Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 02, 2018 | Jun. 27, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | RITE AID CORP | |
Entity Central Index Key | 84,129 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 2, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-02 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,066,805,893 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 02, 2018 | Mar. 03, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 147,092 | $ 447,334 |
Accounts receivable, net | 1,908,955 | 1,869,100 |
Inventories, net of LIFO reserve of $591,056 and $581,090 | 1,809,595 | 1,799,539 |
Prepaid expenses and other current assets | 151,059 | 181,181 |
Current assets held for sale | 179,442 | 438,137 |
Total current assets | 4,196,143 | 4,735,291 |
Property, plant and equipment, net | 1,401,924 | 1,431,246 |
Goodwill | 1,421,120 | 1,421,120 |
Other intangibles, net | 568,920 | 590,443 |
Deferred tax assets | 522,674 | 594,019 |
Other assets | 218,672 | 217,208 |
Total assets | 8,329,453 | 8,989,327 |
Current liabilities: | ||
Current maturities of long-term debt and lease financing obligations | 19,025 | 20,761 |
Accounts payable | 1,767,777 | 1,651,363 |
Accrued salaries, wages and other current liabilities | 1,030,292 | 1,231,736 |
Current liabilities held for sale | 560,205 | |
Total current liabilities | 2,817,094 | 3,464,065 |
Long-term debt, less current maturities | 3,134,704 | 3,340,099 |
Lease financing obligations, less current maturities | 28,874 | 30,775 |
Other noncurrent liabilities | 536,470 | 553,378 |
Total liabilities | 6,517,142 | 7,388,317 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $1 per share; 1,500,000 shares authorized; shares issued and outstanding 1,067,197 and 1,067,318 | 1,067,197 | 1,067,318 |
Additional paid-in capital | 4,855,901 | 4,850,712 |
Accumulated deficit | (4,076,602) | (4,282,471) |
Accumulated other comprehensive loss | (34,185) | (34,549) |
Total stockholders' equity | 1,812,311 | 1,601,010 |
Total liabilities and stockholders' equity | $ 8,329,453 | $ 8,989,327 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 02, 2018 | Mar. 03, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventories, LIFO reserve (in dollars) | $ 591,056 | $ 581,090 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 1,500,000 | 1,500,000 |
Common stock, shares issued | 1,067,197 | 1,067,318 |
Common stock, shares outstanding | 1,067,197 | 1,067,318 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 5,388,490 | $ 5,436,523 |
Costs and expenses: | ||
Cost of revenues | 4,219,741 | 4,274,580 |
Selling, general and administrative expenses | 1,152,627 | 1,160,940 |
Lease termination and impairment charges | 9,859 | 4,038 |
Interest expense | 62,792 | 51,000 |
Loss on debt retirements, net | 554 | |
Gain on sale of assets, net | (5,859) | (5,877) |
Total costs and expenses | 5,439,714 | 5,484,681 |
Loss from continuing operations before income taxes | (51,224) | (48,158) |
Income tax benefit | (9,497) | (12,121) |
Net loss from continuing operations | (41,727) | (36,037) |
Net income (loss) from discontinued operations, net of tax | 256,143 | (39,312) |
Net income (loss) | 214,416 | (75,349) |
Computation of (loss) income attributable to common stockholders: | ||
Loss from continuing operations attributable to common stockholders-basic and diluted | (41,727) | (36,037) |
Income (loss) from discontinued operations attributable to common stockholders-basic and diluted | 256,143 | (39,312) |
Income (loss) attributable to common stockholders-basic and diluted | $ 214,416 | $ (75,349) |
Basic and diluted income (loss) per share: | ||
Continuing operations | $ (0.04) | $ (0.03) |
Discontinued operations | 0.24 | (0.04) |
Net basic and diluted income (loss) per share | $ 0.20 | $ (0.07) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net income (loss) | $ 214,416 | $ (75,349) |
Defined benefit pension plans: | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, net of $144 and $342 tax expense | 364 | 514 |
Total other comprehensive income | 364 | 514 |
Comprehensive income (loss) | $ 214,780 | $ (74,835) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Amortization of prior service cost, net transition obligation and net actuarial losses included in net periodic pension cost, tax expense (benefit) | $ 144 | $ 342 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Operating activities: | ||
Net income (loss) | $ 214,416 | $ (75,349) |
Net income (loss) from discontinued operations, net of tax | 256,143 | (39,312) |
Net loss from continuing operations | (41,727) | (36,037) |
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations: | ||
Depreciation and amortization | 94,529 | 101,029 |
Lease termination and impairment charges | 9,859 | 4,038 |
LIFO charge | 9,966 | 10,173 |
Gain on sale of assets, net | (5,859) | (5,877) |
Stock-based compensation expense | 5,031 | 9,038 |
Loss on debt retirements, net | 554 | |
Changes in deferred taxes | (12,355) | (38,160) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (194,159) | (34,611) |
Inventories | 31,101 | 28,068 |
Accounts payable | 207,960 | (34,313) |
Other assets and liabilities, net | (121,214) | 44,421 |
Net cash (used in) provided by operating activities of continuing operations | (16,314) | 47,769 |
Investing activities: | ||
Payments for property, plant and equipment | (47,971) | (38,325) |
Intangible assets acquired | (13,655) | (5,521) |
Proceeds from insured loss | 8,639 | |
Proceeds from dispositions of assets and investments | 9,916 | 2,137 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | (49,123) | (33,070) |
Financing activities: | ||
Net proceeds from (payments to) revolver | 190,000 | (90,000) |
Principal payments on long-term debt | (431,106) | (3,503) |
Change in zero balance cash accounts | 1,083 | 28,768 |
Net proceeds from issuance of common stock | 910 | 147 |
Payments for taxes related to net share settlement of equity awards | (147) | |
Financing fees paid for early debt redemption | (13) | |
Net cash used in financing activities of continuing operations | (239,126) | (64,735) |
Cash flows from discontinued operations: | ||
Operating activities of discontinued operations | (74,050) | 44,965 |
Investing activities of discontinued operations | 603,402 | (25,126) |
Financing activities of discontinued operations | (525,031) | (764) |
Net cash provided by discontinued operations | 4,321 | 19,075 |
Decrease in cash and cash equivalents | (300,242) | (30,961) |
Cash and cash equivalents, beginning of period | 447,334 | 245,410 |
Cash and cash equivalents, end of period | $ 147,092 | $ 214,449 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Jun. 02, 2018 | |
Summary of Significant Accounting Policies | |
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 June 2, 2018 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation (“Rite Aid”) and Subsidiaries (together with Rite Aid, the “Company”) Fiscal 2018 10-K. The discussion and presentation of the operating and financial results of our business segments have been impacted by the following event. Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement (the “Amended and Restated Asset Purchase Agreement”), dated as of September 18, 2017, by and among Rite Aid, WBA and Walgreen Co., an Illinois corporation and wholly owned direct subsidiary of WBA (“Buyer”), Buyer agreed to purchase from Rite Aid 1,932 stores (the “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 the “Sale”). As of March 27, 2018, the Company has sold all 1,932 Acquired Stores and related assets to WBA in exchange for proceeds of $4,156.7 million, which were used to repay outstanding debt. Based on its magnitude and because the Company is exiting certain markets, the Sale represents a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for the Asset Sale as required by Accounting Standards Codification 210-05—Discontinued Operations (ASC 205-20). In accordance with ASC 205-20, the Company reclassified the assets and liabilities to be sold, including the 1,932 Acquired Stores, three (3) distribution centers, related inventory and other specified assets and liabilities related thereto (collectively the “Assets to be Sold” or “Disposal Group”) to assets and liabilities held for sale on its consolidated balance sheets as of the periods ended June 2, 2018 and March 3, 2018, and reclassified the financial results of the Disposal Group in its consolidated statements of operations and consolidated statements of cash flows for all periods presented. Additionally, corporate support activities related to the Disposal Group were not reclassified to discontinued operations. Please see additional information as provided in Note 3 Asset Sale to WBA. Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) . ASU No. 2014-09 outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU No. 2016-08, “Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net),” which amends the principal-versus-agent implementation guidance and in April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” which amends the guidance in those areas in the new revenue recognition standard. These ASUs, collectively the “new revenue standard”, are effective for annual reporting periods (including interim reporting periods within those periods) beginning January 1, 2018. The Company adopted the new revenue standard as of March 4, 2018 using the modified retrospective method and applying the new standard to all contracts with customers. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. In connection with the adoption of the new revenue standard, the Company identified one difference in its Retail Pharmacy segment related to the timing of revenue recognition for third party prescription revenues, which was historically recognized at the time the prescription was filled. Upon adoption of ASU No. 2014-09, this revenue is recognized at the time the customer takes possession of the merchandise. In connection with its March 4, 2018 adoption of the new revenue standard on a modified retrospective basis, the Company recorded a reduction to accounts receivable of $57,897, a reduction to deferred tax assets of $1,772, an increase to inventory of $51,121, and a corresponding increase to accumulated deficit of $8,548 within its Retail Pharmacy segment. In addition, the Company identified revenues under one specific rebate administration program under which the Company’s Pharmacy Services segment was determined to be the principal and historically recognized revenues and cost of revenues on a gross basis of approximately $123,500 during fiscal 2018. Upon adoption of the new revenue standard, the Company is required to record revenue from this program on a net basis. The Company expects the impact of the adoption of the new revenue standard to be immaterial to its revenues, net income, and cash flows on an ongoing basis. The following is a discussion of the Company’s revenue recognition policies by segment under the new revenue recognition accounting standard: Revenue Recognition Retail Pharmacy Segment For front end sales, the Retail Pharmacy segment recognizes revenues upon the transfer of control of the goods to the customer. The Company satisfies its performance obligation at the point of sale for front end transactions. The Retail Pharmacy segment front end revenue is measured based on the amount of fixed consideration that we expect to receive, net of an allowance for estimated future returns. Return activity is immaterial to revenues and results of operations in all periods presented. For pharmacy sales, the Retail Pharmacy segment recognizes revenue upon the transfer of control of the goods to the customer. The Company satisfies its performance obligation, upon pickup by the customer, which is when the customer takes title to the product. Each prescription claim is its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims. The Company’s revenue is measured based on the amount of fixed consideration that we expect to receive, reduced by refunds owed to the third party payor for pricing guarantees and performance against defined value-based service and performance metrics. The inputs to these estimates are not highly subjective or volatile. The effect of adjustments between estimated and actual amounts have not been material to the Company’s results of operations or financial position. Prescriptions are generally not returnable. The Retail Pharmacy segment offers a chain-wide loyalty card program titled wellness +. Individual customers are able to become members of the wellness + program. Members participating in the wellness + loyalty card program earn points on a calendar year basis for eligible front end merchandise purchases and qualifying prescription purchases which may be redeemed to pay for future purchases. One point is awarded for each dollar spent towards front end merchandise and 25 points are awarded for each qualifying prescription. Members reach specific wellness + tiers based on the points accumulated during the calendar year, which entitles such customers to certain future discounts and other benefits upon reaching that tier. For example, any customer that reaches 1,000 points in a calendar year achieves the “Gold” tier, enabling him or her to receive a 20% discount on qualifying purchases of front end merchandise for the remaining portion of the calendar year and also the next calendar year. There is also a similar “Silver” level with a lower threshold and benefit level. Points earned pursuant to the wellness+ program represent a performance obligations and the Company allocates revenue between the merchandise purchased and the wellness + points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness + points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As customers redeem the points to receive discounted front end merchandise or when the points expire, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $73,191 as of June 2, 2018, of which $49,793 is included in other current liabilities and $23,398 is included in noncurrent liabilities. The Retail Pharmacy segment had accrued contract liabilities of $63,851 as of March 3, 2018, of which $50,036 is included in other current liabilities and $13,815 is included in noncurrent liabilities. The wellness + program also allows a customer to earn Bonus Cash based on qualifying purchases. Wellness + Rewards members have the opportunity to redeem his or her accumulated Bonus Cash on a future purchase with a 60 day expiration window. All Bonus Cash is redeemed using a FIFO methodology (i e., first Bonus Cash earned are the first to be redeemed). For a majority of the Bonus Cash issuances, funding is provided by our vendors through contractual arrangements. This funding is treated as a contract liability and remains a contract liability until i) a wellness + Rewards members redeem their Bonus Cash, or ii) wellness + Rewards members allow the Bonus Cash to expire. Upon redemption or expiration, the Retail Pharmacy segment recognizes an allocable portion of the accrued contract liability into revenue. For Bonus Cash issuances that are not vendor funded, the contract liability is recorded at the time of issuance through a reduction to revenues, and not recognized until the Bonus Cash is redeemed or expires. Pharmacy Services Segment The Pharmacy Services segment sells prescription drugs indirectly through its retail pharmacy network and directly through its mail service dispensing pharmacy. The Pharmacy Services segment recognizes revenue from prescription drugs sold by (i) its mail service dispensing pharmacy and (ii) under retail pharmacy network contracts where it is the principal at the contract prices negotiated with its clients, primarily employers, insurance companies, unions, government employee groups, health plans, Managed Medicaid plans, Medicare plans, and other sponsors of health benefit plans, and individuals throughout the United States. Revenues include: (i) the portion of the price the client pays directly to the Pharmacy Services segment, net of any volume-related or other discounts paid back to the client (see “Drug Discounts” below), (ii) the price paid to the Pharmacy Services segment by client plan members for mail order prescriptions (“Mail Co-Payments”) (iii) client plan member copayments made directly to the retail pharmacy network, and (iv) administrative fees. Revenue is recognized when the Pharmacy Services segment meets its performance obligations relative to each transaction type, The following revenue recognition policies have been established for the Pharmacy Services segment: · Revenues generated from prescription drugs sold by third party pharmacies in the Pharmacy Services segment’s retail pharmacy network and associated administrative fees are recognized at the Pharmacy Services segment’s point-of-sale, which is when the claim is adjudicated by the Pharmacy Services segment’s online claims processing system. At this point the Company has performed all of its performance obligations. · Revenues generated from prescription drugs sold by the Pharmacy Services segment’s mail service dispensing pharmacy are recognized when the prescription is shipped. At the time of shipment, the Pharmacy Services segment has performed all of its performance obligations under its client contracts, as control of and title to the product has passed to the clients plan member. The Pharmacy Services segment does not experience a significant level of returns or reshipments. · Revenues generated from administrative fees based on membership or claims volume are recognized monthly based on the terms within the individual contracts, either a monthly member based fee, or a claims volume based fee. In the majority of its contracts, the Pharmacy Services segment is the principal because its client contracts give clients the right to obtain access to its pharmacy contracts under which the Pharmacy Services segment directs its pharmacy network to provide the services (drug dispensing, consultation, etc.) and goods (prescription drugs) to the clients’ members at its negotiated pricing. The Pharmacy Services segment’s obligations under its client contracts are separate and distinct from its obligations to the third party pharmacies included in its retail pharmacy network contracts. Pursuant to these contracts, the Pharmacy Services segment is contractually required to pay the third party pharmacies in its retail pharmacy network for products sold after payment is received from its clients. The Pharmacy Services segment has control over these transactions until the prescription is transferred to the member and, thus, that it is acting as a principal. As such, the Pharmacy Services segment records the total prescription price contracted with clients in revenues. Amounts paid to pharmacies and amounts charged to clients are exclusive of the applicable co-payment under Pharmacy Services segment contracts. Retail pharmacy co-payments, which we instruct retail pharmacies to collect from members, are included in our revenues and our cost of revenues. For contracts under which the Pharmacy Services segment acts as an agent or does not control the prescription drugs prior to transfer to the client, no revenue is recognized. Drug Discounts—The Pharmacy Services segment deducts from its revenues that are generated from prescription drugs sold by third party pharmacies any rebates, inclusive of discounts and fees, earned by its clients based on utilization levels and other factors as negotiated with the prescription drug manufacturers or suppliers. Rebates are paid to clients in accordance with the terms of client contracts. Medicare Part D—The Pharmacy Services segment, through its EIC subsidiary, participates in the federal government’s Medicare Part D program as a Prescription Drug Plan (“PDP”). Please refer to Note 8, Medicare Part D. Disaggregation of Revenue The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week period ended June 2, 2018: In millions For the thirteen week period ended June 2, Retail Pharmacy segment: Pharmacy sales $ Front end sales Other revenue Total Retail Pharmacy segment $ Pharmacy Services segment 1,542,762 Intersegment elimination ) Total revenue $ Impact of New Revenue Recognition Standard on Financial Statement Line Items The Company adopted the new revenue standard using the modified retrospective method. The cumulative effect of applying the new standard to all contracts was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue standard, the following adjustments were made to accounts on the condensed consolidated balance sheet as of March 4, 2018: Impact of Change in Accounting Policy As Reported Adjusted In millions March 3, 2018 Adjustments March 4, 2018 Condensed Consolidated Balance Sheet: Accounts receivable, net $ $ ) $ Inventories, net Deferred tax assets ) Total assets ) Accumulated deficit ) ) ) Total shareholders’ equity ) Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842) , which is intended to improve financial reporting around leasing transactions. The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment. This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019 (fiscal 2020). On January 5, 2018 the FASB issued an exposure draft amending certain aspects of the new leasing standard. The proposed amendments include a provision to allow entities to elect not to restate comparative periods in the period of adoption when transitioning to the new standard and instead allow a modified retrospective approach. The Company believes that the new standard will have a material impact on its financial position. The Company is currently evaluating the impact this standard implementation will have on its results of operations and cash flows. |
