Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 03, 2023 | Jul. 22, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q/A | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 03, 2023 | |
Document Transition Report | false | |
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 | PO Box 3165 | |
Entity Address, City or Town | Harrisburg | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 17105 | |
City Area Code | 717 | |
Local Phone Number | 761-2633 | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 55,974,015 | |
Entity Central Index Key | 0000084129 | |
Current Fiscal Year End Date | --03-02 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | true | |
Amendment Description | Rite Aid Corporation ("Rite Aid," the "Company," "we," "us," and "our") is filing this Amendment No. 1 on Form 10-Q/A (this "Amendment" or "Form 10-Q/A") to our Quarterly Report on Form 10-Q for the quarter ended June 3, 2023, which was filed with the Securities and Exchange Commission (the "SEC") on July 11, 2023 (the "Original Form 10-Q") to make certain changes, as described below. Subsequent to the issuance of the Company's consolidated financial statements as of and for the fiscal year ended March 4, 2023, management evaluated the materiality of a misstatement related to the Company's historical accounting for closed store liabilities in accordance with changes in ASC 420, Exit or Disposal Cost Obligations. Based on their evaluation, management concluded the misstatement is not material to the Company's previously issued consolidated financial statements as of and for each of the three fiscal years ended March 4, 2023 and each of the interim and year-to-date periods then ended, (collectively the "previously issued financial statements"). However, due to the discovery of this error, we reevaluated the effectiveness of our internal control over financial reporting ("ICFR") as of March 4, 2023 and identified a material weakness in our ICFR. For a more detailed description of this material weakness, refer to Part I, Item 4,"Controls and Procedures." This Amendment therefore amends our assessment of our disclosure controls and procedures to indicate that they were not effective as of June 3, 2023 because of this material weakness. In conjunction with filing this Amendment, we determined it was appropriate to revise the previously issued financial statements and the related notes thereto to reflect the impact of the immaterial misstatement in the periods impacted. For additional information and a more detailed discussion, refer to Note 16 Revision of Previously Issued Consolidated Financial Statements. The revised consolidated financial statements for the fiscal years ended March 4, 2023, February 26, 2022 and February 27, 2021 can be found in Item 8, "Financial Statements and Supplementary Data" of the Company's Annual Report on Form 10K/A, filed with the SEC on July 25, 2024 (the "Fiscal 2023 10-K/A"). The revised condensed consolidated financial statements for the quarterly periods ended June 3, 2023 and May 28, 2022 are provided in Item 1 of this 10-Q/A. The following Items of the Original Form 10-Q have been amended as set forth in this Form 10-Q/A: • Part I, Item 1. "Financial Statements" • Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results" • Part I, Item 4. "Controls and Procedures" • Part II, Item 1A. "Risk Factors." In addition, Part II, Item 6 "Exhibits" also has been amended to include new certifications by our Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The new certifications are attached to this Amendment as Exhibits 31.1, 31.2, and 32. The other Items of the Original Form 10-Q have not been amended and, accordingly, have not been repeated in this Amendment. The only changes to the Original Form 10-Q are related to the matters described above. Except as described above, this Amendment does not amend, update, or change any other item or disclosure in the Original Form 10-Q and does not purport to reflect any information or event subsequent to the filing thereof. As such, this Amendment speaks only as of the date the Original Form 10-Q was filed, and the Company has not undertaken herein to amend, update, or change any information contained in the Original Form 10-Q to give effect to any event following the date of filing of the Original Form 10-Q, other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Form 10-Q and any subsequent filing with the SEC. |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Current assets: | ||
Cash and cash equivalents | $ 135,527 | $ 157,151 |
Accounts receivable, net | 1,392,348 | 1,149,958 |
Inventories, net of LIFO reserve of $547,432 and $539,932 | 1,950,413 | 1,900,744 |
Prepaid expenses and other current assets | 171,175 | 93,194 |
Total current assets | 3,649,463 | 3,301,047 |
Property, plant and equipment, net | 892,540 | 907,771 |
Operating lease right-of-use assets | 2,457,110 | 2,497,206 |
Goodwill | 356,436 | 507,936 |
Other intangibles, net | 244,883 | 250,112 |
Deferred tax assets | 12,368 | 12,368 |
Other assets | 37,618 | 50,922 |
Total assets | 7,650,418 | 7,527,362 |
Current liabilities: | ||
Current maturities of long-term debt and lease financing obligations | 6,060 | 6,332 |
Accounts payable | 1,505,741 | 1,494,611 |
Accrued salaries, wages and other current liabilities | 756,915 | 709,891 |
Current portion of operating lease liabilities | 488,712 | 502,403 |
Total current liabilities | 2,757,428 | 2,713,237 |
Long-term debt, less current maturities | 3,327,970 | 2,925,258 |
Long-term operating lease liabilities | 2,345,277 | 2,372,943 |
Lease financing obligations, less current maturities | 12,151 | 12,580 |
Other noncurrent liabilities | 107,188 | 97,577 |
Total liabilities | 8,550,014 | 8,121,595 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 56,708 and 56,629 | 56,708 | 56,629 |
Additional paid-in capital | 5,918,931 | 5,917,964 |
Accumulated deficit | (6,860,383) | (6,553,974) |
Accumulated other comprehensive loss | (14,852) | (14,852) |
Total stockholders' deficit | (899,596) | (594,233) |
Total liabilities and stockholders' deficit | $ 7,650,418 | $ 7,527,362 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventories, net of LIFO reserve | $ 547,432 | $ 539,932 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 75,000 | 75,000 |
Common stock, shares issued | 56,708 | 56,629 |
Common stock, shares outstanding | 56,708 | 56,629 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 5,653,162 | $ 6,014,583 |
Costs and expenses: | ||
Cost of revenues | 4,474,636 | 4,817,854 |
Selling, general and administrative expenses | 1,255,223 | 1,217,929 |
Facility exit and impairment charges | 19,692 | 41,821 |
Goodwill and intangible asset impairment charges | 151,500 | |
Interest expense | 65,220 | 48,119 |
Gain on sale of assets, net | (8,193) | (29,196) |
Total costs and expenses | 5,958,078 | 6,096,527 |
Loss before income taxes | (304,916) | (81,944) |
Income tax expense | 1,493 | 3,497 |
Net loss | (306,409) | (85,441) |
Computation of loss attributable to common stockholders: | ||
Net loss attributable to common stockholders - basic | (306,409) | (85,441) |
Net loss attributable to common stockholders - diluted | $ (306,409) | $ (85,441) |
Basic loss per share: | ||
Basic loss per share | $ (5.55) | $ (1.57) |
Diluted loss per share: | ||
Diluted loss per share | $ (5.55) | $ (1.57) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
Net loss | $ (306,409) | $ (85,441) |
Defined benefit pension plans: | ||
Amortization of net actuarial losses included in net periodic pension cost, net of $0 and $0 income tax expense | ||
Change in fair value of interest rate cap | ||
Total other comprehensive income | ||
Comprehensive loss | $ (306,409) | $ (85,441) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
Amortization of net actuarial losses included in net periodic pension cost, net of income tax expense | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - 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. 26, 2022 | $ 55,752 | $ 5,910,299 | $ (5,834,786) | $ (15,437) | $ 115,828 |
BALANCE (in shares) at Feb. 26, 2022 | 55,752 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net loss | (85,441) | (85,441) | |||
Comprehensive loss | (85,441) | ||||
Issuance of restricted stock | $ 61 | (61) | |||
Issuance of restricted stock (in shares) | 61 | ||||
Exchange of restricted shares for taxes | $ (63) | (490) | (553) | ||
Exchange of restricted shares for taxes (in shares) | (63) | ||||
Cancellation of restricted stock | $ (127) | 127 | |||
Cancellation of restricted stock (in shares) | (127) | ||||
Amortization of restricted stock balance | 3,324 | 3,324 | |||
Stock-based compensation expense | 201 | 201 | |||
Amortization of performance-based incentive plans | (190) | (190) | |||
BALANCE - end of period at May. 28, 2022 | $ 55,623 | 5,913,210 | (5,920,227) | (15,437) | 33,169 |
BALANCE (in shares) at May. 28, 2022 | 55,623 | ||||
BALANCE - beginning of period at Mar. 04, 2023 | $ 56,629 | 5,917,964 | (6,553,974) | (14,852) | (594,233) |
BALANCE (in shares) at Mar. 04, 2023 | 56,629 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net loss | (306,409) | (306,409) | |||
Comprehensive loss | (306,409) | ||||
Issuance of restricted stock | $ 256 | (256) | |||
Issuance of restricted stock (in shares) | 256 | ||||
Shares issued under the performance-based incentive plans | $ 44 | (44) | |||
Shares issued under the performance-based incentive plans (in shares) | 44 | ||||
Exchange of restricted shares for taxes | $ (18) | (28) | (46) | ||
Exchange of restricted shares for taxes (in shares) | (18) | ||||
Cancellation of restricted stock | $ (203) | 203 | |||
Cancellation of restricted stock (in shares) | (203) | ||||
Amortization of restricted stock balance | 1,201 | 1,201 | |||
Amortization of performance-based incentive plans | (109) | (109) | |||
BALANCE - end of period at Jun. 03, 2023 | $ 56,708 | $ 5,918,931 | $ (6,860,383) | $ (14,852) | $ (899,596) |
BALANCE (in shares) at Jun. 03, 2023 | 56,708 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Operating activities: | ||
Net loss | $ (306,409) | $ (85,441) |
Adjustments to reconcile to net cash used in operating activities: | ||
Depreciation and amortization | 65,895 | 70,073 |
Facility exit and impairment charges | 19,692 | 41,821 |
Goodwill and intangible asset impairment charges | 151,500 | |
LIFO charge | 7,500 | |
Gain on sale of assets, net | (8,193) | (29,196) |
Change in allowances for uncollectible accounts receivable | 4,004 | 3,763 |
Stock-based compensation expense | 1,081 | 3,334 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (246,838) | (104,458) |
Inventories | (57,169) | (15,827) |
Accounts payable | 20,558 | (137,572) |
Operating lease right-of-use assets and operating lease liabilities | (10,857) | (14,812) |
Other assets | (64,687) | 751 |
Other liabilities | 51,385 | 15,327 |
Net cash used in operating activities | (372,538) | (252,237) |
Investing activities: | ||
Payments for property, plant and equipment | (35,891) | (73,176) |
Intangible assets acquired | (11,612) | (12,248) |
Proceeds from dispositions of assets and investments | 8,157 | 30,839 |
Net cash used in investing activities | (39,346) | (54,585) |
Financing activities: | ||
Net proceeds from revolver | 400,000 | 291,000 |
Principal payments on long-term debt | (1,009) | (977) |
Change in zero balance cash accounts | (8,272) | 33,691 |
Financing fees paid for early debt redemption | (51) | |
Payments for taxes related to net share settlement of equity awards | (46) | (553) |
Deferred financing costs paid | (362) | |
Net cash provided by financing activities | 390,260 | 323,161 |
(Decrease) increase in cash and cash equivalents | (21,624) | 16,339 |
Cash and cash equivalents, beginning of period | 157,151 | 39,721 |
Cash and cash equivalents, end of period | $ 135,527 | $ 56,060 |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 3 Months Ended |
Jun. 03, 2023 | |
Basis of Presentation and Significant Accounting Policies | |
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 June 3, 2023 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 2023 10-K/A. Revenue Recognition The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week periods ended June 3, 2023 and May 28, 2022: June 3, May 28, 2023 2022 In thousands (13 weeks) (13 weeks) Retail Pharmacy Segment: Pharmacy sales $ 3,296,974 $ 3,053,449 Front-end sales 1,167,345 1,261,206 Other revenue 28,010 30,701 Total Retail Pharmacy Segment 4,492,329 4,345,356 Pharmacy Services Segment 1,196,154 1,725,857 Intersegment elimination (35,321) (56,630) Total revenue $ 5,653,162 $ 6,014,583 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 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. Beginning in December 2020, the Company granted temporary extensions of benefits to certain previous members that were eligible for a discount as of the end of each previous 6 month period such that those prior members were eligible to continue to receive that discount on purchases made through the subsequent 6 months with no additional purchase requirement. New and existing customers who were not already eligible for program benefits also had the opportunity to earn additional discounts on purchases made through each 6 month period. A final extension was granted on December 31, 2021 through February 26, 2022 at which point all discounts were terminated. A new loyalty program, Rite Aid Rewards, was initiated on February 27, 2022. Customers that enroll in the new program earn points for each dollar spent on front of store purchases as well as for eligible pharmacy prescriptions. Points can then be converted into a “Rite Aid Rewards” coupon that can be tendered as payment in a future purchase. Each point is worth $0.002. Customers must accumulate 1,000 points and create an online account in order to convert earned points to a “Rite Aid Rewards” coupon. Unused/unconverted points expire after 90 days. Unredeemed “Rite Aid Rewards” coupons expire 30 days after conversion from points earned. Points earned pursuant to the Rite Aid Rewards program represent a performance obligation. The value of unredeemed Rite Aid Rewards points is deferred as a contract liability (included in other current liabilities). As members redeem points in the form of a Rite Aid Rewards coupon or when points or unredeemed Rite Aid Rewards coupons expire, the Retail Pharmacy Segment recognizes the redeemed/expired portion of the deferred contract liability into revenue. For the thirteen week period ended June 3, 2023, the Company recognized $177 of deferred contract liability into revenue. The Retail Pharmacy Segment had accrued contract liabilities of $1,853 and $2,030 as of June 3, 2023 and March 4, 2023, respectively. Recently Adopted Accounting Pronouncements In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting |
