Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May. 30, 2015 | Jun. 14, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | RITE AID CORP | |
Entity Central Index Key | 84,129 | |
Document Type | 10-Q | |
Document Period End Date | May 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-27 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,014,924,539 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May. 30, 2015 | Feb. 28, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 1,922,129 | $ 115,899 |
Accounts receivable, net | 969,725 | 980,904 |
Inventories, net of LIFO reserve of $1,003,515 and $997,528 | 2,820,784 | 2,882,980 |
Deferred tax assets | 17,823 | 17,823 |
Prepaid expenses and other current assets | 100,386 | 224,152 |
Total current assets | 5,830,847 | 4,221,758 |
Property, plant and equipment, net | 2,143,575 | 2,091,369 |
Goodwill | 76,124 | 76,124 |
Other intangibles, net | 403,085 | 421,480 |
Deferred tax assets | 1,756,809 | 1,766,349 |
Other assets | 319,334 | 286,172 |
Total assets | 10,529,774 | 8,863,252 |
Current liabilities: | ||
Current maturities of long-term debt and lease financing obligations | 35,039 | 100,376 |
Accounts payable | 1,167,354 | 1,133,520 |
Accrued salaries, wages and other current liabilities | 1,144,889 | 1,193,419 |
Deferred tax liabilities | 57,685 | 57,685 |
Total current liabilities | 2,404,967 | 2,485,000 |
Long-term debt, less current maturities | 7,142,247 | 5,483,415 |
Lease financing obligations, less current maturities | 57,585 | 61,152 |
Other noncurrent liabilities | 772,244 | 776,629 |
Total liabilities | $ 10,377,043 | $ 8,806,196 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $1 per share; 1,500,000 shares authorized; shares issued and outstanding 1,014,827 and 988,558 | $ 1,014,827 | $ 988,558 |
Additional paid-in capital | 4,570,996 | 4,521,023 |
Accumulated deficit | (5,387,839) | (5,406,675) |
Accumulated other comprehensive loss | (45,253) | (45,850) |
Total stockholders' equity | 152,731 | 57,056 |
Total liabilities and stockholders' equity | $ 10,529,774 | $ 8,863,252 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | May. 30, 2015 | Feb. 28, 2015 |
CONDENSED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventories, LIFO reserve (in dollars) | $ 1,003,515 | $ 997,528 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 1,500,000 | 1,500,000 |
Common stock, shares issued | 1,014,827 | 988,558 |
Common stock, shares outstanding | 1,014,827 | 988,558 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 6,647,561 | $ 6,465,531 |
Costs and expenses: | ||
Cost of goods sold | 4,788,031 | 4,662,552 |
Selling, general and administrative expenses | 1,699,585 | 1,644,354 |
Lease termination and impairment charges | 5,022 | 4,848 |
Interest expense | 123,607 | 100,820 |
Loss (gain) on sale of assets, net | 39 | (370) |
Total costs and expenses | 6,616,284 | 6,412,204 |
Income before income taxes | 31,277 | 53,327 |
Income tax expense | 12,441 | 11,881 |
Net income | 18,836 | 41,446 |
Computation of income attributable to common stockholders: | ||
Income attributable to common stockholders-basic | 18,836 | 41,446 |
Income attributable to common stockholders-diluted | $ 18,836 | $ 41,446 |
Basic income per share (in dollars per share) | $ 0.02 | $ 0.04 |
Diluted income per share (in dollars per share) | $ 0.02 | $ 0.04 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income | $ 18,836 | $ 41,446 |
Defined benefit pension plans: | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $398 and $0 tax expense | 597 | 659 |
Total other comprehensive income | 597 | 659 |
Comprehensive income | $ 19,433 | $ 42,105 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, tax expense | $ 398 | $ 0 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Operating activities: | ||
Net income | $ 18,836 | $ 41,446 |
Adjustments to reconcile to net cash provided by operating activities: | ||
Depreciation and amortization | 109,649 | 103,105 |
Lease termination and impairment charges | 5,022 | 4,848 |
LIFO charges | 5,987 | 1,545 |
Loss (gain) on sale of assets, net | 39 | (370) |
Stock-based compensation expense | 7,370 | 4,156 |
Changes in deferred taxes | 9,540 | |
Excess tax benefit on stock options and restricted stock | (2,820) | (10,522) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 11,027 | 41,347 |
Inventories | 56,204 | 59,375 |
Accounts payable | 79,715 | 86,324 |
Other assets and liabilities, net | 67,266 | (91,506) |
Net cash provided by operating activities | 367,835 | 239,748 |
Investing activities: | ||
Payments for property, plant and equipment | (141,037) | (94,342) |
Intangible assets acquired | (14,293) | (19,586) |
Acquisition of Health Dialog and RediClinic, net of cash acquired | (65,306) | |
Proceeds from dispositions of assets and investments | 2,838 | 1,873 |
Net cash used in investing activities | (152,492) | (177,361) |
Financing activities: | ||
Proceeds from issuance of long-term debt | 1,800,000 | 1,152,293 |
Net payments to revolver | (141,000) | (49,000) |
Principal payments on long-term debt | (5,577) | (1,157,443) |
Change in zero balance cash accounts | (34,275) | (8,578) |
Net proceeds from issuance of common stock | 3,378 | 10,904 |
Excess tax benefit on stock options and restricted stock | 2,820 | 10,522 |
Deferred financing costs paid | (34,459) | (1,488) |
Net cash provided by (used in) financing activities | 1,590,887 | (42,790) |
Increase in cash and cash equivalents | 1,806,230 | 19,597 |
Cash and cash equivalents, beginning of period | 115,899 | 146,406 |
Cash and cash equivalents, end of period | 1,922,129 | 166,003 |
Supplementary cash flow data: | ||
Cash paid for interest (net of capitalized amounts of $42 and $49, respectively) | 72,194 | 90,584 |
Cash payments of income taxes, net of refunds | 992 | 795 |
Equipment financed under capital leases | 800 | 1,683 |
Equipment received for noncash consideration | 545 | |
Conversion of the 8.5% convertible notes to common stock | 64,089 | |
Gross borrowings from revolver | 915,000 | 825,000 |
Gross payments to revolver | $ 1,056,000 | $ 874,000 |
CONDENSED CONSOLIDATED STATEME8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Cash paid for interest, capitalized amounts | $ 42 | $ 49 |
8.5% convertible notes due May 2015 | ||
Debt instrument, stated interest rate (as a percent) | 8.50% |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
May. 30, 2015 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended May 30, 2015 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation and Subsidiaries (the “Company”) Fiscal 2015 10-K. New Accounting Pronouncements In May 2013, the FASB issued a proposed Accounting Standards Update, Leases (Topic 842): a revision of the 2010 proposed Accounting Standards Update, Leases (Topic 840), that would require an entity to recognize assets and liabilities arising under lease contracts on the balance sheet. The proposed standard, as currently drafted, will have a material impact on the Company’s reported results of operations and financial position. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2014-09 on its financial position, results of operations and cash flows. In January 2015, the FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20). This ASU eliminates the concept of extraordinary items in Accounting Standards Codification Subtopic 225-20, Income Statement—Extraordinary and Unusual Items. The standard eliminates and no longer requires that an entity recognize an unusual and infrequent event separately in the income statement as an extraordinary item, net of tax. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company does not expect the impact of the adoption of ASU 2015-01 to have a material impact on its financial position, results of operations and cash flows. In February 2015, the FASB issued ASU No. 2015-02, Consolidation—Amendments to the Consolidation Analysis (Topic 810). This ASU requires reporting entities to reevaluate whether they should consolidate certain legal entities under the revised consolidation model. This standard modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs), eliminates the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with VIEs, especially those that have fee arrangements and related party relationships. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2015-02 on its financial position, results of operations and cash flows. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30). This ASU simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, which is consistent with the treatment of debt discounts. The new guidance should be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures necessary for a change in accounting principle. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2015-03 on its financial position. |
