Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 01, 2019 | Jun. 25, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | RITE AID CORP | |
Entity Central Index Key | 0000084129 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 1, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-02 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 53,805,922 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 01, 2019 | Mar. 02, 2019 | Jun. 02, 2018 | Mar. 03, 2018 |
Current assets: | ||||
Cash and cash equivalents | $ 190,453 | $ 144,353 | ||
Accounts receivable, net | 1,803,778 | 1,788,712 | ||
Inventories, net of LIFO reserve of $611,933 and $604,444 | 1,875,917 | 1,871,941 | ||
Prepaid expenses and other current assets | 104,784 | 179,132 | ||
Current assets held for sale | 153,811 | 117,581 | ||
Total current assets | 4,128,743 | 4,101,719 | ||
Property, plant and equipment, net | 1,284,680 | 1,308,514 | ||
Operating lease right-of-use asset | 2,985,213 | |||
Goodwill | 1,108,136 | 1,108,136 | ||
Other intangibles, net | 400,084 | 448,706 | ||
Deferred tax assets | 409,084 | 409,084 | ||
Other assets | 213,749 | 215,208 | ||
Total assets | 10,529,689 | 7,591,367 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 11,751 | 16,111 | ||
Accounts payable | 1,556,425 | 1,618,585 | ||
Accrued salaries, wages and other current liabilities | 782,205 | 808,439 | ||
Current portion of operating lease liabilities | 450,933 | |||
Current liabilities held for sale | 43,829 | |||
Total current liabilities | 2,845,143 | 2,443,135 | ||
Long-term debt, less current maturities | 3,582,037 | 3,454,585 | ||
Long-term operating lease liabilities | 2,790,738 | |||
Lease financing obligations, less current maturities | 22,679 | 24,064 | ||
Other noncurrent liabilities | 253,875 | 482,893 | ||
Total liabilities | 9,494,472 | 6,404,677 | ||
Commitments and contingencies | ||||
Stockholders' equity: | ||||
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 53,833 and 54,016 | 53,833 | 54,016 | ||
Additional paid-in capital | 5,882,363 | 5,876,977 | ||
Accumulated deficit | (4,869,679) | (4,713,244) | ||
Accumulated other comprehensive loss | (31,300) | (31,059) | ||
Total stockholders' equity | 1,035,217 | 1,186,690 | $ 1,812,311 | $ 1,601,010 |
Total liabilities and stockholders' equity | $ 10,529,689 | $ 7,591,367 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 01, 2019 | Mar. 02, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Inventories, LIFO reserve (in dollars) | $ 611,933 | $ 604,444 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 75,000 | 75,000 |
Common stock, shares issued | 53,833 | 54,016 |
Common stock, shares outstanding | 53,833 | 54,016 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 5,372,589 | $ 5,388,490 |
Costs and expenses: | ||
Cost of revenues | 4,245,866 | 4,219,741 |
Selling, general and administrative expenses | 1,162,652 | 1,152,627 |
Lease termination and impairment charges | 478 | 9,859 |
Interest expense | 58,270 | 62,792 |
Loss on debt retirements, net | 554 | |
Gain on sale of assets, net | (2,712) | (5,859) |
Total costs and expenses | 5,464,554 | 5,439,714 |
Loss from continuing operations before income taxes | (91,965) | (51,224) |
Income tax expense (benefit) | 7,374 | (9,497) |
Net loss from continuing operations | (99,339) | (41,727) |
Net (loss) income from discontinued operations, net of tax | (320) | 256,143 |
Net (loss) income | (99,659) | 214,416 |
Computation of (loss) income attributable to common stockholders: | ||
Loss from continuing operations attributable to common stockholders-basic and diluted | (99,339) | (41,727) |
(Loss) income from discontinued operations attributable to common stockholders-basic and diluted | (320) | 256,143 |
(Loss) income attributable to common stockholders-basic and diluted | $ (99,659) | $ 214,416 |
Basic and diluted (loss) income per share: | ||
Continuing operations | $ (1.88) | $ (0.79) |
Discontinued operations | 0 | 4.86 |
Net basic and diluted (loss) income per share | $ (1.88) | $ 4.07 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
Net (loss) income | $ (99,659) | $ 214,416 |
Defined benefit pension plans: | ||
Amortization of net actuarial losses included in net periodic pension cost, net of $0 and $144 tax expense | 415 | 364 |
Change in fair value of interest rate cap | (656) | |
Total other comprehensive (loss) income | (241) | 364 |
Comprehensive (loss) income | $ (99,900) | $ 214,780 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
Amortization of net actuarial losses included in net periodic pension cost, tax expense (benefit) | $ 0 | $ 144 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Balance - beginning of period at Mar. 03, 2018 | $ 53,366 | $ 5,864,664 | $ (4,282,471) | $ (34,549) | $ 1,601,010 |
BALANCE (in shares) at Mar. 03, 2018 | 53,366 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net (loss) income | 214,416 | 214,416 | |||
Other comprehensive (loss) income: | |||||
Changes in Defined Benefit Plans, net of $0, $144 tax expense at June 1, 2019, June2, 2018 respectively | 364 | 364 | |||
Comprehensive (loss) income | 214,780 | ||||
Adoption of ASU | Accounting Standards Update 2014-09 | (8,547) | (8,547) | |||
Cancellation of restricted stock | $ (44) | 44 | |||
Cancellation of restricted stock (in shares) | (44) | ||||
Amortization of restricted stock balance | 3,381 | 3,381 | |||
Stock-based compensation expense | 778 | 778 | |||
Stock options exercised | $ 38 | 871 | 909 | ||
Stock options exercised (in shares) | 38 | ||||
Balance - end of period at Jun. 02, 2018 | $ 53,360 | 5,869,738 | (4,076,602) | (34,185) | 1,812,311 |
BALANCE (in shares) at Jun. 02, 2018 | 53,360 | ||||
Balance - beginning of period at Mar. 02, 2019 | $ 54,016 | 5,876,977 | (4,713,244) | (31,059) | 1,186,690 |
BALANCE (in shares) at Mar. 02, 2019 | 54,016 | ||||
Other comprehensive (loss) income: | |||||
Adoption of ASU | Accounting Standards Update 2016-02 | 56,776 | ||||
Balance - end of period (Accounting Standards Update 2016-02) at Mar. 03, 2019 | 1,129,914 | ||||
Balance - beginning of period at Mar. 02, 2019 | $ 54,016 | 5,876,977 | (4,713,244) | (31,059) | 1,186,690 |
BALANCE (in shares) at Mar. 02, 2019 | 54,016 | ||||
Increase (Decrease) in Stockholders' Deficit | |||||
Net (loss) income | (99,659) | (99,659) | |||
Other comprehensive (loss) income: | |||||
Changes in Defined Benefit Plans, net of $0, $144 tax expense at June 1, 2019, June2, 2018 respectively | 415 | 415 | |||
Change in fair value of interest rate cap | (656) | (656) | |||
Comprehensive (loss) income | (99,900) | ||||
Adoption of ASU | Accounting Standards Update 2016-02 | (56,776) | (56,776) | |||
Exchange of restricted shares for taxes | $ (5) | (190) | (195) | ||
Exchange of restricted shares for taxes (in shares) | (5) | ||||
Cancellation of restricted stock | $ (178) | 178 | |||
Cancellation of restricted stock (in shares) | (178) | ||||
Amortization of restricted stock balance | 5,016 | 5,016 | |||
Stock-based compensation expense | 382 | 382 | |||
Balance - end of period at Jun. 01, 2019 | $ 53,833 | $ 5,882,363 | $ (4,869,679) | $ (31,300) | $ 1,035,217 |
BALANCE (in shares) at Jun. 01, 2019 | 53,833 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||
Changes in defined benefit plans tax expense | $ 0 | $ 144 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Operating activities: | ||
Net (loss) income | $ (99,659) | $ 214,416 |
Net (loss) income from discontinued operations, net of tax | (320) | 256,143 |
Net loss from continuing operations | (99,339) | (41,727) |
Adjustments to reconcile to net cash used in operating activities of continuing operations : | ||
Depreciation and amortization | 83,926 | 94,529 |
Lease termination and impairment charges | 478 | 9,859 |
LIFO charge | 7,489 | 9,966 |
Gain on sale of assets, net | (2,712) | (5,859) |
Stock-based compensation expense | 5,380 | 5,031 |
Loss on debt retirements, net | 554 | |
Changes in deferred taxes | (12,355) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (17,565) | (194,159) |
Inventories | (11,454) | 31,101 |
Accounts payable | (75,893) | 207,960 |
Operating lease right-of-use assets and operating lease liabilities | (11,893) | |
Other assets | 22,513 | 7,102 |
Other liabilities | 47,831 | (128,316) |
Net cash used in operating activities of continuing operations | (51,239) | (16,314) |
Investing activities: | ||
Payments for property, plant and equipment | (40,981) | (47,971) |
Intangible assets acquired | (8,210) | (13,655) |
Proceeds from dispositions of assets and investments | 658 | 9,916 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | (48,533) | (49,123) |
Financing activities: | ||
Net proceeds from revolver | 125,000 | 190,000 |
Principal payments on long-term debt | (1,780) | (431,106) |
Change in zero balance cash accounts | 36,387 | 1,083 |
Net proceeds from issuance of common stock | 910 | |
Payments for taxes related to net share settlement of equity awards | (195) | |
Financing fees paid for early debt redemption | (13) | |
Deferred financing costs paid | (186) | |
Net cash provided by (used in) financing activities of continuing operations | 159,226 | (239,126) |
Cash flows from discontinued operations: | ||
Operating activities of discontinued operations | (13,877) | (74,050) |
Investing activities of discontinued operations | 523 | 603,402 |
Financing activities of discontinued operations | 0 | (525,031) |
Net cash (used in) provided by discontinued operations | (13,354) | 4,321 |
Increase (decrease) in cash and cash equivalents | 46,100 | (300,242) |
Cash and cash equivalents, beginning of period | 144,353 | 447,334 |
Cash and cash equivalents, end of period | $ 190,453 | $ 147,092 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Jun. 01, 2019 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments which are of a recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended June 1, 2019 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 2019 10-K. Recently adopted accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02 , Leases, (Topic 842) (“ASU-2016-02” or the “Lease Standard”), 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). This ASU requires organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet a right of use asset (“ROU asset”) and a lease liability for the obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019. During July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. Among other things, ASU 2018-11 provides administrative relief by allowing entities to implement the Lease Standard using an alternative transition method. Effectively, the alternative transition method permits adoption of the Lease Standard through an adjustment to its opening balance sheet for the period of adoption, with the cumulative effect accounted for as an adjustment to retained earnings, without restating prior periods. The Company adopted the Lease Standard on March 3, 2019 under the alternative transition method as permissible under ASU 2018-11, and applied the Lease Standard to all leases through a cumulative-effect adjustment to beginning accumulated deficit. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the Lease Standard, which includes, among other things, the ability to carry forward the existing lease classification. On March 3, 2019, the Company recorded a liability for operating leases of $3,295,327, a ROU asset for such leases of $3,026,976 and recorded an after-tax transition adjustment to increase accumulated deficit by $56,776. The Lease Standard had a material impact on the unaudited condensed consolidated balance sheet, but did not have a material impact on the unaudited condensed consolidated statement of operations or the unaudited condensed consolidated statement of cash flows. As permitted under the practical expedient concerning assessment of lease portfolio, the Company chose not to reassess its lease portfolio, and consequently, all existing leases that were classified as operating leases in accordance with Topic 840, continue to be classified as operating leases, and all existing leases that were classified as capital leases under Topic 840 continue to be classified as finance leases. The Company performed an evaluation of ROU asset for impairment on transition. Stores that had previously been impaired and continued to fail the recoverability test as of March 2, 2019 were evaluated. Any store ROU asset with a carrying amount in excess of fair value was written down to the fair value. Fair value of those ROU assets was determined based on a study of market rents for similar active/operating retails sites. The result of this impairment assessment was a $81,745 write-down of the ROU assets on transition to accumulated deficit. In addition, the Company recognized $24,969 of deferred gains as a reduction to accumulated deficit upon transition related to prior sale-leaseback transactions along with other minor adjustments. As of March 2, 2019, the Company had $124,046 in closed store and lease exit liabilities under Topic 420 (“Topic 420 Liabilities”). Under transition to Topic 842, existing Topic 420 liabilities were eliminated by recording a reduction to the ROU asset balance. However, in certain cases the Company had larger existing Topic 420 liabilities than the ROU asset balances. This excess amount of $9,333 continues to be recorded as a liability and will reduce lease expense over the remaining lease term of the affected stores. In addition, upon transition, the Company reclassified deferred rent, including unamortized tenant income allowances, prepaid rent, and favorable and unfavorable lease balances resulting from prior acquisition accounting to the ROU asset. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that we would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use quoted interest rates obtained from financial institutions in an input to derive our incremental borrowing rate as the discount rate for the lease. The ROU asset is equal to the operating lease liability plus lease payments made before commencement, less lease incentives received from the landlord. The Company’s real estate leases typically contain options that permit lease extensions for additional periods of up to five years each. For real estate leases, generally, the renewal periods are not included within the lease term and the associated payments are not included in the measurement of the ROU asset and operating lease liability as the options to extend are not considered reasonably certain to occur at lease commencement. The Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options and will include all reasonably certain options in the measurement of our lease term. Generally, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease right-of-use asset and the operating lease liability until the renewals are i) evaluated and ii) determined to be exercised. The Company has an insignificant amount of non-real estate leases however, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. The Company rarely executes leases less than 12 months. On transition, the Company did include in its ROU asset balance leases with less than 12 month remaining. For real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease right-of-use assets and operating lease liabilities. Impact of the Lease Standard on Financial Statement Line Items As a result of applying the alternative transition method to adopt the Lease Standard, the following adjustments were made to accounts on the unaudited condensed consolidated balance sheet as of March 3, 2019: Impact of change in accounting policy As reported As adjusted (in thousands) March 2, 2019 Adjustments March 3, 2019 ASSETS Current assets: Cash and cash equivalents $ 144,353 $ — $ 144,353 Accounts receivable, net 1,788,712 — 1,788,712 Inventories, net 1,871,941 — 1,871,941 Prepaid expenses and other current assets 179,132 (51,448) 127,684 Current assets held for sale 117,581 43,697 161,278 Total current assets 4,101,719 (7,751) 4,093,968 Property, plant and equipment, net 1,308,514 — 1,308,514 Operating lease right-of-use asset — 3,026,976 3,026,976 Goodwill 1,108,136 — 1,108,136 Other intangibles, net 448,706 (29,632) 419,074 Deferred tax assets 409,084 — 409,084 Other assets 215,208 (1,086) 214,122 Total assets $ 7,591,367 $ 2,988,507 $ 10,579,874 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long‑term debt and lease financing obligations $ 16,111 $ — $ 16,111 Accounts payable 1,618,585 — 1,618,585 Accrued salaries, wages and other current liabilities 808,439 (56,553) 751,886 Current portion of operating lease liabilities — 457,305 457,305 Current liabilities held for sale — 45,167 45,167 Total current liabilities 2,443,135 445,919 2,889,054 Long‑term debt, less current maturities 3,454,585 — 3,454,585 Long-term operating lease liabilities — 2,838,022 2,838,022 Lease financing obligations, less current maturities 24,064 — 24,064 Other noncurrent liabilities 482,893 (238,658) 244,235 Total liabilities 6,404,677 3,045,283 9,449,960 Commitments and contingencies — — — Stockholders’ equity: Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 54,016 54,016 — 54,016 Additional paid‑in capital 5,876,977 — 5,876,977 Accumulated deficit (4,713,244) (56,776) (4,770,020) Accumulated other comprehensive loss (31,059) — (31,059) Total stockholders’ equity 1,186,690 (56,776) 1,129,914 Total liabilities and stockholders’ equity $ 7,591,367 $ 2,988,507 $ 10,579,874 See Note 12 for additional information. 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. 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 $1,771, an increase to inventory of $51,121, and a corresponding increase to accumulated deficit of $8,547 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 now recording revenue from this program on a net 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 represents an individual 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. 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 obligation and the Company allocates revenue between the merchandise purchased and the wellness + points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness + points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As members receive discounted front-end merchandise or when the benefit period expires, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $74,921 as of June 1, 2019, of which $51,581 is included in other current liabilities and $23,340 is included in noncurrent liabilities. The Retail Pharmacy segment had accrued contract liabilities of $63,720 as of March 2, 2019, of which $51,042 is included in other current liabilities and $12,678 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 their accumulated Bonus Cash on a future purchase with a 60 day expiration window. 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) wellness + Rewards members redeem their Bonus Cash, or (ii) wellness + Rewards members allow the Bonus Cash to expire. Upon utilization or expiration of the benefit period, 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 client plan members. 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. In the majority of 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 Envision Insurance Company ("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 tables disaggregate the Company’s revenue by major source in each segment for the thirteen week period ended June 1, 2019: For the thirteen week period In thousands ended June 1, 2019 Retail Pharmacy segment: Pharmacy sales $ 2,563,244 Front-end sales 1,265,361 Other revenue 36,203 Total Retail Pharmacy segment 3,864,808 Pharmacy Services segment 1,566,292 Intersegment elimination (58,511) Total revenue $ 5,372,589 Reclassification of the Statements of Cash Flows presentation During fiscal 2019, the Company expanded its disclosure on its Statements of Cash Flows to include changes in other assets separate from changes in other liabilities, which had historically been combined. Prior period amounts have been reclassified to conform to the current period presentation. Recasting of per-share amounts As previously announced, the Company implemented a reverse stock split of the Company’s common stock at a reverse stock split ratio of 1-for-20. The Company’s common stock began trading on a split-adjusted basis on the NYSE at the market open on April 22, 2019. Accordingly, all share and per-share amounts for the prior period has been recasted to reflect the reverse stock split. |