Restructuring
Restructuring | 3 Months Ended |
Jun. 03, 2023 | |
Restructuring | |
Restructuring | 2. 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 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 the enterprise. Other strategic initiatives include the expansion of the Company’s digital business, replacing and updating the Company’s financial systems to improve efficiency, and movement to a common client platform at Elixir. In April 2022, the Company announced further strategic initiatives to reduce costs through the closure of unprofitable stores, reduce corporate administration expenses, improve efficiencies in worked payroll and other store labor costs, engage in a comprehensive review of purchasing and other business processes in both the Retail Pharmacy and Pharmacy Services Segments in order to identify areas of opportunity, as well as expense reductions at the Pharmacy Services Segment. In December 2022, the Company announced a new multi-year performance acceleration program, which allows it to fast-track initiatives that will improve sales, script volume and operating margins, and free up cash. The Company is partnering with a leading consulting firm that has worked with several Fortune 150 firms to execute the turnaround model. This program has given the Company visibility into the profitability opportunities it can drive over the next three years by focusing on improvements and growth in its core businesses. These and future restructuring activities, including those designed to enhance the Company’s liquidity and capital structure, are expected to provide future growth opportunities, expense efficiency benefits, and potentially reduce its leverage. The Company has engaged in and, at any given time, may further engage in strategic alternatives to recapitalize, refinance or otherwise optimize its capital structure. Any such review or contingency planning could ultimately result in the Company’s pursuing one or more significant corporate transactions or other remedial measures. There can be no assurance as to when or whether the Company will determine to implement any such action, whether such actions will be successful, or the effects the failure to take action may have on its business, including the Company’s ability to achieve its operational, strategic, and financial goals. Additionally, there can be no assurance that the Company’s current and future restructuring charges will achieve the cost savings and remerchandising benefits in the amounts or time anticipated. For the thirteen week period ended June 3, 2023, the Company incurred total restructuring-related costs of $78,130, 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) $ 440 $ — $ 440 Professional and other fees relating to restructuring activities (b) 76,029 1,661 77,690 Total restructuring-related costs $ 76,469 $ 1,661 $ 78,130 For the thirteen week period ended May 28, 2022, the Company incurred total restructuring-related costs of $22,646, 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) $ 11,288 $ 616 $ 11,904 Professional and other fees relating to restructuring activities (b) 6,083 4,659 10,742 Total restructuring-related costs $ 17,371 $ 5,275 $ 22,646 A summary of activity for the thirteen week period ended June 3, 2023 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) other fees (b) Total Balance as of March 4, 2023 $ 7,658 $ 42,154 $ 49,812 Additions charged to expense 440 77,690 78,130 Cash payments (2,738) (33,962) (36,700) Balance as of June 3, 2023 $ 5,360 $ 85,882 $ 91,242 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts. (b) – Professional and other fees include costs incurred in connection with the identification and implementation of initiatives associated with restructuring activities. The Company anticipates incurring approximately $155,000 during fiscal 2024 in connection with its continued restructuring activities. |
Loss Per Share
Loss Per Share | 3 Months Ended |
Jun. 03, 2023 | |
Loss Per Share | |
Loss Per Share | 3. Loss Per Share Basic 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 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 June 3, May 28, 2023 2022 Basic and diluted loss per share: Numerator: Net loss attributable to common stockholders — basic and diluted $ (306,409) $ (85,441) Denominator: Basic and diluted weighted average shares 55,179 54,348 Basic and diluted loss per share $ (5.55) $ (1.57) Due to their antidilutive effect, 29 and 700 potential shares related to stock options have been excluded from the computation of diluted loss per share for the thirteen week periods ended June 3, 2023 and May 28, 2022, respectively. Also, excluded from the computation of diluted loss per share for the thirteen week periods ended June 3, 2023 and May 28, 2022 are restricted shares of 1,510 and 1,247, respectively, which are included in shares outstanding. |
Facility Exit and Impairment Ch
Facility Exit and Impairment Charges | 3 Months Ended |
Jun. 03, 2023 | |
Facility Exit and Impairment Charges | |
Facility Exit and Impairment Charges | 4. Facility Exit and Impairment Charges Facility exit and impairment charges consist of amounts as follows: Thirteen Week Period Ended June 3, May 28, 2023 2022 Impairment charges $ 11,738 $ 35,036 Facility exit charges 7,954 6,785 $ 19,692 $ 41,821 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 June 3, 2023, long-lived assets with a carrying value of $11,738, primarily right-of-use assets in connection with stores or leased office spaces, were written down to their fair value of $0, resulting in an impairment charge of $11,738. During the thirteen week period ended May 28, 2022, long-lived assets with a carrying value of $39,228, primarily right-of-use assets in connection with leased office spaces, were written down to their fair value of $4,192, resulting in an impairment charge of $35,036. 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 June 3, 2023 and May 28, 2022: Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date June 3, 2023 Long-lived assets held for use $ — $ — $ — $ — $ (11,738) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (11,738) Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 28, 2022 Long-lived assets held for use $ — $ 4,192 $ — $ 4,192 $ (35,036) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ 4,192 $ — $ 4,192 $ (35,036) The above assets reflected in the caption ‘Long-lived assets held for sale’ have not been reclassified to assets held for sale due to their immateriality. Facility Exit Charges 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 inventory liquidation charges, as well as impairment of assets at these locations. When a store or distribution center is closed, the Company records executory costs for leases, as well as other store or distribution center closing and liquidation costs, when incurred. The Company calculates the liability for facility exit or disposal cost obligations to include long-term contract termination costs and costs related to the disposal of long-lived assets. The following table reflects the accrued facility exit charges: Thirteen Week Period Ended June 3, May 28, 2023 2022 Balance—beginning of period $ 2,228 $ 1,892 Provision for facility exit charges 155 — Changes in assumptions and other adjustments — — Interest accretion — — Cash payments (464) (36) Balance—end of period $ 1,919 $ 1,856 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Jun. 03, 2023 | |
Fair Value Measurements | |
Fair Value Measurements | 5. Fair Value Measurements The Company utilizes the three-level valuation hierarchy as described in Note 4, 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 June 3, 2023 and March 4, 2023, the Company has $4,640 and $7,457, respectively, of investments carried at amortized cost as these investments are being held to maturity, which are included as a component of prepaid expenses and other current assets. The Company believes the carrying value of these investments approximates their fair value. The fair value for Secured Overnight Financing Rate (“SOFR”) 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 $3,327,970 and $2,676,269, respectively, as of June 3, 2023. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $2,925,258 and $2,368,328, respectively, as of March 4, 2023. |
Income Taxes
Income Taxes | 3 Months Ended |
Jun. 03, 2023 | |
Income Taxes | |
Income Taxes | 6. Income Taxes The Company recorded an income tax expense of $1,493 and $3,497 for the thirteen week periods ended June 3, 2023 and May 28, 2022, respectively. The effective tax rate for the thirteen week periods ended June 3, 2023 and May 28, 2022 was (0.5)% and (4.3)%, respectively. The effective tax rate for the thirteen week periods ended June 3, 2023 May 28, 2022 was net of an adjustment of (27.6)% and (37.5)%, 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 $4,001 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 material 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 $1,720,476 and $1,636,461, 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 June 3, 2023 and March 4, 2023, respectively. |
Medicare Part D
Medicare Part D | 3 Months Ended |
Jun. 03, 2023 | |
Medicare Part D | |
Medicare Part D | 7. 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 $5,249 as of March 31, 2023. EI was in excess of the minimum required amounts in these states as of June 3, 2023. 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 August 12, 2021, the Company entered into a receivable purchase agreement (the “August 2021 Receivable Purchase Agreement”) with Bank of America, N.A. (the “Purchaser”). Pursuant to the terms and conditions set forth in the August 2021 Receivable Purchase Agreement, the Company sold $271,829, a portion of its calendar 2021 CMS receivable, for $258,116, of which $239,360 was received on August 12, 2021 and the remainder was received in fiscal 2023 upon final remittance from CMS. In connection therewith, the Company recognized a loss of $13,713, which is included as a component of loss (gain) on sale of assets, net during the thirteen week period ended August 28, 2021. On August 12, 2021, concurrent with the August 2021 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “August 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 August 2021 Indemnity Agreement. Based on its evaluation of the August 2021 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the August 2021 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the August 2021 Indemnity Agreement. On January 24, 2022, the Company entered into a receivable purchase agreement (the “January 2022 Receivable Purchase Agreement”) with Purchaser. Pursuant to the terms and conditions set forth in the January 2022 Receivable Purchase Agreement, the Company sold $400,680, a portion of its calendar 2021 CMS receivable, for $387,035, of which $359,388 was received on January 24, 2022 and the remainder was received in fiscal 2023 upon final remittance from CMS. In connection therewith, the Company recognized a loss of $13,645, which is included as a component of loss (gain) on sale of assets, net during the thirteen week period ended February 26, 2022. On January 24, 2022, concurrent with the January 2022 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “January 2022 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 January 2022 Indemnity Agreement. Based on its evaluation of the January 2022 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the January 2022 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the January 2022 Indemnity Agreement. On October 13, 2022, the Company entered into a receivable purchase agreement (the “October 2022 Receivable Purchase Agreement”) with Purchaser. Pursuant to the terms and conditions set forth in the October 2022 Receivable Purchase Agreement, the Company sold $195,487, a portion of its calendar 2022 CMS receivable, for $180,405, of which $166,917 was received on October 13, 2022. The remaining $13,488, which is included in accounts receivable, net as of June 3, 2023, 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 $15,082, which was included as a component of (gain) loss on sale of assets, net during the thirteen-week period ended November 26, 2022. On October 13, 2022, concurrent with the October 2022 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “October 2022 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 October 2022 Indemnity Agreement. Based on its evaluation of the October 2022 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the October 2022 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the October 2022 Indemnity Agreement. During the thirteen-week period ended November 26, 2022, the Company incurred additional fees of $1,937, which were included as a component of (gain) loss on sale of assets, net related to the sale of the 2021 CMS receivable to Bank of America. The additional fees were incurred due to a CMS delay in settling the 2021 receivable. On February 3, 2023, the Company entered into a receivable purchase agreement (the “February 2023 Receivable Purchase Agreement”) with Purchaser. Pursuant to the terms and conditions set forth in the February 2023 Receivable Purchase Agreement, the Company sold $278,390, a portion of its calendar 2022 CMS receivable, for $261,771, of which $242,562 was received on February 3, 2023. The remaining $19,209, which is included in accounts receivable, net as of June 3, 2023, 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 $16,619, which is included as a component of (gain) loss on sale of assets, net during the fourteen-week period ended March 4, 2023. On February 3, 2023, concurrent with the February 2023 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “February 2023 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 2023 Indemnity Agreement. Based on its evaluation of the February 2023 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the February 2023 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the February 2023 Indemnity Agreement. During the fourteen-week period ended March 4, 2023, the company incurred additional fees of $2,573, which are included as a component of (gain) loss on sale of assets, net related to the sale of the 2021 CMS receivable to Bank of America. The additional fees were incurred due to a CMS delay in settling the 2021 receivable. As of June 3, 2023 and March 4, 2023 accounts receivable, net included $32,697 due from the Purchaser, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance for the respective calendar years from CMS. As of June 3, 2023, and March 4, 2023, accounts receivable, net included $136,070 and $45,201 due from CMS. The Inflation Reduction Act of 2022 contains several provisions affecting Medicare, which will take effect over various periods of time from 2023 to 2029. Based on the Company’s current analysis of the provisions, it does not believe that this legislation will have a material impact on the financial statements. On June 4, 2023, the Company decided to exit the Medicare Part D Individual Insurance market, effective January 1, 2024. As of June 3, 2023, Elixir Insurance operated in eleven markets, with approximately 274,000 Medicare Part D Individual members. The Company expects to service its exiting members in the 2023 plan year through December 31, 2023. |
