Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 29, 2021 | Jun. 23, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | May 29, 2021 | |
Entity File Number | 1-5742 | |
Entity Registrant Name | RITE AID CORP | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 23-1614034 | |
Entity Address, Address Line One | 30 Hunter Lane | |
Entity Address, City or Town | Camp Hill | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 17011 | |
City Area Code | 717 | |
Local Phone Number | 761-2633 | |
Title of 12(b) Security | Common Stock, $1.00 par value | |
Trading Symbol | RAD | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 55,086,812 | |
Current Fiscal Year End Date | --02-26 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000084129 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 118,480 | $ 160,902 |
Accounts receivable, net | 1,612,596 | 1,462,441 |
Inventories, net of LIFO reserve of $481,866 and $485,859 | 1,856,968 | 1,864,890 |
Prepaid expenses and other current assets | 96,908 | 106,941 |
Total current assets | 3,684,952 | 3,595,174 |
Property, plant and equipment, net | 1,074,596 | 1,080,499 |
Operating lease right-of-use asset | 3,013,577 | 3,064,077 |
Goodwill | 1,108,136 | 1,108,136 |
Other intangibles, net | 325,882 | 340,519 |
Deferred tax assets | 14,964 | 14,964 |
Other assets | 129,339 | 132,035 |
Total assets | 9,351,446 | 9,335,404 |
Current liabilities: | ||
Current maturities of long-term debt and lease financing obligations | 7,261 | 6,409 |
Accounts payable | 1,537,469 | 1,437,421 |
Accrued salaries, wages and other current liabilities | 677,151 | 642,364 |
Current portion of operating lease liabilities | 517,602 | 516,752 |
Total current liabilities | 2,739,483 | 2,602,946 |
Long-term debt, less current maturities | 3,014,517 | 3,063,087 |
Long-term operating lease liabilities | 2,771,797 | 2,829,293 |
Lease financing obligations, less current maturities | 16,162 | 16,711 |
Other noncurrent liabilities | 205,507 | 208,213 |
Total liabilities | 8,747,466 | 8,720,250 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 55,093 and 55,143 | 55,093 | 55,143 |
Additional paid-in capital | 5,898,951 | 5,897,168 |
Accumulated deficit | (5,326,160) | (5,313,103) |
Accumulated other comprehensive loss | (23,904) | (24,054) |
Total stockholders' equity | 603,980 | 615,154 |
Total liabilities and stockholders' equity | $ 9,351,446 | $ 9,335,404 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventory, LIFO Reserve | $ 481,866 | $ 485,859 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 75,000 | 75,000 |
Common stock, shares issued | 55,093 | 55,143 |
Common stock, shares outstanding | 55,093 | 55,143 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 6,160,985 | $ 6,027,376 |
Costs and expenses: | ||
Cost of revenues | 4,876,110 | 4,829,057 |
Selling, general and administrative expenses | 1,245,362 | 1,197,147 |
Facility exit and impairment charges | 8,831 | 3,753 |
Intangible asset impairment charges | 29,852 | |
Interest expense | 49,121 | 50,547 |
Loss on debt retirements, net | 396 | |
Gain on sale of assets, net | (6,558) | (2,260) |
Total costs and expenses | 6,173,262 | 6,108,096 |
Loss from continuing operations before income taxes | (12,277) | (80,720) |
Income tax expense (benefit) | 780 | (8,018) |
Net loss from continuing operations | (13,057) | (72,702) |
Net income from discontinued operations, net of tax | 9,161 | |
Net loss | (13,057) | (63,541) |
Computation of loss attributable to common stockholders: | ||
Loss from continuing operations attributable to common stockholders-basic and diluted | (13,057) | (72,702) |
Income from discontinued operations attributable to common stockholders-basic and diluted | 9,161 | |
Loss attributable to common stockholders-basic and diluted | $ (13,057) | $ (63,541) |
Basic and diluted (loss) income per share: | ||
Continuing operations | $ (0.24) | $ (1.36) |
Discontinued operations | 0 | 0.17 |
Net basic and diluted loss per share | $ (0.24) | $ (1.19) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net loss | $ (13,057) | $ (63,541) |
Defined benefit pension plans: | ||
Amortization of net actuarial losses included in net periodic pension cost, net of $0, $0 and $1,765 income tax expense | 123 | 911 |
Change in fair value of interest rate cap | 27 | 116 |
Total other comprehensive income (loss) | 150 | 1,027 |
Comprehensive loss | $ (12,907) | $ (62,514) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Amortization of net actuarial losses included in net periodic pension cost, income tax expense | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Balance - beginning of period at Feb. 29, 2020 | $ 54,716 | $ 5,890,903 | $ (5,222,194) | $ (48,898) | $ 674,527 |
BALANCE (in shares) at Feb. 29, 2020 | 54,716 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net loss | (63,541) | (63,541) | |||
Other comprehensive loss: | |||||
Changes in Defined Benefit Plans, net of tax expense | 911 | 911 | |||
Change in fair value of interest rate cap | 116 | 116 | |||
Comprehensive loss | (62,514) | ||||
Exchange of restricted shares for taxes | $ (7) | (92) | (99) | ||
Exchange of restricted shares for taxes (in shares) | (7) | ||||
Issuance of restricted stock | $ 19 | (19) | |||
Issuance of restricted stock (in shares) | 19 | ||||
Cancellation of restricted stock | $ (53) | 53 | |||
Cancellation of restricted stock (in shares) | (53) | ||||
Amortization of restricted stock balance | 1,725 | 1,725 | |||
Stock-based compensation expense | 150 | 150 | |||
Balance - end of period at May. 30, 2020 | $ 54,675 | 5,892,720 | (5,285,735) | (47,871) | 613,789 |
BALANCE (in shares) at May. 30, 2020 | 54,675 | ||||
Balance - beginning of period at Feb. 27, 2021 | $ 55,143 | 5,897,168 | (5,313,103) | (24,054) | 615,154 |
BALANCE (in shares) at Feb. 27, 2021 | 55,143 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net loss | (13,057) | (13,057) | |||
Other comprehensive loss: | |||||
Changes in Defined Benefit Plans, net of tax expense | 123 | 123 | |||
Change in fair value of interest rate cap | 27 | 27 | |||
Comprehensive loss | (12,907) | ||||
Exchange of restricted shares for taxes | $ (2) | (33) | (35) | ||
Exchange of restricted shares for taxes (in shares) | (2) | ||||
Cancellation of restricted stock | $ (48) | 48 | |||
Cancellation of restricted stock (in shares) | (48) | ||||
Amortization of restricted stock balance | 1,618 | 1,618 | |||
Stock-based compensation expense | 150 | 150 | |||
Balance - end of period at May. 29, 2021 | $ 55,093 | $ 5,898,951 | $ (5,326,160) | $ (23,904) | $ 603,980 |
BALANCE (in shares) at May. 29, 2021 | 55,093 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||
Changes in defined benefit plans, tax expense | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Operating activities: | ||
Net loss | $ (13,057) | $ (63,541) |
Net income (loss) from discontinued operations, net of tax | 9,161 | |
Net loss from continuing operations | (13,057) | (72,702) |
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations : | ||
Depreciation and amortization | 75,859 | 79,103 |
Facility exit and impairment charges | 8,831 | 3,753 |
Intangible asset impairment charges | 29,852 | |
LIFO credit | (3,993) | (12,066) |
Gain on sale of assets, net | (6,558) | (2,260) |
Stock-based compensation expense | 2,811 | 1,874 |
Loss on debt retirements, net | 396 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (149,487) | (308,636) |
Inventories | 11,918 | 43,647 |
Accounts payable | 50,527 | 13,320 |
Operating lease right-of-use assets and operating lease liabilities | (5,909) | (6,595) |
Other assets | 7,978 | 99,177 |
Other liabilities | 34,559 | 13,263 |
Net cash provided by (used in) operating activities of continuing operations | 13,875 | (118,270) |
Investing activities: | ||
Payments for property, plant and equipment | (59,164) | (28,459) |
Intangible assets acquired | (5,436) | (10,715) |
Proceeds from dispositions of assets and investments | 2,448 | 2,755 |
Proceeds from sale-leaseback transactions | 7,456 | |
Net cash used in investing activities of continuing operations | (54,696) | (36,419) |
Financing activities: | ||
Net proceeds from revolver | 39,000 | 242,000 |
Principal payments on long-term debt | (91,941) | (1,298) |
Change in zero balance cash accounts | 51,957 | (26,567) |
Financing fees paid for early debt redemption | (2) | |
Payments for taxes related to net share settlement of equity awards | (35) | (99) |
Deferred financing costs paid | (580) | (1,332) |
Net cash (used in) provided by financing activities of continuing operations | (1,601) | 212,704 |
Cash flows from discontinued operations: | ||
Operating activities of discontinued operations | 0 | (82,189) |
Investing activities of discontinued operations | 0 | 94,310 |
Financing activities of discontinued operations | 0 | 0 |
Net cash provided by discontinued operations | 0 | 12,121 |
(Decrease) increase in cash and cash equivalents | (42,422) | 70,136 |
Cash and cash equivalents, beginning of period | 160,902 | 218,180 |
Cash and cash equivalents, end of period | $ 118,480 | $ 288,316 |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 3 Months Ended |
May 29, 2021 | |
Basis of Presentation | |
Basis of Presentation and Significant Accounting Policies | 1. Basis of Presentation and Significant Accounting Policies 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 29, 2021 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 2021 10-K. Revenue Recognition The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week periods ended May 29, 2021 and May 30, 2020: May 29, May 30, 2021 2020 In thousands (13 weeks) (13 weeks) Retail Pharmacy segment: Pharmacy sales $ 2,997,044 $ 2,625,544 Front-end sales 1,321,699 1,465,467 Other revenue 32,939 32,260 Total Retail Pharmacy segment 4,351,682 4,123,271 Pharmacy Services segment 1,872,282 1,977,246 Intersegment elimination (62,979) (73,141) Total revenue $ 6,160,985 $ 6,027,376 The Retail Pharmacy segment offered a chain-wide loyalty card program titled wellness+. Individual customers were able to become members of the wellness+ program. Members participating in the wellness+ loyalty card program earned points on a calendar year basis for eligible front-end merchandise purchases and qualifying prescription purchases. The existing wellness+ program was terminated as of July 1, 2020, with benefits earned as of that date available to be used through the end of calendar 2020. In December 2020, the Company granted a temporary extension of benefits to previous members that were eligible for a discount as of December 31, 2020 such that those prior members will be eligible to continue to receive that discount on purchases made through December 31, 2021 with no additional purchase requirement. New and existing customers who were not already eligible for “Gold” benefits have the opportunity to earn additional discounts on purchases made through December 31, 2021. Prior to its termination, effective January 1, 2020, members reached specific wellness+ tiers based on points accumulated during the six st th st st six st th remaining portion of that six six Points earned pursuant to the wellness+ program represent a performance obligation and the Company allocates revenue between the merchandise purchased and the wellness+ points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness+ points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As members receive discounted front-end merchandise or when the benefit period expires, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. For the thirteen week period ended May 29, 2021, the Company recognized $1,613 of deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $2,141 as of May 29, 2021, which is included in other current liabilities. The Retail Pharmacy segment had accrued contract liabilities of $3,754 as of February 27, 2021, which is included in other current liabilities. Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) |
Acquisition
Acquisition | 3 Months Ended |
May 29, 2021 | |
Acquisition | |
Acquisition | 2. Acquisition On December 18, 2020, pursuant to that certain stock purchase agreement, dated as of October 7, 2020, by and between the Company and Bartell Drug Company (“Bartell”), the Company acquired Bartell (the “Acquisition”), a Washington corporation, for approximately $89,724 in cash, subject to certain customary post-closing working capital adjustments. Bartell operates 67 retail drug stores and one distribution center in the greater Seattle, Washington area. Bartell will operate as a 100 percent owned subsidiary of the Company within its Retail Pharmacy segment. The Company financed the Acquisition with borrowings under its Senior Secured Revolving Credit Facility together with cash on hand. The closing balance sheet has not yet been finalized, and therefore, the final purchase price and related purchase price allocation of the Acquisition is subject to change. The Company’s condensed consolidated financial statements for the thirteen weeks ended May 29, 2021 include Bartell’s results of operations. The Company’s 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 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 $ 89,724 Total 89,724 Preliminary purchase price allocation Cash and cash equivalents $ 3,494 Accounts receivable 24,188 Inventories 69,046 Prepaid expenses and other current assets 1,857 Total current assets 98,585 Property and equipment 28,229 Operating lease right-of-use assets 143,651 Intangible assets(1) 68,700 Other assets 1,805 Total assets acquired 340,970 Accounts payable 24,166 Accrued salaries, wages and other current liabilities 18,386 Current portion of operating lease liabilities 24,617 Total current liabilities 67,169 Long-term operating lease liabilities 124,023 Total liabilities assumed 191,192 Deferred tax liabilities recorded on purchase 12,349 Net assets acquired 137,429 Bargain purchase gain (47,705) Total purchase price $ 89,724 (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 Prescription files $ 54,300 10 Tradename 14,400 Indefinite Total $ 68,700 The Acquisition resulted in a bargain purchase gain of $47,705 primarily due to fair value adjustments related to prescription files and the tradename compared to book values. The Company believes that the bargain purchase gain was primarily the result of the decision by the Bartell stockholders to sell their interests as Bartell had been experiencing increasing borrowings under its credit agreements to meet its operating needs and increasing net losses. The agreed upon purchase price reflected the fact the seller would have needed to incur further significant debt to cover the operating costs of Bartell, which would have required amendments to its credit arrangements. With the Company’s existing infrastructure, scale and expertise, the Company believes that it has access to the necessary synergies to allow necessary operational improvements to be implemented more efficiently than the seller was capable of. During the thirteen week periods ended May 29, 2021 and May 30, 2020, acquisition costs of $3,886 and $0 were expensed as incurred. The following unaudited pro forma combined financial data gives effect to the Acquisition as if it had occurred as of March 1, 2019. The unaudited combined pro forma 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 combined pro forma information is for informational purposes only. The pro forma 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 information does not purport to project the future results of the combined company. May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Pro forma Pro forma Net revenues as reported $ 6,160,985 $ 6,027,376 Supplemental Pro forma revenues $ 6,160,985 $ 6,164,616 Net loss as reported $ (13,057) $ (63,541) Supplemental Pro forma net loss $ (13,057) $ (70,356) |
