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 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 December 2, 2017, March 4, 2017, and for the thirteen and thirty-nine week periods ended December 2, 2017 and November 26, 2016. Separate financial statements for Subsidiary Guarantors are not presented.

	Rite Aid Corporation
	Condensed Consolidating Balance Sheet
	December 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	$	—	$	163,343	$	6,457	$	—		$	169,800
Accounts receivable, net	—		1,503,578		293,341		—			1,796,919
Intercompany receivable			200,895		—		(200,895		)(a)	—
Inventories, net of LIFO reserve of $0, $627,718, $0, $0, and $627,718	—		1,853,886		—		—			1,853,886
Prepaid expenses and other current assets	—		240,093		619		—			240,712
Current assets held for sale	—		1,868,128		—		—			1,868,128

Total current assets	—		5,829,923		300,417		(200,895		)	5,929,445
Property, plant and equipment, net	—		1,479,214		—		—			1,479,214
Goodwill	—		1,682,847		—		—			1,682,847
Other intangibles, net	—		566,371		51,903		—			618,274
Deferred tax assets	—		1,419,544		—		—			1,419,544
Investment in subsidiaries	7,953,874		47,355		—		(8,001,229		)(b)	—
Intercompany receivable	—		261,847		—		(261,847		)(a)	—
Other assets	—		203,995		7,295		—			211,290

Total assets	$	7,953,874	$	11,491,096	$	359,615	$	(8,463,971	)	$	11,340,614

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	90	$	20,264	$	—	$	—		$	20,354
Accounts payable	—		1,780,226		9,230		—			1,789,456
Intercompany payable	—		—		200,895		(200,895		)(a)	—
Accrued salaries, wages and other current liabilities	94,613		1,082,686		81,287		—			1,258,586
Current liabilities held for sales	3,786,480		51,039		—		—			3,837,519

Total current liabilities	3,881,183		2,934,215		291,412		(200,895		)	6,905,915
Long-term debt, less current maturities	2,985,700		—		—		—			2,985,700
Lease financing obligations, less current maturities	—		31,654		—		—			31,654
Intercompany payable	261,847		—		—		(261,847		)(a)	—
Other noncurrent liabilities	—		571,353		20,848		—			592,201

Total liabilities	7,128,730		3,537,222		312,260		(462,742		)	10,515,470
Commitments and contingencies	—		—		—		—			—

Total stockholders’ equity	825,144		7,953,874		47,355		(8,001,229		)(b)	825,144

Total liabilities and stockholders’ equity	$	7,953,874	$	11,491,096	$	359,615	$	(8,463,971	)	$	11,340,614

(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
	(unaudited)
	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, $607,326, $0, $0, and $607,326	—		1,789,541		—		—			1,789,541
Prepaid expenses and other current assets	—		203,033		8,508		—			211,541
Current assets held for sale	—		1,047,670		—		—			1,047,670

Total current assets	—		4,975,498		305,652		(215,862		)	5,065,288
Property, plant and equipment, net	—		1,526,462		—		—			1,526,462
Goodwill	—		1,682,847		—		—			1,682,847
Other intangibles, net	—		661,778		53,628		—			715,406
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	—		215,917		—		—			215,917
Noncurrent assets held for sale	—		882,268		—		—			882,268

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	$	17,619	$	—	$	—		$	17,709
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		1,207,240		67,342		—			1,340,947
Current liabilities held for sales	—		32,683		—		—			32,683

Total current liabilities	66,455		2,866,567		288,088		(215,862		)	3,005,248
Long-term debt, less current maturities	3,235,888		—		—		—			3,235,888
Lease financing obligations, less current maturities	—		37,204		—		—			37,204
Intercompany payable	7,331,675		—		—		(7,331,675		)(a)	—
Other noncurrent liabilities	—		622,762		21,188		—			643,950
Noncurrent liabilities held for sale	4,027,400		29,992							4,057,392

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 December 2, 2017 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	5,331,788		$	47,064		$	(25,682	)(a)	$	5,353,170
Costs and expenses:
Cost of revenues	—			4,146,272			45,063			(24,888		)(a)	4,166,447
Selling, general and administrative expenses	—			1,162,416			4,892			(794		)(a)	1,166,514
Lease termination and impairment expenses	—			3,939			—			—			3,939
Interest expense	45,586			5,040			(318		)	—			50,308
Gain on sale of assets, net	—			205			—			—			205
Equity in earnings of subsidiaries, net of tax	(186,073		)	1,793			—			184,280		(b)	—