Manufacturer Rebates Receivable
Manufacturer Rebates Receivables | 3 Months Ended |
Jun. 03, 2023 | |
Manufacturer Rebates Receivables | |
Manufacturer Rebates Receivables | 8. Manufacturer Rebates Receivables The Pharmacy Services Segment has manufacturer rebates receivables due directly from manufacturers and from our rebate aggregator of $417,746 and $357,699 included in accounts receivable, net of an allowance for uncollectible rebates of $11,025 and $8,680, as of June 3, 2023 and March 4, 2023, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Jun. 03, 2023 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 9. Goodwill and Other Intangible Assets Goodwill and indefinite-lived assets, such as certain trademarks acquired in connection with acquisition transactions, are not amortized, but are instead evaluated for impairment on an annual basis at the end of the fiscal year, or more frequently if events or circumstances indicate it may be more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, the Company performs a quantitative goodwill impairment test. The fair value estimates used in the quantitative impairment test are calculated using an average of the income and market approaches. The income approach is based on the present value of future cash flows of each reporting unit, while the market approach is based on certain multiples of selected guideline public companies or selected guideline transactions. The approaches, which qualify as Level 3 within the fair value hierarchy, incorporate a number of market participant assumptions including future growth rates, discount rates, income tax rates and market activity in assessing fair value and are reporting unit specific. If the carrying amount exceeds the reporting unit’s fair value, the Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. In addition, the Company considers the income tax effect of any tax deductible goodwill when measuring a goodwill impairment loss. During the thirteen week period ended June 3, 2023, the Company completed a qualitative goodwill impairment assessment, at which time it was determined after evaluating results, events, and circumstances that were not known in prior quarters that a quantitative assessment was necessary for the Pharmacy Services Segment. The quantitative assessment concluded that the carrying amount of the Pharmacy Services Segment exceeded its fair value principally due to projected performance at EI. Unfavorable drug costs and utilization trends that became apparent during the thirteen week period ended June 3, 2023, resulted in an unfavorable MLR which also increased the projected working capital needs of the business and subsequently contributed to the decision to exit the Individual Part D market, effective January 1, 2024. This resulted in goodwill impairment charges of $151,500 for the thirteen week period ended June 3, 2023. The goodwill related to the Pharmacy Services Segment is at risk of future impairment if the fair value of this segment, and its associated assets, decrease in value due to further declines in its operating results or an inability to execute management’s business strategies. Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company's estimates. If the Company's ongoing cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including an unfavorable change in the terminal growth rate or the weighted-average cost of capital, the Company may have to record impairment charges in future periods. Retail Pharmacy Pharmacy Services Total Balance, March 4, 2023 43,492 464,444 507,936 Goodwill impairment — (151,500) (151,500) Balance, June 3, 2023 $ 43,492 $ 312,944 $ 356,436 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 June 3, 2023 and March 4, 2023. June 3, 2023 March 4, 2023 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) $ 205,249 $ (184,911) $ 20,338 3 years $ 201,919 $ (182,957) $ 18,962 3 years Prescription files 1,035,505 (934,114) 101,391 5 years 1,029,665 (928,478) 101,187 5 years Customer relationships (a) 388,000 (310,842) 77,158 8 years 388,000 (306,139) 81,861 9 years CMS license 57,500 (25,904) 31,596 3 years 57,500 (23,798) 33,702 4 years Claims adjudication and other developed software 58,985 (58,985) — 0 years 58,985 (58,985) — 0 years Total finite $ 1,745,239 $ (1,514,756) 230,483 $ 1,736,069 $ (1,500,357) $ 235,712 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,759,639 $ (1,514,756) $ 244,883 $ 1,750,469 $ (1,500,357) $ 250,112 (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. Amortization expense for these intangible assets and liabilities was $17,133 and $20,626 for the thirteen week periods ended June 3, 2023 and May 28, 2022, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2024—$63,486; 2025—$52,554; 2026—$42,028; 2027—$35,018 and 2028—$27,538. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreement | 3 Months Ended |
Jun. 03, 2023 | |
Indebtedness and Credit Agreement | |
Indebtedness and Credit Agreement | 10. Indebtedness and Credit Agreement Following is a summary of indebtedness and lease financing obligations as of June 3, 2023 and March 4, 2023: June 3, March 4, 2023 2023 Secured Debt: Senior secured revolving credit facility due August 2026 ($1,600,000 and $1,200,000 face value less unamortized debt issuance costs of $14,626 and $16,117) 1,585,374 1,183,883 FILO Term Loan due August 2026 ($400,000 face value less unamortized debt issuance costs of $1,936 and $2,090) 398,064 397,910 1,983,438 1,581,793 Second Lien Secured Debt: 7.500% senior secured notes due July 2025 ($320,002 face value less unamortized debt issuance costs of $2,257 and $2,529) 317,745 317,473 8.000% senior secured notes due November 2026 ($849,918 face value less unamortized debt issuance costs of $10,489 and $11,259) 839,429 838,659 1,157,174 1,156,132 Unguaranteed Unsecured Debt: 7.70% notes due February 2027 ($185,691 face value less unamortized debt issuance costs of $373 and $398) 185,318 185,293 6.875% fixed-rate senior notes due December 2028 ($2,046 face value less unamortized debt issuance costs of $6 and $6) 2,040 2,040 187,358 187,333 Lease financing obligations 18,211 18,912 Total debt 3,346,181 2,944,170 Current maturities of long-term debt and lease financing obligations (6,060) (6,332) Long-term debt and lease financing obligations, less current maturities $ 3,340,121 $ 2,937,838 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 “Prior Credit Agreement”; and the Credit Agreement, as further amended by the Second Amendment (as defined below), the “Prior Amended Credit Agreement”), which provided for facilities consisting of a $2,700,000 senior secured asset-based revolving credit facility and a $450,000 “first-in, last-out” senior secured term loan facility, the proceeds of which were used in December 2018 to refinance its prior $2,700,000 existing credit agreement. On August 20, 2021, the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”), which, among other things, amended the Prior Credit Agreement to provide for a $2,800,000 senior secured asset-based revolving credit facility (the “Prior Senior Secured Revolving Credit Facility”) and a $350,000 “first-in, last-out” senior secured term loan facility (“Prior Senior Secured Term Loan” and together with the Prior Senior Secured Revolving Credit Facility, collectively, the “Prior Amended Facilities”). The Prior Amended Facilities extended the Company’s debt maturity profile and provided additional liquidity. Borrowings under the Prior Senior Secured Revolving Credit Facility bore interest at a rate per annum equal to, at the Company’s option, (x) a base rate (determined in a customary manner) plus a margin of between 0.25% to 0.75% or (y) an adjusted LIBOR rate (determined in a customary manner) plus a margin of between 1.25% and 1.75%, in each case based upon the Average ABL Availability (as defined in the Prior Amended Credit Agreement). Borrowings under the Prior Senior Secured Term Loan bore interest at a rate per annum equal to, at the Company’s option, (x) a base rate (determined in a customary manner) plus a margin of 1.75% or (y) an adjusted LIBOR rate (determined in a customary manner) plus a margin of 2.75%. On December 1, 2022, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”), which, among other things, amended the Prior Amended Credit Agreement (the Prior Amended Credit Agreement, as modified by the Third Amendment, the “Existing Credit Agreement”) to provide for a $2,850,000 senior secured asset-based revolving credit facility (the “Existing Senior Secured Revolving Credit Facility”) and a $400,000 “first-in, last-out” senior secured term loan facility (the “Existing Senior Secured Term Loan” and, together with the Existing Senior Secured Revolving Credit Facility, collectively, the “Existing Facilities”), replaced the LIBOR rate with a Term SOFR-based rate as the applicable benchmark for the Existing Facilities, included COVID-19 vaccines in the borrowing base under the Existing Senior Secured Revolving Credit Facility, subject to limitations and conditions as specified in the Existing Credit Agreement, and increased the interest rate applicable to loans under the Existing Senior Secured Term Loan to (x) a base rate (determined in a customary manner) plus a margin of 2.00% or (y) an adjusted Term SOFR-based rate (determined in a customary manner) plus a margin of 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 Existing Senior Secured Revolving Credit Facility, depending on Average ABL Availability (as defined in the Existing Credit Agreement). The Existing Facilities are scheduled to mature on August 20, 2026 (subject to a springing maturity if certain of the Company’s existing secured notes are not refinanced or repaid prior to the date that is 91 days prior to the stated maturity thereof). The Company’s borrowing capacity under the Existing Senior Secured Revolving Credit Facility is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. As of June 3, 2023, the Company had approximately $2,000,000 of borrowings outstanding under the Existing Facilities and had letters of credit outstanding under the Existing Senior Secured Revolving Credit Facility in a face amount of approximately $208,198, which resulted in remaining borrowing capacity under the Existing Senior Secured Revolving Credit Facility of $1,041,802. If at any time the total credit exposure outstanding under the Existing Senior Secured Revolving Credit Facility exceeds the borrowing base, the Company will be required to repay amounts outstanding to eliminate such shortfall. The Existing Credit Agreement restricts the Company and all of its subsidiaries including the subsidiaries that guarantee its obligations under the Existing Facilities and the secured 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 Existing 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) availability under the Existing Senior Secured Revolving Credit Facility is less than or equal to $283,250 for three consecutive business days or less than or equal to $206,000 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 the Company’s 100% owned subsidiaries guarantee the obligations under the Existing Facilities and the secured 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 Existing 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 Existing 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 and the secured guaranteed notes are full and unconditional and joint and several. 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 Existing 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 The Existing 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 Existing Senior Secured Revolving Credit Facility is less than $206,000 or (ii) on the third consecutive business day on which availability under the Existing Senior Secured Revolving Credit Facility is less than $257,500 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 $257,500. As of June 3, 2023, the availability under the Existing Senior Secured Revolving Credit Facility was at a level that did not trigger the Existing Credit Agreement’s financial covenant. The Existing 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 Existing 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 $50,000 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 2023 and 2024 Transactions On June 13, 2022, the Company commenced a series of cash tender offers to purchase up to $150,000 aggregate principal amount of the Company’s 7.500% Senior Secured Notes due 2025 (the “7.500% Notes”), 8.000% Senior Secured Notes due 2026 (the “8.000% Notes”), 7.70% Notes due 2027 (the “7.70% Notes”) and 6.875% Notes due 2028 (the “6.875% Notes”), subject to prioritized acceptance levels, a subcap of $100,000 with respect to the 7.500% Notes and proration. On June 29, 2022, pursuant to an early settlement, the Company purchased an aggregate principal amount of $114,942 of its 7.500% Notes, $51,695 aggregate principal amount of its 7.70% Notes and $26,955 aggregate principal amount of its 6.875% Notes. In connection therewith, the Company recorded a gain on debt retirement of $41,312, 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 during the second quarter of fiscal 2023. On November 3, 2022, the Company announced the commencement of a cash tender offer to purchase up to $200,000 aggregate purchase price (not including any accrued and unpaid interest) of the Company’s 7.500% Notes, subject to proration. On November 30, 2022, pursuant to an early settlement, the Company purchased an aggregate principal amount of $ 160,497 and on December 9, 2022, the Company purchased an additional aggregate principal amount of $4,559 of its 7.500% Notes. In connection therewith, the Company recorded a gain on debt retirement of $38,978 , which includes unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows On December 1, 2022, the Company entered into the Third Amendment in order to, among other things, increase the aggregate principal amount of commitments under the Existing Senior Secured Revolving Credit Facility from $2,800,000 to $2,850,000 and increase the aggregate principal amount of loans outstanding under the Existing Senior Secured Term Loan from $350,000 to $400,000. As a result of the Third Amendment, the Company has increased its liquidity by $100,000. In connection therewith, the Company recorded a loss on debt modification and retirement of $148, which includes unamortized debt issuance costs. The related loss on debt modification and retirement is included in the results of operations and cash flows during the fourth quarter of fiscal 2023. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2024 and thereafter are as follows: 2024—$0; 2025—$0; 2026—$320,002; 2027—$3,035,609; 2028—$0 and $2,046 thereafter. |