Restructuring
Restructuring | 3 Months Ended |
May 29, 2021 | |
Restructuring | |
Restructuring | 3. Restructuring Beginning in fiscal 2019, the Company initiated a series of restructuring plans designed to reorganize its executive management team, reduce managerial layers, and consolidate roles. In March 2020, the Company announced the details of its RxEvolution strategy, which includes building tools to work with regional health plans to improve patient health outcomes, rationalizing SKU’s in its front-end offering to free up working capital and update its merchandise assortment, assessing its pricing and promotional strategy, rebranding its retail pharmacy and pharmacy services business, launching its Store of the Future format and further reducing SG&A and headcount, including integrating certain back office functions in the Pharmacy Services segment both within the segment and across Rite Aid. Other strategic initiatives include the expansion of the Company’s digital business, movement to a common client platform at Elixir and investments in talent in sales and underwriting at Elixir. For the thirteen week period ended May 29, 2021, the Company incurred total restructuring-related costs of $5,932, which are included as a component of SG&A. These costs are as follows: Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ — $ 506 $ 506 Non-executive retention costs associated with the March 2019 reorganization (b) — — — Professional and other fees relating to restructuring activities (c) 1,621 3,805 5,426 Total restructuring-related costs $ 1,621 $ 4,311 $ 5,932 For the thirteen week period ended May 30, 2020, the Company incurred total restructuring-related costs of $35,735, of which $9,972 is included as a component of SG&A and $25,763 is included as a component of cost of revenues. These costs are as follows: Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ 4,559 $ 252 $ 4,811 Non-executive retention costs associated with the March 2019 reorganization (b) 855 (226) 629 Professional and other fees relating to restructuring activities (c) 4,532 — 4,532 SKU optimization charges (d) 25,763 — 25,763 Total restructuring-related costs $ 35,709 $ 26 $ 35,735 In addition, during the thirteen week period ended May 30, 2020, the Company incurred intangible asset impairment charges of $29,852 in connection with its rebranding initiatives as described in Note 11, Goodwill and Other Intangible Assets A summary of activity for the thirteen week period ended May 29, 2021 in the restructuring-related liabilities associated with the programs noted above, which is included in accrued salaries, wages and other current liabilities, is as follows: Severance and related Professional and costs (a) Retention costs (b) other fees (c) Total Balance at February 27, 2021 $ 12,657 $ — $ 2,833 $ 15,490 Additions charged to expense 506 — 5,426 5,932 Cash payments (4,826) — (7,636) (12,462) Balance at May 29, 2021 $ 8,337 $ — $ 623 $ 8,960 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts. (b) – As part of its March 2019 reorganization, the Company incurred costs with the implementation of a retention plan for certain of its key associates. (c) – Professional and other fees include costs incurred in connection with the identification and implementation of initiatives associated with restructuring activities. (d) – Inventory reserve on product lines the Company is exiting and will no longer carry as part of its rebranding initiative. The Company anticipates incurring approximately $30,000 during fiscal 2022 in connection with its continued restructuring activities. |
Asset Sale to WBA
Asset Sale to WBA | 3 Months Ended |
May 29, 2021 | |
Asset Sale to WBA | |
Asset Sale to WBA | 4. Asset Sale to WBA On September 18, 2017, the Company entered into the Amended and Restated Asset Purchase Agreement with Walgreens Boots Alliance, Inc. (“WBA”) and Walgreen Co., an Illinois corporation and 100 % owned subsidiary of WBA (“Buyer”), which amended and restated in its entirety the previously disclosed Asset Purchase Agreement, dated as of June 28, 2017, by and among the Company, WBA and Buyer (the “Original Asset Purchase Agreement”). Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer purchased from the Company 1,932 stores (the “Acquired Stores”), three distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of $4,375,000, on a cash-free, debt-free basis (the “Asset Sale” or “Sale”). The Company completed the store transfer process in March of 2018, which resulted in the transfer of all 1,932 stores and related assets to WBA, and received cash proceeds of $4,156,686. During fiscal 2019, the Company completed the sale of one of its distribution centers and related assets to WBA for proceeds of $61,251. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $14,151, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended March 2, 2019. During fiscal 2020, the Company completed the sale of the second distribution center and related assets to WBA for proceeds of $62,774. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $19,268, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended February 29, 2020. During the first quarter of fiscal 2021, the Company completed the sale of the final distribution center and related assets to WBA for proceeds of $94,289. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $12,690, which was included in the results of operations and cash flows of discontinued operations during the thirteen week period ended May 30, 2020. The transfer of the final distribution center and related assets constitutes the final closing under the Amended and Restated Asset Purchase Agreement. The Company had agreed to provide transition services to Buyer for up to three years after the initial closing of the Sale. Under the terms of the Transition Services Agreement (“TSA”), the Company provided various services on behalf of WBA, including but not limited to the purchase and distribution of inventory and virtually all selling, general and administrative activities. The term of the TSA had been extended to October 17, 2020, unless earlier terminated. In connection with these services, the Company purchased the related inventory and incurred cash payments for the selling, general and administrative activities, which, the Company billed on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the thirteen week periods ended May 29, 2021 and May 30, 2020 were $0 and $31,005, respectively, of which $0 and $4,398 is included in Accounts receivable, net. The Company recorded WBA TSA fees of $0 and $1,080 during the thirteen week periods ended May 29, 2021 and May 30, 2020, respectively, which are reflected as a reduction to selling, general and administrative expenses. In conjunction with the transfer of the final distribution center during the quarter ended May 30, 2020, the Company has substantially completed its obligations under the TSA. On July 14, 2020, the Company entered into a letter agreement with WBA to terminate the services under the TSA, other than certain specified services relating to real estate, accounting, tax, and accounts receivable systems that continued until October 17, 2020 and certain specified services relating to human resources to be performed after October 17, 2020. Based on its magnitude and because the Company exited certain markets, the Sale represented a significant strategic shift that has a material effect on the Company's operations and financial results. Accordingly, the Company has applied discontinued operations treatment for the Sale as required by Accounting Standards Codification 210-05- Discontinued Operations As of February 27, 2021, there are no assets and liabilities classified as held for sale relating to the Asset Sale to WBA. The operating results of the discontinued operations that are reflected on the consolidated statements of operations within net income from discontinued operations are as follows: May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Revenues $ — $ 174 Costs and expenses: Cost of revenues(a) — 8 Selling, general and administrative expenses(a) — 871 Gain on sale of assets, net — (14,149) — (13,270) Income from discontinued operations before income taxes — 13,444 Income tax expense — 4,283 Net income from discontinued operations, net of tax $ — $ 9,161 (a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations. The operating results reflected above do not fully represent the Disposal Group’s historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the Disposal Group. |
Income (Loss) Per Share
Income (Loss) Per Share | 3 Months Ended |
May 29, 2021 | |
Income (Loss) Per Share | |
Income (Loss) Per Share | 5. Income (Loss) Per Share Basic income (loss) per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted income (loss) 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 29, May 30, 2021 2020 Basic and diluted loss per share: Numerator: Net loss from continuing operations $ (13,057) $ (72,702) Net income from discontinued operations — 9,161 Loss attributable to common stockholders— basic and diluted $ (13,057) $ (63,541) Denominator: Basic weighted average shares 53,852 53,462 Outstanding options and restricted shares, net — — Diluted weighted average shares 53,852 53,462 Basic and diluted (loss) income per share: Continuing operations $ (0.24) $ (1.36) Discontinued operations - 0.17 Net basic and diluted loss per share $ (0.24) $ (1.19) Due to their antidilutive effect, 773 and 1,264 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirteen week periods ended May 29, 2021 and May 30, 2020, respectively. Also, excluded from the computation of diluted income (loss) per share for the thirteen week periods ended May 29, 2021 and May 30, 2020 are restricted shares of 1,240 and 1,198, respectively, which are included in shares outstanding. |
Facility Exit and Impairment Ch
Facility Exit and Impairment Charges | 3 Months Ended |
May 29, 2021 | |
Facility Exit and Impairment Charges | |
Facility Exit and Impairment Charges | 6. Facility Exit and Impairment Charges Facility exit and impairment charges consist of amounts as follows: Thirteen Week Period Ended May 29, May 30, 2021 2020 Impairment charges $ 4,313 $ 2,203 Facility exit charges 4,518 1,550 $ 8,831 $ 3,753 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. 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 29, 2021, long-lived assets from continuing operations with a carrying value of $4,313, primarily right-of-use assets in connection with leased office spaces, were written down to their fair value of $0, resulting in an impairment charge of $4,313. During the thirteen week period ended May 30, 2020, long-lived assets from continuing operations with a carrying value of $2,203, were written down to their fair value of $0, resulting in an impairment charge of $2,203. Of the $2,203, $1,919 relates to terminated software project and $284 relates to store assets. 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 29, 2021 and May 30, 2020: Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 29, 2021 Long-lived assets held for use $ — $ — $ — $ — $ (4,313) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (4,313) Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 30, 2020 Long-lived assets held for use $ — $ — $ — $ — $ (2,203) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (2,203) The above assets reflected in the caption Long-lived assets held for sale are separate and apart from the Assets to be Sold and due to their immateriality have not been reclassified to assets held for sale. Facility Exit 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 facility exit charges and inventory liquidation charges, as well as impairment of assets at these locations. When a store or distribution center is closed, the Company records an expense for unrecoverable costs and accrues a liability equal to the present value at current credit adjusted risk-free interest rates of any anticipated executory costs which are not included within the store or distribution center's respective lease liability under Topic 842. Other store or distribution center closing and liquidation costs are expensed when incurred. The following table reflects changes in the Company’s closed store liability relating to closed store and distribution center charges for new closures, changes in assumptions and interest accretion: Thirteen Week Period Ended May 29, May 30, 2021 2020 Balance—beginning of period $ 3,443 $ 2,253 Provision for present value of executory costs for leases exited 1,708 — Changes in assumptions and other adjustments 1,493 — Interest accretion 7 — Cash payments (516) (83) Balance—end of period $ 6,135 $ 2,170 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
May 29, 2021 | |
Fair Value Measurements | |
Fair Value Measurements | 7. Fair Value Measurements The Company utilizes the three-level valuation hierarchy as described in Note 6, Facility Exit and Impairment Charges, 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 we believe approximate their fair values due to their short term nature. In addition, as of May 29, 2021 and February 27, 2021, the Company has $7,043 and $7,041, respectively, of investments carried at amortized cost as these investments are being held to maturity, which are included as a component of other assets. 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 is 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 $3,014,517 and $3,100,602, respectively, as of May 29, 2021. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $3,063,087 and $3,176,322, respectively, as of February 27, 2021. |
Income Taxes
Income Taxes | 3 Months Ended |
May 29, 2021 | |
Income Taxes | |
Income Taxes | 8. Income Taxes The Company recorded an income tax expense from continuing operations of $780 and an income tax benefit from continuing operations of $8,018 for the thirteen week periods ended May 29, 2021 and May 30, 2020, respectively. The effective tax rate for the thirteen week periods ended May 29, 2021 and May 30, 2020 was (6.4)% and 9.9%, respectively. The effective tax rate for the thirteen week periods ended May 29, 2021 and May 30, 2020 was net of an adjustment of (18.5)%, and (10.6)%, respectively, to adjust the valuation allowance against deferred tax assets. 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. The Company believes that it is reasonably possible that a decrease of up to $11,851 in unrecognized tax benefits related to state exposures may be necessary in the next twelve months however management 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 $1,660,547 and $1,657,562, which relates to federal and state deferred tax assets that may not be realized based on the Company's future projections of taxable income at May 29, 2021 and February 27, 2021, respectively. |