Merger Agreement
Merger Agreement | 3 Months Ended |
Jun. 02, 2018 | |
Merger Agreement | |
Merger Agreement | 2. Merger Agreement On February 18, 2018, Rite Aid entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 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 (“Merger Sub” and, together with Merger Sub II, the “Merger Subs”). Pursuant to the Merger Agreement, (i) Merger Sub will merge with and into Rite Aid (the “Merger”), with Rite Aid surviving the Merger as a wholly-owned direct subsidiary of Merger Sub II (the “Surviving Corporation”), and (ii) immediately following the Merger, the Surviving Corporation will merge with and into Merger Sub II (the “Subsequent Merger” and, together with the Merger, the “Mergers”) with Merger Sub II surviving the Subsequent Merger as a wholly-owned direct subsidiary of Albertsons (the “Surviving Company”). At the effective time of the Merger (the “Effective Time”), each share of Rite Aid’s common stock, par value $1.00 per share, issued and outstanding immediately prior to the Effective Time (other than shares of Rite Aid common stock owned by Albertsons, Merger Sub or Rite Aid (including treasury stock held by Rite Aid), which will be cancelled) will be converted into the right to receive and become exchangeable for 0.1000 (the “Base Exchange Ratio”) of a fully paid and nonassessable share of Albertsons common stock, par value $0.01 per share (“Albertsons Common Stock”) (the “Base Consideration”), without interest, plus, at the election of the holder of Rite Aid common stock, either (i) an amount in cash equal to $0.1832 per share (the “Additional Cash Consideration” and, together with the Base Consideration, the “Cash Election Consideration”), without interest, or (ii) 0.0079 (the “Additional Stock Election Exchange Ratio” and, together with the Base Exchange Ratio, the “Stock Election Exchange Ratio”) of a fully paid and nonassessable share of Albertsons Common Stock (the “Additional Stock Consideration” and, together with the Base Consideration, the “Stock Election Consideration”). Consummation of the Merger is subject to various closing conditions, including but not limited to (i) approval of the Merger Agreement by holders of a majority of the outstanding shares of our common stock entitled to vote on the Merger, (ii) the expiration or earlier termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (which condition was satisfied on March 28, 2018), (iii) the absence of any law or order prohibiting the Merger, (iv) the absence of a material adverse effect on the Company and Albertsons, in each case, as defined in the Merger Agreement, (v) approval for listing, on the NYSE, of the shares of Albertsons Common Stock to be issued in the Merger and to be reserved for issuance in connection with the Merger (which approval was obtained on June 21, 2018), (vi) Albertsons’s registration statement on Form S 4 shall have become effective under the Securities Act (which Form S-4 was declared effective on June 25, 2018), and shall not be the subject of any stop order or proceedings seeking a stop order, (vii) approval of the Ohio Department of Insurance for the change of control of EIC, and (viii) Albertsons shall have delivered the Company a Lock Up Agreement, No Action Agreement and Standstill Agreement, in each case, in the form agreed to by the parties to the Merger Agreement. The special meeting of Rite Aid’s stockholders to, among other things, consider and vote on a proposal to approve the Merger Agreement has been scheduled for August 9, 2018. On February 18, 2018, in connection with the Merger Agreement, the Company entered into a standstill agreement (the “Standstill Agreement”) with Albertsons and Cerberus Capital Management, L.P. (“Cerberus”), pursuant to which Cerberus has agreed not to: (i) purchase shares of Albertsons Common Stock or other securities issued by Albertsons, except Cerberus may acquire beneficial ownership of Albertsons Common Stock provided that such beneficial ownership does not result in ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock in the aggregate following such transaction, (ii) make any public statement or public disclosure regarding any intent, purpose, plan or proposal by Cerberus or any of its controlled affiliates to the composition of the Albertsons board of directors, any merger, consolidation or acquisition of Albertsons or its subsidiaries, (iii) engage in any solicitation of proxies or otherwise solicit the stockholders of Albertsons or (iv) enter into any agreements to make any investment with any person that engages or offers or proposes to engage in any of (i) through (iii) during the standstill period. The standstill period commences at the Effective Time and terminates upon the earliest to occur of (a) thirty days following the date that Cerberus does not have any of its designees on the Albertsons board of directors, (b) the date on which Cerberus no longer has the right to appoint (and has not appointed) at least one director to the Albertsons board of directors and (c) the date on which Albertsons materially breaches or takes any action challenging the validity or enforceability of the provisions of the Merger Agreement that grant Cerberus certain rights to appoint directors to the Albertsons board of directors. In addition, pursuant to the Standstill Agreement, from February 18, 2018 until the Effective Time, Cerberus has agreed not to acquire or agree to acquire beneficial ownership of any shares of Albertsons Common Stock, Rite Aid common stock or other securities or debt issued by Albertsons or Rite Aid that would result in beneficial ownership of 30% or more of the issued and outstanding shares of Albertsons Common Stock at the Effective Time (assuming for the purposes of such calculation that the Effective Time occurred immediately after such acquisition). |
Asset Sale to WBA
Asset Sale to WBA | 3 Months Ended |
Jun. 02, 2018 | |
Asset Sale to WBA | |
Asset Sale to WBA | 3. Asset Sale to WBA On September 18, 2017, the Company entered into the Amended and Restated Asset Purchase Agreement with WBA and Buyer, which amended and restated in its entirety the previously disclosed Asset Purchase Agreement (the “Original APA”), dated as of June 28, 2017, by and among the Company, 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 purchase from the Company 1,932 Acquired Stores, three (3) distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of approximately $4,375,000, on a cash-free, debt-free basis in the Sale. The Company announced on September 19, 2017 that the waiting period under the HSR Act, expired with respect to the Sale. As of March 27, 2018, the Company has completed the store transfer process, and all 1,932 stores and related assets have been transferred to WBA and the Company has received cash proceeds of $4,156,686. The transfer of the three (3) distribution centers and related assets is expected to begin after September 1, 2018. The majority of the closing conditions have been satisfied, and the transfer of the three distribution centers and related assets remains subject to minimal customary closing conditions applicable only to the distribution centers being transferred at such distribution center closings, as specified in the Amended and Restated Asset Purchase Agreement. The Company has recorded a pre-tax gain on the Sale of the stores of $2,489,389. The parties to the Amended and Restated Asset Purchase Agreement have each made customary representations and warranties. The Company has agreed to various covenants and agreements, including, among others, the Company’s agreement to conduct its 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. The Company has also agreed to provide transition services to Buyer for up to three (3) years after the initial closing of the Sale. Under the terms of the TSA, the Company provides 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. In connection with these services, the Company purchases the related inventory and incurs cash payments for the selling, general and administrative activities, which, the Company bills on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the thirteen week period ended June 2, 2018 were $2,041,075, of which $447,305 is included in Accounts receivable, net. The Company charged WBA TSA fees of $23,735 during the thirteen week period ended June 2, 2018 which are reflected as a reduction to selling, general and administrative expenses. Albertsons is obligated to assume the Company’s remaining obligations under the TSA. Under the terms of the Amended and Restated Asset Purchase Agreement, the Company has the option to purchase pharmaceutical drugs through an affiliate of WBA under terms, including cost, that are substantially equivalent to Walgreen’s for a period of ten (10) years, subject to certain terms and conditions. Based on its magnitude and because the Company is exiting certain markets, the Sale represents a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for the Sale as required by Accounting Standards Codification 210-05— Discontinued Operations (ASC 205-20). In accordance with ASC 205-20, the Company reclassified the Disposal Group to assets and liabilities held for sale on its consolidated balance sheets as of the periods ended June 2, 2018 and March 3, 2018, and reclassified the financial results of the Disposal Group in its consolidated statements of operations and consolidated statements of cash flows for all periods presented. The Company also revised its discussion and presentation of operating and financial results to be reflective of its continuing operations as required by ASC 205-20. The carrying amount of the Assets to be Sold, which were included in the Retail Pharmacy segment, have been reclassified from their historical balance sheet presentation to current assets and liabilities held for sale as follows: June 2, March 3, Inventories $ $ Property and equipment Goodwill(a) — Intangible assets — Current assets held for sale $ $ Current maturities of long-term lease financing obligations $ — $ Accrued salaries, wages and other current liabilities — Long-term debt, less current maturities(b) — Lease financing obligations, less current maturities — Other noncurrent liabilities — Current liabilities held for sale $ — $ (a) The Company had $76,124 of goodwill in its Retail Pharmacy segment resulting from the acquisition of Health Dialog and RediClinic, which is accounted for as Retail Pharmacy segment enterprise goodwill. The Company has allocated a portion of its Retail Pharmacy segment enterprise goodwill to the discontinued operation. (b) In connection with the Sale, the Company had estimated that the Sale would generate excess cash proceeds of approximately $4,027,400 which would be used to repay outstanding indebtedness. During the thirteen week period ended June 2, 2018, the Company has a use of cash for financing purposes of $525,031 in its discontinued operations and, based on refinements to its calculations, reduced its estimate of excess cash proceeds by approximately $24,500 and reclassified that amount to assets held and used. Consequently, the Company has classified $0 and $549,549 of estimated cash proceeds to be used for debt repayment to liabilities held for sale as of June 2, 2018 and March 3, 2018, respectively. As of June 2, 2018 and March 3, 2018, the Company repaid outstanding indebtedness of $525,031 and $3,135,000 with Sale proceeds. The operating results of the discontinued operations that are reflected on the consolidated statements of operations within net income (loss) from discontinued operations are as follows: June 2, June 3, Revenues $ $ Costs and expenses: Cost of revenues(a) Selling, general and administrative expenses(a) Lease termination and impairment charges — Loss on debt retirements, net — Interest expense(b) Gain on stores sold to Walgreens Boots Alliance ) — (Gain) loss on sale of assets, net — ) ) Income (loss) from discontinued operations before income taxes ) Income tax expense (benefit) ) Net income (loss) from discontinued operations, net of tax $ $ ) (a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations. (b) In accordance with ASC 205-20, the operating results for the thirteen week periods ended June 2, 2018 and June 3, 2017, respectively, for the discontinued operations include interest expense relating to the outstanding indebtedness repaid with the estimated excess proceeds from the Sale. The operating results reflected above do not fully represent the Disposal Group’s historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the Disposal Group. |
Income (Loss) Per Share
Income (Loss) Per Share | 3 Months Ended |
Jun. 02, 2018 | |
Income (Loss) Per Share | |
Income (Loss) Per Share | 4. Income (Loss) Per Share Basic income (loss) per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company subject to anti-dilution limitations. Thirteen Week Period June 2, June 3, Basic and diluted income (loss) per share: Numerator: Net loss from continuing operations $ ) $ ) Net income (loss) from discontinued operations ) Income (loss) attributable to common stockholders— basic and diluted $ $ ) Denominator: Basic weighted average shares Outstanding options and restricted shares, net — — Diluted weighted-average shares Basic and diluted income (loss) per share: Continuing operations $ ) $ ) Discontinued operations ) Net basic and diluted income (loss) per share $ $ ) Due to their antidilutive effect, 25,768 and 33,747 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirteen week period ended June 2, 2018 and June 3, 2017, respectively. Also, excluded from the computation of diluted income (loss) per share as of June 2, 2018 and June 3, 2017 are restricted shares of 11,339 and 5,623, respectively, which are included in shares outstanding. |
Lease Termination and Impairmen
Lease Termination and Impairment Charges | 3 Months Ended |
Jun. 02, 2018 | |
Lease Termination and Impairment Charges | |
Lease Termination and Impairment Charges | 5. Lease Termination and Impairment Charges Lease termination and impairment charges consist of amounts as follows: Thirteen Week Period June 2, June 3, 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 June 2, June 3, 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 |
Jun. 02, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | 6. Fair Value Measurements The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. · Level 3—Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. Non-Financial Assets Measured on a Non-Recurring Basis Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the thirteen week period ended June 2, 2018, long-lived assets from continuing operations with a carrying value of $1,575, primarily store assets, were written down to their fair value of $1,292, resulting in an impairment charge of $283. During the thirteen week period ended June 3, 2017, long-lived assets from continuing operations with a carrying value of $964, primarily store assets, were written down to their fair value of $305, resulting in an impairment charge of $659. If our actual future cash flows differ from our projections materially, certain stores that are either not impaired or partially impaired in the current period may be further impaired in future periods. The following table presents fair values for those assets measured at fair value on a non-recurring basis at June 2, 2018 and June 3, 2017: Fair Value Measurement Using Level 1 Level 2 Level 3 Total as of Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ $ — $ Total $ — $ $ — $ Level 1 Level 2 Level 3 Total as of Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ $ — $ Total $ — $ $ $ The above assets reflected in the caption Long-lived assets held for sale are separate and apart from the Assets to be Sold and do to their immateriality have not been reclassified to assets held for sale. As of June 2, 2018 and June 3, 2017, 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. In addition, as of June 2, 2018 and March 3, 2018 the Company has $7,257 and $7,282, respectively, of investments, carried at amortized cost as these investments are being held to maturity, which are included as a component of other assets. The Company believes the carrying value of these investments approximates their fair value. The fair value for LIBOR-based borrowings under the Company’s senior secured credit facility 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 $3,134,794 and $3,162,700, respectively, as of June 2, 2018. There were no outstanding derivative financial instruments as of June 2, 2018 and March 3, 2018. |
Income Taxes
Income Taxes | 3 Months Ended |
Jun. 02, 2018 | |
Income Taxes | |
Income Taxes | 7. Income Taxes The new federal tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”) enacted on December 22, 2017 (the “Enactment Date”) introduced significant changes to U.S. income tax law. Effective for tax years beginning on or after January 1, 2018, the Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%. The Company recorded an income tax benefit from continuing operations of $9,497 and $12,121 for the thirteen week periods ended June 2, 2018 and June 3, 2017. The effective tax rate for the thirteen week periods ended June 2, 2018 and June 3, 2017 was 18.5% and 25.2%, respectively. The effective tax rate for the thirteen week period ended June 2, 2018 includes an adjustment of (2.3)% to increase the valuation allowance related to certain state deferred taxes. The tax benefit for the thirteen week period ended June 3, 2017 is higher in comparison to 2018, as it is based on a federal statutory rate of 35%, offset by increases to the valuation allowance primarily related to state deferred taxes. The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. The Company believes that it is reasonably possible that a decrease of up to $13,498 in unrecognized tax benefits related to state exposures may be necessary in the next twelve months however management does not expect the change to have a significant impact on the results of operations or the financial position of the Company. The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. The Company continues to maintain a valuation allowance against net deferred tax assets of $903,342 and $896,800, which relates primarily to state deferred tax assets at June 2, 2018 and March 3, 2018, respectively. |
Medicare Part D
Medicare Part D | 3 Months Ended |
Jun. 02, 2018 | |
Medicare Part D | |