Restructuring
Restructuring | 3 Months Ended |
Jun. 01, 2019 | |
Restructuring | |
Restructuring | 2. Restructuring In March 2019, the Board of Directors implemented a reorganization of our executive management team to further streamline our business. In addition, the Company announced a restructuring plan that will reduce managerial layers and consolidate roles across the organization, resulting in the elimination of approximately 400 full-time positions located at the Company’s headquarters and across the field organization. Approximately two-thirds of the reductions took place at the time of the announcement and the balance will occur by the end of fiscal 2020. In April 2019, the Company implemented its Path to the Future transformation initiative, which focuses primarily on opportunities to drive further growth and operating efficiency, including i) building tools to work with regional health plans to improve patient health outcomes, ii) rationalize SKU’s in its front-end offering to free up working capital, improve front-end profitability and improve the customer experience, iii) an assessment of the Company’s pricing and promotional strategy and, iv) a continued review of the Company’s cost structure, which includes opportunities to use technology and vendor partners to help reduce costs. For the thirteen week period ended June 1, 2019, the Company incurred total restructuring-related costs of $43,350, which are included as a component of SG&A. These costs are as follows: Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with the March 2019 reorganization (a) $ 25,272 $ 1,804 $ 27,076 Non-executive retention costs associated with the March 2019 reorganization (b) 4,499 2,165 6,664 Professional and other fees relating to the Path to the Future transformation initiative (c) 9,610 — 9,610 Total restructuring-related costs $ 39,381 $ 3,969 $ 43,350 A summary of activity for the thirteen week period ended June 1, 2019 in the restructuring-related liabilities associated with the programs noted above, which is included in accrued salaries, wages and other current liabilities, is as follows: Severance and related Professional and costs (a) Retention costs (b) other fees (c) Total Balance at March 2, 2019 $ — $ 4,704 $ — $ 4,704 Additions charged to expense 27,076 6,664 9,610 43,350 Cash payments (4,653) (242) (9,610) (14,505) Balance at June 1, 2019 $ 22,423 $ 11,126 $ — $ 33,549 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with the March 2019 reorganization. (b) – As part of its March 2019 reorganization, the Company incurred costs with the implementation of a retention plan for certain of its key associates. (c) – Professional and other fees include costs incurred in connection with the identification and implementation of transformation initiatives associated with the Path to the Future initiative. The Company anticipates its total fiscal 2020 restructuring-related costs to be approximately $55,000. |
Asset Sale to WBA
Asset Sale to WBA | 3 Months Ended |
Jun. 01, 2019 | |
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, 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 distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of $4,375,000, on a cash-free, debt-free basis in the Sale. The Company announced on September 19, 2017 that the waiting period under the HSR Act, expired with respect to the Sale. The Company completed the store transfer process in March of 2018, which resulted in the transfer of all 1,932 stores and related assets to WBA, and the received of cash proceeds of $4,156,686. On September 13, 2018, the Company completed the sale of one of its distribution centers and related assets to WBA for proceeds of $61,251. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $14,151, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended March 2, 2019. The transfer of the remaining two 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 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 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. The term of the TSA has been extended to October 17, 2020. 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 periods ended June 1, 2019 and June 2, 2018 were $1,192,791 and $2,041,075, respectively, of which $224,385 and $447,305 is included in Accounts receivable, net. The Company charged WBA TSA fees of $14,225 and $23,735 during the thirteen week periods ended June 1, 2019 and June 2, 2018, respectively, which are reflected as a reduction to selling, general and administrative expenses. Based on its magnitude and because the Company exited certain markets, the Sale represented a significant strategic shift that has a material effect on the Company's operations and financial results. Accordingly, the Company has applied discontinued operations treatment for the Sale as required by Accounting Standards Codification 210-05- Discontinued Operations (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 1, 2019 and March 2, 2019, 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 1, March 2, 2019 2019 Inventories $ 62,351 $ 68,233 Property and equipment 49,346 49,348 Operating lease right-of-use asset 42,114 — Current assets held for sale $ 153,811 $ 117,581 Current portion of operating lease liabilities $ 3,213 $ — Long-term operating lease liabilities 40,616 — Current liabilities held for sale $ 43,829 $ — 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 1, June 2, 2019 2018 (13 weeks) (13 weeks) Revenues $ (88) $ 23,400 Costs and expenses: Cost of revenues(a) 265 17,081 Selling, general and administrative expenses(a) 486 13,875 Lease termination and impairment charges — — Loss on debt retirements, net — 4,570 Interest expense (b) — 4,615 Gain on stores sold to Walgreens Boots Alliance — (360,557) Gain on sale of assets, net (522) — 229 (320,416) (Loss) income from discontinued operations before income taxes (317) 343,816 Income tax expense 3 87,673 Net (loss) income from discontinued operations, net of tax $ (320) $ 256,143 (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 1, 2019 and June 2, 2018, 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. |
(Loss) Income Per Share
(Loss) Income Per Share | 3 Months Ended |
Jun. 01, 2019 | |
(Loss) Income Per Share | |
(Loss) Income Per Share | 4. (Loss) Income Per Share Basic (loss) income per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company subject to anti-dilution limitations. Thirteen Week Period Ended June 1, June 2, 2019 2018 Basic and diluted (loss) income per share: Numerator: Net loss from continuing operations $ (99,339) $ (41,727) Net (loss) income from discontinued operations (320) 256,143 (Loss) income attributable to common stockholders - basic and diluted $ (99,659) $ 214,416 Denominator: Basic weighted average shares 52,976 52,719 Outstanding options and restricted shares, net — — Diluted weighted average shares 52,976 52,719 Basic and diluted (loss) income per share: Continuing operations $ (1.88) $ (0.79) Discontinued operations 0.00 4.86 Net basic and diluted (loss) income per share $ (1.88) $ 4.07 Due to their antidilutive effect, 992 and 1,288 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 1, 2019 and June 2, 2018, respectively. Also, excluded from the computation of diluted income (loss) per share as of June 1, 2019 and June 2, 2018 are restricted shares of 813 and 567, respectively, which are included in shares outstanding. On April 10, 2019, the Company’s Board of Directors approved a one-for-twenty reverse stock split of the Company’s outstanding shares of common stock. The reverse stock split was effected on April 18, 2019 at 5:00 p.m. Eastern time. At the effective time, every twenty issued and outstanding shares of the Company’s common stock were converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split, and in lieu thereof, each stockholder holding fractional shares was entitled to receive a cash payment (without interest or deduction) from the Company’s transfer agent in an amount equal to such stockholder’s respective pro rata shares of the total net proceeds from the Company’s transfer agent sale of all fractional shares at the then-prevailing prices on the open market. In connection with the reverse stock split, the number of authorized shares of our common stock was also reduced on a one-for-twenty basis, from 1,500,000 to 75,000. The par value of each share of common stock remained unchanged. A proportionate adjustment was also made to the maximum number of shares issuable under the Company’s 2014 Equity Incentive Plan. |
Lease Termination and Impairmen
Lease Termination and Impairment Charges | 3 Months Ended |
Jun. 01, 2019 | |
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 Ended June 1, June 2, 2019 2018 Impairment charges $ 123 $ 283 Lease termination charges — 9,576 Facility exit charges 355 — $ 478 $ 9,859 Impairment Charges These amounts include the write‑down of long‑lived assets at locations that were assessed for impairment because of management’s intention to relocate or close the location or because of changes in circumstances that indicated the carrying value of an asset may not be recoverable. The Company utilizes the three‑level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. · Level 3—Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. Non‑Financial Assets Measured on a Non‑Recurring Basis Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the thirteen week period ended June 1, 2019, long-lived assets from continuing operations with a carrying value of $123, primarily store assets, were written down to their fair value of $000, resulting in an impairment charge of $123. 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. 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 1, 2019 and June 2, 2018: Fair Value Measurement Using Total as of June 1, Level 1 Level 2 Level 3 2019 Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ — $ — Total as of June 2, Level 1 Level 2 Level 3 2018 Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ 1,292 $ — $ 1,292 Total $ — $ 1,292 $ — $ 1,292 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. Lease Termination and Facility Exit Charges As part of the Company's ongoing business activities, the Company assesses stores and distribution centers for potential closure or relocation. Decisions to close or relocate stores or distribution centers in future periods would result in lease termination charges, lease exit costs and inventory liquidation charges, as well as impairment of assets at these locations. When a store or distribution center is closed, the Company records an expense for unrecoverable costs and accrues a liability equal to the present value at current credit adjusted risk-free interest rates of any anticipated executory costs which are not included within the store or distribution center's respective lease liability under Topic 842. Other store or distribution center closing and liquidation costs are expensed when incurred. The following table reflects the closed store and distribution center charges that relate to new closures, changes in assumptions and interest accretion: Thirteen Week Period Ended June 1, June 2, 2019 2018 Balance—beginning of period $ 124,046 $ 133,290 Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset (112,288) — Provision for present value of noncancellable lease payments of closed stores — 8,130 Changes in assumptions about future sublease income, terminations and changes in interest rates — (1,038) Interest accretion — 2,685 Cash payments, net of sublease income (2,425) (11,885) Balance—end of period $ 9,333 $ 131,182 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Jun. 01, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | 6. Fair Value Measurements The Company utilizes the three-level valuation hierarchy as described in Note 5, Lease Termination and Impairment Charges, for the recognition and disclosure of fair value measurements. As of June 1, 2019 and March 2, 2019, 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 1, 2019 and March 2, 2019, the Company has $6,968 and $7,191, respectively, of investments carried at amortized cost as these investments are being held to maturity. These investments are included as a component of other assets as of June 1, 2019 and as a component of prepaid expenses and other current assets as of March 2, 2019. The Company believes the carrying value of these investments approximates their fair value. The fair value for LIBOR‑based borrowings under the Company’s senior secured credit facility is estimated based on the quoted market price of the financial instrument which is considered Level 1 of the fair value hierarchy. The fair values of substantially all of the Company’s other long‑term indebtedness are estimated based on quoted market prices of the financial instruments which are considered Level 1 of the fair value hierarchy. The carrying amount and estimated fair value of the Company’s total long‑term indebtedness was $3,582,037 and $3,172,793, respectively, as of June 1, 2019. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $3,454,585 and $3,120,335, respectively, as of March 2, 2019. On March 15, 2019, the Company entered into an interest rate cap (“Cap”), which has been designated to the variable interest rate payments on the first $650.0 million notional amount of variable rate indebtedness. The Cap has an effective date of March 21, 2019 and expires on March 21, 2021. The Cap provides the Company with interest rate protection in the event that LIBOR increases above 2.75%. The fair market value of the Cap is recorded as a component of other assets. |
Income Taxes
Income Taxes | 3 Months Ended |
Jun. 01, 2019 | |
Income Taxes | |
Income Taxes | 7. Income Taxes The Company recorded an income tax expense from continuing operations of $7,374 and an income tax benefit from continuing operations of $9,497 for the thirteen week periods ended June 1, 2019 and June 2, 2018. The effective tax rate for the thirteen week periods ended June 1, 2019 and June 2, 2018 was (8.0)% and 18.5%, respectively. The effective tax rate for the thirteen week period ended June 1, 2019 is net of an adjustment of (34.5)% to increase the valuation allowance for additional deferred tax assets created this period. The effective tax rate for the thirteen week period ended June 2, 2018 included an adjustment of (2.3)% to increase the valuation allowance related to certain 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 $7,295 in unrecognized tax benefits related to state exposures may be necessary in the next twelve months however management does not expect the change to have a significant impact on the results of operations or the financial position of the Company. The Company regularly evaluates valuation allowances established for deferred tax assets for which future realization is uncertain. Management will continue to monitor all available evidence related to the net deferred tax assets that may change the most recent assessment, including events that have occurred or are anticipated to occur. The Company continues to maintain a valuation allowance against net deferred tax assets of $1,048,101 and $1,091,416, which relates to federal and state deferred tax assets that may not be realized based on the Company's future projections of taxable income at June 1, 2019 and March 2, 2019, respectively. |
Medicare Part D
Medicare Part D | 3 Months Ended |
Jun. 01, 2019 | |
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 $23,314 as of March 31, 2019. EIC was in excess of the minimum required amounts in these states as of June 1, 2019. 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 1, 2019 and March 2, 2019, accounts receivable, net included $448,266 and $392,400 due from CMS respectively. |
Manufacturer Rebates Receivable
Manufacturer Rebates Receivables | 3 Months Ended |
Jun. 01, 2019 | |
Manufacturer Rebates Receivables | |
Manufacturer Rebates Receivables | 9. Manufacturer Rebates Receivables The Pharmacy Services Segment has manufacturer rebates receivables of $465,562 and $445,200 included in Accounts receivable, net, as of June 1, 2019 and March 2, 2019, respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Jun. 01, 2019 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 10. Goodwill and Other Intangible Assets There was no impairment charge for the thirteen week period ended June 1, 2019. At June 1, 2019 and March 2, 2019, accumulated impairment losses for the Pharmacy Services segment was $574,712. The Company’s intangible assets are primarily finite-lived and amortized over their useful lives. Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets as of June 1, 2019 and March 2, 2019. June 1, 2019 March 2, 2019 Remaining Remaining Weighted Weighted Gross Average Gross Average Carrying Accumulated Amortization Carrying Accumulated Amortization Amount Amortization Net Period Amount Amortization Net Period Favorable leases and other(a) $ 180,435 $ (158,605) $ 21,830 3 years $ 370,855 $ (318,503) $ 52,352 7 years Prescription files 926,101 (837,819) 88,282 3 years 919,749 (827,222) 92,527 3 years Customer relationships(a) 388,000 (204,023) 183,977 12 years 388,000 (193,352) 194,648 13 years CMS license 57,500 (9,047) 48,453 21 years 57,500 (8,472) 49,028 22 years Claims adjudication and other developed software 58,985 (33,137) 25,848 3 years 58,985 (31,030) 27,955 4 years Trademarks 20,100 (7,906) 12,194 6 years 20,100 (7,404) 12,696 7 years Backlog 11,500 (11,500) — 0 years 11,500 (11,500) — 0 years Total finite $ 1,642,621 $ (1,262,037) 380,584 $ 1,826,689 $ (1,397,483) $ 429,206 Trademarks 19,500 — 19,500 Indefinite 19,500 — 19,500 Indefinite Total $ 1,662,121 $ (1,262,037) $ 400,084 $ 1,846,189 $ (1,397,483) $ 448,706 (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 1, 2019 and March 2, 2019 are unfavorable lease intangibles with a net carrying amount of $000 and $14,763, respectively. In connection with the Adoption of ASU 2016-02 , Leases (Topic 842) , both favorable and unfavorable leases were reclassified into operating lease right-of-use assets. Amortization expense for these intangible assets and liabilities was $27,660 and $35,400 for the thirteen week periods ended June 1, 2019 and June 2, 2018, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2020—$99,436; 2021—$76,988; 2022—$56,559; 2023—$41,485 and 2024-$27,910. |
Indebtedness and Credit Agreeme
Indebtedness and Credit Agreements | 3 Months Ended |
Jun. 01, 2019 | |
Indebtedness and Credit Agreements | |