Medicare Part D
Medicare Part D | 3 Months Ended |
May 29, 2021 | |
Medicare Part D | |
Medicare Part D | 9. Medicare Part D The Company offers Medicare Part D benefits through Elixir Insurance (“EI”), 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. EI is a licensed domestic insurance company under the applicable laws and regulations. Pursuant to these laws and regulations, EI 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. EI 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 $14,767 as of March 31, 2021. EI was in excess of the minimum required amounts in these states as of May 29, 2021. 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. On February 19, 2020, the Company entered into a receivable purchase agreement (the “2019 Receivable Purchase Agreement”) with Bank of America, N.A. (the “Purchaser”). Pursuant to the terms and conditions set forth in the 2019 Receivable Purchase Agreement, the Company sold $501,422 of its calendar 2019 CMS receivable for $484,547, of which $449,949 was received on February 19, 2020 and the remainder was received in fiscal 2021 upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $16,875, which was included as a component of loss on sale of assets, net in the fourth quarter of fiscal 2020. On February 19, 2020, concurrent with the 2019 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “2019 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the 2019 Indemnity Agreement. Based on its evaluation of the 2019 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the 2019 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the 2019 Indemnity Agreement. On November 12, 2020, the Company entered into a receivable purchase agreement (the “November 2020 Receivable Purchase Agreement”) with Purchaser, which was on terms similar to the 2019 Receivable Purchase Agreement. Pursuant to the terms and conditions set forth in the November 2020 Receivable Purchase Agreement, the Company sold $464,019, a portion of its calendar 2020 CMS receivable, for $444,812, of which $412,795 was received on November 12, 2020. The remaining $32,017, which is included in accounts receivable, net as of May 29, 2021, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $19,207, which is included as a component of gain on sale of assets, net. On November 12, 2020, concurrent with the November 2020 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “November 2020 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the November 2020 Indemnity Agreement. Based on its evaluation of the November 2020 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the November 2020 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the November 2020 Indemnity Agreement. On February 18, 2021, the Company entered into a receivable purchase agreement (the “February 2021 Receivable Purchase Agreement”) with Purchaser, which was on terms similar to the 2019 Receivable Purchase Agreement. Pursuant to the terms and conditions set forth in the February 2021 Receivable Purchase Agreement, the Company sold $300,015, the remaining portion of its calendar 2020 CMS receivable, for $290,613, of which $269,912 was received on February 18, 2021. The remaining $20,701, which is included in accounts receivable, net as of May 29, 2021, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $9,403, which is included as a component of gain on sale of assets, net. On February 18, 2021, concurrent with the February 2021 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “February 2021 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the February 2021 Indemnity Agreement. Based on its evaluation of the February 2021 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the February 2021 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the February 2021 Indemnity Agreement. As of May 29, 2021, and February 27, 2021, accounts receivable, net included $257,860 and $69,800 due from CMS. |
Manufacturer Rebates Receivable
Manufacturer Rebates Receivables | 3 Months Ended |
May 29, 2021 | |
Manufacturer Rebates Receivables | |
Manufacturer Rebates Receivables | 10. Manufacturer Rebates Receivables The Pharmacy Services Segment has manufacturer rebates receivables of $570,030 and $632,267 included in Accounts receivable, net, as of May 29, 2021 and February 27, 2021, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
May 29, 2021 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 11. Goodwill and Other Intangible Assets There was no goodwill impairment charge for the thirteen week period ended May 29, 2021. At May 29, 2021 and February 27, 2021, accumulated impairment losses for the Pharmacy Services segment was $574,712. The Company’s intangible assets are primarily finite-lived and amortized over their useful lives. Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets as of May 29, 2021 and February 27, 2021. May 29, 2021 February 27, 2021 Remaining Remaining Weighted Weighted Gross Average Gross Average Carrying Accumulated Amortization Carrying Accumulated Amortization Amount Amortization Net Period Amount Amortization Net Period Non-compete agreements and other(a) $ 195,238 $ (174,573) $ 20,665 3 years $ 193,916 $ (172,618) $ 21,298 3 years Prescription files 1,025,975 (907,329) 118,646 6 years 1,023,200 (900,321) 122,879 6 years Customer relationships(a) 388,000 (268,674) 119,326 10 years 388,000 (261,584) 126,416 11 years CMS license 57,500 (13,646) 43,854 19 years 57,500 (13,072) 44,428 20 years Claims adjudication and other developed software 58,985 (49,994) 8,991 1 years 58,985 (47,887) 11,098 2 years Backlog 11,500 (11,500) — 0 years 11,500 (11,500) — 0 years Total finite $ 1,737,198 $ (1,425,716) 311,482 $ 1,733,101 $ (1,406,982) $ 326,119 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,751,598 $ (1,425,716) $ 325,882 $ 1,747,501 $ (1,406,982) $ 340,519 (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. In connection with the RxEvolution initiatives previously announced on March 16, 2020, the Company rebranded its EnvisionRxOptions and MedTrak subsidiaries to its new brand name, Elixir. These trademarks qualify as Level 3 within the fair value hierarchy. Upon the implementation of the rebranding initiatives during the first quarter of fiscal 2021, the Company has determined that the carrying value exceeded the fair value and consequently the Company incurred an impairment charge of $29,852 for these trademarks, which is included within intangible asset impairment charges within the condensed consolidated statement of operations. Amortization expense for these intangible assets and liabilities was $20,460 and $24,420 for the thirteen week periods ended May 29, 2021 and May 30, 2020, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2022—$73,637; 2023—$58,620; 2024—$44,936; 2025—$33,650 and 2026—$23,045. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreements | 3 Months Ended |
May 29, 2021 | |
Indebtedness and Credit Agreements | |
Indebtedness and Credit Agreements | 12. Indebtedness and Credit Agreements Following is a summary of indebtedness and lease financing obligations at May 29, 2021 and February 27, 2021: May 29, February 27, 2021 2021 Secured Debt: Senior secured revolving credit facility due December 2023 ($889,000 and $850,000 face value less unamortized debt issuance costs of $12,837 and $14,103) $ 876,163 $ 835,897 FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $2,026 and $2,230) 447,974 447,770 1,324,137 1,283,667 Second Lien Secured Debt: 7.5% senior notes due July 2025 ($600,000 face value less unamortized debt issuance costs of $8,363 and $8,876) 591,637 591,124 8.0% senior notes due November 2026 ($849,918 face value less unamortized debt issuance costs of $16,707 and $17,477) 833,211 832,441 1,424,848 1,423,565 Guaranteed Unsecured Debt: 6.125% senior notes due April 2023 ($0 and $90,808 face value less unamortized debt issuance costs of $0 and $448) — 90,360 — 90,360 Unguaranteed Unsecured Debt: 7.70% notes due February 2027 ($237,386 face value less unamortized debt issuance costs of $742 and $776) 236,644 236,610 6.875% fixed-rate senior notes due December 2028 ($29,001 face value less unamortized debt issuance costs of $113 and $116) 28,888 28,885 265,532 265,495 Lease financing obligations 23,423 23,120 Total debt 3,037,940 3,086,207 Current maturities of long-term debt and lease financing obligations (7,261) (6,409) Long-term debt and lease financing obligations, less current maturities $ 3,030,679 $ 3,079,798 Credit Facility On December 20, 2018, the Company entered into a senior secured credit agreement (as amended by the First Amendment to Credit Agreement, dated as of January 6, 2020, the “Credit Agreement”), consisting of a $2,700,000 senior secured asset-based revolving credit facility (“Senior Secured Revolving Credit Facility”) and a $450,000 “first-in, last out” senior secured term loan facility (“Senior Secured Term Loan,” and together with the Senior Secured Revolving Credit Facility, collectively, the “Existing Facilities”). The Company used proceeds from the Existing Facilities to refinance its prior $2,700,000 existing credit agreement (the “Old Facility”). The Existing Facilities extend the Company’s debt maturity profile and provide additional liquidity. Borrowings under the Senior Secured Revolving Credit Facility bear interest at a rate per annum between LIBOR plus 1.25% and LIBOR plus 1.75% based upon the Average ABL Availability (as defined in the Credit Agreement). Borrowings under the Senior Secured Term Loan bear interest at a rate per annum of LIBOR plus 3.00%. The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the commitments under the Senior Secured Revolving Credit Facility, depending on Average ABL Availability. The Company’s borrowing capacity under the Senior Secured Revolving Credit Facility is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At May 29, 2021, the Company had $1,339,000 of borrowings outstanding under the Existing Facilities and had letters of credit outstanding against the Senior Secured Revolving Credit Facility of $122,023 which resulted in additional borrowing capacity under the Senior Secured Revolving Credit Facility of $1,688,977. If at any time the total credit exposure outstanding under the Existing Facilities and the principal amount of our other senior obligations exceed the borrowing base, the Company will be required to make certain other mandatory prepayments to eliminate such shortfall. The Credit Agreement restricts the Company and all of its subsidiaries that guarantee its obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes (collectively, the “Subsidiary Guarantors”) from accumulating cash on hand in excess of $200,000 at any time when revolving loans are outstanding (not including cash located in store and lockbox deposit accounts and cash necessary to cover current liabilities). The Credit Agreement also states that if at any time (other than following the exercise of remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority debt) either (i) an event of default exists under the Existing Facilities or (ii) the sum of the Company’s borrowing capacity under the Senior Secured Revolving Credit Facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $275.0 million for three consecutive business days or less than or equal to $200.0 million on any day (a “cash sweep period”), the funds in the Company’s deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the Existing Facilities, and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of the Existing Facilities. With the exception of EI, substantially all of Rite Aid Corporation’s 100% owned subsidiaries guarantee the obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes. The Company’s obligations under the Existing Facilities and the Subsidiary Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivable, inventory, prescription files (including eligible script lists), intellectual property (prior to the repayment of the Senior Secured Term Loan) and certain other assets arising therefrom or related thereto (including substantially all of their deposit accounts, collectively, the “ABL priority collateral”) and (ii) a second-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and all other assets that do not constitute ABL priority collateral, in each case, subject to customary exceptions and limitations. The subsidiary guarantees related to the Company’s Existing Facilities, the secured guaranteed notes 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. Other than EI, the subsidiaries, including joint ventures, that do not guarantee the Existing Facilities and applicable notes, are minor. The Credit Agreement allows the Company to have outstanding, at any time, up to an aggregate principal amount of $1,500,000 in secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Existing Facilities and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest maturity date of any Term Loan or Other Revolving Commitment (each as defined in the Credit Agreement) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date). Subject to the limitations described in clauses (i) and (ii) of the immediately preceding sentence, the Credit Agreement 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 Credit Agreement) 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 Credit Agreement also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Credit Agreement also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Existing Facilities are not in default and the Company maintains availability under its revolver of more than $365,000. The Credit Agreement has a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (i) on any date on which availability under the Senior Secured Revolving Credit Facility is less than $200,000 or (ii) on the third consecutive business day on which availability under the Senior Secured 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 revolver is equal to or greater than $250,000. As of May 29, 2021, the Company’s fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the Credit Agreement’s financial covenant. The Credit Agreement also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, the making of investments, sale of assets, mergers and acquisitions and the granting of liens. The Credit Agreement provides for customary events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if the Company fails to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of such debt to accelerate the maturity or require the repayment, repurchase, redemption or defeasance of such debt. Fiscal 2020, 2021 and 2022 Transactions On October 11, 2019, the Company completed a privately negotiated purchase from a noteholder and its affiliated funds of $84,097 aggregate principal amount of the 7.70% Notes due 2027 (the “7.70% Notes”) and 6.875% fixed-rate Senior Notes due 2028 (the “6.875% Notes”) for $51,300. In connection therewith, the Company