Medicare Part D | 8. Medicare Part D The Company offers Medicare Part D benefits through EIC, which has contracted with CMS to be a PDP and, pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, must be a risk-bearing entity regulated under state insurance laws or similar statutes. EIC is a licensed domestic insurance company under the applicable laws and regulations. Pursuant to these laws and regulations, EIC must file quarterly and annual reports with the National Association of Insurance Commissioners (“NAIC”) and certain state regulators, must maintain certain minimum amounts of capital and surplus under formulas established by certain states and must, in certain circumstances, request and receive the approval of certain state regulators before making dividend payments or other capital distributions to the Company. The Company does not believe these limitations on dividends and distributions materially impact its financial position. EIC is subject to minimum capital and surplus requirements in certain states. The minimum amount of capital and surplus required to satisfy regulatory requirements in these states is $29,464 as of March 31, 2018. EIC was in excess of the minimum required amounts in these states as of June 2, 2018. The Company has recorded estimates of various assets and liabilities arising from its participation in the Medicare Part D program based on information in its claims management and enrollment systems. Significant estimates arising from its participation in this program include: (i) estimates of low-income cost subsidies, reinsurance amounts, and coverage gap discount amounts ultimately payable to CMS based on a detailed claims reconciliation that will occur in the following year; (ii) an estimate of amounts receivable from CMS under a risk-sharing feature of the Medicare Part D program design, referred to as the risk corridor and (iii) estimates for claims that have been reported and are in the process of being paid or contested and for our estimate of claims that have been incurred but have not yet been reported. As of June 2, 2018, accounts receivable, net included $442,690 due from CMS and accrued salaries, wages and other current liabilities included $163,134 of EIC liabilities under certain reinsurance contracts. As of March 3, 2018, accounts receivable, net included $350,563 due from CMS and accrued salaries, wages and other current liabilities included $183,318 of EIC liabilities under certain reinsurance contracts. During calendar 2017, EIC limited its exposure to loss and recovered a portion of benefits paid by utilizing quota-share reinsurance with a commercial reinsurance company. Beginning calendar 2018, EIC does not have a reinsurance agreement in place related to its individual and certain group Medicare Part D Plans. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Jun. 02, 2018 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 9. Goodwill and Other Intangible Assets There was no impairment charge for the thirteen week period ended June 2, 2018. At June 2, 2018 and March 3, 2018, accumulated impairment losses for the Pharmacy Services segment was $261,727. The Company’s intangible assets are primarily finite-lived and amortized over their useful lives. Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets as of June 2, 2018 and March 3, 2018. June 2, 2018 March 3, 2018 Gross Accumulated Net Remaining Gross Accumulated Net Remaining Favorable leases and other(a) $ $ ) $ 7 years $ $ ) $ 7 years Prescription files ) 3 years ) 3 years Customer relationships(a) ) 14 years ) 15 years CMS license ) 22 years ) 23 years Claims adjudication and other developed software ) 4 years ) 5 years Trademarks ) 7 years ) 8 years Backlog ) 1 year ) 1 year Total finite $ $ ) $ $ ) $ Trademarks — Indefinite — Indefinite Total $ $ ) $ $ $ ) $ (a) Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows. Also included in other non-current liabilities as of June 2, 2018 and March 3, 2018 are unfavorable lease intangibles with a net carrying amount of $17,857 and $18,888, respectively. These intangible liabilities are amortized over their remaining lease terms at time of acquisition. Amortization expense for these intangible assets and liabilities was $35,400 and $40,962 for the thirteen week periods ended June 2, 2018 and June 3, 2017, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2019—$124,583; 2020—$100,875; 2021—$76,995; 2022—$55,206 and 2023—$38,953. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreements | 3 Months Ended |
Jun. 02, 2018 | |
Indebtedness and Credit Agreements | |
Indebtedness and Credit Agreements | 10. Indebtedness and Credit Agreements Following is a summary of indebtedness and lease financing obligations at June 2, 2018 and March 3, 2018: June 2, 2018 March 3, Secured Debt: Senior secured revolving credit facility due January 2020 ($190,000 and $0 face value less unamortized debt issuance costs of $10,258 and $13,076) $ $ ) Other secured ) Guaranteed Unsecured Debt: 9.25% senior notes due March 2020 ($0 and $902,000 face value plus unamortized premium of $0 and $1,400 and less unamortized debt issuance costs of $0 and $4,924 as of June 2, 2018 and March 3, 2018, respectively) — 6.75% senior notes due June 2021 ($805,169 and $810,000 face value less unamortized debt issuance costs of $4,482 and $4,877) 6.125% senior notes due April 2023 ($1,753,490 and $1,800,000 face value less unamortized debt issuance costs of $20,106 and $21,708) Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,418 and $1,460) 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $691 and $707) 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 $ $ Reconciliation of indebtedness included in continuing operations and discontinued operations: March 3, 2018 Debt Lease Financing Total Debt and Balance, March 3, 2018—per above table $ $ $ Amounts reclassified as current liabilities held for sale in connection with the Sale(a) ) ) ) Total debt and lease financing obligations Current maturities of long-term debt and lease financing obligations—continuing operations ) ) ) Long-term debt and lease financing obligations, less current maturities—continuing operations $ $ $ (a) In connection with the Sale, the Company had estimated that the Sale would generate excess cash proceeds of approximately $4,027,400 which would be used to repay outstanding indebtedness. During the thirteen week period ended June 2, 2018, the Company has a use of cash for financing purposes of $525,031 in its discontinued operations and, based on refinements to its calculations, reduced its estimate of excess cash proceeds by approximately $24,500 and reclassified that amount to assets held and used. Consequently, the Company has classified $0 and $549,549 of estimated cash proceeds to be used for debt repayment to liabilities held for sale as of June 2, 2018 and March 3, 2018, respectively. Additionally, as part of the Sale, the Company will be relieved of approximately $0 and $1,108, respectively, of capital lease obligations as of June 2, 2018 and March 3, 2018. These amounts are also reflected as liabilities held for sale. Please see Note 3 for additional details. Credit Facility The Company’s Amended and Restated Senior Secured Credit Facility has a borrowing capacity of $2,700,000 and matures in January 2020. Borrowings under the revolver bear interest at a rate per annum between (i) LIBOR plus 1.50% and LIBOR plus 2.00% with respect to Eurodollar borrowings and (ii) the alternate base rate plus 0.50% and the alternate base rate plus 1.00% with respect to ABR borrowings, in each case, based upon the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the revolver, depending on the Average Revolver Availability (as defined in the Amended and Restated Senior Secured Credit Facility). Amounts drawn under the revolver become due and payable on January 13, 2020. 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 June 2, 2018, the Company had $190,000 of borrowings outstanding under the revolver and had letters of credit outstanding against the revolver of $55,790 which resulted in additional borrowing capacity of $2,454,210. The Amended and Restated Senior Secured Credit Facility restricts the Company and the Subsidiary Guarantors (as defined herein) from accumulating cash on hand, and under certain circumstances, requires the funds in the Company’s deposit accounts to be applied first to the repayment of outstanding revolving loans under the Amended and Restated Senior Secured Credit Facility and then to be held as collateral for the senior obligations. The Amended and Restated Senior Secured Credit Facility allows the Company to have outstanding, at any time, up to $1,500,000 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 revolver of more than $365,000. The Amended and Restated Senior Secured Credit Facility has a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (a) on any date on which availability under the revolver is less than $200,000 or (b) on the third consecutive business day on which availability under the revolver is less than $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolver is equal to or greater than $250,000. As of June 2, 2018, the Company had availability under its revolver of $2,454,210, its fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the senior secured credit facility’s financial 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. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility and unsecured guaranteed notes. The Amended and Restated Senior Secured Credit Facility is secured, on a senior priority basis, by a lien on, among other things, accounts receivable, inventory and prescription files of the Subsidiary Guarantors. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several, and there are no restrictions on the ability of the Company to obtain funds from its subsidiaries. The Company has no independent assets or operations. Additionally, prior to the Acquisition, the subsidiaries, including joint ventures, that did not guarantee the Amended and Restated Senior Secured Credit Facility and applicable notes, were minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented for those periods. Subsequent to the Acquisition, other than EIC, the subsidiaries, including joint ventures, that do not guarantee the credit facility and applicable notes, are minor. As such, condensed consolidating financial information for the Company, its guaranteeing subsidiaries and non-guaranteeing subsidiaries is presented for those periods subsequent to the Acquisition. See Note 14 “Guarantor and Non-Guarantor Condensed Consolidating Financial Information” for additional disclosure. Fiscal 2018 and 2019 Transactions During January 2018, the Company used proceeds from the Asset Sale to repay and retire all of its outstanding second lien $470,000 tranche 1 term loan and $500,000 tranche 2 term loan principal (the “Second Lien Term Loan Prepayment”). During February 2018, the Company reduced the borrowing capacity on its Amended and Restated Senior Secured Credit Facility from $3,700,000 to $3,000,000. In connection with the transactions, the Company recorded a loss on debt retirement of $8,180, which included interest and unamortized debt issuance costs. The debt repayment and related loss on debt retirement is included in the results of operations and cash flows of discontinued operations. On February 27, 2018, the Company announced that it had commenced an offer to purchase up to $900,000 of the outstanding 9.25% senior notes due 2020 (the “9.25% Notes”), the 6.75% senior notes due 2021 (the “6.75% Notes”) and the 6.125% Senior Notes due 2023 (the “6.125% Notes”), pursuant to the asset sale provisions of the indentures of such notes. On March 29, 2018, the Company accepted for payment, pursuant to its offer to purchase, $3,454 principal amount of the 9.25% Notes, representing 0.38% of the outstanding principal amount of the 9.25% Notes, $3,471 principal amount of the 6.75% Notes, representing 0.43% of the outstanding principal amount of the 6.75% Notes, and $41,751 principal amount of the 6.125% Notes, representing 2.32% of the outstanding principal amount of the 6.125% Notes. In connection therewith, the Company recorded a loss on debt retirement of $49 which included unamortized debt issuance costs, partially offset by unamortized discount. The debt repayment and related loss on debt retirement is included in the results of operations and cash flows of discontinued operations. The debt repayment and related loss on debt retirement of $498 for the 6.125% Notes is included in the results of operations and cash flows of continuing operations. On March 13, 2018, the Company issued a notice of redemption for all of the 9.25%. Notes that were outstanding on April 12, 2018, pursuant to the terms of the indenture of the 9.25% Notes. On April 12, 2018, the Company redeemed 100% of the remaining outstanding 9.25% Notes. In connection therewith, the Company recorded a loss on debt retirement of $3,422 which included unamortized debt issuance costs, partially offset by unamortized discount. The debt repayment and related loss on debt retirement is included in the results of operations and cash flows of discontinued operations. On April 19, 2018, the Company announced that it had commenced an offer to purchase up to $700,000 of its outstanding 6.75% Notes and its 6.125% Notes pursuant to the terms of such indentures. On May 21, 2018, the Company redeemed $1,360 aggregate principal amount of the 6.75% Notes and $4,759 aggregate principal amount of the 6.125% Notes. The debt repayment and related loss on debt retirement of $8 for the 6.75% Notes is included in the results of operations and cash flows of discontinued operations. The debt repayment and related loss on debt retirement of $56 for the 6.125% Notes is included in the results of operations and cash flows of continuing operations. On April 29, 2018, the Company further reduced the borrowing capacity on its Amended and Restated Senior Secured Credit Facility from $3,000,000 to $2,700,000. In connection therewith, the Company recorded a loss on debt retirement of $1,091, which included unamortized debt issuance costs. The loss on debt retirement is included in the results of operations and cash flows of discontinued operations. On May 25, 2018, the Company issued a notice of redemption for all of the 6.75% Notes that were outstanding on June 25 2018, pursuant to the terms of the indenture of the 6.75% Notes. On June 25, 2018, the Company redeemed 100% of the remaining outstanding 6.75% Notes, which resulted in a loss on debt retirement of $18,075. The debt repayment and related loss on debt retirement will be included in the results of operations and cash flows of discontinued operations during the second quarter ending September 1, 2018. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2019 and thereafter are as follows: 2019—$90; 2020—$190,000; 2021—$0; 2022—$805,169; 2023—$0 and $2,176,490 thereafter. |
Retirement Plans
Retirement Plans | 3 Months Ended |
Jun. 02, 2018 | |
Retirement Plans | |
Retirement Plans | 11. Retirement Plans Net periodic pension expense recorded in the thirteen week periods ended June 2, 2018 and June 3, 2017, for the Company’s defined benefit plan includes the following components: Defined Benefit Thirteen Week Period Ended June 2, June 3, Service cost $ $ Interest cost Expected return on plan assets ) ) Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss Net periodic pension expense $ $ During the thirteen week period ended June 2, 2018 the Company contributed $813 to the Defined Benefit Pension Plan. During the remainder of fiscal 2018, the Company expects to contribute $3,800 to the Defined Benefit Pension Plan. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Jun. 02, 2018 | |
Segment Reporting | |
Segment Reporting | 12. Segment Reporting The Company has two reportable segments, its retail drug stores (“Retail Pharmacy”), and its pharmacy services (“Pharmacy Services”) segments, collectively the “Parent Company”. The Retail Pharmacy segment’s primary business is the sale of prescription drugs and related consultation to its customers. Additionally, the Retail Pharmacy segment sells a full selection of health and beauty aids and personal care products, seasonal merchandise and a large private brand product line. The Pharmacy Services segment offers a full range of pharmacy benefit management services including plan design and administration, on both a transparent pass-through model and traditional model, formulary management and claims processing. Additionally, the Pharmacy Services segment offers specialty and mail order services, infertility treatment, and drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program. The Parent Company’s chief operating decision makers are its Parent Company Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Operating Officer—Retail Pharmacy, and the Chief Executive Officer—Pharmacy Services, (collectively the “CODM”). The CODM has ultimate responsibility for enterprise decisions. The CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise, the Retail Pharmacy segment and the Pharmacy Services segment. The Retail Pharmacy and Pharmacy Services segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. The CODM relies on internal management reporting that analyzes enterprise results on certain key performance indicators, namely, revenues, gross profit, and Adjusted EBITDA. The following is balance sheet information for the Company’s reportable segments: Retail Pharmacy Eliminations(2) Consolidated June 2, 2018: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — March 3, 2018: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — (2) As of June 2, 2018 and March 3, 2018, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $40,319 and $38,713, respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $14,774 and $16,256, respectively, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. The following table is a reconciliation of the Company’s business segments to the consolidated financial statements for the thirteen week periods ended June 2, 2018 and June 3, 2017: Retail Pharmacy Intersegment Consolidated June 2, 2018: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — June 3, 2017: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — (1) Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis. (2) See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. The following is a reconciliation of net (loss) income to Adjusted EBITDA for the thirteen week periods ended June 2, 2018 and June 3, 2017: June 2, June 3, Net loss from continuing operations $ ) $ ) Interest expense Income tax benefit ) ) Depreciation and amortization expense LIFO charge Lease termination and impairment charges Loss on debt retirements, net — Other Adjusted EBITDA from continuing operations $ $ |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 3 Months Ended |