Leases
Leases | 3 Months Ended |
Jun. 03, 2023 | |
Leases | |
Leases | 11. Leases The Company leases most of its retail stores and certain distribution facilities under noncancelable operating its equipment and other assets under noncancelable operating leases with initial terms ranging from 3 to 10 years. In addition to minimum rental payments, certain store leases require additional payments based on sales volume, as well as reimbursements for taxes, maintenance and insurance. Most leases contain renewal options, certain of which involve rent increases. The following table is a summary of the Company’s components of net lease cost for the thirteen week Thirteen Week Period Ended June 3, 2023 May 28, 2022 Operating lease cost $ 152,672 $ 159,845 Financing lease cost: Amortization of right-of-use asset 819 809 Interest on long-term finance lease liabilities 467 501 Total finance lease costs $ 1,286 $ 1,310 Short-term lease costs (776) 457 Variable lease costs 46,233 42,645 Less: sublease income (2,737) (3,223) Net lease cost $ 196,678 $ 201,034 Supplemental cash flow information related to leases for the thirteen week periods ended June 3, 2023 and May 28, 2022: Thirteen Week Period Ended June 3, 2023 May 28, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 160,367 $ 175,414 Operating cash flows paid for interest portion of finance leases 467 501 Financing cash flows paid for principal portion of finance leases 996 945 Right-of-use assets obtained in exchange for lease obligations: Operating leases 77,412 57,986 Finance leases — — Supplemental balance sheet information related to leases as of June 3, 2023 and March 4, 2023 (in thousands, except lease term and discount rate): June 3, March 4, 2023 2023 Operating leases: Operating lease right-of-use asset $ 2,457,110 $ 2,497,206 Short-term operating lease liabilities $ 488,712 $ 502,403 Long-term operating lease liabilities 2,345,277 2,372,943 Total operating lease liabilities $ 2,833,989 $ 2,875,346 Finance leases: Property, plant and equipment, net $ 13,064 $ 13,576 Current maturities of long-term debt and lease financing obligations $ 6,060 $ 6,332 Lease financing obligations, less current maturities 12,151 12,580 Total finance lease liabilities $ 18,211 $ 18,912 Weighted average remaining lease term Operating leases 7.4 7.5 Finance leases 8.3 8.0 Weighted average discount rate Operating leases 7.0 % 6.5 % Finance leases 10.6 % 9.0 % The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 3, 2023: June 3, 2023 Finance Operating Fiscal year Leases Leases (1) Total 2024 (remaining thirty-nine weeks) $ 6,506 $ 502,374 $ 508,880 2025 4,003 602,909 606,912 2026 2,198 479,513 481,711 2027 1,500 446,677 448,177 2028 1,500 373,347 374,847 Thereafter 10,548 1,211,362 1,221,910 Total lease payments 26,255 3,616,182 3,642,437 Less: imputed interest (8,044) (782,193) (790,237) Total lease liabilities $ 18,211 $ 2,833,989 $ 2,852,200 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $22 million due in the future under noncancelable leases. During the thirteen week periods ended June 3, 2023 and May 28, 2022, the Company did not enter into any sale-leaseback transactions The Company has additional capacity under its outstanding debt agreements to enter into additional sale-leaseback transactions. |
Retirement Plans
Retirement Plans | 3 Months Ended |
Jun. 03, 2023 | |
Retirement Plans | |
Retirement Plans | 12. Retirement Plans Net periodic pension expense (income) for the thirteen May 28, 2022 Defined Benefit Pension Plan Thirteen Week Period Ended June 3, May 28, 2023 2022 Service cost $ 73 $ 107 Interest cost 1,581 1,264 Expected return on plan assets (1,474) (1,402) Net periodic pension expense $ 180 $ (31) The Company is not required to make any contributions to its company-sponsored pension plans in fiscal 2024 but may make contributions to the extent such contributions are beneficial to the Company. The Company did not make any contributions to its company-sponsored pension plans in the first quarter of fiscal 2024. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Jun. 03, 2023 | |
Segment Reporting | |
Segment Reporting | 13. Segment Reporting The Company has two reportable segments, Retail Pharmacy Segment and Pharmacy Services Segment. 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 Financial Officer and several other members of the Executive Leadership Team, (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 June 3, 2023: Total Assets $ 5,762,566 $ 1,897,726 $ (9,874) $ 7,650,418 Goodwill 43,492 312,944 — 356,436 March 4, 2023: Total Assets $ 5,487,845 $ 2,049,107 $ (9,590) $ 7,527,362 Goodwill 43,492 464,444 — 507,936 (1) As of June 3, 2023 and March 4, 2023, intersegment eliminations include intersegment accounts receivable of $9,874 and $9,590 , 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 June 3, 2023 and May 28, 2022 Retail Pharmacy Intersegment Pharmacy Services Eliminations (1) Consolidated Thirteen Week Period Ended June 3, 2023: Revenues $ 4,492,329 $ 1,196,154 $ (35,321) $ 5,653,162 Gross Profit 1,086,863 91,663 — 1,178,526 Adjusted EBITDA (2) 70,049 21,666 — 91,715 Depreciation and amortization 55,469 10,426 — 65,895 LIFO charge 7,500 — — 7,500 Stock-based compensation expense 723 358 — 1,081 Additions to property and equipment and intangible assets 40,439 7,064 — 47,503 May 28, 2022: Revenues $ 4,345,356 $ 1,725,857 $ (56,630) $ 6,014,583 Gross Profit 1,097,357 99,372 — 1,196,729 Adjusted EBITDA (2) 73,682 26,448 — 100,130 Depreciation and amortization 56,108 13,965 — 70,073 LIFO charge — — — — Stock-based compensation expense 3,102 232 — 3,334 Additions to property and equipment and intangible assets 78,551 6,873 — 85,424 (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 loss to Adjusted EBITDA for the thirteen May 28, 2022 June 3, May 28, 2023 2022 (13 weeks) (13 weeks) Net loss $ (306,409) $ (85,441) Interest expense 65,220 48,119 Income tax expense 1,493 3,497 Depreciation and amortization 65,895 70,073 LIFO charge 7,500 — Facility exit and impairment charges 19,692 41,821 Goodwill and intangible asset impairment charges 151,500 — Stock-based compensation expense 1,081 3,334 Restructuring-related costs 78,130 22,646 Inventory write-downs related to store closings 2,057 7,955 Litigation and other contractual settlements 11,050 18,271 Gain on sale of assets, net (8,193) (29,196) Other 2,699 (949) Adjusted EBITDA $ 91,715 $ 100,130 |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 3 Months Ended |
Jun. 03, 2023 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 14. 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), audits by counter parties under our contracts, 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. Substantial damages are sought from the Company in virtually all of these matters, even if a specific amount is not specified. 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. Unless specifically noted otherwise, 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 at the current stage of 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 may exceed reimbursement pursuant to any applicable insurance. Such proceedings may also require significant attention of management. 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 including findings made by juries; (viii) the exercise of discretion in enforcement actions including in the case of certain government agency investigations, whether a qui tam lawsuit (“whistleblower” action) has been filed and whether the government agency makes a decision to intervene in the lawsuit following investigation; (ix) changes in priorities following any change in political administration at the state or federal level; and/or (x) the impact, results and settlements of similar claims made against competitors and other industry participants. Additionally, the Company may determine that a settlement is in its best interest, even if it believes that it has meritorious defenses and has not previously accrued for the matter. 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 the classification of certain positions as exempt from overtime requirements, failure to pay premiums for missed meals and rest periods, failure to provide accurate wage statements, and failure to reimburse business expenses (collectively, 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. In August 2022, the Company agreed to settle a putative class action regarding reimbursement for cell phone and mileage expenses for shift supervisors and managers/assistant managers for $1.29 million, and a putative wage and hour class action brought on behalf of drivers and other ice cream plant associates for $0.8 million. These settlements are subject to court approval. The Company has also reached an agreement in principle to resolve a putative employment collective and class action filed in federal court in New York, which raises similar allegations in addition to others about the payment frequency for certain employees (the “New York Case”). The Company has aggressively defended itself and challenged the merits of these employment 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. The Company is a defendant 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 On February 6, 2019, Humana, Inc., filed a claim pursuant to a binding arbitration provision of the parties’ agreement 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 arbitration hearing was held in this matter in November 2021. On April 22, 2022, the arbitrator issued an Opinion and Final Award against the Company for breach of contract awarding Humana $122.6 million, which includes $40.7 million in prejudgment interest (the “Arbitration Award”). The Company continues to believe that the Arbitration Award contains a number of significant factual and legal errors. On June 20, 2022, the Company both opposed Humana’s effort to confirm the Arbitration Award and petitioned the United States District Court for Western District of Kentucky for vacatur of the Arbitration Award, as is its right under the Federal Arbitration Act (“FAA”). As such, the Company has determined that it is not probable that a loss has occurred. The FAA, as interpreted and applied by federal courts, permits vacatur when, among other things, an arbitrator’s decision: (1) is irreconcilable with the terms of a contract between the parties; (2) rests on a plain legal error that manifests disregard for the law; or (3) incorporates a refusal to consider pertinent, material evidence. Similarly, the FAA, as interpreted and applied by federal courts, permits modification of an arbitrator’s decision to correct an evident material miscalculation of figures. Although the Company cannot make any assurances of success in its efforts, it is the Company’s view that the errors in the Arbitration Award support both vacatur and modification under the FAA, the effect of either of which could be to set aside the Arbitration Award or reduce or eliminate the damages provided for in the Arbitration Award. Argument on Humana’s petition to confirm the Arbitration Award and Rite Aid’s motion for vacatur of the Arbitration Award was held May 10, 2023 and we await the court’s decision. Depending on the court’s determination, it is possible that one or both parties may appeal the decision, or seek other remedies. 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 to several Pharmacy Benefit Managers, all but one of which are not owned by plaintiffs, with which Rite Aid and the insurers had independent contracts. On May 22, 2023, the Company won a defense verdict in the jury trial of a lawsuit filed in Delaware state court in 2019 by multiple Centene entities alleging that the Company overcharged for prescriptions by improperly reporting usual and customary prices. The Centene entities have filed a motion seeking a new trial. The Company is defending a similar lawsuit filed in 2022 by WellCare in Florida state court. Drug Utilization Review and Code 1 Litigation In June 2012, qui tam 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 (“JPML”) 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. As previously disclosed, on December 13, 2022, a qui tam complaint filed by three former Rite Aid pharmacy personnel (Andrew White, Mark Rosenberg, and Ann Wegelin) (collectively, “ qui tam In April 2019, the Company initiated a coverage action styled Rite Aid Corporation et al. v. ACE American Ins. Co. et al suits set for trial based on the specific allegations at issue in those cases. The matter has been remanded to the lower court for further proceedings. Miscellaneous Litigation and Investigations. Following the Company’s response to a 2020 CID from the Federal Trade Commission (“FTC”) with respect to consumer protection laws, the Company is seeking to negotiate a resolution with the FTC. The allegations relate to certain business practices that the Company has not engaged in for nearly three years, and the Company currently believes that any resolution of that CID would not likely require a monetary payment. During the course of the Company’s discussions with the FTC Staff in connection with its response to that CID, the FTC Staff also requested certain information from the Company related to compliance with the Company’s 2010 FTC Consent Order. The Company cooperated with the request, however, the FTC Staff informed the Company that absent an agreed resolution, it would recommend that the FTC file a complaint against the Company for violation of the Consent Order, including a request for a monetary payment and other relief. The FTC has now combined the two matters and is seeking a single resolution of both, such that discussions related to one matter may affect the ability to resolve the other. The Company is evaluating both matters, including a potential agreed resolution, although no assurance can be given that the matter will be resolved to the parties’ mutual satisfaction, or that a resolution will not include a monetary payment, and that the payment will not be material. The Company has received CIDs from the Department of Justice related to the Medicare Part D plan sponsored by a subsidiary of the Company. The Company is also defending a lawsuit asserting numerous claims based on allegations surrounding the Company’s use of a certain font including in the Company’s rebranded logo. The Company is defending a putative class action it has removed to federal court in California regarding alleged privacy breaches. The Company is defending a putative shareholder class action currently captioned Page v. Rite Aid Corporation et al. . The matter names Rite Aid Corporation and certain executives individually as defendants and raises claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 related to alleged misstatements and omissions concerning the growth of Holland v. Rite Aid Corporation et al. . The matter names Rite Aid Corporation and certain former and current executives individually as defendants and raises claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 related to the DOJ’s Complaint and alleged misstatements and omissions concerning the Company’s |
