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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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Commission File Number 1-5742

RITE AID CORPORATION

(Exact name of registrant as specified in its charter)

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Registrant’s telephone number, including area code: (717) 761-2633

Securities registered pursuant to Section 12(b) of the Act:

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Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “Large Accelerated Filer,” “Accelerated Filer,” “Smaller Reporting Company,” and “Emerging Growth Company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

The aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of the registrant based on the closing price at which such stock was sold on the New York Stock Exchange on August 31, 201929, 2020 was approximately $349,426,555.$737,566,209. For purposes of this calculation, only executive officers and directors are deemed to be affiliates of the registrant.

As of April 16, 202015, 2021 the registrant had outstanding 54,704,57955,101,661 shares of common stock, par value $1.00 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 or an amendment to this Annual Report on Form 10-K, to be filed with the Securities and Exchange Commission, are incorporated by reference into Part III of this Annual Report on Form 10-K.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, as well as our other public filings or public statements, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

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PART I

Item 1.   Business

Overview

Rite Aid Corporation (“Rite Aid” or the “Company”) is on the front lines of delivering health care services and retail products to over one million Americans daily. Our pharmacists are uniquely positioned to engage with customers and improve their health outcomes. We provide an array of whole being health products and services for the entire family through over 2,4002,500 retail pharmacy locations across 1817 states. Through EnvisionRxOptions, which is soon to be rebranded Elixir, our pharmacy benefits manager, we provide pharmacy benefits and services to approximately fourover three million members nationwide.

Our corporate headquarters are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011, and our telephone number is (717) 761-2633. Our common stock is listed on the New York Stock Exchange under the trading symbol of “RAD.” We were incorporated in 1968 and are a Delaware corporation.

The terms “Company,” “Rite Aid,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to Rite Aid Corporation and its affiliates. The term “affiliates” means direct and indirect subsidiaries of Rite Aid Corporation and partnerships and joint ventures in which such subsidiaries are partners.

Fiscal 20202021 was a year of significant changechallenges for Rite Aid. DuringAid as COVID-19 affected all aspects of our retail pharmacy business and well-being of our customers. In the third week of our fiscal 2020, Rite Aid undertook various restructuringyear, in response to the pandemic we implemented business continuity efforts including closing corporate office and call center locations, moving virtually all of our corporate associates to a work from home model, and taking steps to implement safety protocols for our retail and distribution center associates and pharmacy customers. Notwithstanding these challenges, our purchasing teams sourced essential items to stock our stores.

The efforts of our team enabled us to respond to the challenges brought on by the pandemic while also executing on our strategic initiatives appointed new members to its Board of Directors, and hiredaimed at operating as a new executive leadership team, in order to support our objective to continue to operate as an independent,fully integrated, stand-alone organization. Rite Aid has the ability to leverage the power of its assets and personnel, including its trusted pharmacists, to deliver a compelling, comprehensive offering through all channels. These offerings will not only help our current and future consumers to get healthy, it will help them to thrive. While our strategy will take some time to execute, we made significant progress during fiscal 2020 that provides ushealthcare company with a strong foundation on which to build.retail footprint. Our key accomplishments include, but are not limited to, i) reducedadvancing our corporate expenses by approximately $55pharmacy strategy, including rebranding our retail stores and Elixir, our pharmacy services operations, ii) launching a new member portal at Elixir, iii) extending all but $91 million on an annualized basis, ii) extended 35% of our calendar 2023 bond maturities to calendar 2025 iii) reduced our debt and improved our leverage ratio, andcalendar 2026, iv) implemented LEAN initiatives, a method used by companies worldwide to build a culture of continuous improvement, to reduce working capital tied to inventory and improve our pharmacist’s productivity. While these accomplishments are important, they are simply the groundwork needed to allow Rite Aid to unlock its potential through the implementationintroducing three flagship remodels, refreshing over half of our long-term initiatives,store exteriors and resetting 75% of store merchandise, and v) expanding COVID-19 testing to over 1,200 drive-through locations and beginning the process of expanding our COVID-19 vaccine administration, which covered nearly half of our stores in the first quarter of fiscal 2022. These accomplishments advanced our efforts to drive our new strategy - RxEvolution.

RxEvolution – On March 16, 2020, we held an analyst day where we announced our new strategic plan and initiatives, named “RxEvolution”,“RxEvolution,” which includeincludes significant rebranding, a merchandising overhaul, new marketing, and integration and operational initiatives, in both our Retail Pharmacy and Pharmacy Services segments. The execution of these overarching initiatives will result inincludes reintroducing the reintroduction of our trusted and iconic Rite Aid brand to a new generation of consumers, maintainmaintaining relevance in an ever changingever-changing marketplace, and thrivethriving as a significant health care services company with a retail footprint. Our initiatives are focused on three primary areas,areas: i) to become the dominant mid-market pharmacy benefit manager (PBM),establishing Elixir as a clearly differentiated market leader, ii) to unlockunlocking the value of our pharmacists, and iii) to renewrenewing our retail and digital experience.

Becoming the dominant mid-market PBMEstablishing Elixir as a clearly differentiated market leader: Rite Aid’s pharmacy benefits and services company, EnvisionRxOptions,Elixir, includes multiple PBMs, technology and claims adjudication software, mail delivery and specialty pharmacy services, network and rebate administration, as well as prescription discount programs and Medicare Part D insurance for individuals and groups. With a stronger,an integrated offering, this soon-to-be rebranded business will beis well positioned with mid-market employer groups and regional health plans looking forseeking an alternative to the large, health plan affiliated PBM’s.PBMs. Additionally, given the affiliationconnection with Rite Aid’s stores, EnvisionRxOptionsElixir has the opportunity to improve its competitive positioning, deliver exceptional retail and mail order pharmacy service,services, and contribute to positive clinicalhealth outcomes. EnvisionRxOptionsElixir is now the only payor agnostic PBM operated together with a retail pharmacy footprint.

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healthcare providers; however, their full potential ishas not always being utilized or valued.been realized. Rite Aid’s approximately 6,400 pharmacists will beare whole-being health advocates, allowing them to practice at the top of their license and education. Our pharmacists will goare pushing beyond their traditional role to an expanded role, in which they are encouraging a holistic approach to health. Rite Aid is leveraging our associates to engage with LEAN tools, developingto develop new workflows and technologies to free up our pharmacists’ time, and we are also launching our new Pharmacy of the Future, which moves our pharmacists physically closer to the consumer. These new workflows, tools and new space will allow our pharmacists to engage more personally with our consumers. Our initiatives to free up pharmacists time are also helping us to expand our pharmacy services to administer COVID-19 vaccines and COVID-19 testing.

Renewing Rite Aid’s retail and digital experience: As consumers increasingly focus on self-care, they seek to strike the perfect balance between traditional health and holistic wellness. Rite Aid’s goal is to be a whole-beingwhole being health destination that treats mind, body and spirit. To introduce new generations to our iconic brand, Rite Aid is elevating its in-store experience, increasing personalized digital engagement, and refreshing merchandise to include a wide assortment of products with ingredients that are meaningful to Millennial and Gen X shoppers. Rite Aid is re-brandinghas re-branded with a new logo to signal this bold change in pharmacy and retail. Later this year,retail strategy. Rite Aid continues its store-remodel initiative, including the unveiling of new flagship stores in select markets that demonstrate how Rite Aid is planning to introduce its Store of the Future, which will beevolving into a trusted household wellness destination that helps consumers on the journey of care for themselves and their parents, children and pets.

We believe that the strategy inherent in our RxEvolution will enable us to unlock the incredible potential of our trusted and iconic brand. By reinvigorating our integrated PBM offerings, enhancing the role of our approximately 6,400 pharmacists and revitalizing our retail and digital experience, we believe Rite Aid will not only remain relevant to a new generation of consumers, but can thrive as an independent healthcare company with a significant retail footprint.

As described in the following paragraphs, under prior leadership, during the past several years, Rite Aid had been involved in certain activities designed to sell itself and portions of its business.

Termination of the Merger Agreement—On February 18, 2018, Rite Aid entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Albertsons Companies, Inc. (“Albertsons”), Ranch Acquisition II LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Albertsons (“Merger Sub II”) and Ranch Acquisition Corp., a Delaware corporation and a wholly-owned direct subsidiary of Merger Sub II (together with Merger Sub II, the “Merger Subs”). On August 8, 2018, Rite Aid, Albertsons and the Merger Subs entered into a Termination Agreement (the “Merger Termination Agreement”) under which the parties mutually agreed to terminate the Merger Agreement. Subject to limited customary exceptions, the Merger Termination Agreement mutually releases the parties from any claims of liability to one another relating to the contemplated merger. Under the terms of the Merger Agreement, neither Rite Aid nor Albertsons is responsible for any payments to the other party as a result of the termination of the Merger Agreement and Rite Aid is no longer subject to the interim operating covenants and restrictions contained in the Merger Agreement.

Asset Sale—On September 18, 2017, we entered into the Amended and Restated Asset Purchase Agreement (the “Amended and Restated Asset Purchase Agreement”) with WBA and Walgreen Co., an Illinois corporation and wholly-owned direct subsidiary of WBA (“Buyer”), which amended and restated in its entirety the previously disclosed Asset Purchase Agreement (the “Original Asset Purchase Agreement”), dated as of June 28, 2017, by and among Rite Aid, WBA and Buyer. Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer agreed to purchasepurchased from Rite Aid 1,932 Acquired Stores, three distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of approximately $4.375 billion, on a cash-free, debt-free basis (the “Asset Sale” or “Sale”). As of February 29, 2020,27, 2021, we have completed the transfer ofsold all 1,932 stores and related assets to WBA and received cash proceeds of $4.157 billion and two of theAcquired Stores, three distribution centers and related assets to WBA in exchange for proceeds of $124.0 million. On April 1, 2020, we completed the inventory transfer at our remaining distribution center to WBA for proceeds of $19.3 million.$4.375 billion.

The transfer of the remaining distribution center and related non-inventory assets remains subject to minimal customary closing conditions applicable only to the distribution center being transferred at such distribution center

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We report our business in two distinct segments. Our Retail Pharmacy Segment consists of Rite Aid stores, Health Dialog, and RediClinic, and Health Dialog.which was closed during fiscal 2021. Our Pharmacy Services Segment consists of EnvisionRxOptions,Elixir, our PBM, which is soon to be rebranded as Elixir (“EnvisionRx” or “EnvisionRxOptions”).PBM.

Retail Pharmacy Segment— In our Rite Aid retail stores, our highly trained pharmacists dispense prescription medicationmedications pursuant to prescriptions written by medical providers and educate our customers on non-prescriptionalternative remedies that can supplement traditional options. We offer a wide range of healthcare counseling services, including administering immunizations against COVID-19, the flu, shingles and shingles,more; assisting our customers with high blood pressure, cholesterol and diabetes,diabetes; providing guidance on combating obesity and tobacco addiction,addiction; and educating our customers on managing medications and potential side effects. Through the pandemic, pharmacists are on the front lines of testing and vaccinating, and made great strides in changing perceptions of pharmacists as providers whose reach extends well beyond filling prescriptions. We believe that offerings such as these will gain additional momentum in a rapidly changing healthcare environment, and establish pharmacists as the most accessible and trusted last-mile connectors in healthcare.

In addition, we offer a wide assortment of otherfront-end merchandise to complement our pharmaceuticalpharmacy services and to provide convenience ofto our customers, which we call “front-end” products.customers. In fiscal 2020,2021, prescription drug sales accounted for 67.0%66.7% of our total drugstore sales. We believe that our pharmacy operations will continue to represent a significant part of our business due to a combination of our efforts to expand the role of our approximately 6,400 pharmacists as whole-being health advocates, to industryadvocates; demographic trends such as an aging population and increased life expectancy,expectancy; our focus on growth customers, particularly women between the ages of 25 to 49 who take care of themselves, their children, aging parents, and even pets; anticipated growth in the federally funded Medicare Part D prescription program as “baby boomers” continue to enrollenroll; and the discovery of new and better prescription drug and over-the-counter therapies. We carry a full assortment of front-end products, which accounted for the remaining 33.0%33.3% of our total drug store sales in fiscal 2020.2021. Front-end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, pet care, and numerous other everydayevery day and convenience products.