Jun. 02, 2018 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 13. Commitments, Contingencies and Guarantees Legal Matters and Regulatory Proceedings The Company is involved in legal proceedings and is subject to investigations, inspections, claims, audits, inquiries, and similar actions by governmental authorities arising in the ordinary course of its business, including, without limitation, the matters described below. The Company records accruals for outstanding legal matters and applicable regulatory proceedings when it believes it is probable that a loss will be incurred, and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters and regulatory proceedings that could affect the amount of any existing accrual and developments that would make a loss contingency both probable and reasonably estimable, and as a result, warrant an account. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters or regulatory proceedings are material individually or in the aggregate to the Company’s consolidated financial position. The Company’s contingencies are subject to significant uncertainties, many of which are beyond the Company’s control, 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 qui tam lawsuit (“whistleblower” action) has been filed and whether the government agency makes a decision to intervene in the lawsuit following investigation. While the Company cannot predict the outcome of any of the contingencies, the Company’s management does not believe that the outcome of any of these legal matters or regulatory proceedings will be material to the Company’s consolidated financial position. It is possible, however, the Company’s results of operations or cash flows could be materially affected by unfavorable outcomes in outstanding legal matters or regulatory proceedings. After the announcement of the then proposed merger between the Company and Walgreens Boots Alliance, Inc. (WBA), a putative class action lawsuit was filed in Pennsylvania in the Court of Common Pleas of Cumberland County ( Wilson v. Rite Aid Corp., et al. ) by a purported Company stockholder against the Company, its directors (the Individual Defendants, together with the Company, the Rite Aid Defendants), WBA and Victoria Merger Sub Inc. (Victoria) challenging the transactions contemplated by the merger agreement. The complaint alleged primarily that the Individual Defendants breached their fiduciary duties by, among other things, agreeing to an allegedly unfair and inadequate price, agreeing to deal protection devices that allegedly prevented the directors from obtaining higher offers from other interested buyers for the Company and allegedly failing to protect against certain purported conflicts of interest in connection with the merger. The complaint further alleged that the Company, WBA and/or Victoria aided and abetted these alleged breaches of fiduciary duty. The complaint sought, among other things, to enjoin the closing of the merger as well as money damages and attorneys’ and experts’ fees. The matter remains pending, but inactive. Also in connection with that proposed merger, a lawsuit was filed in the United States District Court for the Middle District of Pennsylvania (the Pennsylvania District Court), asserting a claim for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against the Rite Aid Defendants, WBA and Victoria and a claim for violations of Section 20(a) of the Exchange Act against the Individual Defendants and WBA ( Hering v. Rite Aid Corp., et al. ). The complaint in the Hering action alleged, among other things, that the Rite Aid Defendants disseminated an allegedly false and materially misleading proxy and sought to enjoin the shareholder vote on the proposed merger, a declaration that the proxy was materially false and misleading in violation of federal securities laws and an award of money damages and attorneys’ and experts’ fees. On January 14 and 16, 2016, respectively, the plaintiff in the Hering action filed a motion for preliminary injunction and a motion for expedited discovery. On January 21, 2016, the Rite Aid Defendants filed a motion to dismiss the Hering complaint. At a hearing held on January 25, 2016, the Pennsylvania District Court orally denied the plaintiff’s motion for expedited discovery and subsequently denied the plaintiff’s motion for preliminary injunction on January 28, 2016. On March 14, 2016, the Pennsylvania District Court appointed Jerry Hering, Don Michael Hussey and Joanna Pauli Hussey as lead plaintiffs for the putative class and approved their selection of Robbins Geller Rudman & Dowd LLP as lead counsel. On April 14, 2016, the Pennsylvania District Court granted the lead plaintiffs’ unopposed motion to stay the Hering action for all purposes pending consummation of the merger. On March 17, 2017, the Hering plaintiffs filed a motion to lift the stay for the purpose of filing a proposed amended complaint. Defendants opposed the motion, and briefing concluded on April 17, 2017. The proposed amended complaint asserted state law breach of fiduciary duty claims against the Individual Defendants, a claim of aiding and abetting the alleged breaches of fiduciary duty against Rite Aid, WBA and Victoria, as well as claims for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against the Rite Aid Defendants, WBA and Victoria, claims for violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5 against the Rite Aid Defendants, WBA, Victoria and certain WBA executives, and a claim for violations of Section 20(a) of the Exchange Act against the Individual Defendants, WBA and Victoria. On August 4, 2017, the Pennsylvania District Court entered an order lifting the stay, noting that the original claims in this matter are now moot, and directed the plaintiffs to file a motion for leave to amend the complaint, with brief in support thereof, on or before September 15, 2017 which deadline was subsequently extended to September 22, 2017. On September 22, 2017, the lead plaintiffs gave notice that plaintiffs Don Michael Hussey and Joanna Pauli Hussey were withdrawing as lead plaintiffs, and that plaintiff Jerry Hering (the Lead Plaintiff) would continue to represent the proposed class in the Hering action going forward. That same day, Lead Plaintiff filed a motion for leave to file an amended complaint, which the Pennsylvania District Court granted on November 27, 2017. On December 11, 2017, Lead Plaintiff filed the amended complaint (the Amended Complaint), which alleges a claim for violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5 and a claim for violations of Section 20(a) of the Exchange Act against the Rite Aid Defendants, WBA, and certain WBA executives. On February 14 and 16, 2018, the Rite Aid Defendants filed a motion to dismiss the Amended Complaint, and an opening brief in support thereof. Briefing concluded on June 7, 2018. In connection with the proposed merger between the Company and Albertsons Companies, Inc. (ACI), on April 24, 2018, a Rite Aid stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware against Rite Aid, ACI, Ranch Acquisition Corp. (Merger Sub I), Ranch Acquisition II LLC (Merger Sub II, together with ACI and Merger Sub I, the ACI defendants) and each of the Rite Aid directors (the Director defendants, together with Rite Aid, the Rite Aid defendants), Del. C.A. No. 2018-0305-AGB. Plaintiff contends that Rite Aid stockholders have appraisal rights under Section 262 of the DGCL. Plaintiff alleges breach of fiduciary duty claims against the Director defendants for their alleged failure to provide alleged statutory appraisal rights under Delaware law and for allegedly falsely informing Rite Aid stockholders that they will not have appraisal rights. Plaintiff further contends that the proxy statement/prospectus related to the proposed merger, and which was filed on April 6, 2018, was deficient under Section 262(d)(1) of the DGCL for failure to inform stockholders of their alleged appraisal rights. Plaintiff seeks declarations from the Court of Chancery that the action is a proper class action and that the Director defendants breached their fiduciary duties by failing to adequately inform class members of their appraisal rights under Delaware law, to enjoin the proposed action from closing until such time as class members are afforded the ability to seek appraisal of their shares, or otherwise permit class members to petition the Court of Chancery for appraisal, and attorneys’ fees, expenses, and costs to Plaintiff. On May 9, 2018, the Court of Chancery denied Plaintiff’s motion to expedite and declined to schedule a preliminary injunction hearing, ruling that Plaintiff failed to state a colorable claim. Defendants oppose Plaintiff’s claims on the ground that Rite Aid stockholders have no appraisal rights under the DGCL because they have a right to receive all stock consideration as described in the proxy statement/prospectus previously filed on April 6, 2018. On May 16, 2018, the Rite Aid defendants and the ACI defendants each filed a Motion to Dismiss Plaintiff’s Verified Class Action Complaint (collectively, the “Motions to Dismiss”). On June 6, 2018, the parties jointly stipulated that the briefing submitted by the parties in support of, and in opposition to, Plaintiff’s Motion for Expedited Proceedings shall constitute the briefing with respect to the Motions to Dismiss. At this stage of the proceedings, the Company is not able to either predict the outcome of this lawsuit or estimate a potential rage of loss with respect to the lawsuit and is vigorously defending this lawsuit. On June 29, 2018, a purported stockholder of the Company filed a Verified Complaint to Compel Inspection of Books and Records under 8 Del. C. §220 in the Delaware Court of Chancery against the Company, seeking to inspect books and records in order to determine whether wrongdoing or mismanagement has taken place such that it would be appropriate to file claims for breach of fiduciary duty, and to investigate the independence and disinterestedness of the Company's directors with respect to the proposed merger with ACI. The Company's response to this complaint is due on July 23, 2018. The Company is currently a defendant in several lawsuits filed in courts in California alleging violations of California wage-and-hour laws, rules and regulations pertaining primarily to failure to pay overtime, failure to pay for missed meals and rest periods, failure to reimburse business expenses and failure to provide employee seating (the “California Cases”). Some of the California Cases purport or may be determined to be class actions and seek substantial damages and penalties. The single-plaintiff and multi-plaintiff California Cases regarding violations of wage-and-hour laws, failure to pay overtime and failure to pay for missed meals and rest periods, in the aggregate, seek substantial damages. The Company believes that its defenses and assertions in the California Cases, as well as other lawsuits, have merit. The Company has aggressively challenged the merits of the lawsuits and, where applicable, the allegations that the lawsuits should be certified as class or representative actions. Additionally, at this time the Company is not able to predict either the outcome of or estimate a potential range of loss with respect to the California Cases and is vigorously defending them. In the employee seating lawsuit ( 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 were stayed pending a decision by the California Supreme Court in two similar lawsuits. That decision was rendered on April 4, 2016. A status conference in the case was held on November 18, 2016, at which time the court lifted the stay and scheduled the matter for trial on January 26, 2018. The trial scheduled to begin June 15, 2018 was adjourned by the Court. A new trial date has not been scheduled by the Court. On February 2, 2018, the Court denied Rite Aid’s motion for summary judgment. Following service of subpoenas on the Company in 2011 and 2013 by the United States Attorney’s Office for the Eastern District of Michigan (“USAO”) and the State of Indiana’s Office of the Attorney General, respectively, the Company cooperated with inquiries regarding the relationship of Rite Aid’s Rx Savings Program to the reporting of usual and customary charges to publicly funded health programs. In January 2017, the USAO, 18 states and the District of Columbia declined to intervene in a sealed False Claims Act (“FCA”) lawsuit filed by qui tam plaintiff Azam Rahimi (“Relator”) in the District Court for the Eastern District of Michigan. On January 19, 2017, the court unsealed Relator’s Second Amended Complaint against the Company; it alleges that the Company failed to report Rx Savings prices as its usual and customary charges under the Medicare Part D program and to federal and state Medicaid programs in 18 states and the District of Columbia; and that the Company is thus liable under the federal FCA and similar state statutes. In its ruling on the Company’s motion to dismiss the complaint, the Court held that Relator’s complaint was deficient, but allowed Relator the opportunity to re-plead. Relator filed a Third Amended Complaint on May 11, 2018. The Company filed a motion to dismiss the Third Amended Complaint on May 25, 2018, which is pending. At this stage of the proceedings, 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 and is vigorously defending this lawsuit. On April 26, 2012, the Company received an administrative subpoena from the U.S. Drug Enforcement Administration (“DEA”), Albany, New York District Office, requesting information regarding the Company’s sale of products containing pseudoephedrine (“PSE”). In April 2012, it also received a communication from the U.S. Attorney’s Office (“USAO”) for the Northern District of New York concerning an investigation of possible civil violations of the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”). Additional subpoenas were issued in 2013, 2014, and 2015 seeking broader documentation regarding PSE sales and recordkeeping requirements. Assistant U.S. Attorneys from the Northern and Eastern Districts of New York and the Southern District of West Virginia are currently investigating, but no lawsuits have been filed. Violations of the CMEA could result in the imposition of administrative and/or civil penalties against the Company. The Company has entered into tolling agreements with the United States, and discussions have been held to attempt to resolve these matters with those USAOs and the Department of Justice, but whether any agreements can be reached and on what terms is uncertain. At this stage of the investigation, the Company is not able to predict the outcome of the investigation. In December 2017, Rite Aid executed a non-prosecution agreement with the United States Attorney’s Office for the Southern District of West Virginia (countersigned by the government in January 2018), which concluded the previous criminal investigation into Rite Aid’s PSE sales. Pursuant to that agreement, the government agreed not to bring any criminal charges against Rite Aid, and Rite Aid agreed to pay an immaterial amount of money as restitution. The civil investigation is ongoing. In June 2013, the Company was served with a Civil Investigative Demand (“CID”) by the United States Attorney’s Office for the Eastern District of California (the “USAO”) regarding (1) the Company’s Drug Utilization Review (“DUR”) and prescription dispensing protocol; and (2) the dispensing of drugs designated as “Code 1” by the State of California. The Company cooperated with the investigation, researched the government’s allegations, and refuted the government’s position. The Company produced documents including certain prescription files related to Code 1 drugs to the USAO’s office and the State of California Department of Justice’s Bureau of Medical Fraud and Elder Abuse (“CADOJ”). In August 2014, the USAO and 8 states’ attorneys general declined to intervene in a California False Claim Act (“FCA”) action (“Action”) filed under seal in the Eastern District of California by qui tam plaintiff Loyd F. Schmuckley (“Relator”) based on DUR and Code 1 allegations. In July 2016, the Commonwealth of Massachusetts and the District of Columbia also declined to intervene in the Action. On May 15, 2017, Relator and the CADOJ stipulated to dismiss all DUR-related claims and 18 other state-based claims. On September 21, 2017, the CADOJ filed a sealed complaint-in-intervention in the Action, asserting causes under the FCA, for unjust enrichment and for payment by mistake related to the Code 1 allegations. The Action was unsealed on September 26, 2017. On September 28, 2017, Relator filed a First Amended Complaint under the FCA also concerning the Code 1 allegations. The Company filed a motion to dismiss Relator’s and CADOJ’s respective complaints in January 2018, the hearing was held on March 23, 2018, and the court’s order remains pending. At this stage of the proceedings, the Company is not able to either predict the outcome of this matter or estimate a potential range of loss with respect to this matter and is vigorously defending this lawsuit. The State of Mississippi, by and through its Attorney General, filed a First Amended Complaint against the Company and various purported related entities on September 27, 2016 alleging violations of the Mississippi Medicaid Fraud Control Act, violations of the Mississippi Unfair and Deceptive Trade Practices Act, fraud and unjust enrichment. The Complaint alleges the Company failed to accurately report usual and customary prices to Mississippi’s Division of Medicaid. On November 14, 2016, the Company filed motions to dismiss based on substantive and jurisdictional grounds, as well as a motion to transfer venue. These motions are pending and the lawsuit is stayed while related litigation is on appeal. At this stage of the proceedings, 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 and is vigorously defending this lawsuit. In December 2017, the United States Judicial Panel on multidistrict litigation ordered consolidated numerous lawsuits filed against various defendants by plaintiffs such as counties, cities, hospitals, and third-party payors, alleging claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is In re National Prescription Opiate Litigation (MDL No. 2804), pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes relevant federal court lawsuits that name the Company, including lawsuits filed by counties and municipalities in California, Indiana, Maryland, Michigan, Missouri, New Jersey, North Carolina, Ohio, West Virginia, and Wisconsin. Similar lawsuits that name the Company in some capacity have been filed in state courts, including lawsuits filed by Shelby County, Tennessee, Shelby County (Tennessee) v. Purdue Pharma, L.P. et al.; several counties and cities in West Virginia, Brooke County (West Virginia) et al. v. Purdue Pharma L.P., et al. and City of Huntington (West Virginia) et al. v. Express Scripts Holding Company, et al, ; several counties in South Carolina, County of Spartanburg (South Carolina) v. Rite Aid of South Carolina, Inc. et al. , County of Greenville (South Carolina) v. Rite Aid of South Carolina, Inc., et al. , and County of Anderson v. Rite Aid of South Carolina, Inc., et al ; Camden County, New Jersey, Camden County, New Jersey v. Purdue Pharma L.P., et al ; two counties in Oklahoma, The Board of County Commissioners of Delaware County, State of Oklahoma v. Purdue Pharma L.P., et al. and The Board of County Commissioners of Ottawa County, State of Oklahoma v. Purdue Pharma L.P., et al. ; the city of Parma Heights, Ohio, The City of Parma Heights, Ohio v. Purdue Pharma L.P., et al. ; and the city of Atlanta, Georgia, The City of Atlanta v. Purdue Pharma, LP, et al. At this stage of the proceedings, the Company is not able to either predict the outcome of these lawsuits or estimate a potential range of loss with respect to the lawsuits and is vigorously defending them. The Company is involved in two putative consumer class action lawsuits in the United States District Court for the Southern District of California, alleging that it has overcharged customers’ insurance companies for prescription drug purchases, resulting in overpayment of co-pays. The first lawsuit, Byron Stafford v. Rite Aid Corp ., Case No. 17-CV-01340-AJB-JLB, was filed on June 30, 2017, and the second case, Robert Josten v. Rite Aid Corp ., Case No. 18-CV-00152-AJB-JLB, was filed on January 23, 2018. Each lawsuit alleges that (1) the Company was obligated to charge the plaintiffs’ insurance companies a “usual and customary” price for their prescription drugs; and (2) the Company failed to do so properly because the prices it reported were not equal to or adjusted to account for the discount prices that Rite Aid offers to uninsured and underinsured customers through its Rx Savings Program. On December 19, 2017, the court granted the Company’s motion to dismiss Stafford’s complaints with leave to amend for failure to plead compliance with the applicable statutes of limitations. After Stafford amended the complaint on January 9, 2018, the Company filed another motion to dismiss on January 23, 2018, and a similar motion to dismiss Josten’s complaint on March 16, 2018. Both motions are fully briefed and are awaiting a decision from the court. At this stage of the proceedings, the Company is not able to either predict the outcome of these lawsuits or estimate a potential range of loss with respect to the lawsuit and is vigorously defending these lawsuits. 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 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. |
Guarantor and Non-Guarantor Con
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | 3 Months Ended |