Supplementary Cash Flow Data
Supplementary Cash Flow Data | 3 Months Ended |
Jun. 03, 2023 | |
Supplementary Cash Flow Data | |
Supplementary Cash Flow Data | 15. Supplementary Cash Flow Data Thirteen Week Period Ended June 3, 2023 May 28, 2022 Cash paid for interest $ 34,452 $ 11,230 Cash payments for income taxes, net $ 1,006 $ 13,290 Equipment financed under capital leases $ 321 $ — Gross borrowings from revolver $ 829,000 $ 860,000 Gross repayments to revolver $ 429,000 $ 569,000 Significant components of cash provided by Other Liabilities of $51,385 for the thirteen Cash used in Other Assets of $64,687 for the thirteen week period ended June 3, 2023 is comprised primarily of prepaid rent. |
Revision of Previously Issued C
Revision of Previously Issued Consolidated Financial Statements | 3 Months Ended |
Jun. 03, 2023 | |
Revision of Previously Issued Consolidated Financial Statements | |
Revision of Previously Issued Consolidated Financial Statements | 16. Revision of Previously Issued Consolidated Financial Statements Subsequent to the issuance of the Company’s consolidated financial statements as of and for the fiscal year ended March 4, 2023, management evaluated the materiality of a misstatement in accordance with the U.S. SEC Staff’s Accounting Bulletin Nos. 99, Materiality (“SAB 99”) and 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). The misstatement pertains to the Company’s historical accounting for closed store liabilities. Based on their evaluation, management concluded the misstatement is not material to the Company’s previously issued consolidated financial statements as of and for each of the three fiscal years ended March 4, 2023 and each of the interim and year-to-date periods then ended, (collectively the “previously issued financial statements”). However, as prescribed by SAB 108, in conjunction with the re-issuance of the Company’s previously issued financial statements, the misstatement has been corrected as an immaterial revision of the accompanying condensed consolidated financial statements as of and for each of the thirteen week periods ended June 3, 2023 and May 28, 2022 and the related notes hereto. A summary of the nature of the misstatement and its impact on the Company’s previously issued financial statements is summarized as follows. The Company adopted ASC 842, Leases, (“ASC 842”) on the first day of fiscal year 2020 under the alternative transition method as permissible under ASC 842. As part of this adoption, the Company elected the practical expedients, as permitted under the transition guidance, which included, among other things, the ability to carry forward existing lease classifications. Based on this election, the Company appropriately eliminated the majority of its closed store and lease exit liabilities as of the date of adoption, which had been accrued in accordance with ASC 420, Exit or Disposal Cost Obligations, (“ASC 420”). Moreover, due to the Company’s practical expedients election, variable costs, consisting primarily of real estate taxes and common area maintenance expenses, associated with store closures that occur subsequent to the adoption of ASC 842 may no longer be accrued under ASC 420, but rather recognized as expense as they are incurred. Due to an oversight in their evaluation of an amendment to ASC 420 as a result of the adoption of ASC 842, management determined that the Company incorrectly continued to accrue estimated costs associated with store closures as a liability subsequent to the date of adoption, rather than recognize the costs as they are incurred. The impact of the misstatement resulted in an overstatement of these costs, which have historically been classified within Facility exit and impairment charges in the Company’s Condensed Consolidated Statements of Operations, and an overstatement of store closure liabilities, which have historically been classified within Accrued salaries, wages and other current liabilities (current portion) and Other noncurrent liabilities (long-term portion) in the Company’s Condensed Consolidated Balance Sheets. A summary of revisions to the Company’s previously reported financial statements is presented below. As of and for the thirteen week period ended June 3, 2023 Previously As (In 000’s, except per share amounts ) Reported Adjustment Revised Balance Sheet: Accrued salaries, wages, and other current liabilities $ 772,058 $ (15,143) $ 756,915 Total current liabilities 2,772,571 (15,143) 2,757,428 Other noncurrent liabilities 139,897 (32,709) 107,188 Total liabilities 8,597,866 (47,852) 8,550,014 Accumulated deficit (6,908,235) 47,852 (6,860,383) Total stockholders’ (deficit) equity (947,448) 47,852 (899,596) Statements of Operations and Comprehensive Loss: Facility exit and impairment charges $ 20,001 $ (309) $ 19,692 Loss before income taxes (305,225) 309 (304,916) Net loss (306,718) 309 (306,409) Comprehensive loss (306,718) 309 (306,409) Basic and diluted loss per share (5.56) 0.01 (5.55) Statement of Cash Flows: Net loss $ (306,718) $ 309 $ (306,409) Facility exit and impairment charges 20,001 (309) 19,692 As of and for the thirteen week period ended May 28, 2022 Previously As (In 000’s, except per share amounts) Reported Adjustment Revised Balance Sheet: Accrued salaries, wages, and other current liabilities $ 787,591 $ (13,560) $ 774,031 Total current liabilities 2,828,237 (13,560) 2,814,677 Other noncurrent liabilities 162,457 (27,985) 134,472 Total liabilities 8,558,149 (41,545) 8,516,604 Accumulated deficit (5,961,772) 41,545 (5,920,227) Total stockholders’ (deficit) equity (8,376) 41,545 33,169 Statements of Operations and Comprehensive Loss: Facility exit and impairment charges $ 66,571 $ (24,750) $ 41,821 Loss before income taxes (106,694) 24,750 (81,944) Net loss (110,191) 24,750 (85,441) Comprehensive loss (110,191) 24,750 (85,441) Basic and diluted loss per share (2.03) 0.46 (1.57) Statement of Cash Flows: Net loss $ (110,191) $ 24,750 $ (85,441) Facility exit and impairment charges 66,571 (24,750) 41,821 |
Basis of Presentation and Sig_2
Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
Jun. 03, 2023 | |
Basis of Presentation and Significant Accounting Policies | |
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 June 3, 2023 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 2023 10-K/A. |
Revenue Recognition | Revenue Recognition The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week periods ended June 3, 2023 and May 28, 2022: June 3, May 28, 2023 2022 In thousands (13 weeks) (13 weeks) Retail Pharmacy Segment: Pharmacy sales $ 3,296,974 $ 3,053,449 Front-end sales 1,167,345 1,261,206 Other revenue 28,010 30,701 Total Retail Pharmacy Segment 4,492,329 4,345,356 Pharmacy Services Segment 1,196,154 1,725,857 Intersegment elimination (35,321) (56,630) Total revenue $ 5,653,162 $ 6,014,583 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 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. Beginning in December 2020, the Company granted temporary extensions of benefits to certain previous members that were eligible for a discount as of the end of each previous 6 month period such that those prior members were eligible to continue to receive that discount on purchases made through the subsequent 6 months with no additional purchase requirement. New and existing customers who were not already eligible for program benefits also had the opportunity to earn additional discounts on purchases made through each 6 month period. A final extension was granted on December 31, 2021 through February 26, 2022 at which point all discounts were terminated. A new loyalty program, Rite Aid Rewards, was initiated on February 27, 2022. Customers that enroll in the new program earn points for each dollar spent on front of store purchases as well as for eligible pharmacy prescriptions. Points can then be converted into a “Rite Aid Rewards” coupon that can be tendered as payment in a future purchase. Each point is worth $0.002. Customers must accumulate 1,000 points and create an online account in order to convert earned points to a “Rite Aid Rewards” coupon. Unused/unconverted points expire after 90 days. Unredeemed “Rite Aid Rewards” coupons expire 30 days after conversion from points earned. Points earned pursuant to the Rite Aid Rewards program represent a performance obligation. The value of unredeemed Rite Aid Rewards points is deferred as a contract liability (included in other current liabilities). As members redeem points in the form of a Rite Aid Rewards coupon or when points or unredeemed Rite Aid Rewards coupons expire, the Retail Pharmacy Segment recognizes the redeemed/expired portion of the deferred contract liability into revenue. For the thirteen week period ended June 3, 2023, the Company recognized $177 of deferred contract liability into revenue. The Retail Pharmacy Segment had accrued contract liabilities of $1,853 and $2,030 as of June 3, 2023 and March 4, 2023, respectively. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting |
Basis of Presentation and Sig_3
Basis of Presentation and Significant Accounting Policies (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Basis of Presentation and Significant Accounting Policies | |
Schedule of revenues | June 3, May 28, 2023 2022 In thousands (13 weeks) (13 weeks) Retail Pharmacy Segment: Pharmacy sales $ 3,296,974 $ 3,053,449 Front-end sales 1,167,345 1,261,206 Other revenue 28,010 30,701 Total Retail Pharmacy Segment 4,492,329 4,345,356 Pharmacy Services Segment 1,196,154 1,725,857 Intersegment elimination (35,321) (56,630) Total revenue $ 5,653,162 $ 6,014,583 |
Restructuring (Tables)
Restructuring (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Restructuring | |
Schedule of restructuring-related costs | Retail Pharmacy Pharmacy Segment Services Segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ 440 $ — $ 440 Professional and other fees relating to restructuring activities (b) 76,029 1,661 77,690 Total restructuring-related costs $ 76,469 $ 1,661 $ 78,130 Retail Pharmacy Pharmacy Segment Services Segment Total Restructuring-related costs Severance and related costs associated with ongoing reorganization efforts (a) $ 11,288 $ 616 $ 11,904 Professional and other fees relating to restructuring activities (b) 6,083 4,659 10,742 Total restructuring-related costs $ 17,371 $ 5,275 $ 22,646 |
Schedule of restructuring-related liabilities | Severance and related Professional and costs (a) other fees (b) Total Balance as of March 4, 2023 $ 7,658 $ 42,154 $ 49,812 Additions charged to expense 440 77,690 78,130 Cash payments (2,738) (33,962) (36,700) Balance as of June 3, 2023 $ 5,360 $ 85,882 $ 91,242 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts. (b) – Professional and other fees include costs incurred in connection with the identification and implementation of initiatives associated with restructuring activities. |
Loss Per Share (Tables)
Loss Per Share (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Loss Per Share | |
Schedule of calculation of basic and diluted loss per share | Thirteen Week Period Ended June 3, May 28, 2023 2022 Basic and diluted loss per share: Numerator: Net loss attributable to common stockholders — basic and diluted $ (306,409) $ (85,441) Denominator: Basic and diluted weighted average shares 55,179 54,348 Basic and diluted loss per share $ (5.55) $ (1.57) |
Facility Exit and Impairment _2
Facility Exit and Impairment Charges (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Facility Exit and Impairment Charges | |
Schedule of amounts relating to facility exit and impairment charges | Thirteen Week Period Ended June 3, May 28, 2023 2022 Impairment charges $ 11,738 $ 35,036 Facility exit charges 7,954 6,785 $ 19,692 $ 41,821 |
Schedule of fair value of long-lived assets measured on non-recurring basis | Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date June 3, 2023 Long-lived assets held for use $ — $ — $ — $ — $ (11,738) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ — $ — $ — $ (11,738) Fair Values Total as of Charges Level 1 Level 2 Level 3 Impairment Date May 28, 2022 Long-lived assets held for use $ — $ 4,192 $ — $ 4,192 $ (35,036) Long-lived assets held for sale $ — $ — $ — $ — $ — Total $ — $ 4,192 $ — $ 4,192 $ (35,036) |
Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion | Thirteen Week Period Ended June 3, May 28, 2023 2022 Balance—beginning of period $ 2,228 $ 1,892 Provision for facility exit charges 155 — Changes in assumptions and other adjustments — — Interest accretion — — Cash payments (464) (36) Balance—end of period $ 1,919 $ 1,856 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Goodwill and Other Intangible Assets | |
Summary of the changes in the carrying amount of goodwill | Retail Pharmacy Pharmacy Services Total Balance, March 4, 2023 43,492 464,444 507,936 Goodwill impairment — (151,500) (151,500) Balance, June 3, 2023 $ 43,492 $ 312,944 $ 356,436 |
Schedule of indefinite-lived intangible assets | June 3, 2023 March 4, 2023 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) $ 205,249 $ (184,911) $ 20,338 3 years $ 201,919 $ (182,957) $ 18,962 3 years Prescription files 1,035,505 (934,114) 101,391 5 years 1,029,665 (928,478) 101,187 5 years Customer relationships (a) 388,000 (310,842) 77,158 8 years 388,000 (306,139) 81,861 9 years CMS license 57,500 (25,904) 31,596 3 years 57,500 (23,798) 33,702 4 years Claims adjudication and other developed software 58,985 (58,985) — 0 years 58,985 (58,985) — 0 years Total finite $ 1,745,239 $ (1,514,756) 230,483 $ 1,736,069 $ (1,500,357) $ 235,712 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,759,639 $ (1,514,756) $ 244,883 $ 1,750,469 $ (1,500,357) $ 250,112 (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 | June 3, 2023 March 4, 2023 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) $ 205,249 $ (184,911) $ 20,338 3 years $ 201,919 $ (182,957) $ 18,962 3 years Prescription files 1,035,505 (934,114) 101,391 5 years 1,029,665 (928,478) 101,187 5 years Customer relationships (a) 388,000 (310,842) 77,158 8 years 388,000 (306,139) 81,861 9 years CMS license 57,500 (25,904) 31,596 3 years 57,500 (23,798) 33,702 4 years Claims adjudication and other developed software 58,985 (58,985) — 0 years 58,985 (58,985) — 0 years Total finite $ 1,745,239 $ (1,514,756) 230,483 $ 1,736,069 $ (1,500,357) $ 235,712 Trademarks 14,400 — 14,400 Indefinite 14,400 — 14,400 Indefinite Total $ 1,759,639 $ (1,514,756) $ 244,883 $ 1,750,469 $ (1,500,357) $ 250,112 (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 Agreement (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Indebtedness and Credit Agreement | |
Summary of indebtedness and lease financing obligations | June 3, March 4, 2023 2023 Secured Debt: Senior secured revolving credit facility due August 2026 ($1,600,000 and $1,200,000 face value less unamortized debt issuance costs of $14,626 and $16,117) 1,585,374 1,183,883 FILO Term Loan due August 2026 ($400,000 face value less unamortized debt issuance costs of $1,936 and $2,090) 398,064 397,910 1,983,438 1,581,793 Second Lien Secured Debt: 7.500% senior secured notes due July 2025 ($320,002 face value less unamortized debt issuance costs of $2,257 and $2,529) 317,745 317,473 8.000% senior secured notes due November 2026 ($849,918 face value less unamortized debt issuance costs of $10,489 and $11,259) 839,429 838,659 1,157,174 1,156,132 Unguaranteed Unsecured Debt: 7.70% notes due February 2027 ($185,691 face value less unamortized debt issuance costs of $373 and $398) 185,318 185,293 6.875% fixed-rate senior notes due December 2028 ($2,046 face value less unamortized debt issuance costs of $6 and $6) 2,040 2,040 187,358 187,333 Lease financing obligations 18,211 18,912 Total debt 3,346,181 2,944,170 Current maturities of long-term debt and lease financing obligations (6,060) (6,332) Long-term debt and lease financing obligations, less current maturities $ 3,340,121 $ 2,937,838 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Leases | |
Schedule of components of net lease cost | Thirteen Week Period Ended June 3, 2023 May 28, 2022 Operating lease cost $ 152,672 $ 159,845 Financing lease cost: Amortization of right-of-use asset 819 809 Interest on long-term finance lease liabilities 467 501 Total finance lease costs $ 1,286 $ 1,310 Short-term lease costs (776) 457 Variable lease costs 46,233 42,645 Less: sublease income (2,737) (3,223) Net lease cost $ 196,678 $ 201,034 |
Schedule of supplemental cash flow information related to leases | Thirteen Week Period Ended June 3, 2023 May 28, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 160,367 $ 175,414 Operating cash flows paid for interest portion of finance leases 467 501 Financing cash flows paid for principal portion of finance leases 996 945 Right-of-use assets obtained in exchange for lease obligations: Operating leases 77,412 57,986 Finance leases — — |
Schedule of supplemental balance sheet information related to leases | June 3, March 4, 2023 2023 Operating leases: Operating lease right-of-use asset $ 2,457,110 $ 2,497,206 Short-term operating lease liabilities $ 488,712 $ 502,403 Long-term operating lease liabilities 2,345,277 2,372,943 Total operating lease liabilities $ 2,833,989 $ 2,875,346 Finance leases: Property, plant and equipment, net $ 13,064 $ 13,576 Current maturities of long-term debt and lease financing obligations $ 6,060 $ 6,332 Lease financing obligations, less current maturities 12,151 12,580 Total finance lease liabilities $ 18,211 $ 18,912 Weighted average remaining lease term Operating leases 7.4 7.5 Finance leases 8.3 8.0 Weighted average discount rate Operating leases 7.0 % 6.5 % Finance leases 10.6 % 9.0 % |
Schedule of minimum lease payments, financing leases | June 3, 2023 Finance Operating Fiscal year Leases Leases (1) Total 2024 (remaining thirty-nine weeks) $ 6,506 $ 502,374 $ 508,880 2025 4,003 602,909 606,912 2026 2,198 479,513 481,711 2027 1,500 446,677 448,177 2028 1,500 373,347 374,847 Thereafter 10,548 1,211,362 1,221,910 Total lease payments 26,255 3,616,182 3,642,437 Less: imputed interest (8,044) (782,193) (790,237) Total lease liabilities $ 18,211 $ 2,833,989 $ 2,852,200 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $22 million due in the future under noncancelable leases. |
Schedule of minimum lease payments, operating leases | June 3, 2023 Finance Operating Fiscal year Leases Leases (1) Total 2024 (remaining thirty-nine weeks) $ 6,506 $ 502,374 $ 508,880 2025 4,003 602,909 606,912 2026 2,198 479,513 481,711 2027 1,500 446,677 448,177 2028 1,500 373,347 374,847 Thereafter 10,548 1,211,362 1,221,910 Total lease payments 26,255 3,616,182 3,642,437 Less: imputed interest (8,044) (782,193) (790,237) Total lease liabilities $ 18,211 $ 2,833,989 $ 2,852,200 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $22 million due in the future under noncancelable leases. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Retirement Plans | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Pension Plan Thirteen Week Period Ended June 3, May 28, 2023 2022 Service cost $ 73 $ 107 Interest cost 1,581 1,264 Expected return on plan assets (1,474) (1,402) Net periodic pension expense $ 180 $ (31) |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Segment Reporting | |
Schedule of balance sheet information for the Company's reportable segments | Retail Pharmacy Pharmacy Services Eliminations (1) Consolidated June 3, 2023: Total Assets $ 5,762,566 $ 1,897,726 $ (9,874) $ 7,650,418 Goodwill 43,492 312,944 — 356,436 March 4, 2023: Total Assets $ 5,487,845 $ 2,049,107 $ (9,590) $ 7,527,362 Goodwill 43,492 464,444 — 507,936 (1) As of June 3, 2023 and March 4, 2023, intersegment eliminations include intersegment accounts receivable of $9,874 and $9,590 , 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 June 3, 2023: Revenues $ 4,492,329 $ 1,196,154 $ (35,321) $ 5,653,162 Gross Profit 1,086,863 91,663 — 1,178,526 Adjusted EBITDA (2) 70,049 21,666 — 91,715 Depreciation and amortization 55,469 10,426 — 65,895 LIFO charge 7,500 — — 7,500 Stock-based compensation expense 723 358 — 1,081 Additions to property and equipment and intangible assets 40,439 7,064 — 47,503 May 28, 2022: Revenues $ 4,345,356 $ 1,725,857 $ (56,630) $ 6,014,583 Gross Profit 1,097,357 99,372 — 1,196,729 Adjusted EBITDA (2) 73,682 26,448 — 100,130 Depreciation and amortization 56,108 13,965 — 70,073 LIFO charge — — — — Stock-based compensation expense 3,102 232 — 3,334 Additions to property and equipment and intangible assets 78,551 6,873 — 85,424 (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 to Adjusted EBITDA | June 3, May 28, 2023 2022 (13 weeks) (13 weeks) Net loss $ (306,409) $ (85,441) Interest expense 65,220 48,119 Income tax expense 1,493 3,497 Depreciation and amortization 65,895 70,073 LIFO charge 7,500 — Facility exit and impairment charges 19,692 41,821 Goodwill and intangible asset impairment charges 151,500 — Stock-based compensation expense 1,081 3,334 Restructuring-related costs 78,130 22,646 Inventory write-downs related to store closings 2,057 7,955 Litigation and other contractual settlements 11,050 18,271 Gain on sale of assets, net (8,193) (29,196) Other 2,699 (949) Adjusted EBITDA $ 91,715 $ 100,130 |
Supplementary Cash Flow Data (T
Supplementary Cash Flow Data (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Supplementary Cash Flow Data | |
Schedule of supplementary cash flow data | Thirteen Week Period Ended June 3, 2023 May 28, 2022 Cash paid for interest $ 34,452 $ 11,230 Cash payments for income taxes, net $ 1,006 $ 13,290 Equipment financed under capital leases $ 321 $ — Gross borrowings from revolver $ 829,000 $ 860,000 Gross repayments to revolver $ 429,000 $ 569,000 |
Revision of Previously Issued_2
Revision of Previously Issued Consolidated Financial Statements (Tables) | 3 Months Ended |
Jun. 03, 2023 | |
Revision of Previously Issued Consolidated Financial Statements | |
Summary of revisions to previously issued consolidated financial statements | Previously As (In 000’s, except per share amounts ) Reported Adjustment Revised Balance Sheet: Accrued salaries, wages, and other current liabilities $ 772,058 $ (15,143) $ 756,915 Total current liabilities 2,772,571 (15,143) 2,757,428 Other noncurrent liabilities 139,897 (32,709) 107,188 Total liabilities 8,597,866 (47,852) 8,550,014 Accumulated deficit (6,908,235) 47,852 (6,860,383) Total stockholders’ (deficit) equity (947,448) 47,852 (899,596) Statements of Operations and Comprehensive Loss: Facility exit and impairment charges $ 20,001 $ (309) $ 19,692 Loss before income taxes (305,225) 309 (304,916) Net loss (306,718) 309 (306,409) Comprehensive loss (306,718) 309 (306,409) Basic and diluted loss per share (5.56) 0.01 (5.55) Statement of Cash Flows: Net loss $ (306,718) $ 309 $ (306,409) Facility exit and impairment charges 20,001 (309) 19,692 Previously As (In 000’s, except per share amounts) Reported Adjustment Revised Balance Sheet: Accrued salaries, wages, and other current liabilities $ 787,591 $ (13,560) $ 774,031 Total current liabilities 2,828,237 (13,560) 2,814,677 Other noncurrent liabilities 162,457 (27,985) 134,472 Total liabilities 8,558,149 (41,545) 8,516,604 Accumulated deficit (5,961,772) 41,545 (5,920,227) Total stockholders’ (deficit) equity (8,376) 41,545 33,169 Statements of Operations and Comprehensive Loss: Facility exit and impairment charges $ 66,571 $ (24,750) $ 41,821 Loss before income taxes (106,694) 24,750 (81,944) Net loss (110,191) 24,750 (85,441) Comprehensive loss (110,191) 24,750 (85,441) Basic and diluted loss per share (2.03) 0.46 (1.57) Statement of Cash Flows: Net loss $ (110,191) $ 24,750 $ (85,441) Facility exit and impairment charges 66,571 (24,750) 41,821 |
Basis of Presentation and Sig_4
Basis of Presentation and Significant Accounting Policies - Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Product Class | ||
Revenues | $ 5,653,162 | $ 6,014,583 |
Intersegment elimination | ||
Product Class | ||
Revenues | (35,321) | (56,630) |
Retail Pharmacy Segment | ||
Product Class | ||
Other revenue | 28,010 | 30,701 |
Revenues | 4,492,329 | 4,345,356 |
Retail Pharmacy Segment | Pharmacy sales | ||
Product Class | ||
Revenues | 3,296,974 | 3,053,449 |
Retail Pharmacy Segment | Front end sales | ||
Product Class | ||
Revenues | 1,167,345 | 1,261,206 |
Pharmacy Services Segment | ||
Product Class | ||
Revenues | $ 1,196,154 | $ 1,725,857 |
Basis of Presentation and Sig_5
Basis of Presentation and Significant Accounting Policies - Narrative (Details) | 1 Months Ended | 3 Months Ended | ||
Feb. 27, 2022 USD ($) Point | Dec. 31, 2020 | Jun. 03, 2023 USD ($) | Mar. 04, 2023 USD ($) | |
Wellness plus program | ||||
Revenue Recognition | ||||
Loyalty discount eligibility period | 6 months | |||
Rite aid rewards program | Retail Pharmacy Segment | ||||
Revenue Recognition | ||||
Value of each reward point earned | $ 0.002 | |||
Minimum points required for conversion into rewards | Point | 1,000 | |||
Threshold period for expiry of unconverted points | 90 days | |||
Threshold period for expiry of unredeemed rewards | 30 days | |||
Deferred contract liability into revenue | $ 177,000 | |||
Accrued contract liabilities | $ 1,853,000 | $ 2,030,000 |
Restructuring (Details)
Restructuring (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Restructuring related costs | ||
Total restructuring-related costs | $ 78,130 | $ 22,646 |
Anticipated restructuring-related costs during fiscal 2024 | 155,000 | |
Total restructuring-related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 78,130 | 22,646 |
Total restructuring-related costs | Accrued salaries, wages and other current liabilities | ||
Restructuring related costs | ||
Balance-beginning of period | 49,812 | |
Additions charged to expense | 78,130 | |
Cash payments | (36,700) | |
Balance-end of period | 91,242 | |
Severance and related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 440 | 11,904 |
Severance and related costs | Accrued salaries, wages and other current liabilities | ||
Restructuring related costs | ||
Balance-beginning of period | 7,658 | |
Additions charged to expense | 440 | |
Cash payments | (2,738) | |
Balance-end of period | 5,360 | |
Professional and other fees | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 77,690 | 10,742 |
Professional and other fees | Accrued salaries, wages and other current liabilities | ||
Restructuring related costs | ||
Balance-beginning of period | 42,154 | |
Additions charged to expense | 77,690 | |
Cash payments | (33,962) | |
Balance-end of period | 85,882 | |
Retail Pharmacy Segment | Total restructuring-related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 76,469 | 17,371 |
Retail Pharmacy Segment | Severance and related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 440 | 11,288 |
