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, with the exception of EIC, the subsidiaries, including joint ventures, that do not guarantee the Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities, secured guaranteed notes and unsecured guaranteed notes, are minor.

For the purposes of preparing the information below, Rite Aid Corporation uses the equity method to account for its investment in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in the non-guarantor subsidiaries. The subsidiary guarantees related to the Company’s Amended and Restated Senior Secured Credit Facility, second priority secured term loan facilities and secured guaranteed notes and, on an unsecured basis, the unsecured guaranteed notes, are full and unconditional and joint and several. Presented below is condensed consolidating financial information for Rite Aid Corporation, the Subsidiary Guarantors, and the non-guarantor subsidiaries at September 2, 2017, March 4, 2017, and for the thirteen and twenty-six week periods ended September 2, 2017 and August 27, 2016. Separate financial statements for Subsidiary Guarantors are not presented.

	Rite Aid Corporation
	Condensed Consolidating Balance Sheet
	September 2, 2017
	(unaudited)
	Rite Aid Corporation (Parent Company Only)		Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	199,978	$	39,000	$	—		$	238,978
Accounts receivable, net	—		1,430,626		412,694		—			1,843,320
Intercompany receivable			298,450		—		(298,450		)(a)	—
Inventories, net of LIFO reserve of $0, $1,022,282, $0, $0, and $1,022,282	—		2,877,427		—		—			2,877,427
Prepaid expenses and other current assets	—		220,344		1,300		—			221,644

Total current assets	—		5,026,825		452,994		(298,450		)	5,181,369
Property, plant and equipment, net	—		2,188,217		—		—			2,188,217
Goodwill	—		1,715,479		—		—			1,715,479
Other intangibles, net	—		694,810		52,478		—			747,288
Deferred tax assets	—		1,453,291		—		—			1,453,291
Investment in subsidiaries	15,275,200		49,148		—		(15,324,348		)(b)	—
Intercompany receivable	—		7,392,091		—		(7,392,091		)(a)	—
Other assets	—		205,353		7,311		—			212,664

Total assets	$	15,275,200	$	18,725,214	$	512,783	$	(23,014,889	)	$	11,498,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	90	$	22,401	$	—	$	—		$	22,491
Accounts payable	—		1,680,524		7,356		—			1,687,880
Intercompany payable	—		—		298,450		(298,450		)(a)	—
Accrued salaries, wages and other current liabilities	66,860		1,067,239		136,741		—			1,270,840

Total current liabilities	66,950		2,770,164		442,547		(298,450		)	2,981,211
Long-term debt, less current maturities	7,082,549		—		—		—			7,082,549
Lease financing obligations, less current maturities	—		37,890		—		—			37,890
Intercompany payable	7,392,091		—		—		(7,392,091		)(a)	—
Other noncurrent liabilities	—		641,960		21,088		—			663,048

Total liabilities	14,541,590		3,450,014		463,635		(7,690,541		)	10,764,698
Commitments and contingencies	—		—		—		—			—

Total stockholders’ equity	733,610		15,275,200		49,148		(15,324,348		)(b)	733,610

Total liabilities and stockholders’ equity	$	15,275,200	$	18,725,214	$	512,783	$	(23,014,889	)	$	11,498,308

(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 4, 2017
	Rite Aid Corporation (Parent Company Only)		Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	213,104	$	32,306	$	—		$	245,410
Accounts receivable, net	—		1,506,288		264,838		—			1,771,126
Intercompany receivable	—		215,862		—		(215,862		)(a)	—
Inventories, net of LIFO reserve of $0, $999,776, $0, $0, and $999,776	—		2,837,211		—		—			2,837,211
Prepaid expenses and other current assets	—		203,033		8,508		—			211,541

Total current assets	—		4,975,498		305,652		(215,862		)	5,065,288
Property, plant and equipment, net	—		2,251,692		—		—			2,251,692
Goodwill	—		1,715,479		—		—			1,715,479
Other intangibles, net	—		782,167		53,628		—			835,795
Deferred tax assets	—		1,505,564		—		—			1,505,564
Investment in subsidiaries	15,275,488		50,004		—		(15,325,492		)(b)	—
Intercompany receivable	—		7,331,675		—		(7,331,675		)(a)	—
Other assets	—		219,934		—		—			219,934