Jun. 02, 2018 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | 14. Guarantor and Non-Guarantor Condensed Consolidating Financial Information Rite Aid Corporation conducts the majority of its business through its subsidiaries. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes (the “Subsidiary Guarantors”). Additionally, with the exception of EIC, the subsidiaries, including joint ventures, that do not guarantee the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes, are minor. For the purposes of preparing the information below, Rite Aid Corporation uses the equity method to account for its investment in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in the non-guarantor subsidiaries. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several. Presented below is condensed consolidating financial information for Rite Aid Corporation, the Subsidiary Guarantors, and the non-guarantor subsidiaries at June 2, 2018, March 3, 2018, and for the thirteen week periods ended June 2, 2018 and June 3, 2017. Separate financial statements for Subsidiary Guarantors are not presented. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $591,056, $0, $0, and $591,056 — — — Prepaid expenses and other current assets — — Current assets held for sale — — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity )(b) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — )(a) — Inventories, net of LIFO reserve of $0, $581,090, $0, $0, and $581,090 — — — Prepaid expenses and other current assets — — Current assets held for sale — — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Noncurrent assets held for sale — — — — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Current liabilities held for sales — — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Noncurrent liabilities held for sale — — — — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity )(b) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — )(a) Lease termination and impairment charges — — — Interest expense ) — Loss on debt retirements — — — Gain on sale of assets, net — ) — — ) Equity in earnings of subsidiaries, net of tax ) — (b) — ) Income (loss) from continuing operations before income taxes ) ) ) Income tax expense (benefit) — ) — ) Net income (loss) from continuing operations $ $ $ ) $ )(b) $ ) Net income (loss) from discontinued operations ) — — Net income (loss) ) ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ $ $ ) $ ) $ (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — (a) Lease termination and impairment expenses — — — Interest expense — Gain on sale of assets, net — ) — — ) Equity in earnings of subsidiaries, net of tax ) — (b) — Earnings from continuing operations before income taxes ) ) ) ) ) Income tax expense (benefit) — ) ) — ) Net income (loss) from continuing operations ) ) ) ) Net income (loss) from discontinued operations ) — — ) Net income (loss) $ ) $ $ ) $ )(b) $ ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ ) $ $ ) $ ) $ ) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ ) Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from dispositions of assets and investments — — — Proceeds from sale-leaseback transactions — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net proceeds from revolver — — — Principal payments on long-term debt ) ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Financing fees paid for early redemption — ) — — ) Intercompany activity — — ) — Net cash provided by (used in) financing activities ) — ) ) Cash flows of discontinued operations: Operating activities of discontinued operations ) ) — — ) Investing activities of discontinued operations — — — Financing activities of discontinued operations ) — — — ) Net cash (used in) provided by discontinued operations ) — — (Decrease) increase in cash and cash equivalents — ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from insured loss — — — Proceeds from dispositions of assets and investments — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net payments to revolver ) — — — ) Principal payments on long-term debt — ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Payments for taxes related to net share settlement of equity awards — ) — — ) Intercompany activity — — ) — Net cash provided by (used in) financing activities — ) ) Cash flows of discontinued operations: Operating activities of discontinued operations ) — — Investing activities of discontinued operations — ) — — ) Financing activities of discontinued operations — ) — — ) Net cash (used in) provided by discontinued operations ) — — (Decrease) increase in cash and cash equivalents — ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ |
Tax Benefits Preservation Plan
Tax Benefits Preservation Plan | 3 Months Ended |
Jun. 02, 2018 | |
Tax Benefits Preservation Plan | |
Tax Benefits Preservation Plan | 15. Tax Benefits Preservation Plan On March 25, 2018, the Board of Directors of the Company approved, and on March 27, 2018, the Company and Broadridge Corporate Issuer Solutions, as rights agent, entered into an amendment to the Tax Benefits Preservation Plan that the Company entered into on January 3, 2018 (the “Amendment”). The Amendment changed the final expiration date with respect to the Rights issued under the Plan to 5:00 P.M. (New York City time) on March 27, 2018. In accordance with the terms of the Plan, as amended by the Amendment, all of the Rights then outstanding expired at 5:00 P.M. (New York City time) on March 27, 2018, and no Rights are to be issued from and after that time. |
Supplementary Cash Flow Data
Supplementary Cash Flow Data | 3 Months Ended |
Jun. 02, 2018 | |
Supplementary Cash Flow Data | |
Supplementary Cash Flow Data | 16. Supplementary Cash Flow Data Thirteen Weeks Ended June 2, 2018 June 3, 2017 Cash paid for interest(a) $ $ Cash payments for income taxes, net(a) $ $ Equipment financed under capital leases $ $ Equipment received for noncash consideration — $ Reduction in lease financing obligation — $ Gross borrowings from revolver(a) $ $ Gross repayments to revolver(a) $ $ (a)—Amounts are presented on a total company basis. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Jun. 02, 2018 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended June 2, 2018 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Rite Aid Corporation (“Rite Aid”) and Subsidiaries (together with Rite Aid, the “Company”) Fiscal 2018 10-K. The discussion and presentation of the operating and financial results of our business segments have been impacted by the following event. Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement (the “Amended and Restated Asset Purchase Agreement”), dated as of September 18, 2017, by and among Rite Aid, WBA and Walgreen Co., an Illinois corporation and wholly owned direct subsidiary of WBA (“Buyer”), Buyer agreed to purchase from Rite Aid 1,932 stores (the “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 the “Sale”). As of March 27, 2018, the Company has sold all 1,932 Acquired Stores and related assets to WBA in exchange for proceeds of $4,156.7 million, which were used to repay outstanding debt. Based on its magnitude and because the Company is exiting certain markets, the Sale represents a significant strategic shift that has a material effect on the Company’s operations and financial results. Accordingly, the Company has applied discontinued operations treatment for the Asset Sale as required by Accounting Standards Codification 210-05—Discontinued Operations (ASC 205-20). In accordance with ASC 205-20, the Company reclassified the assets and liabilities to be sold, including the 1,932 Acquired Stores, three (3) distribution centers, related inventory and other specified assets and liabilities related thereto (collectively the “Assets to be Sold” or “Disposal Group”) to assets and liabilities held for sale on its consolidated balance sheets as of the periods ended June 2, 2018 and March 3, 2018, and reclassified the financial results of the Disposal Group in its consolidated statements of operations and consolidated statements of cash flows for all periods presented. Additionally, corporate support activities related to the Disposal Group were not reclassified to discontinued operations. Please see additional information as provided in Note 3 Asset Sale to WBA. |
Revenue Recognition | Revenue Recognition Retail Pharmacy Segment For front end sales, the Retail Pharmacy segment recognizes revenues upon the transfer of control of the goods to the customer. The Company satisfies its performance obligation at the point of sale for front end transactions. The Retail Pharmacy segment front end revenue is measured based on the amount of fixed consideration that we expect to receive, net of an allowance for estimated future returns. Return activity is immaterial to revenues and results of operations in all periods presented. For pharmacy sales, the Retail Pharmacy segment recognizes revenue upon the transfer of control of the goods to the customer. The Company satisfies its performance obligation, upon pickup by the customer, which is when the customer takes title to the product. Each prescription claim is its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims. The Company’s revenue is measured based on the amount of fixed consideration that we expect to receive, reduced by refunds owed to the third party payor for pricing guarantees and performance against defined value-based service and performance metrics. The inputs to these estimates are not highly subjective or volatile. The effect of adjustments between estimated and actual amounts have not been material to the Company’s results of operations or financial position. Prescriptions are generally not returnable. The Retail Pharmacy segment offers a chain-wide loyalty card program titled wellness +. Individual customers are able to become members of the wellness + program. Members participating in the wellness + loyalty card program earn points on a calendar year basis for eligible front end merchandise purchases and qualifying prescription purchases which may be redeemed to pay for future purchases. One point is awarded for each dollar spent towards front end merchandise and 25 points are awarded for each qualifying prescription. Members reach specific wellness + tiers based on the points accumulated during the calendar year, which entitles such customers to certain future discounts and other benefits upon reaching that tier. For example, any customer that reaches 1,000 points in a calendar year achieves the “Gold” tier, enabling him or her to receive a 20% discount on qualifying purchases of front end merchandise for the remaining portion of the calendar year and also the next calendar year. There is also a similar “Silver” level with a lower threshold and benefit level. Points earned pursuant to the wellness+ program represent a performance obligations and the Company allocates revenue between the merchandise purchased and the wellness + points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness + points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As customers redeem the points to receive discounted front end merchandise or when the points expire, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $73,191 as of June 2, 2018, of which $49,793 is included in other current liabilities and $23,398 is included in noncurrent liabilities. The Retail Pharmacy segment had accrued contract liabilities of $63,851 as of March 3, 2018, of which $50,036 is included in other current liabilities and $13,815 is included in noncurrent liabilities. The wellness + program also allows a customer to earn Bonus Cash based on qualifying purchases. Wellness + Rewards members have the opportunity to redeem his or her accumulated Bonus Cash on a future purchase with a 60 day expiration window. All Bonus Cash is redeemed using a FIFO methodology (i e., first Bonus Cash earned are the first to be redeemed). For a majority of the Bonus Cash issuances, funding is provided by our vendors through contractual arrangements. This funding is treated as a contract liability and remains a contract liability until i) a wellness + Rewards members redeem their Bonus Cash, or ii) wellness + Rewards members allow the Bonus Cash to expire. Upon redemption or expiration, the Retail Pharmacy segment recognizes an allocable portion of the accrued contract liability into revenue. For Bonus Cash issuances that are not vendor funded, the contract liability is recorded at the time of issuance through a reduction to revenues, and not recognized until the Bonus Cash is redeemed or expires. Pharmacy Services Segment The Pharmacy Services segment sells prescription drugs indirectly through its retail pharmacy network and directly through its mail service dispensing pharmacy. The Pharmacy Services segment recognizes revenue from prescription drugs sold by (i) its mail service dispensing pharmacy and (ii) under retail pharmacy network contracts where it is the principal at the contract prices negotiated with its clients, primarily employers, insurance companies, unions, government employee groups, health plans, Managed Medicaid plans, Medicare plans, and other sponsors of health benefit plans, and individuals throughout the United States. Revenues include: (i) the portion of the price the client pays directly to the Pharmacy Services segment, net of any volume-related or other discounts paid back to the client (see “Drug Discounts” below), (ii) the price paid to the Pharmacy Services segment by client plan members for mail order prescriptions (“Mail Co-Payments”) (iii) client plan member copayments made directly to the retail pharmacy network, and (iv) administrative fees. Revenue is recognized when the Pharmacy Services segment meets its performance obligations relative to each transaction type, The following revenue recognition policies have been established for the Pharmacy Services segment: · Revenues generated from prescription drugs sold by third party pharmacies in the Pharmacy Services segment’s retail pharmacy network and associated administrative fees are recognized at the Pharmacy Services segment’s point-of-sale, which is when the claim is adjudicated by the Pharmacy Services segment’s online claims processing system. At this point the Company has performed all of its performance obligations. · Revenues generated from prescription drugs sold by the Pharmacy Services segment’s mail service dispensing pharmacy are recognized when the prescription is shipped. At the time of shipment, the Pharmacy Services segment has performed all of its performance obligations under its client contracts, as control of and title to the product has passed to the clients plan member. The Pharmacy Services segment does not experience a significant level of returns or reshipments. · Revenues generated from administrative fees based on membership or claims volume are recognized monthly based on the terms within the individual contracts, either a monthly member based fee, or a claims volume based fee. In the majority of its contracts, the Pharmacy Services segment is the principal because its client contracts give clients the right to obtain access to its pharmacy contracts under which the Pharmacy Services segment directs its pharmacy network to provide the services (drug dispensing, consultation, etc.) and goods (prescription drugs) to the clients’ members at its negotiated pricing. The Pharmacy Services segment’s obligations under its client contracts are separate and distinct from its obligations to the third party pharmacies included in its retail pharmacy network contracts. Pursuant to these contracts, the Pharmacy Services segment is contractually required to pay the third party pharmacies in its retail pharmacy network for products sold after payment is received from its clients. The Pharmacy Services segment has control over these transactions until the prescription is transferred to the member and, thus, that it is acting as a principal. As such, the Pharmacy Services segment records the total prescription price contracted with clients in revenues. Amounts paid to pharmacies and amounts charged to clients are exclusive of the applicable co-payment under Pharmacy Services segment contracts. Retail pharmacy co-payments, which we instruct retail pharmacies to collect from members, are included in our revenues and our cost of revenues. For contracts under which the Pharmacy Services segment acts as an agent or does not control the prescription drugs prior to transfer to the client, no revenue is recognized. Drug Discounts—The Pharmacy Services segment deducts from its revenues that are generated from prescription drugs sold by third party pharmacies any rebates, inclusive of discounts and fees, earned by its clients based on utilization levels and other factors as negotiated with the prescription drug manufacturers or suppliers. Rebates are paid to clients in accordance with the terms of client contracts. Medicare Part D—The Pharmacy Services segment, through its EIC subsidiary, participates in the federal government’s Medicare Part D program as a Prescription Drug Plan (“PDP”). Please refer to Note 8, Medicare Part D. Disaggregation of Revenue The following table disaggregates the Company’s revenue by major source in each segment for the thirteen week period ended June 2, 2018: In millions For the thirteen week period ended June 2, Retail Pharmacy segment: Pharmacy sales $ Front end sales Other revenue Total Retail Pharmacy segment $ Pharmacy Services segment 1,542,762 Intersegment elimination ) Total revenue $ Impact of New Revenue Recognition Standard on Financial Statement Line Items The Company adopted the new revenue standard using the modified retrospective method. The cumulative effect of applying the new standard to all contracts was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue standard, the following adjustments were made to accounts on the condensed consolidated balance sheet as of March 4, 2018: Impact of Change in Accounting Policy As Reported Adjusted In millions March 3, 2018 Adjustments March 4, 2018 Condensed Consolidated Balance Sheet: Accounts receivable, net $ $ ) $ Inventories, net Deferred tax assets ) Total assets ) Accumulated deficit ) ) ) Total shareholders’ equity ) |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) . ASU No. 2014-09 outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU No. 2016-08, “Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net),” which amends the principal-versus-agent implementation guidance and in April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” which amends the guidance in those areas in the new revenue recognition standard. These ASUs, collectively the “new revenue standard”, are effective for annual reporting periods (including interim reporting periods within those periods) beginning January 1, 2018. The Company adopted the new revenue standard as of March 4, 2018 using the modified retrospective method and applying the new standard to all contracts with customers. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. In connection with the adoption of the new revenue standard, the Company identified one difference in its Retail Pharmacy segment related to the timing of revenue recognition for third party prescription revenues, which was historically recognized at the time the prescription was filled. Upon adoption of ASU No. 2014-09, this revenue is recognized at the time the customer takes possession of the merchandise. In connection with its March 4, 2018 adoption of the new revenue standard on a modified retrospective basis, the Company recorded a reduction to accounts receivable of $57,897, a reduction to deferred tax assets of $1,772, an increase to inventory of $51,121, and a corresponding increase to accumulated deficit of $8,548 within its Retail Pharmacy segment. In addition, the Company identified revenues under one specific rebate administration program under which the Company’s Pharmacy Services segment was determined to be the principal and historically recognized revenues and cost of revenues on a gross basis of approximately $123,500 during fiscal 2018. Upon adoption of the new revenue standard, the Company is required to record revenue from this program on a net basis. The Company expects the impact of the adoption of the new revenue standard to be immaterial to its revenues, net income, and cash flows on an ongoing basis. The following is a discussion of the Company’s revenue recognition policies by segment under the new revenue recognition accounting standard: Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842) , which is intended to improve financial reporting around leasing transactions. The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment. This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019 (fiscal 2020). On January 5, 2018 the FASB issued an exposure draft amending certain aspects of the new leasing standard. The proposed amendments include a provision to allow entities to elect not to restate comparative periods in the period of adoption when transitioning to the new standard and instead allow a modified retrospective approach. The Company believes that the new standard will have a material impact on its financial position. The Company is currently evaluating the impact this standard implementation will have on its results of operations and cash flows. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Summary of Significant Accounting Policies | |
Schedule of revenues | In millions For the thirteen week period ended June 2, Retail Pharmacy segment: Pharmacy sales $ Front end sales Other revenue Total Retail Pharmacy segment $ Pharmacy Services segment 1,542,762 Intersegment elimination ) Total revenue $ |
Schedule of impact of the Company's adoption of the ASU on the prior period consolidated balance sheet | Impact of Change in Accounting Policy As Reported Adjusted In millions March 3, 2018 Adjustments March 4, 2018 Condensed Consolidated Balance Sheet: Accounts receivable, net $ $ ) $ Inventories, net Deferred tax assets ) Total assets ) Accumulated deficit ) ) ) Total shareholders’ equity ) |
Asset Sale to WBA (Tables)
Asset Sale to WBA (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Asset Sale to WBA | |