Pending Acquisition
Pending Acquisition | 3 Months Ended |
May. 30, 2015 | |
Pending Acquisition | |
Pending Acquisition | 2. Pending Acquisition On February 10, 2015, the Company entered into a Definitive Agreement (“Agreement”) with a subsidiary of TPG Capital, L.P. Under the terms of the Agreement, the Company will acquire (the “Pending Acquisition”) from TPG, EnvisionRx, a full-service pharmacy benefit manager (“PBM”), a portfolio company of TPG. EnvisionRx provides both transparent and traditional PBM options through its EnvisionRx and MedTrak PBMs, respectively. EnvisionRx also offers fully integrated mail-order and specialty pharmacy services through Orchard Pharmaceutical Services; access to the nation’s largest cash pay infertility discount drug program via Design Rx; an innovative claims adjudication software platform in Laker Software; and a national Medicare Part D prescription drug plan through Envision Insurance Company’s EnvisionRx Plus product offering. Under the terms of the Agreement, the Company will pay $1,800,000 in cash, subject to working capital adjustments, financed with the proceeds from the April 2, 2015 issuance of $1,800,000 aggregate principal amount of 6.125% senior notes due 2023, and 27,862 shares of Rite Aid common stock. The Company and TPG have each made customary representations, warranties and covenants in the Agreement, including, among other things, that EnvisionRx and its subsidiaries will continue to conduct their business in the ordinary course between the execution of the Agreement and the closing of the Pending Acquisition. Completion of the Pending Acquisition is subject to regulatory approvals and other customary conditions. The Company expects the Pending Acquisition to close in the second quarter of fiscal 2016. |
Income Per Share
Income Per Share | 3 Months Ended |
May. 30, 2015 | |
Income Per Share | |
Income Per Share | 3. Income Per Share Basic income per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company subject to anti-dilution limitations. Thirteen Week Period Ended May 30, 2015 May 31, 2014 Numerator for income per share: Income attributable to common stockholders—basic and diluted $ $ Denominator: Basic weighted average shares Outstanding options and restricted shares, net Diluted weighted average shares Basic income per share $ $ Diluted income per share $ $ Due to their antidilutive effect, the following potential common shares have been excluded from the computation of diluted income per share as of May 30, 2015 and May 31, 2014: Thirteen Week Period Ended May 30, 2015 May 31, 2014 Stock options — — Convertible notes — — During the thirteen week period ended May 30, 2015, $64,089 of the Company’s 8.5% convertible notes due 2015 were converted into 24,762 shares of common stock, pursuant to their terms. |
Lease Termination and Impairmen
Lease Termination and Impairment Charges | 3 Months Ended |
May. 30, 2015 | |
Lease Termination and Impairment Charges | |
Lease Termination and Impairment Charges | 4. Lease Termination and Impairment Charges Lease termination and impairment charges consist of amounts as follows: Thirteen Week Period Ended May 30, 2015 May 31, 2014 Impairment charges $ $ Lease termination charges $ $ Impairment Charges These amounts include the write-down of long-lived assets at locations that were assessed for impairment because of management’s intention to relocate or close the location or because of changes in circumstances that indicated the carrying value of an asset may not be recoverable. Lease Termination Charges As part of the Company’s ongoing business activities, the Company assesses stores and distribution centers for potential closure or relocation. Decisions to close or relocate stores or distribution centers in future periods would result in lease termination charges, lease exit costs and inventory liquidation charges, as well as impairment of assets at these locations. The following table reflects the closed store and distribution center charges that relate to new closures, changes in assumptions and interest accretion: Thirteen Week Period Ended May 30, 2015 May 31, 2014 Balance—beginning of period $ $ Provision for present value of noncancellable lease payments of closed stores Changes in assumptions about future sublease income, terminations and changes in interest rates ) ) Interest accretion Cash payments, net of sublease income ) ) Balance—end of period $ $ |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
May. 30, 2015 | |
Fair Value Measurements | |
Fair Value Measurements | 5. Fair Value Measurements The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. · Level 3—Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. Non-Financial Assets Measured on a Non-Recurring Basis Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the thirteen week period ended May 30, 2015, long-lived assets from continuing operations with a carrying value of $1,289, primarily store assets, were written down to their fair value of $1,016, resulting in an impairment charge of $273. During the thirteen week period ended May 31, 2014, long-lived assets from continuing operations with a carrying value of $358, primarily store assets, were written down to their fair value of $207, resulting in an impairment charge of $151. If our actual future cash flows differ from our projections materially, certain stores that are either not impaired or partially impaired in the current period may be further impaired in future periods. The following table presents fair values for those assets measured at fair value on a non-recurring basis at May 30, 2015 and May 31, 2014: Fair Value Measurement Using Level 1 Level 2 Level 3 Total as of May 30, 2015 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ Level 1 Level 2 Level 3 Total as of May 31, 2014 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ As of May 30, 2015 and May 31, 2014, the Company did not have any financial assets measured on a recurring basis. Other Financial Instruments Financial instruments other than long-term indebtedness include cash and cash equivalents, accounts receivable and accounts payable. These instruments are recorded at book value, which we believe approximate their fair values due to their short term nature. The fair value for LIBOR-based borrowings under the Company’s senior secured credit facility and first and second lien term loans are estimated based on the quoted market price of the financial instrument which is considered Level 1 of the fair value hierarchy. The fair values of substantially all of the Company’s other long-term indebtedness are estimated based on quoted market prices of the financial instruments which are considered Level 1 of the fair value hierarchy. The carrying amount and estimated fair value of the Company’s total long-term indebtedness was $7,147,615 and $7,428,669, respectively, as of May 30, 2015. There were no outstanding derivative financial instruments as of May 30, 2015 and February 28, 2015. |
Income Taxes
Income Taxes | 3 Months Ended |
May. 30, 2015 | |
Income Taxes | |
Income Taxes | 6. Income Taxes The Company recorded an income tax expense of $12,441 and $11,881 for the thirteen week periods ended May 30, 2015 and May 31, 2014, respectively. The income tax expense for the period ended May 30, 2015 is based on an estimated effective tax rate of 39.8 %. The income tax expense for the period ended May 31, 2014 was recorded net of adjustments to maintain a full valuation allowance against the Company’s net deferred tax assets and was primarily attributable to an increase in the deferred tax valuation allowance to offset the windfall tax benefits recorded in Additional Paid in Capital (“APIC”) pursuant to the tax law ordering approach. The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, the Company does not expect the change to have a significant impact on the results of operations or the financial position of the Company. The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. As a result of the Company’s historical operating performance and the more favorable near term outlook for profitability, the Company released $1,841,304 of valuation allowance in the fourth quarter of fiscal year 2015. The Company continues to maintain a valuation allowance against net deferred tax assets of $231,683 and $231,679, which relates primarily to state deferred tax assets at May 30, 2015 and February 28, 2015, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