recorded a gain on debt retirement of $32,416, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations. On October 15, 2019, the Company commenced an offer to purchase up to $100,000 of its outstanding 7.70% Notes and its 6.875% Notes. In November 2019, the Company accepted for payment $18,075 aggregate principal amount of the 7.70% Notes and $39,441 aggregate principal amount of the 6.875% Notes for $38,392. In connection therewith, the Company recorded a gain on debt retirement of $18,510, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations. During November 2019, the Company made additional purchases of $15,000 aggregate principal amount of the 7.70% Notes for $10,012. In connection therewith, the Company recorded a gain on debt retirement of $4,766, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations. On January 6, 2020, the Company commenced an offer to exchange up to $600,000 aggregate principal amount of the outstanding 6.125% Notes for newly issued 7.500% Senior Secured Notes due 2025 (the “7.500% Notes”). On February 5, 2020, the Company announced that the exchange offer was oversubscribed and accepted for payment $600,000 aggregate principal amount of the 6.125% Notes in exchange for newly issued 7.500% Notes. The Company accounted for the exchange as a debt modification and accordingly did not record a loss on debt retirement. The 7.500% Notes mature on July 1, 2025, and are guaranteed on a senior secured basis by the same Subsidiary Guarantors that guarantee the Existing Facilities and the 6.125% Notes. The 7.500% Notes and the obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and other collateral to the extent it does not constitute ABL priority collateral (as defined below), and (ii) a second-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivables, payment intangibles, inventory, prescription files (including eligible script lists) and, intellectual property (prior to the repayment of the Senior Secured Term Loan (collectively, the “ABL priority collateral”), which, in each case, also secure the Existing Facilities. On June 25, 2020, the Company commenced an offer to exchange (the “June 25, 2020 Exchange Offer”) up to $750,000 aggregate principal amount of the outstanding 6.125% Notes for a combination of $600,000 newly issued 8.0% Senior Secured Notes due 2026 (the “8.0% Notes”) and $145,500 cash. On July 10, 2020, the Company increased the maximum amount of 6.125% Notes that may be accepted for exchange from $750,000 to $1,125,000 and, on July 24, 2020, the Company announced that it accepted for payment $1,062,682 aggregate principal amount of the 6.125% Notes in exchange for $849,918 aggregate principal amount of newly issued 8.0% Notes and $206,373 in cash. In connection therewith, the Company recorded a gain on debt modification of $5,274 which is included in the results of operations and cash flows of continuing operations. The 8.0% Notes are secured on an equal and ratable basis by the same assets that secure the 7.500% Notes. The 8.0% Notes are guaranteed on a senior secured basis by the same subsidiaries that guarantee the 7.500% Notes. In conjunction with the June 25, 2020 Exchange Offer, the Company also commenced a solicitation of consents from the holders of outstanding 6.125% Notes to certain proposed amendments to the indenture governing the 6.125% Notes. On July 9, 2020, following the receipt of the requisite number of consents, the Company entered into a supplemental indenture, which modified certain limitations in the debt covenant to allow for the creation of the 8.0% Notes. On April 28, 2021, the Company issued a notice of redemption for all of the 6.125% Notes that were outstanding on May 28, 2021, pursuant to the terms of the indenture of the 6.125% Notes. On May 28, 2021, the Company redeemed 100% of the remaining outstanding 6.125% Notes at par. In connection therewith, the Company recorded a loss on debt retirement of $396 which included unamortized debt issuance costs. The debt repayment and related loss on debt retirement is included in the results of operations and cash flows of continuing operations. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2022 and thereafter are as follows: 2022—$0; 2023—$0; 2024—$1,339,000; 2025—$0; 2026—$600,000 and $1,116,305 thereafter. |
Leases
Leases | 3 Months Ended |
May 29, 2021 | |
Leases | |
Leases | 13. Leases The Company leases most of its retail stores and certain distribution facilities under noncancelable operating The following table is a summary of the Company’s components of net lease cost for the thirteen week Thirteen Week Period Ended May 29, 2021 May 30, 2020 Operating lease cost $ 169,494 $ 161,866 Financing lease cost: Amortization of right-of-use asset 1,011 1,131 Interest on long-term finance lease liabilities 568 689 Total finance lease costs $ 1,579 $ 1,820 Short-term lease costs 1,099 153 Variable lease costs 46,038 42,448 Less: sublease income (3,343) (4,132) Net lease cost $ 214,867 $ 202,155 Supplemental cash flow information related to leases for the thirteen week periods ended May 29, 2021 and May 30, 2020: Thirteen Week Period Ended May 29, 2021 May 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 176,591 $ 170,370 Operating cash flows paid for interest portion of finance leases 568 689 Financing cash flows paid for principal portion of finance leases 1,111 1,243 Right-of-use assets obtained in exchange for lease obligations: Operating leases 76,314 107,913 Finance leases — — Supplemental balance sheet information related to leases as of May 29, 2021 and February 27, 2021 (in thousands, except lease term and discount rate): May 29, February 27, 2021 2021 Operating leases: Operating lease right-of-use asset $ 3,013,577 $ 3,064,077 Short-term operating lease liabilities $ 517,602 $ 516,752 Long-term operating lease liabilities 2,771,797 2,829,293 Total operating lease liabilities $ 3,289,399 $ 3,346,045 Finance leases: Property, plant and equipment, net $ 16,506 $ 16,074 Current maturities of long-term debt and lease financing obligations $ 7,261 $ 6,409 Lease financing obligations, less current maturities 16,162 16,711 Total finance lease liabilities $ 23,423 $ 23,120 Weighted average remaining lease term Operating leases 7.8 7.9 Finance leases 8.4 8.9 Weighted average discount rate Operating leases 6.0 % 6.0 % Finance leases 10.1 % 9.8 % The following table summarizes the maturity of lease liabilities under finance and operating leases as of May 29, 2021: May 29, 2021 Finance Operating Fiscal year Leases Leases (1) Total 2022(remaining thirty-nine weeks) $ 7,868 $ 522,553 $ 530,421 2023 4,953 660,310 665,263 2024 3,390 599,834 603,224 2025 3,149 502,915 506,064 2026 2,367 410,090 412,457 Thereafter 13,548 1,441,967 1,455,515 Total lease payments 35,275 4,137,669 4,172,944 Less: imputed interest (11,852) (848,270) (860,122) Total lease liabilities $ 23,423 $ 3,289,399 $ 3,312,822 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $39 million due in the future under noncancelable leases. During the thirteen week 15 years May 30, 2020 |
Retirement Plans
Retirement Plans | 3 Months Ended |
May 29, 2021 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
Retirement Plans | 14. Retirement Plans Net periodic pension expense for the thirteen May 30, 2020 Defined Benefit Pension Plan Thirteen Week Period Ended May 29, May 30, 2021 2020 Service cost $ 128 $ 144 Interest cost 1,232 1,199 Expected return on plan assets (1,313) (1,177) Amortization of unrecognized net loss 123 911 Net periodic pension expense $ 170 $ 1,077 During the thirteen week |
Segment Reporting
Segment Reporting | 3 Months Ended |
May 29, 2021 | |
Segment Reporting | |
Segment Reporting | 15. Segment Reporting The Company has 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, formulary management and claims processing. Additionally, the Pharmacy Services segment offers specialty and mail order services, and drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program. The Company’s chief operating decision makers are its Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer, (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 is balance sheet information for the Company’s reportable segments: Retail Pharmacy Pharmacy Services Eliminations(1) Consolidated May 29, 2021: Total Assets $ 6,561,475 $ 2,803,665 $ (13,694) $ 9,351,446 Goodwill 43,492 1,064,644 — 1,108,136 February 27, 2021: Total Assets $ 6,613,370 $ 2,736,546 $ (14,512) $ 9,335,404 Goodwill 43,492 1,064,644 — 1,108,136 (1) As of May 29, 2021 and February 27, 2021, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $13,694 and $14,512, 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. The following table is a reconciliation of the Company’s business segments to the consolidated financial statements for the thirteen week periods ended May 29, 2021 and May 30, 2020 Retail Pharmacy Intersegment Pharmacy Services Eliminations(1) Consolidated Thirteen Week Period Ended May 29, 2021: Revenues $ 4,351,682 $ 1,872,282 $ (62,979) $ 6,160,985 Gross Profit 1,169,934 114,941 — 1,284,875 Adjusted EBITDA(2) 94,914 43,963 — 138,877 Additions to property and equipment and intangible assets 60,893 3,707 — 64,600 May 30, 2020: Revenues $ 4,123,271 $ 1,977,246 $ (73,141) $ 6,027,376 Gross Profit 1,081,536 116,783 — 1,198,319 Adjusted EBITDA(2) 62,982 44,410 — 107,392 Additions to property and equipment and intangible assets 36,607 2,567 — 39,174 (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 (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. The following is a reconciliation of net income (loss) to Adjusted EBITDA for the thirteen May 30, 2020 May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Net loss from continuing operations $ (13,057) $ (72,702) Interest expense 49,121 50,547 Income tax expense (benefit) 780 (8,018) Depreciation and amortization 75,859 79,103 LIFO credit (3,993) (12,066) Facility exit and impairment charges 8,831 3,753 Intangible asset impairment charges — 29,852 Loss on debt retirements, net 396 — Merger and Acquisition-related costs 3,886 — Stock-based compensation expense 2,811 1,874 Restructuring-related costs 5,932 35,735 Inventory write-downs related to store closings 472 834 Litigation settlements 14,000 — Gain on sale of assets, net (6,558) (2,260) Other 397 740 Adjusted EBITDA from continuing operations $ 138,877 $ 107,392 |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 3 Months Ended |
May 29, 2021 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 16. Commitments, Contingencies and Guarantees Legal Matters and Regulatory Proceedings The Company is regularly involved in a variety of legal matters including arbitration, litigation (and related settlement discussions), and other claims, and is subject to regulatory proceedings including audits, inspections, inquiries, investigations, and similar actions by health care, insurance, pharmacy, tax and other governmental authorities arising in the ordinary course of its business, including, without limitation, the matters described below. The Company records accruals for outstanding legal matters and applicable regulatory proceedings when it believes it is probable that a loss has been incurred, and the amount can be reasonably estimated. The Company evaluates on a quarterly basis, developments in legal matters and regulatory proceedings that could affect the amount of any existing accrual or that warrant an accrual. If a loss contingency is not both probable and estimable, the Company typically does not establish an accrued liability. With respect to the litigation and other legal proceedings described below, the Company is unable to estimate the amount or range of reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding such litigation and legal proceedings. None of the Company’s accruals for outstanding legal matters or regulatory proceedings are currently material, individually or in the aggregate, to the Company’s consolidated financial position. However, during the course of any proceeding, developments may result in the creation or an increase of an accrual that could be material. Additionally, unfavorable or unexpected outcomes in outstanding legal matters or regulatory proceedings could exceed any accrual and impact the Company’s financial position. Further, even if the Company is successful in its legal proceedings, the Company may incur significant costs and expenses defending itself or others that it is required to indemnify, and such costs and expenses may not be subject to or exceed reimbursement pursuant to any applicable insurance. The Company’s contingencies are subject to significant uncertainties, many of which are beyond the Company’s control, including, among other factors: (i) the stage of any proceeding and delays in scheduling; (ii) whether class or collective action status is sought and the likelihood of a class being certified; (iii) the outcome of pending or potential appeals, motions and settlement discussions; (iv) the range and magnitude 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 or advanced; (vii) whether there are significant factual issues to be resolved; (viii) in the case of certain government agency investigations, whether a qui tam California Employment Litigation. The Company is currently a defendant in several lawsuits filed in courts in California that contain allegations regarding violations of the California Business and Professions Code, various California employment laws and regulations, industry wage orders, wage-and-hour laws, rules and regulations pertaining primarily to failure to pay overtime, failure to pay premiums for missed meals and rest periods, failure to provide accurate wage statements, and failure to reimburse business expenses (the “California Cases”). Some of the California Cases purport or may be determined to be class actions or representative actions under the California Private Attorneys General Act and seek substantial damages and penalties. These single-plaintiff and multi-plaintiff California Cases in the aggregate, seek substantial damages. In June 2021, the Company agreed to settle two of the California Cases in which the plaintiffs brought class-based claims alleging that they and all other similarly-situated associates were not paid for time waiting for their bags to be checked. One set of cases involving store associates was settled for $9,000, while the other involving distribution center associates was settled for $1,750. As class actions, both settlements must be approved by the court. The Company believes that it has meritorious defenses in the California Cases. The Company has aggressively defended itself and challenged the merits of the lawsuits and, where applicable, allegations that the lawsuits should be certified as class or representative actions. Usual and Customary Litigation. The Company is named as a defendant in a number of lawsuits, including the cases below, that allege that the Company’s retail stores overcharged for prescription drugs by not submitting the price available to members of the Rite Aid’s Rx Savings Program as the pharmacy’s usual and customary price, and related theories. The Company is defending itself against