Retail Pharmacy Segment | Professional and other fees | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 76,029 | 6,083 |
Pharmacy Services Segment | Total restructuring-related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 1,661 | 5,275 |
Pharmacy Services Segment | Severance and related costs | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | 616 | |
Pharmacy Services Segment | Professional and other fees | Selling, general and administrative expenses | ||
Restructuring related costs | ||
Total restructuring-related costs | $ 1,661 | $ 4,659 |
Loss Per Share (Details)
Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Numerator: | ||
Net loss attributable to common stockholders - basic | $ (306,409) | $ (85,441) |
Net loss attributable to common stockholders - diluted | $ (306,409) | $ (85,441) |
Denominator: | ||
Basic weighted average shares | 55,179 | 54,348 |
Diluted weighted average shares | 55,179 | 54,348 |
Basic loss per share: | ||
Basic loss per share | $ (5.55) | $ (1.57) |
Diluted loss per share: | ||
Diluted loss per share | $ (5.55) | $ (1.57) |
Incentive Stock options | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income (loss) per share | 29 | 700 |
Unvested Restricted stock | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income (loss) per share | 1,510 | 1,247 |
Facility Exit and Impairment _3
Facility Exit and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Lease termination and impairment charges | ||
Facility exit and impairment charges | $ 19,692 | $ 41,821 |
Impairment charges | ||
Lease termination and impairment charges | ||
Facility exit and impairment charges | 11,738 | 35,036 |
Facility exit charges | ||
Lease termination and impairment charges | ||
Facility exit and impairment charges | $ 7,954 | $ 6,785 |
Facility Exit and Impairment _4
Facility Exit and Impairment Charges - Fair value (Details) - Nonrecurring basis - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets held, impairment charges | $ (11,738) | $ (35,036) |
Long-lived assets held for sale, impairment charges | ||
Total | (11,738) | (35,036) |
Carrying value of long-lived assets | 11,738 | 39,228 |
Level 1 | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Fair value of Long-lived assets held for use | ||
Fair value of Long-lived assets held for sale | ||
Total | ||
Level 2 | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Fair value of Long-lived assets held for use | 4,192 | |
Fair value of Long-lived assets held for sale | ||
Total | 4,192 | |
Level 3 | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Fair value of Long-lived assets held for use | ||
Fair value of Long-lived assets held for sale | ||
Total | ||
Fair Value | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Fair value of Long-lived assets held for use | 0 | 4,192 |
Fair value of Long-lived assets held for sale | 0 | |
Total | $ 0 | $ 4,192 |
Facility Exit and Impairment _5
Facility Exit and Impairment Charges - Closed Store Liability rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Closed store liability | ||
Provision for facility exit charges | $ 78,130 | $ 22,646 |
Facility Exit Charges | ||
Closed store liability | ||
Balance-beginning of period | 2,228 | 1,892 |
Provision for facility exit charges | 155 | |
Cash payments | (464) | (36) |
Balance-end of period | $ 1,919 | $ 1,856 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Other Financial Instruments | ||
Held to maturity investments | $ 4,640 | $ 7,457 |
Level 1 | ||
Other Financial Instruments | ||
Carrying value of total long-term indebtedness | 3,327,970 | 2,925,258 |
Estimated fair value of total long-term indebtedness | $ 2,676,269 | $ 2,368,328 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 03, 2023 | May 28, 2022 | Mar. 04, 2023 | |
Income Taxes | |||
Income tax expense | $ 1,493 | $ 3,497 | |
Overall tax rate impact percent | (0.50%) | (4.30%) | |
Valuation allowance to offset the current year deferred state tax benefits (as a percent) | (27.60%) | (37.50%) | |
Decrease in unrecognized tax benefits related to state exposures | $ 4,001 | ||
Valuation allowance against net deferred tax assets | $ 1,720,476 | $ 1,636,461 |
Medicare Part D (Details)
Medicare Part D (Details) $ in Thousands | 3 Months Ended | ||||||||||
Feb. 03, 2023 USD ($) | Oct. 13, 2022 USD ($) | Jan. 24, 2022 USD ($) | Aug. 12, 2021 USD ($) | Jun. 03, 2023 USD ($) item individual | Mar. 04, 2023 USD ($) | Nov. 26, 2022 USD ($) | May 28, 2022 USD ($) | Feb. 26, 2022 USD ($) | Aug. 28, 2021 USD ($) | Mar. 31, 2023 USD ($) | |
Statutory Accounting Practices [Line Items] | |||||||||||
Accounts receivable, net | $ 1,392,348 | $ 1,149,958 | |||||||||
Medicare Part D | |||||||||||
Remaining receivable for receivables sold to third party | 32,697 | 32,697 | |||||||||
Loss (gain) on sale of assets, net | (8,193) | $ (29,196) | |||||||||
Goodwill, impairment charges | 151,500 | ||||||||||
August 2021 Receivable Purchase Agreement | |||||||||||
Medicare Part D | |||||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 271,829 | ||||||||||
Sale price for receivables sold | 258,116 | ||||||||||
Receipts from sale of receivables | $ 239,360 | ||||||||||
Loss (gain) on sale of assets, net | $ 13,713 | ||||||||||
October 2022 Receivable Purchase Agreement | |||||||||||
Statutory Accounting Practices [Line Items] | |||||||||||
Accounts receivable, net | 13,488 | ||||||||||
Medicare Part D | |||||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 195,487 | ||||||||||
Sale price for receivables sold | 180,405 | ||||||||||
Receipts from sale of receivables | $ 166,917 | ||||||||||
Loss on sale of receivable | $ 1,937 | ||||||||||
Loss (gain) on sale of assets, net | $ 15,082 | ||||||||||
January 2022 Receivable Purchase Agreement | |||||||||||
Medicare Part D | |||||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 400,680 | ||||||||||
Sale price for receivables sold | 387,035 | ||||||||||
Receipts from sale of receivables | $ 359,388 | ||||||||||
Loss (gain) on sale of assets, net | $ 13,645 | ||||||||||
February 2023 Receivable Purchase Agreement | |||||||||||
Statutory Accounting Practices [Line Items] | |||||||||||
Accounts receivable, net | 19,209 | ||||||||||
Medicare Part D | |||||||||||
Amount of receivables sold under Receivable Purchase Agreement | $ 278,390 | ||||||||||
Sale price for receivables sold | 261,771 | ||||||||||
Receipts from sale of receivables | $ 242,562 | ||||||||||
Loss (gain) on sale of assets, net | 16,619 | ||||||||||
Most Current Receivable Purchase Agreement | |||||||||||
Medicare Part D | |||||||||||
Loss on sale of receivable | 2,573 | ||||||||||
EI (Elixir Insurance) | |||||||||||
Statutory Accounting Practices [Line Items] | |||||||||||
Minimum amount of capital and surplus required by regulatory requirements | $ 5,249 | ||||||||||
Accounts receivable, net | $ 136,070 | $ 45,201 | |||||||||
Medicare Part D | |||||||||||
Number of markets | item | 11 | ||||||||||
Number of individual members | individual | 274,000 |
Manufacturer Rebates Receivab_2
Manufacturer Rebates Receivables (Details) - Pharmacy Services Segment - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Manufacturer Rebates Receivables | ||
Manufacturer rebates receivables | $ 417,746 | $ 357,699 |
Manufacturers Rebates Receivables | ||
Manufacturer Rebates Receivables | ||
Allowance for uncollectible accounts | $ 11,025 | $ 8,680 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | Mar. 04, 2023 | |
Goodwill, impairment charges | $ 151,500 | |
Goodwill and intangible asset impairment charges | 151,500 | |
Pharmacy Services Segment | ||
Accumulated impairment losses | 1,326,412 | $ 1,174,912 |
Goodwill, impairment charges | $ 151,500 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Goodwill (Details) $ in Thousands | 3 Months Ended |
Jun. 03, 2023 USD ($) | |
Carrying amount of goodwill | |
Beginning Balance | $ 507,936 |
Goodwill impairment | (151,500) |
Ending Balance | 356,436 |
Retail Pharmacy Segment | |
Carrying amount of goodwill | |
Beginning Balance | 43,492 |
Ending Balance | 43,492 |
Pharmacy Services Segment | |
Carrying amount of goodwill | |
Beginning Balance | 464,444 |
Goodwill impairment | (151,500) |
Ending Balance | $ 312,944 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Intangibles (Details) - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Finite | $ 1,745,239 | $ 1,736,069 |
Total Accumulated Amortization, Finite | (1,514,756) | (1,500,357) |
Total Net, finite | 230,483 | 235,712 |
Gross Carrying Amount, Total | 1,759,639 | 1,750,469 |
Net, Total | 244,883 | 250,112 |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Indefinite Lived | 14,400 | 14,400 |
Noncompete agreements and other | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Finite | 205,249 | 201,919 |
Total Accumulated Amortization, Finite | (184,911) | (182,957) |
Total Net, finite | $ 20,338 | $ 18,962 |
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 | $ 1,035,505 | $ 1,029,665 |
Total Accumulated Amortization, Finite | (934,114) | (928,478) |
Total Net, finite | $ 101,391 | $ 101,187 |
Remaining Weighted Average Amortization Period | 5 years | 5 years |
Customer relationships | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Finite | $ 388,000 | $ 388,000 |
Total Accumulated Amortization, Finite | (310,842) | (306,139) |
Total Net, finite | $ 77,158 | $ 81,861 |
Remaining Weighted Average Amortization Period | 8 years | 9 years |
CMS license | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Finite | $ 57,500 | $ 57,500 |
Total Accumulated Amortization, Finite | (25,904) | (23,798) |
Total Net, finite | $ 31,596 | $ 33,702 |
Remaining Weighted Average Amortization Period | 3 years | 4 years |
Claims adjudication and other developed software | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount, Finite | $ 58,985 | $ 58,985 |
Total Accumulated Amortization, Finite | $ (58,985) | $ (58,985) |
Remaining Weighted Average Amortization Period | 0 years | 0 years |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets - Unfavorable lease intangibles and amortization expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Goodwill and Other Intangible Assets | ||
Amortization expense for intangible assets and liabilities | $ 17,133 | $ 20,626 |
Anticipated annual amortization expense for intangible assets and liabilities | ||
2024 | 63,486 | |
2025 | 52,554 | |
2026 | 42,028 | |
2027 | 35,018 | |
2028 | $ 27,538 |
Indebtedness and Credit Agree_3
Indebtedness and Credit Agreement - Indebtedness and lease financing obligations (Details) - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 | Jun. 13, 2022 |
Indebtedness and credit agreements | |||
Lease financing obligations | $ 18,211 | $ 18,912 | |
Total debt | 3,346,181 | 2,944,170 | |
Less: Current maturities of long-term debt and lease financing obligations | (6,060) | (6,332) | |
Long-term debt and lease financing obligations, less current maturities | 3,340,121 | 2,937,838 | |
Less: Cash and cash equivalents | (135,527) | (157,151) | |
Senior Secured Debt | |||
Indebtedness and credit agreements | |||
Long-term debt | 1,983,438 | 1,581,793 | |
Senior secured revolving credit facility due August 2026 | |||
Indebtedness and credit agreements | |||
Long-term debt | 1,585,374 | 1,183,883 | |
Principal | 1,600,000 | 1,200,000 | |
Unamortized debt issuance costs | 14,626 | 16,117 | |
FILO term loan due August 2026 | |||
Indebtedness and credit agreements | |||
Long-term debt | 398,064 | 397,910 | |
Principal | 400,000 | 400,000 | |
Unamortized debt issuance costs | 1,936 | 2,090 | |
Second Lien Secured Debt | |||
Indebtedness and credit agreements | |||
Long-term debt | 1,157,174 | 1,156,132 | |
7.5% senior secured notes due July 2025 | |||
Indebtedness and credit agreements | |||
Long-term debt | $ 317,745 | $ 317,473 | |
Debt instrument, stated interest rate (as a percent) | 7.50% | 7.50% | 7.50% |
Principal | $ 320,002 | $ 320,002 | |
Unamortized debt issuance costs | 2,257 | 2,529 | |
8.0% senior secured notes due November 2026 | |||
Indebtedness and credit agreements | |||
Long-term debt | $ 839,429 | $ 838,659 | |
Debt instrument, stated interest rate (as a percent) | 8% | 8% | 8% |
Principal | $ 849,918 | $ 849,918 | |
Unamortized debt issuance costs | 10,489 | 11,259 | |
Unguaranteed Unsecured Debt | |||
Indebtedness and credit agreements | |||
Long-term debt | 187,358 | 187,333 | |
7.7% notes due February 2027 | |||
Indebtedness and credit agreements | |||
Long-term debt | $ 185,318 | $ 185,293 | |
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | 7.70% |
Principal | $ 185,691 | $ 185,691 | |
Unamortized debt issuance costs | 373 | 398 | |
6.875% fixed-rate senior notes due December 2028 | |||
Indebtedness and credit agreements | |||
Long-term debt | $ 2,040 | $ 2,040 | |
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | 6.875% |
Principal | $ 2,046 | $ 2,046 | |
Unamortized debt issuance costs | $ 6 | $ 6 |
Indebtedness and Credit Agree_4
Indebtedness and Credit Agreement - Credit Facility (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Dec. 01, 2022 | Aug. 20, 2021 | Jun. 03, 2023 | Dec. 20, 2018 | |
Rite Aid Lease Management Company | ||||
Credit facility | ||||
Ownership interest (as a percent) | 100% | |||
Senior secured revolving credit facility due December 2023 | ||||
Credit facility | ||||
Maximum borrowing capacity | $ 2,700,000 | |||
FILO term loan due December 2023 | ||||
Credit facility | ||||
Maximum borrowing capacity | 450,000 | |||
FILO term loan due August 2026 | ||||
Credit facility | ||||
Maximum borrowing capacity | $ 400,000 | $ 350,000 | ||
FILO term loan due August 2026 | Maximum | ||||
Credit facility | ||||
Threshold availability on the third consecutive business day | $ 257,500 | |||
FILO term loan due August 2026 | LIBOR | ||||
Credit facility | ||||
Percentage points added to the reference rate | 2.75% | |||
FILO term loan due August 2026 | Citibank's base rate | ||||
Credit facility | ||||
Percentage points added to the reference rate | 2% | 1.75% | ||
FILO term loan due August 2026 | SOFR | ||||
Credit facility | ||||
Percentage points added to the reference rate | 3% | |||
Senior secured revolving credit facility due August 2026 | ||||
Credit facility | ||||
Maximum borrowing capacity | $ 2,850,000 | $ 2,800,000 | ||
Period triggering springing maturity | 91 days | |||
Outstanding borrowings | 2,000,000 | |||
Letters of credit outstanding | 208,198 | |||
Additional borrowing capacity | 1,041,802 | |||