May. 30, 2015 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 7. Goodwill and Other Intangible Assets Goodwill is not amortized, but is instead evaluated for impairment on an annual basis at the end of the fiscal year, or more frequently if events or circumstances indicate that impairment may be more likely. During the thirteen weeks ended May 30, 2015 and the fifty-two weeks ended February 28, 2015, no impairment charges have been taken against the Company’s goodwill. The Company’s other intangible assets are finite-lived and amortized over their useful lives. Following is a summary of the Company’s amortizable intangible assets as of May 30, 2015 and February 28, 2015. May 30, 2015 February 28, 2015 Gross Carrying Amount Accumulated Amortization Remaining Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Remaining Weighted Average Amortization Period Favorable leases and other $ $ ) 8 years $ $ ) 8 years Prescription files ) 3 years ) 3 years Total $ $ ) $ $ ) Also included in other non-current liabilities as of May 30, 2015 and February 28, 2015 are unfavorable lease intangibles with a net carrying amount of $53,638 and $55,571, respectively. These intangible liabilities are amortized over their remaining lease terms at the time of acquisition. Amortization expense for these intangible assets and liabilities was $31,941 and $29,237 for the thirteen week periods ended May 30, 2015 and May 31, 2014, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2016—$118,669; 2017—$105,472; 2018—$67,542; 2019—$41,508 and 2020—$22,107. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreements | 3 Months Ended |
May. 30, 2015 | |
Indebtedness and Credit Agreements | |
Indebtedness and Credit Agreements | 8. Indebtedness and Credit Agreements Following is a summary of indebtedness and lease financing obligations at May 30, 2015 and February 28, 2015: May 30, 2015 February 28, 2015 Secured Debt: Senior secured revolving credit facility due January 2020 $ $ 8.00% senior secured notes (senior lien) due August 2020 Tranche 1 Term Loan (second lien) due August 2020 Tranche 2 Term Loan (second lien) due June 2021 Other secured Unsecured Guaranteed Debt: 9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $3,247 and $3,415) 6.75% senior notes due June 2021 6.125% senior notes due April 2023 — Unsecured Unguaranteed Debt: 8.5% convertible notes due May 2015 — 7.7% notes due February 2027 6.875% fixed-rate senior notes due December 2028 Lease financing obligations Total debt Current maturities of long-term debt and lease financing obligations ) ) Long-term debt and lease financing obligations, less current maturities $ $ Credit Facility On January 13, 2015, the Company amended and restated its senior secured credit facility (“Amended and Restated Senior Secured Credit Facility” or “revolver”), which, among other things, increased borrowing capacity from $1,795,000 to $3,000,000 (increasing to $3,700,000 upon the repayment of its 8.00% senior secured notes due August 2020 (“8.00% Notes”)), and extended the maturity to January 2020 from February 2018. The Company used borrowings under the revolver to repay and retire all of the $1,143,650 outstanding under its Tranche 7 Senior Secured Term Loan due 2020, along with associated fees and expenses. Borrowings under the revolver bear interest at a rate per annum between LIBOR plus 1.50% and LIBOR plus 2.00% based upon the average revolver availability (as defined in the Amended and Restated Senior Secured Credit Facility). The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the revolver, depending on the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). Amounts drawn under the revolver become due and payable on January 13, 2020. On February 10, 2015, the Company amended the Amended and Restated Senior Secured Credit Facility to, among other things, increase the flexibility of Rite Aid to incur and/or issue unsecured indebtedness, including in connection with the Pending Acquisition, and made certain other modifications to the covenants applicable to Rite Aid and its subsidiaries. The Company’s ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At May 30, 2015, the Company had $1,584,000 of borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $69,309, which resulted in additional borrowing capacity of $1,346,691. The Amended and Restated Senior Secured Credit Facility restricts the Company and the subsidiary guarantors from accumulating cash on hand, and under certain circumstances, requires the funds in the Company’s deposit accounts to be applied first to the repayment of outstanding revolving loans under the senior secured credit facility and then to be held as collateral for the senior obligations. This provision does not apply to the proceeds from the 6.125% senior notes due 2023 (the “6.125% Notes”) as discussed in the “Financing for the Pending Acquisition” section below. The Amended and Restated Senior Secured Credit Facility allows the Company to have outstanding, at any time, up to $1,500,000 (or $1,800,000 solely to the extent incurred in anticipation of the funding of the Pending Acquisition) in secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Amended and Restated Senior Secured Credit Facility and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority term loan debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest of (a) the fifth anniversary of the effectiveness of the Amended and Restated Senior Secured Credit Facility and (b) the latest maturity date of any Term Loan or Other Revolving Loan (each as defined in the Amended and Restated Senior Secured Credit Facility) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date and, with respect to any escrow notes issued by Rite Aid, excluding any special mandatory redemption of the type described in clause (iii) of the definition of “Escrow Notes” in the Amended and Restated Senior Secured Credit Facility). Subject to the limitations described in clauses (a) and (b) of the immediately preceding sentence, the Amended and Restated Senior Secured Credit Facility additionally allows the Company to issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a Financial Covenant Effectiveness Period (as defined in the Amended and Restated Senior Secured Credit Facility) is not in effect; provided, however, that certain of the Company’s other outstanding indebtedness limits the amount of unsecured debt that can be incurred if certain interest coverage levels are not met at the time of incurrence or other exemptions are not available. The Amended and Restated Senior Secured Credit Facility also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Amended and Restated Senior Secured Credit Facility also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Amended and Restated Senior Secured Credit Facility is not in default and the Company maintains availability under its revolving credit facility of more than (i) prior to the repayment of our 8.00% Notes, $300,000 and (ii) on and after the repayment of the Company’s 8.00% Notes, $365,000. As of January 13, 2015, the Amended and Restated Senior Secured Credit Facility has a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (a) on any date on which availability under the revolving credit facility is less than (i) in the case of dates prior to the repayment of our 8.00% Notes, $175,000 and (ii) in the case of dates on and after the repayment of the Company’s 8.00% Notes, $200,000 or (b) on the third consecutive business day on which availability under the revolving credit facility is less than (i) in the case of dates prior to the repayment of the Company’s 8.00% Notes, $225,000 and (ii) in the case of dates on or after the repayment of the Company’s 8.00% Notes, $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolving credit facility is equal to or greater than (i) in the case of dates prior to the repayment of the Company’s 