Indebtedness and Credit Agreements | 11. Indebtedness and Credit Agreements Following is a summary of indebtedness and lease financing obligations at June 1, 2019 and March 2, 2019: June 1, March 2, 2019 2019 Secured Debt: Senior secured revolving credit facility due December 2023 ($1,000,000 and $875,000 face value less unamortized debt issuance costs of $22,972 and $24,069) $ 977,028 $ 850,931 FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $3,662 and $3,918) 446,338 446,082 1,423,366 1,297,013 Guaranteed Unsecured Debt: 6.125% senior notes due April 2023 ($1,753,490 face value less unamortized debt issuance costs of $15,940 and $16,982) 1,737,550 1,736,508 1,737,550 1,736,508 Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,253 and $1,295) 293,747 293,705 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $626 and $642) 127,374 127,358 421,121 421,063 Lease financing obligations 34,430 40,176 Total debt 3,616,467 3,494,760 Current maturities of long-term debt and lease financing obligations (11,751) (16,111) Long-term debt and lease financing obligations, less current maturities $ 3,604,716 $ 3,478,649 Credit Facility On December 20, 2018, the Company entered into a new senior secured credit agreement, consisting of a new $2,700,000 senior secured asset-based revolving credit facility (“Senior Secured Revolving Credit Facility”) and a new $450,000 “first-in, last out” senior secured term loan facility (“Senior Secured Term Loan”) (collectively the “New Facilities”). Proceeds from the New Facilities were used to refinance the Company’s prior $2,700,000 Amended and Restated Senior Secured Credit Facility due January 2020 (the “Old Facility” the New Facilities and the Old Facility are collectively referred to herein as the “Facilities”). The New Facilities extend the Company’s debt maturity profile and provide additional liquidity. The New Facilities mature in December 2023, subject to an earlier maturity on December 31, 2022 if the Company has not repaid or refinanced its existing 6.125% Senior Notes due 2023 prior to such date. The Company’s new Senior Secured Revolving Credit Facility will bear interest at a rate of LIBOR plus 125 to 175 basis points (or an alternate base rate plus 25 to 75 basis points), depending on availability under the revolving facility. The Company’s new Senior Secured Term Loan will bear interest at a rate of LIBOR plus 300 basis points (or an alternate base rate plus 200 basis points). The Company’s ability to borrow under the New Facilities is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At June 1, 2019, the Company had $1,450,000 of borrowings outstanding under the New Facilities and had letters of credit outstanding against the New Facilities of $83,205 which resulted in additional borrowing capacity of $1,616,795. The New Facilities restrict the Company and the Subsidiary Guarantors (as defined herein) from accumulating cash on hand in excess of $200,000 at any time revolving loans are outstanding (not including cash located in its stores and lockbox deposit account and cash necessary to cover current liabilities). The New Facilities allow 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 New Facilities 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 (i) the fifth anniversary of the effectiveness of the New Facilities and (ii) the latest maturity date of any Term Loan or Other Revolving Commitment (each as defined in the New Facilities). Subject to the limitations described in clauses (i) and (ii) of the immediately preceding sentence, the New Facilities additionally allow 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 New Facilities) 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 New Facilities also contain certain restrictions on the amount of secured first priority debt the Company is able to incur. The New Facilities also allow for the voluntary repurchase of any debt or other convertible debt, so long as the New Facilities are not in default and the Company maintains availability under its revolver of more than $365,000. The New Facilities have a financial covenant that requires the Company to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (i) on any date on which availability under the revolver is less than $200,000 or (ii) 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 New Facilities is equal to or greater than $250,000. As of June 1, 2019, the Company had availability under its New Facilities of $1,616,795, its fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the New Facilities' financial covenant. The New Facilities also contain 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 New Facilities also provide for customary events of default. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 % owned subsidiaries guarantee the obligations under the New Facilities and unsecured guaranteed notes. The New Facilities are 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 New Facilities and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several, and there are no restrictions on the ability of the Company to obtain funds from its subsidiaries. The Company has no independent assets or operations. Other than EIC, the subsidiaries, including joint ventures, that do not guarantee the New Facilities 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 of EnvisionRx. See Note 16 “Guarantor and Non-Guarantor Condensed Consolidating Financial Information” for additional disclosure. Fiscal 2019 and 2020 Transactions 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 asset sale provisions of such indentures. On May 21, 2018, the Company accepted for payment, pursuant to its offer to purchase, $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 Old 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 June 25, 2018, the Company redeemed the remaining $805,169 of its 6.75% Notes, which resulted in a loss on debt retirement of $18,075. The loss on debt retirement is included in the results of operations and cash flows of discontinued operations. On March 15, 2019, the Company entered into a Cap, which has been assigned to the variable interest rate payments on the first $650,000 notional amount of variable rate indebtedness. The Cap has an effective date of March 21, 2019 and expires on March 21, 2021. The Cap provides the Company with interest rate protection in the event that LIBOR increases above 2.75%. Maturities The aggregate annual principal payments of long-term debt for the remainder of fiscal 2020 and thereafter are as follows: 2020—$000; 2021—$000; 2022—$000; 2023—$000; 2024—$3,203,490 and $423,000 thereafter. These aggregate annual principal payments of long-term debt assume that the Company has not repaid or refinanced its existing 6.125% Senior Notes due 2023 prior to December 31, 2022. |
Leases
Leases | 3 Months Ended |
Jun. 01, 2019 | |
Leases | |
Leases | 12. Leases The Company leases most of its retail stores and certain distribution facilities under noncancellable operating and capital leases, most of which have initial lease terms ranging from 5 to 22 years. The Company also leases certain of its equipment and other assets under noncancellable operating leases with initial terms ranging from 3 to 10 years. In addition to minimum rental payments, certain store leases require additional payments based on sales volume, as well as reimbursements for taxes, maintenance and insurance. Most leases contain renewal options, certain of which involve rent increases. The following table is a summary of the Company’s components of net lease cost for the thirteen week period ended June 1, 2019: For the thirteen week period ended June 1, 2019 Operating lease cost $ 164,983 Financing lease cost: Amortization of right-of-use asset 1,536 Interest on long-term finance lease liabilities 905 Total finance lease costs $ 2,441 Short-term lease costs 1 Variable lease costs 40,545 Less: sublease income (5,751) Net lease cost $ 202,219 Supplemental cash flow information related to leases for the thirteen week period ended June 1, 2019: For the thirteen week period ended June 1, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 176,237 Operating cash flows paid for interest portion of finance leases 905 Financing cash flows paid for principal portion of finance leases 3,490 Right-of-use assets obtained in exchange for lease obligations: Operating leases 77,384 Finance leases 0 Supplemental balance sheet information related to leases as of June 1, 2019 (in thousands, except lease term and discount rate): June 1, 2019 Operating leases: Operating lease right-of-use asset $ 2,985,213 Short-term operating lease liabilities $ 450,933 Long-term operating lease liabilities 2,790,738 Total operating lease liabilities $ 3,241,671 Finance leases: Property, plant and equipment, net $ 24,825 Current maturities of long-term debt and lease financing obligations $ 11,751 Lease financing obligations, less current maturities 22,679 Total finance lease liabilities $ 34,430 Weighted average remaining lease term Operating leases Finance leases Weighted average discount rate Operating leases % Finance leases % The following table summarizes the maturity of lease liabilities under finance and operating leases as of June 1, 2019: June 1, 2019 Finance Operating Fiscal year Leases Leases (1) Total 2020 (remaining thirty-nine weeks) $ 10,774 $ 519,217 $ 529,991 2021 6,922 630,612 637,534 2022 4,360 563,470 567,830 2023 4,143 508,479 512,622 2024 3,842 447,507 451,349 Thereafter 20,469 1,554,206 1,574,675 Total lease payments 50,510 4,223,491 4,274,001 Less: imputed interest (16,080) (981,820) (997,900) Total lease liabilities $ 34,430 $ 3,241,671 $ 3,276,101 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $60 million due in the future under noncancelable leases. Following are the minimum lease payments for all properties under a lease agreement that will have to be made in each of the years indicated based on non-cancelable leases in effect as of March 2, 2019: Lease Financing Operating Fiscal year Obligations Leases 2020 $ 19,300 $ 687,412 2021 4,811 610,874 2022 4,588 545,863 2023 4,383 490,864 2024 4,042 431,714 Later years 20,470 1,541,408 Total minimum lease payments 57,594 $ 4,308,135 Amount representing interest (17,418) Present value of minimum lease payments $ 40,176 During the thirteen week periods ended June 1, 2019 and June 2, 2018, the Company did not enter into any sale-leaseback transactions whereby the Company sold owned operating stores to independent third parties and concurrent with the sale, entered into an agreement to lease the store back from the purchasers. |
Retirement Plans
Retirement Plans | 3 Months Ended |
Jun. 01, 2019 | |
Retirement Plans | |
Retirement Plans | 13. Retirement Plans Net periodic pension expense recorded in the thirteen week periods ended June 1, 2019 and June 2, 2018, for the Company’s defined benefit plan includes the following components: Defined Benefit Pension Plan Thirteen Week Period Ended June 1, June 2, 2019 2018 Service cost $ 143 $ 312 Interest cost 1,556 1,578 Expected return on plan assets (1,214) (1,434) Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss 415 508 Net periodic pension expense $ 900 $ 964 During the thirteen week period ended June 1, 2019 the Company contributed $000 to the Defined Benefit Pension Plan. During the remainder of fiscal 2020, the Company expects to contribute $000 to the Defined Benefit Pension Plan. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Jun. 01, 2019 | |
Segment Reporting | |
Segment Reporting | 14. 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 Pharmacy Services Eliminations (1) Consolidated June 1, 2019: Total Assets $ 7,918,381 $ 2,628,214 $ (16,906) $ 10,529,689 Goodwill 43,492 1,064,644 — 1,108,136 March 2, 2019: Total Assets $ 5,071,055 $ 2,534,771 $ (14,459) $ 7,591,367 Goodwill 43,492 1,064,644 — 1,108,136 (1) As of June 1, 2019 and March 2, 2019, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $000 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $16,906 and $14,459, 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 1, 2019 and June 2, 2018: Retail Pharmacy Intersegment Pharmacy Services Eliminations (1) Consolidated June 1, 2019: Revenues $ 3,864,808 $ 1,566,292 $ (58,511) $ 5,372,589 Gross Profit 1,030,495 96,228 — 1,126,723 Adjusted EBITDA (2) 84,008 26,339 — 110,347 Additions to property and equipment and intangible assets 44,244 4,947 — 49,191 June 2, 2018: Revenues $ 3,897,765 $ 1,542,762 $ (52,037) $ 5,388,490 Gross Profit 1,069,457 99,292 — 1,168,749 Adjusted EBITDA (2) 104,129 33,863 — 137,992 Additions to property and equipment and intangible assets 58,067 3,559 — 61,626 (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 1, 2019 and June 2, 2018: June 1, June 2, 2019 2018 (13 weeks) (13 weeks)(a) Net loss from continuing operations $ (99,339) $ (41,727) Interest expense 58,270 62,792 Income tax expense (benefit) 7,374 (9,497) Depreciation and amortization 83,926 94,529 LIFO charge 7,489 9,966 Lease termination and impairment charges 478 9,859 Loss on debt retirements, net — 554 Merger and Acquisition-related costs 3,085 7,188 Stock-based compensation expense 5,380 5,031 Restructuring-related costs 43,350 — Inventory write-downs related to store closings 841 3,833 Gain on sale of assets, net (2,712) (5,859) Other 2,205 1,323 Adjusted EBITDA from continuing operations $ 110,347 $ 137,992 (a) During fiscal 2019, the Company revised its definition of Adjusted EBITDA to no longer exclude the impact of revenue deferrals related to our customer loyalty program and further revised its disclosure by presenting certain amounts previously included within Other as separate reconciling items. Consequently, the Company revised Adjusted EBITDA for the thirteen week period ended June 2, 2018 to conform with the revised definition and present separate reconciling items previously included with Other. |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 3 Months Ended |
Jun. 01, 2019 | |
Commitments, Contingencies and Guarantees | |
Commitments, Contingencies and Guarantees | 15. Commitments, Contingencies and Guarantees Legal Matters and Regulatory Proceedings The Company is involved in legal proceedings including litigation, arbitration, and other claims, and is subject to investigations, inspections, audits, inquiries, and similar actions by pharmacy, health care, tax and other governmental authorities arising in the ordinary course of its business, including, without limitation, the matters described below. The Company records accruals for outstanding legal matters and applicable regulatory proceedings when it believes it is probable that a loss has been incurred, and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters and regulatory proceedings that could affect the amount of any existing accrual and developments that would make a loss contingency both probable and reasonably estimable, and as a result, warrant an accrual. 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. The Company is currently a defendant in several lawsuits filed in courts in California alleging violations of California Business and Professions Code, industry wage orders, 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 or PAGA representative 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. 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. On March 30, 2019, the Company’s motion to dismiss the Third Amended Complaint was denied. The court entered a scheduling order on May 29, 2019, and the case is proceeding through discovery. 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 was served with 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 for the Northern District of New York ("USAO") regarding an investigation of possible civil violations of the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”). Additional subpoenas were served in 2013, 2014, and 2015 requesting broader documentation regarding PSE sales and recordkeeping requirements. Assistant U.S. Attorneys from the Northern and Eastern Districts of New York are currently investigating, but no lawsuits have been filed. Civil 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 criminal investigation into Rite Aid’s PSE sales. Pursuant to the non-prosecution 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. On September 5, 2018, the court issued an order denying the motion to dismiss. The case is proceeding with the first stage of discovery, which focuses on plaintiffs' proposed sampling methodology for determining liability and damages. The Company's motion challenging plaintiffs' proposed sampling methodology was filed on April 15, 2019, and is scheduled to be heard on June 28, 2019. 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 (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 jurisdictional and substantive grounds, as well as a motion to transfer venue, all of which were stayed pending the resolution of related litigation involving another chain pharmacy on appeal. In September 2018, the stay of the case was lifted. On November 28, 2018, the case was transferred to the Circuit Court of Desoto County and consolidated with related cases containing similar allegations brought by Mississippi against other chain pharmacies. On June 11, 2019, the court (i) dismissed the claims against the Company for lack of personal jurisdiction; and (ii) dismissed the fraud-based claims against the Company's purportedly related entities (Rite Aid Hdqtrs. Corp., Harco, Inc., and K&B of Mississippi Corporation) for failure to plead the fraud-based claims with particularity, but with leave to amend. The court did not dismiss the claims against the purportedly related entities for unjust enrichment or for restitution under the Mississippi Consumer Protection Act. To date, the State of Mississippi has not indicated how it intends to proceed in response to the court's decision. 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. The Company is a defendant in the consolidated multidistrict litigation proceeding, In re National Prescription Opiate Litigation (Case No. 17-md-2804), pending in the U.S. District Court for the Northern District of Ohio. Various plaintiffs (such as counties, cities, hospitals, and third-party payors) allege claims generally concerning the impacts of widespread opioid abuse against defendants along the pharmaceutical supply chain, including manufacturers, wholesale distributors, and retail pharmacy chains. Since December 2017, nearly all related cases pending in federal district courts have been transferred to this multi-district litigation. Two Ohio lawsuits (referred to as the “Track One” or “bellwether” cases) have been set for trial in the multi-district litigation : The County of Summit, Ohio v. Purdue Pharma L.P., et al. , Case No. 18-OP-45090 (N.D. Ohio);and The County of Cuyahoga v. Purdue Pharma L.P., et al. , Case No. 17-OP-45004 (N.D. Ohio). On January 29, 2019, the multi-district litigation court entered an order moving the trial date from September 3, 2019 to October 21, 2019 for the two bellwether cases. On May 25, 2018, the Company and other defendants filed Motions to Dismiss the Complaints in the bellwether cases. On October 5, 2018, the magistrate judge assigned to review these Motions to Dismiss issued a report and recommendation to the district court judge on the multi-district litigation. The magistrate judge recommended granting dismissal of two claims, the common law absolute public nuisance claim and the City of Akron’s public nuisance claim. The report otherwise recommended denying all the defendants’ Motions to Dismiss. The Company filed its objections to the magistrate judge’s report on November 2, 2018 (along with other defendants). The district court judge overseeing the multi-district litigation reviewed the magistrate judge's report and recommendation, along with the parties' Objections to the report, and their Responses. The district court subsequently ruled that Defendants' Motions to Dismiss were denied with the following exceptions. The City of Akron's statutory public nuisance claim was dismissed for lack of standing. The district court judge also ruled that the County of Summit's statutory public nuisance claim was limited to seeking injunctive relief. The Company (as well as most of the parties in the litigation) has engaged in intensive and extensive discovery, and participated in numerous depositions. The bellwether cases are now in expert discovery. New cases continue to be added each week to the multi-district litigation, which currently includes over 920 federal lawsuits that name the Company, including lawsuits filed by counties and municipalities in California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Texas, Virginia, West Virginia, and Wisconsin. There are also approximately 136 similar lawsuits that name the Company in some capacity that have been filed outside the multi-district litigation, including lawsuits filed in Connecticut, Georgia, Idaho, Illinois, Louisiana, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Washington, and West Virginia. 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. Additionally, the Company has received from the Attorney Generals of several states subpoenas, civil investigative demands, and/or other requests regarding opioids. 