Schedule of discontinued operations | June 2, March 3, Inventories $ $ Property and equipment Goodwill(a) — Intangible assets — Current assets held for sale $ $ Current maturities of long-term lease financing obligations $ — $ Accrued salaries, wages and other current liabilities — Long-term debt, less current maturities(b) — Lease financing obligations, less current maturities — Other noncurrent liabilities — Current liabilities held for sale $ — $ (a) The Company had $76,124 of goodwill in its Retail Pharmacy segment resulting from the acquisition of Health Dialog and RediClinic, which is accounted for as Retail Pharmacy segment enterprise goodwill. The Company has allocated a portion of its Retail Pharmacy segment enterprise goodwill to the discontinued operation. (b) In connection with the Sale, the Company had estimated that the Sale would generate excess cash proceeds of approximately $4,027,400 which would be used to repay outstanding indebtedness. During the thirteen week period ended June 2, 2018, the Company has a use of cash for financing purposes of $525,031 in its discontinued operations and, based on refinements to its calculations, reduced its estimate of excess cash proceeds by approximately $24,500 and reclassified that amount to assets held and used. Consequently, the Company has classified $0 and $549,549 of estimated cash proceeds to be used for debt repayment to liabilities held for sale as of June 2, 2018 and March 3, 2018, respectively. As of June 2, 2018 and March 3, 2018, the Company repaid outstanding indebtedness of $525,031 and $3,135,000 with Sale proceeds. |
Reconciliation of Revenue from Segments to Consolidated | June 2, June 3, Revenues $ $ Costs and expenses: Cost of revenues(a) Selling, general and administrative expenses(a) Lease termination and impairment charges — Loss on debt retirements, net — Interest expense(b) Gain on stores sold to Walgreens Boots Alliance ) — (Gain) loss on sale of assets, net — ) ) Income (loss) from discontinued operations before income taxes ) Income tax expense (benefit) ) Net income (loss) from discontinued operations, net of tax $ $ ) (a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations. (b) In accordance with ASC 205-20, the operating results for the thirteen week periods ended June 2, 2018 and June 3, 2017, respectively, for the discontinued operations include interest expense relating to the outstanding indebtedness repaid with the estimated excess proceeds from the Sale. |
Income (Loss) Per Share (Tables
Income (Loss) Per Share (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Income (Loss) Per Share | |
Schedule of calculation of basic and diluted income (loss) per share | Thirteen Week Period June 2, June 3, Basic and diluted income (loss) per share: Numerator: Net loss from continuing operations $ ) $ ) Net income (loss) from discontinued operations ) Income (loss) attributable to common stockholders— basic and diluted $ $ ) Denominator: Basic weighted average shares Outstanding options and restricted shares, net — — Diluted weighted-average shares Basic and diluted income (loss) per share: Continuing operations $ ) $ ) Discontinued operations ) Net basic and diluted income (loss) per share $ $ ) |
Lease Termination and Impairm28
Lease Termination and Impairment Charges (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Lease Termination and Impairment Charges | |
Schedule of amounts relating to lease termination and impairment charges | Thirteen Week Period June 2, June 3, 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 June 2, June 3, 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 |
Jun. 02, 2018 | |
Fair Value Measurements | |
Schedule of fair value of assets measured on non-recurring basis | Level 1 Level 2 Level 3 Total as of Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ $ — $ Total $ — $ $ — $ Level 1 Level 2 Level 3 Total as of Long-lived assets held for use $ — $ — $ $ Long-lived assets held for sale $ — $ $ — $ Total $ — $ $ $ |
Goodwill and Other Intangible30
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Goodwill and Other Intangible Assets | |
Summary of the company's finite-lived and indefinite-lived intangible assets | June 2, 2018 March 3, 2018 Gross Accumulated Net Remaining Gross Accumulated Net Remaining Favorable leases and other(a) $ $ ) $ 7 years $ $ ) $ 7 years Prescription files ) 3 years ) 3 years Customer relationships(a) ) 14 years ) 15 years CMS license ) 22 years ) 23 years Claims adjudication and other developed software ) 4 years ) 5 years Trademarks ) 7 years ) 8 years Backlog ) 1 year ) 1 year Total finite $ $ ) $ $ ) $ Trademarks — Indefinite — Indefinite Total $ $ ) $ $ $ ) $ (a) Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows. |
Indebtedness and Credit Agree31
Indebtedness and Credit Agreements (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Indebtedness and Credit Agreements | |
Summary of indebtedness and lease financing obligations | June 2, 2018 March 3, Secured Debt: Senior secured revolving credit facility due January 2020 ($190,000 and $0 face value less unamortized debt issuance costs of $10,258 and $13,076) $ $ ) Other secured ) Guaranteed Unsecured Debt: 9.25% senior notes due March 2020 ($0 and $902,000 face value plus unamortized premium of $0 and $1,400 and less unamortized debt issuance costs of $0 and $4,924 as of June 2, 2018 and March 3, 2018, respectively) — 6.75% senior notes due June 2021 ($805,169 and $810,000 face value less unamortized debt issuance costs of $4,482 and $4,877) 6.125% senior notes due April 2023 ($1,753,490 and $1,800,000 face value less unamortized debt issuance costs of $20,106 and $21,708) Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,418 and $1,460) 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $691 and $707) 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 $ $ |
Schedule of debt instruments included in continuing operations and discontinued operations | March 3, 2018 Debt Lease Financing Total Debt and Balance, March 3, 2018—per above table $ $ $ Amounts reclassified as current liabilities held for sale in connection with the Sale(a) ) ) ) Total debt and lease financing obligations Current maturities of long-term debt and lease financing obligations—continuing operations ) ) ) Long-term debt and lease financing obligations, less current maturities—continuing operations $ $ $ (a) In connection with the Sale, the Company had estimated that the Sale would generate excess cash proceeds of approximately $4,027,400 which would be used to repay outstanding indebtedness. During the thirteen week period ended June 2, 2018, the Company has a use of cash for financing purposes of $525,031 in its discontinued operations and, based on refinements to its calculations, reduced its estimate of excess cash proceeds by approximately $24,500 and reclassified that amount to assets held and used. Consequently, the Company has classified $0 and $549,549 of estimated cash proceeds to be used for debt repayment to liabilities held for sale as of June 2, 2018 and March 3, 2018, respectively. Additionally, as part of the Sale, the Company will be relieved of approximately $0 and $1,108, respectively, of capital lease obligations as of June 2, 2018 and March 3, 2018. These amounts are also reflected as liabilities held for sale. Please see Note 3 for additional details. |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Retirement Plans | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Thirteen Week Period Ended June 2, June 3, Service cost $ $ Interest cost Expected return on plan assets ) ) Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss Net periodic pension expense $ $ |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Segment Reporting | |
Schedule of balance sheet information for the Company's reportable segments | Retail Pharmacy Eliminations(2) Consolidated June 2, 2018: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — March 3, 2018: Total Assets $ $ $ ) $ Goodwill — Additions to property and equipment and intangible assets — (2) As of June 2, 2018 and March 3, 2018, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $40,319 and $38,713, respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $14,774 and $16,256, respectively, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. |
Schedule of reconciliation of the Company's business segments to the condensed consolidated financial statements | Retail Pharmacy Intersegment Consolidated June 2, 2018: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — June 3, 2017: Revenues $ $ $ ) $ Gross Profit — Adjusted EBITDA(2) — (1) Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis. (2) See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” in MD&A for additional details. The following is a reconciliation of net (loss) income to Adjusted EBITDA for the thirteen week periods ended June 2, 2018 and June 3, 2017: |
Schedule of reconciliation of net income to Adjusted EBITDA | June 2, June 3, Net loss from continuing operations $ ) $ ) Interest expense Income tax benefit ) ) Depreciation and amortization expense LIFO charge Lease termination and impairment charges Loss on debt retirements, net — Other Adjusted EBITDA from continuing operations $ $ |
Guarantor and Non-Guarantor C34
Guarantor and Non-Guarantor Condensed Consolidating Financial Information (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Schedule of condensed consolidating balance sheet | Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — — )(a) — Inventories, net of LIFO reserve of $0, $591,056, $0, $0, and $591,056 — — — Prepaid expenses and other current assets — — Current assets held for sale — — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity )(b) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ $ $ — $ Accounts receivable, net — — Intercompany receivable — )(a) — Inventories, net of LIFO reserve of $0, $581,090, $0, $0, and $581,090 — — — Prepaid expenses and other current assets — — Current assets held for sale — — — Total current assets — ) Property, plant and equipment, net — — — Goodwill — — — Other intangibles, net — — Deferred tax assets — — — Investment in subsidiaries — )(b) — Intercompany receivable — — )(a) — Other assets — — Noncurrent assets held for sale — — — — — Total assets $ $ $ $ ) $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ $ $ — $ — $ Accounts payable — — Intercompany payable — — )(a) — Accrued salaries, wages and other current liabilities — Current liabilities held for sales — — Total current liabilities ) Long-term debt, less current maturities — — — Lease financing obligations, less current maturities — — — Intercompany payable — — )(a) — Other noncurrent liabilities — — Noncurrent liabilities held for sale — — — — — Total liabilities ) Commitments and contingencies — — — — — Total stockholders’ equity )(b) Total liabilities and stockholders’ equity $ $ $ $ ) $ (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. |
Schedule of condensed consolidating statement of operations | Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — )(a) Lease termination and impairment charges — — — Interest expense ) — Loss on debt retirements — — — Gain on sale of assets, net — ) — — ) Equity in earnings of subsidiaries, net of tax ) — (b) — ) Income (loss) from continuing operations before income taxes ) ) ) Income tax expense (benefit) — ) — ) Net income (loss) from continuing operations $ $ $ ) $ )(b) $ ) Net income (loss) from discontinued operations ) — — Net income (loss) ) ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ $ $ ) $ ) $ (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Revenues $ — $ $ $ )(a) $ Costs and expenses: Cost of revenues — )(a) Selling, general and administrative expenses — (a) Lease termination and impairment expenses — — — Interest expense — Gain on sale of assets, net — ) — — ) Equity in earnings of subsidiaries, net of tax ) — (b) — Earnings from continuing operations before income taxes ) ) ) ) ) Income tax expense (benefit) — ) ) — ) Net income (loss) from continuing operations ) ) ) ) Net income (loss) from discontinued operations ) — — ) Net income (loss) $ ) $ $ ) $ )(b) $ ) Total other comprehensive income (loss) — ) Comprehensive (loss) income $ ) $ $ ) $ ) $ ) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. |
Schedule of condensed consolidating statement of cash flows | Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ ) Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from dispositions of assets and investments — — — Proceeds from sale-leaseback transactions — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net proceeds from revolver — — — Principal payments on long-term debt ) ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Financing fees paid for early redemption — ) — — ) Intercompany activity — — ) — Net cash provided by (used in) financing activities ) — ) ) Cash flows of discontinued operations: Operating activities of discontinued operations ) ) — — ) Investing activities of discontinued operations — — — Financing activities of discontinued operations ) — — — ) Net cash (used in) provided by discontinued operations ) — — (Decrease) increase in cash and cash equivalents — ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ Rite Aid Corporation Rite Aid Subsidiary Non- Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ ) $ $ $ — $ Investing activities: Payments for property, plant and equipment — ) — — ) Intangible assets acquired — ) — — ) Intercompany activity — ) — — Proceeds from insured loss — — — Proceeds from dispositions of assets and investments — — — Net cash (used in) provided by investing activities — ) — ) Financing activities: Net payments to revolver ) — — — ) Principal payments on long-term debt — ) — — ) Change in zero balance cash accounts — — — Net proceeds from issuance of common stock — — — Payments for taxes related to net share settlement of equity awards — ) — — ) Intercompany activity — — ) — Net cash provided by (used in) financing activities — ) ) Cash flows of discontinued operations: Operating activities of discontinued operations ) — — Investing activities of discontinued operations — ) — — ) Financing activities of discontinued operations — ) — — ) Net cash (used in) provided by discontinued operations ) — — (Decrease) increase in cash and cash equivalents — ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ — $ |
Supplementary Cash Flow Data (T
Supplementary Cash Flow Data (Tables) | 3 Months Ended |
Jun. 02, 2018 | |
Supplementary Cash Flow Data | |
Schedule of supplementary cash flow data | Thirteen Weeks Ended June 2, 2018 June 3, 2017 Cash paid for interest(a) $ $ Cash payments for income taxes, net(a) $ $ Equipment financed under capital leases $ $ Equipment received for noncash consideration — $ Reduction in lease financing obligation — $ Gross borrowings from revolver(a) $ $ Gross repayments to revolver(a) $ $ (a)—Amounts are presented on a total company basis. |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Thousands | Mar. 27, 2018USD ($)storeitem | Sep. 18, 2017USD ($)storeitem | Jun. 02, 2018USD ($)storeitem | Jun. 03, 2017USD ($) | Mar. 03, 2018USD ($) | Mar. 04, 2018USD ($) | Jun. 28, 2017item |
Basis of presentation | |||||||
Revenues reported under this contract | $ 5,388,490 | $ 5,436,523 | |||||
Accounts receivable, net | 1,908,955 | $ 1,869,100 | $ 1,811,203 | ||||
Inventories, net | 1,809,595 | 1,799,539 | 1,850,660 | ||||
Accumulated deficit | (4,076,602) | (4,282,471) | $ (4,291,019) | ||||
Accounting Standards Update 2016-09 | |||||||
Basis of presentation | |||||||
Revenues reported under this contract | 123,500 | ||||||
Accounts receivable, net | (57,897) | ||||||
Deferred tax asset | (1,772) | ||||||
Inventories, net | 51,121 | ||||||
Accumulated deficit | 8,548 | ||||||
WBA and Walgreen Co. | |||||||
Basis of presentation | |||||||
Proceeds from assets sold | $ 525,031 | $ 3,135,000 | |||||
WBA and Walgreen Co. | Rite Aid | |||||||
Basis of presentation | |||||||
Proceeds from assets sold | $ 4,156,686 | ||||||
Asset Sale | WBA and Walgreen Co. | Rite Aid | |||||||
Basis of presentation | |||||||
Purchase price | $ 4,375,000 | ||||||
Numbers of stores | store | 1,932 | ||||||
Number of stores Rite Aid agreed to sell | store | 1,932 | 1,932 | |||||
Number of distribution centers agreed to sell | item | 3 | 3 | 3 | 3 |
Basis of Presentation (Detail37
Basis of Presentation (Details) - Revenue Recognition $ in Thousands | 3 Months Ended | |||
Jun. 02, 2018USD ($)Point | Jun. 03, 2017USD ($) | Mar. 04, 2018USD ($) | Mar. 03, 2018USD ($) | |
Revenue Recognition | ||||
Revenues | $ 5,388,490 | $ 5,436,523 | ||
Accounts receivable, net | 1,908,955 | $ 1,811,203 | $ 1,869,100 | |
Inventories, net | 1,809,595 | 1,850,660 | 1,799,539 | |
Deferred tax assets | 522,674 | 592,247 | 594,019 | |
Total assets | 8,329,453 | 8,980,779 | 8,989,327 | |
Accumulated deficit | (4,076,602) | (4,291,019) | (4,282,471) | |
Total stockholders' equity | 1,812,311 | 1,592,462 | 1,601,010 | |
Accounting Standards Update 2016-09 | ||||
Revenue Recognition | ||||
Revenues | 123,500 | |||
Accounts receivable, net | (57,897) | |||
Inventories, net | 51,121 | |||
Accumulated deficit | $ 8,548 | |||
Difference between Revenue Guidance in Effect before and after Topic 606 | ||||
Revenue Recognition | ||||
Accounts receivable, net | (57,897) | |||
Inventories, net | 51,121 | |||
Deferred tax assets | (1,772) | |||
Total assets | (8,548) | |||
Accumulated deficit | (8,548) | |||
Total stockholders' equity | $ (8,548) | |||
Retail Pharmacy | ||||
Revenue Recognition | ||||
Number of points awarded for each dollar spent towards front end merchandise | Point | 1 | |||
Number of points awarded for each qualifying prescription | Point | 25 | |||
Accumulated number of points in a calendar year to achieve the "Gold" tier | Point | 1,000 | |||
Percentage discount on qualifying purchases of front end merchandise on achieving "Gold" tier | 20.00% | |||
Accrued contract liabilities | $ 73,191 | 63,851 | ||
Accrued contract liabilities included in other current liabilities | 49,793 | 50,036 | ||
Accrued contract liabilities included in noncurrent liabilities | 23,398 | $ 13,815 | ||
Pharmacy sales | 2,565,286 | |||
Front end sales | 1,296,147 | |||
Revenues | 3,897,765 | |||
Retail Pharmacy | Other | ||||
Revenue Recognition | ||||
Revenues | 36,332 | |||
Pharmacy Services | ||||
Revenue Recognition | ||||
Revenues | $ 1,542,762 |
Merger Agreement (Details)
Merger Agreement (Details) | Feb. 18, 2018$ / shares | Jun. 02, 2018$ / shares | Mar. 03, 2018$ / shares |
Merger Agreement | |||
Common stock, par value (in dollars per share) | $ 1 | $ 1 | |
Albertsons and the Merger Subs | Merger Agreement | |||
Merger Agreement | |||
Base Exchange Ratio | 0.1000 | ||
Common stock, par value (in dollars per share) | $ 0.01 | ||
Cash Election Consideration, price per share | $ 0.1832 | ||
Stock Election Exchange Ratio | 0.0079 | ||
Cerberus | Standstill Agreement | Minimum | |||
Merger Agreement | |||
Ownership interest (as percent) | 30.00% |
Asset Sale to WBA (Details)
Asset Sale to WBA (Details) $ in Thousands | Mar. 27, 2018USD ($)storeitem | Sep. 18, 2017USD ($)storeitem | Jun. 28, 2017USD ($)item | Jun. 02, 2018USD ($)storeitem | Jun. 03, 2017USD ($) | Mar. 03, 2018USD ($) | Sep. 01, 2018item | Dec. 02, 2017 |
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Noncontrolling Interest, Ownership Percentage by Parent | 100.00% | 100.00% | ||||||
Gain on the sale of stores | $ 5,859 | $ 5,877 | ||||||
Total billings for purchase of inventory | 47,971 | $ 38,325 | ||||||
Asset Sale | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Gain on the sale of stores | 2,489,389 | |||||||
WBA and Victoria Merger Sub | Rite Aid | Forecast | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Number of distribution centers agreed to sell | item | 3 | |||||||
WBA and Walgreen Co. | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Proceeds from assets sold | $ 525,031 | $ 3,135,000 | ||||||
TSA fees from initial closing | $ 23,735 | |||||||
WBA and Walgreen Co. | Rite Aid | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Proceeds from assets sold | $ 4,156,686 | |||||||
WBA and Walgreen Co. | Rite Aid | Asset Sale | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Number of stores Rite Aid agreed to sell | store | 1,932 | 1,932 | ||||||
Number of distribution centers agreed to sell | item | 3 | 3 | 3 | 3 | ||||
Purchase price | $ 4,375,000 | |||||||
Number of stores and related assets transferred | store | 1,932 | |||||||
Maximum period for transition services (in years) | 3 years | |||||||