these claims. In January 2017, qui tam District of Michigan, 18 states, and the District of Columbia declined to intervene. The unsealed lawsuit alleges that the Company failed to report its Rx Savings Program prices as its usual and customary prices under the Medicare Part D program, federal and state Medicaid programs, and other publicly funded health care programs, and that the Company is thus liable under the federal FCA and similar state statutes. On December 12, 2019, the court granted the Company’s motion to dismiss and judgment on the pleadings based upon the FCA’s public disclosure bar. The Relator filed a motion for reconsideration which was denied. The Relator has appealed from the order granting the Company’s motion to dismiss and for judgment on the pleadings, and also from the order denying his motion for reconsideration. That appeal has been fully argued and briefed and is now awaiting decision. The State of Mississippi, by and through its Attorney General, filed a lawsuit against the Company and various purported related entities on September 27, 2016 alleging the Company failed to accurately report usual and customary prices to Mississippi’s Division of Medicaid. The Company is involved in a putative consumer class action lawsuit in the United States District Court for the Southern District of California captioned Byron Stafford v. Rite Aid Corp Robert Josten v. Rite Aid Corp Stafford On February 6, 2019, Humana, Inc., filed an arbitration claim alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program prices as its usual and customary prices to Humana. An arbitral hearing is scheduled to commence in September 2021. The Company is a defendant in two consolidated lawsuits pending in the United States District Court for the District of Minnesota filed in 2020 by various Blue Cross/Blue Shield plans that operate in eight different states (North Carolina, North Dakota, Alabama, Utah, Minnesota, Oregon, Washington and New Jersey) alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program pricing to several Pharmacy Benefit Managers with which Rite Aid and the insurers had independent contracts. Drug Utilization Review and Code 1 Litigation In June 2012, qui tam respective complaints in January 2018, the hearing was held on March 23, 2018. On September 5, 2018, the court issued an order denying the motion to dismiss. No trial date has been set. Controlled Substances Litigation, Audits and Investigations The Company, along with various other defendants, is named in multiple opioid-related lawsuits filed by counties, cities, municipalities, Native American tribes, hospitals, third-party payers, and others across the United States. In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated and transferred more than a thousand federal opioid-related lawsuits that name the Company as a defendant to the multi-district litigation (“MDL”) pending in the United States District Court for the Northern District of Ohio under In re National Prescription Opiate Litigation The Company also has received warrants, subpoenas, CIDs, and other requests for documents and information from, and is being investigated by, the federal and state governments regarding opioids and other controlled substances. The Company has been cooperating with and responding to these investigatory inquiries. In April 2019, the Company initiated a coverage action styled Rite Aid Corporation et al. v. ACE American Ins. Co. et al. Miscellaneous Litigation and Investigations. The U.S. Securities and Exchange Commission (“SEC”) is investigating trading in the Company’s securities that occurred in or around January 2017, and has subpoenaed information from the Company in connection with that investigation. The Company is cooperating with the SEC in this matter. The Company has received a CID and requests for information with respect to consumer protection laws. |
Supplementary Cash Flow Data
Supplementary Cash Flow Data | 3 Months Ended |
May 29, 2021 | |
Supplementary Cash Flow Data | |
Supplementary Cash Flow Data | 17. Supplementary Cash Flow Data Thirteen Week Period Ended May 29, 2021 May 30, 2020 Cash paid for interest(a) $ 12,813 $ 12,843 Cash payments for income taxes, net(a) $ 556 $ 2,100 Equipment financed under capital leases $ 1,585 $ 335 Gross borrowings from revolver(a) $ 1,546,000 $ 2,139,000 Gross repayments to revolver(a) $ 1,507,000 $ 1,897,000 (a) — Amounts are presented on a total company basis. A significant component of cash provided by Other Liabilities of $34,559 for the thirteen |
Basis of Presentation and Sig_2
Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
May 29, 2021 | |
Basis of Presentation | |
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 29, 2021 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 2021 10-K. |
Revenue Recognition | Revenue Recognition The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week periods ended May 29, 2021 and May 30, 2020: May 29, May 30, 2021 2020 In thousands (13 weeks) (13 weeks) Retail Pharmacy segment: Pharmacy sales $ 2,997,044 $ 2,625,544 Front-end sales 1,321,699 1,465,467 Other revenue 32,939 32,260 Total Retail Pharmacy segment 4,351,682 4,123,271 Pharmacy Services segment 1,872,282 1,977,246 Intersegment elimination (62,979) (73,141) Total revenue $ 6,160,985 $ 6,027,376 The Retail Pharmacy segment offered a chain-wide loyalty card program titled wellness+. Individual customers were able to become members of the wellness+ program. Members participating in the wellness+ loyalty card program earned points on a calendar year basis for eligible front-end merchandise purchases and qualifying prescription purchases. The existing wellness+ program was terminated as of July 1, 2020, with benefits earned as of that date available to be used through the end of calendar 2020. In December 2020, the Company granted a temporary extension of benefits to previous members that were eligible for a discount as of December 31, 2020 such that those prior members will be eligible to continue to receive that discount on purchases made through December 31, 2021 with no additional purchase requirement. New and existing customers who were not already eligible for “Gold” benefits have the opportunity to earn additional discounts on purchases made through December 31, 2021. Prior to its termination, effective January 1, 2020, members reached specific wellness+ tiers based on points accumulated during the six st th st st six st th remaining portion of that six six Points earned pursuant to the wellness+ program represent a performance obligation and the Company allocates revenue between the merchandise purchased and the wellness+ points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness+ points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As members receive discounted front-end merchandise or when the benefit period expires, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. For the thirteen week period ended May 29, 2021, the Company recognized $1,613 of deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $2,141 as of May 29, 2021, which is included in other current liabilities. The Retail Pharmacy segment had accrued contract liabilities of $3,754 as of February 27, 2021, which is included in other current liabilities. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) |
Basis of Presentation and Sig_3
Basis of Presentation and Significant Accounting Policies (Tables) | 3 Months Ended |
May 29, 2021 | |
Basis of Presentation | |
Schedule of revenues | May 29, May 30, 2021 2020 In thousands (13 weeks) (13 weeks) Retail Pharmacy segment: Pharmacy sales $ 2,997,044 $ 2,625,544 Front-end sales 1,321,699 1,465,467 Other revenue 32,939 32,260 Total Retail Pharmacy segment 4,351,682 4,123,271 Pharmacy Services segment 1,872,282 1,977,246 Intersegment elimination (62,979) (73,141) Total revenue $ 6,160,985 $ 6,027,376 |
Acquisition (Tables)
Acquisition (Tables) - Bartell Drug Company | 3 Months Ended |
May 29, 2021 | |
Business Acquisition [Line Items] | |
Schedule of purchase price allocation | Preliminary purchase price Cash consideration $ 89,724 Total 89,724 Preliminary purchase price allocation Cash and cash equivalents $ 3,494 Accounts receivable 24,188 Inventories 69,046 Prepaid expenses and other current assets 1,857 Total current assets 98,585 Property and equipment 28,229 Operating lease right-of-use assets 143,651 Intangible assets(1) 68,700 Other assets 1,805 Total assets acquired 340,970 Accounts payable 24,166 Accrued salaries, wages and other current liabilities 18,386 Current portion of operating lease liabilities 24,617 Total current liabilities 67,169 Long-term operating lease liabilities 124,023 Total liabilities assumed 191,192 Deferred tax liabilities recorded on purchase 12,349 Net assets acquired 137,429 Bargain purchase gain (47,705) Total purchase price $ 89,724 (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 Prescription files $ 54,300 10 Tradename 14,400 Indefinite Total $ 68,700 |
Schedule of estimated fair value of intangible assets and related useful lives as included in the final purchase price allocation | Estimated Fair Value Estimated Useful Life Prescription files $ 54,300 10 Tradename 14,400 Indefinite Total $ 68,700 |
Schedule of unaudited pro forma combined financial data | May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Pro forma Pro forma Net revenues as reported $ 6,160,985 $ 6,027,376 Supplemental Pro forma revenues $ 6,160,985 $ 6,164,616 Net loss as reported $ (13,057) $ (63,541) Supplemental Pro forma net loss $ (13,057) $ (70,356) |
Restructuring (Tables)
Restructuring (Tables) | 3 Months Ended |
May 29, 2021 | |
Restructuring | |
Schedule of restructuring-related costs | For the thirteen week period ended May 29, 2021, the Company incurred total restructuring-related costs of $5,932, which are included as a component of SG&A. These costs are as follows: Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ — $ 506 $ 506 Non-executive retention costs associated with the March 2019 reorganization (b) — — — Professional and other fees relating to restructuring activities (c) 1,621 3,805 5,426 Total restructuring-related costs $ 1,621 $ 4,311 $ 5,932 For the thirteen week period ended May 30, 2020, the Company incurred total restructuring-related costs of $35,735, of which $9,972 is included as a component of SG&A and $25,763 is included as a component of cost of revenues. These costs are as follows: Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ 4,559 $ 252 $ 4,811 Non-executive retention costs associated with the March 2019 reorganization (b) 855 (226) 629 Professional and other fees relating to restructuring activities (c) 4,532 — 4,532 SKU optimization charges (d) 25,763 — 25,763 Total restructuring-related costs $ 35,709 $ 26 $ 35,735 |
Schedule of restructuring-related liabilities | Severance and related Professional and costs (a) Retention costs (b) other fees (c) Total Balance at February 27, 2021 $ 12,657 $ — $ 2,833 $ 15,490 Additions charged to expense 506 — 5,426 5,932 Cash payments (4,826) — (7,636) (12,462) Balance at May 29, 2021 $ 8,337 $ — $ 623 $ 8,960 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts. (b) – As part of its March 2019 reorganization, the Company incurred costs with the implementation of a retention plan for certain of its key associates. (c) – Professional and other fees include costs incurred in connection with the identification and implementation of initiatives associated with restructuring activities. (d) – Inventory reserve on product lines the Company is exiting and will no longer carry as part of its rebranding initiative. |
Asset Sale to WBA (Tables)
Asset Sale to WBA (Tables) | 3 Months Ended |
May 29, 2021 | |
Asset Sale to WBA | |
Schedule of assets and operating results of discontinued operations | The operating results of the discontinued operations that are reflected on the consolidated statements of operations within net income from discontinued operations are as follows: May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Revenues $ — $ 174 Costs and expenses: Cost of revenues(a) — 8 Selling, general and administrative expenses(a) — 871 Gain on sale of assets, net — (14,149) — (13,270) Income from discontinued operations before income taxes — 13,444 Income tax expense — 4,283 Net income from discontinued operations, net of tax $ — $ 9,161 (a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations. |
Income (Loss) Per Share (Tables
Income (Loss) Per Share (Tables) | 3 Months Ended |
May 29, 2021 | |
Income (Loss) Per Share | |
Schedule of calculation of basic and diluted income (loss) per share | Thirteen Week Period Ended May 29, May 30, 2021 2020 Basic and diluted loss per share: Numerator: Net loss from continuing operations $ (13,057) $ (72,702) Net income from discontinued operations — 9,161 Loss attributable to common stockholders— basic and diluted $ (13,057) $ (63,541) Denominator: Basic weighted average shares 53,852 53,462 Outstanding options and restricted shares, net — — Diluted weighted average shares 53,852 53,462 Basic and diluted (loss) income per share: Continuing operations $ (0.24) $ (1.36) Discontinued operations - 0.17 Net basic and diluted loss per share $ (0.24) $ (1.19) |
Facility Exit and Impairment _2
Facility Exit and Impairment Charges (Tables) | 3 Months Ended |
May 29, 2021 | |
Facility Exit and Impairment Charges | |
Schedule of amounts relating to facility exit and impairment charges | Thirteen Week Period Ended May 29, May 30, 2021 2020 Impairment charges $ 4,313 $ 2,203 Facility exit charges 4,518 1,550 $ 8,831 $ 3,753 |
Schedule of fair value of long-lived assets measured on recurring and non-recurring basis | Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 29, 2021 Long-lived assets held for use $ — $ — $ — $ — $ (4,313) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (4,313) Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 30, 2020 Long-lived assets held for use $ — $ — $ — $ — $ (2,203) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (2,203) |
Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion | Thirteen Week Period Ended May 29, May 30, 2021 2020 Balance—beginning of period $ 3,443 $ 2,253 Provision for present value of executory costs for leases exited 1,708 — Changes in assumptions and other adjustments 1,493 — Interest accretion 7 — Cash payments (516) (83) Balance—end of period $ 6,135 $ 2,170 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
May 29, 2021 | |
Goodwill and Other Intangible Assets | |
Schedule of Indefinite-Lived Intangible Assets [Table Text Block] | May 29, 2021 February 27, 2021 Remaining Remaining Weighted Weighted Gross Average Gross Average Carrying Accumulated Amortization Carrying Accumulated Amortization Amount Amortization Net Period Amount Amortization Net Period Non-compete agreements and other(a) $ 195,238 $ (174,573) $ 20,665 3 years $ 193,916 $ (172,618) $ 21,298 3 years Prescription files 1,025,975 (907,329) 118,646 6 years 1,023,200 (900,321) 122,879 6 years Customer relationships(a) 388,000 (268,674) 119,326 10 years 388,000 (261,584) 126,416 11 years CMS license 57,500 (13,646) 43,854 19 years 57,500 (13,072) 44,428 20 years Claims adjudication and other developed software 58,985 (49,994) 8,991 1 years 58,985 (47,887) 11,098 2 years Backlog 11,500 (11,500) — 0 years 11,500 (11,500) — 0 years Total finite $ 1,737,198 $ (1,425,716) 311,482 $ 1,733,101 $ (1,406,982) $ 326,119 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,751,598 $ (1,425,716) $ 325,882 $ 1,747,501 $ (1,406,982) $ 340,519 (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. |
