10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 28, 2020

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission File Number: 1-5742

RITE AID CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	23-1614034 (I.R.S. Employer Identification No.)
30 Hunter Lane, Camp Hill, Pennsylvania (Address of principal executive offices)	17011 (Zip Code)

Registrant’s telephone number, including area code: (717) 761-2633.

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report):

Not Applicable

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	RAD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “Large Accelerated Filer,” “Accelerated Filer,” “Smaller Reporting Company” and “Emerging Growth Company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ◻ Accelerated Filer ⌧ Non-Accelerated Filer ◻ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange act). Yes ☐ No ⌧

The registrant had 55,224,363 shares of its $1.00 par value common stock outstanding as of December 16, 2020.

RITE AID CORPORATION

TABLE OF CONTENTS

	Cautionary Statement Regarding Forward-Looking Statements	3
	PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of November 28, 2020 and February 29, 2020	5
	Condensed Consolidated Statements of Operations for the Thirteen Week Periods Ended November 28, 2020 and November 30, 2019	6
	Condensed Consolidated Statements of Comprehensive Income for the Thirteen Week Periods Ended November 28, 2020 and November 30, 2019	7
	Condensed Consolidated Statements of Operations for the Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019	8
	Condensed Consolidated Statements of Comprehensive Loss for the Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019	9
	Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020	10
	Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen and Thirty-Nine Week Periods Ended November 30, 2019	11
	Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019	12
	Notes to Condensed Consolidated Financial Statements	13
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations	43
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	59
ITEM 4.	Controls and Procedures	60
	PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings	61
ITEM 1A.	Risk Factors	61
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
ITEM 3.	Defaults Upon Senior Securities	61
ITEM 4.	Mine Safety Disclosures	61
ITEM 5.	Other Information	61
ITEM 6.	Exhibits	61

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, as well as our other public filings or public statements, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

● the impact of widespread health developments, including the continued impact of the global coronavirus (“COVID-19”) pandemic, and the responses thereto (such as quarantines, shut downs and other restrictions on travel and commercial, social and other activities), including the reinstitution of more stringent regulations, (including mandatory stay at home orders and the availability and rollout of vaccines to treat the virus), which could materially and adversely affect, among other things, the economic, financial and labor markets in which we operate, access to credit, our front-end and pharmaceutical operations, supply chain, associates and executive and administrative personnel. These widespread health developments, or an increase in the number of cases, could also materially and adversely affect our third-party service providers, including suppliers, vendors and business partners, and customers. The COVID-19 pandemic has resulted in recessionary economic conditions which could negatively impact our sales. Any of these developments could result in a material adverse effect on our business, financial conditions and results of operations;

● our ability to successfully implement RxEvolution, integrate acquisitions, and improve the operating performance of our stores;

● our high level of indebtedness and our ability to satisfy our obligations and the other covenants contained in our debt agreements;

● general competitive, economic, industry, market, political (including healthcare reform) and regulatory conditions, civil unrest (including any resulting store closures, damage, or loss of inventory), as well as other factors specific to the markets in which we operate;

● the impact of private and public third party payors’ continued reduction in prescription drug reimbursement rates and efforts to encourage mail order;

● our ability to achieve the benefits of our efforts to reduce the costs of our generic and other drugs;

● the risk that changes in federal or state laws or regulations, including the Health Care Education Affordability Reconciliation Act, the repeal of all or part of the Patient Protection and the Affordable Care Act (or "ACA"), and decisions of the United States Supreme Court regarding these, and any regulations enacted thereunder may occur;

● the impact of the loss of one or more major third party payor contracts and the risk that providers and state contract changes may occur;

● the risk that we may need to take further impairment charges if our future results do not meet our expectations;

● our ability to refinance our indebtedness on terms favorable to us;

● our ability to sell our Centers of Medicare and Medicaid Services (“CMS”) receivables, in whole or in part, which could negatively impact our leverage ratio if we do not consummate a sale;

● our ability to grow prescription count and realize front-end sales growth;

3

● our ability to achieve cost savings and the other benefits of our organizational restructuring within our anticipated timeframe, if at all;

● decisions to close additional stores and distribution centers or undertake additional refinancing activities, which could result in further charges;

● our ability to manage expenses and our investments in working capital;

● the continued impact of gross margin pressure in the pharmacy benefit management (“PBM”) industries due to continued consolidation and client demand for lower prices while providing enhanced service offerings;

● risks related to compromises of our information or payment systems or unauthorized access to confidential or personal information of our associates or customers;

