRx). The Company’s condensed consolidated financial statements reflect preliminary purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was preliminarily allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the Acquisition date. The following allocation of the purchase price and the estimated transaction costs is preliminary and is based on information available to the Company’s management at the time the condensed consolidated financial statements were prepared. Accordingly, the allocation is subject to change and the impact of such changes may be material. Preliminary purchase price Cash consideration $ Stock consideration Total $ Preliminary purchase price allocation Cash and cash equivalents $ Accounts receivable Inventories Prepaid expenses and other current assets Total current assets Property and equipment Intangible assets(1) Goodwill Other assets Total assets acquired Accounts payable Reinsurance funds held Other current liabilities(2) Total current liabilities Other long term liabilities(3) Total liabilities assumed Net assets acquired $ (1) Intangible assets are recorded at estimated fair value, as determined by management based on available information which includes a preliminary valuation prepared by an independent third party. The fair values assigned to identifiable intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. The major assumptions used in arriving at the estimated identifiable intangible asset values included management’s preliminary estimates of future cash flows, discounted at an appropriate rate of return which are based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. The estimated fair value of intangible assets and related useful lives as included in the preliminary purchase price allocation include: Estimated Fair Value Estimated Useful Life (In Years) Customer relationships $ CMS license Claims adjudication and other developed software Trademarks Backlog Trademarks Indefinite Total $ (2) Other current liabilities includes $116,500 due to TPG under the terms of the Agreement, representing the amounts due to EnvisionRx from CMS, less corresponding amounts due to various reinsurance providers under certain reinsurance programs, for CMS activities that relate to the year ended December 31, 2014. This liability was satisfied with a payment to TPG on November 5, 2015. (3) Primarily relates to deferred tax liabilities. The above goodwill represents future economic benefits expected to be recognized from the Company’s expansion into the pharmacy services market, as well as expected future synergies and operating efficiencies from combining operations with EnvisionRx. Goodwill resulting from the Acquisition of $1,637,351 has been allocated to the Pharmacy Services segment of which $1,360,156 is deductible for tax purposes. At the time the financial statements were issued, initial accounting for the business combination related to tax matters were preliminary and may be adjusted during the measurement period. During the thirteen week periods ended May 28, 2016 and May 30, 2015, costs of $6 and $17,459, respectively, related to the Acquisition were expensed by the Company as incurred. The following unaudited pro forma combined financial data gives effect to the Acquisition as if it had occurred as of March 1, 2014. These unaudited pro forma combined results have been prepared by combining the historical results of the Company and historical results of EnvisionRx. The unaudited pro forma condensed combined financial data for all periods presented were adjusted to give effect to pro forma events that 1) are directly attributable to the aforementioned transaction, 2) factually supportable, and 3) expected to have a continuing impact on the consolidated results of operations. Specifically, these adjustments reflect: · Incremental interest expense relating to the $1,800,000 6.125% Notes issued on April 2, 2015, the net proceeds of which were used finance to the cash portion of the Acquisition. · Incremental amortization resulting from increased fair value of the identifiable intangible assets as noted in the preliminary purchase price allocation. · Removal of costs incurred in connection with the Acquisition by both the Company and EnvisionRx, including bridge loan commitment fees of $15,375. · Removal of interest expense incurred by EnvisionRx as the underlying debt was repaid upon the acquisition date. · Removal of debt extinguishment charges incurred by EnvisionRx. · Inclusion of the 27,754 shares of Rite Aid common stock issued to fund the stock portion of the purchase price in the basic and diluted share calculation. The unaudited pro forma combined results do not include any incremental cost savings that may result from the integration. The adjustments are based on information available to the Company at this time. Accordingly, the adjustments are subject to change and the impact of such changes may be material. The unaudited pro forma combined information is not necessarily indicative of what the combined company’s results actually would have been had the Acquisition been completed as of the beginning of the periods as indicated. In addition, the unaudited pro forma combined information does not purport to project the future results of the combined company. Thirteen Week Periods Ended May 28, 2016 May 30, 2015 Pro forma Pro forma Net revenues as reported $ $ EnvisionRx revenue, prior to the acquisition — Less pre-acquisition intercompany revenue — ) Pro forma combined revenues $ $ Net (loss) income as reported $ ) $ EnvisionRx net income before income taxes, prior to the acquisition — Incremental interest expense on the 6.125% Notes issued on April 2, 2015 — ) Incremental amortization resulting from fair value adjustments of the identifiable intangible assets — ) Transaction costs incurred by both the Company and EnvisionRx — Interest expense incurred by EnvisionRx — Income tax expense relating to pro forma adjustments — ) Pro forma net (loss) income $ ) $ Basic and diluted (loss) income per share $ $ The unaudited pro forma condensed combined financial information for the thirteen weeks ended May 28, 2016 is identical to the actual results reported by the Company because EnvisionRx results were included in the consolidated operations of the Company for the entire period. |
Pending Merger
Pending Merger | 3 Months Ended |
May 28, 2016 | |
Pending Merger | |
Pending Merger | 3. Pending Merger On October 27, 2015, Rite Aid entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WBA, and Victoria Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of WBA (“Victoria Merger Sub”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Victoria Merger Sub will merge with and into Rite Aid (the “Merger”), with Rite Aid surviving the Merger as a 100 percent owned direct subsidiary of WBA. On February 4, 2016, the proposal to adopt the Merger Agreement was approved by approximately 97% of the votes cast at the special meeting, which represented approximately 72% of the Company’s total outstanding shares of common stock entitled to vote as of the record date of the special meeting. A quorum of 74% of the Company’s total outstanding shares of common stock as of the record date voted at the special meeting. Completion of the Merger is subject to various closing conditions, including but not limited to (i) the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any law or order prohibiting the Merger, and (iii) the absence of a material adverse effect on Rite Aid, as defined in the Merger Agreement. Under the terms of the Merger Agreement, at the effective time of the Merger, each share of Rite Aid’s common stock, par value $1.00 per share, issued and outstanding immediately prior to the effective time (other than shares owned by (i) WBA, Victoria Merger Sub or Rite Aid (which will be cancelled), (ii) stockholders who have properly exercised and perfected appraisal rights under Delaware law, or (iii) any direct or indirect 100 percent owned subsidiary of Rite Aid or WBA (which will be converted into shares of common stock of the surviving corporation)) will be converted into the right to receive $9.00 per share in cash, without interest. Rite Aid and WBA and Victoria Merger Sub have each made customary representations, warranties and covenants in the Merger Agreement, including, among other things, that (i) Rite Aid and its subsidiaries will continue to conduct our business in the ordinary course consistent with past practice between the execution of the Merger Agreement and the closing of the Merger and (ii) Rite Aid will not solicit proposals relating to alternative transactions to the Merger or engage in discussions or negotiations with respect thereto, subject to certain exceptions. Additionally, the Merger Agreement limits the Company’s ability to incur indebtedness for borrowed money and issue additional capital stock, among other things. The Company currently anticipates that the Merger will close in the second half of calendar 2016. |
(Loss) Income Per Share
(Loss) Income Per Share | 3 Months Ended |
May 28, 2016 | |
(Loss) Income Per Share | |
(Loss) Income Per Share | 4. (Loss) Income Per Share Basic (loss) income per share is computed by dividing (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company subject to anti-dilution limitations. Thirteen Week Period Ended May 28, 2016 May 30, 2015 Numerator for (loss) income per share: (Loss) income attributable to common stockholders—basic and diluted $ ) $ Denominator: Basic weighted average shares Outstanding options and restricted shares, net — Diluted weighted average shares Basic and diluted (loss) income per share $ ) $ Due to their antidilutive effect, 36,860 and 0 potential common shares related to stock options have been excluded from the computation of diluted income per share as of May 28, 2016 and May 30, 2015, respectively. Also, excluded from the computation of diluted (loss) income per share as of May 28, 2016 and May 30, 2015 are restricted shares of 4,742 and 0, respectively, which are included in shares outstanding. During the thirteen week period ended May 30, 2015, $64,089 of the Company’s 8.5% convertible notes due 2015 were converted into 24,762 shares of common stock, pursuant to their terms. |
Lease Termination and Impairmen
Lease Termination and Impairment Charges | 3 Months Ended |
May 28, 2016 | |
Lease Termination and Impairment Charges | |
Lease Termination and Impairment Charges | 5. Lease Termination and Impairment Charges Lease termination and impairment charges consist of amounts as follows: Thirteen Week Period Ended May 28, 2016 May 30, 2015 Impairment charges $ $ Lease termination charges $ $ 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. Lease Termination Charges As part of the Company’s ongoing business activities, the Company assesses stores and distribution centers for potential closure or relocation. Decisions to close or relocate stores or distribution centers in future periods would result in lease termination charges, lease exit costs and inventory liquidation charges, as well as impairment of assets at these locations. The following table reflects the closed store and distribution center charges that relate to new closures, changes in assumptions and interest accretion: Thirteen Week Period Ended May 28, 2016 May 30, 2015 Balance—beginning of period $ $ Provision for present value of noncancellable lease payments of closed stores Changes in assumptions about future sublease income, terminations and changes in interest rates ) Interest accretion Cash payments, net of sublease income ) ) Balance—end of period $ $ |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
May 28, 2016 | |
Fair Value Measurements | |
Fair Value Measurements | 6. Fair Value Measurements The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. · Level 3—Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. Non-Financial Assets Measured on a Non-Recurring Basis Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the thirteen week period ended May 28, 2016, long-lived assets from continuing operations with a carrying value of $1,051, primarily store assets, were written down to their fair value of $432, resulting in an impairment charge of $619. During the thirteen week period ended May 30, 2015, long-lived assets from continuing operations with a carrying value of $1,289, primarily store assets, were written down to their fair value of $1,016, resulting in an impairment charge of $273. If our actual future cash flows differ from our projections materially, certain stores that are either not impaired or partially impaired in the current period may be further impaired in future periods. The following table presents fair values for those assets measured at fair value on a non-recurring basis at May 28, 2016 and May 30, 2015: Fair Value Measurement Using Level 1 Level 2 Level 3 Total as of May 28, 2016 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ Level 1 Level 2 Level 3 Total as of May 30, 2015 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ As of May 28, 2016 and May 30, 2015, the Company did not have any financial assets measured on a recurring basis. Other Financial Instruments Financial instruments other than long-term indebtedness include cash and cash equivalents, accounts receivable and accounts payable. These instruments are recorded at book value, which the Company believes approximate their fair values due to their short term nature. In addition, the Company has $6,567 of investments, carried at amortized cost as these investments are being held to maturity, which are included as a component of other assets as of May 28, 2016. The Company believes the carrying value of these investments approximates their fair value. The fair value for LIBOR-based borrowings under the Company’s senior secured credit facility and first and second lien term loans are estimated based on the quoted market price of the financial instrument which is considered Level 1 of the fair value hierarchy. The fair values of substantially all of the Company’s other long-term indebtedness are estimated based on quoted market prices of the financial instruments which are considered Level 1 of the fair value hierarchy. The carrying amount and estimated fair value of the Company’s total long-term indebtedness was $6,899,115 and $7,228,550, respectively, as of May 28, 2016. There were no outstanding derivative financial instruments as of May 28, 2016 and February 27, 2016. |