We seek to differentiate our stores from other nationallarger chain drugstores, in part, through our wellness+ Rewards loyalty program, our Wellnessemphasis on the benefits of both traditional and alternative remedies, a reconstituted assortment of clean, natural, organic and eco-friendly merchandise, brand new flagship store format, stores, innovative merchandising, owned brands and our strategic partnership with GNC, a leading retailer of vitamin and mineral supplements. We offer a wide variety of products through our portfolio of owned brands, which contributed approximately 19% of our front-end sales in fiscal 2021, and which we are positioning for future growth.

We completed the acquisition of the Bartell Drug Company during December 2020. The strategic acquisition of the Bartell Drug Company fits into our RxEvolution strategy, complementing our commitment to total health and wellness, the importance of the pharmacist as a trusted health advisor and the critical role the neighborhood pharmacy plays. This expansion within the greater Seattle area will allow us to better service customers, health plans and healthcare provides.

The average size of each store in our chain is approximately 13,600 square feet, and average store size is larger for our locations in the western United States. As of February 29, 2020, 58%27, 2021, 59% of our stores were freestanding; 54% of our stores included a drive-thrudrive-through pharmacy; and 66% included a GNC store within a Rite Aid store.

RediClinic, based in Houston, is an operator of retail clinics. RediClinics are staffed by board-certified nurse practitioners and physician assistants, who are trained and licensed to treat common conditions and provide preventative services, in collaboration with local physicians who are affiliated with a leading health care system in each market. Patients can be treated for more than 30 common medical conditions and RediClinic’s clinicians are able to write prescriptions for these conditions when appropriate. Additionally, RediClinics provide a broad range of preventive services, including screenings, medical tests, immunizations and basic physical exams. We operated a total of 67 RediClinics at the end of fiscal 2020. We have owned 100% of RediClinic since 2014.

Health Dialog based in Boston, is a provider of healthcare coaching and disease management services to health plans and employers. Health Dialog provides these services using a call incall-in line staffed by nurse practitioners and through an on-lineonline platform.

RediClinic, based in Houston, was an operator of retail clinics. RediClinics were staffed by board-certified nurse practitioners and physician assistants, who were trained and licensed to treat common conditions and provide preventative services, in collaboration with local physicians who were affiliated with a leading health care system in each market. We have owned 100%closed all RediClinic locations as of Health Dialog since 2014.late summer 2020, however, we continue to offer virtual health care services through telehealth.

Pharmacy Services Segment—EnvisionRxOptions,Elixir, our mid-market national pharmacy benefits manager (“PBM”), provides a fully integrated suite of PBM offerings including technology solutions, mail delivery services, specialty pharmacy, network and rebate

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administration, claims adjudication and pharmacy discount programs. EnvisionRxOptionsElixir also provides prescription discount programs and Medicare Part D insurance offerings for individuals and groups. EnvisionRxOptions provideElixir provides services to various clients across its different lines of business, including major health plans, commercial employers, labor groups and state and local governments, representing

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The retail drugstore industry continues to rely significantly on third partythird-party payors. Over the past several years, third partythird-party payors, including the Medicare Part D plans and the state-sponsoredstate-sponsored Medicaid and related managed care Medicaid agencies, have changed the eligibility requirements of participants and have successfully reduced certain reimbursement rates. This trend is expected to continue, which puts added pressure on ourRite Aid and our competitors’ results.

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We carry a full assortment of non-prescription, or front-end, products. The types and number of front-end products in each store vary, and selections are based on customer needs and preferences and available space. No single front-end product category contributed significantly to our sales during fiscal 2020.2021. Our Retail Pharmacy segment’s principal classes of products in fiscal 20202021 were the following:

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We offer a wide variety of own brand products under our private brands to meet the needs of our customers in virtually every non-pharmacynon-pharmacy department. We intend to increase our private brand sales and penetration in fiscal 20212022 by expanding our product lines,assortment, redefining our brand architecture and brand names, refreshing our package design, along with leveragingand driving greater support through our marketing vehicles.marketing. We believe that our assortment is differentiated and a compelling value to our customers based on our emphasis ontoday’s consumer expects high quality standards and everyday/promotional pricing, whiledifferentiated own brand products that deliver performance equal to national brands at the same time,a better value. A refresh our own brand offering is critical to improving our gross margin and reducing our working capital investment in inventory.

We have a strategic alliance with GNC under which we have opened over 1,6231,652 GNC stores within Rite Aid stores as of February 29, 202027, 2021, and have a contractual commitment to open at least 9933 additional GNC stores within Rite Aid stores by December 2021. We believe the GNC stores enhance our wellness offerings and help differentiate us from our competitors. GNC is a leading nationwide retailer of vitamin and mineral supplements, personal care, fitness and other health-related products.

Through our 100% owned subsidiary, EnvisionRxOptions,Elixir, we offerprovide a broad rangefully integrated suite of pharmacy-related services.PBM offerings including technology solutions, mail delivery services, specialty pharmacy, network and rebate administration, claims adjudication and pharmacy discount programs. In addition to its transparent and traditional PBM offerings, through the EnvisionRx and MedTrak PBMs, EnvisionRxElixir also offers fully integrated mail-order and specialty pharmacy services through EnvisionPharmacies.Elixir Pharmacy. Through its EnvisionElixir Insurance Company (“EIC”EI”), EnvisionRxElixir also serves one of the fastest-growing demographics in healthcare: seniors enrolled in Medicare Part D. In addition, EnvisionRx,Elixir, through its state of the art Laker Software, performs prescription adjudication services for its own claims as well as claims for other PBM’s.claims.

Technology

All of our stores are integrated into a common pharmacy system, which enables our customers to fill or refill prescriptions in any of our stores throughout the country, identifies adverse drug interactions, and enables our pharmacists to fill prescriptions more accurately and efficiently. Our customers may also order prescription refills over the Internet through our website,online, at www.riteaid.com, using our mobile app, or over the phone through our telephonic automated

Table of bringing together the best systems and processes across each organization to create a single, consistent PBM platform focused on providing an optimized member, client, and partner experience.Contents

We are also in the process of relaunchingcontinue to enhance our EnvisionRxOptionsElixir mobile app with a focus on getting customersproviding members with the informationbest and services they need,most effective low cost medications, in a manner that is completely personalized to them.personalized. It will not simply facilitate transactions, but rather provide customized, educational content, services and solutions that our customers needadvance a members ability to get the most effective low cost prescriptions.

We intend to deliver these digital initiatives during the next two fiscal years. The digital experience initiatives we have outlined with our PBM, our pharmacies, our stores online, and through mobile, will revolutionize how we engage and service customers, members and partners.improve whole health.

Sources and Availability of Raw Materials

Since fiscal 2015, under our pharmaceutical purchasing and delivery agreement (“Purchasing and Delivery Agreement”) with limited exceptions, we purchased all of our branded pharmaceutical products and almost all of our generic (non-brand name) pharmaceutical products from McKesson. If our relationship with McKesson were disrupted, we could temporarily experience difficulties filling prescriptions for branded and generic drugs until we execute a replacement wholesaler agreement or develop and implement self-distribution processes.

We purchase our non-pharmaceutical merchandise from numerous manufacturers and wholesalers. We believe that competitive sources are readily available for substantially all of the non-pharmaceutical merchandise we carry and that the loss of any one supplier would not have a material effect on our business.

We sell private brand and co-branded products that generally are supplied by numerous sources. The GNC branded vitamin and mineral supplement products that we sell in our stores are developed by GNC, and along with our Rite Aid brand vitamin and mineral supplements, are manufactured by GNC.

Customers and Third Party Payors

During fiscal 2020,2021, our stores filled approximately 169.2164.1 million prescriptions and served over one million customers per day. The loss of any one customer would not have a material impact on our results of operations.

In fiscal 2020,2021, substantially all of our pharmacy sales were to customers covered by third party payors (such as insurance companies, prescription benefit management companies, government agencies, private employers or other

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Our retail drugstore operations compete with, among others, retail drugstore chains, such as Walgreens and CVS, along with independently owned drugstores, supermarkets such as Kroger, mass merchandisers like Walmart and Target, discount stores, wellness offerings, dollar stores and mail order and internet pharmacies. We compete on the basis of store location, payor access, convenience, price, customer service, and product selection, price, and payor access. selection.

Our pharmacy benefit management operations competecompany competes with other pharmacy benefit managers, such as Caremark, and Express Scripts, OptumRx and emerging competitors.mid-market PBMs. We will increasingly compete on the basis of our PBM service offerings flexibility, clinical offerings, network management, Rite Aid as an anchor (in Rite Aid markets), omni-channel consumer engagement and the strength of client facing teams through both transparent and traditional PBM models.teams.

We believe continued consolidation in the healthcare industry, and the aggressive discounting of generic drugspricing by supermarkets and mass merchandisers and other PBM service providers will further increase competitive pressures in our industries.

Marketing and Advertising

In fiscal 2020,2021, we advanced efforts to provide a seamlessly connected omni-channel customer experience. We continuecontinued to take a holistic approach to managing our media mix while shifting towards a digital-firstdigital-centric strategy. Marketing and advertising expense was approximately $142.1 million, which was spent on our$122.7 million. This spend encompasses digital marketing to support pharmacy and front end sales, the wellness+ program and customer relationship marketing, in-store communication, weekly circular (print and digital), wellness+ rewards program/customer relationship marketing (CRM), digital/social marketing and focused pharmacy marketing initiativescampaign support including television, radio, and direct mail. OurDuring fiscal 2021, our marketing and advertising activities arewere primarily focused on the following:

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the lives of our customers. Our mission is to keep our communities healthy and thriving, and at the core of that mission is our associates.

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We believe our associates are integral to the success of our business transformation, through our RxEvolution strategy. In order to transform and grow our business, it is important for us to invest in our associates, giving them opportunities to grow professionally, care for themselves and their families, work in diverse and inclusive environments and be whole health ambassadors in their communities.

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As of February 29, 2020,27, 2021, we had approximately 48,000 Retail Pharmacy segment associates: 13% were pharmacists, 42% were part-timeemployed over 50,000 associates across the United States, including Puerto Rico.

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Communication and 36% were represented by unions. Additionally, we have approximately 2,000 Pharmacy Services segment associates. Associate engagement is critical to our success. We annually survey our associates to obtain feedback on various employment-related topics, including job satisfaction and their understanding of our core values and mission. We believe that our relationships withEngagement

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Because our associates are good.so essential to our business strategy, we engage with them to measure and understand their perspectives and gather critical feedback. For the past two years, more than 70% of our associates have participated in our annual and periodic pulse associate surveys. The surveys give us valuable information regarding topics such as career development and growth, well-being, compensation, benefits, recognition, and leadership effectiveness.

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Training and Development

Growing and developing our talent is key to our future and our ability to lead at our best every day. We seek to inspire a high-performance culture and promote talent development. We offer development on leadership, safety, compliance and other critical business skills. We offer various instructor-led and virtual instructor-led programs and maintain a vast curriculum of graduates from U.S. Schoolsrelevant, on-demand learning and development resources.

We also provide discounted tuition and reimbursement programs for associates to pursue degrees at select colleges or universities. We have recently been certified as an ACEP, Accredited Provider of Continuing Pharmacy Education, which will allow us to offer courses that count toward the CE licensing requirements of our pharmacists. In addition, we offer an accredited pharmacy technician certification program. Both efforts allow us to develop pharmacy associates to meet the demands of our business.

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Our goal is largely meetingto grow leaders at all levels and provide associates best-in-class opportunities to develop and grow the skills needed to meet personal goals and support Rite Aid’s future growth and success.

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Diversity, Equity and Inclusion

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We are proud to be a part of diverse communities with associates and customers that reflect the diversity of those communities. As such, we believe that an inclusive and welcoming culture is essential. We are committed to building a workplace in which every associate is appreciated and respected for their uniqueness and differences. We are transforming our workforce demand. However, pharmacist employment opportunities still existbusiness by viewing health and wellness through the lens of both traditional medicines and alternative remedies; we just don’t want to get healthy - we want to get thriving. On a parallel path, our approach to Diversity, Equity & Inclusion is intended to also be transformative. We just don’t strive to increase diversity; we want our talent to thrive.

We are focused on strengthening our DEI infrastructure which includes the development of a DEI team (a Center of Excellence) and DEI integrated strategy that will address talent processes such as talent acquisition, talent development and talent management. A key focus will be to develop solutions that seek to enhance the work environment so our associates can perform to their best potential and provide an optimum customer experience.