	(140,487		)	5,319,665			49,637			158,598			5,387,413

Earnings from continuing operations before income taxes	140,487			12,123			(2,573		)	(184,280		)	(34,243		)
Income tax expense (benefit)	—			(15,281		)	(780		)	—			(16,061		)
Net income (loss) from continuing operations	140,487			27,404			(1,793		)	(184,280		)	(18,182		)
Net income (loss) from discontinued operations	(59,456		)	158,669			—			—			99,213

Net income (loss)	$	81,031		$	186,073		$	(1,793	)	$	(184,280	)(b)	$	81,031
Total other comprehensive income (loss)	514			514			—			(514		)	514

Comprehensive income (loss)	$	81,545		$	186,587		$	(1,793	)	$	(184,794	)	$	81,545

(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 November 26, 2016 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	5,641,856		$	57,044		$	(29,789	)(a)	$	5,669,111
Costs and expenses:
Cost of revenues	—			4,395,976			57,270			(28,987		)(a)	4,424,259
Selling, general and administrative expenses	—			1,167,983			1,465			(802		)(a)	1,168,646
Lease termination and impairment expenses	—			7,199			—			—			7,199
Interest expense	45,959			4,322			23			—			50,304
Gain on sale of assets, net	—			(225		)	—			—			(225		)
Equity in earnings of subsidiaries, net of tax	(116,974		)	3,059			—			113,915		(b)	—

	(71,015		)	5,578,314			58,758			84,126			5,650,183

Earnings from continuing operations before income taxes	71,015			63,542			(1,714		)	(113,915		)	18,928
Income tax expense (benefit)	—			(6,027		)	1,345			—			(4,682		)
Net income (loss) from continuing operations	71,015			69,569			(3,059		)	(113,915		)	23,610
Net income (loss) from discontinued operations	(56,005		)	47,405			—			—			(8,600		)

Net income (loss)	$	15,010		$	116,974		$	(3,059	)	$	(113,915	)(b)	$	15,010
Total other comprehensive income (loss)	681			681			—			(681		)	681

Comprehensive income (loss)	$	15,691		$	117,655		$	(3,059	)	$	(114,596	)	$	15,691

(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 Thirty-Nine Weeks Ended December 2, 2017 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	16,070,256		$	128,391		$	(63,943	)(a)	$	16,134,704
Costs and expenses:
Cost of revenues	—			12,565,600			122,926			(64,161		)(a)	12,624,365
Selling, general and administrative expenses	—			3,459,511			9,569			218		(a)	3,469,298
Lease termination and impairment expenses	—			11,090			—			—			11,090
Interest expense	137,562			14,896			(293		)	—			152,165
Walgreens Boots Alliance, Inc. termination fee	(325,000		)	—			—			—			(325,000		)
Gain on sale of assets, net	—			(20,623		)	—			—			(20,623		)
Equity in earnings of subsidiaries, net of tax	(167,757		)	2,649			—			165,108		(b)	—

	(355,195		)	16,033,123			132,202			101,165			15,911,295

Earnings from continuing operations before income taxes	355,195			37,133			(3,811		)	(165,108		)	223,409
Income tax expense (benefit)	—			90,430			(1,162		)	—			89,268
Net income (loss) from continuing operations	355,195			(53,297		)	(2,649		)	(165,108		)	134,141
Net income (loss) from discontinued operations	(178,797		)	221,054			—			—			42,257

Net income (loss)	$	176,398		$	167,757		$	(2,649	)	$	(165,108	)(b)	$	176,398
Total other comprehensive income (loss)	1,543			1,543			—			(1,543		)	1,543

Comprehensive income (loss)	$	177,941		$	169,300		$	(2,649	)	$	(166,651	)	$	177,941

(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 Thirty-Nine Weeks Ended November 26, 2016 (unaudited)
	Rite Aid Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Revenues	$	—		$	16,946,453		$	176,153		$	(98,452	)(a)	$	17,024,154
Costs and expenses:
Cost of revenues	—			13,233,024			170,883			(95,402		)(a)	13,308,505
Selling, general and administrative expenses	—			3,519,465			7,435			(3,050		)(a)	3,523,850
Lease termination and impairment expenses	—			20,203			—			—			20,203
Interest expense	133,208			13,436			30			—			146,674
Gain (loss) on sale of assets, net	—			(388		)	—			—			(388		)
Equity in earnings of subsidiaries, net of tax	(328,539		)	3,704			—			324,835		(b)	—