Income Taxes
Income Taxes | 3 Months Ended |
May 28, 2016 | |
Income Taxes | |
Income Taxes | 7. Income Taxes The Company recorded an income tax benefit of $6,309 and an income tax expense of $12,441 for the thirteen week periods ended May 28, 2016 and May 30, 2015, respectively. The effective tax rate for the thirteen week periods ended May 28, 2016 and May 30, 2015 was 57.9% and 39.8%, respectively. The higher effective income tax benefit rate for the period ended May 28, 2016 is the result of a discrete income tax benefit recorded for the lapse of a statute of limitations on an uncertain tax position which raised the Company’s effective income tax benefit rate by 13.3%. The Company recognizes 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. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, the Company does not expect the change to have a significant impact on the results of operations or the financial position of the Company. The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. The Company continues to maintain a valuation allowance against net deferred tax assets of $210,074 and $212,023, which relates primarily to state deferred tax assets at May 28, 2016 and February 27, 2016, respectively. |
Medicare Part D
Medicare Part D | 3 Months Ended |
May 28, 2016 | |
Medicare Part D | |
Medicare Part D | 8. Medicare Part D The Company offers Medicare Part D benefits through EIC, which has contracted with CMS to be a Prescription Drug Plan (“PDP”) and, pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, must be a risk-bearing entity regulated under state insurance laws or similar statutes. EIC is a licensed domestic insurance company under the applicable laws and regulations. Pursuant to these laws and regulations, EIC must file quarterly and annual reports with the National Association of Insurance Commissioners (“NAIC”) and certain state regulators, must maintain certain minimum amounts of capital and surplus under formulas established by certain states and must, in certain circumstances, request and receive the approval of certain state regulators before making dividend payments or other capital distributions to the Company. The Company does not believe these limitations on dividends and distributions materially impact its financial position. EIC is subject to minimum capital and surplus requirements in certain states. The minimum amount of capital and surplus required to satisfy regulatory requirements in these states is $25,014 as of March 31, 2016. EIC was in excess of the minimum required amounts in these states as of May 28, 2016. The Company has recorded estimates of various assets and liabilities arising from its participation in the Medicare Part D program based on information in its claims management and enrollment systems. Significant estimates arising from its participation in this program include: (i) estimates of low-income cost subsidies, reinsurance amounts, and coverage gap discount amounts ultimately payable to CMS based on a detailed claims reconciliation that will occur in the following year; (ii) an estimate of amounts receivable from CMS under a risk-sharing feature of the Medicare Part D program design, referred to as the risk corridor and (iii) estimates for claims that have been reported and are in the process of being paid or contested and for our estimate of claims that have been incurred but have not yet been reported. As of May 28, 2016, accounts receivable, net included $319,976 due from CMS and accrued salaries, wages and other current liabilities included $152,970 of EIC liabilities under certain reinsurance contracts. EIC limits its exposure to loss and recovers a portion of benefits paid by utilizing quota-share reinsurance with a commercial reinsurance company. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
May 28, 2016 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 9. Goodwill and Other Intangible Assets Goodwill and indefinitely-lived assets, such as certain trademarks acquired in connection with acquisition transactions, are not amortized, but are instead evaluated for impairment on an annual basis at the end of the fiscal year, or more frequently if events or circumstances indicate that impairment may be more likely. During the thirteen weeks ended May 28, 2016 and the fifty-two weeks ended February 27, 2016, no impairment charges have been taken against the Company’s goodwill or indefinitely-lived intangible assets. No changes were made to the carrying amount of goodwill for the thirteen week period ended May 28, 2016 (see Note 2. Acquisition). The Company’s intangible assets are finite-lived and amortized over their useful lives. Following is a summary of the Company’s finite-lived and indefinitely-lived intangible assets as of May 28, 2016 and February 27, 2016. May 28, 2016 February 27, 2016 Gross Carrying Amount Accumulated Amortization Net Remaining Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Remaining Weighted Average Amortization Period Favorable leases and other $ $ ) $ 8 years $ $ ) $ 8 years Prescription files ) 3 years ) 3 years Customer relationships(a) ) 16 years ) 17 years CMS license ) 24 years ) 25 years Claims adjudication and other developed software ) 6 years ) 7 years Trademarks ) 9 years ) 10 years Backlog ) 2 years ) 3 years Total finite $ $ ) $ $ ) Trademarks — Indefinite — Indefinite Total $ $ ) $ $ $ ) $ (a) —Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows. Also included in other non-current liabilities as of May 28, 2016 and February 27, 2016 are unfavorable lease intangibles with a net carrying amount of $45,525 and $46,947, respectively. These intangible liabilities are amortized over their remaining lease terms at the time of acquisition. Amortization expense for these intangible assets and liabilities was $55,503 and $31,941 for the thirteen week periods ended May 28, 2016 and May 30, 2015, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2017—$214,640; 2018—$172,135; 2019—$134,730; 2020—$105,199 and 2021—$72,517. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreements | 3 Months Ended |
May 28, 2016 | |
Indebtedness and Credit Agreements | |
Indebtedness and Credit Agreements | 10. Indebtedness and Credit Agreements Following is a summary of indebtedness and lease financing obligations at May 28, 2016 and February 27, 2016: May 28, 2016 February 27, 2016 Secured Debt: Senior secured revolving credit facility due January 2020 ($2,080,000 and $2,100,000 face value less unamortized debt issuance costs of $31,699 and $33,903) $ $ Tranche 1 Term Loan (second lien) due August 2020 ($470,000 face value less unamortized debt issuance costs of $5,108 and $5,414) May 28, 2016 February 27, 2016 Tranche 2 Term Loan (second lien) due June 2021 ($500,000 face value less unamortized debt issuance costs of $2,866 and $3,007) Other secured Guaranteed Unsecured Debt: 9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $2,575 and $2,743 and less unamortized debt issuance costs of $9,529 and $10,180) 6.75% senior notes due June 2021 ($810,000 face value less unamortized debt issuance costs of $7,501 and $7,872) 6.125% senior notes due April 2023 ($1,800,000 face value less unamortized debt issuance costs of $29,274 and $30,343) Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,752 and $1,794) 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $821 and $837) Lease financing obligations Total debt Current maturities of long-term debt and lease financing obligations ) ) Long-term debt and lease financing obligations, less current maturities $ $ Credit Facility On January 13, 2015, the Company amended and restated its senior secured credit facility (“Amended and Restated Senior Secured Credit Facility” or “revolver”), which, among other things, increased borrowing capacity from $1,795,000 to $3,000,000 (which further increased to $3,700,000 upon the redemption of its 8.00% senior secured notes due August 2020 (“8.00% Notes”) on August 15, 2015), and extended the maturity to January 2020 from February 2018. The Company used borrowings under the revolver to repay and retire all of the $1,143,650 outstanding under its Tranche 7 Senior Secured Term Loan due 2020, along with associated fees and expenses. Borrowings under the revolver bear interest at a rate per annum between (i) LIBOR plus 1.50% and LIBOR plus 2.00% with respect to Eurodollar borrowings and (ii) the alternate base rate plus 0.50% and the alternate base rate plus 1.00% with respect to ABR borrowings, in each case, based upon the average revolver availability (as defined in the Amended and Restated Senior Secured Credit Facility). The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the revolver, depending on the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). Amounts drawn under the revolver become due and payable on January 13, 2020. On February 10, 2015, the Company amended the Amended and Restated Senior Secured Credit Facility to, among other things, increase the flexibility of Rite Aid to incur and/or issue unsecured indebtedness, including in connection with the Acquisition, and made certain other modifications to the covenants applicable to Rite Aid and its subsidiaries. The Company’s ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At May 28, 2016, the Company had $2,080,000 of borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $69,301, which resulted in additional borrowing capacity of $1,550,699. The Merger Agreement contains a requirement that the Company’s borrowings under the revolver not exceed $3,000,000 in the aggregate immediately prior to the closing of the Merger. The Amended and Restated Senior Secured Credit Facility restricts the Company and the Subsidiary Guarantors (as defined herein) from accumulating cash on hand, and under certain circumstances, requires the funds in the Company’s deposit accounts to be applied first to the repayment of outstanding revolving loans under the Amended and Restated Senior Secured Credit Facility and then to be held as collateral for the senior obligations. The Amended and Restated Senior Secured Credit Facility allows the Company to have outstanding, at any time, up to $1,500,000 (or $1,800,000 solely to the extent incurred for the purpose of funding of the Acquisition) in secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Amended and Restated Senior Secured Credit Facility and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest of (a) the fifth anniversary of the effectiveness of the Amended and Restated Senior Secured Credit Facility and (b) the latest maturity date of any Term Loan or Other Revolving Loan (each as defined in the Amended and Restated Senior Secured Credit Facility) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date and, with respect to any escrow notes issued by Rite Aid, excluding any special mandatory redemption of the type described in clause (iii) of the definition of “Escrow Notes” in the Amended and Restated Senior Secured Credit Facility). Subject to the limitations described in clauses (a) and (b) of the immediately preceding sentence, the Amended and Restated Senior Secured Credit Facility additionally allows the Company to issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a Financial Covenant Effectiveness Period (as defined in the Amended and Restated Senior Secured Credit Facility) is not in effect; provided, however, that certain of the Company’s 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 or other exemptions are not available. The Amended and Restated Senior Secured Credit Facility also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Amended and Restated Senior Secured Credit Facility also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Amended and Restated Senior Secured Credit Facility is not in default and the Company maintains availability under its revolving credit facility of more than $365,000. The Amended and Restated Senior Secured Credit Facility has a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (a) on any date on which availability under the revolving credit facility is less than $200,000 or (b) on the third consecutive business day on which availability under the revolving credit facility is less than $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolving credit facility is equal to or greater than $250,000. As of May 28, 2016, the availability was at a level that did not trigger this covenant. The Amended and Restated Senior Secured Credit Facility also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, sale of assets, mergers and acquisitions and the granting of liens. The Amended and Restated Senior Secured Credit Facility also provides for customary events of default. The Company also has two second priority secured term loan facilities. The first includes a $470,000 second priority secured term loan (the “Tranche 1 Term Loan”). The Tranche 1 Term Loan matures on August 21, 2020 and currently bears interest at a rate per annum equal to LIBOR plus 4.75% with a LIBOR floor of 1.00%, if the Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 3.75%. The second includes a $500,000 second priority secured term loan (the “Tranche 2 Term Loan”). The Tranche 2 Term Loan matures on June 21, 2021 and currently bears interest at a rate per annum equal to LIBOR plus 3.875% with a LIBOR floor of 1.00%, if the Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 2.875%. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, and unsecured guaranteed notes. The Amended and Restated Senior Secured Credit Facility and second priority secured term loan facilities are secured, on a senior or second priority basis, as applicable, by a lien on, among other things, accounts receivable, inventory and prescription files of the Subsidiary Guarantors. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility and second priority secured term loan facilities and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several, and there are no restrictions on the ability of the Company to obtain funds from its subsidiaries. The Company has no independent assets or operations. Additionally, prior to the Acquisition, the subsidiaries, including joint ventures, that did not guarantee the Amended and Restated Senior Secured Credit Facility, the credit facility, second priority secured term loan facilities and applicable notes, were minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented for those periods. Subsequent to the Acquisition, other than EIC, the subsidiaries, including joint ventures, that do not guarantee the credit facility, second priority secured term loan facilities and applicable notes, are minor. As such, condensed consolidating financial information for the Company, its guaranteeing subsidiaries and non-guaranteeing subsidiaries is presented for those periods subsequent to the Acquisition. See Note 15 “Guarantor and Non-Guarantor Condensed Consolidating Financial Information” for additional disclosure. Other Transactions On April 2, 2015, the Company issued $1,800,000 aggregate principal amount of its 6.125% Notes, the net proceeds of which, along with other available cash and borrowings under its Amended and Restated Senior Secured Credit Facility, were used to finance the cash portion of the Acquisition. The Company’s obligations under the notes are fully and unconditionally guaranteed, jointly and severally, on an unsubordinated basis, by all of its subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, the 9.25% senior notes due 2020 (the “9.25% Notes”) and the 6.75% senior notes due 2021 (the “6.75% Notes”) (the “Rite Aid Subsidiary Guarantors”), including EnvisionRx and certain of its domestic subsidiaries other than, among others, EIC (the “EnvisionRx Subsidiary Guarantors” and, together with the Rite Aid Subsidiary Guarantors, the “Subsidiary Guarantors”). The guarantees are unsecured. The 6.125% Notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in right of payment with all of its other unsecured, unsubordinated indebtedness. During the thirteen week period ended May 30, 2015, $64,089 of the Company’s 8.5% convertible notes due 2015 were converted into 24,762 shares of common stock, pursuant to their terms. The remaining $79 of the Company’s 8.5% convertible notes due 2015 were repaid by the Company upon maturity. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2017 and thereafter are as follows: 2017—$90; 2018—$0; 2019—$0; 2020—$2,080,000; 2021—$1,372,000 and $3,533,000 thereafter. |
Reclassifications from Accumula
Reclassifications from Accumulated Other Comprehensive Loss | 3 Months Ended |
May 28, 2016 | |
Reclassifications from Accumulated Other Comprehensive Loss | |
Reclassifications from Accumulated Other Comprehensive Loss | 11. Reclassifications from Accumulated Other Comprehensive Loss The following table summarizes the components of accumulated other comprehensive loss and the changes in balances of each component of accumulated other comprehensive loss, net of tax as applicable, for the thirteen week periods ended May 28, 2016 and May 30, 2015: Thirteen week period ended May 28, 2016 Thirteen week period ended May 30, 2015 Defined benefit pension plans Accumulated other comprehensive loss Defined benefit pension plans Accumulated other comprehensive loss Accumulated other comprehensive loss Balance—beginning of period $ ) $ ) $ ) $ ) Amounts reclassified from accumulated other comprehensive loss to net income, net of $451 and $398 tax expense Balance—end of period $ ) $ ) $ ) $ ) The following table summarizes the effects on net income of significant amounts classified out of each component of accumulated other comprehensive loss for the thirteen week periods ended May 28, 2016 and May 30, 2015: Thirteen Week Periods Ended May 28, 2016 and May 30, 2015 Amount reclassified from accumulated other comprehensive loss Details about accumulated other comprehensive loss components May 28, 2016 May 30, 2015 Affected line item in the condensed consolidated statements of operations Defined benefit pension plans Amortization of unrecognized prior service cost(a) $ — $ ) Selling, general and administrative expenses Amortization of unrecognized net loss(a) ) ) Selling, general and administrative expenses ) ) Total before income tax expense Income tax expense $ ) $ ) Net of income tax expense (a) See Note 12, Retirement Plans for additional details. |
Retirement Plans
Retirement Plans | 3 Months Ended |
May 28, 2016 | |
Retirement Plans | |
Retirement Plans | 12. Retirement Plans Net periodic pension expense recorded in the thirteen week periods ended May 28, 2016 and May 30, 2015, for the Company’s defined benefit plans includes the following components: Defined Benefit Pension Plan Nonqualified Executive Retirement Plans Thirteen Week Period Ended May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015 Service cost $ $ $ — $ — Interest cost Expected return on plan assets ) ) — — Amortization of unrecognized prior service cost — — — Amortization of unrecognized net loss — — Net pension expense $ $ $ $ During the thirteen week period ended May 28, 2016 the Company contributed $362 to the Nonqualified Executive Retirement Plans and $0 to the Defined Benefit Pension Plan. During the remainder of fiscal 2017, the Company expects to contribute $1,142 to the Nonqualified Executive Retirement Plans and $0 to the Defined Benefit Pension Plan. |
Segment Reporting
Segment Reporting | 3 Months Ended |
May 28, 2016 | |
Segment Reporting | |
Segment Reporting | 13. Segment Reporting Prior to June 24, 2015, the Company’s operations were within one reportable segment. As a result of the completion of the Acquisition, the Company has realigned its internal management reporting to reflect two reportable segments, its retail drug stores (“Retail Pharmacy”), and its pharmacy services (“Pharmacy Services”) segments. The Retail Pharmacy segment’s primary business is the sale of prescription drugs and related consultation to its customers. Additionally, the Retail Pharmacy segment sells a full selection of health and beauty aids and personal care products, seasonal merchandise and a large private brand product line. The Pharmacy Services segment offers a full range of pharmacy benefit management services including plan design and administration, on both a transparent pass-through model and traditional model, formulary management and claims processing. Additionally, the Pharmacy Services segment offers specialty and mail order services, infertility treatment, and drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program. The Parent Company’s chief operating decision makers are its Parent Company Chief Executive Officer, Parent Company President and CEO—Retail Pharmacy, CEO—Pharmacy Services, Chief Financial Officer and its Senior Executive Vice Presidents (collectively the “CODM”). The CODM has ultimate responsibility for enterprise decisions. The CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise, the Retail Pharmacy segment and the Pharmacy Services segment. The Retail Pharmacy and Pharmacy Services segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. The CODM relies on internal management reporting that analyzes enterprise results on certain key performance indicators, namely, revenues, gross profit, and Adjusted EBITDA. The following table is a reconciliation of the Company’s business segments to the condensed consolidated financial statements for the thirteen week periods ended May 28, 2016 and May 30, 2015: Retail Pharmacy Pharmacy Services Intersegment Eliminations(1) Consolidated May 28, 2016: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — May 30, 2015: Revenues $ $ — $ — $ Gross Profit — — Adjusted EBITDA(2) — — (1) Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis. (2) See “Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. The following is a reconciliation of net (loss) income to Adjusted EBITDA for the thirteen week periods ended May 28, 2016 and May 30, 2015: Thirteen Week Period Ended May 28, 2016 May 30, 2015 (dollars in thousands) Net (loss) income $ ) $ Interest expense Income tax (benefit) expense ) Depreciation and amortization expense LIFO charge Lease termination and impairment charges Other Adjusted EBITDA $ $ The following is balance sheet information for the Company’s reportable segments: Retail Pharmacy Pharmacy Services Eliminations(2) Consolidated May 28, 2016: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — February 27, 2016: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — (2) As of May 28, 2016 and February 27, 2016, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $118,991 and $116,027, respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $20,042 and $23,697, respectively, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 28, 2016 | |
Commitments and Contingencies. | |
Commitments and Contingencies. | 14. Commitments and Contingencies Legal Matters The Company is a party to legal proceedings, investigations and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. The Company’s contingencies are subject to significant uncertainties, including, among other factors: (i) proceedings are in early stages; (ii) whether class or collective action status is sought and the likelihood of a class being certified; (iii) the outcome of pending appeals or motions; (iv) the extent of potential damages, fines or penalties, which are often unspecified or indeterminate; (v) the impact of discovery on the matter; (vi) whether novel or unsettled legal theories are at issue; (vii) there are significant factual issues to be resolved; and/or (viii) in the case of certain government agency investigations, whether a sealed qui tam lawsuit (“whistleblower” action) has been filed and whether the government agency makes a decision to intervene in the lawsuit following investigation. As of May 28, 2016, the Company was aware of ten (10) putative class action lawsuits that were filed by purported Company stockholders, against the Company, its directors (the Individual Defendants, together with the Company, the Rite Aid Defendants), Walgreens Boots Alliance, Inc. (“WBA”) and Victoria Merger Sub Inc., (Victoria) challenging the transactions contemplated by the Merger agreement between the Company and WBA. Eight (8) of these actions were filed in the Court of Chancery of the State of Delaware ( Smukler v. Rite Aid Corp., et al. , Hirschler v. Standley, et al. , Catelli v. Rite Aid Corp., et al. , Orr v. Rite Aid Corp., et al. , DePietro v. Standley, et al. , Abadi v. Rite Aid Corp., et al. , Mortman v. Rite Aid Corp., et al. ). One (1) action was filed in Pennsylvania in the Court of Common Pleas of Cumberland County ( Wilson v. Rite Aid Corp., et al. , Sachs Investment Grp., et al. v. Standley, et al. ). The complaints in these nine (9) actions alleged primarily that the Company’s directors breached their fiduciary duties by, among other things, agreeing to an allegedly unfair and inadequate price, agreeing to deal protection devices that allegedly prevented the directors from obtaining higher offers from other interested buyers for the Company and allegedly failing to protect against certain purported conflicts of interest in connection with the Merger. The Complaints further allege that the Company, WBA and/or Victoria aided and abetted these alleged breaches of fiduciary duty. The complaints sought, among other things, to enjoin the closing of the Merger as well as money damages and attorneys’ and experts’ fees. On December 23, 2015, the eight (8) Delaware actions were consolidated in an action captioned In re Rite Aid Corporation Stockholders Litigation, Consol. C.A. No. 11663-CB (the Consolidated Action). In addition to the claims asserted in the nine (9) complaints