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 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 (i) the Company was obligated to charge the plaintiffs’ insurance companies a “usual and customary” price for their prescription drugs; and (ii) the Company failed to do so properly because the prices it reported were not equal to or adjusted to account for the 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 complaint 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. The court granted the motion to dismiss most of Josten’s claims for failure to plead compliance with the applicable statute of limitations but with leave to amend. The Company's motion to dismiss Josten's amended complaint on the grounds that the statute of limitations expired and that he failed to exhaust Medicare administrative remedies, is scheduled to be heard on July 18, 2019. The court denied the motion to dismiss Stafford’s claims, opened discovery, and set a June 19, 2019 deadline for Stafford's class certification motion. On June 17, 2019, Stafford filed a motion seeking to extend the time for filing of his class certification motion until December 11, 2019; and the court's decision on that unopposed motion is pending. Also on June 17, 2019, Rite Aid filed a motion to compel all Stafford's claims to an individual arbitration; and that motion is scheduled to be heard on September 5, 2019. Relatedly, on June 19, 2019, Rite Aid filed an ex parte motion to stay the entire action pending the court's decision on its motion to compel arbitration; Plaintiff's opposition is due on June 20, 2019, and the Court will thereafter make a ruling without a hearing. 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. 01, 2019 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | 16. 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% owned subsidiaries guarantee the obligations under the New Facilities and unsecured guaranteed notes (the “Subsidiary Guarantors”). Additionally, with the exception of EIC, the subsidiaries, including joint ventures, that do not guarantee the New Facilities 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 New Facilities 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 1, 2019, March 2, 2019 and for the thirteen week periods ended June 1, 2019 and June 2, 2018. Separate financial statements for Subsidiary Guarantors are not presented. Rite Aid Corporation Condensed Consolidating Balance Sheet June 1, 2019 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ 137,022 $ 53,431 $ — $ 190,453 Accounts receivable, net — 1,342,745 461,033 — 1,803,778 Intercompany receivable — 458,684 — (458,684) (a) — Inventories, net of LIFO reserve of $0 , $611,933, $0, $0, and $611,933 — 1,875,917 — — 1,875,917 Prepaid expenses and other current assets — 100,118 4,666 — 104,784 Current assets held for sale — 153,811 — — 153,811 Total current assets — 4,068,297 519,130 (458,684) 4,128,743 Property, plant and equipment, net — 1,284,680 — — 1,284,680 Operating lease right-of-use assets — 2,985,213 — — 2,985,213 Goodwill — 1,108,136 — — 1,108,136 Other intangibles, net — 351,631 48,453 — 400,084 Deferred tax assets — 419,122 (10,038) — 409,084 Investment in subsidiaries 9,224,254 56,405 — (9,280,659) (b) — Intercompany receivable — 4,558,036 — (4,558,036) (a) — Other assets 180 206,601 6,968 — 213,749 Total assets $ 9,224,434 $ 15,038,121 $ 564,513 $ (14,297,379) $ 10,529,689 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ — $ 11,751 $ — $ — $ 11,751 Accounts payable — 1,550,469 5,956 — 1,556,425 Intercompany payable — — 458,684 (458,684) (a) — Accrued salaries, wages and other current liabilities 49,144 697,593 35,468 — 782,205 Current portion of operating lease liabilities — 450,933 — — 450,933 Current liabilities held for sale — 43,829 — — 43,829 Total current liabilities 49,144 2,754,575 500,108 (458,684) 2,845,143 Long-term debt, less current maturities 3,582,037 — — — 3,582,037 Non-current operating lease liabilities — 2,790,738 — — 2,790,738 Lease financing obligations, less current maturities — 22,679 — — 22,679 Intercompany payable 4,558,036 — — (4,558,036) (a) — Other noncurrent liabilities — 245,875 8,000 — 253,875 Total liabilities 8,189,217 5,813,867 508,108 (5,016,720) 9,494,472 Commitments and contingencies — — — — — Total stockholders’ equity 1,035,217 9,224,254 56,405 (9,280,659) (b) 1,035,217 Total liabilities and stockholders’ equity $ 9,224,434 $ 15,038,121 $ 564,513 $ (14,297,379) $ 10,529,689 (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Balance Sheet March 2, 2019 Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ 122,134 $ 22,219 $ — $ 144,353 Accounts receivable, net — 1,377,342 411,370 — 1,788,712 Intercompany receivable 400,526 — (400,526) (a) — Inventories, net of LIFO reserve of $0 , $604,444, $0, $0, and $604,444 — 1,871,941 — — 1,871,941 Prepaid expenses and other current assets — 172,448 6,684 — 179,132 Current assets held for sale — 117,581 — — 117,581 Total current assets — 4,061,972 440,273 (400,526) 4,101,719 Property, plant and equipment, net — 1,308,514 — — 1,308,514 Goodwill — 1,108,136 — — 1,108,136 Other intangibles, net — 399,678 49,028 — 448,706 Deferred tax assets — 419,122 (10,038) — 409,084 Investment in subsidiaries 8,294,315 55,109 — (8,349,424) (b) — Intercompany receivable — 3,639,035 — (3,639,035) (a) — Other assets — 208,018 7,190 — 215,208 Noncurrent assets held for sale — — — — — Total assets $ 8,294,315 $ 11,199,584 $ 486,453 $ (12,388,985) $ 7,591,367 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ — $ 16,111 $ — $ — $ 16,111 Accounts payable — 1,612,181 6,404 — 1,618,585 Intercompany payable — — 400,526 (400,526) (a) — Accrued salaries, wages and other current liabilities 14,005 778,020 16,414 — 808,439 Total current liabilities 14,005 2,406,312 423,344 (400,526) 2,443,135 Long-term debt, less current maturities 3,454,585 — — — 3,454,585 Lease financing obligations, less current maturities — 24,064 — — 24,064 Intercompany payable 3,639,035 — — (3,639,035) (a) — Other noncurrent liabilities — 474,893 8,000 — 482,893 Total liabilities 7,107,625 2,905,269 431,344 (4,039,561) 6,404,677 Commitments and contingencies — — — — — Total stockholders’ equity 1,186,690 8,294,315 55,109 (8,349,424) (b) 1,186,690 Total liabilities and stockholders’ equity $ 8,294,315 $ 11,199,584 $ 486,453 $ (12,388,985) $ 7,591,367 (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended June 1, 2019 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ 5,281,323 $ 104,422 $ (13,156) (a) $ 5,372,589 Costs and expenses: Cost of revenues — 4,162,142 96,783 (13,059) (a) 4,245,866 Selling, general and administrative expenses — 1,156,226 6,523 (97) (a) 1,162,652 Lease termination and impairment charges — 478 — — 478 Interest expense 54,955 3,495 (180) — 58,270 Gain on sale of assets, net — (2,712) — — (2,712) Equity in earnings of subsidiaries, net of tax 44,704 (1,296) — (43,408) (b) — 99,659 5,318,333 103,126 (56,564) 5,464,554 Income (loss) from continuing operations before income taxes (99,659) (37,010) 1,296 43,408 (91,965) Income tax expense — 7,374 — — 7,374 Net income (loss) from continuing operations $ (99,659) $ (44,384) $ 1,296 $ 43,408 (b) $ (99,339) Net loss from discontinued operations — (320) — — (320) Net income (loss) (99,659) (44,704) 1,296 43,408 (99,659) Total other comprehensive income (loss) (241) 415 — (415) (241) Comprehensive (loss) income $ (99,900) $ (44,289) $ 1,296 $ 42,993 $ (99,900) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended June 2, 2018 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ 5,321,025 $ 95,584 $ (28,119) (a) $ 5,388,490 Costs and expenses: Cost of revenues — 4,158,627 89,032 (27,918) (a) 4,219,741 Selling, general and administrative expenses — 1,144,832 7,996 (201) (a) 1,152,627 Lease termination and impairment charges — 9,859 — — 9,859 Interest expense 59,939 2,946 (93) — 62,792 Loss on debt retirements — 554 — — 554 Gain on sale of assets, net — (5,859) — — (5,859) Equity in earnings of subsidiaries, net of tax (278,970) 1,485 — 277,485 (b) — (219,031) 5,312,444 96,935 249,366 5,439,714 Income (loss) from continuing operations before income taxes 219,031 8,581 (1,351) (277,485) (51,224) Income tax expense (benefit) — (9,631) 134 — (9,497) Net income (loss) from continuing operations $ 219,031 $ 18,212 $ (1,485) $ (277,485) (b) $ (41,727) Net income (loss) from discontinued operations (4,615) 260,758 — — 256,143 Net income (loss) 214,416 278,970 (1,485) (277,485) 214,416 Total other comprehensive income (loss) 364 364 — (364) 364 Comprehensive (loss) income $ 214,780 $ 279,334 $ (1,485) $ (277,849) $ 214,780 (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended June 1, 2019 (unaudited) Rite Aid Corporation (Parent Non- Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ (17,363) $ (65,088) $ 31,212 $ — $ (51,239) Investing activities: Payments for property, plant and equipment — (40,981) — — (40,981) Intangible assets acquired — (8,210) — — (8,210) Intercompany activity — 111,417 — (111,417) — Proceeds from dispositions of assets and investments — 658 — — 658 Net cash provided by (used in) investing activities — 62,884 — (111,417) (48,533) Financing activities: Net proceeds from revolver 125,000 — — — 125,000 Principal payments on long-term debt 3,966 (5,746) — — (1,780) Change in zero balance cash accounts — 36,387 — — 36,387 Payments for taxes related to net share settlement of equity awards — (195) — — (195) Deferred financing costs paid (186) — — — (186) Intercompany activity (111,417) — — 111,417 — Net cash provided by financing activities 17,363 30,446 — 111,417 159,226 Cash flows of discontinued operations: Operating activities of discontinued operations — (13,877) — — (13,877) Investing activities of discontinued operations — 523 — — 523 Financing activities of discontinued operations — — — — — Net cash used in discontinued operations — (13,354) — — (13,354) (Decrease) increase in cash and cash equivalents — 14,888 31,212 — 46,100 Cash and cash equivalents, beginning of period — 122,134 22,219 — 144,353 Cash and cash equivalents, end of period $ — $ 137,022 $ 53,431 $ — $ 190,453 Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended June 2, 2018 (unaudited) Rite Aid Corporation (Parent Non- Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ (48,608) $ 29,692 $ 2,602 $ — $ (16,314) Investing activities: Payments for property, plant and equipment — (47,971) — — (47,971) Intangible assets acquired — (13,655) — — (13,655) Intercompany activity — (813,705) — 813,705 — Proceeds from dispositions of assets and investments — 9,916 — — 9,916 Proceeds from sale-leaseback transactions — 2,587 — — 2,587 Net cash (used in) provided by investing activities — (862,828) — 813,705 (49,123) Financing activities: Net proceeds from revolver 190,000 — — — 190,000 Principal payments on long-term debt (426,361) (4,745) — — (431,106) Change in zero balance cash accounts — 1,083 — — 1,083 Net proceeds from issuance of common stock 910 — — — 910 Financing fees paid for early redemption — (13) — — (13) Intercompany activity 813,705 — — (813,705) — Net cash provided by (used in) financing activities 578,254 (3,675) — (813,705) (239,126) Cash flows of discontinued operations: Operating activities of discontinued operations (4,615) (69,435) — — (74,050) Investing activities of discontinued operations — 603,402 — — 603,402 Financing activities of discontinued operations (525,031) — — — (525,031) Net cash (used in) provided by discontinued operations (529,646) 533,967 — — 4,321 (Decrease) increase in cash and cash equivalents — (302,844) 2,602 — (300,242) Cash and cash equivalents, beginning of period — 441,244 6,090 — 447,334 Cash and cash equivalents, end of period $ — $ 138,400 $ 8,692 $ — $ 147,092 |
Supplementary Cash Flow Data
Supplementary Cash Flow Data | 3 Months Ended |
Jun. 01, 2019 | |
Supplementary Cash Flow Data | |
Supplementary Cash Flow Data | 17. Supplementary Cash Flow Data Thirteen Weeks Ended June 1, 2019 June 2, 2018 Cash paid for interest(a) $ 19,462 $ 53,553 Cash payments for income taxes, net(a) $ 830 $ 591 Change in operating lease right-of-use assets $ 41,764 $ — Change in operating lease liabilities $ (53,657) $ — Equipment financed under capital leases $ 1,253 $ 1,963 Gross borrowings from revolver(a) $ 499,000 $ 444,000 Gross repayments to revolver(a) $ 374,000 $ 254,000 (a) — Amounts are presented on a total company basis. Significant components of cash provided by Other Liabilities of $47,831 for the thirteen week period ended June 1, 2019 includes cash provided resulting from changes in accrued interest of $35,139 and changes in compensation and benefit related accruals of $12,299. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Jun. 01, 2019 | |
Basis of Presentation | |
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 1, 2019 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 2019 10-K. |
Recently adopted accounting pronouncements | Recently adopted accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02 , Leases, (Topic 842) (“ASU-2016-02” or the “Lease Standard”), 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). This ASU requires organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet a right of use asset (“ROU asset”) and a lease liability for the obligations created by those leases. ASU No. 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019. During July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. Among other things, ASU 2018-11 provides administrative relief by allowing entities to implement the Lease Standard using an alternative transition method. Effectively, the alternative transition method permits adoption of the Lease Standard through an adjustment to its opening balance sheet for the period of adoption, with the cumulative effect accounted for as an adjustment to retained earnings, without restating prior periods. The Company adopted the Lease Standard on March 3, 2019 under the alternative transition method as permissible under ASU 2018-11, and applied the Lease Standard to all leases through a cumulative-effect adjustment to beginning accumulated deficit. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the Lease Standard, which includes, among other things, the ability to carry forward the existing lease classification. On March 3, 2019, the Company recorded a liability for operating leases of $3,295,327, a ROU asset for such leases of $3,026,976 and recorded an after-tax transition adjustment to increase accumulated deficit by $56,776. The Lease Standard had a material impact on the unaudited condensed consolidated balance sheet, but did not have a material impact on the unaudited condensed consolidated statement of operations or the unaudited condensed consolidated statement of cash flows. As permitted under the practical expedient concerning assessment of lease portfolio, the Company chose not to reassess its lease portfolio, and consequently, all existing leases that were classified as operating leases in accordance with Topic 840, continue to be classified as operating leases, and all existing leases that were classified as capital leases under Topic 840 continue to be classified as finance leases. The Company performed an evaluation of ROU asset for impairment on transition. Stores that had previously been impaired and continued to fail the recoverability test as of March 2, 2019 were evaluated. Any store ROU asset with a carrying amount in excess of fair value was written down to the fair value. Fair value of those ROU assets was determined based on a study of market rents for similar active/operating retails sites. The result of this impairment assessment was a $81,745 write-down of the ROU assets on transition to accumulated deficit. In addition, the Company recognized $24,969 of deferred gains as a reduction to accumulated deficit upon transition related to prior sale-leaseback transactions along with other minor adjustments. As of March 2, 2019, the Company had $124,046 in closed store and lease exit liabilities under Topic 420 (“Topic 420 Liabilities”). Under transition to Topic 842, existing Topic 420 liabilities were eliminated by recording a reduction to the ROU asset balance. However, in certain cases the Company had larger existing Topic 420 liabilities than the ROU asset balances. This excess amount of $9,333 continues to be recorded as a liability and will reduce lease expense over the remaining lease term of the affected stores. In addition, upon transition, the Company reclassified deferred rent, including unamortized tenant income allowances, prepaid rent, and favorable and unfavorable lease balances resulting from prior acquisition accounting to the ROU asset. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that we would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use quoted interest rates obtained from financial institutions in an input to derive our incremental borrowing rate as the discount rate for the lease. The ROU asset is equal to the operating lease liability plus lease payments made before commencement, less lease incentives received from the landlord. The Company’s real estate leases typically contain options that permit lease extensions for additional periods of up to five years each. For real estate leases, generally, the renewal periods are not included within the lease term and the associated payments are not included in the measurement of the ROU asset and operating lease liability as the options to extend are not considered reasonably certain to occur at lease commencement. The Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options and will include all reasonably certain options in the measurement of our lease term. Generally, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease right-of-use asset and the operating lease liability until the renewals are i) evaluated and ii) determined to be exercised. The Company has an insignificant amount of non-real estate leases however, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. The Company rarely executes leases less than 12 months. On transition, the Company did include in its ROU asset balance leases with less than 12 month remaining. For real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease right-of-use assets and operating lease liabilities. Impact of the Lease Standard on Financial Statement Line Items As a result of applying the alternative transition method to adopt the Lease Standard, the following adjustments were made to accounts on the unaudited condensed consolidated balance sheet as of March 3, 2019: Impact of change in accounting policy As reported As adjusted (in thousands) March 2, 2019 Adjustments March 3, 2019 ASSETS Current assets: Cash and cash equivalents $ 144,353 $ — $ 144,353 Accounts receivable, net 1,788,712 — 1,788,712 Inventories, net 1,871,941 — 1,871,941 Prepaid expenses and other current assets 179,132 (51,448) 127,684 Current assets held for sale 117,581 43,697 161,278 Total current assets 4,101,719 (7,751) 4,093,968 Property, plant and equipment, net 1,308,514 — 1,308,514 Operating lease right-of-use asset — 3,026,976 3,026,976 Goodwill 1,108,136 — 1,108,136 Other intangibles, net 448,706 (29,632) 419,074 Deferred tax assets 409,084 — 409,084 Other assets 215,208 (1,086) 214,122 Total assets $ 7,591,367 $ 2,988,507 $ 10,579,874 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long‑term debt and lease financing obligations $ 16,111 $ — $ 16,111 Accounts payable 1,618,585 — 1,618,585 Accrued salaries, wages and other current liabilities 808,439 (56,553) 751,886 Current portion of operating lease liabilities — 457,305 457,305 Current liabilities held for sale — 45,167 45,167 Total current liabilities 2,443,135 445,919 2,889,054 Long‑term debt, less current maturities 3,454,585 — 3,454,585 Long-term operating lease liabilities — 2,838,022 2,838,022 Lease financing obligations, less current maturities 24,064 — 24,064 Other noncurrent liabilities 482,893 (238,658) 244,235 Total liabilities 6,404,677 3,045,283 9,449,960 Commitments and contingencies — — — Stockholders’ equity: Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 54,016 54,016 — 54,016 Additional paid‑in capital 5,876,977 — 5,876,977 Accumulated deficit (4,713,244) (56,776) (4,770,020) Accumulated other comprehensive loss (31,059) — (31,059) Total stockholders’ equity 1,186,690 (56,776) 1,129,914 Total liabilities and stockholders’ equity $ 7,591,367 $ 2,988,507 $ 10,579,874 See Note 12 for additional information. 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. 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 $1,771, an increase to inventory of $51,121, and a corresponding increase to accumulated deficit of $8,547 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 now recording revenue from this program on a net basis. The following is a discussion of the Company's revenue recognition policies by segment under the new revenue recognition accounting standard: |