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As of December 31, 2020 67% of associates self-reported as female. In addition, associates reported their race/ethnicity as: White 56%; Hispanic 15%; Black 13%; Asian 11%; and Other 5%.

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Total Rewards and Recognition

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We design compensation and benefit programs to support, recognize and reward performance of our associates. Included within the package of offerings for associates are annual bonuses, 401(k) plans, healthcare benefits, paid time off, life and disability coverage, merchandise discounts, and many other services and programs. In addition, we offer our associates wellness programs and tools for whole health in certain areas.areas of importance such as mental health, disease management and financial wellness.

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We also value and encourage associate recognition in order to celebrate outstanding contributions. We’ve recently added financial incentives into our recognition platform, and we utilize this tool to both celebrate the great achievements of our teams and create a community experience for our workforce.

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COVID-19 Response

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Rite Aid associates have been at the heart of our response to the pandemic, providing communities with medications, essential supplies, COVID-19 related information, COVID-19 tests, and COVID-19 vaccines.

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During fiscal 2021, we supported our associates and their families in the following ways: bonuses and additional pay for our frontline associates who were working directly for and with our customers; pandemic pay for associates who tested positive or who were required to quarantine due to exposure; additional 15% associate discount; and job protected administrative leave for associates who did not feel comfortable coming to work due to health concerns. Additionally, the separately funded Rite Aid Foundation Associate Relief Fund provided over $3 million in assistance to grant recipient associates experiencing COVID-19 related hardships through financial support payments. As the safety of our customers and associates were our top concern, we also enacted protocols around cleaning, safety and social distancing.

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Research and Development

We do not make significant expenditures for research and development.

Licenses, Trademarks and Patents

The Rite Aid name is our most significant trademark and the most important factor in marketing our stores and private brand products. Additionally, we utilize important tradenames for our Elixir operations and the recently acquired Bartell Drugs. We hold licenses to sell beer, wine and liquor, cigarettes and lottery tickets. As part of our strategic alliance with GNC, we have a license to operate GNC “stores-within-Rite Aid-stores.” We also hold licenses to operate our pharmacies and our distribution facilities. Through our 100% owned subsidiary EnvisionRx,Elixir, we hold a license to conduct Medicare Part D business with CMS.

Collectively, these licenses are material to our operations.

Seasonality

We experience moderate seasonal fluctuations in our results of operations concentrated in the first and fourth fiscal quarters as the result of the concentration of the cough, cold and flu season and the holidays. We tailor certain front-end merchandise to capitalize on holidays and seasons. We increase our inventory levels during our third fiscal quarter in anticipation of the seasonal fluctuations described above. Our results of operations in the fourth and first fiscal

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other publicly financed health benefit plan regulations prohibiting kickbacks, beneficiary inducement and the submission of false claims; the ACA; regulations of the U.S. Food and Drug Administration, the U.S Consumer Product Safety Commission, the U.S. Federal Trade Commission, and the U.S. Drug Enforcement Administration, including regulations governing the purchase, sale, storing and dispensing of controlled substances, listed chemicals, and other products, as well as regulations promulgated by state and other federal agencies concerning automated outbound contacts such as phone calls, text messages and emails and the sale, advertisement and promotion of the products we sell, including nicotine products and alcoholic beverages. We are also subject to laws governing our relationship with our associates, including health and safety, minimum wage requirements, overtime, sick leave, working conditions, equal employment opportunity and unionizing efforts.

The legal environment affecting our business will continue to become more complex as new legal requirements and rules are introduced and existing laws are modified. Such legal changes could also create areas of uncertainty and require that we make material changes in our business operations and practices. Finally, any real or alleged non-compliance with these laws could materially and adversely impact our business and financial condition.

Legal Developments Relating to COVID-19

As one of the federal legislative responses to the COVID-19 pandemic, in March 2020, Congress enacted the Families First Coronavirus Response Act (the “Families First Act”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which require insurers and other payors to provide coverage for COVID-19 related medical services, in many cases without member cost-sharing. Pursuant to the government’s implementation of COVID-19 related legislation, the Company has received reimbursement for furnishing COVID-19 related testing, vaccinations, and monoclonal antibody treatment. We received provider relief funds under the CARES Act. We also elected to defer paying our employer share of Social Security tax payments for the period beginning March 27, 2020, and we plan to remit such payments by making two equal installments on or about December 31, 2021 and December 31, 2022.

The American Rescue Plan Act of 2021, which was signed into law on March 15, 2021, authorized the government to spend approximately $1.9 trillion to address continued impacts from the COVID-19 pandemic, including approximately $415 billion in increased funding to cover the national vaccination program, COVID-19 testing, contract tracing, research and development, and medical supply manufacturing. Our business began offering COVID-19 vaccinations in its stores during the fourth quarter of fiscal 2021 to eligible individuals based on state and local jurisdiction guidelines.

In addition to the above legislation, we have operated pursuant to a large number of new laws, regulations, and directives from federal, state, county, and city authorities related to the COVID-19 pandemic. For the remainder of the COVID-19 pandemic and for some time thereafter, we anticipate additional mandates and directives, from federal, state, county, and city authorities. Such directives could include additional travel bans and restrictions, quarantines, shelter-in-place orders, and shutdowns or the reinstitution of more stringent regulations (including mandatory stay at home orders). While there is uncertainty regarding the financial and operational impacts of COVID-19 related governmental actions and inactions, such impacts could be material and adverse or could require substantial and permanent changes in the Company’s operations.

Health Care Fraud and Abuse Laws

Because we submit claims and other information to Medicare, Medicaid, and other government-sponsored health care programs, the Company is subject to various health care fraud and abuse laws, including the federal False Claims Act (“FCA”) and Anti-Kickback Statute (“AKS”), of which many states have similar state counterparts, as well as the federal Physician Self-Referral Law (“Stark Law”), and the beneficiary inducement provision of the Civil Monetary Penalties Law (“CMPL”). Violations of these laws can result in various forms of sanctions, including civil and criminal fines, treble damages, imprisonment, and exclusion from participation in government-sponsored health care programs. FCA lawsuits can be initiated by the government or by individual whistleblowers who pursue qui tam actions on behalf of the government. In order to participate in government health care programs and mitigate our risks under the health care fraud and abuse laws, the Company maintains a compliance program. The Department of Health and Human Services (“HHS”) has the authority to monitor our operations and compliance efforts through audits and investigations,

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and noncompliance can result in the imposition of significant civil and criminal penalties and exclusion from future participation in government programs.

Medicare Laws and Regulations

We participate in the federal government’s Medicare Part D program as a stand-alone Prescription Drug Plan (“PDP”) through our EI subsidiary, and our PBM business contracts to provide drug benefit administration services for other Medicare plans. Accordingly, we are subject to federal, state, and local regulations, including rules, guidance, memoranda, and updates published by CMS. This includes the governance set forth by the Medicare Part D program, which makes prescription drug coverage available to eligible Medicare beneficiaries through private insurers. This program regulates the provision of Medicare outpatient prescription drug coverage, including enrollment, formularies, pharmacy networks, marketing, and claims processing. Some Medicare regulations, including those governing pharmacy network, benefit designs, and product pricing, have been and may continue to be modified.

CMS could decrease Medicare reimbursement or increase fees imposed upon PDPs. Among other things, PDPs could be required to pay Medical Loss Ratio (“MLR”) rebates for failure to meet minimum MLRs in a given year and repeated failure to meet such minimum annual thresholds can serve as a basis for program termination by CMS. Because our Medicare plan clients are subject to these same regulations, if they are negatively impacted by legal noncompliance or unexpected reimbursement cuts, they could seek to terminate or renegotiate contractual arrangements with our Company.

CMS assesses the quality of PDPs through star ratings, which may impact beneficiary enrollment numbers and sustained negative star ratings can result in plan termination. PDPs that fail or are unable to achieve or maintain star ratings can be terminated from Medicare.

Pharmacy, Professional Licensure, and Controlled Substance Laws and Regulations

We are subject to a wide range of statutes and regulations at the federal and state levels regarding the practice, licensure, and professional regulation of pharmacy and nursing. These statutes and regulations govern our retail, mail order, and specialty pharmacy operations, as well as the professional conduct of our pharmacists, pharmacy technicians, nurses, and physician assistants. Federal and state law also governs the regulation of prescriptions, drug products, and controlled substances. Governmental agencies with regulatory authority to audit and/or investigate our Company’s operations in this area include, but are not limited to CMS, DEA, DOJ, FDA, state pharmacy boards, state nursing boards, state controlled substance regulators, and the state attorneys general. These agencies are authorized to impose criminal, civil, and administrative law sanctions for failure to comply with these laws and regulations.

HIPAA, Privacy, and Security Laws

Our business is also subject to patient and consumer privacy obligations, including corporate, pharmacy and associate responsibility imposed by the Health Insurance Portability and Accountability Act (“HIPAA”)., as modified by the American Recovery and Reinvestment Act of 2009, including the Health Information Technology for Economic and Clinical Health Act. As a HIPAA covered entity, we are required to implement privacy standards, train our associates on the permitted uses and disclosures of protected health information (“PHI”), report breaches of PHI, provide a notice of privacy practices to our pharmacy customers and permit pharmacy customers to access and amend their records and receive an accounting of disclosures of protected health information.PHI. We are also subject to regulations governing the receipt of remuneration in exchange for PHI and are subject to audit for HIPAA compliance and failure to satisfy HIPAA standards may result in civil and criminal penalties. Corresponding state health privacy laws also apply to our business to the extent they are more stringent than HIPAA, and require additional compliance efforts that may vary by state.

Data Protection and Cybersecurity Laws

Our business is subject to federal and state privacy and data security laws, with respect to our receipt, use and disclosure by us of personally identifiable information (“PII”), which laws require us to provide appropriate privacy and security safeguards for such information. The Cybersecurity Information Sharing Act of 2015 invites business entities to

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share cyber threat indicators with the federal government and directs HHS to create a set of voluntary cybersecurity best practices for health care entities. In addition, we are also subject to the recently enacted California Consumer Privacy Act (“CCPA”), which established numerous consumer rights including rights of access and deletion of consumer’s data upon request. The approved California Privacy Rights Act (the “CPRA”) with a January 1, 2023 compliance deadline amends and expands the CCPA. Similarly, Virginia has enacted the Virginia Consumer Data Protection Act (“CDPA”), which goes into effect on January 1, 2023, and provides for consumer privacy rights and protections that are in many ways similar to those in the California law, although the CDPA does not include a private right of action. Other states are considering laws that would give consumers increased control over their personal data. Courts also may adopt the standards for fair information practices promulgated by the FTC that concern consumer notice, choice, security, and access. Likewise, a number of states that have passed data safeguard legislation, most notably New York’s Stop Hacks and Improve Electronic Data Security Act (the “SHIELD Act”), signed into law in July 2019, that requires any person or business owning or licensing computerized data that includes the private information of a resident of New York to implement and maintain reasonable safeguards to protect the security, confidentiality, and integrity of the private information. We are also subject to the Payment Card Industry Data Security Standard promulgated by the payment card industry in connection with handling credit card data. This standard contains requirements devised to aid entities that process, store or transmit credit card information to maintain a secure environment.

Our business faces a significant compliance burden in seeking to satisfy federal as well as multiple and sometimes inconsistent state laws regarding privacy and data security. We further anticipate the introduction of new state data security laws that could increase our compliance burdens or negatively impact our future business plans and operations. Additionally, many of the public health insurance exchanges (“Public Exchanges”) governed by the Patient Protection and Affordable Care Act (“ACA”) impose their own privacy and security standards. Because these standards may impact downstream entities, such as PBMs, they may impose additional compliance burdens for our business.

Consumer Protection Laws

Our business is required to comply with certain federal and state consumer protection laws. Applicable federal laws include the Federal Trade Commission Act, the Federal Postal Service Act, and the Consumer Product Safety Act. Our retail pharmacies and clinics are also subject to federal and state laws governingregarding the accessibility of goods and services to people with disabilities. Moreover, our relationshipwebsite operations and electronic marketing and customer communications must be employed in compliance with certain consumer protection requirements. Under these laws, regulated entities may be subject to legal action and government investigations in regards to a wide array of customer-facing matters, including product pricing and expiration, disability access, and member loyalty and other financial incentive programs.