8.00% Notes, $225,000 and (ii) in the case of dates on or after the repayment of the Company’s 8.00% Notes, $250,000. As of May 30, 2015, the availability was at a level that did not trigger this covenant. The Amended and Restated Senior Secured Credit Facility also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, sale of assets, mergers and acquisitions and the granting of liens. The Amended and Restated Senior Secured Credit Facility also provides for customary events of default. The Company also has two second priority secured term loan facilities. The first includes a $470,000 second priority secured term loan (the “Tranche 1 Term Loan”). The Tranche 1 Term Loan matures on August 21, 2020 and currently bears interest at a rate per annum equal to LIBOR plus 4.75% with a LIBOR floor of 1.00%, if the Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 3.75%. The second includes a $500,000 second priority secured term loan (the “Tranche 2 Term Loan”). The Tranche 2 Term Loan matures on June 21, 2021 and currently bears interest at a rate per annum equal to LIBOR plus 3.875% with a LIBOR floor of 1.00%, if the Company chooses to make LIBOR borrowings, or at Citibank’s base rate plus 2.875%. Substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes. The Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes are secured, on a senior or second priority basis, as applicable, by a lien on, among other things, accounts receivable, inventory and prescription files of the subsidiary guarantors. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes and, on an unsecured basis, the unsecured guaranteed notes are full and unconditional and joint and several, and there are no restrictions on the ability of the Company to obtain funds from its subsidiaries. The Company has no independent assets or operations. Additionally, the subsidiaries, including joint ventures, that do not guaranty the credit facility, second priority secured term loan facilities and applicable notes, are minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented. Financing for the Pending Acquisition On April 2, 2015, the Company issued $1,800,000 aggregate principal amount of its 6.125% Notes to finance the cash portion of the Pending Acquisition. The Company’s obligations under the notes are fully and unconditionally guaranteed, jointly and severally, on an unsubordinated basis, by all of its subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Secured Credit Facility, the Tranche 1 Term Loan, the Tranche 2 Term Loan, and the 8.00% Notes, the 9.25% senior notes due 2020 (the “9.25% Notes”) and the 6.75% senior notes due 2021 (the “6.75% Notes”) (the “Rite Aid Subsidiary Guarantors”), and, will be guaranteed upon completion of the acquisition, by EnvisionRx and certain of its domestic subsidiaries other than, among others, Envision Insurance Company (the “EnvisionRx Subsidiary Guarantors” and, together with the Rite Aid Subsidiary Guarantors, the “Subsidiary Guarantors”). The guarantees will be unsecured. The 6.125% Notes are unsecured, unsubordinated obligations of Rite Aid Corporation and rank equally in right of payment with all of its other unsecured, unsubordinated indebtedness. In the unlikely event that the Company does not complete the Pending Acquisition, it can redeem the 6.125% Notes at a price of 101% or can use the proceeds from the issuance of the 6.125% Notes to refinance other indebtedness. The net proceeds of the 6.125% Notes of $1,768,622 are included as a component of cash and cash equivalents as of May 30, 2015. Other Transactions During the thirteen week period ended May 30, 2015, $64,089 of the Company’s 8.5% convertible notes due 2015 were converted into 24,762 shares of common stock, pursuant to their terms. The remaining $79 of the Company’s 8.5% convertible notes due 2015 were repurchased by the Company upon maturity. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2016 and thereafter are as follows: 2016—$5,368; 2017—$0; 2018—$0; 2019—$0; 2020—$1,584,000 and $5,555,000 thereafter. |
Reclassifications from Accumula
Reclassifications from Accumulated Other Comprehensive Loss | 3 Months Ended |
May. 30, 2015 | |
Reclassifications from Accumulated Other Comprehensive Loss | |
Reclassifications from Accumulated Other Comprehensive Loss | 9. Reclassifications from Accumulated Other Comprehensive Loss The following table summarizes the components of accumulated other comprehensive loss and the changes in balances of each component of accumulated other comprehensive loss, net of tax as applicable, for the thirteen week periods ended May 30, 2015 and May 31, 2014: Thirteen week period ended May 30, 2015 Thirteen week period ended May 31, 2014 Defined benefit pension plans Accumulated other comprehensive loss Defined benefit pension plans Accumulated other comprehensive loss Accumulated other comprehensive loss Balance—beginning of period $ ) $ ) $ ) $ ) Amounts reclassified from accumulated other comprehensive loss to net income, net of $398 and $0 tax expense Balance—end of period $ ) $ ) $ ) $ ) The following table summarizes the effects on net income of significant amounts classified out of each component of accumulated other comprehensive loss for the thirteen week periods ended May 30, 2015 and May 31, 2014: Thirteen Week Periods Ended May 30, 2015 and May 31, 2014 Amount reclassified from accumulated other comprehensive loss Details about accumulated other comprehensive loss components May 30, 2015 May 31, 2014 Affected line item in the condensed consolidated statements of operations Defined benefit pension plans Amortization of unrecognized prior service cost(a) $ ) $ ) Selling, general and administrative expenses Amortization of unrecognized net loss(a) ) ) Selling, general and administrative expenses ) ) Total before income tax expense — Income tax expense(b) $ ) $ ) Net of income tax expense (a) See Note 10, Retirement Plans for additional details. (b) Income tax expense is $0 for May 31, 2014 due to the valuation allowance. See Note 6, Income Taxes for additional details. |
Retirement Plans
Retirement Plans | 3 Months Ended |
May. 30, 2015 | |
Retirement Plans | |
Retirement Plans | 10. Retirement Plans Net periodic pension expense recorded in the thirteen week periods ended May 30, 2015 and May 31, 2014, for the Company’s defined benefit plans includes the following components: Defined Benefit Pension Plan Nonqualified Executive Retirement Plans Thirteen Week Period Ended May 30, 2015 May 31, 2014 May 30, 2015 May 31, 2014 Service cost $ $ $ — $ — Interest cost Expected return on plan assets ) ) — — Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss — — Net pension expense $ $ $ $ During the thirteen week period ended May 30, 2015 the Company contributed $377 to the Nonqualified Executive Retirement Plans and $0 to the Defined Benefit Pension Plan. During the remainder of fiscal 2016, the Company expects to contribute $1,173 to the Nonqualified Executive Retirement Plans and $0 to the Defined Benefit Pension Plan. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May. 30, 2015 | |
Commitments and Contingencies: | |
Commitments and Contingencies | 11. Commitments and Contingencies Legal Matters The Company is a party to legal proceedings, investigations and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. The Company’s contingencies are subject to significant uncertainties, including, among other factors: (i) proceedings are in early stages; (ii) whether class or collective action status is sought and the likelihood of a class being certified; (iii) the outcome of pending appeals or motions; (iv) the extent of potential damages, fines or penalties, which are often unspecified or indeterminate; (v) the impact of discovery on the matter; (vi) whether novel or unsettled legal theories are at issue; (vii) there are significant factual issues to be resolved; and/or (viii) in the case of certain government agency investigations, whether a sealed qui tam lawsuit (“whistleblower” action) has been filed and whether the government agency makes a decision to intervene in the lawsuit following investigation. The Company has been named in a collective and class action lawsuit, Indergit v. Rite Aid Corporation et al pending in the United States District Court for the Southern District of New York, filed purportedly on behalf of current and former store managers working in