discussed above, the operative pleading in the Consolidated Action also included allegations that the preliminary proxy statement contained material omissions, including with respect to the process that resulted in the Merger agreement and the fairness opinion rendered by the Company’s banker. On December 28, 2015, the plaintiffs in the Consolidated Action filed a motion for expedited proceedings, which the Court orally denied at a hearing held on January 5, 2016. On March 11, 2016, the Court granted the plaintiffs’ notice and proposed order voluntarily dismissing the Consolidated Action as moot, while retaining jurisdiction solely for the purpose of adjudicating plaintiffs’ counsel’s anticipated application for an award of attorneys’ fees and reimbursement of expenses. On April 15, 2016, the Company reached a settlement in principle related to this matter for an immaterial amount and on May 11, 2016, the Court entered a stipulated order regarding notice of payment thereof and final dismissal of this matter. A tenth action was filed in the United States District Court for the Middle District of Pennsylvania (the Pennsylvania District Court), asserting a claim for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against all defendants and a claim for violations of Section 20(a) of the Exchange Act against the Individual Defendants and WBA ( Herring v. Rite Aid Corp., et al. ). The Herring complaint alleges, among other things, that Rite Aid and its Board of Directors disseminated an allegedly false and materially misleading proxy. The complaint sought to enjoin the shareholder vote on the proposed Merger, a declaration that the proxy was materially false and misleading in violation of federal securities laws, and an award of money damages and attorneys’ and experts’ fees. On January 14 and 16, 2016, respectively, the plaintiff in the Herring action filed a motion for preliminary injunction and a motion for expedited discovery. On January 21, 2016, the Rite Aid Defendants filed a motion to dismiss the Herring complaint. At a hearing held on January 25, 2016, the Pennsylvania District Court orally denied the plaintiff’s motion for expedited discovery and subsequently denied the plaintiff’s motion for preliminary injunction on January 28, 2016. On March 14, 2016, the Pennsylvania District Court appointed Jerry Herring, Don Michael Hussey and Joanna Pauli Hussey as lead plaintiffs for the putative class and approved their selection of Robbins Geller Rudman & Dowd LLP as lead counsel. On April 14, 2016, the Pennsylvania District Court granted the plaintiffs’ unopposed motion to stay the Herring action for all purposes pending consummation of the Merger. The Company has been named in a collective and class action lawsuit, Indergit v. Rite Aid Corporation et al. pending in the United States District Court for the Southern District of New York, filed purportedly on behalf of current and former store managers working in the Company’s stores at various locations around the country. The lawsuit alleges that the Company failed to pay overtime to store managers as required under the FLSA and under certain New York state statutes. The lawsuit also seeks other relief, including liquidated damages, punitive damages, attorneys’ fees, costs and injunctive relief arising out of state and federal claims for overtime pay. On April 2, 2010, the Court conditionally certified a nationwide collective group of individuals who worked for the Company as store managers since March 31, 2007. The Court ordered that Notice of the Indergit action be sent to the purported members of the collective group (approximately 7,000 current and former store managers) and approximately 1,550 joined the Indergit action. Discovery as to certification issues has been completed. On September 26, 2013, the Court granted Rule 23 class certification of the New York store manager claims as to liability only, but denied it as to damages, and denied the Company’s motion for decertification of the nationwide collective action claims. The Company filed a motion seeking reconsideration of the Court’s September 26, 2013 decision which motion was denied in June 2014. The Company subsequently filed a petition for an interlocutory appeal of the Court’s September 26, 2013 ruling with the U. S. Court of Appeals for the Second Circuit which petition was denied in September 2014. Notice of the Rule 23 class certification as to liability only has been sent to approximately 1,750 current and former store managers in the state of New York. Discovery related to the merits of the claims is ongoing. At this time, the Company is not able to either predict the outcome of this lawsuit or estimate a potential range of loss with respect to the lawsuit. The Company’s management believes, however, that this lawsuit is without merit and is vigorously defending this lawsuit. The Company is currently a defendant in several lawsuits filed in state courts in California alleging violations of California wage and hour laws, rules and regulations pertaining primarily to failure to pay overtime, failure to pay for missed meals and rest periods, failure to reimburse business expenses and failure to provide employee seating (the “California Cases”). The lawsuits pertaining to failure to reimburse business expenses and provide employee seating purport to be class actions and seek substantial damages. The single-plaintiff and multi-plaintiff lawsuits regarding failure to pay overtime and failure to pay for missed meals and rest periods, in the aggregate, seek substantial damages. The Company has aggressively challenged the merits of the lawsuits and, where applicable, the allegations that the cases should be certified as class or representative actions. With respect to cases involving pharmacist meal and rest periods ( Chase and Scherwin v. Rite Aid Corporation pending in Los Angeles County Superior Court and Kyle v. Rite Aid Corporation pending in Sacramento County Superior Court), during the period ended March 1, 2014, the Company recorded a legal accrual with respect to these matters. The Company settled the lawsuit for $9.0 million. Following final approval by the Court earlier in the year, all settlement funds were disbursed in March 2016. In the employee seating case ( Hall v. Rite Aid Corporation, San Diego County Superior Court ), the Court, in October 2011, granted the plaintiff’s motion for class certification. The Company filed its motion for decertification, which motion was granted in November 2012. Plaintiff subsequently appealed the Court’s order which appeal was granted in May 2014. The Company filed a petition for review of the appellate court’s decision with the California Supreme Court, which petition was denied in August 2014. Proceedings in the Hall case are stayed pending a decision by the California Supreme Court in two similar cases. That decision was rendered on April 4, 2016. The Company is conferring with counsel about next steps in the litigation. A further status conference in the case is scheduled for September 16, 2016. With respect to the California Cases (other than Chase and Scherwin and Kyle) , the Company, at this time, is not able to predict either the outcome of these lawsuits or estimate a potential range of loss with respect to said lawsuits. The Company was served with a Civil Investigative Demand Subpoena Duces Tecum dated August 26, 2011 by the United States Attorney’s Office for the Eastern District of Michigan. The subpoena requests records regarding the relationship of Rite Aid’s Rx Savings Program to the reporting of usual and customary charges to publicly funded health programs. In connection with the same investigation, the Company was served with a Civil Subpoena Duces Tecum dated February 22, 2013 by the State of Indiana Office of the Attorney General requesting additional information regarding both Rite Aid’s Rx Savings Program and usual and customary charges. The Company has responded to both of the subpoenas. To enable the parties to discuss a possible resolution, the Medicaid Fraud Control Units of the several states, commonwealths and the District of Columbia and Rite Aid have entered into an agreement tolling the statute of limitations until October 7, 2015. The parties agreed to extend the tolling agreement until April 7, 2016. At this stage of the proceedings, Rite Aid is unable to predict the outcome of any review by the government of such information. On April 26, 2012, the Company received an administrative subpoena from the U.S. Drug Enforcement Administration (“DEA”), Albany, New York District Office, requesting information regarding the Company’s sale of products containing pseudoephedrine (“PSE”). In April 2012, it also received a communication from the U.S. Attorney’s Office (“USAO”) for the Northern District of New York concerning an investigation of possible civil violations of the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”). Additional subpoenas were issued in 2013, 2014, and 2015 seeking broader documentation regarding PSE sales and recordkeeping requirements. Assistant U.S. Attorneys from the Northern and Eastern Districts of New York and the Southern District of West Virginia are currently investigating, but no charges have been filed. On September 2, 2015, March 11, 2016, April 29, 2016, and June 9, 2016 the Company received grand jury subpoenas from the U.S. District Court for the Southern District of West Virginia seeking additional information in connection with the investigation of violations of the CMEA and/or the Controlled Substances Act (“CSA”). Violations of the CMEA or the CSA could result in the imposition of administrative, civil and/or criminal penalties against the Company. The Company is cooperating with the government and continues to provide information responsive to the subpoenas. The Company has entered into a tolling agreement with the USAOs in the Northern and Eastern Districts of New York and entered into a separate tolling agreement with the USAO in the Southern District of West Virginia. Discussions are underway to resolve these matters with those USAOs, but whether an agreement can be reached and on what terms is uncertain. While the Company’s management cannot predict the outcome of these matters, it is possible that the Company’s results of operations or cash flows could be materially affected by an unfavorable resolution. At this stage of the investigation, Rite Aid is unable to predict the outcome of the investigation. In January 2013, the DEA, Los Angeles District Office, served an administrative subpoena on the Company seeking documents related to prescriptions by a certain prescriber. The USAO, Central District of California, also contacted the Company about a related investigation into allegations that Rite Aid pharmacies filled certain controlled substance prescriptions for a number of practitioners after their DEA registrations had expired or otherwise become invalid in violation of the federal Controlled Substances Act and DEA regulations. The Company responded to the administrative subpoena and subsequent informal requests for information from the USAO. The Company met with the USAO and DEA in January 2014 and is involved in ongoing discussions with the government regarding this matter. The Company has entered into a tolling agreement with the USAO. The Company recorded a legal accrual during the period ended March 1, 2014, which was revised during the period ending August 29, 2015. However, Rite Aid cannot predict at this time whether an agreement can be reached and the terms of any agreement. The Company was served with a Civil Investigative Demand (“CID”) dated June 21, 2013 by the USAO for the Eastern District of California and the Attorney General’s Office of the State of California (the “AG”). The CID requested records and responses to interrogatories regarding Rite Aid’s Drug Utilization Review and prescription dispensing protocol and the dispensing of drugs designated “Code 1” by the State of California. The Company produced responsive documents and interrogatory responses to the USAO and AG. The Company and the government are in the process of evaluating the government’s allegations and documents produced and have been exchanging position letters concerning the merits of the government’s claims. At this stage, Rite Aid is unable to predict the outcome of the investigation. In addition to the above described matters, the Company is subject from time to time to various claims and lawsuits and governmental investigations arising in the ordinary course of business. While the Company’s management cannot predict the outcome of any of the claims, the Company’s management does not believe that the outcome of any of these legal matters will be material to the Company’s consolidated financial position. It is possible, however, that the Company’s results of operations or cash flows could be materially affected by an unfavorable resolution of pending litigation or contingencies. Contingencies The California Department of Health Care Services (“DHCS”), the agency responsible for administering the State of California Medicaid program, implemented retroactive reimbursement rate reductions effective June 1, 2011, impacting the medical provider community in California, including pharmacies. Numerous medical providers, including representatives of both chain and independent pharmacies, filed suits against DHCS in Federal District Court in California and obtained preliminary injunctions against the rate cuts, subject to a trial on the merits. DHCS appealed the preliminary injunctions to the Ninth Circuit Court of Appeals, which Court vacated the injunctions. Based upon the actions of DHCS and the decision of the Appeals Court, the Company recorded an appropriate accrual. In January 2014, the Center for Medicare and Medicaid Services approved a state plan amendment that excluded certain drugs from the retroactive reimbursement rate reductions effective March 31, 2012. Accordingly, the Company adjusted its accrual during that fiscal year to take into account this exclusion. In December 2015, DHCS provided notice that it adjudicated all claims related to this retroactive reimbursement and the Company has adjusted its accrual to the total amount that will be recouped by DHCS. |