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 represents an individual 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. 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 obligation and the Company allocates revenue between the merchandise purchased and the wellness + points based on the relative stand-alone selling price of each performance obligation. The relative value of the wellness + points is initially deferred as a contract liability (included in other current and noncurrent liabilities). As members receive discounted front-end merchandise or when the benefit period expires, the Retail Pharmacy segment recognizes an allocable portion of the deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $74,921 as of June 1, 2019, of which $51,581 is included in other current liabilities and $23,340 is included in noncurrent liabilities. The Retail Pharmacy segment had accrued contract liabilities of $63,720 as of March 2, 2019, of which $51,042 is included in other current liabilities and $12,678 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 their accumulated Bonus Cash on a future purchase with a 60 day expiration window. 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) wellness + Rewards members redeem their Bonus Cash, or (ii) wellness + Rewards members allow the Bonus Cash to expire. Upon utilization or expiration of the benefit period, 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 client plan members. 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. In the majority of 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 Envision Insurance Company ("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 tables disaggregate the Company’s revenue by major source in each segment for the thirteen week period ended June 1, 2019: For the thirteen week period In thousands ended June 1, 2019 Retail Pharmacy segment: Pharmacy sales $ 2,563,244 Front-end sales 1,265,361 Other revenue 36,203 Total Retail Pharmacy segment 3,864,808 Pharmacy Services segment 1,566,292 Intersegment elimination (58,511) Total revenue $ 5,372,589 |
Reclassification of the Statements of Cash Flows presentation | Reclassification of the Statements of Cash Flows presentation During fiscal 2019, the Company expanded its disclosure on its Statements of Cash Flows to include changes in other assets separate from changes in other liabilities, which had historically been combined. Prior period amounts have been reclassified to conform to the current period presentation. |
Recasting of per-share amounts | Recasting of per-share amounts As previously announced, the Company implemented a reverse stock split of the Company’s common stock at a reverse stock split ratio of 1-for-20. The Company’s common stock began trading on a split-adjusted basis on the NYSE at the market open on April 22, 2019. Accordingly, all share and per-share amounts for the prior period has been recasted to reflect the reverse stock split. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Schedule of revenues | For the thirteen week period In thousands ended June 1, 2019 Retail Pharmacy segment: Pharmacy sales $ 2,563,244 Front-end sales 1,265,361 Other revenue 36,203 Total Retail Pharmacy segment 3,864,808 Pharmacy Services segment 1,566,292 Intersegment elimination (58,511) Total revenue $ 5,372,589 |
Accounting Standards Update 2016-02 | |
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 As adjusted (in thousands) March 2, 2019 Adjustments March 3, 2019 ASSETS Current assets: Cash and cash equivalents $ 144,353 $ — $ 144,353 Accounts receivable, net 1,788,712 — 1,788,712 Inventories, net 1,871,941 — 1,871,941 Prepaid expenses and other current assets 179,132 (51,448) 127,684 Current assets held for sale 117,581 43,697 161,278 Total current assets 4,101,719 (7,751) 4,093,968 Property, plant and equipment, net 1,308,514 — 1,308,514 Operating lease right-of-use asset — 3,026,976 3,026,976 Goodwill 1,108,136 — 1,108,136 Other intangibles, net 448,706 (29,632) 419,074 Deferred tax assets 409,084 — 409,084 Other assets 215,208 (1,086) 214,122 Total assets $ 7,591,367 $ 2,988,507 $ 10,579,874 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long‑term debt and lease financing obligations $ 16,111 $ — $ 16,111 Accounts payable 1,618,585 — 1,618,585 Accrued salaries, wages and other current liabilities 808,439 (56,553) 751,886 Current portion of operating lease liabilities — 457,305 457,305 Current liabilities held for sale — 45,167 45,167 Total current liabilities 2,443,135 445,919 2,889,054 Long‑term debt, less current maturities 3,454,585 — 3,454,585 Long-term operating lease liabilities — 2,838,022 2,838,022 Lease financing obligations, less current maturities 24,064 — 24,064 Other noncurrent liabilities 482,893 (238,658) 244,235 Total liabilities 6,404,677 3,045,283 9,449,960 Commitments and contingencies — — — Stockholders’ equity: Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 54,016 54,016 — 54,016 Additional paid‑in capital 5,876,977 — 5,876,977 Accumulated deficit (4,713,244) (56,776) (4,770,020) Accumulated other comprehensive loss (31,059) — (31,059) Total stockholders’ equity 1,186,690 (56,776) 1,129,914 Total liabilities and stockholders’ equity $ 7,591,367 $ 2,988,507 $ 10,579,874 |
Restructuring (Tables)
Restructuring (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Restructuring | |
Schedule of restructuring-related costs | Retail Pharmacy Pharmacy segment Services segment Total Restructuring-related costs Severance and related costs associated with the March 2019 reorganization (a) $ 25,272 $ 1,804 $ 27,076 Non-executive retention costs associated with the March 2019 reorganization (b) 4,499 2,165 6,664 Professional and other fees relating to the Path to the Future transformation initiative (c) 9,610 — 9,610 Total restructuring-related costs $ 39,381 $ 3,969 $ 43,350 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with the March 2019 reorganization. (b) – As part of its March 2019 reorganization, the Company incurred costs with the implementation of a retention plan for certain of its key associates. (c) – Professional and other fees include costs incurred in connection with the identification and implementation of transformation initiatives associated with the Path to the Future initiative. |
Schedule of restructuring-related liabilities | Severance and related Professional and costs (a) Retention costs (b) other fees (c) Total Balance at March 2, 2019 $ — $ 4,704 $ — $ 4,704 Additions charged to expense 27,076 6,664 9,610 43,350 Cash payments (4,653) (242) (9,610) (14,505) Balance at June 1, 2019 $ 22,423 $ 11,126 $ — $ 33,549 (a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with the March 2019 reorganization. (b) – As part of its March 2019 reorganization, the Company incurred costs with the implementation of a retention plan for certain of its key associates. (c) – Professional and other fees include costs incurred in connection with the identification and implementation of transformation initiatives associated with the Path to the Future initiative. |
Asset Sale to WBA (Tables)
Asset Sale to WBA (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Asset Sale to WBA | |
Schedule of carrying amount of Assets to be Sold | June 1, March 2, 2019 2019 Inventories $ 62,351 $ 68,233 Property and equipment 49,346 49,348 Operating lease right-of-use asset 42,114 — Current assets held for sale $ 153,811 $ 117,581 Current portion of operating lease liabilities $ 3,213 $ — Long-term operating lease liabilities 40,616 — Current liabilities held for sale $ 43,829 $ — |
Schedule of operating results of the discontinued operations | June 1, June 2, 2019 2018 (13 weeks) (13 weeks) Revenues $ (88) $ 23,400 Costs and expenses: Cost of revenues(a) 265 17,081 Selling, general and administrative expenses(a) 486 13,875 Lease termination and impairment charges — — Loss on debt retirements, net — 4,570 Interest expense (b) — 4,615 Gain on stores sold to Walgreens Boots Alliance — (360,557) Gain on sale of assets, net (522) — 229 (320,416) (Loss) income from discontinued operations before income taxes (317) 343,816 Income tax expense 3 87,673 Net (loss) income from discontinued operations, net of tax $ (320) $ 256,143 (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 1, 2019 and June 2, 2018, respectively, for the discontinued operations include interest expense relating to the outstanding indebtedness repaid with the estimated excess proceeds from the Sale. |
(Loss) Income Per Share (Tables
(Loss) Income Per Share (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
(Loss) Income Per Share | |
Schedule of calculation of basic and diluted (loss) income per share | Thirteen Week Period Ended June 1, June 2, 2019 2018 Basic and diluted (loss) income per share: Numerator: Net loss from continuing operations $ (99,339) $ (41,727) Net (loss) income from discontinued operations (320) 256,143 (Loss) income attributable to common stockholders - basic and diluted $ (99,659) $ 214,416 Denominator: Basic weighted average shares 52,976 52,719 Outstanding options and restricted shares, net — — Diluted weighted average shares 52,976 52,719 Basic and diluted (loss) income per share: Continuing operations $ (1.88) $ (0.79) Discontinued operations 0.00 4.86 Net basic and diluted (loss) income per share $ (1.88) $ 4.07 |
Lease Termination and Impairm_2
Lease Termination and Impairment Charges (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Lease Termination and Impairment Charges | |
Schedule of amounts relating to lease termination and impairment charges | Thirteen Week Period Ended June 1, June 2, 2019 2018 Impairment charges $ 123 $ 283 Lease termination charges — 9,576 Facility exit charges 355 — $ 478 $ 9,859 |
Schedule of fair value of long-lived assets measured at fair value on a non-recurring basis | Total as of June 1, Level 1 Level 2 Level 3 2019 Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ — $ — $ — Total $ — $ — $ — $ — Total as of June 2, Level 1 Level 2 Level 3 2018 Long-lived assets held for use $ — $ — $ — $ — Long-lived assets held for sale $ — $ 1,292 $ — $ 1,292 Total $ — $ 1,292 $ — $ 1,292 |
Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion | Thirteen Week Period Ended June 1, June 2, 2019 2018 Balance—beginning of period $ 124,046 $ 133,290 Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset (112,288) — Provision for present value of noncancellable lease payments of closed stores — 8,130 Changes in assumptions about future sublease income, terminations and changes in interest rates — (1,038) Interest accretion — 2,685 Cash payments, net of sublease income (2,425) (11,885) Balance—end of period $ 9,333 $ 131,182 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Goodwill and Other Intangible Assets | |
Summary of the company's finite-lived and indefinite-lived intangible assets | June 1, 2019 March 2, 2019 Remaining Remaining Weighted Weighted Gross Average Gross Average Carrying Accumulated Amortization Carrying Accumulated Amortization Amount Amortization Net Period Amount Amortization Net Period Favorable leases and other(a) $ 180,435 $ (158,605) $ 21,830 3 years $ 370,855 $ (318,503) $ 52,352 7 years Prescription files 926,101 (837,819) 88,282 3 years 919,749 (827,222) 92,527 3 years Customer relationships(a) 388,000 (204,023) 183,977 12 years 388,000 (193,352) 194,648 13 years CMS license 57,500 (9,047) 48,453 21 years 57,500 (8,472) 49,028 22 years Claims adjudication and other developed software 58,985 (33,137) 25,848 3 years 58,985 (31,030) 27,955 4 years Trademarks 20,100 (7,906) 12,194 6 years 20,100 (7,404) 12,696 7 years Backlog 11,500 (11,500) — 0 years 11,500 (11,500) — 0 years Total finite $ 1,642,621 $ (1,262,037) 380,584 $ 1,826,689 $ (1,397,483) $ 429,206 Trademarks 19,500 — 19,500 Indefinite 19,500 — 19,500 Indefinite Total $ 1,662,121 $ (1,262,037) $ 400,084 $ 1,846,189 $ (1,397,483) $ 448,706 (a) Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows. |
Indebtedness and Credit Agree_2
Indebtedness and Credit Agreements (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Indebtedness and Credit Agreements | |
Summary of indebtedness and lease financing obligations | June 1, March 2, 2019 2019 Secured Debt: Senior secured revolving credit facility due December 2023 ($1,000,000 and $875,000 face value less unamortized debt issuance costs of $22,972 and $24,069) $ 977,028 $ 850,931 FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $3,662 and $3,918) 446,338 446,082 1,423,366 1,297,013 Guaranteed Unsecured Debt: 6.125% senior notes due April 2023 ($1,753,490 face value less unamortized debt issuance costs of $15,940 and $16,982) 1,737,550 1,736,508 1,737,550 1,736,508 Unguaranteed Unsecured Debt: 7.7% notes due February 2027 ($295,000 face value less unamortized debt issuance costs of $1,253 and $1,295) 293,747 293,705 6.875% fixed-rate senior notes due December 2028 ($128,000 face value less unamortized debt issuance costs of $626 and $642) 127,374 127,358 421,121 421,063 Lease financing obligations 34,430 40,176 Total debt 3,616,467 3,494,760 Current maturities of long-term debt and lease financing obligations (11,751) (16,111) Long-term debt and lease financing obligations, less current maturities $ 3,604,716 $ 3,478,649 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Leases | |
Schedule of components of net lease cost | For the thirteen week period ended June 1, 2019 Operating lease cost $ 164,983 Financing lease cost: Amortization of right-of-use asset 1,536 Interest on long-term finance lease liabilities 905 Total finance lease costs $ 2,441 Short-term lease costs 1 Variable lease costs 40,545 Less: sublease income (5,751) Net lease cost $ 202,219 |
Schedule of supplemental cash flow information related to leases | For the thirteen week period ended June 1, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 176,237 Operating cash flows paid for interest portion of finance leases 905 Financing cash flows paid for principal portion of finance leases 3,490 Right-of-use assets obtained in exchange for lease obligations: Operating leases 77,384 Finance leases 0 |
Schedule of supplemental balance sheet information related to leases | June 1, 2019 Operating leases: Operating lease right-of-use asset $ 2,985,213 Short-term operating lease liabilities $ 450,933 Long-term operating lease liabilities 2,790,738 Total operating lease liabilities $ 3,241,671 Finance leases: Property, plant and equipment, net $ 24,825 Current maturities of long-term debt and lease financing obligations $ 11,751 Lease financing obligations, less current maturities 22,679 Total finance lease liabilities $ 34,430 Weighted average remaining lease term Operating leases Finance leases Weighted average discount rate Operating leases % Finance leases % |
Schedule of maturity of lease liabilities under finance and operating leases | June 1, 2019 Finance Operating Fiscal year Leases Leases (1) Total 2020 (remaining thirty-nine weeks) $ 10,774 $ 519,217 $ 529,991 2021 6,922 630,612 637,534 2022 4,360 563,470 567,830 2023 4,143 508,479 512,622 2024 3,842 447,507 451,349 Thereafter 20,469 1,554,206 1,574,675 Total lease payments 50,510 4,223,491 4,274,001 Less: imputed interest (16,080) (981,820) (997,900) Total lease liabilities $ 34,430 $ 3,241,671 $ 3,276,101 (1) – Future operating lease payments have not been reduced by minimum sublease rentals of $60 million due in the future under noncancelable leases. |
Schedule of minimum lease payments for all properties under a lease agreement | Lease Financing Operating Fiscal year Obligations Leases 2020 $ 19,300 $ 687,412 2021 4,811 610,874 2022 4,588 545,863 2023 4,383 490,864 2024 4,042 431,714 Later years 20,470 1,541,408 Total minimum lease payments 57,594 $ 4,308,135 Amount representing interest (17,418) Present value of minimum lease payments $ 40,176 |
Retirement Plans (Tables)
Retirement Plans (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Retirement Plans | |
Summary of net periodic pension expense for the defined benefit plans | Defined Benefit Pension Plan Thirteen Week Period Ended June 1, June 2, 2019 2018 Service cost $ 143 $ 312 Interest cost 1,556 1,578 Expected return on plan assets (1,214) (1,434) Amortization of unrecognized prior service cost — — Amortization of unrecognized net loss 415 508 Net periodic pension expense $ 900 $ 964 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Segment Reporting | |
Schedule of balance sheet information for the Company's reportable segments | Retail Pharmacy Pharmacy Services Eliminations (1) Consolidated June 1, 2019: Total Assets $ 7,918,381 $ 2,628,214 $ (16,906) $ 10,529,689 Goodwill 43,492 1,064,644 — 1,108,136 March 2, 2019: Total Assets $ 5,071,055 $ 2,534,771 $ (14,459) $ 7,591,367 Goodwill 43,492 1,064,644 — 1,108,136 (1) As of June 1, 2019 and March 2, 2019, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $000 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $16,906 and $14,459, respectively, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. |
Schedule of reconciliation of the Company's business segments to the condensed consolidated financial statements | Retail Pharmacy Intersegment Pharmacy Services Eliminations (1) Consolidated June 1, 2019: Revenues $ 3,864,808 $ 1,566,292 $ (58,511) $ 5,372,589 Gross Profit 1,030,495 96,228 — 1,126,723 Adjusted EBITDA (2) 84,008 26,339 — 110,347 Additions to property and equipment and intangible assets 44,244 4,947 — 49,191 June 2, 2018: Revenues $ 3,897,765 $ 1,542,762 $ (52,037) $ 5,388,490 Gross Profit 1,069,457 99,292 — 1,168,749 Adjusted EBITDA (2) 104,129 33,863 — 137,992 Additions to property and equipment and intangible assets 58,067 3,559 — 61,626 (1) Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis. (2) See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non‑GAAP Measures” in MD&A for additional details. |
Schedule of reconciliation of net (loss) income to Adjusted EBITDA | June 1, June 2, 2019 2018 (13 weeks) (13 weeks)(a) Net loss from continuing operations $ (99,339) $ (41,727) Interest expense 58,270 62,792 Income tax expense (benefit) 7,374 (9,497) Depreciation and amortization 83,926 94,529 LIFO charge 7,489 9,966 Lease termination and impairment charges 478 9,859 Loss on debt retirements, net — 554 Merger and Acquisition-related costs 3,085 7,188 Stock-based compensation expense 5,380 5,031 Restructuring-related costs 43,350 — Inventory write-downs related to store closings 841 3,833 Gain on sale of assets, net (2,712) (5,859) Other 2,205 1,323 Adjusted EBITDA from continuing operations $ 110,347 $ 137,992 (a) During fiscal 2019, the Company revised its definition of Adjusted EBITDA to no longer exclude the impact of revenue deferrals related to our customer loyalty program and further revised its disclosure by presenting certain amounts previously included within Other as separate reconciling items. Consequently, the Company revised Adjusted EBITDA for the thirteen week period ended June 2, 2018 to conform with the revised definition and present separate reconciling items previously included with Other. |
Guarantor and Non-Guarantor C_2
Guarantor and Non-Guarantor Condensed Consolidating Financial Information (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Guarantor and Non-Guarantor Condensed Consolidating Financial Information | |