Total assets	$	15,275,488	$	18,832,013	$	359,280	$	(22,873,029	)	$	11,593,752

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	90	$	21,245	$	—	$	—		$	21,335
Accounts payable	—		1,609,025		4,884		—			1,613,909
Intercompany payable	—		—		215,862		(215,862		)(a)	—
Accrued salaries, wages and other current liabilities	66,365		1,236,297		67,342		—			1,370,004

Total current liabilities	66,455		2,866,567		288,088		(215,862		)	3,005,248
Long-term debt, less current maturities	7,263,288		—		—		—			7,263,288
Lease financing obligations, less current maturities	—		44,070		—		—			44,070
Intercompany payable	7,331,675		—		—		(7,331,675		)(a)	—
Other noncurrent liabilities	—		645,888		21,188		—			667,076

Total liabilities	14,661,418		3,556,525		309,276		(7,547,537		)	10,979,682
Commitments and contingencies	—		—		—		—			—

Total stockholders’ equity	614,070		15,275,488		50,004		(15,325,492		)(b)	614,070

Total liabilities and stockholders’ equity	$	15,275,488	$	18,832,013	$	359,280	$	(22,873,029	)	$	11,593,752

(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 September 2, 2017 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	7,657,233		$	41,877		$	(20,207	)(a)	$	7,678,903
Costs and expenses:
Cost of revenues	—			5,872,689			39,961			(20,750		)(a)	5,891,900
Selling, general and administrative expenses	—			1,732,288			1,475			543		(a)	1,734,306
Lease termination and impairment expenses	—			3,128			—			—			3,128
Interest expense	105,384			5,889			(12		)	—			111,261
Walgreens Boots Alliance merger termination fee	(325,000		)	—			—			—			(325,000		)
Gain on sale of assets, net	—			(14,495		)	—			—			(14,495		)
Equity in earnings of subsidiaries, net of tax	48,900			(456		)	—			(48,444		)(b)	—

	(170,716		)	7,599,043			41,424			(68,651		)	7,401,100

Income before income taxes	170,716			58,190			453			48,444			277,803
Income tax expense (benefit)	—			107,090			(3		)	—			107,087

Net income (loss)	$	170,716		$	(48,900	)	$	456		$	48,444	(b)	$	170,716
Total other comprehensive income (loss)	515			515			—			(515		)	515

Comprehensive income (loss)	$	171,231		$	(48,385	)	$	456		$	47,929		$	171,231

(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 August 27, 2016 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	7,995,349	$	60,581		$	(26,124	)(a)	$	8,029,806
Costs and expenses:
Cost of revenues	—			6,080,299		57,767			(25,003		)(a)	6,113,063
Selling, general and administrative expenses	—			1,776,135		3,233			(1,121		)(a)	1,778,247
Lease termination and impairment expenses	—			7,233		—			—			7,233
Interest expense	100,933			4,447		8			—			105,388
Loss on sale of assets, net	—			174		—			—			174
Equity in earnings of subsidiaries, net of tax	(115,706		)	593		—			115,113		(b)	—

	(14,773		)	7,868,881		61,008			88,989			8,004,105

Income (loss) before income taxes	14,773			126,468		(427		)	(115,113		)	25,701
Income tax expense	—			10,762		166			—			10,928

Net income (loss)	$	14,773		$	115,706	$	(593	)	$	(115,113	)(b)	$	14,773
Total other comprehensive income (loss)	681			681		—			(681		)	681

Comprehensive income (loss)	$	15,454		$	116,387	$	(593	)	$	(115,794	)	$	15,454

(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 September 2, 2017 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	15,417,291		$	81,327		$	(38,262	)(a)	$	15,460,356
Costs and expenses:
Cost of revenues	—			11,875,730			77,863			(39,274		)(a)	11,914,319
Selling, general and administrative expenses	—			3,489,908			4,676			1,012		(a)	3,495,596
Lease termination and impairment expenses	—			7,214			—			—			7,214
Interest expense	211,317			9,855			26			—			221,198
Walgreens Boots Alliance merger termination fee	(325,000		)	—			—			—			(325,000		)
Gain on sale of assets, net	—			(20,216		)	—			—			(20,216		)
Equity in earnings of subsidiaries, net of tax	18,316			856			—			(19,172		)(b)	—

	(95,367		)	15,363,347			82,565			(57,434		)	15,293,111

Income before income taxes	95,367			53,944			(1,238		)	19,172			167,245
Income tax expense (benefit)	—			72,260			(382		)	—			71,878