Schedule of Finite-Lived Intangible Assets [Table Text Block] | May 29, 2021 February 27, 2021 Remaining Remaining Weighted Weighted Gross Average Gross Average Carrying Accumulated Amortization Carrying Accumulated Amortization Amount Amortization Net Period Amount Amortization Net Period Non-compete agreements and other(a) $ 195,238 $ (174,573) $ 20,665 3 years $ 193,916 $ (172,618) $ 21,298 3 years Prescription files 1,025,975 (907,329) 118,646 6 years 1,023,200 (900,321) 122,879 6 years Customer relationships(a) 388,000 (268,674) 119,326 10 years 388,000 (261,584) 126,416 11 years CMS license 57,500 (13,646) 43,854 19 years 57,500 (13,072) 44,428 20 years Claims adjudication and other developed software 58,985 (49,994) 8,991 1 years 58,985 (47,887) 11,098 2 years Backlog 11,500 (11,500) — 0 years 11,500 (11,500) — 0 years Total finite $ 1,737,198 $ (1,425,716) 311,482 $ 1,733,101 $ (1,406,982) $ 326,119 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,751,598 $ (1,425,716) $ 325,882 $ 1,747,501 $ (1,406,982) $ 340,519 (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 Agree_2
Indebtedness and Credit Agreements (Tables) | 3 Months Ended |
May 29, 2021 | |
Indebtedness and Credit Agreements | |
Summary of indebtedness and lease financing obligations | May 29, February 27, 2021 2021 Secured Debt: Senior secured revolving credit facility due December 2023 ($889,000 and $850,000 face value less unamortized debt issuance costs of $12,837 and $14,103) $ 876,163 $ 835,897 FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $2,026 and $2,230) 447,974 447,770 1,324,137 1,283,667 Second Lien Secured Debt: 7.5% senior notes due July 2025 ($600,000 face value less unamortized debt issuance costs of $8,363 and $8,876) 591,637 591,124 8.0% senior notes due November 2026 ($849,918 face value less unamortized debt issuance costs of $16,707 and $17,477) 833,211 832,441 1,424,848 1,423,565 Guaranteed Unsecured Debt: 6.125% senior notes due April 2023 ($0 and $90,808 face value less unamortized debt issuance costs of $0 and $448) — 90,360 — 90,360 Unguaranteed Unsecured Debt: 7.70% notes due February 2027 ($237,386 face value less unamortized debt issuance costs of $742 and $776) 236,644 236,610 6.875% fixed-rate senior notes due December 2028 ($29,001 face value less unamortized debt issuance costs of $113 and $116) 28,888 28,885 265,532 265,495 Lease financing obligations 23,423 23,120 Total debt 3,037,940 3,086,207 Current maturities of long-term debt and lease financing obligations (7,261) (6,409) Long-term debt and lease financing obligations, less current maturities $ 3,030,679 $ 3,079,798 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
May 29, 2021 | |
Leases | |
Schedule of components of net lease cost | Thirteen Week Period Ended May 29, 2021 May 30, 2020 Operating lease cost $ 169,494 $ 161,866 Financing lease cost: Amortization of right-of-use asset 1,011 1,131 Interest on long-term finance lease liabilities 568 689 Total finance lease costs $ 1,579 $ 1,820 Short-term lease costs 1,099 153 Variable lease costs 46,038 42,448 Less: sublease income (3,343) (4,132) Net lease cost $ 214,867 $ 202,155 |
Schedule of supplemental cash flow information related to leases | Thirteen Week Period Ended May 29, 2021 May 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 176,591 $ 170,370 Operating cash flows paid for interest portion of finance leases 568 689 Financing cash flows paid for principal portion of finance leases 1,111 1,243 Right-of-use assets obtained in exchange for lease obligations: Operating leases 76,314 107,913 Finance leases — — |
Schedule of supplemental balance sheet information related to leases | May 29, February 27, 2021 2021 Operating leases: Operating lease right-of-use asset $ 3,013,577 $ 3,064,077 Short-term operating lease liabilities $ 517,602 $ 516,752 Long-term operating lease liabilities 2,771,797 2,829,293 Total operating lease liabilities $ 3,289,399 $ 3,346,045 Finance leases: Property, plant and equipment, net $ 16,506 $ 16,074 Current maturities of long-term debt and lease financing obligations $ 7,261 $ 6,409 Lease financing obligations, less current maturities 16,162 16,711 Total finance lease liabilities $ 23,423 $ 23,120 Weighted average remaining lease term Operating leases 7.8 7.9 Finance leases 8.4 8.9 Weighted average discount rate Operating leases 6.0 % 6.0 % Finance leases 10.1 % 9.8 % |
Schedule of minimum lease payments, financing leases | May 29, 2021 Finance Operating Fiscal year Leases Leases (1) Total 2022(remaining thirty-nine weeks) $ 7,868 $ 522,553 $ 530,421 2023 4,953 660,310 665,263 2024 3,390 599,834 603,224 2025 3,149 502,915 506,064 2026 2,367 410,090 412,457 Thereafter 13,548 1,441,967 1,455,515 Total lease payments 35,275 4,137,669 4,172,944 Less: imputed interest (11,852) (848,270) (860,122) Total lease liabilities $ 23,423 $ 3,289,399 $ 3,312,822 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $39 million due in the future under noncancelable leases. |
Schedule of minimum lease payments, operating leases | May 29, 2021 Finance Operating Fiscal year Leases Leases (1) Total 2022(remaining thirty-nine weeks) $ 7,868 $ 522,553 $ 530,421 2023 4,953 660,310 665,263 2024 3,390 599,834 603,224 2025 3,149 502,915 506,064 2026 2,367 410,090 412,457 Thereafter 13,548 1,441,967 1,455,515 Total lease payments 35,275 4,137,669 4,172,944 Less: imputed interest (11,852) (848,270) (860,122) Total lease liabilities $ 23,423 $ 3,289,399 $ 3,312,822 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $39 million due in the future under noncancelable leases. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
May 29, 2021 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Pension Plan Thirteen Week Period Ended May 29, May 30, 2021 2020 Service cost $ 128 $ 144 Interest cost 1,232 1,199 Expected return on plan assets (1,313) (1,177) Amortization of unrecognized net loss 123 911 Net periodic pension expense $ 170 $ 1,077 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
May 29, 2021 | |
Segment Reporting | |
Schedule of balance sheet information for the Company's reportable segments | Retail Pharmacy Pharmacy Services Eliminations(1) Consolidated May 29, 2021: Total Assets $ 6,561,475 $ 2,803,665 $ (13,694) $ 9,351,446 Goodwill 43,492 1,064,644 — 1,108,136 February 27, 2021: Total Assets $ 6,613,370 $ 2,736,546 $ (14,512) $ 9,335,404 Goodwill 43,492 1,064,644 — 1,108,136 (1) As of May 29, 2021 and February 27, 2021, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $13,694 and $14,512, 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. |
Schedule of reconciliation of the Company's business segments to the condensed consolidated financial statements | Retail Pharmacy Intersegment Pharmacy Services Eliminations(1) Consolidated Thirteen Week Period Ended May 29, 2021: Revenues $ 4,351,682 $ 1,872,282 $ (62,979) $ 6,160,985 Gross Profit 1,169,934 114,941 — 1,284,875 Adjusted EBITDA(2) 94,914 43,963 — 138,877 Additions to property and equipment and intangible assets 60,893 3,707 — 64,600 May 30, 2020: Revenues $ 4,123,271 $ 1,977,246 $ (73,141) $ 6,027,376 Gross Profit 1,081,536 116,783 — 1,198,319 Adjusted EBITDA(2) 62,982 44,410 — 107,392 Additions to property and equipment and intangible assets 36,607 2,567 — 39,174 (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 (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. |
Schedule of reconciliation of net (loss) income to Adjusted EBITDA | May 29, May 30, 2021 2020 (13 weeks) (13 weeks) Net loss from continuing operations $ (13,057) $ (72,702) Interest expense 49,121 50,547 Income tax expense (benefit) 780 (8,018) Depreciation and amortization 75,859 79,103 LIFO credit (3,993) (12,066) Facility exit and impairment charges 8,831 3,753 Intangible asset impairment charges — 29,852 Loss on debt retirements, net 396 — Merger and Acquisition-related costs 3,886 — Stock-based compensation expense 2,811 1,874 Restructuring-related costs 5,932 35,735 Inventory write-downs related to store closings 472 834 Litigation settlements 14,000 — Gain on sale of assets, net (6,558) (2,260) Other 397 740 Adjusted EBITDA from continuing operations $ 138,877 $ 107,392 |
Supplementary Cash Flow Data (T
Supplementary Cash Flow Data (Tables) | 3 Months Ended |
May 29, 2021 | |
Supplementary Cash Flow Data | |
Schedule of supplementary cash flow data | Thirteen Week Period Ended May 29, 2021 May 30, 2020 Cash paid for interest(a) $ 12,813 $ 12,843 Cash payments for income taxes, net(a) $ 556 $ 2,100 Equipment financed under capital leases $ 1,585 $ 335 Gross borrowings from revolver(a) $ 1,546,000 $ 2,139,000 Gross repayments to revolver(a) $ 1,507,000 $ 1,897,000 (a) — Amounts are presented on a total company basis. |
Basis of Presentation and Sig_4
Basis of Presentation and Significant Accounting Policies (Details) $ in Thousands | Jan. 02, 2020item | May 29, 2021USD ($) | May 30, 2020USD ($) | Feb. 27, 2021USD ($) |
Disaggregation of Revenue [Abstract] | ||||
Total revenue | $ 6,160,985 | $ 6,027,376 | ||
Measurement period | 6 months | |||
Number of points for Gold status | item | 500 | |||
Percentage discount on qualifying purchases of front end merchandise on achieving "Gold" tier | 20.00% | |||
Liability recognized into revenue | 1,613 | |||
Intersegment elimination | ||||
Disaggregation of Revenue [Abstract] | ||||
Revenue from contract with customer | (62,979) | (73,141) | ||
Total revenue | (62,979) | (73,141) | ||
Retail Pharmacy | ||||
Disaggregation of Revenue [Abstract] | ||||
Other revenue | 32,939 | 32,260 | ||
Total revenue | 4,351,682 | 4,123,271 | ||
Accrued contract liabilities | 2,141 | $ 3,754 | ||
Pharmacy sales | ||||
Disaggregation of Revenue [Abstract] | ||||
Revenue from contract with customer | 2,997,044 | 2,625,544 | ||
Front end sales | ||||
Disaggregation of Revenue [Abstract] | ||||
Revenue from contract with customer | 1,321,699 | 1,465,467 | ||
Pharmacy Services | ||||
Disaggregation of Revenue [Abstract] | ||||
Revenue from contract with customer | $ 1,872,282 | $ 1,977,246 |
Acquisition (Details)
Acquisition (Details) - Bartell Drug Company $ in Thousands | Dec. 18, 2020USD ($)item |
Business Acquisition [Line Items] | |
Cash consideration | $ | $ 89,724 |
Number of stores | 67 |
Number of distribution centers | 1 |
Percentage of ownership in subsidiary | 100.00% |
Acquisition - Purchase price al
Acquisition - Purchase price allocation (Details) - Bartell Drug Company $ in Thousands | Dec. 18, 2020USD ($) |
Preliminary purchase price | |
Cash consideration | $ 89,724 |
Purchase price | 89,724 |
Preliminary purchase price allocation | |
Cash and cash equivalents | 3,494 |
Accounts receivable | 24,188 |
Inventories | 69,046 |
Prepaid expenses and other current assets | 1,857 |
Total current assets | 98,585 |
Property and equipment | 28,229 |
Operating lease right-of-use assets | 143,651 |
Intangible assets | 68,700 |
Other assets | 1,805 |
Total assets acquired | 340,970 |
Accounts payable | 24,166 |
Accrued salaries, wages and other current liabilities | 18,386 |
Current portion of operating lease liabilities | 24,617 |
Total current liabilities | 67,169 |
Long-term operating lease liabilities | 124,023 |
Total liabilities assumed | 191,192 |
Deferred tax liabilities recorded on purchase | 12,349 |
Net assets acquired | 137,429 |
Bargain purchase gain | (47,705) |
Purchase price | $ 89,724 |
Acquisition - Intangible assets
Acquisition - Intangible assets acquired (Details) - Bartell Drug Company $ in Thousands | Dec. 18, 2020USD ($) |
Business Acquisition [Line Items] | |
Intangible assets acquired | $ 68,700 |
Trademarks | |
Business Acquisition [Line Items] | |
Intangible assets acquired | 14,400 |
Prescription files | |
Business Acquisition [Line Items] | |
Intangible assets acquired | $ 54,300 |
Estimated Useful Life | 10 years |
Acquisition - Acquisition costs
Acquisition - Acquisition costs (Details) - USD ($) $ in Thousands | Dec. 18, 2020 | May 29, 2021 | May 30, 2020 |
Business Acquisition [Line Items] | |||
Merger and Acquisition-related costs | $ 3,886 | ||
Bartell Drug Company | |||
Business Acquisition [Line Items] | |||
Bargain purchase gain | $ 47,705 | ||
Merger and Acquisition-related costs | $ 3,886 | $ 0 |
Acquisition - Proforma informat
Acquisition - Proforma information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Business Acquisition [Line Items] | ||
Net revenues as reported | $ 6,160,985 | $ 6,027,376 |
Net loss | (13,057) | (63,541) |
Bartell Drug Company | ||
Business Acquisition [Line Items] | ||
Net revenues as reported | 6,160,985 | 6,027,376 |
Supplemental Pro forma revenues | 6,160,985 | 6,164,616 |
Net loss | (13,057) | (63,541) |
Supplemental Pro forma net loss | $ (13,057) | $ (70,356) |
Restructuring (Details)
Restructuring (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Restructuring related liabilities | ||
Restructuring expense | $ 5,932 | $ 35,735 |
Anticipated restructuring-related costs | 30,000 | |
Trademarks | ||
Restructuring related liabilities | ||
Impairment of intangible assets | 29,852 | |
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | ||
Restructuring related liabilities | ||
Balance-beginning of period | 15,490 | |
Restructuring expense | 5,932 | 35,735 |
Cash payments | (12,462) | |
Balance-end of period | 8,960 | |
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | Selling, general and administrative expenses | ||
Restructuring related liabilities | ||
Restructuring expense | 9,972 | |
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | Cost of revenues | ||
Restructuring related liabilities | ||
Restructuring expense | 25,763 | |
Severance and related costs | ||
Restructuring related liabilities | ||
Balance-beginning of period | 12,657 | |
Restructuring expense | 506 | 4,811 |
Cash payments | (4,826) | |
Balance-end of period | 8,337 | |
Non-executive retention costs | ||
Restructuring related liabilities | ||
Restructuring expense | 629 | |
Professional and other fees | ||
Restructuring related liabilities | ||
Balance-beginning of period | 2,833 | |
Restructuring expense | 5,426 | 4,532 |
Cash payments | (7,636) | |
Balance-end of period | 623 | |
SKU Optimization [Member] | ||
Restructuring related liabilities | ||
Restructuring expense | 25,763 | |
Retail Pharmacy | Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | ||
Restructuring related liabilities | ||
Restructuring expense | 1,621 | 35,709 |
Retail Pharmacy | Severance and related costs | ||
Restructuring related liabilities | ||
Restructuring expense | 4,559 | |
Retail Pharmacy | Non-executive retention costs | ||
Restructuring related liabilities | ||
Restructuring expense | 855 | |
Retail Pharmacy | Professional and other fees | ||
Restructuring related liabilities | ||