Schedule of condensed consolidating balance sheet | Rite Aid Corporation Condensed Consolidating Balance Sheet June 1, 2019 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ 137,022 $ 53,431 $ — $ 190,453 Accounts receivable, net — 1,342,745 461,033 — 1,803,778 Intercompany receivable — 458,684 — (458,684) (a) — Inventories, net of LIFO reserve of $0 , $611,933, $0, $0, and $611,933 — 1,875,917 — — 1,875,917 Prepaid expenses and other current assets — 100,118 4,666 — 104,784 Current assets held for sale — 153,811 — — 153,811 Total current assets — 4,068,297 519,130 (458,684) 4,128,743 Property, plant and equipment, net — 1,284,680 — — 1,284,680 Operating lease right-of-use assets — 2,985,213 — — 2,985,213 Goodwill — 1,108,136 — — 1,108,136 Other intangibles, net — 351,631 48,453 — 400,084 Deferred tax assets — 419,122 (10,038) — 409,084 Investment in subsidiaries 9,224,254 56,405 — (9,280,659) (b) — Intercompany receivable — 4,558,036 — (4,558,036) (a) — Other assets 180 206,601 6,968 — 213,749 Total assets $ 9,224,434 $ 15,038,121 $ 564,513 $ (14,297,379) $ 10,529,689 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ — $ 11,751 $ — $ — $ 11,751 Accounts payable — 1,550,469 5,956 — 1,556,425 Intercompany payable — — 458,684 (458,684) (a) — Accrued salaries, wages and other current liabilities 49,144 697,593 35,468 — 782,205 Current portion of operating lease liabilities — 450,933 — — 450,933 Current liabilities held for sale — 43,829 — — 43,829 Total current liabilities 49,144 2,754,575 500,108 (458,684) 2,845,143 Long-term debt, less current maturities 3,582,037 — — — 3,582,037 Non-current operating lease liabilities — 2,790,738 — — 2,790,738 Lease financing obligations, less current maturities — 22,679 — — 22,679 Intercompany payable 4,558,036 — — (4,558,036) (a) — Other noncurrent liabilities — 245,875 8,000 — 253,875 Total liabilities 8,189,217 5,813,867 508,108 (5,016,720) 9,494,472 Commitments and contingencies — — — — — Total stockholders’ equity 1,035,217 9,224,254 56,405 (9,280,659) (b) 1,035,217 Total liabilities and stockholders’ equity $ 9,224,434 $ 15,038,121 $ 564,513 $ (14,297,379) $ 10,529,689 (a) Elimination of intercompany accounts receivable and accounts payable amounts. (b) Elimination of investments in consolidated subsidiaries. Rite Aid Corporation Condensed Consolidating Balance Sheet March 2, 2019 Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) ASSETS Current assets: Cash and cash equivalents $ — $ 122,134 $ 22,219 $ — $ 144,353 Accounts receivable, net — 1,377,342 411,370 — 1,788,712 Intercompany receivable 400,526 — (400,526) (a) — Inventories, net of LIFO reserve of $0 , $604,444, $0, $0, and $604,444 — 1,871,941 — — 1,871,941 Prepaid expenses and other current assets — 172,448 6,684 — 179,132 Current assets held for sale — 117,581 — — 117,581 Total current assets — 4,061,972 440,273 (400,526) 4,101,719 Property, plant and equipment, net — 1,308,514 — — 1,308,514 Goodwill — 1,108,136 — — 1,108,136 Other intangibles, net — 399,678 49,028 — 448,706 Deferred tax assets — 419,122 (10,038) — 409,084 Investment in subsidiaries 8,294,315 55,109 — (8,349,424) (b) — Intercompany receivable — 3,639,035 — (3,639,035) (a) — Other assets — 208,018 7,190 — 215,208 Noncurrent assets held for sale — — — — — Total assets $ 8,294,315 $ 11,199,584 $ 486,453 $ (12,388,985) $ 7,591,367 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt and lease financing obligations $ — $ 16,111 $ — $ — $ 16,111 Accounts payable — 1,612,181 6,404 — 1,618,585 Intercompany payable — — 400,526 (400,526) (a) — Accrued salaries, wages and other current liabilities 14,005 778,020 16,414 — 808,439 Total current liabilities 14,005 2,406,312 423,344 (400,526) 2,443,135 Long-term debt, less current maturities 3,454,585 — — — 3,454,585 Lease financing obligations, less current maturities — 24,064 — — 24,064 Intercompany payable 3,639,035 — — (3,639,035) (a) — Other noncurrent liabilities — 474,893 8,000 — 482,893 Total liabilities 7,107,625 2,905,269 431,344 (4,039,561) 6,404,677 Commitments and contingencies — — — — — Total stockholders’ equity 1,186,690 8,294,315 55,109 (8,349,424) (b) 1,186,690 Total liabilities and stockholders’ equity $ 8,294,315 $ 11,199,584 $ 486,453 $ (12,388,985) $ 7,591,367 (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 Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended June 1, 2019 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ 5,281,323 $ 104,422 $ (13,156) (a) $ 5,372,589 Costs and expenses: Cost of revenues — 4,162,142 96,783 (13,059) (a) 4,245,866 Selling, general and administrative expenses — 1,156,226 6,523 (97) (a) 1,162,652 Lease termination and impairment charges — 478 — — 478 Interest expense 54,955 3,495 (180) — 58,270 Gain on sale of assets, net — (2,712) — — (2,712) Equity in earnings of subsidiaries, net of tax 44,704 (1,296) — (43,408) (b) — 99,659 5,318,333 103,126 (56,564) 5,464,554 Income (loss) from continuing operations before income taxes (99,659) (37,010) 1,296 43,408 (91,965) Income tax expense — 7,374 — — 7,374 Net income (loss) from continuing operations $ (99,659) $ (44,384) $ 1,296 $ 43,408 (b) $ (99,339) Net loss from discontinued operations — (320) — — (320) Net income (loss) (99,659) (44,704) 1,296 43,408 (99,659) Total other comprehensive income (loss) (241) 415 — (415) (241) Comprehensive (loss) income $ (99,900) $ (44,289) $ 1,296 $ 42,993 $ (99,900) (a) Elimination of intercompany revenues and expenses. (b) Elimination of equity in earnings of subsidiaries. Rite Aid Corporation Condensed Consolidating Statement of Operations For the Thirteen Weeks Ended June 2, 2018 (unaudited) Rite Aid Corporation Non- (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Revenues $ — $ 5,321,025 $ 95,584 $ (28,119) (a) $ 5,388,490 Costs and expenses: Cost of revenues — 4,158,627 89,032 (27,918) (a) 4,219,741 Selling, general and administrative expenses — 1,144,832 7,996 (201) (a) 1,152,627 Lease termination and impairment charges — 9,859 — — 9,859 Interest expense 59,939 2,946 (93) — 62,792 Loss on debt retirements — 554 — — 554 Gain on sale of assets, net — (5,859) — — (5,859) Equity in earnings of subsidiaries, net of tax (278,970) 1,485 — 277,485 (b) — (219,031) 5,312,444 96,935 249,366 5,439,714 Income (loss) from continuing operations before income taxes 219,031 8,581 (1,351) (277,485) (51,224) Income tax expense (benefit) — (9,631) 134 — (9,497) Net income (loss) from continuing operations $ 219,031 $ 18,212 $ (1,485) $ (277,485) (b) $ (41,727) Net income (loss) from discontinued operations (4,615) 260,758 — — 256,143 Net income (loss) 214,416 278,970 (1,485) (277,485) 214,416 Total other comprehensive income (loss) 364 364 — (364) 364 Comprehensive (loss) income $ 214,780 $ 279,334 $ (1,485) $ (277,849) $ 214,780 (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 Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended June 1, 2019 (unaudited) Rite Aid Corporation (Parent Non- Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ (17,363) $ (65,088) $ 31,212 $ — $ (51,239) Investing activities: Payments for property, plant and equipment — (40,981) — — (40,981) Intangible assets acquired — (8,210) — — (8,210) Intercompany activity — 111,417 — (111,417) — Proceeds from dispositions of assets and investments — 658 — — 658 Net cash provided by (used in) investing activities — 62,884 — (111,417) (48,533) Financing activities: Net proceeds from revolver 125,000 — — — 125,000 Principal payments on long-term debt 3,966 (5,746) — — (1,780) Change in zero balance cash accounts — 36,387 — — 36,387 Payments for taxes related to net share settlement of equity awards — (195) — — (195) Deferred financing costs paid (186) — — — (186) Intercompany activity (111,417) — — 111,417 — Net cash provided by financing activities 17,363 30,446 — 111,417 159,226 Cash flows of discontinued operations: Operating activities of discontinued operations — (13,877) — — (13,877) Investing activities of discontinued operations — 523 — — 523 Financing activities of discontinued operations — — — — — Net cash used in discontinued operations — (13,354) — — (13,354) (Decrease) increase in cash and cash equivalents — 14,888 31,212 — 46,100 Cash and cash equivalents, beginning of period — 122,134 22,219 — 144,353 Cash and cash equivalents, end of period $ — $ 137,022 $ 53,431 $ — $ 190,453 Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended June 2, 2018 (unaudited) Rite Aid Corporation (Parent Non- Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated (in thousands) Operating activities: Net cash (used in) provided by operating activities $ (48,608) $ 29,692 $ 2,602 $ — $ (16,314) Investing activities: Payments for property, plant and equipment — (47,971) — — (47,971) Intangible assets acquired — (13,655) — — (13,655) Intercompany activity — (813,705) — 813,705 — Proceeds from dispositions of assets and investments — 9,916 — — 9,916 Proceeds from sale-leaseback transactions — 2,587 — — 2,587 Net cash (used in) provided by investing activities — (862,828) — 813,705 (49,123) Financing activities: Net proceeds from revolver 190,000 — — — 190,000 Principal payments on long-term debt (426,361) (4,745) — — (431,106) Change in zero balance cash accounts — 1,083 — — 1,083 Net proceeds from issuance of common stock 910 — — — 910 Financing fees paid for early redemption — (13) — — (13) Intercompany activity 813,705 — — (813,705) — Net cash provided by (used in) financing activities 578,254 (3,675) — (813,705) (239,126) Cash flows of discontinued operations: Operating activities of discontinued operations (4,615) (69,435) — — (74,050) Investing activities of discontinued operations — 603,402 — — 603,402 Financing activities of discontinued operations (525,031) — — — (525,031) Net cash (used in) provided by discontinued operations (529,646) 533,967 — — 4,321 (Decrease) increase in cash and cash equivalents — (302,844) 2,602 — (300,242) Cash and cash equivalents, beginning of period — 441,244 6,090 — 447,334 Cash and cash equivalents, end of period $ — $ 138,400 $ 8,692 $ — $ 147,092 |
Supplementary Cash Flow Data (T
Supplementary Cash Flow Data (Tables) | 3 Months Ended |
Jun. 01, 2019 | |
Supplementary Cash Flow Data | |
Schedule of supplementary cash flow data | Thirteen Weeks Ended June 1, 2019 June 2, 2018 Cash paid for interest(a) $ 19,462 $ 53,553 Cash payments for income taxes, net(a) $ 830 $ 591 Change in operating lease right-of-use assets $ 41,764 $ — Change in operating lease liabilities $ (53,657) $ — Equipment financed under capital leases $ 1,253 $ 1,963 Gross borrowings from revolver(a) $ 499,000 $ 444,000 Gross repayments to revolver(a) $ 374,000 $ 254,000 (a) — Amounts are presented on a total company basis. |
Basis of Presentation - Recentl
Basis of Presentation - Recently adopted accounting pronouncements (Details) $ / shares in Units, shares in Thousands, $ in Thousands | Mar. 03, 2019USD ($)$ / sharesshares | Mar. 02, 2019USD ($)$ / sharesshares | Jun. 01, 2019USD ($)$ / sharesshares | Jun. 02, 2018USD ($) | Mar. 04, 2018USD ($) | Mar. 03, 2018USD ($) |
Basis of presentation | ||||||
Operating lease liability | $ 3,241,671 | |||||
Operating right-of-use assets | $ 2,985,213 | |||||
Store and lease exit liabilities | $ 124,046 | |||||
Deferred lease liability | 9,333 | |||||
Option to lease extension | false | |||||
Maximum additional period for lease extension | 5 years | |||||
Number of fixed lease payment | 1 | |||||
Current assets: | ||||||
Cash and cash equivalents | 144,353 | $ 190,453 | ||||
Accounts receivable, net | 1,788,712 | 1,803,778 | ||||
Inventories, net | 1,871,941 | 1,875,917 | ||||
Prepaid expenses and other current assets | 179,132 | 104,784 | ||||
Current assets held for sale | 117,581 | 153,811 | ||||
Total current assets | 4,101,719 | 4,128,743 | ||||
Property, plant and equipment, net | 1,308,514 | 1,284,680 | ||||
Operating lease right-of-use asset | 2,985,213 | |||||
Goodwill | 1,108,136 | 1,108,136 | ||||
Other intangibles, net | 448,706 | 400,084 | ||||
Deferred tax assets | 409,084 | 409,084 | ||||
Other assets | 215,208 | 213,749 | ||||
Total assets | 7,591,367 | 10,529,689 | ||||
Current liabilities: | ||||||
Current maturities of long-term debt and lease financing obligations | 16,111 | 11,751 | ||||
Accounts payable | 1,618,585 | 1,556,425 | ||||
Accrued salaries, wages and other current liabilities | 808,439 | 782,205 | ||||
Current portion of operating lease liabilities | 450,933 | |||||
Current liabilities held for sale | 43,829 | |||||
Total current liabilities | 2,443,135 | 2,845,143 | ||||
Long-term debt, less current maturities | 3,454,585 | 3,582,037 | ||||
Long-term operating lease liabilities | 2,790,738 | |||||
Lease financing obligations, less current maturities | 24,064 | 22,679 | ||||
Other noncurrent liabilities | 482,893 | 253,875 | ||||
Total liabilities | 6,404,677 | 9,494,472 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 54,016 | 54,016 | 53,833 | ||||
Additional paid-in capital | 5,876,977 | 5,882,363 | ||||
Accumulated deficit | (4,713,244) | (4,869,679) | ||||
Accumulated other comprehensive loss | (31,059) | (31,300) | ||||
Total stockholders' equity | 1,186,690 | 1,035,217 | $ 1,812,311 | $ 1,601,010 | ||
Total liabilities and stockholders' equity | $ 7,591,367 | $ 10,529,689 | ||||
Common stock, par value (in dollars per share) | $ / shares | $ 1 | $ 1 | ||||
Common stock, shares authorized | shares | 75,000 | 75,000 | ||||
Common stock, shares issued | shares | 54,016 | 53,833 | ||||
Common stock, shares outstanding | shares | 54,016 | 53,833 | ||||
Accounting Standards Update 2016-02 | ||||||
Basis of presentation | ||||||
Operating lease liability | $ 3,295,327 | |||||
Operating right-of-use assets | 3,026,976 | |||||
Adjustment to increase accumulated deficit | 56,776 | $ (56,776) | ||||
Impairment loss | $ 81,745 | |||||
Deferred gains on sale-leaseback transactions | $ 24,969 | |||||
Current assets: | ||||||
Cash and cash equivalents | 144,353 | |||||
Accounts receivable, net | 1,788,712 | |||||
Inventories, net | 1,871,941 | |||||
Prepaid expenses and other current assets | 127,684 | |||||
Current assets held for sale | 161,278 | |||||
Total current assets | 4,093,968 | |||||
Property, plant and equipment, net | 1,308,514 | |||||
Operating lease right-of-use asset | 3,026,976 | |||||
Goodwill | 1,108,136 | |||||
Other intangibles, net | 419,074 | |||||
Deferred tax assets | 409,084 | |||||
Other assets | 214,122 | |||||
Total assets | 10,579,874 | |||||
Current liabilities: | ||||||
Current maturities of long-term debt and lease financing obligations | 16,111 | |||||
Accounts payable | 1,618,585 | |||||
Accrued salaries, wages and other current liabilities | 751,886 | |||||
Current portion of operating lease liabilities | 457,305 | |||||
Current liabilities held for sale | 45,167 | |||||
Total current liabilities | 2,889,054 | |||||
Long-term debt, less current maturities | 3,454,585 | |||||
Long-term operating lease liabilities | 2,838,022 | |||||
Lease financing obligations, less current maturities | 24,064 | |||||
Other noncurrent liabilities | 244,235 | |||||
Total liabilities | 9,449,960 | |||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 54,016 | 54,016 | |||||
Additional paid-in capital | 5,876,977 | |||||
Accumulated deficit | (4,770,020) | |||||
Accumulated other comprehensive loss | (31,059) | |||||
Total stockholders' equity | 1,129,914 | |||||
Total liabilities and stockholders' equity | $ 10,579,874 | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 1 | |||||
Common stock, shares authorized | shares | 75,000 | |||||
Common stock, shares issued | shares | 54,016 | |||||
Common stock, shares outstanding | shares | 54,016 | |||||
Accounting Standards Update 2016-02 | Adjustments | ||||||
Basis of presentation | ||||||
Operating right-of-use assets | $ 3,026,976 | |||||
Current assets: | ||||||
Prepaid expenses and other current assets | (51,448) | |||||
Current assets held for sale | 43,697 | |||||
Total current assets | (7,751) | |||||
Operating lease right-of-use asset | 3,026,976 | |||||
Other intangibles, net | (29,632) | |||||
Other assets | (1,086) | |||||
Total assets | 2,988,507 | |||||
Current liabilities: | ||||||
Accrued salaries, wages and other current liabilities | (56,553) | |||||
Current portion of operating lease liabilities | 457,305 | |||||
Current liabilities held for sale | 45,167 | |||||
Total current liabilities | 445,919 | |||||
Long-term operating lease liabilities | 2,838,022 | |||||
Other noncurrent liabilities | (238,658) | |||||
Total liabilities | 3,045,283 | |||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Accumulated deficit | (56,776) | |||||
Total stockholders' equity | (56,776) | |||||
Total liabilities and stockholders' equity | $ 2,988,507 | |||||
Accounting Standards Update 2014-09 | ||||||
Basis of presentation | ||||||
Adjustment to increase accumulated deficit | $ (8,547) | |||||
Current assets: | ||||||
Accounts receivable, net | $ (57,897) | |||||
Inventories, net | 51,121 | |||||
Deferred tax assets | (1,771) | |||||
Stockholders' equity: | ||||||
Accumulated deficit | $ 8,547 |
Basis of Presentation - Revenue
Basis of Presentation - Revenue Recognition (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Jun. 01, 2019USD ($)Point | Jun. 02, 2018USD ($) | Mar. 02, 2019USD ($) | |
Revenue Recognition | |||
Revenues | $ 5,372,589 | $ 5,388,490 | |
Intersegment elimination | |||
Revenue Recognition | |||
Revenues | $ (58,511) | $ (52,037) | |
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 | $ 74,921 | $ 63,720 | |
Accrued contract liabilities included in other current liabilities | 51,581 | 51,042 | |
Accrued contract liabilities included in noncurrent liabilities | $ 23,340 | 12,678 | |
Expiration window to redeem accumulated Bonus Cash (in days) | 60 days | ||
Revenues | $ 3,864,808 | ||
Retail Pharmacy | Other | |||
Revenue Recognition | |||
Revenues | 36,203 | ||
Pharmacy sales | |||
Revenue Recognition | |||
Revenues | 2,563,244 | ||
Front end sales | |||
Revenue Recognition | |||
Revenues | 1,265,361 | ||
Pharmacy Services | |||
Revenue Recognition | |||
Revenues | $ 1,566,292 | ||
Accounting Standards Update 2014-09 | |||
Revenue Recognition | |||
Revenues | $ 123,500 |
Restructuring - Related costs (
Restructuring - Related costs (Details) $ in Thousands | 1 Months Ended | 3 Months Ended |
Mar. 31, 2019position | Jun. 01, 2019USD ($) | |
Restructuring | ||
Number of full-time positions eliminated | position | 400 | |
Percentage of reduction in full-time positions at the time of announcement | 66.70% | |
Restructuring related liabilities | ||
Anticipated restructuring-related costs in fiscal 2020 | $ 55,000 | |
Accrued salaries, wages and other current liabilities | ||
Restructuring-related costs | ||
Total restructuring-related costs | 43,350 | |
Restructuring related liabilities | ||
Balance-beginning of period | 4,704 | |
Additions charged to expense | 43,350 | |
Cash payments | (14,505) | |
Balance-end of period | 33,549 | |
Selling, general and administrative expenses | ||
Restructuring-related costs | ||
Severance and related costs associated with the March 2019 reorganization (a) | 27,076 | |
Non-executive retention costs associated with the March 2019 reorganization (b) | 6,664 | |
Professional and other fees relating to the Path to the Future transformation initiative (c) | 9,610 | |
Total restructuring-related costs | 43,350 | |
Restructuring related liabilities | ||
Additions charged to expense | 43,350 | |
Severance and related costs | Accrued salaries, wages and other current liabilities | ||
Restructuring-related costs | ||
Total restructuring-related costs | 27,076 | |
Restructuring related liabilities | ||
Additions charged to expense | 27,076 | |
Cash payments | (4,653) | |
Balance-end of period | 22,423 | |
Retention costs | Accrued salaries, wages and other current liabilities | ||
Restructuring-related costs | ||
Total restructuring-related costs | 6,664 | |
Restructuring related liabilities | ||
Balance-beginning of period | 4,704 | |
Additions charged to expense | 6,664 | |
Cash payments | (242) | |
Balance-end of period | 11,126 | |
Professional and other fees | Accrued salaries, wages and other current liabilities | ||
Restructuring-related costs | ||
Total restructuring-related costs | 9,610 | |
Restructuring related liabilities | ||
Additions charged to expense | 9,610 | |
Cash payments | (9,610) | |
Retail Pharmacy | Selling, general and administrative expenses | ||
Restructuring-related costs | ||
Severance and related costs associated with the March 2019 reorganization (a) | 25,272 | |
