15. Guarantor and Non-Guarantor Condensed Consolidating Financial Information

Rite Aid Corporation conducts the majority of its business through its subsidiaries. With the exception of EIC, substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations under the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes (the “Subsidiary Guarantors”). Additionally, prior to the Acquisition, the subsidiaries, including joint ventures, that did not guarantee the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes, were minor. Accordingly, condensed consolidating financial information for the Company and subsidiaries is not presented for those periods. Condensed consolidating financial information for the Company, its Subsidiary Guarantors and non-guarantor subsidiaries, is presented for periods subsequent to the Acquisition.

For the purposes of preparing the information below, Rite Aid Corporation uses the equity method to account for its investment in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in the non-guarantor subsidiaries. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several. Presented below is condensed consolidating financial information for Rite Aid Corporation, the Subsidiary Guarantors, and the Non-Guarantor Subsidiaries at August 29, 2015 and for the thirteen and twenty-six week periods ended August 29, 2015. Separate financial statements for Subsidiary Guarantors are not presented.

	Rite Aid Corporation
	Condensed Consolidating Balance Sheet
	August 29, 2015
	(unaudited)
	Rite Aid Corporation (Parent Company Only)		Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	120,905	$	31,742	$	—		$	152,647
Accounts receivable, net	—		1,299,313		573,663		—			1,872,976
Intercompany receivable			271,673		—		(271,673		)(a)	—
Inventories, net of LIFO reserve of $0, $1,009,501, $0, $0, and $1,009,501	—		2,902,749		—		—			2,902,749
Deferred tax assets	—		17,122		701		—			17,823
Prepaid expenses and other current assets	—		137,841		3,098		—			140,939

Total current assets	—		4,749,603		609,204		(271,673		)	5,087,134
Property, plant and equipment, net	—		2,198,674		—		—			2,198,674
Goodwill	—		1,533,827		—		—			1,533,827
Other intangibles, net	—		1,117,595		107,936		—			1,225,531
Deferred tax assets	—		1,617,311		—		—			1,617,311
Investment in subsidiaries	14,527,800		129,383		—		(14,657,183		)(b)	—
Intercompany receivable	—		6,678,421		—		(6,678,421		)(a)	—
Other assets	103,577		206,579		6,598		—			316,754

Total assets	$	14,631,377	$	18,231,393	$	723,738	$	(21,607,277	)	$	11,979,231

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	90	$	28,912	$	—	$	—		$	29,002
Accounts payable	—		1,593,835		576		—			1,594,411
Intercompany payable	—		—		271,673		(271,673		)(a)	—
Accrued salaries, wages and other current liabilities	99,971		1,281,468		322,106		—			1,703,545
Deferred tax liabilities	—		57,622		—		—			57,622

Total current liabilities	100,061		2,961,837		594,355		(271,673		)	3,384,580
Long-term debt, less current maturities	7,361,079		—		—		—			7,361,079
Lease financing obligations, less current maturities	—		54,232		—		—			54,232
Intercompany payable	6,678,421		—		—		(6,678,421		)(a)	—
Other noncurrent liabilities	17,458		732,179		—		—			749,637

Total liabilities	14,157,019		3,748,248		594,355		(6,950,094		)	11,549,528
Commitments and contingencies	—		—		—		—			—

Total stockholders’ equity	474,358		14,483,145		129,383		(14,657,183		)(b)	429,703

Total liabilities and stockholders’ equity	$	14,631,377	$	18,231,393	$	723,738	$	(21,607,277	)	$	11,979,231

(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 August 29, 2015
	(unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Revenues	$	—		$	7,641,439	$	44,365		$	(21,028	)(a)	$	7,664,776
Costs and expenses:
Cost of revenues	—			5,720,403		42,752			(20,670		)(a)	5,742,485
Selling, general and administrative expenses	—			1,724,067		2,117			(358		)(a)	1,725,826
Lease termination and impairment expenses	—			9,637		—			—			9,637
Interest expense	110,529			4,884		(3		)	—			115,410
Loss on debt retirement, net	33,205			—		—			—			33,205
Loss on sale of assets, net	—			281		—			—			281
Equity in earnings of subsidiaries	(181,666		)	501		—			181,165		(b)	—