Guarantor and Non-Guarantor Con
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | 3 Months Ended |
May 28, 2016 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | 15. Guarantor and Non-Guarantor Condensed Consolidating Financial Information Rite Aid Corporation conducts the majority of its business through its subsidiaries. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes (the “Subsidiary Guarantors”). Additionally, prior to the Acquisition, the subsidiaries, including joint ventures, that did not guarantee the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes, were minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented for those periods. Condensed consolidating financial information for the Company, its Subsidiary Guarantors and non-guarantor subsidiaries, is presented for periods subsequent to the Acquisition. For the purposes of preparing the information below, Rite Aid Corporation uses the equity method to account for its investment in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in the non-guarantor subsidiaries. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several. Presented below is condensed consolidating financial information for Rite Aid Corporation, the Subsidiary Guarantors, and the non-guarantor subsidiaries at May 28, 2016, February 27, 2016, and for the thirteen week period ended May 28, 2016. Separate financial statements for Subsidiary Guarantors are not presented. Rite Aid Corporation Condensed Consolidating Balance Sheet May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $1,020,147, $0, $0, and $1,020,147 — — — Prepaid expenses and other current assets — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Rite Aid Corporation Condensed Consolidating Balance Sheet May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity ) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Balance Sheet February 27, 2016 Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $1,006,396, $0, $0, and $1,006,396 — — — Prepaid expenses and other current assets — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Rite Aid Corporation Condensed Consolidating Balance Sheet February 27, 2016 Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity ) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — )(a) Lease termination and impairment expenses — — — Interest expense (income) ) — Loss on sale of assets, net — — — Equity in earnings of subsidiaries, net of tax ) — (b) — (Loss) income before income taxes ) ) ) ) Income tax benefit — ) ) — ) Net (loss) income $ ) $ $ ) $ ) $ ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ ) $ $ ) $ ) $ ) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from dispositions of assets and investments — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net payments on revolver ) — — — ) Principal payments on long-term debt — ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Excess tax benefit on stock options and restricted stock — — — Intercompany activity — — ) — Net cash provided by (used in) financing activities ) — ) ) Increase in cash and cash equivalents — — Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
May 28, 2016 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended May 28, 2016 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation (“Rite Aid”) and Subsidiaries (together with Rite Aid, the “Company”) Fiscal 2016 10-K. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2014-09 on its financial position, results of operations and cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842) , which is intended to improve financial reporting around leasing transactions. The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment. This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019. The Company is in process of assessing the impact of the adoption of ASU No. 2016-02 on its financial position, results of operations and cash flows. |
Acquisition (Tables)
Acquisition (Tables) | 3 Months Ended |
May 28, 2016 | |
Acquisition | |
Schedule of purchase price allocation | Preliminary purchase price Cash consideration $ Stock consideration Total $ Preliminary purchase price allocation Cash and cash equivalents $ Accounts receivable Inventories Prepaid expenses and other current assets Total current assets Property and equipment Intangible assets(1) Goodwill Other assets Total assets acquired Accounts payable Reinsurance funds held Other current liabilities(2) Total current liabilities Other long term liabilities(3) Total liabilities assumed Net assets acquired $ (1) Intangible assets are recorded at estimated fair value, as determined by management based on available information which includes a preliminary valuation prepared by an independent third party. The fair values assigned to identifiable intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. The major assumptions used in arriving at the estimated identifiable intangible asset values included management’s preliminary estimates of future cash flows, discounted at an appropriate rate of return which are based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. The estimated fair value of intangible assets and related useful lives as included in the preliminary purchase price allocation include: Estimated Fair Value Estimated Useful Life (In Years) Customer relationships $ CMS license Claims adjudication and other developed software Trademarks Backlog Trademarks Indefinite Total $ (2) Other current liabilities includes $116,500 due to TPG under the terms of the Agreement, representing the amounts due to EnvisionRx from CMS, less corresponding amounts due to various reinsurance providers under certain reinsurance programs, for CMS activities that relate to the year ended December 31, 2014. This liability was satisfied with a payment to TPG on November 5, 2015. (3) Primarily relates to deferred tax liabilities. |
Schedule of estimated fair value of intangible assets and related useful lives as included in the preliminary purchase price allocation | Estimated Fair Value Estimated Useful Life (In Years) Customer relationships $ CMS license Claims adjudication and other developed software Trademarks Backlog Trademarks Indefinite Total $ |
Schedule of unaudited pro forma combined financial data | Thirteen Week Periods Ended May 28, 2016 May 30, 2015 Pro forma Pro forma Net revenues as reported $ $ EnvisionRx revenue, prior to the acquisition — Less pre-acquisition intercompany revenue — ) Pro forma combined revenues $ $ Net (loss) income as reported $ ) $ EnvisionRx net income before income taxes, prior to the acquisition — Incremental interest expense on the 6.125% Notes issued on April 2, 2015 — ) Incremental amortization resulting from fair value adjustments of the identifiable intangible assets — ) Transaction costs incurred by both the Company and EnvisionRx — Interest expense incurred by EnvisionRx — Income tax expense relating to pro forma adjustments — ) Pro forma net (loss) income $ ) $ Basic and diluted (loss) income per share $ $ |
(Loss) Income Per Share (Tables
(Loss) Income Per Share (Tables) | 3 Months Ended |
May 28, 2016 | |
(Loss) Income Per Share | |
Schedule of calculation of basic and diluted (loss) income per share | Thirteen Week Period Ended May 28, 2016 May 30, 2015 Numerator for (loss) income per share: (Loss) income attributable to common stockholders—basic and diluted $ ) $ Denominator: Basic weighted average shares Outstanding options and restricted shares, net — Diluted weighted average shares Basic and diluted (loss) income per share $ ) $ |
Lease Termination and Impairm27
Lease Termination and Impairment Charges (Tables) | 3 Months Ended |
May 28, 2016 | |
Lease Termination and Impairment Charges | |
Schedule of amounts relating to lease termination and impairment charges | Thirteen Week Period Ended May 28, 2016 May 30, 2015 Impairment charges $ $ Lease termination charges $ $ |
Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion | Thirteen Week Period Ended May 28, 2016 May 30, 2015 Balance—beginning of period $ $ Provision for present value of noncancellable lease payments of closed stores Changes in assumptions about future sublease income, terminations and changes in interest rates ) Interest accretion Cash payments, net of sublease income ) ) Balance—end of period $ $ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
May 28, 2016 | |
Fair Value Measurements | |
Schedule of fair value of assets measured on non-recurring basis | Level 1 Level 2 Level 3 Total as of May 28, 2016 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ Level 1 Level 2 Level 3 Total as of May 30, 2015 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ |
Goodwill and Other Intangible29
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
May 28, 2016 | |
Goodwill and Other Intangible Assets | |
Summary of the company's finite-lived and indefinitely-lived intangible assets | May 28, 2016 February 27, 2016 Gross Carrying Amount Accumulated Amortization Net Remaining Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Remaining Weighted Average Amortization Period Favorable leases and other $ $ ) $ 8 years $ $ ) $ 8 years Prescription files ) 3 years ) 3 years Customer relationships(a) ) 16 years ) 17 years CMS license ) 24 years ) 25 years Claims adjudication and other developed software ) 6 years ) 7 years Trademarks ) 9 years ) 10 years Backlog ) 2 years ) 3 years Total finite $ $ ) $ $ ) Trademarks — Indefinite — Indefinite Total $ $ ) $ $ $ ) $ (a) —Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows. |
Indebtedness and Credit Agree30
Indebtedness and Credit Agreements (Tables) | 3 Months Ended |
May 28, 2016 | |
Indebtedness and Credit Agreements | |
Summary of indebtedness and lease financing obligations | May 28, 2016 February 27, 2016 Secured Debt: Senior secured revolving credit facility due January 2020 ($2,080,000 and $2,100,000 face value less unamortized debt issuance costs of $31,699 and $33,903) $ $ Tranche 1 Term Loan (second lien) due August 2020 ($470,000 face value less unamortized debt issuance costs of $5,108 and $5,414) May 28, 2016 February 27, 2016 Tranche 2 Term Loan (second lien) due June 2021 ($500,000 face value less unamortized debt issuance costs of $2,866 and $3,007) Other secured Guaranteed Unsecured Debt: 9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $2,575 and $2,743 and less unamortized debt issuance costs of $9,529 and $10,180) 6.75% senior notes due June 2021 ($810,000 face value less unamortized debt issuance costs of $7,501 and $7,872) 6.125% senior notes due April 2023 ($1,800,000 face value less unamortized debt issuance costs of $29,274 and $30,343) Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,752 and $1,794) 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $821 and $837) Lease financing obligations Total debt Current maturities of long-term debt and lease financing obligations ) ) Long-term debt and lease financing obligations, less current maturities $ $ |
Reclassifications from Accumu31
Reclassifications from Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
May 28, 2016 | |
Reclassifications from Accumulated Other Comprehensive Loss | |
Summary of components of accumulated other comprehensive loss and the changes in balances of each component of accumulated other comprehensive loss, net of tax | Thirteen week period ended May 28, 2016 Thirteen week period ended May 30, 2015 Defined benefit pension plans Accumulated other comprehensive loss Defined benefit pension plans Accumulated other comprehensive loss Accumulated other comprehensive loss Balance—beginning of period $ ) $ ) $ ) $ ) Amounts reclassified from accumulated other comprehensive loss to net income, net of $451 and $398 tax expense Balance—end of period $ ) $ ) $ ) $ ) |
Summary of effects on net income of significant amounts classified out of each component of accumulated other comprehensive loss | Thirteen Week Periods Ended May 28, 2016 and May 30, 2015 Amount reclassified from accumulated other comprehensive loss Details about accumulated other comprehensive loss components May 28, 2016 May 30, 2015 Affected line item in the condensed consolidated statements of operations Defined benefit pension plans Amortization of unrecognized prior service cost(a) $ — $ ) Selling, general and administrative expenses Amortization of unrecognized net loss(a) ) ) Selling, general and administrative expenses ) ) Total before income tax expense Income tax expense $ ) $ ) Net of income tax expense (a) See Note 12, Retirement Plans for additional details. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