the Company’s stores at various locations around the country. The lawsuit alleges that the Company failed to pay overtime to store managers as required under the FLSA and under certain New York state statutes. The lawsuit also seeks other relief, including liquidated damages, punitive damages, attorneys’ fees, costs and injunctive relief arising out of state and federal claims for overtime pay. On April 2, 2010, the Court conditionally certified a nationwide collective group of individuals who worked for the Company as store managers since March 31, 2007. The Court ordered that Notice of the Indergit action be sent to the purported members of the collective group (approximately 7,000 current and former store managers) and approximately 1,550 joined the Indergit action. Discovery as to certification issues has been completed. On September 26, 2013, the Court granted Rule 23 class certification of the New York store manager claims as to liability only, but denied it as to damages, and denied the Company’s motion for decertification of the nationwide collective action claims. The Company filed a motion seeking reconsideration of the Court’s September 26, 2013 decision which motion was denied in June 2014. The Company subsequently filed a petition for an interlocutory appeal of the Court’s September 26, 2013 ruling with the U. S. Court of Appeals for the Second Circuit which petition was denied in September 2014. N otice of the Rule 23 class certification as to liability only has been sent to approximately 1,750 current and former store managers in the state of New York. At this time, the Company is not able to either predict the outcome of this lawsuit or estimate a potential range of loss with respect to the lawsuit. The Company’s management believes, however, that this lawsuit is without merit and is vigorously defending this lawsuit. The Company is currently a defendant in several putative class action lawsuits filed in state Courts in California alleging violations of California wage and hour laws, rules and regulations pertaining primarily to failure to pay overtime, pay for missed meals and rest periods, failure to reimburse business expenses and failure to provide employee seating (the “California Cases”). These suits purport to be class actions and seek substantial damages. The Company has aggressively challenged both the merits of the lawsuits and the allegations that the cases should be certified as class or representative actions. With respect to cases involving pharmacist meal and rest periods ( Chase and Scherwin v. Rite Aid Corporation pending in Los Angeles County Superior Court and Kyle v. Rite Aid Corporation pending in Sacramento County Superior Court), during the period ended March 1, 2014, the Company recorded a legal accrual with respect to these matters. The Company and the attorneys representing the putative class of pharmacists have agreed to a class wide settlement of the case of $9.0 million subject to final Court approval. The parties are in the process of obtaining Court approval. In the employee seating case ( Hall v. Rite Aid Corporation, San Diego County Superior Court ), the Court, in October 2011, granted the plaintiff’s motion for class certification. The Company filed its motion for decertification, which motion was granted in November 2012. Plaintiff subsequently appealed the Court’s order which appeal was granted in May 2014. The Company filed a petition for review of the appellate court’s decision with the California Supreme Court, which petition was denied in August 2014. Proceedings in the Hall case are stayed pending a decision by the California Supreme Court in two similar cases. With respect to the California Cases (other than Chase and Scherwin and Kyle) , the Company, at this time, is not able to predict either the outcome of these lawsuits or estimate a potential range of loss with respect to said lawsuits. The Company was served with a Civil Investigative Demand Subpoena Duces Tecum dated August 26, 2011 by the United States Attorney’s Office for the Eastern District of Michigan. The subpoena requests records regarding Rite Aid’s Rx Savings Program and the reporting of usual and customary charges to publicly funded health programs. In connection with the same investigation, the Company was served with a Civil Subpoena Duces Tecum dated February 22, 2013 by the State of Indiana Office of the Attorney General. The Company has substantially completed its response to both of the subpoenas and is unable to predict the timing or outcome of any review by the government of such information. In April 2012, the Company received an administrative subpoena from the Drug Enforcement Administration (“DEA”), Albany, New York District Office, requesting information regarding the Company’s sale of products containing pseudoephedrine (“PSE”). In April 2012, it also received a communication from the United States Attorneys Office (“USAO”) for the Northern District of New York concerning an investigation of possible civil violations of the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”). In April 2013, the Company received additional administrative subpoenas from DEA concerning certain retail PSE transactions at New York stores and the USAO commenced discussions with the Company regarding whether, from 2009 (upon implementation of an electronic PSE transaction logbook system) through the present, the Company sold products containing PSE in violation of the CMEA. The Company received additional administrative subpoenas from the DEA beginning in December 2013 requesting information in connection with an investigation of violations of the CMEA in West Virginia. Violations of the CMEA could result in the imposition of administrative, civil and/or criminal penalties against the Company. The Company is cooperating with the government and continues to provide information responsive to the subpoenas. The Company has entered into a tolling agreement with the USAO. Discussions are underway to resolve these matters, but whether an agreement can be reached and on what terms are uncertain. While the Company’s management cannot predict the outcome of these matters, it is possible that the Company’s results of operations or cash flows could be materially affected by an unfavorable resolution. In January 2013, the DEA, Los Angeles District Office, served an administrative subpoena on the Company seeking documents related to prescriptions by a certain prescriber. The USAO, Central District of California, also contacted the Company about a related investigation into allegations that Rite Aid pharmacies filled certain controlled substance prescriptions for a number of practitioners after their DEA registrations had expired or otherwise become invalid in violation of the federal Controlled Substances Act and DEA regulations. The Company responded to the administrative subpoena and subsequent informal requests for information from the USAO. The Company met with the USAO and DEA in January 2014 and is involved in ongoing discussions with the government regarding this matter. The Company recorded a legal accrual during the period ended March 1, 2014. The Company was served with a Civil Investigative Demand (“CID”) dated June 21, 2013 by the USAO for the Eastern District of California and the Attorney General’s Office of the State of California (the “AG”). The CID requests records and responses to interrogatories regarding Rite Aid’s Drug Utilization Review and prescription dispensing protocol and the dispensing of drugs designated “Code 1” by the State of California. The Company is in the process of producing responsive documents and interrogatory responses to the USAO and AG and is unable to predict the timing or outcome of any review by the government of such information. In addition to the above described matters, the Company is subject from time to time to various claims and lawsuits and governmental investigations arising in the ordinary course of business. While the Company’s management cannot predict the outcome of any of the claims, the Company’s management does not believe that the outcome of any of these legal matters will be material to the Company’s consolidated financial position. It is possible, however, that the Company’s results of operations or cash flows could be materially affected by an unfavorable resolution of pending litigation or contingencies. Contingencies The California Department of Health Care Services (“DHCS”), the agency responsible for administering the State of California Medicaid program, implemented retroactive reimbursement rate reductions effective June 1, 2011, impacting the medical provider community in California, including pharmacies. Numerous medical providers, including representatives of both chain and independent pharmacies, filed suits against DHCS in Federal District Court in California and obtained preliminary injunctions against the rate cuts, subject to a trial on the merits. DHCS appealed the preliminary injunctions to the Ninth Circuit Court of Appeals, which Court vacated the injunctions. Based upon the actions of DHCS and the decision of the Appeals Court, the Company recorded an appropriate accrual. In January 2014, the Center for Medicare and Medicaid Services approved a state plan amendment that excluded certain drugs from the retroactive reimbursement rate reductions effective March 31, 2012. Accordingly, the Company adjusted its accrual during that fiscal year to take into account this exclusion. As pertinent facts and circumstances develop, this accrual may be adjusted further. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