Option to purchase pharmaceutical drugs (in years) | 10 years | |||||||
WBA | Selling, general and administrative expenses | ||||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||||
Total billings for purchase of inventory | $ 2,041,075 | |||||||
Payments incurred but not yet been paid | $ 447,305 |
Asset Sale to WBA - Carrying am
Asset Sale to WBA - Carrying amount of assets sold (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Jun. 02, 2018 | Jun. 03, 2017 | Mar. 03, 2018 | Mar. 04, 2017 | |
Current assets held for sale | ||||
Current assets held for sale | $ 179,442 | $ 438,137 | ||
Current liabilities held for sale | ||||
Current liabilities held for sale | 560,205 | |||
Noncurrent liabilities held for sale | ||||
Goodwill | 1,421,120 | 1,421,120 | ||
Estimated excess cash proceeds decrease from sale of debt | 24,500 | |||
Use of cash for financing purposes | (525,031) | $ (764) | ||
WBA and Walgreen Co. | ||||
Noncurrent liabilities held for sale | ||||
Proceeds from assets sold | 525,031 | 3,135,000 | ||
Assets under Retail Pharmacy to be Sold | WBA | Assets held for sale | ||||
Current assets held for sale | ||||
Inventories | 111,001 | 264,286 | ||
Property and equipment | 68,441 | 158,433 | ||
Goodwill | 4,629 | |||
Intangible assets | 10,789 | |||
Current assets held for sale | 179,442 | 438,137 | ||
Current liabilities held for sale | ||||
Current maturities of long-term lease financing obligations | 270 | |||
Accrued salaries, wages and other current liabilities | 6,146 | |||
Long-term debt, less current maturities | 549,549 | |||
Lease financing obligations, less current maturities | 838 | |||
Other noncurrent liabilities | 3,402 | |||
Current liabilities held for sale | $ 560,205 | |||
Noncurrent liabilities held for sale | ||||
Goodwill | $ 76,124 | |||
Amounts reclassified as current and noncurrent liabilities held for sale in connection with the Sale, Debt | $ 4,027,400 |
Asset Sale to WBA - Operating r
Asset Sale to WBA - Operating results of discontinued operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Income statement disclosures | ||
Revenues | $ 23,400 | $ 2,377,857 |
Costs and expenses: | ||
Cost of revenues | 17,081 | 1,780,765 |
Selling, general and administrative expenses | 13,875 | 600,640 |
Lease termination and impairment charges | 48 | |
Loss on debt retirements, net | 4,570 | |
Interest expense | 4,615 | 58,937 |
Gain on stores sold to Walgreens Boots Alliance | (360,557) | |
(Gain) loss on sale of assets, net | (156) | |
Cost and expenses | (320,416) | 2,440,234 |
Income (loss) from discontinued operations before income taxes | 343,816 | (62,377) |
Income tax expense (benefit) | 87,673 | (23,065) |
Net income (loss) from discontinued operations, net of tax | $ 256,143 | $ (39,312) |
Income (Loss) Per Share (Detail
Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Numerator: | ||
Net loss from continuing operations | $ (41,727) | $ (36,037) |
Net income (loss) from discontinued operations | 256,143 | (39,312) |
Income (loss) attributable to common stockholders-basic and diluted | $ 214,416 | $ (75,349) |
Denominator: | ||
Basic weighted average shares | 1,054,381 | 1,046,826 |
Diluted weighted average shares | 1,054,381 | 1,046,826 |
Continuing operations | $ (0.04) | $ (0.03) |
Discontinued operations | 0.24 | (0.04) |
Net basic and diluted income (loss) per share | $ 0.20 | $ (0.07) |
Stock options | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income per share | 25,768 | 33,747 |
Restricted stock | ||
Antidilutive securities excluded from computation of income per share | ||
Shares excluded from the computation of diluted income per share | 11,339 | 5,623 |
Lease Termination and Impairm43
Lease Termination and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Lease termination and impairment charges | ||
Lease termination and impairment charges | $ 9,859 | $ 4,038 |
Impairment charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 283 | 659 |
Lease termination charges | ||
Lease termination and impairment charges | ||
Lease termination and impairment charges | 9,576 | 3,379 |
Closed store and distribution center charges | ||
Balance-beginning of period | 133,290 | 165,138 |
Provision for present value of noncancellable lease payments of closed stores | 8,130 | 913 |
Changes in assumptions about future sublease income, terminations and changes in interest rates | (1,038) | (549) |
Interest accretion | 2,685 | 3,095 |
Cash payments, net of sublease income | (11,885) | (12,931) |
Balance-end of period | $ 131,182 | $ 155,666 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 02, 2018 | Jun. 03, 2017 | Mar. 03, 2018 | |
Non-financial assets measured on a non-recurring basis | |||
Outstanding derivative financial instruments | $ 0 | $ 0 | |
Other assets | |||
Non-financial assets measured on a non-recurring basis | |||
Investment at amortized cost | 7,257 | $ 7,282 | |
Nonrecurring basis | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of long-lived assets | 1,575 | $ 964 | |
Impairment charges | 283 | 659 | |
Nonrecurring basis | Fair Value | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Long-lived assets held for use | 201 | ||
Fair value of Long-lived assets held for sale | 1,292 | 104 | |
Fair value of Total | 1,292 | 305 | |
Nonrecurring basis | Level 1 | |||
Non-financial assets measured on a non-recurring basis | |||
Carrying value of total long-term indebtedness | 3,134,794 | ||
Estimated fair value of total long-term indebtedness | 3,162,700 | ||
Nonrecurring basis | Level 2 | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Long-lived assets held for sale | 1,292 | 104 | |
Fair value of Total | $ 1,292 | 104 | |
Nonrecurring basis | Level 3 | |||
Non-financial assets measured on a non-recurring basis | |||
Fair value of Long-lived assets held for use | 201 | ||
Fair value of Total | $ 201 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 10 Months Ended | ||
Jun. 02, 2018 | Jun. 03, 2017 | Dec. 31, 2017 | Mar. 03, 2018 | |
Income Taxes | ||||
Federal statutory rate (as a percent) | 21.00% | 35.00% | ||
Income tax expense (benefit) | $ (9,497) | $ (12,121) | ||
Estimated effective tax rate (as a percent) | 18.50% | 25.20% | ||
Increase in valuation allowance to offset the current year deferred state tax benefits (as a percent) | (2.30%) | |||
Decrease in unrecognized tax benefits related to state exposures | $ 13,498 | |||
Valuation allowance against net deferred tax assets | $ 903,342 | $ 896,800 |
Medicare Part D (Details)
Medicare Part D (Details) - USD ($) $ in Thousands | Jun. 02, 2018 | Mar. 31, 2018 | Mar. 03, 2018 |
Medicare Part D | |||
Accounts receivable, net | $ 442,690 | $ 350,563 | |
Accrued salaries, wages and other current liabilities | |||
Medicare Part D | |||
Liabilities under reinsurance contracts | $ 163,134 | $ 183,318 | |
EIC | |||
Medicare Part D | |||
Minimum amount of capital and surplus required by regulatory requirements | $ 29,464 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Jun. 02, 2018 | Mar. 03, 2018 | |
Carrying amount of goodwill | ||
Goodwill impairment | $ 0 | |
Pharmacy Services | ||
Carrying amount of goodwill | ||
Goodwill impairment | $ 261,727 | $ 261,727 |
Goodwill and Other Intangible48
Goodwill and Other Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Jun. 02, 2018 | Mar. 03, 2018 | |
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 1,899,075 | $ 1,892,551 |
Accumulated Amortization | (1,363,655) | (1,335,608) |
Net | 535,420 | 556,943 |
Gross Carrying Amount of Indefinite Lived | 33,500 | |
Gross Carrying Amount, Total | 1,932,575 | 1,926,051 |
Net, Total | 568,920 | 590,443 |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Indefinite Lived | 33,500 | 33,500 |
Favorable leases and other | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | 379,809 | 379,355 |
Accumulated Amortization | (318,930) | (316,798) |
Net | $ 60,879 | $ 62,557 |
Remaining Weighted Average Amortization Period | 7 years | 7 years |
Prescription files | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 906,181 | $ 900,111 |
Accumulated Amortization | (808,498) | (801,706) |
Net | $ 97,683 | $ 98,405 |
Remaining Weighted Average Amortization Period | 3 years | 3 years |
Customer relationships | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 465,000 | $ 465,000 |
Accumulated Amortization | (187,616) | (172,635) |
Net | $ 277,384 | $ 292,365 |
Remaining Weighted Average Amortization Period | 14 years | 15 years |
CMS license | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 57,500 | $ 57,500 |
Accumulated Amortization | (6,747) | (6,172) |
Net | $ 50,753 | $ 51,328 |
Remaining Weighted Average Amortization Period | 22 years | 23 years |
Claims adjudication and other developed software | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 58,985 | $ 58,985 |
Accumulated Amortization | (24,724) | (22,617) |
Net | $ 34,261 | $ 36,368 |
Remaining Weighted Average Amortization Period | 4 years | 5 years |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 20,100 | $ 20,100 |
Accumulated Amortization | (5,896) | (5,394) |
Net | $ 14,204 | $ 14,706 |
Remaining Weighted Average Amortization Period | 7 years | 8 years |
Backlog | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 11,500 | $ 11,500 |
Accumulated Amortization | (11,244) | (10,286) |
Net | $ 256 | $ 1,214 |
Remaining Weighted Average Amortization Period | 1 year | 1 year |
Goodwill and Other Intangible49
Goodwill and Other Intangibles - Summary of reclassified noncurrent assets held for sale (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 02, 2018 | Jun. 03, 2017 | Mar. 03, 2018 | |
Goodwill and Other Intangible Assets | |||
Unfavorable lease intangibles | $ 17,857 | $ 18,888 | |
Amortization expense for intangible assets and liabilities | 35,400 | $ 40,962 | |
Anticipated annual amortization expense for intangible assets and liabilities | |||
2,019 | 124,583 | ||
2,020 | 100,875 | ||
2,021 | 76,995 | ||
2,022 | 55,206 | ||
2,023 | $ 38,953 |
Indebtedness and Credit Agree50
Indebtedness and Credit Agreements (Details) - Indebtedness and lease financing obligations - USD ($) $ in Thousands | Jun. 25, 2018 | May 21, 2018 | Apr. 29, 2018 | Apr. 19, 2018 | Apr. 12, 2018 | Mar. 29, 2018 | Feb. 27, 2018 | Feb. 28, 2018 | Jun. 02, 2018 | Dec. 02, 2017 | Apr. 28, 2018 | Mar. 03, 2018 | Jan. 31, 2018 | Mar. 04, 2017 | Jan. 15, 2015 |
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 3,889,738 | ||||||||||||||
Lease financing obligations | $ 47,809 | 52,554 | |||||||||||||
Total Debt | 3,182,603 | 3,942,292 | |||||||||||||
Current Maturities of Long-Term Debt and Lease Financing Obligations | (19,025) | (21,031) | |||||||||||||
Long-term debt and lease financing obligations, less current maturities | 3,163,578 | 3,921,261 | |||||||||||||
Loss on debt retirements, net | $ 8,180 | 554 | |||||||||||||
Secured Debt | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | (12,986) | ||||||||||||||
Long-term debt | 179,832 | ||||||||||||||
Senior secured revolving credit facility due January 2020 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | (13,076) | ||||||||||||||
Long-term debt | 179,742 | ||||||||||||||
Principal amount of debt | 190,000 | 0 | |||||||||||||
Unamortized debt issuance costs | 10,258 | 13,076 | |||||||||||||
Maximum borrowing capacity | $ 2,700,000 | $ 3,000,000 | $ 3,000,000 | $ 3,700,000 | $ 2,700,000 | ||||||||||
Loss on debt retirements, net | $ 1,091 | ||||||||||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Minimum | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Percentage points added to the reference rate | 1.50% | ||||||||||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Maximum | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Percentage points added to the reference rate | 2.00% | ||||||||||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Minimum | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Percentage points added to the reference rate | 0.50% | ||||||||||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Maximum | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Percentage points added to the reference rate | 1.00% | ||||||||||||||
Tranche 1 Term Loan (second lien) due August 2020 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Principal amount of debt | 470,000 | ||||||||||||||
Tranche 2 Term Loan (second lien) due June 2021 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Principal amount of debt | $ 500,000 | ||||||||||||||
Other secured | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | 90 | 90 | |||||||||||||
Guaranteed Unsecured Debt | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 2,534,071 | 3,481,891 | |||||||||||||
9.25% senior notes due March 2020 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | 898,476 | ||||||||||||||
Debt instrument, stated interest rate (as a percent) | 9.25% | 9.25% | 9.25% | ||||||||||||
Principal amount of debt | $ 3,454 | $ 0 | 902,000 | ||||||||||||
Unamortized debt issuance costs | 0 | 4,924 | |||||||||||||
Unamortized premium | 0 | 1,400 | |||||||||||||
Loss on debt retirements, net | $ 3,422 | ||||||||||||||
Offer to purchase of outstanding amount | $ 900,000 | ||||||||||||||
Percentage of outstanding principal amount redeemed | 100.00% | 0.38% | |||||||||||||
6.75% senior notes due June 2021 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 800,687 | 805,123 | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 6.75% | 6.75% | 6.75% | ||||||||||||
Principal amount of debt | $ 805,169 | 810,000 | |||||||||||||
Unamortized debt issuance costs | 4,482 | 4,877 | |||||||||||||
Loss on debt retirements, net | $ 18,075 | $ 8 | |||||||||||||
Principal amount of debt redeemed | 1,360 | $ 3,471 | |||||||||||||
Percentage of outstanding principal amount redeemed | 100.00% | 0.43% | |||||||||||||
6.125% senior notes due April 2023 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 1,733,384 | $ 1,778,292 | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | |||||||||||||
Principal amount of debt | $ 1,753,490 | $ 1,800,000 | |||||||||||||
Unamortized debt issuance costs | 20,106 | 21,708 | |||||||||||||
Loss on debt retirements, net | 56 | $ 49 | 498 | ||||||||||||
Principal amount of debt redeemed | $ 4,759 | $ 41,751 | |||||||||||||
Percentage of outstanding principal amount redeemed | 2.32% | ||||||||||||||
6.75% and 6.125% senior notes | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Offer to purchase of outstanding amount | $ 700,000 | ||||||||||||||
Unguaranteed Unsecured Debt | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | 420,891 | 420,833 | |||||||||||||
7.7% notes due February 2027 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 293,582 | $ 293,540 | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | |||||||||||||
Principal amount of debt | $ 295,000 | $ 295,000 | |||||||||||||
Unamortized debt issuance costs | 1,418 | 1,460 | |||||||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||||||||
Indebtedness and credit agreements | |||||||||||||||
Long-term debt | $ 127,309 | $ 127,293 | |||||||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | |||||||||||||
Principal amount of debt | $ 128,000 | $ 128,000 | |||||||||||||
Unamortized debt issuance costs | $ 691 | $ 707 |
Indebtedness and Credit Agree51
Indebtedness and Credit Agreements - Continuing operations and discontinued operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Jun. 02, 2018 | Jun. 03, 2017 | Mar. 03, 2018 | Mar. 04, 2017 | Dec. 02, 2017 | |
Indebtedness and Credit Agreements | |||||
Long-term Debt, Total | $ 3,889,738 | ||||
Capital Lease Obligations, Total | $ 47,809 | 52,554 | |||
Total Debt | 3,182,603 | 3,942,292 | |||
Amounts reclassified as current liabilities held for sale in connection with the Sale, Debt | (549,549) | ||||
Amounts reclassified as current liabilities held for sale in connection with the Sale, Lease Financing Obligations | (1,108) | ||||
Amounts reclassified as current liabilities held for sale in connection with the Sale, Total Debt and Lease Financing Obligations | (550,657) | ||||
Total debt and lease financing obligations, debt | 3,340,189 | ||||
Total debt and lease financing obligations, lease financing obligations | 51,446 | ||||
Total debt and lease financing obligations | 3,391,635 | ||||
Current maturities of long-term debt - continuing operations | (90) | ||||
Lease financing obligations - continuing operations | (20,671) | ||||
Current maturities of long-term debt and lease financing obligations - continuing operations | (20,761) | ||||
Long-term debt, less current maturities - continuing operations | 3,340,099 | ||||
Lease financing obligations, less current maturities - continuing operations | 30,775 | ||||
Long-term debt and lease financing obligations, less current maturities - continuing operations | 3,370,874 | ||||
Excess cash proceeds from sale of debt | $ 4,027,400 | ||||
Use of cash for financing purposes | (525,031) | $ (764) | |||
Estimated excess cash proceeds from sale of debt | 0 | $ 549,549 | |||
Estimated excess cash proceeds decrease from sale of debt | $ 24,500 | ||||
Credit facility | |||||
Ownership interest (as a percent) | 100.00% | 100.00% |
Indebtedness and Credit Agree52
Indebtedness and Credit Agreement - Credit Facility (Details) $ in Thousands | 9 Months Ended | ||||||||||
Dec. 02, 2017USD ($) | Jun. 02, 2018USD ($) | Apr. 29, 2018USD ($) | Apr. 28, 2018USD ($) | Mar. 29, 2018USD ($) | Mar. 03, 2018USD ($) | Feb. 28, 2018USD ($) | Jan. 31, 2018USD ($) | Mar. 04, 2017 | Nov. 26, 2016USD ($) | Jan. 15, 2015USD ($) | |
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 3,889,738 | ||||||||||
Lease financing obligations | $ 47,809 | 52,554 | |||||||||
Total Debt | 3,182,603 | 3,942,292 | |||||||||
Current maturities of long-term debt and lease financing obligations | (19,025) | (20,761) | |||||||||
Long-term debt and lease financing obligations, less current maturities | $ 3,163,578 | 3,921,261 | |||||||||
Credit facility | |||||||||||
Ownership interest (as a percent) | 100.00% | 100.00% | |||||||||
Maturities | |||||||||||
2,019 | $ 90 | ||||||||||
2,020 | 190,000 | ||||||||||
2,021 | 0 | ||||||||||
2,022 | 805,169 | ||||||||||
2,023 | 0 | ||||||||||
thereafter | 2,176,490 | ||||||||||
Secured Debt | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | (12,986) | ||||||||||
Long-term debt | $ 179,832 | ||||||||||
Senior secured revolving credit facility due January 2020 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | (13,076) | ||||||||||
Long-term debt | 179,742 | ||||||||||
Principal amount of debt | 190,000 | 0 | |||||||||
Unamortized debt issuance costs | 10,258 | 13,076 | |||||||||
Credit facility | |||||||||||
Maximum borrowing capacity | $ 2,700,000 | $ 3,000,000 | $ 3,000,000 | $ 3,700,000 | $ 2,700,000 | ||||||
Outstanding borrowings | 190,000 | ||||||||||
Letters of credit outstanding | 55,790 | ||||||||||
Additional borrowing capacity | 2,454,210 | ||||||||||
Amount of debt allowed to be outstanding | 1,500,000 | ||||||||||
Threshold amount of debt | $ 750,000 | ||||||||||
Number of days relating to debt threshold | 90 days | ||||||||||
Period allowed for extensions on customary terms | 90 days | ||||||||||
Availability under revolving credit facility | $ 2,454,210 | ||||||||||
Senior secured revolving credit facility due January 2020 | Minimum | |||||||||||
Credit facility | |||||||||||
Percentage of fee payable on daily unused revolver availability | 0.25% | ||||||||||
Additional borrowing capacity | $ 365,000 | $ 365,000 | |||||||||
Threshold availability on the thirtieth consecutive calendar day | $ 250,000 | ||||||||||
Fixed charge coverage ratio | 1 | ||||||||||
Senior secured revolving credit facility due January 2020 | Maximum | |||||||||||
Credit facility | |||||||||||
Percentage of fee payable on daily unused revolver availability | 0.375% | ||||||||||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | $ 200,000 | ||||||||||
Threshold availability on the third consecutive business day | $ 250,000 | ||||||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Minimum | |||||||||||
Credit facility | |||||||||||
Percentage points added to the reference rate | 1.50% | ||||||||||
Senior secured revolving credit facility due January 2020 | LIBOR | Maximum | |||||||||||
Credit facility | |||||||||||
Percentage points added to the reference rate | 2.00% | ||||||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Minimum | |||||||||||
Credit facility | |||||||||||
Percentage points added to the reference rate | 0.50% | ||||||||||
Senior secured revolving credit facility due January 2020 | Alternate base rate | Maximum | |||||||||||