May 28, 2016 | |
Retirement Plans | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Pension Plan Nonqualified Executive Retirement Plans Thirteen Week Period Ended May 28, 2016 May 30, 2015 May 28, 2016 May 30, 2015 Service cost $ $ $ — $ — Interest cost Expected return on plan assets ) ) — — Amortization of unrecognized prior service cost — — — Amortization of unrecognized net loss — — Net pension expense $ $ $ $ |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
May 28, 2016 | |
Segment Reporting | |
Schedule of reconciliation of the company's business segments to the condensed consolidated financial statements | Retail Pharmacy Pharmacy Services Intersegment Eliminations(1) Consolidated May 28, 2016: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — May 30, 2015: Revenues $ $ — $ — $ Gross Profit — — Adjusted EBITDA(2) — — (1) Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis. (2) See “Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. |
Schedule of reconciliation of net (loss) income to Adjusted EBITDA | Thirteen Week Period Ended May 28, 2016 May 30, 2015 (dollars in thousands) Net (loss) income $ ) $ Interest expense Income tax (benefit) expense ) Depreciation and amortization expense LIFO charge Lease termination and impairment charges Other Adjusted EBITDA $ $ |
Schedule of reconciliation of balance sheet information for the Company's reportable segments | Retail Pharmacy Pharmacy Services Eliminations(2) Consolidated May 28, 2016: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — February 27, 2016: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — (2) As of May 28, 2016 and February 27, 2016, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $118,991 and $116,027, respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $20,042 and $23,697, respectively, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. |
Guarantor and Non-Guarantor C34
Guarantor and Non-Guarantor Condensed Consolidating Financial Information (Tables) | 3 Months Ended |
May 28, 2016 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Schedule of condensed consolidated balance sheet | Rite Aid Corporation Condensed Consolidating Balance Sheet May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $1,020,147, $0, $0, and $1,020,147 — — — Prepaid expenses and other current assets — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Rite Aid Corporation Condensed Consolidating Balance Sheet May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity ) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Balance Sheet February 27, 2016 Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $1,006,396, $0, $0, and $1,006,396 — — — Prepaid expenses and other current assets — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Rite Aid Corporation Condensed Consolidating Balance Sheet February 27, 2016 Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity ) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. |
Schedule of condensed consolidated statements of operations | Rite Aid Corporation Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — )(a) Lease termination and impairment expenses — — — Interest expense (income) ) — Loss on sale of assets, net — — — Equity in earnings of subsidiaries, net of tax ) — (b) — (Loss) income before income taxes ) ) ) ) Income tax benefit — ) ) — ) Net (loss) income $ ) $ $ ) $ ) $ ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ ) $ $ ) $ ) $ ) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. |
Schedule of condensed consolidated statements of cash flows | Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended May 28, 2016 (unaudited) Rite Aid Corporation (Parent Company Only) Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from dispositions of assets and investments — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net payments on revolver ) — — — ) Principal payments on long-term debt — ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Excess tax benefit on stock options and restricted stock — — — Intercompany activity — — ) — Net cash provided by (used in) financing activities ) — ) ) Increase in cash and cash equivalents — — Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ |
Acquisition (Details)
Acquisition (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Nov. 05, 2015 | Jun. 24, 2015 | May 28, 2016 | May 30, 2015 | Feb. 27, 2016 | Apr. 02, 2015 |
Preliminary purchase price allocation | ||||||
Goodwill | $ 1,713,475 | $ 1,713,475 | ||||
Unaudited pro forma combined financial data | ||||||
Bridge loan commitment fees incurred with the Acquisition by both the Company and EnvisionRx | 15,375 | |||||
Net revenues | 8,184,181 | $ 6,647,561 | ||||
Less pre-acquisition intercompany revenue | (79,899) | |||||
Pro forma combined revenues | 8,184,181 | 7,939,139 | ||||
Income before income taxes | (10,897) | 31,277 | ||||
Net (loss) income | (4,588) | 18,836 | ||||
Incremental interest expense on the 6.125% Notes issued on April 2, 2015 | (9,617) | |||||
Incremental amortization resulting from fair value adjustments of the identifiable intangible assets | (10,988) | |||||
Transaction costs incurred by both the Company and EnvisionRx | 19,110 | |||||
Income tax benefit (expense) relating to pro forma adjustments | (11,302) | |||||
Pro forma net (loss) income | $ (4,588) | $ 35,372 | ||||
Basic and diluted (loss) income per share (in dollars per share) | $ 0 | $ 0.03 | ||||
Pharmacy Services | ||||||
Preliminary purchase price allocation | ||||||
Goodwill | $ 1,637,351 | |||||
Amount of goodwill deductible for tax purpose | $ 1,360,156 | |||||
6.125% senior notes due 2023 | ||||||
Acquisitions | ||||||
Principal amount of debt | $ 1,800,000 | $ 1,800,000 | ||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | ||||
EnvisionRx | ||||||
Acquisitions | ||||||
Ownership interest (as a percent) | 100.00% | |||||
Stock consideration (in shares) | 27,754 | |||||
Share price | $ 8.68 | |||||
Preliminary purchase price | ||||||
Cash consideration | $ 116,500 | $ 1,882,211 | ||||
Stock consideration | 240,907 | |||||
Total | 2,123,118 | |||||
Preliminary purchase price allocation | ||||||
Cash and cash equivalents | 103,834 | |||||
Accounts receivable | 896,473 | |||||
Inventories | 7,276 | |||||
Prepaid expenses and other current assets | 13,386 | |||||
Total current assets | 1,020,969 | |||||
Property and equipment | 13,196 | |||||
Intangible assets(1) | 646,600 | |||||
Goodwill | 1,637,351 | |||||
Other assets | 7,219 | |||||
Total assets acquired | 3,325,335 | |||||
Accounts payable | 491,672 | |||||
Reinsurance funds held | 381,225 | |||||
Other current liabilities(2) | 216,937 | |||||
Total current liabilities | 1,089,834 | |||||
Other long term liabilities(3) | 112,383 | |||||
Total liabilities assumed | 1,202,217 | |||||
Net assets acquired | 2,123,118 | |||||
Amount due under the terms of agreement | 116,500 | |||||
Acquisition costs | $ 6 | $ 17,459 | ||||
EnvisionRx | Trademarks | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of indefinite lived intangible assets | 33,500 | |||||
EnvisionRx | Customer relationships | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of Finite lived intangible assets | $ 465,000 | |||||
Estimated Useful Life | 17 years | |||||
EnvisionRx | CMS license | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of Finite lived intangible assets | $ 57,500 | |||||
Estimated Useful Life | 25 years | |||||
EnvisionRx | Claims adjudication and other developed software | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of Finite lived intangible assets | $ 59,000 | |||||
Estimated Useful Life | 7 years | |||||
EnvisionRx | Trademarks | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of Finite lived intangible assets | $ 20,100 | |||||
Estimated Useful Life | 10 years | |||||
EnvisionRx | Backlog | ||||||
Preliminary purchase price allocation | ||||||
Estimated Fair Value of Finite lived intangible assets | $ 11,500 | |||||
Estimated Useful Life | 3 years | |||||
EnvisionRx | 6.125% senior notes due 2023 | ||||||
Acquisitions | ||||||
Principal amount of debt | $ 1,800,000 | |||||
Debt instrument, stated interest rate (as a percent) | 6.125% | |||||
EnvisionRx | ||||||
Unaudited pro forma combined financial data | ||||||
Net revenues | 1,371,477 | |||||
Income before income taxes | 11,238 | |||||
Interest expense incurred by EnvisionRx | $ 18,095 |
Pending Merger (Details)
Pending Merger (Details) - $ / shares | May 28, 2016 | Feb. 27, 2016 | Feb. 04, 2016 | Oct. 27, 2015 |
Pending Merger | ||||
Ownership interest (as a percent) | 100.00% | |||
Shareholders voted in favor of merger(as a percent) | 97.00% | |||
Holders of outstanding common stock entitled to vote as of the record date who approved the merger agreement ( as a percent) | 72.00% | |||
Quorum percentage of outstanding shares of common stock | 74.00% | |||
Par value of common stock (in dollars per share) | $ 1 | $ 1 | $ 1 | |
Rite Aid | ||||
Pending Merger | ||||
Ownership interest (as a percent) | 100.00% | |||
WBA | Rite Aid | ||||
Pending Merger | ||||
Ownership interest (as a percent) | 100.00% | |||
Price of shares (in dollars per share) | $ 9 |
(Loss) Income Per Share (Detail
(Loss) Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Numerator for (loss) income per share: | ||
(Loss) income attributable to common stockholders-basic | $ (4,588) | $ 18,836 |
(Loss) income attributable to common stockholders-diluted | $ (4,588) | $ 18,836 |
Denominator: | ||
Basic weighted average shares | 1,042,437 | 986,691 |
Outstanding options and restricted shares, net (in shares) | 22,461 | |
Diluted weighted average shares | 1,042,437 | 1,009,152 |
Basic and diluted (loss) income per share (in dollars per share) | $ 0 | $ 0.02 |
Convertible notes due 2015 | ||
Convertible notes amount | $ 64,089 | |
Stock options | ||
Antidilutive securities excluded from computation of earnings per share | ||
Shares excluded from the computation of diluted income (loss) per share | 36,860 | 0 |
Restricted shares | ||
Antidilutive securities excluded from computation of earnings per share | ||
Shares excluded from the computation of diluted income (loss) per share | 4,742 | 0 |
8.5% convertible notes due May 2015 | ||
Convertible notes due 2015 | ||
Convertible notes amount | $ 64,089 | |
Debt instrument, stated interest rate (as a percent) | 8.50% | 8.50% |
Shares issued | 24,762 |
Lease Termination and Impairm38
Lease Termination and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Lease termination and impairment charges | ||
Lease termination and impairment charges | $ 5,781 | $ 5,022 |
Impairment charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 619 | 273 |
Lease termination charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 5,162 | 4,749 |
Closed store and distribution center charges | ||
Balance-beginning of period | 208,421 | 241,047 |
Provision for present value of noncancellable lease payments of closed stores | 622 | 1,546 |
Changes in assumptions about future sublease income, terminations and changes in interest rates | 811 | (571) |
Interest accretion | 3,778 | 4,303 |
Cash payments, net of sublease income | (14,642) | (15,522) |
Balance-end of period | $ 198,990 | $ 230,803 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 28, 2016 | May 30, 2015 | Feb. 27, 2016 | |
Non-financial assets measured on a non-recurring basis | |||
Outstanding derivative financial instruments | $ 0 | $ 0 | |
Other assets | |||
Non-financial assets measured on a non-recurring basis | |||
Investment at amortized cost | 6,567 | ||
Nonrecurring basis | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of long-lived assets | 1,051 | $ 1,289 | |
Impairment charges | 619 | 273 | |
Nonrecurring basis | Level 1 | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of total long-term indebtedness | 6,899,115 | ||
Estimated fair value of total long-term indebtedness | 7,228,550 | ||
Nonrecurring basis | Level 3 | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Total | 432 | 1,016 | |
Fair value of Long-lived assets held for use | 432 | 1,016 | |
Nonrecurring basis | Fair Value | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Total | 432 | 1,016 | |
Fair value of Long-lived assets held for use | $ 432 | $ 1,016 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 28, 2016 | May 30, 2015 | Feb. 27, 2016 | |
Income Taxes | |||
Income tax (benefit) expense | $ (6,309) | $ 12,441 | |
Estimated effective tax rate (as a percent) | 57.90% | 39.80% | |
Increase in estimated effective tax rate (as a percent) | 13.30% | ||
Valuation allowance against net deferred tax assets | $ 210,074 | $ 212,023 |
Medicare Part D (Details)
Medicare Part D (Details) - USD ($) $ in Thousands | May 28, 2016 | Mar. 31, 2016 |
Medicare Part D | ||
Accounts receivable, net | $ 319,976 | |
Accrued salaries, wages and other current liabilities | ||
Medicare Part D | ||
Liabilities under reinsurance contracts | $ 152,970 | |
EIC | ||
Medicare Part D | ||
Minimum amount of capital and surplus required by regulatory requirements | $ 25,014 |
Goodwill and Other Intangible42
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
May 28, 2016 | Feb. 27, 2016 | |
Goodwill and Other Intangible Assets | ||
Goodwill impairment charges | $ 0 | $ 0 |
Impairment of indefinite lived intangible assets | 0 | $ 0 |