Telemarketing and Other Outbound Contacts

The Company engages in certain telemarketing activities that involve outbound phone calls, texts and emails. Accordingly, we are subject to various federal and state laws, including, but not limited to the federal Telephone Consumer Protection Act and the federal Telemarketing Sales Rule, under which federal and state regulators and private individuals may be authorized to take legal action and seek financial penalties for violations.

The Affordable Care Act

The ACA made broad and far-reaching changes to the U.S. health care system and increased access to coverage for persons who may be our associates,patients or enrollees through federally-subsidized coverages. Among other things, the ACA expanded the Medicaid program eligibility in states that accepted federal incentives on such expansion. Pursuant to the ACA, the Company’s PBM and PDP businesses, and its health plan clients, have also been subjected to greater government oversight and regulation, including in relation to minimum MLR requirements, benefit plan design mandates, and group rating and pricing practices. Parts of the ACA continue to change over time through federal and state regulatory and policy actions and related litigation. The U.S. Supreme Court is expected to rule on a major legal challenge to the constitutionality of the ACA and the U.S. Congress could take action to repeal, modify, or expand the ACA in the future. While the American Rescue Plan Act of 2021 increased federal subsidies for insurance obtained under the health exchange marketplace, this increase is temporary and it is unclear whether or not Congress will extend

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the subsidies beyond their current expiration date at the end of 2022. As a result, there is significant uncertainty regarding the ACA and its ongoing impacts. Furthermore, any changes to the ACA and any state responses to such changes could have a significant adverse effect on our business operations and finances.

340B Drug Pricing Program

Under the 340B Drug Pricing Program, which is overseen by HHS and the Health Resources and Services Administration (“HRSA”), drug manufacturers are required to sell outpatient prescription drugs to certain safety minimum wage requirements, overtime, sick leave, working conditions, equal employment opportunitynet covered entities at discount prices. Drugs covered under the 340B Program may be dispensed by the covered entity or through contract pharmacies. In recent years, there has been litigation and unionizing efforts.enforcement actions regarding the dispensing of program drugs by contract pharmacies and the payment of mandatory 340B Program drug discounts by drug manufacturers. To the extent these actions could restrict the scope of the 340B Program or contract pharmacy arrangements, our Company’s participation in the program could be significantly impacted. Congressional action with respect to the program might also have an impact.

Environmental, Safety, Hazardous Materials Laws

In addition, in connection with the ownership and operations of our stores, distribution centers and other sites, we are subject to laws and regulations at the federal, state, and local levels relating to the protection of the environment, andpublic health, and occupational safety matters, including those governing the management and disposal of hazardous substances and the cleanup of contaminated sites. Failure to comply with such laws or regulations could result in fines or other government-imposed sanctions.

Pharmacy Network, Audit, and Plan Design Legislation

RegardingMedicare Part D and many states have implemented “any willing provider” laws and related legal provisions that regulate the ability of drug benefit plans and PBMs to utilize limited pharmacy networks. In addition, an increasing number of states have imposed conditions restricting or modifying the ability of health plans and PBMs to audit pharmacies and recover overpayments. Finally, CMS and the various states may regulate the design and structure of prescription drug formularies with regard to Medicare Part D and ACA-regulated plans. Some of these regulations may limit the ability of PBMs and health plans to impose formulary conditions or restrictions, such as copayment differentials and drug tiering designs, which may be used to manage drug benefits and promote cost-efficient utilization. These laws can significantly affect the ability of PBMs to develop and enforce pharmacy networks, formularies, and other plan design features to manage costs and to effectively conduct audits aimed at recovering overpayments for our health plan clients.

Medicare November 2020 Rebate Rule

Our Medicare PDP and PBM businesses could be impacted by the HHS final rule issued in November 2020, which would eliminate AKS safe harbor protection for rebates offered by drug manufacturers to PDPs and their contracting PBMs in exchange for formulary placement. The final rule would replace the previous safe harbor with two narrower safe harbors, one of which applies to certain point-of-sale rebates and the other to certain fixed service fees paid by manufacturers to PBMs. The final rule has been the subject of industry legal challenge, and pursuant to a court order, its implementation date has been delayed until at least January 1, 2023. It is currently unclear whether the final rule will survive legal challenge and be implemented as currently drafted, or whether it will be struck down, modified, or rescinded. Moreover, even if implemented in its current form, it is unclear what the final rule’s resulting impact could be to the Company and its PBM and affiliate operations, wePDP businesses.

Pharmacy Pricing Legislation

An increasing number of states are regulating Maximum Allowable Cost reimbursement (“MAC”), which may be employed by PBMs to regulate generic drugs costs. State MAC laws are frequently designed to regulate MAC pricing methodologies, price transparency, the types of drugs subject to MAC pricing, and MAC pricing appeals by pharmacies. In December 2020, the U.S. Supreme Court held that an Arkansas law that regulated PBM activities relating to MAC

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pricing and procedures was not preempted under ERISA. This decision affords states greater latitude to enact and enforce MAC laws that could restrict the ability of PBMs to impose and enforce MAC pricing parameters to maximize cost efficiency.

Antitrust and Unfair Competition Laws

The Company falls under the oversight of the U.S. Federal Trade Commission (“FTC”) and state regulatory authorities that are charged with investigating and enforcing laws relating to unfair and deceptive trade practices and “unfair methods of competition.” Some government investigations and prosecutions have focused on competitive and trade practices employed by PBMs with regard to rebates, drug pricing, and restrictive pharmacy networks, as well as various other business practices of PBMs and retail pharmacies. In addition, the federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive. Antitrust enforcement in the healthcare sector is currently a priority of the FTC and the U.S. Department of Justice. Violations of federal or state antitrust and unfair trade practices laws and regulations could result in substantial statutory penalties and other sanctions.

FDA Regulation

The Company’s business operations include, among other things, the distribution and dispensing of prescription drugs, the sale of over-the-counter medications and products, the private labeling of certain drug products and medical devices, and the sale of prepared food, all of which are regulated in whole or in part by the FDA. The FDA is authorized to impose various forms of sanction, including financial penalties, for failure to comply with regulations governing matters within its oversight.

ERISA Regulation

Our PBM business provides prescription drug administrative services for various employer and union sponsored health plans, many of which are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). In some cases, our PBM business may contract with a plan sponsor to assume limited fiduciary responsibilities and may be subject to direct civil and/or criminal liability under ERISA for any illegal remuneration provided to or received from plan sponsors.

ERISA generally preempts state and local laws that relate to employee benefit plans, but there is a lack of clarity as to the scope of ERISA preemption, which has been a frequent subject of litigation. In December 2020, the U.S. Supreme Court upheld an Arkansas law designed to restrict the ability of PBMs to impose certain financial and operational parameters on network pharmacies. To the extent that future cases further limit ERISA’s preemptive scope, PBMs could be increasingly subject to state-imposed legal requirements.

PBM Laws and Regulations

Many states have implemented laws and regulations designed to more stringently regulate PBM activities, including all rules, guidance, memoranda,by means of PBM licensure and updates published by CMS. This includes the governance set forth by the Medicare Part D program, which makes prescription drug coverage available to eligible Medicare beneficiaries through private insurers. This program regulates all aspects of the provision of Medicare drug coverage, including enrollment, formularies,registration requirements, restrictions on pharmacy networks, marketing,audits, MAC pricing transparency, and claims processing.restrictions on PBM pharmacy network designs and dispensing channels. In addition, various quasi-regulatory organizations and credentialing organizations have issued (or may propose) model standards or other requirements concerning PBMs, specialty pharmacies, or health plans. Examples include the National Association of Boards of Pharmacy, the National Association of Insurance Commissioners (“NAIC”), the National Committee for Quality Assurance (“NCQA”), and the Utilization Review Accreditation Commission (“URAC”), among others. Cumulatively, these efforts could restrict PBMs’ leeway to manage costs and lead to greater inconsistency among state standards and laws, thereby increasing PBM compliance burdens.

PBMs are also subject to various federal and state fraud, waste, and abuse laws, including the FCA, AKS, and state false claims act and anti-kickback laws. Failure to comply with any of these laws could invite financial penalties and/or civil or criminal sanctions.

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Government Agreements and Mandates

The Company may, from time to time, be subject to certain agreements or mandates imposed by federal, state, and local authorities in the form of consent orders, corporate integrity agreements, corrective action plans, and settlements. Currently, our business is subject to consent orders that pertain to information security, tobacco, pricing and product expiration dates.

Among other actions, the Company maintains a comprehensive security program designed to protect the security, confidentiality, and integrity of personal information collected from or about our consumers. Compliance with these consent orders requires regular assessments and reports and our compliance activities may occasionally be subject to audit or inspection. Any failure to abide by the terms of these consent orders could result in civil, criminal, or administrative remedies or penalties.

Consumer Financial Laws

The Company offers various financial products and services at certain of our retail store locations that include money (wire) transfer services, bill payment, money orders, check cashing, prepaid gift cards, and digital payment platforms. Accordingly, our business is subject to certain international, federal, and state anti-money laundering and consumer financial laws. Violations of these laws and regulations can result in civil and criminal penalties as well as reputational harm.

Corporate Governance and Internet Address

We recognize that good corporate governance is an important means of protecting the interests of our stockholders, associates, customers and the community. We have closely monitored and implemented relevant legislative and regulatory corporate governance reforms, including provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the rules of the SEC interpreting and implementing Sarbanes-Oxley and the corporate governance listing standards of the NYSE.

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Summary

The following is a summary of the principal risks we face:

Risks Related to our Financial Condition

Risks Related to our Operations

Risks Related to the Retail Pharmacy and PBM Industries in which we Operate

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Risks Related to our Financial Condition

Widespread health developments, including the global COVID-19 pandemic, could materially and adversely affect our business, financial condition and results of operations.

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We arecontinue to closely monitoringmonitor the impactevents and impacts relating to COVID-19, which has been declared a pandemic by the World Health Organization, and has spread to, and impacted the economies of, every state in the COVID-19 pandemic on all aspects of our businessU.S. and countries around the markets in which we have stores or otherwise operate.world. This pandemic, as well as the reality or fear of any other adverse public health developments, has impacted and could further adversely and materially affect, among other things, our workforce, operations, stores, consumer behavior, and supply chain, and the operations of our customers, suppliers and business partners. The local, national and international responseresponses to the virus is quickly developing, fluidhave continued to evolve and uncertain. Responses have included voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social, medical and other activities, and declarations of emergencies. Such measures have contributed to the sudden increaseincreases in the unemployment rate and changes in customer spending. Any such negative

The nature and scope of COVID-19’s impacts to our business and operations will depend on a series of evolving factors and developments that are difficult to assess, predict, or control, which include, but are not limited to, the following:

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The above factors and risks, among others, are difficult to predict and could result in a material adverse effectimpacts to our business, operations, cash flows, and financial condition. In addition, it is difficult to predict the potentially adverse impacts that COVID-19 could have on our customers, suppliers, vendors, and other business financial conditionspartners, which, in turn could materially and results of operations.adversely impact our business.

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In response to the spread of COVID-19, we have modified certain of our business practices (including store hours and access, employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our associates, customers, suppliers and business partners. There isWe have also modified certain other parts of our operations during the pandemic, including by changing protocols for employee-customer interactions and customer traffic and imposing other restrictions or modifications in operations due to applicable legal or other requirements. These measures have adversely affected, and may continue to adversely affect, the customer experience, sales, and operations, and there can be no certaintyassurance that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be negatively impacted.pandemic. Further, the initiatives we have implemented to slow and/or reduce the impact of COVID-19COVID-

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19 and the related support programs we have put in place for our associates and customers have in some instances, increased our operating expenses and reduced the efficiency of our operations. There can be no assurance that a continued effect of COVID-19 will not impact the measuremeasures we have taken to reduce costs.

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We have incurred additional costs to ensure we meet the safety and needs of our associates and customers, including the installation of Plexiglas shields at pharmacy and front-end counters to provide additional protection, providing additional cleaning materials for our stores and other facilities, and focusing on home delivery and digital services. In addition, we have enhanced certain employee benefits and compensation for those on the front-line. We

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Existing Facilities to replace LIBOR with the new standard benchmark rate that is established, if any, or to otherwise agree with the trustees or agents on a new means of calculating interest. In addition, changes to benchmark rates may have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our securities.