May. 30, 2015 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended May 30, 2015 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation and Subsidiaries (the “Company”) Fiscal 2015 10-K. |
New Accounting Pronouncements | New Accounting Pronouncements In May 2013, the FASB issued a proposed Accounting Standards Update, Leases (Topic 842): a revision of the 2010 proposed Accounting Standards Update, Leases (Topic 840), that would require an entity to recognize assets and liabilities arising under lease contracts on the balance sheet. The proposed standard, as currently drafted, will have a material impact on the Company’s reported results of operations and financial position. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605—Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2014-09 on its financial position, results of operations and cash flows. In January 2015, the FASB issued ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20). This ASU eliminates the concept of extraordinary items in Accounting Standards Codification Subtopic 225-20, Income Statement—Extraordinary and Unusual Items. The standard eliminates and no longer requires that an entity recognize an unusual and infrequent event separately in the income statement as an extraordinary item, net of tax. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company does not expect the impact of the adoption of ASU 2015-01 to have a material impact on its financial position, results of operations and cash flows. In February 2015, the FASB issued ASU No. 2015-02, Consolidation—Amendments to the Consolidation Analysis (Topic 810). This ASU requires reporting entities to reevaluate whether they should consolidate certain legal entities under the revised consolidation model. This standard modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs), eliminates the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with VIEs, especially those that have fee arrangements and related party relationships. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2015-02 on its financial position, results of operations and cash flows. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30). This ASU simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, which is consistent with the treatment of debt discounts. The new guidance should be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures necessary for a change in accounting principle. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company is in the process of assessing the impact of the adoption of ASU 2015-03 on its financial position. |
Income Per Share (Tables)
Income Per Share (Tables) | 3 Months Ended |
May. 30, 2015 | |
Income Per Share | |
Schedule of calculation of basic and diluted income per share | Thirteen Week Period Ended May 30, 2015 May 31, 2014 Numerator for income per share: Income attributable to common stockholders—basic and diluted $ $ Denominator: Basic weighted average shares Outstanding options and restricted shares, net Diluted weighted average shares Basic income per share $ $ Diluted income per share $ $ |
Schedule of antidilutive effect of potential common shares, excluded from computation of diluted income per share | Thirteen Week Period Ended May 30, 2015 May 31, 2014 Stock options — — Convertible notes — — |
Lease Termination and Impairm22
Lease Termination and Impairment Charges (Tables) | 3 Months Ended |
May. 30, 2015 | |
Lease Termination and Impairment Charges | |
Schedule of amounts relating to lease termination and impairment charges | Thirteen Week Period Ended May 30, 2015 May 31, 2014 Impairment charges $ $ Lease termination charges $ $ |
Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion | Thirteen Week Period Ended May 30, 2015 May 31, 2014 Balance—beginning of period $ $ Provision for present value of noncancellable lease payments of closed stores Changes in assumptions about future sublease income, terminations and changes in interest rates ) ) Interest accretion Cash payments, net of sublease income ) ) Balance—end of period $ $ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
May. 30, 2015 | |
Fair Value Measurements | |
Schedule of fair value of assets measured on non-recurring basis | Level 1 Level 2 Level 3 Total as of May 30, 2015 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ Level 1 Level 2 Level 3 Total as of May 31, 2014 Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ $ |
Goodwill and Other Intangible24
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
May. 30, 2015 | |
Goodwill and Other Intangible Assets | |
Summary of the Company's amortizable intangible assets | May 30, 2015 February 28, 2015 Gross Carrying Amount Accumulated Amortization Remaining Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Remaining Weighted Average Amortization Period Favorable leases and other $ $ ) 8 years $ $ ) 8 years Prescription files ) 3 years ) 3 years Total $ $ ) $ $ ) |
Indebtedness and Credit Agree25
Indebtedness and Credit Agreement (Tables) | 3 Months Ended |
May. 30, 2015 | |
Indebtedness and Credit Agreements | |
Summary of indebtedness and lease financing obligations | May 30, 2015 February 28, 2015 Secured Debt: Senior secured revolving credit facility due January 2020 $ $ 8.00% senior secured notes (senior lien) due August 2020 Tranche 1 Term Loan (second lien) due August 2020 Tranche 2 Term Loan (second lien) due June 2021 Other secured Unsecured Guaranteed Debt: 9.25% senior notes due March 2020 ($902,000 face value plus unamortized premium of $3,247 and $3,415) 6.75% senior notes due June 2021 6.125% senior notes due April 2023 — Unsecured Unguaranteed Debt: 8.5% convertible notes due May 2015 — 7.7% notes due February 2027 6.875% fixed-rate senior notes due December 2028 Lease financing obligations Total debt Current maturities of long-term debt and lease financing obligations ) ) Long-term debt and lease financing obligations, less current maturities $ $ |
Reclassifications from Accumu26
Reclassifications from Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
May. 30, 2015 | |
Reclassifications from Accumulated Other Comprehensive Loss | |
Summary of components of accumulated other comprehensive loss and the changes in balances of each component of accumulated other comprehensive loss, net of tax | Thirteen week period ended May 30, 2015 Thirteen week period ended May 31, 2014 Defined benefit pension plans Accumulated other comprehensive loss Defined benefit pension plans Accumulated other comprehensive loss Accumulated other comprehensive loss Balance—beginning of period $ ) $ ) $ ) $ ) Amounts reclassified from accumulated other comprehensive loss to net income, net of $398 and $0 tax expense Balance—end of period $ ) $ ) $ ) $ ) |