Carrying amount of goodwill | ||
Change in goodwill resulting from changes to the preliminary purchase price allocation (see Note 2. Acquisition) | $ 0 |
Goodwill and Other Intangible43
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
May 28, 2016 | May 30, 2015 | Feb. 27, 2016 | |
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 2,833,297 | $ 2,819,815 | |
Accumulated Amortization | (1,902,088) | (1,848,936) | |
Net | 931,209 | 970,879 | |
Gross Carrying Amount of Indefinite Lived | 33,500 | ||
Gross Carrying Amount, Total | 2,866,797 | 2,853,315 | |
Net, Total | 964,709 | 1,004,379 | |
Unfavorable lease intangibles | 45,525 | 46,947 | |
Amortization expense for intangible assets and liabilities | 55,503 | $ 31,941 | |
Anticipated annual amortization expense for intangible assets and liabilities | |||
2,017 | 214,640 | ||
2,018 | 172,135 | ||
2,019 | 134,730 | ||
2,020 | 105,199 | ||
2,021 | 72,517 | ||
Trademarks | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Indefinite Lived | 33,500 | 33,500 | |
Favorable leases and other | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | 665,143 | 665,197 | |
Accumulated Amortization | (514,173) | (507,776) | |
Net | $ 150,970 | $ 157,421 | |
Remaining Weighted Average Amortization Period | 8 years | 8 years | |
Prescription files | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 1,555,054 | $ 1,541,518 | |
Accumulated Amortization | (1,312,073) | (1,285,633) | |
Net | $ 242,981 | $ 255,885 | |
Remaining Weighted Average Amortization Period | 3 years | 3 years | |
Customer relationships | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 465,000 | $ 465,000 | |
Accumulated Amortization | (60,374) | (44,203) | |
Net | $ 404,626 | $ 420,797 | |
Remaining Weighted Average Amortization Period | 16 years | 17 years | |
CMS license | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 57,500 | $ 57,500 | |
Accumulated Amortization | (2,147) | (1,572) | |
Net | $ 55,353 | $ 55,928 | |
Remaining Weighted Average Amortization Period | 24 years | 25 years | |
Claims adjudication and other developed software | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 59,000 | $ 59,000 | |
Accumulated Amortization | (7,867) | (5,760) | |
Net | $ 51,133 | $ 53,240 | |
Remaining Weighted Average Amortization Period | 6 years | 7 years | |
Trademarks | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 20,100 | $ 20,100 | |
Accumulated Amortization | (1,876) | (1,373) | |
Net | $ 18,224 | $ 18,727 | |
Remaining Weighted Average Amortization Period | 9 years | 10 years | |
Backlog | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount of Finite Lived | $ 11,500 | $ 11,500 | |
Accumulated Amortization | (3,578) | (2,619) | |
Net | $ 7,922 | $ 8,881 | |
Remaining Weighted Average Amortization Period | 2 years | 3 years |
Indebtedness and Credit Agree44
Indebtedness and Credit Agreements (Details) shares in Thousands, $ in Thousands | 3 Months Ended | ||||||
May 28, 2016USD ($)loan | May 30, 2015USD ($)shares | Feb. 27, 2016USD ($) | Aug. 15, 2015USD ($) | Apr. 02, 2015USD ($) | Jan. 13, 2015USD ($) | Jan. 12, 2015USD ($) | |
Indebtedness and credit agreements | |||||||
Lease financing obligations | $ 75,287 | $ 79,653 | |||||
Total debt | 6,974,402 | 6,994,136 | |||||
Current maturities of long-term debt and lease financing obligations | (25,640) | (26,848) | |||||
Long-term debt and lease financing obligations, less current maturities | $ 6,948,762 | 6,967,288 | |||||
Convertible notes amount | $ 64,089 | ||||||
Credit facility | |||||||
Number of second priority secured term loan facilities | loan | 2 | ||||||
Ownership interest (as a percent) | 100.00% | ||||||
Maturities | |||||||
Remainder of fiscal 2017 | $ 90 | ||||||
2,018 | 0 | ||||||
2,019 | 0 | ||||||
2,020 | 2,080,000 | ||||||
2,021 | 1,372,000 | ||||||
Thereafter | 3,533,000 | ||||||
Senior secured credit facility | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | 3,010,417 | 3,027,766 | |||||
Senior secured revolving credit facility due January 2020 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | 2,048,301 | 2,066,097 | |||||
Principal amount of debt | 2,080,000 | 2,100,000 | |||||
Unamortized debt issuance costs | 31,699 | 33,903 | |||||
Credit facility | |||||||
Maximum borrowing capacity | 3,000,000 | $ 3,700,000 | $ 3,000,000 | $ 1,795,000 | |||
Outstanding borrowings | 2,080,000 | ||||||
Letters of credit outstanding | 69,301 | ||||||
Additional borrowing capacity | 1,550,699 | ||||||
Amount of debt allowed to be outstanding | 1,500,000 | ||||||
Amount of debt allowed to be outstanding related to Pending Acquisition | 1,800,000 | ||||||
Threshold amount of debt | $ 750,000 | ||||||
Number of days relating to debt threshold | 90 days | ||||||
Period allowed for extensions on customary terms | 90 days | ||||||
Senior secured revolving credit facility due January 2020 | Minimum | |||||||
Credit facility | |||||||
Percentage of fee payable on daily unused revolver availability | 0.25% | ||||||
Additional borrowing capacity | $ 365,000 | ||||||
Threshold availability on the thirtieth consecutive calendar day | $ 250,000 | ||||||
Fixed charge coverage ratio | 1 | ||||||
Senior secured revolving credit facility due January 2020 | Maximum | |||||||
Credit facility | |||||||
Percentage of fee payable on daily unused revolver availability | 0.375% | ||||||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | $ 200,000 | ||||||
Threshold availability on the third consecutive business day | $ 250,000 | ||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Minimum | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 1.50% | ||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Maximum | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 2.00% | ||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Minimum | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 0.50% | ||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Maximum | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 1.00% | ||||||
Tranche 7 Term Loan due February 2020 | |||||||
Credit facility | |||||||
Amount of debt repurchased | $ 1,143,650 | ||||||
8.00% senior secured notes (senior lien) due August 2020 | |||||||
Indebtedness and credit agreements | |||||||
Debt instrument, stated interest rate (as a percent) | 8.00% | 8.00% | |||||
Tranche 1 Term Loan (second lien) due August 2020 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 464,892 | 464,586 | |||||
Principal amount of debt | 470,000 | 470,000 | |||||
Unamortized debt issuance costs | $ 5,108 | 5,414 | |||||
Tranche 1 Term Loan (second lien) due August 2020 | LIBOR | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 4.75% | ||||||
LIBOR floor (as a percent) | 1.00% | ||||||
Tranche 1 Term Loan (second lien) due August 2020 | Citibank's base rate | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 3.75% | ||||||
Tranche 2 Term Loan (second lien) due June 2021 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 497,134 | 496,993 | |||||
Principal amount of debt | 500,000 | 500,000 | |||||
Unamortized debt issuance costs | $ 2,866 | 3,007 | |||||
Tranche 2 Term Loan (second lien) due June 2021 | LIBOR | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 3.875% | ||||||
LIBOR floor (as a percent) | 1.00% | ||||||
Tranche 2 Term Loan (second lien) due June 2021 | Citibank's base rate | |||||||
Credit facility | |||||||
Percentage points added to the reference rate | 2.875% | ||||||
Other secured | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 90 | 90 | |||||
Unsecured Guaranteed Debt | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | 3,468,271 | 3,466,348 | |||||
9.25% senior notes due March 2020 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | 895,046 | 894,563 | |||||
Principal amount of debt | 902,000 | 902,000 | |||||
Unamortized debt issuance costs | 9,529 | 10,180 | |||||
Unamortized premium | $ 2,575 | $ 2,743 | |||||
Debt instrument, stated interest rate (as a percent) | 9.25% | 9.25% | |||||
6.75% senior notes due June 2021 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 802,499 | $ 802,128 | |||||
Principal amount of debt | 810,000 | 810,000 | |||||
Unamortized debt issuance costs | $ 7,501 | $ 7,872 | |||||
Debt instrument, stated interest rate (as a percent) | 6.75% | 6.75% | |||||
6.125% senior notes due 2023 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 1,770,726 | $ 1,769,657 | |||||
Principal amount of debt | 1,800,000 | 1,800,000 | |||||
Unamortized debt issuance costs | $ 29,274 | $ 30,343 | |||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | |||||
Unsecured Unguaranteed Debt | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 420,427 | $ 420,369 | |||||
8.5% convertible notes due May 2015 | |||||||
Indebtedness and credit agreements | |||||||
Debt instrument, stated interest rate (as a percent) | 8.50% | 8.50% | |||||
Convertible notes amount | $ 64,089 | ||||||
Shares issued for EnvisionRx acquisition (in shares) | shares | 24,762 | ||||||
Face amount of debt repurchased | $ 79 | ||||||
7.7% notes due February 2027 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 293,248 | 293,206 | |||||
Principal amount of debt | 295,000 | 295,000 | |||||
Unamortized debt issuance costs | $ 1,752 | $ 1,794 | |||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | |||||
6.875% fixed-rate senior notes due December 2028 | |||||||
Indebtedness and credit agreements | |||||||
Long-term debt | $ 127,179 | $ 127,163 | |||||
Principal amount of debt | 128,000 | 128,000 | |||||
Unamortized debt issuance costs | $ 821 | $ 837 | |||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | |||||
EnvisionRx | 6.125% senior notes due 2023 | |||||||
Indebtedness and credit agreements | |||||||
Principal amount of debt | $ 1,800,000 | ||||||
Debt instrument, stated interest rate (as a percent) | 6.125% |
Reclassifications from Accumu45
Reclassifications from Accumulated Other Comprehensive Loss - Change in Components (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Accumulated other comprehensive loss | ||
Balance - beginning of period | $ 581,428 | |
Balance - end of period | 591,504 | |
Accumulated other comprehensive loss | ||
Accumulated other comprehensive loss | ||
Balance - beginning of period | (47,781) | $ (45,850) |
Amounts reclassified from accumulated other comprehensive loss to net income, net of $451 and $398 tax expense | 681 | 597 |
Balance - end of period | (47,100) | (45,253) |
Defined benefit pension plans | ||
Accumulated other comprehensive loss | ||
Balance - beginning of period | (47,781) | (45,850) |
Amounts reclassified from accumulated other comprehensive loss to net income, net of $451 and $398 tax expense | 681 | 597 |
Balance - end of period | (47,100) | (45,253) |
Amounts reclassified from accumulated other comprehensive loss to net income, tax expense | $ 451 | $ 398 |
Reclassifications from Accumu46
Reclassifications from Accumulated Other Comprehensive Loss - Impact on Net Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Defined benefit pension plans | ||
Reclassification from accumulated other comprehensive loss | ||
Net of income tax expense | $ (681) | $ (597) |
Defined benefit pension plans | Reclassification from accumulated other comprehensive loss | ||
Reclassification from accumulated other comprehensive loss | ||
Total before income tax expense | (1,132) | (995) |
Income tax expense | 451 | 398 |
Prior service cost | Reclassification from accumulated other comprehensive loss | Selling, general and administrative expenses | ||
Reclassification from accumulated other comprehensive loss | ||
Total before income tax expense | (17) | |
Unrecognized net loss | Reclassification from accumulated other comprehensive loss | Selling, general and administrative expenses | ||
Reclassification from accumulated other comprehensive loss | ||
Total before income tax expense | $ (1,132) | $ (978) |
Retirement Plans (Details)
Retirement Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Defined Benefit Pension Plan | ||
Net periodic pension expense | ||
Service cost | $ 292 | $ 512 |
Interest cost | 1,621 | 1,633 |
Expected return on plan assets | (1,142) | (1,593) |
Amortization of unrecognized prior service cost | 17 | |
Amortization of unrecognized net loss | 1,132 | 978 |
Net pension expense | 1,903 | 1,547 |
Employer contributions | 0 | |
Expected employer contribution during the remainder of fiscal year | 0 | |
Nonqualified Executive Retirement Plans | ||
Net periodic pension expense | ||
Interest cost | 109 | 119 |
Net pension expense | 109 | $ 119 |
Employer contributions | 362 | |
Expected employer contribution during the remainder of fiscal year | $ 1,142 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | Jun. 24, 2015USD ($)segment | Jun. 23, 2015segment | May 28, 2016USD ($) | May 30, 2015USD ($) | Feb. 27, 2016USD ($) |
Segment Reporting | |||||
Number of reportable segments | segment | 2 | 1 | |||
Revenues | $ 8,184,181 | $ 6,647,561 | |||
Gross Profit | 1,894,300 | 1,859,530 | |||
Adjusted EBITDA | 286,002 | 299,263 | |||
Total Assets | 11,254,947 | $ 11,277,010 | |||
Goodwill | 1,713,475 | 1,713,475 | |||
Additions to property and equipment and intangible assets | 122,458 | 669,995 | |||
Accounts receivable | 1,679,166 | 1,601,008 | |||
Pharmacy Services | |||||
Segment Reporting | |||||
Goodwill | $ 1,637,351 | ||||
Operating segments | Retail Pharmacy | |||||