Maximum amount of accumulated cash on hand | 200,000 | |||
Amount of debt allowed to be outstanding | 1,500,000 | |||
Cash sweep, 3-day minimum threshold | 283,250 | |||
Cash sweep, 1-day minimum threshold | 206,000 | |||
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 | |||
Senior secured revolving credit facility due August 2026 | Minimum | ||||
Credit facility | ||||
Credit facility commitment fee (as a percent) | 0.25% | |||
Additional borrowing capacity | $ 375,950 | |||
Fixed charge coverage ratio | 1 | |||
Threshold availability on thirtieth consecutive day | $ 257,500 | |||
Senior secured revolving credit facility due August 2026 | Maximum | ||||
Credit facility | ||||
Credit facility commitment fee (as a percent) | 0.375% | |||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | $ 206,000 | |||
Senior secured revolving credit facility due August 2026 | LIBOR | Minimum | ||||
Credit facility | ||||
Percentage points added to the reference rate | 1.25% | |||
Senior secured revolving credit facility due August 2026 | LIBOR | Maximum | ||||
Credit facility | ||||
Percentage points added to the reference rate | 1.75% | |||
Senior secured revolving credit facility due August 2026 | Citibank's base rate | Minimum | ||||
Credit facility | ||||
Percentage points added to the reference rate | 0.25% | |||
Senior secured revolving credit facility due August 2026 | Citibank's base rate | Maximum | ||||
Credit facility | ||||
Percentage points added to the reference rate | 0.75% | |||
Senior secured revolving credit facility due January 2020 | ||||
Credit facility | ||||
Maximum borrowing capacity | $ 2,700,000 |
Indebtedness and Credit Agree_5
Indebtedness and Credit Agreement - Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||||||
Dec. 09, 2022 | Dec. 01, 2022 | Jun. 13, 2022 | Mar. 04, 2023 | Jun. 03, 2023 | Nov. 30, 2022 | Nov. 03, 2022 | Jun. 29, 2022 | Aug. 20, 2021 | |
Indebtedness and credit agreements | |||||||||
Gain (loss) on debt modifications and retirements, net | $ 41,312 | ||||||||
Maturities | |||||||||
2024 | $ 0 | ||||||||
2025 | 0 | ||||||||
2026 | 320,002 | ||||||||
2027 | 3,035,609 | ||||||||
2028 | 0 | ||||||||
thereafter | $ 2,046 | ||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | 6.875% | ||||||
Face amount of debt repurchased | $ 26,955 | ||||||||
7.7% notes due February 2027 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | 7.70% | ||||||
Face amount of debt repurchased | 51,695 | ||||||||
7.5% senior secured notes due July 2025 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 7.50% | 7.50% | 7.50% | ||||||
Debt instrument, subcap amount | $ 100,000 | ||||||||
Gain (loss) on debt modifications and retirements, net | $ 38,978 | ||||||||
Face amount of debt repurchased | $ 4,559 | $ 150,000 | $ 160,497 | $ 200,000 | $ 114,942 | ||||
7.70% senior secured notes due 2027 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | ||||||||
6.875% senior secured notes due 2028 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | ||||||||
8.0% senior secured notes due November 2026 | |||||||||
Indebtedness and credit agreements | |||||||||
Debt instrument, stated interest rate (as a percent) | 8% | 8% | 8% | ||||||
Senior secured credit facility | |||||||||
Indebtedness and credit agreements | |||||||||
Gain (loss) on debt modifications and retirements, net | $ 100,000 | $ (148) | |||||||
FILO term loan due August 2026 | |||||||||
Indebtedness and credit agreements | |||||||||
Maximum borrowing capacity | 400,000 | $ 350,000 | |||||||
Senior secured revolving credit facility due August 2026 | |||||||||
Indebtedness and credit agreements | |||||||||
Maximum borrowing capacity | $ 2,850,000 | $ 2,800,000 |
Leases (Details)
Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Property, Plant and Equipment [Line Items] | ||
Operating lease cost | $ 152,672 | $ 159,845 |
Financing lease cost: | ||
Amortization of right-of-use asset | 819 | 809 |
Interest on long-term finance lease liabilities | 467 | 501 |
Total finance lease costs | 1,286 | 1,310 |
Short-term lease costs | (776) | 457 |
Variable lease costs | 46,233 | 42,645 |
Less: sublease income | (2,737) | (3,223) |
Net lease cost | $ 196,678 | $ 201,034 |
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 | |
Jun. 03, 2023 | May 28, 2022 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows paid for operating leases | $ 160,367 | $ 175,414 |
Operating cash flows paid for interest portion of finance leases | 467 | 501 |
Financing cash flows paid for principal portion of finance leases | 996 | 945 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | $ 77,412 | $ 57,986 |
Leases - Supplemental BS Inform
Leases - Supplemental BS Information (Details) - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Operating leases: | ||
Operating lease right-of-use assets | $ 2,457,110 | $ 2,497,206 |
Short-term operating lease liabilities | 488,712 | 502,403 |
Long-term operating lease liabilities | 2,345,277 | 2,372,943 |
Total operating lease liabilities | 2,833,989 | 2,875,346 |
Finance leases: | ||
Property, plant and equipment, net | 892,540 | 907,771 |
Current maturities of lease financing obligations | $ 6,060 | $ 6,332 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Long-term Debt and Capital Lease Obligations, Current | Long-term Debt and Capital Lease Obligations, Current |
Lease financing obligations, less current maturities | $ 12,151 | $ 12,580 |
Total finance lease liabilities | $ 18,211 | $ 18,912 |
Weighted average remaining lease term | ||
Operating leases (in years) | 7 years 4 months 24 days | 7 years 6 months |
Finance leases (in years) | 8 years 3 months 18 days | 8 years |
Weighted average discount rate | ||
Operating leases (as a percent) | 7% | 6.50% |
Finance leases (as a percent) | 10.60% | 9% |
Finance Leased Assets | ||
Finance leases: | ||
Property, plant and equipment, net | $ 13,064 | $ 13,576 |
Leases - Maturity of lease liab
Leases - Maturity of lease liabilities under finance and operating leases (Details) - USD ($) $ in Thousands | Jun. 03, 2023 | Mar. 04, 2023 |
Finance Leases | ||
2024 (remaining thirty-nine weeks) | $ 6,506 | |
2025 | 4,003 | |
2026 | 2,198 | |
2027 | 1,500 | |
2028 | 1,500 | |
Thereafter | 10,548 | |
Total lease payments | 26,255 | |
Less: imputed interest | (8,044) | |
Total finance lease liabilities | 18,211 | $ 18,912 |
Operating Leases | ||
2024 (remaining thirty-nine weeks) | 502,374 | |
2025 | 602,909 | |
2026 | 479,513 | |
2027 | 446,677 | |
2028 | 373,347 | |
Thereafter | 1,211,362 | |
Total lease payments | 3,616,182 | |
Less: imputed interest | (782,193) | |
Total operating lease liabilities | 2,833,989 | $ 2,875,346 |
Minimum sublease rentals | 22,000 | |
Finance and Operating Leases | ||
2024 (remaining thirty-nine weeks) | 508,880 | |
2025 | 606,912 | |
2026 | 481,711 | |
2027 | 448,177 | |
2028 | 374,847 | |
Thereafter | 1,221,910 | |
Total lease payments | 3,642,437 | |
Less: imputed interest | (790,237) | |
Total lease liabilities | $ 2,852,200 |
Retirement Plans - Net periodic
Retirement Plans - Net periodic expense (income) (Details) - Defined Benefit Pension Plan - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Net periodic pension expense | ||
Service cost | $ 73 | $ 107 |
Interest cost | 1,581 | 1,264 |
Expected return on plan assets | (1,474) | (1,402) |
Net periodic pension expense (income) | $ 180 | $ (31) |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet information (Details) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 USD ($) segment | Mar. 04, 2023 USD ($) | |
Segment Reporting | ||
Number of reportable segments | segment | 2 | |
Total Assets | $ 7,650,418 | $ 7,527,362 |
Goodwill | 356,436 | 507,936 |
Accounts receivable | 1,392,348 | 1,149,958 |
Retail Pharmacy Segment | ||
Segment Reporting | ||
Goodwill | 43,492 | 43,492 |
Pharmacy Services Segment | ||
Segment Reporting | ||
Goodwill | 312,944 | 464,444 |
Operating Segments | Retail Pharmacy Segment | ||
Segment Reporting | ||
Total Assets | 5,762,566 | 5,487,845 |
Goodwill | 43,492 | 43,492 |
Operating Segments | Pharmacy Services Segment | ||
Segment Reporting | ||
Total Assets | 1,897,726 | 2,049,107 |
Goodwill | 312,944 | 464,444 |
Intersegment elimination | ||
Segment Reporting | ||
Total Assets | (9,874) | (9,590) |
Accounts receivable | $ 9,874 | $ 9,590 |
Segment Reporting - Revenues (D
Segment Reporting - Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Segment Reporting | ||
Revenues | $ 5,653,162 | $ 6,014,583 |
Gross Profit | 1,178,526 | 1,196,729 |
Adjusted EBITDA | 91,715 | 100,130 |
Depreciation and amortization | 65,895 | 70,073 |
LIFO charge | 7,500 | |
Stock-based compensation expense | 1,081 | 3,334 |
Additions to property and equipment and intangible assets | 47,503 | 85,424 |
Retail Pharmacy Segment | ||
Segment Reporting | ||
Revenues | 4,492,329 | 4,345,356 |
Operating Segments | Retail Pharmacy Segment | ||
Segment Reporting | ||
Revenues | 4,492,329 | 4,345,356 |
Gross Profit | 1,086,863 | 1,097,357 |
Adjusted EBITDA | 70,049 | 73,682 |
Depreciation and amortization | 55,469 | 56,108 |
LIFO charge | 7,500 | |
Stock-based compensation expense | 723 | 3,102 |
Additions to property and equipment and intangible assets | 40,439 | 78,551 |
Operating Segments | Pharmacy Services Segment | ||
Segment Reporting | ||
Revenues | 1,196,154 | 1,725,857 |
Gross Profit | 91,663 | 99,372 |
Adjusted EBITDA | 21,666 | 26,448 |
Depreciation and amortization | 10,426 | 13,965 |
Stock-based compensation expense | 358 | 232 |
Additions to property and equipment and intangible assets | 7,064 | 6,873 |
Intersegment elimination | ||
Segment Reporting | ||
Revenues | $ (35,321) | $ (56,630) |
Segment Reporting - Adjusted EB
Segment Reporting - Adjusted EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Segment Reporting | ||
Net loss | $ (306,409) | $ (85,441) |
Interest expense | 65,220 | 48,119 |
Income tax expense | 1,493 | 3,497 |
Depreciation and amortization | 65,895 | 70,073 |
LIFO charge | 7,500 | |
Facility exit and impairment charges | 19,692 | 41,821 |
Goodwill and intangible asset impairment charges | 151,500 | |
Stock-based compensation expense | 1,081 | 3,334 |
Restructuring-related costs | 78,130 | 22,646 |
Inventory write-downs related to store closings | 2,057 | 7,955 |
Litigation and other contractual settlements | 11,050 | 18,271 |
Gain on sale of assets, net | (8,193) | (29,196) |
Other | 2,699 | (949) |
Adjusted EBITDA | $ 91,715 | $ 100,130 |
Commitments, Contingencies an_2
Commitments, Contingencies and Guarantees (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Apr. 22, 2022 USD ($) | Dec. 31, 2022 USD ($) | Aug. 31, 2022 USD ($) | Jun. 03, 2023 state lawsuit | |
California Employment Litigation Claims Related To Reimbursement For Cell phone and Mileage Expenses | ||||
Commitments, Contingencies and Guarantees | ||||
Amount awarded to other party | $ 1,290 | |||
California Employment Litigation Claims Related To Wages And Hour Class Action | ||||
Commitments, Contingencies and Guarantees | ||||
Amount awarded to other party | $ 800 | |||
New York Employment Litigation Claims Related To Wages And Hour Class Action | ||||
Commitments, Contingencies and Guarantees | ||||
Amount awarded to other party | $ 6,450 | |||
Blue Cross Blue Shield Litigation | ||||
Commitments, Contingencies and Guarantees | ||||
Number of claims | lawsuit | 2 | |||
Number of states in which operated | state | 8 | |||
Humana Litigation | ||||
Commitments, Contingencies and Guarantees | ||||
Amount awarded to other party | $ 122,600 | |||
Prejudgment interest awarded | $ 40,700 |
Supplementary Cash Flow Data (D
Supplementary Cash Flow Data (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 03, 2023 | May 28, 2022 | |
Supplementary Cash Flow Data | ||
Cash paid for interest | $ 34,452 | $ 11,230 |
Cash payments (refunds) for income taxes, net | 1,006 | 13,290 |
Equipment financed under capital leases | 321 | |
Gross borrowings from revolver | 829,000 | 860,000 |
Gross repayments to revolver | 429,000 | 569,000 |
Significant components of cash provided by (used in) Other Liabilities (Other Assets) | ||
Other Liabilities | 51,385 | 15,327 |
Other Assets | $ (64,687) | $ 751 |
Revision of Previously Issued_3
Revision of Previously Issued Consolidated Financial Statements (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Jun. 03, 2023 | May 28, 2022 | Mar. 04, 2023 | Feb. 26, 2022 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Accrued salaries, wages and other current liabilities | $ 756,915 | $ 774,031 | $ 709,891 | |
Total current liabilities | 2,757,428 | 2,814,677 | 2,713,237 | |
Other noncurrent liabilities | 107,188 | 134,472 | 97,577 | |
Total liabilities | 8,550,014 | 8,516,604 | 8,121,595 | |
Accumulated deficit | (6,860,383) | (5,920,227) | (6,553,974) | |
Total stockholders' (deficit) equity | (899,596) | 33,169 | $ (594,233) | $ 115,828 |
Facility exit and impairment charges | 19,692 | 41,821 | ||
Loss before income taxes | (304,916) | (81,944) | ||
Net loss | (306,409) | (85,441) | ||
Comprehensive loss | $ (306,409) | $ (85,441) | ||
Basic loss per share | $ (5.55) | $ (1.57) | ||
Diluted loss per share | $ (5.55) | $ (1.57) | ||
As Previously Reported | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Accrued salaries, wages and other current liabilities | $ 772,058 | $ 787,591 | ||
Total current liabilities | 2,772,571 | 2,828,237 | ||
Other noncurrent liabilities | 139,897 | 162,457 | ||
Total liabilities | 8,597,866 | 8,558,149 | ||
Accumulated deficit | (6,908,235) | (5,961,772) | ||
Total stockholders' (deficit) equity | (947,448) | (8,376) | ||
Facility exit and impairment charges | 20,001 | 66,571 | ||
Loss before income taxes | (305,225) | (106,694) | ||
Net loss | (306,718) | (110,191) | ||
Comprehensive loss | $ (306,718) | $ (110,191) | ||
Basic loss per share | $ (5.56) | $ (2.03) | ||
Adjustment | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Accrued salaries, wages and other current liabilities | $ (15,143) | $ (13,560) | ||
Total current liabilities | (15,143) | (13,560) | ||
Other noncurrent liabilities | (32,709) | (27,985) | ||
Total liabilities | (47,852) | (41,545) | ||
Accumulated deficit | 47,852 | 41,545 | ||
Total stockholders' (deficit) equity | 47,852 | 41,545 | ||
Facility exit and impairment charges | (309) | (24,750) | ||
Loss before income taxes | 309 | 24,750 | ||
Net loss | 309 | 24,750 | ||
Comprehensive loss | $ 309 | $ 24,750 | ||
Basic loss per share | $ 0.01 | $ 0.46 |