Summary of effects on net income of significant amounts classified out of each component of accumulated other comprehensive loss | Thirteen Week Periods Ended May 30, 2015 and May 31, 2014 Amount reclassified from accumulated other comprehensive loss Details about accumulated other comprehensive loss components May 30, 2015 May 31, 2014 Affected line item in the condensed consolidated statements of operations Defined benefit pension plans Amortization of unrecognized prior service cost(a) $ ) $ ) Selling, general and administrative expenses Amortization of unrecognized net loss(a) ) ) Selling, general and administrative expenses ) ) Total before income tax expense — Income tax expense(b) $ ) $ ) Net of income tax expense (a) See Note 10, Retirement Plans for additional details. (b) Income tax expense is $0 for May 31, 2014 due to the valuation allowance. See Note 6, Income Taxes for additional details. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
May. 30, 2015 | |
Retirement Plans | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Pension Plan Nonqualified Executive Retirement Plans Thirteen Week Period Ended May 30, 2015 May 31, 2014 May 30, 2015 May 31, 2014 Service cost $ $ $ — $ — Interest cost Expected return on plan assets ) ) — — Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss — — Net pension expense $ $ $ $ |
Pending Acquisition (Details)
Pending Acquisition (Details) - USD ($) shares in Thousands, $ in Thousands | Feb. 10, 2015 | May. 30, 2015 | Apr. 02, 2015 |
6.125% senior notes due 2023 | |||
Pending Acquisition | |||
Debt instrument, stated interest rate (as a percent) | 6.125% | ||
T P G EnvisionRx | 6.125% senior notes due 2023 | |||
Pending Acquisition | |||
Principal amount of debt | $ 1,800,000 | ||
Debt instrument, stated interest rate (as a percent) | 6.125% | ||
T P G EnvisionRx | Forecast | |||
Pending Acquisition | |||
Cash payment | $ 1,800,000 | ||
Number of shares of common stock issued | 27,862 |
Income Per Share (Details)
Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||
May. 30, 2015 | May. 31, 2014 | Feb. 28, 2015 | |
Numerator for income per share: | |||
Income attributable to common stockholders-basic | $ 18,836 | $ 41,446 | |
Income attributable to common stockholders-diluted | $ 18,836 | $ 41,446 | |
Denominator: | |||
Basic weighted average shares | 986,691 | 963,332 | |
Outstanding options and restricted shares, net (in shares) | 22,461 | 33,222 | |
Diluted weighted average shares | 1,009,152 | 996,554 | |
Basic income per share (in dollars per share) | $ 0.02 | $ 0.04 | |
Diluted income per share (in dollars per share) | $ 0.02 | $ 0.04 | |
Antidilutive securities excluded from computation of earnings per share | |||
Potential common shares excluded from the computation of diluted income per share | 24,800 | ||
Convertible notes due 2015 | |||
Convertible notes amount | $ 64,089 | ||
Convertible notes | |||
Antidilutive securities excluded from computation of earnings per share | |||
Potential common shares excluded from the computation of diluted income per share | 24,800 | ||
8.5% convertible notes due May 2015 | |||
Convertible notes due 2015 | |||
Convertible notes amount | $ 68,089 | ||
Debt instrument, stated interest rate (as a percent) | 8.50% | 8.50% | |
Convertible notes due 2015 were converted into common stock (in shares) | 24,762 |
Lease Termination and Impairm30
Lease Termination and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Lease termination and impairment charges | ||
Lease termination and impairment charges | $ 5,022 | $ 4,848 |
Impairment charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 273 | 151 |
Lease termination charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 4,749 | 4,697 |
Closed store and distribution center charges | ||
Balance-beginning of period | 241,047 | 284,270 |
Provision for present value of noncancellable lease payments of closed stores | 1,546 | 142 |
Changes in assumptions about future sublease income, terminations and changes in interest rates | (571) | (427) |
Interest accretion | 4,303 | 4,982 |
Cash payments, net of sublease income | (15,522) | (18,645) |
Balance-end of period | $ 230,803 | $ 270,322 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May. 30, 2015 | May. 31, 2014 | Feb. 28, 2015 | |
Non-financial assets measured on a non-recurring basis | |||
Outstanding derivative financial instruments | $ 0 | $ 0 | |
Nonrecurring basis | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of long-lived assets | 1,289 | $ 358 | |
Impairment charges | 273 | 151 | |
Nonrecurring basis | Fair Value | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Long-lived assets held for use | 1,016 | 207 | |
Fair value of Total | 1,016 | 207 | |
Nonrecurring basis | Level 1 | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of total long-term indebtedness | 7,147,615 | ||
Estimated fair value of total long-term indebtedness | 7,428,669 | ||
Nonrecurring basis | Level 3 | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Long-lived assets held for use | 1,016 | 207 | |
Fair value of Total | $ 1,016 | $ 207 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May. 30, 2015 | Feb. 28, 2015 | May. 31, 2014 | |
Income Taxes | |||
Income tax expense | $ 12,441 | $ 11,881 | |
Estimated effective tax rate (as a percent) | 39.80% | ||
Valuation allowance released | $ 1,841,304 | ||
Valuation allowance against net deferred tax assets | $ 231,683 | $ 231,679 |
Goodwill and Other Intangible33
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
May. 30, 2015 | May. 31, 2014 | Feb. 28, 2015 | |
Goodwill and Other Intangible Assets | |||
Goodwill impairment charges | $ 0 | $ 0 | |
Finite-lived intangible assets | |||
Gross Carrying Amount | 2,107,419 | 2,093,531 | |
Accumulated Amortization | (1,704,334) | (1,672,051) | |
Unfavorable lease intangibles | 53,638 | 55,571 | |
Amortization expense for intangible assets and liabilities | 31,941 | $ 29,237 | |
Anticipated annual amortization expense for intangible assets and liabilities | |||
2,016 | 118,669 | ||
2,017 | 105,472 | ||
2,018 | 67,542 | ||
2,019 | 41,508 | ||
2,020 | 22,107 | ||
Favorable leases and other | |||
Finite-lived intangible assets | |||
Gross Carrying Amount | 657,137 | 653,377 | |
Accumulated Amortization | $ (490,273) | $ (481,041) | |
Remaining Weighted Average Amortization Period | 8 years | 8 years | |
Prescription files | |||
Finite-lived intangible assets | |||
Gross Carrying Amount | $ 1,450,282 | $ 1,440,154 | |
Accumulated Amortization | $ (1,214,061) | $ (1,191,010) | |
Remaining Weighted Average Amortization Period | 3 years | 3 years |
Indebtedness and Credit Agree34
Indebtedness and Credit Agreements (Details) shares in Thousands, $ in Thousands | May. 30, 2015USD ($) | Apr. 02, 2015USD ($) | May. 30, 2015USD ($)loanshares | Feb. 28, 2015USD ($) | Jan. 13, 2015USD ($) | Jan. 12, 2015USD ($) |
Indebtedness and credit agreement | ||||||
Lease financing obligations | $ 87,256 | $ 87,256 | $ 91,993 | |||
Total debt | 7,234,871 | 7,234,871 | 5,644,943 | |||
Current maturities of long-term debt and lease financing obligations | (35,039) | (35,039) | (100,376) | |||
Long-term debt and lease financing obligations, less current maturities | $ 7,199,832 | 7,199,832 | 5,544,567 | |||
Convertible notes amount | $ 64,089 | |||||
Credit facility | ||||||
Number of second priority secured term loan facilities | loan | 2 | |||||
Ownership interest (as a percent) | 100.00% | 100.00% | ||||
Maturities | ||||||
Remainder of fiscal 2016 | $ 5,368 | $ 5,368 | ||||
2,017 | 0 | 0 | ||||
2,018 | 0 | 0 | ||||
2,019 | 0 | 0 | ||||
2,020 | 1,584,000 | 1,584,000 | ||||
Thereafter | 5,555,000 | 5,555,000 | ||||
Senior secured credit facility | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 3,209,368 | 3,209,368 | 3,350,367 | |||
Senior secured revolving credit facility due January 2020 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 1,584,000 | 1,584,000 | 1,725,000 | |||
Credit facility | ||||||
Maximum borrowing capacity | $ 3,000,000 | $ 1,795,000 | ||||
Outstanding borrowings | 1,584,000 | 1,584,000 | ||||
Letters of credit outstanding | 69,309 | 69,309 | ||||
Additional borrowing capacity | 1,346,691 | 1,346,691 | ||||
Amount of debt allowed to be outstanding | 1,500,000 | |||||
Amount of debt allowed to be outstanding related to Pending Acquisition | 1,800,000 | |||||
Threshold amount of debt | $ 750,000 | |||||
Number of days relating to debt threshold | 90 days | |||||
Period allowed for extensions on customary terms | 90 days | |||||
Senior secured revolving credit facility due January 2020 | Minimum | ||||||
Credit facility | ||||||
Percentage of fee payable on daily unused revolver availability | 0.25% | |||||
Fixed charge coverage ratio | 1 | |||||
Senior secured revolving credit facility due January 2020 | Maximum | ||||||