	(37,932		)	7,459,773		44,866			160,137			7,626,844

Income (loss) before income taxes	37,932			181,666		(501		)	(181,165		)	37,932
Income tax expense	16,463			16,463		186			(16,649		)	16,463

Net income (loss)	$	21,469		$	165,203	$	(687	)	$	(164,516	)	$	21,469
Total other comprehensive income	598			598		—			(598		)	598

Comprehensive income (loss)	$	22,067		$	165,801	$	(687	)	$	(165,114	)	$	22,067

(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 Twenty-Six Weeks Ended August 29, 2015
	(unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Revenues	$	—		$	14,289,000	$	44,365		$	(21,028	)(a)	$	14,312,337
Costs and expenses:
Cost of revenues	—			10,508,434		42,752			(20,670		)(a)	10,530,516
Selling, general and administrative expenses	—			3,423,652		2,117			(358		)(a)	3,425,411
Lease termination and impairment expenses	—			14,659		—			—			14,659
Interest expense	213,894			25,126		(3		)	—			239,017
Loss on debt retirement, net	33,205			—		—			—			33,205
Loss on sale of assets, net	—			320		—			—			320
Equity in earnings of subsidiaries	(316,308		)	501		—			315,807		(b)	—

	(69,209		)	13,972,692		44,866			294,779			14,243,128

Income (loss) before income taxes	69,209			316,308		(501		)	(315,807		)	69,209
Income tax expense	28,904			28,904		186			(29,090		)	28,904

Net (loss) income	$	40,305		$	287,404	$	(687	)	$	(286,717	)	$	40,305
Total other comprehensive income	1,195			1,195		—			(1,195		)	1,195

Comprehensive income (loss)	$	41,500		$	288,599	$	(687	)	$	(287,912	)	$	41,500

(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 Twenty Six Weeks Ended August 29, 2015
	(unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Operating activities:
Net cash (used in) provided by operating activities	$	(162,122	)	$	512,340		$	(8,646	)	$	—		$	341,572

Investing activities:
Payments for property, plant and equipment	—			(271,683		)	—			—			(271,683		)
Intangible assets acquired	—			(43,462		)	—			—			(43,462		)
Acquisition of businesses, net of cash acquired	(1,779,571		)	—			—			—			(1,779,571		)
Intercompany activity	(103,834		)	(220,138		)	—			323,972			—
Proceeds from dispositions of assets and investments	—			6,081			—			—			6,081

Net cash used in investing activities	(1,883,405		)	(529,202		)	—			323,972			(2,088,635		)

Financing activities:
Proceeds from issuance of long-term debt	1,800,000			—			—			—			1,800,000
Net proceeds from revolver	728,000			—			—			—			728,000
Principal payments on long-term debt	(650,079		)	(11,138		)	—			—			(661,217		)
Change in zero balance cash accounts	—			(51,309		)	—			—			(51,309		)
Net proceeds from issuance of common stock	8,105			—			—			—			8,105
Financing fees paid for early debt redemption	(26,003		)	—			—			—			(26,003		)
Excess tax benefit on stock options and restricted stock	—			20,869			—			—			20,869
Deferred financing costs paid	(34,634		)	—			—			—			(34,634		)
Intercompany activity	220,138			63,446			40,388			(323,972		)	—

Net cash provided by (used in) financing activities	2,045,527			21,868			40,388			(323,972		)	1,783,811

Increase in cash and cash equivalents	—			5,006			31,742			—			36,748
Cash and cash equivalents, beginning of period	—			115,899			—			—			115,899

Cash and cash equivalents, end of period	$	—		$	120,905		$	31,742		$	—		$	152,647