The covenants in the instruments that govern our current indebtedness may limit our operating and financial flexibility.

The covenants in the instruments that govern our current indebtedness limit our ability to:

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improve profitability and operating cash flow. If we are not successful in implementing our strategies, including our efforts to increase sales and further reduce costs, or if our strategies are not effective, we may not be able to improve our operations. A prolonged impact of COVID-19 may also make it more difficult to implement our strategies or cause a delay in such implementation. In addition, if we are unable to meet our obligations under the TSA, we would be exposed to significant financial penalties. Furthermore, any adverse change or weakness in general economic conditions or major industries can adversely affect drug benefit plans and reduce our pharmacy sales. Adverse changes in general economic conditions, including those resulting from COVID-19, such as increased unemployment, could affect consumer buying practices and consequently reduce our sales of front-end products, and cause a decrease in our profitability. Failure to improve operations or weakness in major industries or general economic conditions would adversely affect our results of operations, financial condition and cash flows and our ability to make principal or interest payments on our debt.

We purchase all of our brand and generic drugs from a single wholesaler. A disruption in this relationship may have a negative effect on us.

We purchase all of our brand drugs and, with limited exceptions, all of our generic drugs from a single wholesaler, McKesson. Because McKesson acts as a wholesaler for drugs purchased from manufacturers worldwide, any disruption in the supply of a given drug, including disruptions related to COVID-19b, includingCOVID-19 or to extreme weather or natural disasters, supply shortages of key ingredients, or regulatory actions by domestic or foreign governmental agencies, or specific actions taken by drug manufacturers, could adversely impact McKesson’s ability to fulfill our demands, which could adversely affect us. Pharmacy sales represented approximately 67.0%66.7% of our total drugstore sales during fiscal 2020.2021. While we believe that

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could undermine stakeholder support. Ultimately, the unpredictability regarding employee continuity and potential disruption stemming from employee losses pose a threat to our overall financial condition and operations.

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Failure or significant disruption into our computer systemsinformation technology systems/infrastructure or a cyber securitycyber-security breach could adversely affect our operations.

WeTechnology and computer systems are critical to many aspects of our pharmacy business, including, but not limited to, the drug supply chain, our dispensing of drugs, and our reimbursement. For instance, we rely extensively on our computer systems including those used by EnvisionRx, RediClinic,Rite Aid, Elixir, Bartell Drugs, and Health Dialog, to manage our ordering, pricing, point-of-sale, inventory replenishment and other processes. Our computer systems are at risk for failures, security breaches, and natural disasters, and they have been subject to attack by perpetrators of random or targeted malicious technology-related events, such as cyberattacks, computer viruses, worms, bot attacks or other destructive or disruptive software and attempts to misappropriate customer information, including credit card information. These sorts of attacks could subject our systems to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber security breaches, vandalism, coordinated cyber security attacks, severe weather conditions, catastrophic events and human error, and our disaster recovery planning cannot account for all eventualities. Although we deploy an information security program designed to protect confidential information against data security breaches through a multi-layered approach to address information security threats and vulnerabilities, including ones from a cyber securitycyber-security standpoint, a compromise of our information security controls or of those businesses with whom we interact, which results in confidential information being accessed, obtained, damaged or used by unauthorized or improper persons, could harm our reputation and expose us to regulatory actions and claims from customers and clients, financial institutions, payment card associations and other persons, any of which could adversely affect our business, financial position and results of operations. Moreover, a data security breach could require that we expend significant resources related to our information systems and infrastructure, and could distract management and other key personnel from performing their primary operational duties. We could also be adversely impacted by any significant disruptions in, or security breaches of, the systems and technology of third partiesparty suppliers or processors we interact with, including key payors and vendors.vendors with whom we share information including PHI. If our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to perform critical functions, which could adversely affect our business and results of operations. Any compromise or breach of our data security, whether external or internal, or misuse of customer, associate, supplier or our data could also result in a violation of applicable privacy, information security, and other laws, significant legal and financial exposure, fines or lawsuits, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business. Although we maintain cyber security insurance, we cannot assure you that the coverage limits under our insurance program will be adequate to protect us against future claims.

To effectively compete with our competitors and continue business partner relations, we must constantly invest in and update our technology and computer systems. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business,

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certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected.

If we failAny failure to protect the security of personal information about our customers and associates, we could be subject to costly government enforcement actions or private litigation.result in significant business liability and reputational harm.

Through our sales and marketing activities,In the ordinary course of business, we collect and store certain personal information that our customers provide to purchase products or services, enroll in promotional programs, register on our web site, or otherwise communicate and interact with us.us, including in connection with our administration of COVID-19 vaccines. We also gathermay collect, maintain, and retainstore information about our associates in the normal course of business.business and contract with third party business associates and vendors to accomplish these tasks. We may share information about such persons with vendors that assist with certain aspects of our business. Despite instituted safeguards for the protection of such information, security could be compromised and confidential customer or business information misappropriated, for which we have paid related penalties in the past. LossData breaches or violations of data protection laws may result in liability for the Company, even if caused, in whole or in part, by a business associate, vendor, or other third party. The unlawful handling or disclosure of sensitive personal information could also pose a serious risk to our customers’ trust in the Company, including the unlawful handling or disclosure due to security breaches of the systems and technology of third party suppliers or processors that we interact with, including key payors and vendors with whom we share information including PHI, PII and personal credit card information (“PCI”). Ransomware attacks or loss of customer or business information could disrupt our operations, damage our reputation, and expose us to claims from customers, financial institutions, payment card associations and other persons, or result in governmental investigation and enforcement, sanctions, fines, and/or penalties, any of which could have an adverse effect on our business, financial condition and results of operations. In addition, compliance with more rigorous privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes. Our brand, reputation, and customer loyalty may be negatively impacted in the event of any personal information security failures. The occurrence or scope of any future data security failures are unpredictable, and it may prove difficult or impossible to fully mitigate or remediate their negative consequences. If we fail to comply or are alleged to have failed to comply with applicable data protection and privacy laws and regulations, we could be subject to government enforcement actions or private lawsuits.

Any inability to keep existing store locations or open new locations in desirable places may have a negative impact on our operations.

We compete with other retailers and businesses to identify and develop desirable locations for retail store operations. Our ability to find suitable locations and our store construction, renovation, and operating costs can vary based on the specific state and locality and applicable zoning, environmental, and real estate laws. Additionally, construction delays, adverse modifications in lease terms, and changes in community demographics can negatively impact our store operations and revenues, and in some instances may cause us to close or relocate stores.

A variety of business continuity hazards and risks could materially and adversely affect our and our vendors’ business operations and our quarterly results may fluctuate significantly.

A variety of potential hazards, risks, and factors could adversely impact our and our vendors’ operations and performance, including, but not limited to, health epidemics or pandemics like COVID-19 and the unexpected impact of

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mitigation efforts, such as social distancing, mask mandates and the delay of elective medical procedures, could have on the demand for cough, cold and flu products and acute prescriptions, natural disasters, acts of war or terrorism, extended protests or periods of civil unrest, labor disputes, quality control issues, infrastructure failures, trade sanctions, inflation, changing market conditions, the introduction of new prescriptions drugs, the seasonal nature of our business, and changes in payor reimbursement rates and terms. These and other factors could also lead to disruptions in domestic and global supply chains and our ability to source products and find qualified vendors to access appropriate products in a timely and efficient manner. We could also be liable for any resulting personal injury or property damage arising from these risks to the extent our existing insurance coverage is insufficient or unavailable to cover associated losses. Due to these often unavoidable risks, some of which are beyond our management and control, our businesses, operating results, cash flows, and financial condition could be adversely affected.

Historically, our operating results have varied on a quarterly basis, and one or more of the above or other factors or risks could cause our results to fluctuate significantly. Accordingly, quarter-to-quarter comparisons of our operating results are not necessarily meaningful and a single quarter’s results may not provide reliable insight into our anticipated future performance.

Risks Related to the Retail Pharmacy and PBM Industries in which we Operate

The markets in which we operate are very competitive and further increases in competition could adversely affect us.

WeIn the retail pharmacy business, we face intense competition with local, regional and national companies, including other drugstore chains, independently owned drugstores, supermarkets, mass merchandisers, dollar stores and internet pharmacies. Many of our competitors are larger, better capitalized, have access to greater financial and other resources, are diversified through other industries and have an international presence. Additionally, some of our competitors are vertically integrated, allowing them to leverage healthcare, health plan, and PBM operations together with their retail pharmacy footprint. Increasingly, these competitors are expanding in our existing markets. Greater competition exerts pressure on our pricing and promotional models and may force us to modify or reduce our prices.

Competition from grocers and on-line retailers has significantly increased during the past few years. Some of our competitors have or may merge with or acquire pharmacies, pharmaceutical services companies, PBMs, health insurance companies, specialty or mail order facilities and/or enter into strategic partnership alliances with wholesalersGroup Purchasing Organizations or PBMs,wholesalers, which may further increase competition. We may not be able to effectively compete against them because our existing or potential competitors may have financial and other resources that are superior to ours. We

In the PBM business, we also face competition from other PBMs, including large, national PBMs, PBMs owned by national health plans and smaller standalone PBMs. Certain of these competitors entered into the PBM industry before us, and there is no assurance that we will successfully compete with entities with more established PBM businesses.businesses and scale. Further, we may be at a competitive disadvantage because we are more highly leveraged than our competitors. The

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the higher costs and complexities of specialty drugs may be difficult to manage. If we are unable to effectively compete for specialty drug business and access this market, we face potential harm to our business operations and adverse impacts to our financial condition. 

A change in our pharmacy and payor mix could adversely affect our profit margins.

Our Retail Pharmacy segment is subject to changes in pharmacy and payor mix, including shifts in pharmacy prescription volume toward programs offering less favorable reimbursement terms, which could adversely affect the results of our operations. For instance, we anticipate that a growing number of prescription drug sales will involve government subsidized drug benefit programs, 90-day fill programs, and specialty drug sales, under which our business may receive lower margins. As our government-funded businesses grow, our exposure to changes in law and policy under those programs will increase. Also, the government could reduce funding for health care or other programs or cancel, decline to renew, or modify our contracts, which could adversely impact our business, operating results, and cash flows. Moreover, many Medicare Part D plans and commercial payors are adopting preferred pharmacy networks, in which participating pharmacies must accept lower reimbursement in exchange for access to the payors’ patient population. We could incur negative financial impacts should the terms and conditions of such preferred networks become less favorable or if we are unable to offset lower reimbursement with additional prescription volume, other business, or improved efficiencies. We could also be negatively impacted by changes in the relative distribution of drugs dispensed at our pharmacies between brands and generics or if we experience an increase in the amounts we pay to procure pharmaceutical products.

Consolidation in the healthcare industry could adversely affect our business, financial condition and results of operations.

Many organizations in the healthcare industry, including PBMs, have consolidated to create larger healthcare enterprises with greater market power, which has contributed to continued pricing pressures. If this consolidation trend continues, it could give the resulting enterprises even greater bargaining power, which may lead to further pressure on the prices for our products and services and/or reduce our access to customers. If these pressures result in reductions in our prices and/or reduce our access to customers, our business will become less profitable unless we are able to achieve corresponding reductions in costs or develop profitable new revenue streams. We expect that market demand, government regulation, third-party reimbursement policies, government contracting requirements, and societal pressures will continue to cause the healthcare industry to evolve, potentially resulting in further business consolidations and alliances among the industry participants we engage with, which may adversely impact our business, financial condition and results of operations. In addition, our new strategy also includes selective acquisition opportunities and we cannot assure you that we will be able to consummate any such transactions on commercially reasonable terms, if at all.

TheThere are risks related to the availability, pricing, and safety profiles of the pharmacy drugs is subject to governmental regulations.and products we purchase and sell.