Credit facility | ||||||
Percentage of fee payable on daily unused revolver availability | 0.375% | |||||
Senior secured revolving credit facility due January 2020 | LIBOR | Minimum | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 1.50% | |||||
Senior secured revolving credit facility due January 2020 | LIBOR | Maximum | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 2.00% | |||||
Tranche 7 Term Loan due February 2020 | ||||||
Credit facility | ||||||
Amount of debt repurchased | $ 1,143,650 | |||||
8.00% senior secured notes (senior lien) due August 2020 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 650,000 | $ 650,000 | $ 650,000 | |||
Debt instrument, stated interest rate (as a percent) | 8.00% | 8.00% | 8.00% | 8.00% | ||
Tranche 1 Term Loan (second lien) due August 2020 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 470,000 | $ 470,000 | $ 470,000 | |||
Principal amount of debt | 470,000 | $ 470,000 | ||||
Tranche 1 Term Loan (second lien) due August 2020 | LIBOR | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 4.75% | |||||
LIBOR floor (as a percent) | 1.00% | |||||
Tranche 1 Term Loan (second lien) due August 2020 | Citibank's base rate | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 3.75% | |||||
Tranche 2 Term Loan (second lien) due June 2021 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 500,000 | $ 500,000 | 500,000 | |||
Principal amount of debt | 500,000 | $ 500,000 | ||||
Tranche 2 Term Loan (second lien) due June 2021 | LIBOR | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 3.875% | |||||
LIBOR floor (as a percent) | 1.00% | |||||
Tranche 2 Term Loan (second lien) due June 2021 | Citibank's base rate | ||||||
Credit facility | ||||||
Percentage points added to the reference rate | 2.875% | |||||
Other secured | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 5,368 | $ 5,368 | 5,367 | |||
Unsecured Guaranteed Debt | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 3,515,247 | 3,515,247 | 1,715,415 | |||
9.25% senior notes due March 2020 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | 905,247 | 905,247 | 905,415 | |||
Principal amount of debt | 902,000 | 902,000 | 902,000 | |||
Unamortized premium | $ 3,247 | $ 3,247 | $ 3,415 | |||
Debt instrument, stated interest rate (as a percent) | 9.25% | 9.25% | 9.25% | |||
6.75% senior notes due June 2021 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 810,000 | $ 810,000 | $ 810,000 | |||
Debt instrument, stated interest rate (as a percent) | 6.75% | 6.75% | 6.75% | |||
6.125% senior notes due 2023 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 1,800,000 | $ 1,800,000 | ||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | ||||
Unsecured Unguaranteed Debt | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 423,000 | $ 423,000 | $ 487,168 | |||
8.5% convertible notes due May 2015 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 64,168 | |||||
Debt instrument, stated interest rate (as a percent) | 8.50% | 8.50% | 8.50% | |||
Convertible notes amount | $ 68,089 | |||||
Convertible notes due 2015 were converted into common stock (in shares) | shares | 24,762 | |||||
Face amount of debt repurchased | $ 79 | $ 79 | ||||
7.7% notes due February 2027 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 295,000 | $ 295,000 | $ 295,000 | |||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | 7.70% | |||
6.875% fixed-rate senior notes due December 2028 | ||||||
Indebtedness and credit agreement | ||||||
Long-term debt | $ 128,000 | $ 128,000 | $ 128,000 | |||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | 6.875% | |||
Forecast | Senior secured revolving credit facility due January 2020 | ||||||
Credit facility | ||||||
Maximum borrowing capacity | $ 3,700,000 | |||||
Prior to repayment of 2020 8.00% Notes | Senior secured revolving credit facility due January 2020 | Minimum | ||||||
Credit facility | ||||||
Additional borrowing capacity | $ 300,000 | $ 300,000 | ||||
Threshold availability on the thirtieth consecutive calendar day | 225,000 | |||||
Prior to repayment of 2020 8.00% Notes | Senior secured revolving credit facility due January 2020 | Maximum | ||||||
Credit facility | ||||||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | 175,000 | |||||
Threshold availability on the third consecutive business day | 225,000 | |||||
On and after repayment of 2020 8.00% Notes | Senior secured revolving credit facility due January 2020 | Minimum | ||||||
Credit facility | ||||||
Additional borrowing capacity | 365,000 | 365,000 | ||||
Threshold availability on the thirtieth consecutive calendar day | 250,000 | |||||
On and after repayment of 2020 8.00% Notes | Senior secured revolving credit facility due January 2020 | Maximum | ||||||
Credit facility | ||||||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | 200,000 | |||||
Threshold availability on the third consecutive business day | $ 250,000 | |||||
T P G EnvisionRx | 6.125% senior notes due 2023 | ||||||
Indebtedness and credit agreement | ||||||
Principal amount of debt | $ 1,800,000 | |||||
Debt instrument, stated interest rate (as a percent) | 6.125% | |||||
Credit facility | ||||||
Redemption price | 101.00% | |||||
Net proceeds included in cash and cash equivalents | $ 1,768,622 |
Reclassifications from Accumu35
Reclassifications from Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Accumulated other comprehensive loss | ||
Balance - beginning of period | $ (45,850) | $ (37,334) |
Amounts reclassified from accumulated other comprehensive loss to net income, net of $398 and $0 tax expense | 597 | 659 |
Balance - end of period | (45,253) | (36,675) |
Defined benefit pension plans | ||
Accumulated other comprehensive loss | ||
Balance - beginning of period | (45,850) | (37,334) |
Amounts reclassified from accumulated other comprehensive loss to net income, net of $398 and $0 tax expense | 597 | 659 |
Balance - end of period | (45,253) | (36,675) |
Amounts reclassified from accumulated other comprehensive loss to net income, tax expense | $ 398 | $ 0 |
Reclassifications from Accumu36
Reclassifications from Accumulated Other Comprehensive Loss (Details 2) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Reclassification from accumulated other comprehensive loss | ||
Income before income taxes | $ 31,277 | $ 53,327 |
Income tax expense | (12,441) | (11,881) |
Net income | 18,836 | 41,446 |
Defined benefit pension plans | Reclassification from accumulated other comprehensive loss | ||
Reclassification from accumulated other comprehensive loss | ||
Income before income taxes | (995) | (659) |
Income tax expense | 398 | |
Net income | (597) | (659) |
Defined benefit pension plans | Reclassification from accumulated other comprehensive loss | Selling, general and administrative expenses | ||
Reclassification from accumulated other comprehensive loss | ||
Amortization of unrecognized prior service costs | (17) | (60) |
Amortization of unrecognized net loss | $ (978) | $ (599) |
Retirement Plans (Details)
Retirement Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May. 30, 2015 | May. 31, 2014 | |
Defined Benefit Pension Plan | ||
Net periodic pension expense | ||
Service cost | $ 512 | $ 793 |
Interest cost | 1,633 | 1,631 |
Expected return on plan assets | (1,593) | (1,929) |
Amortization of unrecognized prior service cost | 17 | 60 |
Amortization of unrecognized net loss (gain) | 978 | 599 |
Net pension expense | 1,547 | 1,154 |
Employer contributions | 0 | |
Expected employer contribution during the remainder of fiscal year | 0 | |
Nonqualified Executive Retirement Plan | ||
Net periodic pension expense | ||
Interest cost | 119 | 135 |
Net pension expense | 119 | $ 135 |
Employer contributions | 377 | |
Expected employer contribution during the remainder of fiscal year | $ 1,173 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - May. 30, 2015 $ in Millions | USD ($)caseStoreManager |
Indergit | |
Commitments and contingencies | |
Number of current and former store managers court ordered notices to be sent | 7,000 |
Number of current and former store managers who joined the action | 1,550 |
Number of current and former store managers to whom notices have been sent | 1,750 |
Chase and Scherwin and Kyle | |
Commitments and contingencies | |
Legal settlement amount | $ | $ 9 |
Hall | |
Commitments and contingencies | |
Number of similar cases | case | 2 |