Non-executive retention costs associated with the March 2019 reorganization (b) | 4,499 | |
Professional and other fees relating to the Path to the Future transformation initiative (c) | 9,610 | |
Total restructuring-related costs | 39,381 | |
Restructuring related liabilities | ||
Additions charged to expense | 39,381 | |
Pharmacy Services | Selling, general and administrative expenses | ||
Restructuring-related costs | ||
Severance and related costs associated with the March 2019 reorganization (a) | 1,804 | |
Non-executive retention costs associated with the March 2019 reorganization (b) | 2,165 | |
Total restructuring-related costs | 3,969 | |
Restructuring related liabilities | ||
Additions charged to expense | $ 3,969 |
Asset Sale to WBA (Details)
Asset Sale to WBA (Details) $ in Thousands | Sep. 13, 2018USD ($)store | Sep. 18, 2017USD ($)storeitem | Mar. 31, 2018USD ($)store | Jun. 01, 2019USD ($) | Jun. 02, 2018USD ($) | Jun. 28, 2017item |
Asset Sale | ||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||
Pre-tax gain on sale of the distribution center and related assets | $ 14,151 | |||||
WBA and Walgreen Co. | ||||||
Termination of the Merger Agreement with WBA and Asset Sale to WBA | ||||||
TSA fees from initial closing | $ 14,225 | $ 23,735 | ||||
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 | |||||
Number of distribution centers agreed to sell | 2 | 3 | 3 | |||
Purchase price | $ 4,375,000 | |||||
Number of stores and related assets transferred | store | 1,932 | |||||
Proceeds from assets sold | $ 61,251 | $ 4,156,686 | ||||
Maximum period for transition services (in years) | 3 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 | $ 1,192,791 | 2,041,075 | ||||
Payments incurred but not yet been paid | $ 224,385 | $ 447,305 |
Asset Sale to WBA - Carrying am
Asset Sale to WBA - Carrying amount of assets sold (Details) - USD ($) $ in Thousands | Jun. 01, 2019 | Mar. 02, 2019 |
Current assets held for sale | ||
Current assets held for sale | $ 153,811 | $ 117,581 |
Current liabilities held for sale | ||
Current liabilities held for sale | 43,829 | |
Assets under Retail Pharmacy to be Sold | WBA | Assets held for sale | ||
Current assets held for sale | ||
Inventories | 62,351 | 68,233 |
Property and equipment | 49,346 | 49,348 |
Operating lease right-of-use asset | 42,114 | |
Current assets held for sale | 153,811 | $ 117,581 |
Current liabilities held for sale | ||
Current portion of operating lease liabilities | 3,213 | |
Long-term operating lease liabilities | 40,616 | |
Current liabilities held for sale | $ 43,829 |
Asset Sale to WBA - Operating r
Asset Sale to WBA - Operating results of discontinued operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Income statement disclosures | ||
Revenues | $ (88) | $ 23,400 |
Costs and expenses: | ||
Cost of revenues | 265 | 17,081 |
Selling, general and administrative expenses | 486 | 13,875 |
Loss on debt retirements, net | 4,570 | |
Interest expense | 4,615 | |
Gain on stores sold to Walgreens Boots Alliance | (360,557) | |
Gain on sale of assets, net | (522) | |
Cost and expenses | 229 | (320,416) |
(Loss) income from discontinued operations before income taxes | (317) | 343,816 |
Income tax expense | 3 | 87,673 |
Net (loss) income from discontinued operations, net of tax | $ (320) | $ 256,143 |
(Loss) Income Per Share (Detail
(Loss) Income Per Share (Details) $ / shares in Units, $ in Thousands | Apr. 18, 2019shares | Apr. 10, 2019shares | Jun. 01, 2019USD ($)$ / sharesshares | Jun. 02, 2018USD ($)$ / sharesshares |
Numerator: | ||||
Net loss from continuing operations | $ | $ (99,339) | $ (41,727) | ||
Net (loss) income from discontinued operations | $ | (320) | 256,143 | ||
(Loss) income attributable to common stockholders-basic and diluted | $ | $ (99,659) | $ 214,416 | ||
Denominator: | ||||
Basic weighted average shares | 52,976,000 | 52,719,000 | ||
Diluted weighted average shares | 52,976,000 | 52,719,000 | ||
Continuing operations | $ / shares | $ (1.88) | $ (0.79) | ||
Discontinued operations | $ / shares | 0 | 4.86 | ||
Net basic and diluted (loss) income per share | $ / shares | $ (1.88) | $ 4.07 | ||
Reverse stock split, 1-for-20 | ||||
Reverse stock split | ||||
Reverse stock split ratio | 0.05 | |||
Change in authorized shares due to reverse stock split | 75,000 | 1,500,000 | ||
Stock options | ||||
Antidilutive securities excluded from computation of income per share | ||||
Shares excluded from the computation of diluted income per share | 992,000 | 1,288,000 | ||
Restricted shares | ||||
Antidilutive securities excluded from computation of income per share | ||||
Shares excluded from the computation of diluted income per share | 813,000 | 567,000 |
Lease Termination and Impairm_3
Lease Termination and Impairment Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 01, 2019 | Mar. 02, 2019 | Jun. 02, 2018 | |
Lease termination and impairment charges | |||
Lease termination and impairment charges | $ 478 | $ 9,859 | |
Impairment charges | |||
Lease termination and impairment charges | |||
Lease termination and impairment charges | 123 | 283 | |
Lease termination charges | |||
Lease termination and impairment charges | |||
Lease termination and impairment charges | 9,576 | ||
Closed store and distribution center charges | |||
Balance-beginning of period | 124,046 | 133,290 | |
Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset | $ (112,288) | ||
Provision for present value of noncancellable lease payments of closed stores | 8,130 | ||
Changes in assumptions about future sublease income, terminations and changes in interest rates | (1,038) | ||
Interest accretion | 2,685 | ||
Cash payments, net of sublease income | (2,425) | (11,885) | |
Balance-end of period | 9,333 | $ 124,046 | $ 131,182 |
Facility exit charges | |||
Lease termination and impairment charges | |||
Lease termination and impairment charges | $ 355 |
Lease Termination and Impairm_4
Lease Termination and Impairment Charges - Fair value (Details) - Nonrecurring basis - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Non Financial Assets Measured on a Non Recurring Basis | ||
Carrying value of long-lived assets | $ 123 | $ 1,575 |
Impairment charges | 123 | 283 |
Fair value of Long-lived assets held for sale | 1,292 | |
Fair value of Total | 1,292 | |
Fair Value | ||
Non Financial Assets Measured on a Non Recurring Basis | ||
Fair value of Total | $ 0 | 1,292 |
Level 2 | ||
Non Financial Assets Measured on a Non Recurring Basis | ||
Fair value of Long-lived assets held for sale | 1,292 | |
Fair value of Total | $ 1,292 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 15, 2019 | Jun. 01, 2019 | Mar. 02, 2019 |
Interest rate cap | |||
Other Financial Instruments | |||
Principal amount of debt | $ 650,000 | ||
Interest rate cap | LIBOR | |||
Other Financial Instruments | |||
Interest rate | 2.75% | ||
Prepaid expenses and other current assets | |||
Other Financial Instruments | |||
Investment at amortized cost | $ 6,968 | $ 7,191 | |
Nonrecurring basis | Level 1 | |||
Other Financial Instruments | |||
Carrying value of total long-term indebtedness | 3,582,037 | 3,454,585 | |
Estimated fair value of total long-term indebtedness | $ 3,172,793 | $ 3,120,335 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 01, 2019 | Jun. 02, 2018 | Mar. 02, 2019 | |
Income Taxes | |||
Income tax expense (benefit) | $ 7,374 | $ (9,497) | |
Estimated effective tax rate (as a percent) | (8.00%) | 18.50% | |
Increase in valuation allowance to offset the current year deferred state tax benefits (as a percent) | (34.50%) | (2.30%) | |
Decrease in unrecognized tax benefits related to state exposures | $ 7,295 | ||
Valuation allowance against net deferred tax assets | $ 1,048,101 | $ 1,091,416 |
Medicare Part D (Details)
Medicare Part D (Details) - USD ($) $ in Thousands | Jun. 01, 2019 | Mar. 31, 2019 | Mar. 02, 2019 |
Medicare Part D | |||
Accounts receivable, net | $ 448,266 | $ 392,400 | |
EIC | |||
Medicare Part D | |||
Minimum amount of capital and surplus required by regulatory requirements | $ 23,314 |
Manufacturer Rebates Receivab_2
Manufacturer Rebates Receivables (Details) - USD ($) $ in Thousands | Jun. 01, 2019 | Mar. 02, 2019 |
Pharmacy Services | ||
Manufacturer Rebates Receivables | ||
Rebates receivables | $ 465,562 | $ 445,200 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Jun. 01, 2019 | Mar. 02, 2019 | |
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Goodwill impairment | $ 0 | |
Gross Carrying Amount of Finite Lived | 1,642,621 | $ 1,826,689 |
Accumulated Amortization | (1,262,037) | (1,397,483) |
Net | 380,584 | 429,206 |
Gross Carrying Amount, Total | 1,662,121 | 1,846,189 |
Net, Total | 400,084 | 448,706 |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Indefinite Lived | 19,500 | 19,500 |
Pharmacy Services | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Accumulated impairment losses | 574,712 | 574,712 |
Favorable leases and other | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | 180,435 | 370,855 |
Accumulated Amortization | (158,605) | (318,503) |
Net | $ 21,830 | $ 52,352 |
Remaining Weighted Average Amortization Period | 3 years | 7 years |
Prescription files | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 926,101 | $ 919,749 |
Accumulated Amortization | (837,819) | (827,222) |
Net | $ 88,282 | $ 92,527 |
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 | $ 388,000 | $ 388,000 |
Accumulated Amortization | (204,023) | (193,352) |
Net | $ 183,977 | $ 194,648 |
Remaining Weighted Average Amortization Period | 12 years | 13 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 | (9,047) | (8,472) |
Net | $ 48,453 | $ 49,028 |
Remaining Weighted Average Amortization Period | 21 years | 22 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 | (33,137) | (31,030) |
Net | $ 25,848 | $ 27,955 |
Remaining Weighted Average Amortization Period | 3 years | 4 years |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 20,100 | $ 20,100 |
Accumulated Amortization | (7,906) | (7,404) |
Net | $ 12,194 | $ 12,696 |
Remaining Weighted Average Amortization Period | 6 years | 7 years |
Backlog | ||
Finite Lived And Indefinite Lived Intangible Assets By Major Class | ||
Gross Carrying Amount of Finite Lived | $ 11,500 | $ 11,500 |
Accumulated Amortization | $ (11,500) | $ (11,500) |
Remaining Weighted Average Amortization Period | 0 years | 0 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Unfavourable lease intangibles and amortization expense (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 01, 2019 | Jun. 02, 2018 | Mar. 02, 2019 | |
Goodwill and Other Intangible Assets | |||
Unfavorable lease intangibles | $ 0 | $ 14,763 | |
Amortization expense for intangible assets and liabilities | 27,660 | $ 35,400 | |
Anticipated annual amortization expense for intangible assets and liabilities | |||
2020 | 99,436 | ||
2021 | 76,988 | ||
2022 | 56,559 | ||
2023 | 41,485 | ||
2024 | $ 27,910 |
Indebtedness and Credit Agree_3
Indebtedness and Credit Agreements - Indebtedness and lease financing obligations (Details) - USD ($) $ in Thousands | Mar. 15, 2019 | Dec. 20, 2018 | Jun. 25, 2018 | May 21, 2018 | Apr. 29, 2018 | Apr. 19, 2018 | Apr. 12, 2018 | Jun. 02, 2018 | Jun. 01, 2019 | Mar. 02, 2019 | Apr. 28, 2018 |
Indebtedness and credit agreements | |||||||||||
Lease financing obligations | $ 34,430 | $ 40,176 | |||||||||
Total Debt | 3,616,467 | 3,494,760 | |||||||||
Current maturities of long-term debt and lease financing obligations | (11,751) | (16,111) | |||||||||
Long-term debt and lease financing obligations, less current maturities | 3,604,716 | 3,478,649 | |||||||||
Loss on debt retirements, net | $ 554 | ||||||||||
Secured Debt | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 1,423,366 | 1,297,013 | |||||||||
Senior secured revolving credit facility due January 2020 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Maximum borrowing capacity | $ 2,700,000 | 2,700,000 | $ 3,000,000 | ||||||||
Loss on debt retirements, net | $ 1,091 | ||||||||||
Senior secured revolving credit facility due December 2023 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 977,028 | 850,931 | |||||||||
Principal amount of debt | 1,000,000 | 875,000 | |||||||||
Unamortized debt issuance costs | 22,972 | 24,069 | |||||||||
Maximum borrowing capacity | $ 2,700,000 | ||||||||||
Senior secured revolving credit facility due December 2023 | Minimum | LIBOR | |||||||||||
Indebtedness and credit agreements | |||||||||||
Interest rate | 1.25% | ||||||||||
Senior secured revolving credit facility due December 2023 | Maximum | LIBOR | |||||||||||
Indebtedness and credit agreements | |||||||||||
Interest rate | 1.75% | ||||||||||
FILO term loan due December 2023 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 446,338 | 446,082 | |||||||||
Principal amount of debt | $ 450,000 | 450,000 | |||||||||
Unamortized debt issuance costs | 3,662 | 3,918 | |||||||||
FILO term loan due December 2023 | LIBOR | |||||||||||
Indebtedness and credit agreements | |||||||||||
Interest rate | 3.00% | ||||||||||
Guaranteed Unsecured Debt | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | 1,737,550 | 1,736,508 | |||||||||
9.25% senior notes due March 2020 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Loss on debt retirements, net | $ 3,422 | ||||||||||
Percentage of outstanding principal amount redeemed | 100.00% | ||||||||||
6.75% senior notes due June 2021 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Loss on debt retirements, net | $ 18,075 | $ 8 | |||||||||
Principal amount of debt redeemed | $ 805,169 | 1,360 | |||||||||
6.125% senior notes due April 2023 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 1,737,550 | $ 1,736,508 | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.125% | 6.125% | |||||||||
Principal amount of debt | $ 1,753,490 | ||||||||||
Unamortized debt issuance costs | 15,940 | $ 16,982 | |||||||||
Loss on debt retirements, net | 56 | ||||||||||
Principal amount of debt redeemed | $ 4,759 | ||||||||||
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 | 421,121 | 421,063 | |||||||||
7.7% notes due February 2027 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 293,747 | $ 293,705 | |||||||||
Debt instrument, stated interest rate (as a percent) | 7.70% | 7.70% | |||||||||
Principal amount of debt | $ 295,000 | ||||||||||
Unamortized debt issuance costs | 1,253 | $ 1,295 | |||||||||
6.875% fixed-rate senior notes due December 2028 | |||||||||||
Indebtedness and credit agreements | |||||||||||
Long-term debt | $ 127,374 | $ 127,358 | |||||||||
Debt instrument, stated interest rate (as a percent) | 6.875% | 6.875% | |||||||||
Principal amount of debt | $ 128,000 | ||||||||||
Unamortized debt issuance costs | $ 626 | $ 642 | |||||||||
Interest rate cap | |||||||||||
Indebtedness and credit agreements | |||||||||||
Principal amount of debt | $ 650,000 | ||||||||||
Interest rate cap | LIBOR | |||||||||||
Indebtedness and credit agreements | |||||||||||
Interest rate | 2.75% |
Indebtedness and Credit Agree_4
Indebtedness and Credit Agreement - Credit Facility (Details) $ in Thousands | Dec. 20, 2018USD ($) | Jun. 01, 2019USD ($) | Mar. 02, 2019USD ($) | Apr. 29, 2018USD ($) | Apr. 28, 2018USD ($) |
Maturities | |||||
2020 | $ 0 | ||||
2021 | 0 | ||||
2022 | 0 | ||||
2023 | 0 | ||||
2024 | 3,203,490 | ||||
thereafter | $ 423,000 | ||||
Rite Aid Corporation (Parent Company Only) | |||||
Credit facility | |||||
Ownership interest (as a percent) | 100.00% | ||||
Senior secured revolving credit facility due January 2020 | |||||
Credit facility | |||||
Maximum borrowing capacity | $ 2,700,000 | $ 2,700,000 | $ 3,000,000 | ||
Maximum amount of accumulated cash on hand | $ 200,000 | ||||
Senior secured revolving credit facility due January 2020 | Minimum | |||||
Credit facility | |||||
Fixed charge coverage ratio | 1 | ||||
Senior secured revolving credit facility due December 2023 | |||||
Credit facility | |||||
Principal amount of debt | $ 1,000,000 | $ 875,000 | |||
Maximum borrowing capacity | $ 2,700,000 | ||||
Outstanding borrowings | 1,450,000 | ||||
Letters of credit outstanding | 83,205 | ||||
Additional borrowing capacity | 1,616,795 | ||||
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 | ||||
Availability under revolving credit facility | 1,616,795 | ||||
Senior secured revolving credit facility due December 2023 | Minimum | |||||
Credit facility | |||||
Additional borrowing capacity | 365,000 | ||||
Fixed charge coverage ratio | 1 | ||||
Threshold availability on the thirtieth consecutive calendar day | $ 250,000 | ||||
Senior secured revolving credit facility due December 2023 | Maximum | |||||
Credit facility | |||||
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements | 200,000 | ||||
Threshold availability on the third consecutive business day | $ 250,000 | ||||
Senior secured revolving credit facility due December 2023 | Alternate base rate | Minimum | |||||
Credit facility | |||||
Percentage points added to the reference rate | 0.25% | ||||
Senior secured revolving credit facility due December 2023 | Alternate base rate | Maximum | |||||
Credit facility | |||||
Percentage points added to the reference rate | 0.75% | ||||
Senior secured revolving credit facility due December 2023 | LIBOR | Minimum | |||||
Credit facility | |||||
Percentage points added to the reference rate | 1.25% | ||||
Senior secured revolving credit facility due December 2023 | LIBOR | Maximum | |||||
Credit facility | |||||
Percentage points added to the reference rate | 1.75% | ||||
FILO term loan due December 2023 | |||||
Credit facility | |||||
Principal amount of debt | $ 450,000 | $ 450,000 | |||
FILO term loan due December 2023 | Alternate base rate | |||||
Credit facility | |||||
Percentage points added to the reference rate | 2.00% | ||||
FILO term loan due December 2023 | LIBOR | |||||
Credit facility | |||||
Percentage points added to the reference rate | 3.00% |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended |
Jun. 01, 2019USD ($) | |
Leases | |
Operating lease cost | $ 164,983 |
Financing lease cost: | |
Amortization of right-of-use asset | 1,536 |
Interest on long-term finance lease liabilities | 905 |
Total finance lease costs | 2,441 |
Short-term lease costs | 1 |
Variable lease costs | 40,545 |
Less: sublease income | (5,751) |
Net lease cost | $ 202,219 |
Minimum | |
Leases | |
Initial lease terms under noncancellable operating and capital leases | 5 years |
Initial terms of noncancellable operating lease | 3 years |
Maximum | |
Leases | |
Initial lease terms under noncancellable operating and capital leases | 22 years |
Initial terms of noncancellable operating lease | 10 years |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information related to leases (Details) $ in Thousands | 3 Months Ended |
Jun. 01, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows paid for operating leases | $ 176,237 |
Operating cash flows paid for interest portion of finance leases | 905 |
Financing cash flows paid for principal portion of finance leases | 3,490 |
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | 77,384 |
Finance leases | $ 0 |
Leases - Supplemental balance s
Leases - Supplemental balance sheet information related to leases (Details) $ in Thousands | Jun. 01, 2019USD ($) |
Operating leases: | |
Operating lease right-of-use asset | $ 2,985,213 |
Short-term operating lease liabilities | 450,933 |
Long-term operating lease liabilities | 2,790,738 |
Total operating lease liabilities | 3,241,671 |
Finance leases: | |
Property, plant and equipment, net | 24,825 |
Current maturities of long-term debt and lease financing obligations | 11,751 |
Lease financing obligations, less current maturities | 22,679 |
Total finance lease liabilities | $ 34,430 |
Weighted average remaining lease term | |
Operating leases (in years) | 8 years 6 months |
Finance leases (in years) | 8 years 4 months 24 days |
Weighted average discount rate | |
Operating leases (as a percent) | 6.00% |
Finance leases (as a percent) | 10.30% |
Leases - Maturity of lease liab
Leases - Maturity of lease liabilities under finance and operating leases (Details) $ in Thousands | Jun. 01, 2019USD ($) |
Finance Leases | |