Restructuring expense | 1,621 | 4,532 |
Retail Pharmacy | SKU Optimization [Member] | ||
Restructuring related liabilities | ||
Restructuring expense | 25,763 | |
Pharmacy Services | Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | ||
Restructuring related liabilities | ||
Restructuring expense | 4,311 | 26 |
Pharmacy Services | Severance and related costs | ||
Restructuring related liabilities | ||
Restructuring expense | 506 | 252 |
Pharmacy Services | Non-executive retention costs | ||
Restructuring related liabilities | ||
Restructuring expense | $ (226) | |
Pharmacy Services | Professional and other fees | ||
Restructuring related liabilities | ||
Restructuring expense | $ 3,805 |
Asset Sale to WBA (Details)
Asset Sale to WBA (Details) $ in Thousands | Sep. 18, 2017USD ($)itemstore | Mar. 31, 2018USD ($)store | May 29, 2021USD ($) | May 30, 2020USD ($) | Feb. 29, 2020USD ($) | Mar. 02, 2019USD ($)item | Feb. 27, 2021USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Accounts receivable, net | $ 1,612,596 | $ 1,462,441 | |||||
Walgreens Boots Alliance WBA [Member] | Walgreens | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Ownership interest (as a percent) | 100.00% | ||||||
Assets held for sale | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member] | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Number of stores | store | 1,932 | ||||||
Number of distribution centers | item | 3 | ||||||
Purchase price per agreement | $ 4,375,000 | ||||||
Discontinued Operations, Disposed of by Sale [Member] | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member] | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Number of stores | store | 1,932 | ||||||
Number of distribution centers | item | 1 | ||||||
Proceeds from assets sold | $ 4,156,686 | $ 94,289 | $ 62,774 | $ 61,251 | |||
Pre-tax gain on sale | 12,690 | $ 19,268 | $ 14,151 | ||||
Period of transition | 3 years | ||||||
Payments for inventory and selling, general and administrative activities | 0 | 31,005 | |||||
Accounts receivable, net | 0 | 4,398 | |||||
TSA fees | $ 0 | $ 1,080 |
Asset Sale to WBA - Operating r
Asset Sale to WBA - Operating results of discontinued operations (Details) $ in Thousands | 3 Months Ended |
May 30, 2020USD ($) | |
Costs and expenses: | |
Net income from discontinued operations, net of tax | $ 9,161 |
Discontinued Operations, Disposed of by Sale [Member] | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member] | |
Income statement disclosures | |
Revenues | 174 |
Costs and expenses: | |
Cost of revenues | 8 |
Selling, general and administrative expenses | 871 |
Gain on sale of assets, net | (14,149) |
Net expenses and non-operating income | (13,270) |
Income from discontinued operations before income taxes | 13,444 |
Income tax (benefit) expense, discontinued operation | 4,283 |
Net income from discontinued operations, net of tax | $ 9,161 |
Income (Loss) Per Share (Detail
Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Numerator: | ||
Loss from continuing operations attributable to common stockholders-basic and diluted | $ (13,057) | $ (72,702) |
Income from discontinued operations attributable to common stockholders-basic and diluted | 9,161 | |
Loss attributable to common stockholders-basic and diluted | $ (13,057) | $ (63,541) |
Denominator: | ||
Basic weighted average shares | 53,852 | 53,462 |
Diluted weighted average shares | 53,852 | 53,462 |
Continuing operations | $ (0.24) | $ (1.36) |
Discontinued operations | 0 | 0.17 |
Net basic and diluted loss per share | $ (0.24) | $ (1.19) |
Stock options | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income per share | 773 | 1,264 |
Restricted shares | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income per share | 1,240 | 1,198 |
Facility Exit and Impairment _3
Facility Exit and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 29, 2021 | May 30, 2020 | Feb. 27, 2021 | |
Lease termination and impairment charges | |||
Facility exit and impairment charges | $ 8,831 | $ 3,753 | |
Carrying value of long-lived assets | 4,313 | 2,203 | |
Operating right-of-use assets | 3,013,577 | $ 3,064,077 | |
Impairment related to terminated software project | 1,919 | ||
Impairment charges, store assets | 284 | ||
Impairment charges | |||
Lease termination and impairment charges | |||
Facility exit and impairment charges | 4,313 | 2,203 | |
Facility exit charges | |||
Lease termination and impairment charges | |||
Facility exit and impairment charges | $ 4,518 | $ 1,550 |
Facility Exit and Impairment _4
Facility Exit and Impairment Charges - Fair value (Details) - Nonrecurring basis - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Non Financial Assets Measured on a Non Recurring Basis | ||
Long-lived assets held and used, impairment charges | $ (4,313) | $ (2,203) |
Total Charges | (4,313) | (2,203) |
Fair Value | ||
Non Financial Assets Measured on a Non Recurring Basis | ||
Fair value of Total | $ 0 | $ 0 |
Facility Exit and Impairment _5
Facility Exit and Impairment Charges - Closed Store Liability rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Closed store and distribution center charges | ||
Provision for present value of executory costs for leases exited | $ 5,932 | $ 35,735 |
Revenues and operating losses of closed stores or stores approved for closure | ||
Income (loss) before income taxes | (12,277) | (80,720) |
Depreciation and amortization | 75,859 | 79,103 |
Closed store and distribution center charges | ||
Closed store and distribution center charges | ||
Balance-beginning of period | 3,443 | 2,253 |
Provision for present value of executory costs for leases exited | 1,708 | |
Changes in assumptions and other adjustments | 1,493 | |
Interest accretion | 7 | |
Cash payments | (516) | (83) |
Balance-end of period | $ 6,135 | $ 2,170 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
Other Financial Instruments | ||
Held to maturity investments | $ 7,043 | $ 7,041 |
Level 1 | ||
Other Financial Instruments | ||
Carrying value of total long-term indebtedness | 3,014,517 | 3,063,087 |
Estimated fair value of total long-term indebtedness | $ 3,100,602 | $ 3,176,322 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 29, 2021 | May 30, 2020 | Feb. 27, 2021 | |
Income Taxes | |||
Income tax (benefit) expense | $ 780 | $ (8,018) | |
Estimated effective tax rate (as a percent) | (6.40%) | (9.90%) | |
Increase in valuation allowance to offset the current year deferred state tax benefits (as a percent) | (18.50%) | (10.60%) | |
Decrease in unrecognized tax benefits related to state exposures | $ 11,851 | ||
Valuation allowance against net deferred tax assets | $ 1,660,547 | $ 1,657,562 |
Medicare Part D (Details)
Medicare Part D (Details) - USD ($) $ in Thousands | Feb. 18, 2021 | Nov. 12, 2020 | Feb. 19, 2020 | Nov. 28, 2020 | Feb. 29, 2020 | Feb. 27, 2021 | May 29, 2021 | Mar. 31, 2021 |
Statutory Accounting Practices [Line Items] | ||||||||
Minimum amount of capital and surplus required by regulatory requirements | $ 14,767 | |||||||
Accounts receivable, net | $ 1,462,441 | $ 1,612,596 | ||||||
Medicare Part D | ||||||||
Accrued salaries, wages and other current liabilities | 642,364 | 677,151 | ||||||
Current Year Receivable Purchase Agreement | ||||||||
Medicare Part D | ||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 300,015 | |||||||
Sale price for receivables sold | 290,613 | |||||||
Receipts from sale of receivables | $ 269,912 | |||||||
Remaining receivable for receivables sold to third party | 20,701 | |||||||
Loss on sale of receivable | 9,403 | |||||||
Prior Year Receivable Purchase Agreement | ||||||||
Medicare Part D | ||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 464,019 | |||||||
Sale price for receivables sold | 444,812 | |||||||
Receipts from sale of receivables | $ 412,795 | |||||||
Remaining receivable for receivables sold to third party | 32,017 | |||||||
Loss on sale of receivable | $ 19,207 | |||||||
Sale Of Second Prior Year Receivables [Member] | ||||||||
Medicare Part D | ||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 501,422 | |||||||
Sale price for receivables sold | 484,547 | |||||||
Receipts from sale of receivables | $ 449,949 | |||||||
Loss on sale of receivable | $ 16,875 | |||||||
EI (Elixir Insurance) | ||||||||
Statutory Accounting Practices [Line Items] | ||||||||
Accounts receivable, net | $ 69,800 | $ 257,860 |
Manufacturer Rebates Receivab_2
Manufacturer Rebates Receivables (Details) - USD ($) $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
Manufacturer Rebates Receivables | ||
Manufacturer rebates receivables | $ 570,030 | $ 632,267 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | Feb. 27, 2021 | |
Goodwill | ||
Accumulated impairment losses | $ 574,712 | $ 574,712 |
Carrying amount of goodwill | ||
Beginning Balance | 1,108,136 | |
Goodwill impairment | 0 | |
Ending Balance | $ 1,108,136 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
May 29, 2021 | May 30, 2020 | Feb. 27, 2021 | |
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Goodwill impairment | $ 0 | ||
Accumulated impairment losses | 574,712 | $ 574,712 | |
Gross Carrying Amount, Finite Lived | 1,737,198 | 1,733,101 | |
Accumulated Amortization | (1,425,716) | (1,406,982) | |
Net | 311,482 | 326,119 | |
Gross Carrying Amount, Total | 1,751,598 | 1,747,501 | |
Net, Total | 325,882 | 340,519 | |
Other intangibles, net | 325,882 | 340,519 | |
Trademarks | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Indefinite Lived | 14,400 | 14,400 | |
Impairment of intangible assets | $ 29,852 | ||
Noncompete agreements and other | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | 195,238 | 193,916 | |
Accumulated Amortization | (174,573) | (172,618) | |
Net | $ 20,665 | $ 21,298 | |
Remaining Weighted Average Amortization Period | 3 years | 3 years | |
Prescription files | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | $ 1,025,975 | $ 1,023,200 | |
Accumulated Amortization | (907,329) | (900,321) | |
Net | $ 118,646 | $ 122,879 | |
Remaining Weighted Average Amortization Period | 6 years | 6 years | |
Customer relationships | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | $ 388,000 | $ 388,000 | |
Accumulated Amortization | (268,674) | (261,584) | |
Net | $ 119,326 | $ 126,416 | |
Remaining Weighted Average Amortization Period | 10 years | 11 years | |
CMS license | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | $ 57,500 | $ 57,500 | |
Accumulated Amortization | (13,646) | (13,072) | |
Net | $ 43,854 | $ 44,428 | |
Remaining Weighted Average Amortization Period | 19 years | 20 years | |
Claims adjudication and other developed software | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | $ 58,985 | $ 58,985 | |
Accumulated Amortization | (49,994) | (47,887) | |
Net | $ 8,991 | $ 11,098 | |
Remaining Weighted Average Amortization Period | 1 year | 2 years | |
Backlog | |||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | |||
Gross Carrying Amount, Finite Lived | $ 11,500 | $ 11,500 | |
Accumulated Amortization | $ (11,500) | $ (11,500) | |
Remaining Weighted Average Amortization Period | 0 years | 0 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Unfavorable lease intangibles and amortization expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Goodwill and Other Intangible Assets | ||
Amortization expense for intangible assets and liabilities | $ 20,460 | $ 24,420 |
Anticipated annual amortization expense for intangible assets and liabilities | ||
2021 | 73,637 | |
2022 | 58,620 | |
2023 | 44,936 | |
2024 | 33,650 | |
2025 | $ 23,045 |
Indebtedness and Credit Agree_3
Indebtedness and Credit Agreements - Indebtedness and lease financing obligations (Details) - USD ($) $ in Thousands | May 29, 2021 | May 28, 2021 | Feb. 27, 2021 | Jul. 24, 2020 | Jul. 10, 2020 | Jul. 09, 2020 | Jun. 25, 2020 | Feb. 05, 2020 | Jan. 06, 2020 | Nov. 30, 2019 | Oct. 15, 2019 | Oct. 11, 2019 | Dec. 20, 2018 |
Indebtedness and credit agreements | |||||||||||||
Lease financing obligations | $ 23,423 | $ 23,120 | |||||||||||
Total Debt | 3,037,940 | 3,086,207 | |||||||||||
Current maturities of long-term debt and lease financing obligations | (7,261) | (6,409) | |||||||||||
Long-term debt and lease financing obligations, less current maturities | 3,030,679 | 3,079,798 | |||||||||||
Senior Secured Debt [Member] | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 1,324,137 | 1,283,667 | |||||||||||
Senior secured revolving credit facility due December 2023 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 876,163 | 835,897 | |||||||||||
Principal amount of debt | 889,000 | 850,000 | |||||||||||
Unamortized debt issuance costs | 12,837 | 14,103 | |||||||||||
FILO term loan due December 2023 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 447,974 | 447,770 | |||||||||||
Principal amount of debt | 450,000 | 450,000 | $ 450,000 | ||||||||||
Unamortized debt issuance costs | 2,026 | 2,230 | |||||||||||
Second Lien Secured Debt | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 1,424,848 | 1,423,565 | |||||||||||
7.5% senior notes due July 2025 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | $ 591,637 | $ 591,124 | |||||||||||
Debt instrument, stated interest rate (as a percent) | 7.50% | 7.50% | 7.50% | 7.50% | 7.50% | ||||||||
Principal amount of debt | $ 600 | $ 600 | |||||||||||
Unamortized debt issuance costs | 8,363 | 8,876 | |||||||||||
8.0% senior secured notes due 2026 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | $ 833,211 | 832,441 | |||||||||||
Debt instrument, stated interest rate (as a percent) | 8.00% | 8.00% | 8.00% | 8.00% | |||||||||
Principal amount of debt | $ 849,918 | 849,918 | $ 849,918 | $ 600,000 | |||||||||
Unamortized debt issuance costs | $ 16,707 | 17,477 | |||||||||||
Guaranteed Unsecured Debt | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 90,360 | ||||||||||||
6.125% senior notes due April 2023 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | $ 90,360 | ||||||||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | |||||
Principal amount of debt | $ 0 | $ 90,808 | |||||||||||
Unamortized debt issuance costs | 0 | 448 | |||||||||||
Unguaranteed Unsecured Debt | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | 265,532 | 265,495 | |||||||||||
7.7% notes due February 2027 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | $ 236,644 | $ 236,610 | |||||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | 7.70% | 7.70% | 7.70% | ||||||||
Principal amount of debt | $ 237,386 | $ 237,386 | |||||||||||
Unamortized debt issuance costs | 742 | 776 | |||||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Long-term debt | $ 28,888 | $ 28,885 | |||||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||||||||
Principal amount of debt | $ 29,001 | $ 29,001 | |||||||||||
Unamortized debt issuance costs | $ 113 | $ 116 |
Indebtedness and Credit Agree_4
Indebtedness and Credit Agreement - Credit Facility (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||||||
May 29, 2021 | May 28, 2021 | Feb. 27, 2021 | Jul. 24, 2020 | Jul. 10, 2020 | Jun. 25, 2020 | Feb. 05, 2020 | Jan. 06, 2020 | Dec. 20, 2018 | |
Credit facility | |||||||||
Cash sweep, 3-day minimum threshold | $ 275,000 | ||||||||