Segment Reporting | |||||
Revenues | 6,675,548 | 6,647,561 | |||
Gross Profit | 1,805,367 | 1,859,530 | |||
Adjusted EBITDA | 244,827 | $ 299,263 | |||
Total Assets | 8,409,623 | 8,468,186 | |||
Goodwill | 76,124 | 76,124 | |||
Additions to property and equipment and intangible assets | 119,780 | 667,719 | |||
Operating segments | Pharmacy Services | |||||
Segment Reporting | |||||
Revenues | 1,602,359 | ||||
Gross Profit | 88,933 | ||||
Adjusted EBITDA | 41,175 | ||||
Total Assets | 2,984,357 | 2,948,548 | |||
Goodwill | 1,637,351 | 1,637,351 | |||
Additions to property and equipment and intangible assets | 2,678 | 2,276 | |||
Intersegment elimination | |||||
Segment Reporting | |||||
Revenues | (93,726) | ||||
Total Assets | (139,033) | (139,724) | |||
Long-term deferred tax liability | (118,991) | (116,027) | |||
Accounts receivable | $ (20,042) | $ (23,697) |
Segment Reporting - Adjusted EB
Segment Reporting - Adjusted EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Segment Reporting | ||
Net (loss) income | $ (4,588) | $ 18,836 |
Interest expense | 105,113 | 123,607 |
Income tax (benefit) expense | (6,309) | 12,441 |
Depreciation and amortization expense | 138,788 | 109,649 |
LIFO charge | 13,751 | 5,987 |
Lease termination and impairment charges | 5,781 | 5,022 |
Other | 33,466 | 23,721 |
Adjusted EBITDA | $ 286,002 | $ 299,263 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 3 Months Ended |
May 28, 2016USD ($)caseStoreManager | |
WBA Merger | |
Commitments and contingencies | |
Number of lawsuits | 10 |
Indergit | |
Commitments and contingencies | |
Number of current and former store managers court ordered notices to be sent | StoreManager | 7,000 |
Number of current and former store managers who joined the action | StoreManager | 1,550 |
Number of current and former store managers to whom notices have been sent | StoreManager | 1,750 |
Chase and Scherwin and Kyle | |
Commitments and contingencies | |
Legal settlement amount | $ | $ 9 |
Hall | |
Commitments and contingencies | |
Number of similar cases | 2 |
DELAWARE | WBA Merger | |
Commitments and contingencies | |
Number of lawsuits | 8 |
PENNSYLVANIA | WBA Merger | |
Commitments and contingencies | |
Number of lawsuits | 1 |
DELAWARE AND PENNSYLVANIA | WBA Merger | |
Commitments and contingencies | |
Number of lawsuits | 9 |
Guarantor and Non-Guarantor C51
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Balance Sheet (Details) - USD ($) $ in Thousands | May 28, 2016 | Feb. 27, 2016 | May 30, 2015 | Feb. 28, 2015 |
Condensed consolidating balance sheet | ||||
Ownership interest (as a percent) | 100.00% | |||
Current assets: | ||||
Cash and cash equivalents | $ 144,840 | $ 124,471 | $ 1,922,129 | $ 115,899 |
Accounts receivable, net | 1,679,166 | 1,601,008 | ||
Inventories, net of LIFO reserve | 2,623,886 | 2,697,104 | ||
Prepaid expenses and other current assets | 107,293 | 128,144 | ||
Total current assets | 4,555,185 | 4,550,727 | ||
Property, plant and equipment, net | 2,257,795 | 2,255,398 | ||
Goodwill | 1,713,475 | 1,713,475 | ||
Other intangibles, net | 964,709 | 1,004,379 | ||
Deferred tax assets | 1,544,890 | 1,539,141 | ||
Other assets | 218,893 | 213,890 | ||
Total assets | 11,254,947 | 11,277,010 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 25,640 | 26,848 | ||
Accounts payable | 1,663,436 | 1,542,797 | ||
Accrued salaries, wages and other current liabilities | 1,290,693 | 1,427,250 | ||
Total current liabilities | 2,979,769 | 2,996,895 | ||
Long-term debt, less current maturities | 6,899,025 | 6,914,393 | ||
Lease financing obligations, less current maturities | 49,737 | 52,895 | ||
Other noncurrent liabilities | 734,912 | 731,399 | ||
Total liabilities | 10,663,443 | 10,695,582 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 591,504 | 581,428 | ||
Total liabilities and stockholders' equity | 11,254,947 | 11,277,010 | ||
Inventories, LIFO reserve (in dollars) | 1,020,147 | 1,006,396 | ||
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||||
Current assets: | ||||
Investment in subsidiaries | 14,940,808 | 14,832,523 | ||
Total assets | 14,940,808 | 14,832,523 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 90 | 90 | ||
Accrued salaries, wages and other current liabilities | 94,102 | 65,743 | ||
Total current liabilities | 94,192 | 65,833 | ||
Long-term debt, less current maturities | 6,899,025 | 6,914,393 | ||
Intercompany payable | 7,356,087 | 7,270,869 | ||
Total liabilities | 14,349,304 | 14,251,095 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 591,504 | 581,428 | ||
Total liabilities and stockholders' equity | 14,940,808 | 14,832,523 | ||
Inventories, LIFO reserve (in dollars) | 0 | 0 | ||
Reportable legal entity | Subsidiary Guarantors | ||||
Current assets: | ||||
Cash and cash equivalents | 105,971 | 90,569 | ||
Accounts receivable, net | 1,354,315 | 1,316,797 | ||
Intercompany receivable | 271,211 | 224,220 | ||
Inventories, net of LIFO reserve | 2,623,886 | 2,697,104 | ||
Prepaid expenses and other current assets | 102,698 | 121,684 | ||
Total current assets | 4,458,081 | 4,450,374 | ||
Property, plant and equipment, net | 2,257,795 | 2,255,398 | ||
Goodwill | 1,713,475 | 1,713,475 | ||
Other intangibles, net | 909,356 | 948,451 | ||
Deferred tax assets | 1,544,890 | 1,539,141 | ||
Investment in subsidiaries | 57,115 | 57,167 | ||
Intercompany receivable | 7,356,087 | 7,270,869 | ||
Other assets | 212,326 | 207,821 | ||
Total assets | 18,509,125 | 18,442,696 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 25,550 | 26,758 | ||
Accounts payable | 1,662,409 | 1,541,984 | ||
Accrued salaries, wages and other current liabilities | 1,112,634 | 1,274,074 | ||
Total current liabilities | 2,800,593 | 2,842,816 | ||
Lease financing obligations, less current maturities | 49,737 | 52,895 | ||
Other noncurrent liabilities | 717,987 | 714,462 | ||
Total liabilities | 3,568,317 | 3,610,173 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 14,940,808 | 14,832,523 | ||
Total liabilities and stockholders' equity | 18,509,125 | 18,442,696 | ||
Inventories, LIFO reserve (in dollars) | 1,020,147 | 1,006,396 | ||
Reportable legal entity | Non-Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and cash equivalents | 38,869 | 33,902 | ||
Accounts receivable, net | 324,851 | 284,211 | ||
Prepaid expenses and other current assets | 4,595 | 6,460 | ||
Total current assets | 368,315 | 324,573 | ||
Other intangibles, net | 55,353 | 55,928 | ||
Other assets | 6,567 | 6,069 | ||
Total assets | 430,235 | 386,570 | ||
Current liabilities: | ||||
Accounts payable | 1,027 | 813 | ||
Intercompany payable | 271,211 | 224,220 | ||
Accrued salaries, wages and other current liabilities | 83,957 | 87,433 | ||
Total current liabilities | 356,195 | 312,466 | ||
Other noncurrent liabilities | 16,925 | 16,937 | ||
Total liabilities | 373,120 | 329,403 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 57,115 | 57,167 | ||
Total liabilities and stockholders' equity | 430,235 | 386,570 | ||
Inventories, LIFO reserve (in dollars) | 0 | 0 | ||
Eliminations | ||||
Current assets: | ||||
Intercompany receivable | (271,211) | (224,220) | ||
Total current assets | (271,211) | (224,220) | ||
Investment in subsidiaries | (14,997,923) | (14,889,690) | ||
Intercompany receivable | (7,356,087) | (7,270,869) | ||
Total assets | (22,625,221) | (22,384,779) | ||
Current liabilities: | ||||
Intercompany payable | (271,211) | (224,220) | ||
Total current liabilities | (271,211) | (224,220) | ||
Intercompany payable | (7,356,087) | (7,270,869) | ||
Total liabilities | (7,627,298) | (7,495,089) | ||
Commitments and contingencies | ||||
Total stockholders' equity | (14,997,923) | (14,889,690) | ||
Total liabilities and stockholders' equity | (22,625,221) | (22,384,779) | ||
Inventories, LIFO reserve (in dollars) | $ 0 | $ 0 |
Guarantor and Non-Guarantor C52
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Condensed consolidated statements of operations | ||
Revenues | $ 8,184,181 | $ 6,647,561 |
Costs and expenses: | ||
Cost of revenues | 6,289,881 | 4,788,031 |
Selling, general and administrative expenses | 1,793,247 | 1,699,585 |
Lease termination and impairment charges | 5,781 | 5,022 |
Interest expense (income) | 105,113 | 123,607 |
Loss on sale of assets, net | 1,056 | 39 |
Total costs and expenses | 8,195,078 | 6,616,284 |
(Loss) income before income taxes | (10,897) | 31,277 |
Income tax benefit | (6,309) | 12,441 |
Net (loss) income | (4,588) | 18,836 |
Total other comprehensive income (loss) | 681 | 597 |
Comprehensive (loss) income | (3,907) | $ 19,433 |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||
Costs and expenses: | ||
Interest expense (income) | 100,448 | |
Equity in earnings of subsidiaries, net of tax | (95,860) | |
Total costs and expenses | 4,588 | |
(Loss) income before income taxes | (4,588) | |
Net (loss) income | (4,588) | |
Total other comprehensive income (loss) | 681 | |
Comprehensive (loss) income | (3,907) | |
Reportable legal entity | Subsidiary Guarantors | ||
Condensed consolidated statements of operations | ||
Revenues | 8,168,192 | |
Costs and expenses: | ||
Cost of revenues | 6,275,447 | |
Selling, general and administrative expenses | 1,791,637 | |
Lease termination and impairment charges | 5,781 | |
Interest expense (income) | 4,666 | |
Loss on sale of assets, net | 1,056 | |
Equity in earnings of subsidiaries, net of tax | 52 | |
Total costs and expenses | 8,078,639 | |
(Loss) income before income taxes | 89,553 | |
Income tax benefit | (6,307) | |
Net (loss) income | 95,860 | |
Total other comprehensive income (loss) | 681 | |
Comprehensive (loss) income | 96,541 | |
Reportable legal entity | Non-Guarantor Subsidiaries | ||
Condensed consolidated statements of operations | ||
Revenues | 58,528 | |
Costs and expenses: | ||
Cost of revenues | 55,846 | |
Selling, general and administrative expenses | 2,737 | |
Interest expense (income) | (1) | |
Total costs and expenses | 58,582 | |
(Loss) income before income taxes | (54) | |
Income tax benefit | (2) | |
Net (loss) income | (52) | |
Comprehensive (loss) income | (52) | |
Eliminations | ||
Condensed consolidated statements of operations | ||
Revenues | (42,539) | |
Costs and expenses: | ||
Cost of revenues | (41,412) | |
Selling, general and administrative expenses | (1,127) | |
Equity in earnings of subsidiaries, net of tax | 95,808 | |
Total costs and expenses | 53,269 | |
(Loss) income before income taxes | (95,808) | |
Net (loss) income | (95,808) | |
Total other comprehensive income (loss) | (681) | |
Comprehensive (loss) income | $ (96,489) |
Guarantor and Non-Guarantor C53
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Cash Flow (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 28, 2016 | May 30, 2015 | |
Operating activities: | ||
Net cash (used in) provided by operating activities | $ 159,944 | $ 367,835 |
Investing activities: | ||
Payments for property, plant and equipment | (106,077) | (141,037) |
Intangible assets acquired | (16,381) | (14,293) |
Proceeds from dispositions of assets and investments | 3,088 | 2,838 |
Net cash used in investing activities | (119,370) | (152,492) |
Financing activities: | ||
Net payments on revolver | (20,000) | (141,000) |
Principal payments on long-term debt | (5,721) | (5,577) |
Change in zero balance cash accounts | 2,262 | (34,275) |
Net proceeds from issuance of common stock | 2,371 | 3,378 |
Excess tax benefit on stock options and restricted stock | 883 | 2,820 |
Net cash (used in) provided by financing activities | (20,205) | 1,590,887 |
Increase in cash and cash equivalents | 20,369 | 1,806,230 |
Cash and cash equivalents, beginning of period | 124,471 | 115,899 |
Cash and cash equivalents, end of period | 144,840 | $ 1,922,129 |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | (67,457) | |
Financing activities: | ||
Net payments on revolver | (20,000) | |
Net proceeds from issuance of common stock | 2,371 | |
Intercompany activity | 85,086 | |
Net cash (used in) provided by financing activities | 67,457 | |
Reportable legal entity | Subsidiary Guarantors | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | 222,434 | |
Investing activities: | ||
Payments for property, plant and equipment | (106,077) | |
Intangible assets acquired | (16,381) | |
Intercompany activity | (85,086) | |
Proceeds from dispositions of assets and investments | 3,088 | |
Net cash used in investing activities | (204,456) | |
Financing activities: | ||
Principal payments on long-term debt | (5,721) | |
Change in zero balance cash accounts | 2,262 | |
Excess tax benefit on stock options and restricted stock | 883 | |
Net cash (used in) provided by financing activities | (2,576) | |
Increase in cash and cash equivalents | 15,402 | |
Cash and cash equivalents, beginning of period | 90,569 | |
Cash and cash equivalents, end of period | 105,971 | |
Reportable legal entity | Non-Guarantor Subsidiaries | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | 4,967 | |
Financing activities: | ||
Increase in cash and cash equivalents | 4,967 | |
Cash and cash equivalents, beginning of period | 33,902 | |
Cash and cash equivalents, end of period | 38,869 | |
Eliminations | ||
Investing activities: | ||
Intercompany activity | 85,086 | |
Net cash used in investing activities | 85,086 | |
Financing activities: | ||
Intercompany activity | (85,086) | |
Net cash (used in) provided by financing activities | $ (85,086) |