2020 (remaining thirty-nine weeks) | $ 10,774 |
2021 | 6,922 |
2022 | 4,360 |
2023 | 4,143 |
2024 | 3,842 |
Thereafter | 20,469 |
Total lease payments | 50,510 |
Less: imputed interest | (16,080) |
Total finance lease liabilities | 34,430 |
Operating Leases | |
2020 (remaining thirty-nine weeks) | 519,217 |
2021 | 630,612 |
2022 | 563,470 |
2023 | 508,479 |
2024 | 447,507 |
Thereafter | 1,554,206 |
Total lease payments | 4,223,491 |
Less: imputed interest | (981,820) |
Total operating lease liabilities | 3,241,671 |
Minimum sublease rentals | 60,000 |
Operating and finance leases | |
2020 (remaining thirty-nine weeks) | 529,991 |
2021 | 637,534 |
2022 | 567,830 |
2023 | 512,622 |
2024 | 451,349 |
Thereafter | 1,574,675 |
Total lease payments | 4,274,001 |
Less: imputed interest | (997,900) |
Total lease liabilities | $ 3,276,101 |
Leases - Minimum lease payments
Leases - Minimum lease payments (Details) $ in Thousands | Mar. 02, 2019USD ($) |
Minimum payments for Lease Financing Obligations | |
2020 | $ 19,300 |
2021 | 4,811 |
2022 | 4,588 |
2023 | 4,383 |
2024 | 4,042 |
Later years | 20,470 |
Total minimum lease payments | 57,594 |
Amount representing interest | (17,418) |
Present value of minimum lease payments | 40,176 |
Minimum payments for Operating Leases | |
2020 | 687,412 |
2021 | 610,874 |
2022 | 545,863 |
2023 | 490,864 |
2024 | 431,714 |
Later years | 1,541,408 |
Total minimum lease payments | $ 4,308,135 |
Retirement Plans (Details)
Retirement Plans (Details) - Defined Benefit Pension Plan - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Net periodic pension expense | ||
Service cost | $ 143 | $ 312 |
Interest cost | 1,556 | 1,578 |
Expected return on plan assets | (1,214) | (1,434) |
Amortization of unrecognized net loss | 415 | 508 |
Net periodic pension expense | 900 | $ 964 |
Employer contributions | 0 | |
Expected employer contribution during the remainder of fiscal year | $ 0 |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet information (Details) $ in Thousands | 3 Months Ended | ||
Jun. 01, 2019USD ($)segment | Mar. 02, 2019USD ($) | Jun. 02, 2018USD ($) | |
Segment Reporting | |||
Number of reportable segments | segment | 2 | ||
Total assets | $ 10,529,689 | $ 7,591,367 | |
Goodwill | 1,108,136 | 1,108,136 | |
Accounts receivable | 1,803,778 | 1,788,712 | |
Operating segments | Retail Pharmacy | |||
Segment Reporting | |||
Total assets | 7,918,381 | 5,071,055 | |
Goodwill | 43,492 | 43,492 | |
Operating segments | Pharmacy Services | |||
Segment Reporting | |||
Total assets | 2,628,214 | 2,534,771 | |
Goodwill | 1,064,644 | 1,064,644 | |
Intersegment elimination | |||
Segment Reporting | |||
Total assets | (16,906) | (14,459) | |
Long-term deferred tax liability | 0 | $ 0 | |
Accounts receivable | $ (16,906) | $ (14,459) |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Segment Reporting | ||
Revenues | $ 5,372,589 | $ 5,388,490 |
Gross Profit | 1,126,723 | 1,168,749 |
Adjusted EBITDA | 110,347 | 137,992 |
Additions to property and equipment and intangible assets | 49,191 | 61,626 |
Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 3,864,808 | |
Pharmacy Services | ||
Segment Reporting | ||
Revenues | 1,566,292 | |
Operating segments | Retail Pharmacy | ||
Segment Reporting | ||
Revenues | 3,864,808 | 3,897,765 |
Gross Profit | 1,030,495 | 1,069,457 |
Adjusted EBITDA | 84,008 | 104,129 |
Additions to property and equipment and intangible assets | 44,244 | 58,067 |
Operating segments | Pharmacy Services | ||
Segment Reporting | ||
Revenues | 1,566,292 | 1,542,762 |
Gross Profit | 96,228 | 99,292 |
Adjusted EBITDA | 26,339 | 33,863 |
Additions to property and equipment and intangible assets | 4,947 | 3,559 |
Intersegment elimination | ||
Segment Reporting | ||
Revenues | $ (58,511) | $ (52,037) |
Segment Reporting - Adjusted EB
Segment Reporting - Adjusted EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Segment Reporting | ||
Net loss from continuing operations | $ (99,339) | $ (41,727) |
Interest expense | 58,270 | 62,792 |
Income tax expense (benefit) | 7,374 | (9,497) |
Depreciation and amortization | 83,926 | 94,529 |
LIFO charge | 7,489 | 9,966 |
Lease termination and impairment charges | 478 | 9,859 |
Loss on debt retirements, net | 554 | |
Merger and Acquisition-related costs | 3,085 | 7,188 |
Stock-based compensation expense | 5,380 | 5,031 |
Restructuring-related costs | 43,350 | |
Inventory write-downs related to store closings | 841 | 3,833 |
Gain on sale of assets, net | (2,712) | (5,859) |
Other | 2,205 | 1,323 |
Adjusted EBITDA from continuing operations | $ 110,347 | $ 137,992 |
Commitments, Contingencies an_2
Commitments, Contingencies and Guarantees (Details) | Oct. 05, 2018claim | Jun. 01, 2019lawsuit | Dec. 01, 2018lawsuit | Jan. 19, 2017state |
Commitments, Contingencies and Guarantees | ||||
Number of states failed to report Rx savings prices | state | 18 | |||
Number of lawsuits | 2 | |||
Number of claims dismissed | claim | 2 | |||
Number of lawsuits filed by consolidated countries and municipalities | 300 | |||
Similar lawsuits filed outside the multi-district litigation | 136 |
Guarantor and Non-Guarantor C_3
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Balance Sheet (Details) - USD ($) $ in Thousands | Jun. 01, 2019 | Mar. 02, 2019 | Jun. 02, 2018 | Mar. 03, 2018 |
Current assets: | ||||
Cash and cash equivalents | $ 190,453 | $ 144,353 | ||
Accounts receivable, net | 1,803,778 | 1,788,712 | ||
Inventories, net of LIFO reserve of $611,933 and $604,444 | 1,875,917 | 1,871,941 | ||
Prepaid expenses and other current assets | 104,784 | 179,132 | ||
Current assets held for sale | 153,811 | 117,581 | ||
Total current assets | 4,128,743 | 4,101,719 | ||
Property, plant and equipment, net | 1,284,680 | 1,308,514 | ||
Operating right-of-use assets | 2,985,213 | |||
Goodwill | 1,108,136 | 1,108,136 | ||
Other intangibles, net | 400,084 | 448,706 | ||
Deferred tax assets | 409,084 | 409,084 | ||
Other assets | 213,749 | 215,208 | ||
Total assets | 10,529,689 | 7,591,367 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 11,751 | 16,111 | ||
Accounts payable | 1,556,425 | 1,618,585 | ||
Accrued salaries, wages and other current liabilities | 782,205 | 808,439 | ||
Current portion of operating lease liabilities | 450,933 | |||
Current liabilities held for sale | 43,829 | |||
Total current liabilities | 2,845,143 | 2,443,135 | ||
Long-term debt, less current maturities | 3,582,037 | 3,454,585 | ||
Non-current operating lease liabilities | 2,790,738 | |||
Lease financing obligations, less current maturities | 22,679 | 24,064 | ||
Other noncurrent liabilities | 253,875 | 482,893 | ||
Total liabilities | 9,494,472 | 6,404,677 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 1,035,217 | 1,186,690 | $ 1,812,311 | $ 1,601,010 |
Total liabilities and stockholders' equity | 10,529,689 | 7,591,367 | ||
Inventories, LIFO reserve (in dollars) | 611,933 | 604,444 | ||
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||||
Current assets: | ||||
Investment in subsidiaries | 9,224,254 | 8,294,315 | ||
Other assets | 180 | |||
Total assets | 9,224,434 | 8,294,315 | ||
Current liabilities: | ||||
Accrued salaries, wages and other current liabilities | 49,144 | 14,005 | ||
Total current liabilities | 49,144 | 14,005 | ||
Long-term debt, less current maturities | 3,582,037 | 3,454,585 | ||
Intercompany payable | 4,558,036 | 3,639,035 | ||
Total liabilities | 8,189,217 | 7,107,625 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 1,035,217 | 1,186,690 | ||
Total liabilities and stockholders' equity | 9,224,434 | 8,294,315 | ||
Inventories, LIFO reserve (in dollars) | 0 | 0 | ||
Reportable legal entity | Subsidiary Guarantors | ||||
Current assets: | ||||
Cash and cash equivalents | 137,022 | 122,134 | ||
Accounts receivable, net | 1,342,745 | 1,377,342 | ||
Intercompany receivable | 458,684 | 400,526 | ||
Inventories, net of LIFO reserve of $611,933 and $604,444 | 1,875,917 | 1,871,941 | ||
Prepaid expenses and other current assets | 100,118 | 172,448 | ||
Current assets held for sale | 153,811 | 117,581 | ||
Total current assets | 4,068,297 | 4,061,972 | ||
Property, plant and equipment, net | 1,284,680 | 1,308,514 | ||
Operating right-of-use assets | 2,985,213 | |||
Goodwill | 1,108,136 | 1,108,136 | ||
Other intangibles, net | 351,631 | 399,678 | ||
Deferred tax assets | 419,122 | 419,122 | ||
Investment in subsidiaries | 56,405 | 55,109 | ||
Intercompany receivable | 4,558,036 | 3,639,035 | ||
Other assets | 206,601 | 208,018 | ||
Total assets | 15,038,121 | 11,199,584 | ||
Current liabilities: | ||||
Current maturities of long-term debt and lease financing obligations | 11,751 | 16,111 | ||
Accounts payable | 1,550,469 | 1,612,181 | ||
Accrued salaries, wages and other current liabilities | 697,593 | 778,020 | ||
Current portion of operating lease liabilities | 450,933 | |||
Current liabilities held for sale | 43,829 | |||
Total current liabilities | 2,754,575 | 2,406,312 | ||
Non-current operating lease liabilities | 2,790,738 | |||
Lease financing obligations, less current maturities | 22,679 | 24,064 | ||
Other noncurrent liabilities | 245,875 | 474,893 | ||
Total liabilities | 5,813,867 | 2,905,269 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 9,224,254 | 8,294,315 | ||
Total liabilities and stockholders' equity | 15,038,121 | 11,199,584 | ||
Inventories, LIFO reserve (in dollars) | 611,933 | 604,444 | ||
Reportable legal entity | Non-Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and cash equivalents | 53,431 | 22,219 | ||
Accounts receivable, net | 461,033 | 411,370 | ||
Prepaid expenses and other current assets | 4,666 | 6,684 | ||
Total current assets | 519,130 | 440,273 | ||
Other intangibles, net | 48,453 | 49,028 | ||
Deferred tax assets | (10,038) | (10,038) | ||
Other assets | 6,968 | 7,190 | ||
Total assets | 564,513 | 486,453 | ||
Current liabilities: | ||||
Accounts payable | 5,956 | 6,404 | ||
Intercompany payable | 458,684 | 400,526 | ||
Accrued salaries, wages and other current liabilities | 35,468 | 16,414 | ||
Total current liabilities | 500,108 | 423,344 | ||
Other noncurrent liabilities | 8,000 | 8,000 | ||
Total liabilities | 508,108 | 431,344 | ||
Commitments and contingencies | ||||
Total stockholders' equity | 56,405 | 55,109 | ||
Total liabilities and stockholders' equity | 564,513 | 486,453 | ||
Inventories, LIFO reserve (in dollars) | 0 | 0 | ||
Eliminations | ||||
Current assets: | ||||
Intercompany receivable | (458,684) | (400,526) | ||
Total current assets | (458,684) | (400,526) | ||
Investment in subsidiaries | (9,280,659) | (8,349,424) | ||
Intercompany receivable | (4,558,036) | (3,639,035) | ||
Total assets | (14,297,379) | (12,388,985) | ||
Current liabilities: | ||||
Intercompany payable | (458,684) | (400,526) | ||
Total current liabilities | (458,684) | (400,526) | ||
Intercompany payable | (4,558,036) | (3,639,035) | ||
Total liabilities | (5,016,720) | (4,039,561) | ||
Commitments and contingencies | ||||
Total stockholders' equity | (9,280,659) | (8,349,424) | ||
Total liabilities and stockholders' equity | (14,297,379) | (12,388,985) | ||
Inventories, LIFO reserve (in dollars) | $ 0 | $ 0 | ||
Rite Aid Corporation (Parent Company Only) | ||||
Condensed Consolidating Balance Sheet | ||||
Ownership interest (as a percent) | 100.00% |
Guarantor and Non-Guarantor C_4
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Condensed Consolidating Statement of Operations | ||
Revenues | $ 5,372,589 | $ 5,388,490 |
Costs and expenses: | ||
Cost of revenues | 4,245,866 | 4,219,741 |
Selling, general and administrative expenses | 1,162,652 | 1,152,627 |
Lease termination and impairment charges | 478 | 9,859 |
Interest expense | 58,270 | 62,792 |
Loss on debt retirements, net | 554 | |
Gain on sale of assets, net | (2,712) | (5,859) |
Total costs and expenses | 5,464,554 | 5,439,714 |
Income (loss) from continuing operations before income taxes | (91,965) | (51,224) |
Income tax expense (benefit) | 7,374 | (9,497) |
Net loss from continuing operations | (99,339) | (41,727) |
Net income (loss) from discontinued operations | (320) | 256,143 |
Net (loss) income | (99,659) | 214,416 |
Total other comprehensive income (loss) | (241) | 364 |
Comprehensive (loss) income | (99,900) | 214,780 |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||
Costs and expenses: | ||
Interest expense | 54,955 | 59,939 |
Equity in earnings of subsidiaries, net of tax | 44,704 | (278,970) |
Total costs and expenses | 99,659 | (219,031) |
Income (loss) from continuing operations before income taxes | (99,659) | 219,031 |
Net loss from continuing operations | (99,659) | 219,031 |
Net income (loss) from discontinued operations | (4,615) | |
Net (loss) income | (99,659) | 214,416 |
Total other comprehensive income (loss) | (241) | 364 |
Comprehensive (loss) income | (99,900) | 214,780 |
Reportable legal entity | Subsidiary Guarantors | ||
Condensed Consolidating Statement of Operations | ||
Revenues | 5,281,323 | 5,321,025 |
Costs and expenses: | ||
Cost of revenues | 4,162,142 | 4,158,627 |
Selling, general and administrative expenses | 1,156,226 | 1,144,832 |
Lease termination and impairment charges | 478 | 9,859 |
Interest expense | 3,495 | 2,946 |
Loss on debt retirements, net | 554 | |
Gain on sale of assets, net | (2,712) | (5,859) |
Equity in earnings of subsidiaries, net of tax | (1,296) | 1,485 |
Total costs and expenses | 5,318,333 | 5,312,444 |
Income (loss) from continuing operations before income taxes | (37,010) | 8,581 |
Income tax expense (benefit) | 7,374 | (9,631) |
Net loss from continuing operations | (44,384) | 18,212 |
Net income (loss) from discontinued operations | (320) | 260,758 |
Net (loss) income | (44,704) | 278,970 |
Total other comprehensive income (loss) | 415 | 364 |
Comprehensive (loss) income | (44,289) | 279,334 |
Reportable legal entity | Non-Guarantor Subsidiaries | ||
Condensed Consolidating Statement of Operations | ||
Revenues | 104,422 | 95,584 |
Costs and expenses: | ||
Cost of revenues | 96,783 | 89,032 |
Selling, general and administrative expenses | 6,523 | 7,996 |
Interest expense | (180) | (93) |
Total costs and expenses | 103,126 | 96,935 |
Income (loss) from continuing operations before income taxes | 1,296 | (1,351) |
Income tax expense (benefit) | 134 | |
Net loss from continuing operations | 1,296 | (1,485) |
Net (loss) income | 1,296 | (1,485) |
Comprehensive (loss) income | 1,296 | (1,485) |
Eliminations | ||
Condensed Consolidating Statement of Operations | ||
Revenues | (13,156) | (28,119) |
Costs and expenses: | ||
Cost of revenues | (13,059) | (27,918) |
Selling, general and administrative expenses | (97) | (201) |
Equity in earnings of subsidiaries, net of tax | (43,408) | 277,485 |
Total costs and expenses | (56,564) | 249,366 |
Income (loss) from continuing operations before income taxes | 43,408 | (277,485) |
Net loss from continuing operations | 43,408 | (277,485) |
Net (loss) income | 43,408 | (277,485) |
Total other comprehensive income (loss) | (415) | (364) |
Comprehensive (loss) income | $ 42,993 | $ (277,849) |
Guarantor and Non-Guarantor C_5
Guarantor and Non-Guarantor Condensed Consolidating Financial Information - Statement of Cash Flow (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Operating activities: | ||
Net cash (used in) provided by operating activities | $ (51,239) | $ (16,314) |
Investing activities: | ||
Payments for property, plant and equipment | (40,981) | (47,971) |
Intangible assets acquired | (8,210) | (13,655) |
Proceeds from dispositions of assets and investments | 658 | 9,916 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | (48,533) | (49,123) |
Financing activities: | ||
Net proceeds from revolver | 125,000 | 190,000 |
Principal payments on long-term debt | (1,780) | (431,106) |
Change in zero balance cash accounts | 36,387 | 1,083 |
Net proceeds from issuance of common stock | 910 | |
Financing fees paid for early debt redemption | (13) | |
Payments for taxes related to net share settlement of equity awards | (195) | |
Deferred financing costs paid | (186) | |
Net cash provided by (used in) financing activities of continuing operations | 159,226 | (239,126) |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (13,877) | (74,050) |
Investing activities of discontinued operations | 523 | 603,402 |
Financing activities of discontinued operations | 0 | (525,031) |
Net cash (used in) provided by discontinued operations | (13,354) | 4,321 |
Increase (decrease) in cash and cash equivalents | 46,100 | (300,242) |
Cash and cash equivalents, beginning of period | 144,353 | 447,334 |
Cash and cash equivalents, end of period | 190,453 | 147,092 |
Reportable legal entity | Rite Aid Corporation (Parent Company Only) | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | (17,363) | (48,608) |
Financing activities: | ||
Net proceeds from revolver | 125,000 | 190,000 |
Principal payments on long-term debt | 3,966 | (426,361) |
Net proceeds from issuance of common stock | 910 | |
Intercompany activity | (111,417) | 813,705 |
Deferred financing costs paid | (186) | |
Net cash provided by (used in) financing activities of continuing operations | 17,363 | 578,254 |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (4,615) | |
Financing activities of discontinued operations | (525,031) | |
Net cash (used in) provided by discontinued operations | (529,646) | |
Reportable legal entity | Subsidiary Guarantors | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | (65,088) | 29,692 |
Investing activities: | ||
Payments for property, plant and equipment | (40,981) | (47,971) |
Intangible assets acquired | (8,210) | (13,655) |
Intercompany activity | 111,417 | (813,705) |
Proceeds from dispositions of assets and investments | 658 | 9,916 |
Proceeds from sale-leaseback transactions | 2,587 | |
Net cash used in investing activities of continuing operations | 62,884 | (862,828) |
Financing activities: | ||
Principal payments on long-term debt | (5,746) | (4,745) |
Change in zero balance cash accounts | 36,387 | 1,083 |
Financing fees paid for early debt redemption | (13) | |
Payments for taxes related to net share settlement of equity awards | (195) | |
Net cash provided by (used in) financing activities of continuing operations | 30,446 | (3,675) |
Cash flows of discontinued operations: | ||
Operating activities of discontinued operations | (13,877) | (69,435) |
Investing activities of discontinued operations | 523 | 603,402 |
Net cash (used in) provided by discontinued operations | (13,354) | 533,967 |
Increase (decrease) in cash and cash equivalents | 14,888 | (302,844) |
Cash and cash equivalents, beginning of period | 122,134 | 441,244 |
Cash and cash equivalents, end of period | 137,022 | 138,400 |
Reportable legal entity | Non-Guarantor Subsidiaries | ||
Operating activities: | ||
Net cash (used in) provided by operating activities | 31,212 | 2,602 |
Cash flows of discontinued operations: | ||
Increase (decrease) in cash and cash equivalents | 31,212 | 2,602 |
Cash and cash equivalents, beginning of period | 22,219 | 6,090 |
Cash and cash equivalents, end of period | 53,431 | 8,692 |
Eliminations | ||
Investing activities: | ||
Intercompany activity | (111,417) | 813,705 |
Net cash used in investing activities of continuing operations | (111,417) | 813,705 |
Financing activities: | ||
Intercompany activity | 111,417 | (813,705) |
Net cash provided by (used in) financing activities of continuing operations | $ 111,417 | $ (813,705) |
Supplementary Cash Flow Data (D
Supplementary Cash Flow Data (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 01, 2019 | Jun. 02, 2018 | |
Supplementary Cash Flow Data | ||
Cash paid for interest | $ 19,462 | $ 53,553 |
Cash payments for income taxes, net | 830 | 591 |
Change in operating lease right-of-use assets | 41,764 | |
Change in operating lease liabilities | (53,657) | |
Equipment financed under capital leases | 1,253 | 1,963 |
Gross borrowings from revolver | 499,000 | 444,000 |
Gross repayments to revolver | 374,000 | $ 254,000 |
Significant components of cash used by Other Liabilities | ||
Cash used by Other Liabilities | 47,831 | |
Accrued interest | 35,139 | |
Accruals related to compensation and benefit | $ 12,299 |