The continued conversion of various prescription drugs, including potential conversions of a number of popular medications, to over-the-counter medications may reduce our pharmacy sales and customers may seek to purchase such medications at non-pharmacy stores. Also, if the rate at which new prescription drugs become available slows or if new prescription drugs that are introduced into the market fail to achieve popularity, our pharmacy sales may be adversely affected. Additionally, we cannot assure you that the historic approval time for new drugs will not be impacted by the FDA’s priorities in response to COVID-19. The withdrawal of certain drugs from the market, including COVID-19 vaccines, increased safety risk profiles or regulatory restrictions, concerns about the safety or effectiveness of certain drugs, or negative publicity surrounding certain categories of drugs may also have a negative effect on our pharmacy sales or may cause shifts in our pharmacy or front-end product mix. Additionally, as we offer new products and services, our litigation and regulatory risk profile may change and increase our exposure to new risks that we have not previously encountered or addressed.

The availability of brand versus generic drugs and changes in those markets may also negatively impact our financial condition. Brand name drugs may become subject to inflation. Moreover, as generic drug utilization has increased, and due to consolidation within the generic drug manufacturing industry, our pharmacy business has

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experienced decreasing profit margins on generic drug sales. If our businesses are unable to accommodate shrinking profit margins and decreased sales on certain prescription drug products, our costs, revenue and overall profits could be adversely and materially impacted. 

Changes in third party reimbursement levels for prescription drugs and changes in industry pricing benchmarks could reduce our margins and have a material adverse effect on our business.

Sales of prescription drugs reimbursed by third party payors, including the Medicare Part D plans and state sponsored Medicaid and related managed care Medicaid agencies,plans, represented substantially all of our pharmacy sales in our Retail Pharmacy segment in fiscal 2020.2021.

The continued efforts of theCongress and Federal government,agencies, health maintenance organizations, managed care organizations, PBM companies, other State and local government entities, and other third-party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation relating to how drugs are priced, may impact our profitability. These efforts may be increased as a result of increased deficits or sudden losses as a result of the impact of COVID-19. In addition, someThe competitive success of our pharmacy business is largely dependent on our ability to establish and maintain contractual relationships with PBMs and other payors on acceptable terms as they may adopt narrow or restricted retail or specialty pharmacy networks. Some of these entities may offer pricing terms that we may not be willing to accept or otherwise restrict or exclude our participation in their networks of pharmacy providers. Any significant loss of third-party business could have a material adverse effect on our business and results of operations. In particular, there has been a growth in the number of preferred Medicare Part D networks, many of which we are excluded from participating in. Decreased reimbursement payments to retail and mail order pharmacies for brand and generic drugs has caused a reduction in our profit. Historically, the effect of this trend has been mitigated by our efforts to negotiate reduced acquisition costs of generic pharmaceuticals with manufacturers. Additionally, it has resulted in us providing contractual financial performance guarantees to certain of our PBM clients with respect to minimum drug price discounts for our retail pharmacy network and mail order pharmacy. Any inability to achieve guaranteed minimum drug price discounts provided to our PBM clients could have an adverse effect on our results of operations.

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prescription drug coverage. Even if the ACA remains, significant provisions of the ACA have not yet been finalized (e.g., nondiscrimination in health programs and activities, excise tax on high-cost employer-sponsored health coverage) and it is uncertain whether or in what form these provisions will be finalized. We cannot predict the effect, if any, a repeal of all or part of the ACA, the implementation or failure to implement the outstanding provisions of the ACA, or the enactment of new health care system legislation to replace current legislation may have on our retail pharmacy, LTC pharmacy and pharmacy services operations.

A substantial portion of our pharmacy revenue is currently generated from a limited number of third party payors, and, if there is a loss of, or significant change to prescription drug reimbursement rates by, a major third party payor, our revenue will decrease and our business and prospects could be adversely impacted.

A substantial portion of our pharmacy revenue is currently generated from a limited number of third party payors. While we are not limited in the number of third party payors with which we can do business and results may vary over time, our top five third party payors accounted for 79.9%77.9%, 80.4%79.9% and 78.6%80.4% of our pharmacy revenue during fiscal 2021, 2020 2019 and 2018,2019, respectively. The largest third party payor, Caremark, represented 28.8%30.4%, 28.3%28.8% and 27.2%28.3% of pharmacy sales during fiscal 2021, 2020 2019 and 2018,2019, respectively. We expect that a limited number of third party payors will continue to account for a significant percentage of our pharmacy revenue, and the loss of all or a portion of, or a significant change to customer access or prescription drug reimbursement rates by, a major third party payor could decrease our revenue and harm our business.

A substantial portion of our Pharmacy Services segment revenue is currently generated from a limited number of customers, and, if there is a loss of a major customer, our revenue will decrease and our business and prospects could be adversely impacted.

A substantial portion of our Pharmacy Services segment revenue is currently generated from a limited number of customers. While we are not limited in the number of customers with which we can do business and results may vary over time, our top five customers accounted for 53.2%59.7%, 49.3%53.2% and 40.7%49.3% of our Pharmacy Services segment revenue during fiscal 2021, 2020 2019 and 2018,2019, respectively. The largest payor, CMS, represented 27.4%36.6%, 27.4% and 23.0% and 17.3% of

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We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Proceedings that we believe are insignificant may develop into material proceedings and subject us to unforeseen outcomes or expenses. Additionally, the actions of certain participants in our industry may encourage legal proceedings against us or cause us to reconsider our litigation strategies. As a result, we could from time to time incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could harm our reputation and have a material adverse effect on our results of operations, in the period in which the amounts are accrued and/or our cash flows in the period in which the amounts are paid.financial condition and business practices.

We are subject to governmental regulations, procedures and requirements; our noncompliance or a significant legislative, regulatory, or public policy change could adversely affect our business, the results of our operations or our financial condition.

Our business is subject to numerous federal, state and local laws and regulations. Changes in these laws, regulations, or in related public policy may require extensive system and operating changes that may be difficult to implement. Untimely compliance or noncompliance with applicable regulations could result in the imposition of civil and criminal penalties that could adversely affect the continued operation of our business, including: (i) suspension of payments from government programs; (ii) loss of required government certifications; (iii) loss of authorizations or changes in requirements for participating in, or exclusion from government reimbursement programs, such as the Medicare and Medicaid programs; (iv) loss of licenses; or (v) significant fines or monetary penalties. The regulations to which we are subject include, but are not limited to, federal, state and local registration and regulation of pharmacies; dispensing and sale of controlled substances and products containing pseudoephedrine;pseudoephedrine, among others; applicable Medicare and Medicaid Regulations; the HIPAA; regulations relating to the protection of the environment and health and safety matters, including those governing exposure to and the management and disposal of hazardous substances; regulations enforced by the U. S.U.S. Federal Trade Commission, the U. S.U.S. Department of Health and Human Services and the Drug Enforcement Administration as well as state regulatory authorities, governing the sale, advertisement and promotion of products we sell; anti-kickback laws; false claims laws and federal and state laws governing the practice of the profession of pharmacy. We are also governed by federal and state laws of general applicability, including laws regulating matters of wage and hour laws, working conditions, health and safety and equal employment opportunity.

Our dealings with customers face scrutiny from the federal and state government agencies, including the Federal Trade Commission, who are charged with enforcing consumer protection laws and deterring alleged unfair or deceptive trade practices. Under these laws, regulated entities may be subject to legal action and government investigations in regards to a wide array of customer-facing matters, including product pricing and expiration, disability access, and member loyalty and other financial incentive programs. A failure to keep our customers adequately informed of our practices could result in government investigations or regulatory action which may result in potential fines and penalties.

Additionally, Congress passed the ACA in 2010, which resulted in significant structural changes to the health insurance system. However, in December 2017, the individual mandate was repealed. If the individual mandate repeal or a rollback of other aspects of the ACA, such as Medicaid expansion, actually leads to a significant reduction in demand for the healthcare services, the demand for our pharmacy services businesses may decline and could have a material impact on our business. A major legal challenge to the constitutionality of the ACA is currently pending before the U.S. Supreme Court and the U.S. Congress could take action to repeal, modify, or expand the ACA in the future. Therefore, we cannot predict what effect, if any, the repeal of all or part of the ACA or any subsequent replacement legislation may have on our retail pharmacy and pharmacy services businesses.

Government audits, investigations, and reviews could lead to liability and operational changes.

Our pharmacy, PBM, and PDP businesses are subject to periodic audits, investigations, and reviews from state and federal regulators and agencies. Health care laws and regulations, particularly within the pharmacy sector, are complex and subject to frequent change. Moreover, federal and state regulators are highly focused on and engage in vigorous enforcement efforts with regard to fraud, waste and abuse within the health care and pharmacy industry. Accordingly, we invest significant resources in our compliance efforts and must constantly re-evaluate our efforts, as the laws, regulations, and enforcement trends may change.

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Because our business is subject to varied audits, investigations, and reviews, we face risks including financial penalties, civil and/or criminal liability, suspension or exclusion from government programs, and possible licensure sanction. For example, because our PDP is governed by CMS’ audit authority, it could be subject to financial recoupment, penalties, beneficiary enrollment restrictions, and other forms of sanction. In addition, our PBM’s operations could be indirectly and adversely impacted if any of its Medicare plan clients are subjected to adverse government audits or enforcement actions. The outcome of any given audit, investigation, and/or review could require significant changes to our business practices, revenue flow, and overall financial condition, with a resulting adverse impact on the Company as a whole.

If our compliance or other systems and processes fail or are deemed inadequate, we may become subject to regulatory actions and/or litigation.

In addition to Rite Aid being subject to extensive and complex regulations, many contracts that Elixir has with its customers impose compliance obligations on it. These compliance obligations frequently are reviewed and audited by Elixir’s customers and regulators. More generally, if the Company’s systems and processes designed to maintain compliance with applicable legal and contractual requirements, and to prevent and detect instances of, or the potential for, non-compliance fail or are deemed inadequate, we may be subject to regulatory actions, litigation and other proceedings which may result in damages, fines, suspension or loss of licensure, suspension or exclusion from participation in government programs and/or other penalties, any of which could adversely affect our businesses, operating results, cash flows and/or financial condition.

Certain risks are inherent in providing pharmacy services; our insurance may not be adequate to cover any claims against us.

Pharmacies are exposed to risks inherent in the packaging and distribution of pharmaceuticals and other healthcare products, such as with respect to improper filling of prescriptions, labeling of prescriptions, adequacy of warnings, unintentional distribution of counterfeit drugs and expiration of drugs. In addition, federal and state laws that

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Risks of declining gross margins in the PBM industry could adversely impact our profitability.

The PBM industry has been experiencing margin pressure as a result of competitive pressures and increased client demands for lower prices, performance guarantees, enhanced service offerings and higher rebate yields. With respect to rebate yields, we maintain contractual relationships with brand name pharmaceutical manufacturers that provide for rebates on drugs dispensed by pharmacies in our retail network and by our mail order pharmacy (all or a portion of which may be passed on to clients). Manufacturer rebates often depend on a PBM’s ability to meet contractual market share or other requirements, including in some cases the placement of a manufacturer’s products on the PBM’s formularies. If we lose our relationship with one or more pharmaceutical manufacturers, or if the rebates provided by pharmaceutical manufacturers decline, our business and financial results could be adversely affected. Further, changes in existing federal or state laws or regulations or the adoption of new laws or regulations relating to patent term extensions, rebate arrangements with pharmaceutical manufacturers, or to formulary management or other PBM services could also reduce or eliminate the manufacturer rebates we receive. We also have performance guarantees with select customers for rebates, and if our rebate aggregation contracts change or we are unable to meet our obligations due to mix of brand drugs, our financial performance for this business could be impacted.

We also maintain contractual relationships with participating pharmacies that provide for discounts on retail transactions for generic drugs and brand drugs dispensed by pharmacies in our retail network. If we lose our relationship with one or more of the larger pharmacies in our network, or if the retail discounts provided by network pharmacies decline, our business and financial results could be adversely affected. In addition, changes in federal or state laws or regulations or the adoption of new laws or regulations relating to claims processing and billing, including our ability to collect network administration and technology fees, could adversely impact our profitability.

Legislation exists under Medicare Part D and in the majority of states that affect the ability of our PBM business (and its health plan clients) to limit access to pharmacy provider networks or remove pharmacy network providers. For instance, “any willing provider” laws may mandate that our PBM or its health plan clients admit nonparticipating pharmacies that are willing and able to satisfy the applicable terms and conditions for network participation. Medicare Part D and many states have implemented laws or rules that limit the ability of PBMs and health plans to impose formulary conditions or restrictions, such as copayment differentials, and drug tiering designs, which may be used to manage drug benefits and promote cost-efficient utilization. Together, these laws could affect the ability of our PBM to effectively manage costs for its health plan clients. Additionally, many states now have legislation impacting the ability of our PBM to conduct audits of claims submitted by network pharmacies. These laws could hinder our PBM’s ability to recover overpayments identified through audits and negatively affect our PBM’s services and its ability to achieve enhanced economic outcomes for its health plan clients.