Credit facility | |||||||||||
Percentage points added to the reference rate | 1.00% | ||||||||||
Tranche 1 Term Loan (second lien) due August 2020 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Principal amount of debt | 470,000 | ||||||||||
Tranche 2 Term Loan (second lien) due June 2021 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Principal amount of debt | $ 500,000 | ||||||||||
Other secured | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 90 | 90 | |||||||||
Guaranteed Unsecured Debt | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 2,534,071 | 3,481,891 | |||||||||
9.25% senior notes due March 2020 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 898,476 | ||||||||||
Debt instrument, stated interest rate (as a percent) | 9.25% | 9.25% | 9.25% | ||||||||
Principal amount of debt | $ 0 | $ 3,454 | 902,000 | ||||||||
Unamortized debt issuance costs | 0 | 4,924 | |||||||||
Unamortized premium | 0 | 1,400 | |||||||||
6.75% senior notes due June 2021 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 800,687 | 805,123 | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.75% | 6.75% | 6.75% | ||||||||
Principal amount of debt | $ 805,169 | 810,000 | |||||||||
Unamortized debt issuance costs | 4,482 | 4,877 | |||||||||
6.125% senior notes due April 2023 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 1,733,384 | $ 1,778,292 | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | |||||||||
Principal amount of debt | $ 1,753,490 | $ 1,800,000 | |||||||||
Unamortized debt issuance costs | 20,106 | 21,708 | |||||||||
Unguaranteed Unsecured Debt | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 420,891 | 420,833 | |||||||||
7.7% notes due February 2027 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 293,582 | $ 293,540 | |||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | |||||||||
Principal amount of debt | $ 295,000 | $ 295,000 | |||||||||
Unamortized debt issuance costs | 1,418 | 1,460 | |||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 127,309 | $ 127,293 | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | |||||||||
Principal amount of debt | $ 128,000 | $ 128,000 | |||||||||
Unamortized debt issuance costs | $ 691 | $ 707 |
Retirement Plans (Details)
Retirement Plans (Details) - Defined Benefit Pension Plan - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Net periodic pension expense | ||
Service cost | $ 312 | $ 346 |
Interest cost | 1,578 | 1,603 |
Expected return on plan assets | (1,434) | (1,147) |
Amortization of unrecognized net loss | 507 | 856 |
Net periodic pension expense | 963 | $ 1,658 |
Employer contributions | 813 | |
Expected employer contribution during the remainder of fiscal year | $ 3,800 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018USD ($)segment | Jun. 03, 2017USD ($) | |
Segment Reporting | ||
Number of reportable segments | segment | 2 | |
Revenues | $ 5,388,490 | $ 5,436,523 |
Gross Profit | 1,168,749 | 1,161,943 |
Adjusted EBITDA | 147,332 | 135,964 |
Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 3,897,765 | |
Pharmacy Services | ||
Segment Reporting | ||
Revenues | 1,542,762 | |
Operating segments | Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 3,897,765 | 3,972,351 |
Gross Profit | 1,069,457 | 1,056,971 |
Adjusted EBITDA | 113,469 | 87,365 |
Operating segments | Pharmacy Services | ||
Segment Reporting | ||
Revenues | 1,542,762 | 1,513,241 |
Gross Profit | 99,292 | 104,972 |
Adjusted EBITDA | 33,863 | 48,599 |
Intersegment elimination | ||
Segment Reporting | ||
Revenues | $ (52,037) | $ (49,069) |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Jun. 02, 2018 | Mar. 03, 2018 | Mar. 04, 2018 | |
Segment Reporting | |||
Total assets | $ 8,329,453 | $ 8,989,327 | $ 8,980,779 |
Goodwill | 1,421,120 | 1,421,120 | |
Additions to property and equipment and intangible assets | 61,626 | 214,764 | |
Accounts receivable | 1,908,955 | 1,869,100 | $ 1,811,203 |
Operating segments | Retail Pharmacy | |||
Segment Reporting | |||
Total assets | 5,434,447 | 6,089,343 | |
Goodwill | 43,493 | 43,492 | |
Additions to property and equipment and intangible assets | 58,067 | 199,437 | |
Operating segments | Pharmacy Services | |||
Segment Reporting | |||
Total assets | 2,950,099 | 2,954,953 | |
Goodwill | 1,377,627 | 1,377,628 | |
Additions to property and equipment and intangible assets | 3,559 | 15,327 | |
Intersegment elimination | |||
Segment Reporting | |||
Total assets | (55,093) | (54,969) | |
Long-term deferred tax liability | (40,319) | (38,713) | |
Accounts receivable | $ (14,774) | $ (16,256) |
Segment Reporting - Adjusted EB
Segment Reporting - Adjusted EBITDA for continuing operations (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Feb. 28, 2018 | Jun. 02, 2018 | Jun. 03, 2017 | |
Segment Reporting | |||
Net loss from continuing operations | $ (41,727) | $ (36,037) | |
Interest expense | 62,792 | 51,000 | |
Income tax benefit | (9,497) | (12,121) | |
Depreciation and amortization expense | 94,529 | 101,029 | |
LIFO charge | 9,966 | 10,173 | |
Lease termination and impairment charges | 9,859 | 4,038 | |
Loss on debt retirements | $ 8,180 | 554 | |
Other | 20,856 | 17,882 | |
Adjusted EBITDA from continuing operations | $ 147,332 | $ 135,964 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended | |
Jun. 02, 2018case | Jan. 19, 2017state | |
Commitments and Contingencies | ||
Number of states failed to report Rx savings prices | state | 18 | |
Hall | ||
Commitments and Contingencies | ||
Number of similar cases | case | 2 |
Guarantor and Non-Guarantor C58
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Balance Sheet (Details) - USD ($) $ in Thousands | Jun. 02, 2018 | Mar. 04, 2018 | Mar. 03, 2018 | Dec. 02, 2017 | Jun. 03, 2017 | Mar. 04, 2017 | Feb. 27, 2016 |
Condensed consolidating balance sheet | |||||||
Ownership interest (as a percent) | 100.00% | 100.00% | |||||
Current assets: | |||||||
Cash and cash equivalents | $ 147,092 | $ 447,334 | $ 214,449 | $ 245,410 | $ 245,410 | ||
Accounts receivable, net | 1,908,955 | $ 1,811,203 | 1,869,100 | ||||
Inventories, net | 1,809,595 | 1,850,660 | 1,799,539 | ||||
Prepaid expenses and other current assets | 151,059 | 181,181 | |||||
Current assets held for sale | 179,442 | 438,137 | |||||
Total current assets | 4,196,143 | 4,735,291 | |||||
Property, plant and equipment, net | 1,401,924 | 1,431,246 | |||||
Goodwill | 1,421,120 | 1,421,120 | |||||
Other intangibles, net | 568,920 | 590,443 | |||||
Deferred tax assets | 522,674 | 592,247 | 594,019 | ||||
Other assets | 218,672 | 217,208 | |||||
Total assets | 8,329,453 | 8,980,779 | 8,989,327 | ||||
Current liabilities: | |||||||
Current maturities of long-term debt and lease financing obligations | 19,025 | 20,761 | |||||
Accounts payable | 1,767,777 | 1,651,363 | |||||
Accrued salaries, wages and other current liabilities | 1,030,292 | 1,231,736 | |||||
Current liabilities held for sales | 560,205 | ||||||
Total current liabilities | 2,817,094 | 3,464,065 | |||||
Long-term debt, less current maturities | 3,134,704 | 3,340,099 | |||||
Lease financing obligations, less current maturities | 28,874 | 30,775 | |||||
Other noncurrent liabilities | 536,470 | 553,378 | |||||
Total liabilities | 6,517,142 | 7,388,317 | |||||
Commitments and contingencies | |||||||
Total stockholders' equity | 1,812,311 | $ 1,592,462 | 1,601,010 | ||||
Total liabilities and stockholders' equity | 8,329,453 | 8,989,327 | |||||
Inventories, LIFO reserve (in dollars) | 591,056 | 581,090 | |||||
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | |||||||
Current assets: | |||||||
Investment in subsidiaries | 8,971,553 | 8,745,390 | |||||
Total assets | 8,971,553 | 8,745,390 | |||||
Current liabilities: | |||||||
Current maturities of long-term debt and lease financing obligations | 90 | 90 | |||||
Accrued salaries, wages and other current liabilities | 74,552 | 65,223 | |||||
Current liabilities held for sales | 549,549 | ||||||
Total current liabilities | 74,642 | 614,862 | |||||
Long-term debt, less current maturities | 3,134,704 | 3,340,099 | |||||
Intercompany payable | 3,949,896 | 3,189,419 | |||||
Total liabilities | 7,159,242 | 7,144,380 | |||||
Commitments and contingencies | |||||||
Total stockholders' equity | 1,812,311 | 1,601,010 | |||||
Total liabilities and stockholders' equity | 8,971,553 | 8,745,390 | |||||
Inventories, LIFO reserve (in dollars) | 0 | 0 | |||||
Reportable legal entity | Subsidiary Guarantors | |||||||
Current assets: | |||||||
Cash and cash equivalents | 138,400 | 441,244 | 181,648 | 441,244 | 213,104 | ||
Accounts receivable, net | 1,390,296 | 1,502,507 | |||||
Intercompany receivable | 337,627 | 223,413 | |||||
Inventories, net | 1,809,595 | 1,799,539 | |||||
Prepaid expenses and other current assets | 147,760 | 176,678 | |||||
Current assets held for sale | 179,442 | 438,137 | |||||
Total current assets | 4,003,120 | 4,581,518 | |||||
Property, plant and equipment, net | 1,401,924 | 1,431,246 | |||||
Goodwill | 1,421,120 | 1,421,120 | |||||
Other intangibles, net | 518,167 | 539,115 | |||||
Deferred tax assets | 522,674 | 594,019 | |||||
Investment in subsidiaries | 52,591 | 54,076 | |||||
Intercompany receivable | 3,949,896 | 3,189,419 | |||||
Other assets | 211,415 | 209,926 | |||||
Total assets | 12,080,907 | 12,020,439 | |||||
Current liabilities: | |||||||
Current maturities of long-term debt and lease financing obligations | 18,935 | 20,671 | |||||
Accounts payable | 1,762,078 | 1,641,676 | |||||
Accrued salaries, wages and other current liabilities | 781,315 | 1,031,379 | |||||
Current liabilities held for sales | 10,656 | ||||||
Total current liabilities | 2,562,328 | 2,704,382 | |||||
Lease financing obligations, less current maturities | 28,874 | 30,775 | |||||
Other noncurrent liabilities | 518,152 | 539,892 | |||||
Total liabilities | 3,109,354 | 3,275,049 | |||||
Commitments and contingencies | |||||||
Total stockholders' equity | 8,971,553 | 8,745,390 | |||||
Total liabilities and stockholders' equity | 12,080,907 | 12,020,439 | |||||
Inventories, LIFO reserve (in dollars) | 591,056 | 581,090 | |||||
Reportable legal entity | Non-Guarantor Subsidiaries | |||||||
Current assets: | |||||||
Cash and cash equivalents | 8,692 | 6,090 | $ 32,801 | $ 6,090 | $ 32,306 | ||
Accounts receivable, net | 518,659 | 366,593 | |||||
Prepaid expenses and other current assets | 3,299 | 4,503 | |||||
Total current assets | 530,650 | 377,186 | |||||
Other intangibles, net | 50,753 | 51,328 | |||||
Other assets | 7,257 | 7,282 | |||||
Total assets | 588,660 | 435,796 | |||||
Current liabilities: | |||||||
Accounts payable | 5,699 | 9,687 | |||||
Intercompany payable | 337,627 | 223,413 | |||||
Accrued salaries, wages and other current liabilities | 174,425 | 135,134 | |||||
Total current liabilities | 517,751 | 368,234 | |||||
Other noncurrent liabilities | 18,318 | 13,486 | |||||
Total liabilities | 536,069 | 381,720 | |||||
Commitments and contingencies | |||||||
Total stockholders' equity | 52,591 | 54,076 | |||||
Total liabilities and stockholders' equity | 588,660 | 435,796 | |||||
Inventories, LIFO reserve (in dollars) | 0 | 0 | |||||
Eliminations | |||||||
Current assets: | |||||||
Intercompany receivable | (337,627) | (223,413) | |||||
Total current assets | (337,627) | (223,413) | |||||
Investment in subsidiaries | (9,024,144) | (8,799,466) | |||||
Intercompany receivable | (3,949,896) | (3,189,419) | |||||
Total assets | (13,311,667) | (12,212,298) | |||||
Current liabilities: | |||||||
Intercompany payable | (337,627) | (223,413) | |||||
Total current liabilities | (337,627) | (223,413) | |||||
Intercompany payable | (3,949,896) | (3,189,419) | |||||
Total liabilities | (4,287,523) | (3,412,832) | |||||
Commitments and contingencies | |||||||
Total stockholders' equity | (9,024,144) | (8,799,466) | |||||
Total liabilities and stockholders' equity | (13,311,667) | (12,212,298) | |||||
Inventories, LIFO reserve (in dollars) | $ 0 | $ 0 |
Guarantor and Non-Guarantor C59
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Operations (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Feb. 28, 2018 | Jun. 02, 2018 | Jun. 03, 2017 | |
Condensed consolidating statement of operations | |||
Revenues | $ 5,388,490 | $ 5,436,523 | |
Costs and expenses: | |||
Cost of revenues | 4,219,741 | 4,274,580 | |
Selling, general and administrative expenses | 1,152,627 | 1,160,940 | |
Lease termination and impairment expenses | 9,859 | 4,038 | |
Interest expense | 62,792 | 51,000 | |
Loss on debt retirements | $ 8,180 | 554 | |
Gain on sale of assets, net | (5,859) | (5,877) | |
Total costs and expenses | 5,439,714 | 5,484,681 | |
Income (loss) from continuing operations before income taxes | (51,224) | (48,158) | |
Income tax expense (benefit) | (9,497) | (12,121) | |
Net loss from continuing operations | (41,727) | (36,037) | |
Net income (loss) from discontinued operations | 256,143 | (39,312) | |
Net income (loss) | 214,416 | (75,349) | |
Total other comprehensive income (loss) | 364 | 514 | |
Comprehensive income (loss) | 214,780 | (74,835) | |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | |||
Costs and expenses: | |||
Interest expense | 59,939 | 46,447 | |
Equity in earnings of subsidiaries, net of tax | (278,970) | (30,035) | |
Total costs and expenses | (219,031) | 16,412 | |
Income (loss) from continuing operations before income taxes | 219,031 | (16,412) | |
Net loss from continuing operations | 219,031 | (16,412) | |
Net income (loss) from discontinued operations | (4,615) | (58,937) | |
Net income (loss) | 214,416 | (75,349) | |
Total other comprehensive income (loss) | 364 | 514 | |
Comprehensive income (loss) | 214,780 | (74,835) | |
Reportable legal entity | Subsidiary Guarantors | |||
Condensed consolidating statement of operations | |||
Revenues | 5,321,025 | 5,415,128 | |
Costs and expenses: | |||
Cost of revenues | 4,158,627 | 4,255,202 | |
Selling, general and administrative expenses | 1,144,832 | 1,157,270 | |
Lease termination and impairment expenses | 9,859 | 4,038 | |
Interest expense | 2,946 | 4,515 | |
Loss on debt retirements | 554 | ||
Gain on sale of assets, net | (5,859) | (5,877) | |
Equity in earnings of subsidiaries, net of tax | 1,485 | 1,312 | |
Total costs and expenses | 5,312,444 | 5,416,460 | |
Income (loss) from continuing operations before income taxes | 8,581 | (1,332) | |
Income tax expense (benefit) | (9,631) | (11,742) | |
Net loss from continuing operations | 18,212 | 10,410 | |
Net income (loss) from discontinued operations | 260,758 | 19,625 | |
Net income (loss) | 278,970 | 30,035 | |
Total other comprehensive income (loss) | 364 | 514 | |
Comprehensive income (loss) | 279,334 | 30,549 | |
Reportable legal entity | Non-Guarantor Subsidiaries | |||
Condensed consolidating statement of operations | |||
Revenues | 95,584 | 39,450 | |
Costs and expenses: | |||
Cost of revenues | 89,032 | 37,902 | |
Selling, general and administrative expenses | 7,996 | 3,201 | |
Interest expense | (93) | 38 | |
Total costs and expenses | 96,935 | 41,141 | |
Income (loss) from continuing operations before income taxes | (1,351) | (1,691) | |
Income tax expense (benefit) | 134 | (379) | |
Net loss from continuing operations | (1,485) | (1,312) | |
Net income (loss) | (1,485) | (1,312) | |
Comprehensive income (loss) | (1,485) | (1,312) | |
Eliminations | |||
Condensed consolidating statement of operations | |||
Revenues | (28,119) | (18,055) | |
Costs and expenses: | |||
Cost of revenues | (27,918) | (18,524) | |
Selling, general and administrative expenses | (201) | 469 | |
Equity in earnings of subsidiaries, net of tax | 277,485 | 28,723 | |
Total costs and expenses | 249,366 | 10,668 | |
Income (loss) from continuing operations before income taxes | (277,485) | (28,723) | |
Net loss from continuing operations | (277,485) | (28,723) | |
Net income (loss) | (277,485) | (28,723) | |
Total other comprehensive income (loss) | (364) | (514) | |
Comprehensive income (loss) | $ (277,849) | $ (29,237) |
Guarantor and Non-Guarantor C60
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Cash Flow (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Operating activities: | ||
Net cash (used in) provided by operating activities | $ (16,314) | $ 47,769 |
Investing activities: | ||
Payments for property, plant and equipment | (47,971) | (38,325) |
Intangible assets acquired | (13,655) | (5,521) |
Proceeds from insured loss | 8,639 | |
Proceeds from dispositions of assets and investments | 9,916 | 2,137 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | (49,123) | (33,070) |
Financing activities: | ||
Net proceeds from (payments to) revolver | 190,000 | (90,000) |
Principal payments on long-term debt | (431,106) | (3,503) |
Change in zero balance cash accounts | 1,083 | 28,768 |
Net proceeds from issuance of common stock | 910 | 147 |
Financing fees paid for early debt redemption | (13) | |
Payments for taxes related to net share settlement of equity awards | (147) | |
Net cash used in financing activities of continuing operations | (239,126) | (64,735) |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (74,050) | 44,965 |
Investing activities of discontinued operations | 603,402 | (25,126) |
Financing activities of discontinued operations | (525,031) | (764) |
Net cash provided by discontinued operations | 4,321 | 19,075 |
Decrease in cash and cash equivalents | (300,242) | (30,961) |
Cash and cash equivalents, beginning of period | 447,334 | 245,410 |
Cash and cash equivalents, end of period | 147,092 | 214,449 |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | (48,608) | (13,020) |
Financing activities: | ||
Net proceeds from (payments to) revolver | 190,000 | (90,000) |
Principal payments on long-term debt | (426,361) | |
Net proceeds from issuance of common stock | 910 | 147 |
Intercompany activity | 813,705 | 161,810 |
Net cash used in financing activities of continuing operations | 578,254 | 71,957 |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (4,615) | (58,937) |
Financing activities of discontinued operations | (525,031) | |
Net cash provided by discontinued operations | (529,646) | (58,937) |
Reportable legal entity | Subsidiary Guarantors | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | 29,692 | 60,294 |
Investing activities: | ||
Payments for property, plant and equipment | (47,971) | (38,325) |
Intangible assets acquired | (13,655) | (5,521) |
Intercompany activity | (813,705) | (161,810) |
Proceeds from insured loss | 8,639 | |
Proceeds from dispositions of assets and investments | 9,916 | 2,137 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | (862,828) | (194,880) |
Financing activities: | ||
Principal payments on long-term debt | (4,745) | (3,503) |
Change in zero balance cash accounts | 1,083 | 28,768 |
Financing fees paid for early debt redemption | (13) | |
Payments for taxes related to net share settlement of equity awards | (147) | |
Net cash used in financing activities of continuing operations | (3,675) | 25,118 |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (69,435) | 103,902 |
Investing activities of discontinued operations | 603,402 | (25,126) |
Financing activities of discontinued operations | (764) | |
Net cash provided by discontinued operations | 533,967 | 78,012 |
Decrease in cash and cash equivalents | (302,844) | (31,456) |
Cash and cash equivalents, beginning of period | 441,244 | 441,244 |
Cash and cash equivalents, end of period | 138,400 | 181,648 |
Reportable legal entity | Non-Guarantor Subsidiaries | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | 2,602 | 495 |
Cash flows of discontinued operations: | ||
Decrease in cash and cash equivalents | 2,602 | 495 |
Cash and cash equivalents, beginning of period | 6,090 | 6,090 |
Cash and cash equivalents, end of period | 8,692 | 32,801 |
Eliminations | ||
Investing activities: | ||
Intercompany activity | 813,705 | 161,810 |
Net cash used in investing activities of continuing operations | 813,705 | 161,810 |
Financing activities: | ||
Intercompany activity | (813,705) | (161,810) |
Net cash used in financing activities of continuing operations | $ (813,705) | $ (161,810) |
Supplementary Cash Flow Data (D
Supplementary Cash Flow Data (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 02, 2018 | Jun. 03, 2017 | |
Supplementary Cash Flow Data | ||
Cash paid for interest | $ 53,553 | $ 75,535 |
Cash payments for income taxes, net | 591 | 1,461 |
Equipment financed under capital leases | 1,963 | 3,857 |
Equipment received for noncash consideration | 1,295 | |
Reduction in lease financing obligation | 2,416 | |
Gross borrowings from revolver | 444,000 | 579,000 |
Gross repayments to revolver | $ 254,000 | $ 669,000 |