	(195,331		)	16,789,444			178,348			226,383			16,998,844

Earnings from continuing operations before income taxes	195,331			157,009			(2,195		)	(324,835		)	25,310
Income tax expense (benefit)	—			(5,333		)	1,509			—			(3,824		)
Net income (loss) from continuing operations	195,331			162,342			(3,704		)	(324,835		)	29,134
Net income (loss) from discontinued operations	(170,136		)	166,197			—			—			(3,939		)

Net income (loss)	$	25,195		$	328,539		$	(3,704	)	$	(324,835	)(b)	$	25,195
Total other comprehensive income (loss)	2,043			2,043			—			(2,043		)	2,043

Comprehensive income (loss)	$	27,238		$	330,582		$	(3,704	)	$	(326,878	)	$	27,238

(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 Thirty-Nine Weeks Ended December 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	$	229,578		$	220,721		$	(25,849	)	$	—		$	424,450

Investing activities:
Payments for property, plant and equipment	—			(140,816		)	—			—			(140,816		)
Intangible assets acquired	—			(20,201		)	—			—			(20,201		)
Intercompany activity	—			(449,803		)	—			449,803			—
Proceeds from dispositions of assets and investments	—			19,254			—			—			19,254
Proceeds from insured loss	—			3,627			—			—			3,627

Net cash (used in) provided by investing activities	—			(587,939		)	—			449,803			(138,136		)

Financing activities:
Net payments to revolver	(264,080		)	—			—			—			(264,080		)
Principal payments on long-term debt	—			(7,292		)	—			—			(7,292		)
Change in zero balance cash accounts	—			27,594			—			—			27,594
Net proceeds from issuance of common stock	4,416			—			—			—			4,416
Payments for taxes related to net share settlement of equity awards	—			(4,103		)	—			—			(4,103		)
Intercompany activity	449,803			—			—			(449,803		)	—

Net cash provided by (used in) financing activities	190,139			16,199			—			(449,803		)	(243,465		)

Cash flows of discontinued operations:
Operating activities of discontinued operations	(178,797		)	116,503			—			—			(62,294		)
Investing activities of discontinued operations	—			189,175			—			—			189,175
Financing activities of discontinued operations	(240,920		)	(4,420		)	—			—			(245,340		)

Net cash provided by (used in) discontinued operations	(419,717		)	301,258			—			—			(118,459		)

(Decrease) increase in cash and cash equivalents	—			(49,761		)	(25,849		)	—			(75,610		)
Cash and cash equivalents, beginning of period	—			213,104			32,306			—			245,410

Cash and cash equivalents, end of period	$	—		$	163,343		$	6,457		$	—		$	169,800

	Rite Aid Corporation Condensed Consolidating Statement of Cash Flows For the Thirty-Nine Weeks Ended November 26, 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	$	(92,312	)	$	259,647		$	5,913	$	—		$	173,248

Investing activities:
Payments for property, plant and equipment	—			(197,723		)	—		—			(197,723		)
Intangible assets acquired	—			(35,986		)	—		—			(35,986		)
Intercompany activity	—			21,964			—		(21,964		)	—
Proceeds from dispositions of assets and investments	—			10,217			—		—			10,217

Net cash used in investing activities	—			(201,528		)	—		(21,964		)	(223,492		)

Financing activities:
Net proceeds from revolver	280,000			—			—		—			280,000
Principal payments on long-term debt	—			(12,728		)	—		—			(12,728		)
Change in zero balance cash accounts	—			30,685			—		—			30,685
Net proceeds from issuance of common stock	4,412			—			—		—			4,412
Excess tax benefit on stock options and restricted stock	—			3,809			—		—			3,809
Payments for taxes related to net share settlement of equity awards	—			(6,254		)	—		—			(6,254		)
Intercompany activity	(21,964		)	—			—		21,964			—

Net cash provided by financing activities	262,448			15,512			—		21,964			299,924

Cash flows of discontinued operations:
Operating activities of discontinued operations	(170,136		)	168,595			—		—			(1,541		)
Investing activities of discontinued operations	—			(148,884		)	—		—			(148,884		)
Financing activities of discontinued operations	—			(3,698		)	—		—			(3,698		)

Net cash provided by (used in) discontinued operations	(170,136		)	16,013			—		—			(154,123		)

Increase in cash and cash equivalents	—			89,644			5,913		—			95,557
Cash and cash equivalents, beginning of period	—			90,569			33,902		—			124,471

Cash and cash equivalents, end of period	$	—		$	180,213		$	39,815	$	—		$	220,028