The possibility of PBM client loss and/or the failure to win new PBM business could impact our ability to secure new business.

Our PBM business generates net revenues primarily by contracting with clients to provide prescription drugs and related health care services to plan members. PBM client contracts often have terms of approximately three years in duration, so approximately one third of a PBM’s client base typically is subject to renewal each year. In some cases, however, PBM clients may negotiate a shorter or longer contract term or may require early or periodic renegotiation of pricing prior to expiration of a contract. In addition, the reputational impact of a service-related incident could negatively affect our ability to grow and retain our client base. Further, the PBM industry has been impacted by consolidation activity that may continue in the future. In the event one or more of our PBM clients is acquired by an entity that obtains PBM services from a competitor, we may be unable to retain all or a portion of our clients’ business. Because of the competitive nature of the business, we continually face challenges in competing for new PBM business and retaining or renewing our existing PBM business. There can be no assurance that we will be able to win new business or secure

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Regulatory or business changes relating to our participation in Medicare Part D, the medical loss ofratio for our Medicare Part D eligible members, or our failure to otherwise execute on our strategies related to Medicare Part D, may adversely impact our business and our financial results.

One of our subsidiaries, EIC,Elixir Insurance, is an insurer domiciled in Ohio (with Ohio as its primary insurance regulator) and licensed in all 50 states, and is approved to function as a Medicare Part D Prescription Drug Plan (“PDP”) plan sponsor for purposes of individual insurance products offered to Medicare-eligible beneficiaries and for purposes of making employer/union-only group waiver plans available for eligible clients. We also provide other products and services in support of our clients’ Medicare Part D plans or the Federal Retiree Drug Subsidy program. We are working to minimize the working capital tied to the business by reducing and/or selling the receivable as we did for calendar 2019,2020, however there are no assurances that we can reduce or sell the receivable for calendar 2020.2021. There are many uncertainties about the financial and regulatory risks of participating in the Medicare Part D program and we can give no assurance that these risks will not materially adversely impact our business and financial results in future periods.

EICEI is subject to various contractual and regulatory compliance requirements associated with participating in Medicare Part D. EICEI is subject to certain aspects of state laws regulating the business of insurance in all jurisdictions in which EICEI offers its PDP plans. As a PDP sponsor, EICEI is required to comply with Federal Medicare Part D laws and regulations applicable to PDP sponsors. Additionally, the receipt of Federal funds made available through the Part D program by us, our affiliates, or clients is subject to compliance with the Part D regulations and established laws and regulations governing the Federal government’s payment for healthcare goods and services, including the Anti-Kickback Statute and the False Claims Act. Similar to our requirements with other clients, our policies and practices associated with operating our PDP are subject to audit. If material contractual or regulatory non-compliance was to be identified, monetary penalties and/or applicable sanctions, including suspension of enrollment and marketing or debarment from participation in Medicare programs, could be imposed. Further, the adoption or promulgation of new or more complex Medicare Part D regulatory requirements, associated with Medicare mayincluding those governing pharmacy networks, benefit designs, and product pricing, could require us to incur significant costs which could adversely impact our business and our financial results. Similar negative impacts could result from potential Part D reimbursement reductions, adverse CMS audits, government enforcement actions, or decreases in star ratings. Further, EI’s level of margin is limited by minimum Medical Loss Ratio (“MLR”) requirements imposed by the ACA. Medicare PDPs are subject to minimum MLR audits and EI could be required to pay MLR rebates for failure to meet minimum MLRs in a given year and repeated MLR failures could lead to CMS termination.

In addition, due to the availability of Medicare Part D, some of our employer clients may decide to stop providing pharmacy benefit coverage to retirees, instead allowing the retirees to choose their own Part D plans, which could cause a reduction in demand for our Medicare Part D group insurance products. Extensive competition among Medicare Part D plans could also result in the loss of Medicare Part D members by our managed care customers, which would also result in a decline in our membership base. For example, if we were to lose our current Star rating with the CMS, fewer customers may select our plans, which could have an adverse effect on our financial results. Like many aspects of our business, the administration of the Medicare Part D program is complex. Any failure to execute the provisions of the Medicare Part D program may have an adverse effect on our financial position, results of operations or cash flows. As discussed above, in March 2010, comprehensive healthcare reform was enacted into federal law through the passage of the ACA. Additionally, as described above, the ACA contains various changes to the Part D program and could have a financial impact on our PDP and our clients’ demand for our other Part D products and services. Further, a major constitutional challenge to the ACA is currently pending before the U.S. Supreme Court and it is unclear what effect, if any, the case and/or the potential repeal of all or part of the ACA may have on the Part D program.

Failure to timely identify or effectively respond to changing consumer preferences and spending patterns, an inability to expand the products being purchased by our clients and customers, or the failure or inability to obtain or offer particular categories of products could negatively affect our relationship with our clients and customers and the demand for our products and services.

The success of our business depends in part on customer loyalty, superior customer service and our ability to persuade customers to purchase products in additional categories and our private label brands. Failure to timely identify or effectively respond to changing consumer preferences and spending patterns, an inability to expand the products being

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purchased by our clients and customers, or the failure or inability to obtain or offer particular categories of products could negatively affect our relationship with our clients and customers and the demand for our products and services.

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increase our costs as an employer. Our employee-related operating costs could also increase in response to any union organizing activities among our employees. Overall, these potential labor, wage and union-related changes could increase our operating costs and thereby negatively impact our financial condition.

Item 1B.   Unresolved SEC Staff Comments

None

Item 2.    Properties

As of February 29, 2020,27, 2021, we operated 2,4612,510 retail drugstores. The average selling square feet of each store in our chain is approximately 10,500 square feet. The average total square feet of each store in our chain is approximately 13,600. The stores in the eastern part of the U.S. average 8,800 selling square feet per store (11,200 average total square feet per store). The stores in the western part of the U.S. average 14,30014,000 selling square feet per store (19,000(18,500 average total square feet per store).

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Pennsylvania for document warehousing use and additional administrative personnel. We own additional buildings near Harrisburg, Pennsylvania which total 100,000 square feet and house our model store and additional administrative personnel.

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Item 4.   Mine Safety Disclosures

Not applicable

Information about our Executive Officers

The following sets forth the name, age and biographical information for each of the Registrant’s executive officers as of February 27, 2021. In each case the officer’s term of office extends to the date of the meeting of the Board following the next annual meeting of stockholders of Rite Aid Corporation. Previous positions and responsibilities held by each of the executive officers over the past five years or more are indicated below:

Heyward Donigan, 60, Ms. Donigan was appointed Chief Executive Officer in 2019 and President and Chief Executive Officer in February 2020. From 2015 to 2019 Ms. Donigan served as President and Chief Executive Officer of Sapphire Digital, which designs and develops omni-channel platforms that help consumers choose their best fit healthcare providers. Previously, she served as President and Chief Executive Officer of Value Options, then the nation’s largest independent behavioral health improvement company, and prior to that she served as Executive Vice President and Chief Marketing Officer at Premara Blue Cross and as Senior Vice President of all operations at Cigna Healthcare. She previously held executive roles at General Electric, Empire BCBS and U.S. Healthcare. She has served on the Board of Directors of Rite Aid since 2019.

James J. Peters, 49, Mr. Peters was appointed Chief Operating Officer in October 2019. From 2016 until 2019 Mr. Peters served as chief executive officer of Skyward Health, a strategic healthcare advisory firm. Prior to joining Skyward Health, Mr. Peters was a 12-year senior executive of Geisinger Health System, helping establish Geisinger’s national reputation for healthcare innovation. At Geisinger, Mr. Peters held roles including chief executive officer of Geisinger Medical Management Corporation, managing partner of Geisinger Ventures and senior vice president, chief strategic partnerships officer. Prior to joining Geisinger, Mr. Peters served as principal at Updata Capital, a venture capital firm focused on software, data analytics and health information technology, from 2002 to 2004. Mr. Peters is a member of the American College of Corporate Directors, and from 2016 until its acquisition in 2019 Mr. Peters was an independent director of NxStage Medical, Inc. In 2020, Mr. Peters was elected as a board member of the National Association of Chain Drug Stores and appointed to its executive committee.

Matthew Schroeder, 51, Mr. Schroeder was appointed Chief Financial Officer of Rite Aid Corporation in March 2019 and was named Executive Vice President in September 2019. Prior to his promotion to this position, Mr. Schroeder served as Senior Vice President, Chief Accounting Officer and Treasurer from 2017 until 2019. Mr. Schroeder joined Rite Aid in 2000 as Vice President of Financial Accounting and served as Group Vice President of Strategy, Investor Relations and Treasurer from 2010 to 2017. Prior to joining the Company, Mr. Schroeder worked in public accounting for Arthur Andersen, LLP. Mr. Schroeder serves as a member of the board of directors of The Rite Aid Foundation.

Jessica Kazmaier, 44, Ms. Kazmaier has been the Chief Human Resources Officer at Rite Aid since March 2019 and was named Executive Vice President of Rite Aid in September 2019. Ms. Kazmaier joined Rite Aid in 2001 in the total rewards function and has held various human resources positions of increasing responsibility, including Vice President, Total Rewards; and Group Vice President, Compensation, Benefits and Human Resources Corporate Services. Ms. Kazmaier previously served as retirement benefits manager at Harsco Corporation. Ms. Kazmaier has served as the President of The Rite Aid Foundation since October 2019.

Jocelyn Z. Konrad, 51, Ms. Konrad was appointed Executive Vice President and Chief Pharmacy Officer of Rite Aid in September 2019. Ms. Konrad joined Rite Aid in 2007 as a result of the Eckerd acquisition. Prior positions at Rite Aid include Regional Pharmacy Vice President; Vice President of Healthcare Initiatives; Group Vice President of Pharmacy Initiatives and Clinical Services; Executive Vice President, Pharmacy; and most recently, Executive Vice President, Pharmacy and Retail Operations. Ms. Konrad served as a District Manager for Eckerd Pharmacy from 1997 through 2007. From 1992 to 1997, she served as a pharmacist for Thrift Drug Pharmacy. Ms. Konrad serves as a member of the board of directors of The Rite Aid Foundation.

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Brian T. Hoover, 56, Mr. Hoover was appointed Chief Accounting Officer in March 2019. Prior to his promotion to this position, Mr. Hoover served as Group Vice President and Controller of the Company since 2017. Prior to that position, Mr. Hoover served as Vice President, Financial Reporting and Accounting from 2008 to 2017. Prior to that role, Mr. Hoover served in various positions of increasing responsibility at the Company. Mr. Hoover served for six years in public accounting at KPMG.

Justin Mennen, 40, Mr. Mennen was appointed Senior Vice President and Chief Information Officer in January 2019 and was named Executive Vice President in October 2019. Prior to joining Rite Aid, Mr. Mennen served as chief digital officer and chief information officer for CompuCom Systems Inc. from 2016 to December 2018. Before CompuCom, Mr. Mennen led technology organizations across several industries, most recently as the vice president of enterprise architecture and technology innovation for Estée Lauder Companies Inc. from 2014 to 2016 and as the regional chief information officer Asia Pacific and Japan for Dell Technologies from 2012 to 2014.

Andre Persaud, 52, Mr. Persaud was appointed Executive Vice President, Retail for Rite Aid in February 2020. From 2018 to January 2020 Mr. Persaud was an executive consultant with Wakefern Food Corporation, the nation’s largest retailer-owned cooperative, where he worked on the company’s ongoing strategic transformation. From 2016 to January 2020 Mr. Persaud was the principal of The AVNP Group LLC, which provided management consulting services to drive organization transformations. From 2015 to 2016 Mr. Persaud served as executive vice president, retail, for Shopko Stores Operating Company with direct responsibility for all operating divisions and banners across retail, pharmacy and optical. Mr. Persaud also served as senior vice president, store operations for Burlington Stores and senior vice president, central operations and merchandising for Loblaw Companies Limited, Canada’s leading grocery business. Prior to Loblaw, Mr. Persaud served in senior operational leadership roles for Shoppers Drug Mart. He began his career as a pharmacist and served in progressive leadership roles to eventually lead drug store operations for Walmart Canada. Mr. Persaud has served on the National Association of Chain Drug Stores’ board of directors and as a board advisor for Profitect, an AI and prescriptive analytics company.