Net income (loss)	$	95,367		$	(18,316	)	$	(856	)	$	19,172	(b)	$	95,367
Total other comprehensive income (loss)	1,029			1,029			—			(1,029		)	1,029

Comprehensive income (loss)	$	96,396		$	(17,287	)	$	(856	)	$	18,143		$	96,396

(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 27, 2016 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	16,163,541	$	119,109		$	(68,663	)(a)	$	16,213,987
Costs and expenses:
Cost of revenues	—			12,355,746		113,613			(66,415		)(a)	12,402,944
Selling, general and administrative expenses	—			3,567,772		5,970			(2,248		)(a)	3,571,494
Lease termination and impairment expenses	—			13,014		—			—			13,014
Interest expense	201,380			9,114		7			—			210,501
Loss on sale of assets, net	—			1,230		—			—			1,230
Equity in earnings of subsidiaries, net of tax	(211,565		)	645		—			210,920		(b)	—

	(10,185		)	15,947,521		119,590			142,257			16,199,183

Income (loss) before income taxes	10,185			216,020		(481		)	(210,920		)	14,804
Income tax expense	—			4,455		164			—			4,619

Net income (loss)	$	10,185		$	211,565	$	(645	)	$	(210,920	)(b)	$	10,185
Total other comprehensive income (loss)	1,362			1,362		—			(1,362		)	1,362

Comprehensive income (loss)	$	11,547		$	212,927	$	(645	)	$	(212,282	)	$	11,547

(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 September 2, 2017 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries		Eliminations			Consolidated
							(in thousands)
Operating activities:
Net cash provided by operating activities	$	123,440		$	167,697		$	6,694	$	—		$	297,831

Investing activities:
Payments for property, plant and equipment	—			(120,461		)	—		—			(120,461		)
Intangible assets acquired	—			(13,073		)	—		—			(13,073		)
Intercompany activity	—			(66,345		)	—		66,345			—
Proceeds from dispositions of assets and investments	—			17,407			—		—			17,407
Proceeds from insured loss	—			3,627			—		—			3,627

Net cash (used in) provided by investing activities	—			(178,845		)	—		66,345			(112,500		)

Financing activities:
Net payments to revolver	(190,000		)	—			—		—			(190,000		)
Principal payments on long-term debt	—			(8,096		)	—		—			(8,096		)
Change in zero balance cash accounts	—			10,189			—		—			10,189
Net proceeds from issuance of common stock	215			—			—		—			215
Payments for taxes related to net share settlement of equity awards	—			(4,071		)	—		—			(4,071		)
Intercompany activity	66,345			—			—		(66,345		)	—

Net cash provided by (used in) financing activities	(123,440		)	(1,978		)	—		(66,345		)	(191,763		)

(Decrease) increase in cash and cash equivalents	—			(13,126		)	6,694		—			(6,432		)
Cash and cash equivalents, beginning of period	—			213,104			32,306		—			245,410

Cash and cash equivalents, end of period	$	—		$	199,978		$	39,000	$	—		$	238,978

	Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Twenty-Six Weeks Ended August 27, 2016 (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	$	(192,321	)	$	211,970		$	(610	)	$	—		$	19,039

Investing activities:
Payments for property, plant and equipment	—			(225,718		)	—			—			(225,718		)
Intangible assets acquired	—			(28,869		)	—			—			(28,869		)
Intercompany activity	—			61,637			—			(61,637		)	—
Proceeds from dispositions of assets and investments	—			6,833			—			—			6,833

Net cash (used in) provided by investing activities	—			(186,117		)	—			(61,637		)	(247,754		)

Financing activities:
Net proceeds from revolver	250,000			—			—			—			250,000
Principal payments on long-term debt	—			(11,230		)	—			—			(11,230		)
Change in zero balance cash accounts	—			534			—			—			534
Net proceeds from issuance of common stock	3,958			—			—			—			3,958
Excess tax benefit on stock options and restricted stock	—			3,248			—			—			3,248
Payments for taxes related to net share settlement of equity awards	—			(6,173		)	—			—			(6,173		)
Intercompany activity	(61,637		)	—			—			61,637			—

Net cash provided by (used in) financing activities	192,321			(13,621		)	—			61,637			240,337

Increase (decrease) in cash and cash equivalents	—			12,232			(610		)	—			11,622
Cash and cash equivalents, beginning of period	—			90,569			33,902			—			124,471

Cash and cash equivalents, end of period	$	—		$	102,801		$	33,292		$	—		$	136,093