Cash sweep, 1-day minimum threshold | $ 200,000 | ||||||||
Rite Aid Subsidiaries [Member] | |||||||||
Credit facility | |||||||||
Ownership interest (as a percent) | 100.00% | ||||||||
Existing Facilities | |||||||||
Credit facility | |||||||||
Outstanding borrowings | $ 1,339,000 | ||||||||
Maximum amount of accumulated cash on hand | 200,000 | ||||||||
Amount of debt allowed to be outstanding | 1,500,000 | ||||||||
Threshold amount of debt | $ 750,000 | ||||||||
Number of days relating to debt threshold | 90 days | ||||||||
Minimum principal balance for which non-payment causes default | $ 50,000 | ||||||||
Existing Facilities | Minimum | |||||||||
Credit facility | |||||||||
Fixed charge coverage ratio | 1 | ||||||||
Senior secured revolving credit facility due December 2023 | |||||||||
Credit facility | |||||||||
Maximum borrowing capacity | $ 2,700,000 | ||||||||
Principal amount of debt | $ 889,000 | $ 850,000 | |||||||
Letters of credit outstanding | 122,023 | ||||||||
Additional borrowing capacity | $ 1,688,977 | ||||||||
Senior secured revolving credit facility due December 2023 | Minimum | |||||||||
Credit facility | |||||||||
Credit facility commitment fee (as a percent) | 0.25% | ||||||||
Additional borrowing capacity | $ 365,000 | ||||||||
Threshold availability on thirtieth consecutive day | $ 250,000 | ||||||||
Senior secured revolving credit facility due December 2023 | Maximum | |||||||||
Credit facility | |||||||||
Credit facility commitment fee (as a percent) | 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 December 2023 | LIBOR | Minimum | |||||||||
Credit facility | |||||||||
Percentage points added to the reference rate | 1.25% | ||||||||
Senior secured revolving credit facility due December 2023 | LIBOR | Maximum | |||||||||
Credit facility | |||||||||
Percentage points added to the reference rate | 1.75% | ||||||||
FILO term loan due December 2023 | |||||||||
Credit facility | |||||||||
Principal amount of debt | $ 450,000 | 450,000 | 450,000 | ||||||
FILO term loan due December 2023 | LIBOR | |||||||||
Credit facility | |||||||||
Percentage points added to the reference rate | 0.03% | ||||||||
Senior secured revolving credit facility due January 2020 | |||||||||
Credit facility | |||||||||
Maximum borrowing capacity | $ 2,700,000 | ||||||||
6.125% senior notes due April 2023 | |||||||||
Credit facility | |||||||||
Principal amount of debt | $ 0 | $ 90,808 | |||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% |
Indebtedness and Credit Agree_5
Indebtedness and Credit Agreement - Transactions and Maturity (Details) - USD ($) $ in Thousands | May 28, 2021 | Jul. 24, 2020 | Jul. 10, 2020 | Jun. 25, 2020 | Oct. 11, 2019 | Nov. 30, 2019 | May 29, 2021 | Aug. 29, 2020 | Feb. 27, 2021 | Jul. 09, 2020 | Feb. 05, 2020 | Jan. 06, 2020 | Oct. 15, 2019 |
Indebtedness and credit agreements | |||||||||||||
Gain (loss) on debt retirements, net | $ (396) | ||||||||||||
Proceeds from issuance of debt | $ 206,373 | ||||||||||||
Gain on debt modification | $ 5,274 | ||||||||||||
Maturities | |||||||||||||
Remainder of fiscal 2022 | 0 | ||||||||||||
2023 | 0 | ||||||||||||
2024 | 1,339,000 | ||||||||||||
2025 | 0 | ||||||||||||
2026 | 600,000 | ||||||||||||
thereafter | $ 1,116,305 | ||||||||||||
6.125% senior notes due April 2023 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Notes redeemed and discharged | $ 1,125,000 | $ 750,000 | |||||||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | 6.125% | |||||
Gain (loss) on debt retirements, net | $ (396) | ||||||||||||
Face amount of debt repurchased | $ 1,062,682 | $ 600,000 | $ 600,000 | ||||||||||
Principal amount of debt | $ 0 | $ 90,808 | |||||||||||
Proceeds from issuance of debt | $ 145,500 | ||||||||||||
Percentage of outstanding principal amount redeemed | 100.00% | ||||||||||||
Senior Notes 7.70 Percent And 6.875 Percent [Member] | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Notes redeemed and discharged | $ 84,097 | ||||||||||||
Early redemption of debt | 51,300 | $ 38,392 | |||||||||||
Gain (loss) on debt retirements, net | $ 32,416 | 18,510 | |||||||||||
Senior Notes 7.70 Percent And 6.875 Percent [Member] | Maximum | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Face amount of debt repurchased | $ 100,000 | ||||||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Notes redeemed and discharged | $ 39,441 | ||||||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | 6.875% | 6.875% | 6.875% | ||||||||
Principal amount of debt | $ 29,001 | $ 29,001 | |||||||||||
7.7% notes due February 2027 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Notes redeemed and discharged | $ 18,075 | ||||||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | 7.70% | 7.70% | 7.70% | ||||||||
Early redemption of debt | $ 10,012 | ||||||||||||
Gain (loss) on debt retirements, net | 4,766 | ||||||||||||
Face amount of debt repurchased | $ 15,000 | ||||||||||||
Principal amount of debt | $ 237,386 | $ 237,386 | |||||||||||
7.5% senior notes due July 2025 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 7.50% | 7.50% | 7.50% | 7.50% | 7.50% | ||||||||
Principal amount of debt | $ 600 | $ 600 | |||||||||||
8.0% senior secured notes due 2026 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 8.00% | 8.00% | 8.00% | 8.00% | |||||||||
Principal amount of debt | $ 849,918 | $ 600,000 | $ 849,918 | 849,918 | |||||||||
Senior secured revolving credit facility due December 2023 | |||||||||||||
Indebtedness and credit agreements | |||||||||||||
Principal amount of debt | $ 889,000 | $ 850,000 |
Leases (Details)
Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Property, Plant and Equipment [Line Items] | ||
Operating lease cost | $ 169,494 | $ 161,866 |
Financing lease cost: | ||
Amortization of right-of-use asset | 1,011 | 1,131 |
Interest on long-term finance lease liabilities | 568 | 689 |
Total finance lease costs | 1,579 | 1,820 |
Short-term lease costs | 1,099 | 153 |
Variable lease costs | 46,038 | 42,448 |
Less: sublease income | (3,343) | (4,132) |
Net lease cost | $ 214,867 | $ 202,155 |
Buildings | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Initial terms of noncancellable operating leases | 5 years | |
Initial terms of noncancellable finance leases | 5 years | |
Buildings | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Initial terms of noncancellable operating leases | 22 years | |
Initial terms of noncancellable finance leases | 22 years | |
Equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Initial terms of noncancellable operating leases | 3 years | |
Equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Initial terms of noncancellable operating leases | 10 years |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information related to leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows paid for operating leases | $ 176,591 | $ 170,370 |
Operating cash flows paid for interest portion of finance leases | 568 | 689 |
Financing cash flows paid for principal portion of finance leases | 1,111 | 1,243 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | 76,314 | 107,913 |
Finance leases | $ 0 | $ 0 |
Leases - Supplemental B_S Infor
Leases - Supplemental B/S Information (Details) - USD ($) $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
Operating leases: | ||
Operating lease right-of-use asset | $ 3,013,577 | $ 3,064,077 |
Short-term operating lease liabilities | 517,602 | 516,752 |
Long-term operating lease liabilities | 2,771,797 | 2,829,293 |
Total operating lease liabilities | 3,289,399 | 3,346,045 |
Finance leases: | ||
Property, plant and equipment, net | 1,074,596 | 1,080,499 |
Current maturities of long-term debt and lease financing obligations | 7,261 | 6,409 |
Lease financing obligations, less current maturities | 16,162 | 16,711 |
Total finance lease liabilities, ASC842 | $ 23,423 | $ 23,120 |
Weighted average remaining lease term | ||
Operating leases (in years) | 7 years 9 months 18 days | 7 years 10 months 24 days |
Finance leases (in years) | 8 years 4 months 24 days | 8 years 10 months 24 days |
Weighted average discount rate | ||
Operating leases (as a percent) | 6.00% | 6.00% |
Finance leases (as a percent) | 10.10% | 9.80% |
Finance Leased Assets [Member] | ||
Finance leases: | ||
Property, plant and equipment, net | $ 16,506 | $ 16,074 |
Leases - Maturity of lease liab
Leases - Maturity of lease liabilities under finance and operating leases (Details) - USD ($) $ in Thousands | May 29, 2021 | Feb. 27, 2021 |
Finance Leases, ASC842 | ||
2021 | $ 7,868 | |
2022 | 4,953 | |
2023 | 3,390 | |
2024 | 3,149 | |
2025 | 2,367 | |
Thereafter | 13,548 | |
Total lease payments | 35,275 | |
Less: imputed interest | (11,852) | |
Total finance lease liabilities, ASC842 | 23,423 | $ 23,120 |
Operating Leases, ASC842 | ||
2021 | 522,553 | |
2022 | 660,310 | |
2023 | 599,834 | |
2024 | 502,915 | |
2025 | 410,090 | |
Thereafter | 1,441,967 | |
Total lease payments | 4,137,669 | |
Less: imputed interest | (848,270) | |
Total operating lease liabilities | 3,289,399 | $ 3,346,045 |
Minimum sublease rentals | 39,000 | |
Operating and finance leases, ASC842 | ||
2021 | 530,421 | |
2022 | 665,263 | |
2023 | 603,224 | |
2024 | 506,064 | |
2025 | 412,457 | |
Thereafter | 1,455,515 | |
Total lease payments | 4,172,944 | |
Less: imputed interest | (860,122) | |
Total lease liabilities | $ 3,312,822 |
Leases - Sale_Leaseback (Detail
Leases - Sale/Leaseback (Details) $ in Thousands | 3 Months Ended |
May 29, 2021USD ($)facility | |
Leases | |
Number of facilities in sale/leaseback | facility | 2 |
Sale/leaseback proceeds | $ 7,456 |
Leaseback term | 15 years |
Gain on sale-leaseback transactions | $ 3,688 |
Retirement Plans - Net periodic
Retirement Plans - Net periodic cost (Details) - Pension Plan - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Net periodic pension expense | ||
Service cost | $ 128 | $ 144 |
Interest cost | 1,232 | 1,199 |
Expected return on plan assets | (1,313) | (1,177) |
Amortization of unrecognized net loss | 123 | 911 |
Net periodic pension expense | $ 170 | $ 1,077 |
Retirement Plans - Benefit obli
Retirement Plans - Benefit obligation and funded status (Details) - Pension Plan - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Change in benefit obligations: | ||
Service cost | $ 128 | $ 144 |
Interest cost | 1,232 | $ 1,199 |
Change in plan assets: | ||
Employer contributions | $ 805 |
Retirement Plans - Assumptions
Retirement Plans - Assumptions and assets (Details) $ in Thousands | May 29, 2021USD ($) |
Pension Plan | |
Defined benefit plans estimated future employer contributions | |
Expected employer contribution during next fiscal year | $ 3,040 |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet information (Details) $ in Thousands | 3 Months Ended | |
May 29, 2021USD ($)segment | Feb. 27, 2021USD ($) | |
Segment Reporting | ||
Number of reportable segments | segment | 2 | |
Total assets | $ 9,351,446 | $ 9,335,404 |
Goodwill | 1,108,136 | 1,108,136 |
Accounts receivable | 1,612,596 | 1,462,441 |
Operating segments | Retail Pharmacy | ||
Segment Reporting | ||
Total assets | 6,561,475 | 6,613,370 |
Goodwill | 43,492 | 43,492 |
Operating segments | Pharmacy Services | ||
Segment Reporting | ||
Total assets | 2,803,665 | 2,736,546 |
Goodwill | 1,064,644 | 1,064,644 |
Intersegment elimination | ||
Segment Reporting | ||
Total assets | (13,694) | (14,512) |
Long-term deferred tax liability | 0 | 0 |
Accounts receivable | $ 13,694 | $ 14,512 |
Segment Reporting - Revenues (D
Segment Reporting - Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Segment Reporting | ||
Revenues | $ 6,160,985 | $ 6,027,376 |
Gross Profit | 1,284,875 | 1,198,319 |
Adjusted EBITDA from continuing operations | 138,877 | 107,392 |
Additions to property and equipment and intangible assets | 64,600 | 39,174 |
Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 4,351,682 | 4,123,271 |
Operating segments | Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 4,351,682 | 4,123,271 |
Gross Profit | 1,169,934 | 1,081,536 |
Adjusted EBITDA from continuing operations | 94,914 | 62,982 |
Additions to property and equipment and intangible assets | 60,893 | 36,607 |
Operating segments | Pharmacy Services | ||
Segment Reporting | ||
Revenues | 1,872,282 | 1,977,246 |
Gross Profit | 114,941 | 116,783 |
Adjusted EBITDA from continuing operations | 43,963 | 44,410 |
Additions to property and equipment and intangible assets | 3,707 | 2,567 |
Intersegment elimination | ||
Segment Reporting | ||
Revenues | $ (62,979) | $ (73,141) |
Segment Reporting - Adjusted EB
Segment Reporting - Adjusted EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Segment Reporting | ||
Net loss from continuing operations | $ (13,057) | $ (72,702) |
Interest expense | 49,121 | 50,547 |
Income tax expense (benefit) | 780 | (8,018) |
Depreciation and amortization | 75,859 | 79,103 |
LIFO credit | (3,993) | (12,066) |
Facility exit and impairment charges | 8,831 | 3,753 |
Intangible asset impairment charges | 29,852 | |
Loss on debt retirements, net | 396 | |
Merger and Acquisition-related costs | 3,886 | |
Stock-based compensation expense | 2,811 | 1,874 |
Restructuring-related costs | 5,932 | 35,735 |
Inventory write-downs related to store closings | 472 | 834 |
Litigation settlement | 14,000 | |
Gain on sale of assets, net | (6,558) | (2,260) |
Other | 397 | 740 |
Adjusted EBITDA from continuing operations | $ 138,877 | $ 107,392 |
Commitments, Contingencies an_2
Commitments, Contingencies and Guarantees (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jun. 30, 2021USD ($)item | May 29, 2021USD ($)item | Jan. 31, 2017item | |
California Employment Litigation [Member] | Subsequent Event | |||
Commitments, Contingencies and Guarantees | |||
Number of claims | 2 | ||
California Employment Litigation, Claims Related To Store Associates [Member] | Subsequent Event | |||
Commitments, Contingencies and Guarantees | |||
Potential settlement amount | $ | $ 9,000 | ||
California Employment Litigation, Claims Related To Distribution Center Associates [Member] | Subsequent Event | |||
Commitments, Contingencies and Guarantees | |||
Potential settlement amount | $ | $ 1,750 | ||
Rx Savings Program False Claims Act Lawsuit [Member] | |||
Commitments, Contingencies and Guarantees | |||
Number of states failed to report Rx savings prices | 18 | ||
Blue Cross Blue Shield Litigation [Member] | |||
Commitments, Contingencies and Guarantees | |||
Number of claims | 2 | ||
Number of states in which operated | 8 | ||
Opioid Related Litigation [Member] | |||
Commitments, Contingencies and Guarantees | |||
Insurer retention | $ | $ 3,000 |
Supplementary Cash Flow Data (D
Supplementary Cash Flow Data (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 29, 2021 | May 30, 2020 | |
Supplementary Cash Flow Data | ||
Cash paid for interest | $ 12,813 | $ 12,843 |
Cash payments for income taxes, net | 556 | 2,100 |
Equipment financed under capital leases | 1,585 | 335 |
Gross borrowings from revolver | 1,546,000 | 2,139,000 |
Gross repayments to revolver | 1,507,000 | 1,897,000 |
Significant components of cash provided by Other Liabilities | ||
Other liabilities | 34,559 | $ 13,263 |
Accrued interest | $ 33,211 |