Paul Gilbert, 54, Mr. Gilbert was appointed Executive Vice President, General Counsel and Corporate Secretary in August 2020. Mr. Gilbert was a partner at Epstein Becker & Green, P.C from 2017 to 2020. Before that, he served for 10 years as the executive vice president, chief legal officer and corporate governance officer at LifePoint Health, Inc.  While at LifePoint, he also served as Chief Development Officer and Corporate Secretary.

Erik Keptner, 48, Mr. Keptner was appointed Senior Vice President and Chief Marketing and Merchandising Officer in June 2019. Mr. Keptner served as Senior Vice President, Marketing of Wakefern Food Corporation from 2018 to June 2019 and as Senior Vice President, Sales, Marketing & Merchandising at Giant Food Stores (a subsidiary of Ahold Delhaize) from 2014 to 2018. Prior to these roles Mr. Keptner served in various leadership positions at Ahold Delhaize and Giant Food Stores.

PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

On April 10, 2019, our Board of Directors approved a one-for-twenty reverse stock split of our outstanding shares of common stock. The reverse stock split was effected on April 18, 2019 at 5:00 p.m. Eastern time. At the effective time, every twenty issued and outstanding shares of our common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company’s transfer agent in an amount equal to such stockholder’s respective pro rata shares of the total net proceeds from the Company’s transfer agent sale of all fractional shares at the then-prevailing prices on the open market. In connection with the reverse stock split, the number of authorized shares of our common stock was also reduced on a one-for-twenty basis, from 1.5 billion to 75 million. The par value of each share of common stock remained unchanged. A proportionate adjustment was also made to the maximum number of shares issuable under the Company’s 2014 Equity Incentive Plan.

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Our common stock is listed on the NYSE under the symbol “RAD.” On April 16, 2020,15, 2021, we had approximately 9,5909,652 stockholders of record. The following table shows the quarterly high and low sales prices for our common stock, adjusted on a retroactive basis to reflect the reverse stock split:

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We have not declared or paid any cash dividends on our common stock since the third quarter of fiscal 2000 and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Our senior secured credit facility and some of the indentures that govern our other outstanding indebtedness restrict our ability to pay dividends.

We have not sold any unregistered equity securities during the period covered by this report, nor have we repurchased any of our common stock, during the period covered by this report.

STOCK PERFORMANCE GRAPH

The graph below compares the yearly percentage change in the cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return on (i) the Russell 2000 Consumer Staples Index, (ii) the Russell 3000 Consumer Staples Index, (iii) the Russell 2000 Index, and (iv) the Russell 3000 Index, over the same period (assuming the investment of $100.00 in our common stock and such indexes on February 28, 201527, 2016 and reinvestment of dividends).

For comparison of cumulative total return, we have elected to use the Russell 2000 Consumer Staples Index, consisting of 55 companies, and the Russell 2000 Index. In the past we used the Russell 1000 Consumer Staples Index and the Russell 1000 Index but we feel this is a better comparison of the Company to a peer group of similar sized companies. The Russell 2000 Consumer Staples Index is a capitalization-weighted index of companies that provide products directly to consumers that are typically considered nondiscretionary items based on consumer purchasing habits. The Russell 2000 Index consists of the smallest 2000 companies in the Russell 3000 Index and represents the universe of small capitalization stocks from which many active money managers typically select.

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Item 6.   Selected Financial Data—Continuing Operations

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and the audited consolidated financial statements and related notes.

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations

Overview

We are a healthcare company with a retail footprint, providing our customers and communities with a high level of care and service through various programs we offer through our two reportable business segments, our Retail Pharmacy segment and our Pharmacy Services segment. We accomplish our goal of delivering comprehensive care to our customers through our retail drugstores RediClinic walk-in retail health clinics and our transparent and traditional PBMs EnvisionRxOptions and MedTrak.PBM, Elixir. We also offer fully integrated mail-order and specialty pharmacy services through EnvisionPharmacies.Elixir Pharmacy. Additionally through EIC, EnvisionRxOptionsElixir Insurance, Elixir also serves one of the fastest-growing demographics in healthcare: seniors enrolled in Medicare Part D. When combined with our retail platform, this comprehensive suite of services allows us to provide value and choice to customers, patients and payors and allows us to compete in today’s evolving healthcare marketplace.

Retail Pharmacy Segment

Our Retail Pharmacy segment sells brand and generic prescription drugs and various other pharmacy services, as well as an assortment of front-end products including health and beauty aids, personal care products, seasonal merchandise, and a large private brand product line. Our Retail Pharmacy segment generates the majority of its revenue through the sale of prescription drugs and front-end products at our 2,461over 2,500 retail stores.pharmacy locations across 17 states. We replenish our retail stores through a combination of direct store delivery of pharmaceutical products facilitated through our pharmaceutical Purchasing and Delivery Agreement with McKesson, and the majority of our front-end products through our network of distribution centers. In addition, as of February 29, 2020, the Retail Pharmacy segment includes 67 RediClinic walk-in retail clinics, of which, 31 were located within Rite Aid retail stores in the Philadelphia and New Jersey markets.

Pharmacy Services Segment

Our Pharmacy Services segment provides a full range of pharmacy benefit services through EnvisionRxOptions. The Pharmacy Services segment provides both transparent and traditional PBM options through its EnvisionRxOptions and MedTrak PBMs. EnvisionRxOptions also offers fully integrated mail-order andsuite of PBM offerings including technology solutions, mail delivery services, specialty pharmacy, services through EnvisionPharmacies; an innovativenetwork and rebate administration, claims adjudication software platform in Laker Software; and a nationalpharmacy discount programs. Elixir also provides prescription discount programs and Medicare Part D prescription drug plan through EIC’s EnvisionRx Plus product offering. The segment’sinsurance offerings for individuals and groups. Elixir provides services to various clients are primarily employers, insurance companies, unions, government employee groups,across its different lines of business, including major health plans, Managed Medicaidcommercial employers, labor groups and state and local governments, representing approximately 3.25 million covered lives, including approximately 1 million covered lives through our Medicare Part D insurance offerings. Elixir continues to focus its efforts and offerings to its target market of small to mid-market employers, labor unions and regional health plans, Medicare plans, other sponsors ofincluding provider-led health benefit plans and individuals throughout the United States.government sponsored Medicaid and Medicare plans.

Restructuring

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Beginning in Fiscal 2019, we initiated a series of restructuring plans designed to reorganize our executive management team, reduce managerial layers, and consolidate roles. We also initiated restructuring plans with regard toIn March 2020, we announced the details of our futureRxEvolution strategy, and brand identification, which includes building tools to work with regional health plans to improve patient health outcomes, rationalizing SKU’s in our front-end offering to free up working capital and update our merchandise assortment, assessing our pricing and promotional strategy, rebranding our retail pharmacy and EnvisionRxOptionspharmacy services business, implementing executive team enhancements,launching our Store of the Future format and further reducing SG&A and headcount, separating the front-end and retail pharmacy teams into separate units,including integrating certain back office functions in the Pharmacy Services segment both within the segment and across Rite Aid, including a detailed review of our EnvisionRxOptions cost structure and action plans to streamline.Aid.

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As a result of the restructuring that we announced in March 2019, we achieved annual cost savings of approximately $55.0 million. These savings offset the reduction in TSA fees that we experienced in fiscal 2020. We have also incurredimplemented further restructuring costs toactivities in support of our transformationRxEvolution and other initiatives, which we expectresulted in additional restructuring charges due to further reductions in corporate staffing levels, charges associated with rationalizing SKU’s in our front-end offering and other operational changes. These and future restructuring activities are expected to provide future growth and expense efficiency benefits. We anticipateThere can be no assurance that our total fiscal 2021 restructuring-related costs to be approximately $60.0 millioncurrent and expect to realizefuture restructuring charges will achieve the full benefit of this investment overcost savings and remerchandising benefits in the next two years, although a prolonged impact of COVID-19 could result in us realizing an amount different thanamounts or time anticipated.

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Asset Sale to WBA

On September 18, 2017, we entered into the Amended and Restated Asset Purchase Agreement with WBA and Buyer, which amended and restated in its entirety the previously disclosed Original Asset Purchase Agreement. Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer agreed to purchasepurchased from Rite Aid 1,932 Acquired Stores, three distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of approximately $4.375 billion, on a cash-free, debt-free basis, in the Sale. We completed the store transfer process in March of 2018, which resulted in the transfer of all 1,932 stores and related assets to WBA and received cash proceeds of $4.157 billion.

During fiscal 2019, we completed the sale of one of our distribution centers and related assets to WBA for proceeds of $61.2 million. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $14.2 million, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended March 2, 2019. During fiscal 2020, we completed the sale of the second distribution center and related assets to WBA for proceeds of $62.8 million. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $19.3 million, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended February 29, 2020. On April 1, 2020,During the first quarter of fiscal 2021, we completed the inventory transfer at our remainingsale of the final distribution center and related assets to WBA for proceeds of $19.3$94.3 million.

The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $12.7 million, which has been included in the results of operations and cash flows of discontinued operations during the thirteen week period ended May 30, 2020. The transfer of the remainingfinal distribution center and related non-inventory assets remains subject to minimal customary closing conditions applicable only to the distribution center being transferred at such distribution center closing, as specified in the Amended and Restated Asset Purchase Agreement. The transfer of the remaining distribution center and related non-inventory assets is expected to occur in May 2020, and will constituteconstitutes the final closing under the Amended and Restated Asset Purchase Agreement. The term of the TSA continues after the final closing until October 17, 2020, unless earlier terminated.

The parties to the Amended and Restated Asset Purchase Agreement have each made customary representations and warranties. We have agreed to various covenants and agreements, including, among others, our agreement to conduct our business at the distribution centers being sold to WBA in the ordinary course during the period between the execution of the Amended and Restated Asset Purchase Agreement and the distribution center closing. We have alsohad agreed to provide transition services to Buyer for up to three years after the initial closing of the Sale. Under the terms of the TSA, we provideprovided various services on behalf of WBA, including but not limited to the purchase and distribution of inventory and virtually all selling, general and administrative activities. The term of the TSA hashad been extended to October 17, 2020.2020, unless earlier terminated. In connection with these services, we purchasepurchased the related inventory and incurincurred cash payments for the selling, general and administrative activities, which, we billbilled on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the fifty-two week periods ended February 27, 2021 and February 29, 2020 were $35.2 million and March 2, 2019 were $3.0 billion and $6.9 billion, respectively, of which $38.7$0.0 million and $293.7$38.7 million is included in Accounts receivable, net. We charged WBA TSA fees of $1.5 million, $37.9 million and $80.2 million during the fifty-two week periodperiods ended February 27, 2021, February 29, 2020 and $80.2 million in the fifty-two week period ended March 2, 2019, which are reflected as a reduction to selling, general and administrative expenses. In conjunction with the transfer of the final distribution center during the quarter ended May 30, 2020, we have substantially completed our obligations under the TSA. On July 14, 2020, we entered into a letter agreement with WBA to terminate the services under the TSA, other than certain specified services relating to real estate, accounting, tax, and accounts receivable systems that continued until October 17, 2020 and certain specified services relating to human resources to be performed after October 17, 2020.

Based on its magnitude and because we exited certain markets, the Sale represented a significant strategic shift that hashad a material effect on our operations and financial results. Accordingly, we have applied discontinued operations treatment for the Sale as required by GAAP.

Impact of COVID-19

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, andOrganization. The COVID-19 pandemic has severely impacted the outbreak has become increasingly widespread ineconomies of the United States including inand other countries around the markets in which we operate. In an effort to limitworld.

Since the spreadonset of the COVID-19 governmental entities have taken various regulatory actions including, but not limited to “shelter in place” orders and the temporary closures of many non-life sustaining businesses. Entities that provide life-sustaining services, such as healthcare providers, retail pharmacy, grocery stores and gas stations have generally been permitted to remain open, which has allowed us to continue to serve our customers during the pandemic.

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Consolidated Results of Operations—Continuing Operations

Revenue and Other Operating Data

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