● our ability to maintain our current pharmacy services business and obtain new pharmacy services business, including maintaining renewals of expiring contracts, avoiding contract termination rights that may permit certain of our clients to terminate their contracts prior to their expiration, early price renegotiations prior to contract expirations and the risk that we cannot meet client guarantees;

● our ability to maintain our current Medicare Part D business and obtain new Medicare Part D business, as a result of the annual Medicare Part D competitive bidding process and meet the financial obligations of our bid;

● the expiration or termination of our Medicare or Medicaid managed care contracts by federal or state governments;

● changes in future exchange or interest rates or credit ratings, changes in tax laws, regulations, rates and policies;

● the risk that we could experience deterioration in our current Star rating with the CMS or incur CMS penalties and/or sanctions;

● the nature, cost and outcome of pending and future litigation and other legal or regulatory proceedings, and governmental investigations;

● other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (the “SEC”).

We undertake no obligation to update or revise the forward-looking statements included in this report, whether as a result of new information, future events or otherwise, after the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” included herein and in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020, which we filed with the SEC on April 27, 2020 (the “Fiscal 2020 10-K"), our Quarterly Report on Form 10-Q for the thirteen weeks ended May 30, 2020, which we filed on July 2, 2020 (the “First Quarter Fiscal 2021 10-Q”), and our Quarterly Report on Form 10-Q for the thirteen weeks ended August 29, 2020, which we filed on October 6, 2020, as well as in “Part I – Item 1A. Risk Factors” of the Fiscal 2020 10-K and in “Part II – Item 1A. Risk Factors” in the First Quarter Fiscal 2021 10-Q. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of the risk factors described herein, in our Fiscal 2020 10-K and in our First Quarter Fiscal 2021 10-Q.

4

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(unaudited)

	November 28,		February 29,
	2020		2020
ASSETS
Current assets:
Cash and cash equivalents	$	50,813	$	218,180
Accounts receivable, net		1,770,691		1,286,785
Inventories, net of LIFO reserve of $509,337 and $539,640		1,971,250		1,921,604
Prepaid expenses and other current assets		116,463		181,794
Current assets held for sale		42,231		92,278
Total current assets		3,951,448		3,700,641
Property, plant and equipment, net		1,045,682		1,215,838
Operating lease right-of-use assets		2,892,445		2,903,256
Goodwill		1,108,136		1,108,136
Other intangibles, net		291,013		359,491
Deferred tax assets		16,680		16,680
Other assets		123,999		148,327
Total assets	$	9,429,403	$	9,452,369
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and lease financing obligations	$	7,097	$	8,840
Accounts payable		1,482,521		1,484,081
Accrued salaries, wages and other current liabilities		676,582		746,318
Current portion of operating lease liabilities		489,867		490,161
Current liabilities held for sale		—		37,063
Total current liabilities		2,656,067		2,766,463
Long-term debt, less current maturities		3,200,577		3,077,268
Long-term operating lease liabilities		2,676,153		2,710,347
Lease financing obligations, less current maturities		17,098		19,326
Other noncurrent liabilities		268,973		204,438
Total liabilities		8,818,868		8,777,842
Commitments and contingencies		—		—
Stockholders’ equity:
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 55,251 and 54,716		55,251		54,716
Additional paid-in capital		5,895,709		5,890,903
Accumulated deficit		(5,294,608)		(5,222,194)
Accumulated other comprehensive loss		(45,817)		(48,898)
Total stockholders’ equity		610,535		674,527
Total liabilities and stockholders’ equity	$	9,429,403	$	9,452,369

See accompanying notes to condensed consolidated financial statements.

5

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Thirteen Week Period Ended
	November 28, 2020		November 30, 2019
Revenues	$	6,117,038	$	5,462,298
Costs and expenses:
Cost of revenues		4,913,939		4,273,323
Selling, general and administrative expenses		1,156,355		1,134,854
Lease termination and impairment charges		7,453		166
Interest expense		50,835		57,856
Gain on debt retirements, net		—		(55,692)
Gain on sale of assets, net		(16,305)		(1,371)
		6,112,277		5,409,136
Income from continuing operations before income taxes		4,761		53,162
Income tax expense		437		876
Net income from continuing operations		4,324		52,286
Net loss from discontinued operations, net of tax		—		(801)
Net income	$	4,324	$	51,485
Computation of income attributable to common stockholders:
Income from continuing operations attributable to common stockholders—basic and diluted	$	4,324	$	52,286
Loss from discontinued operations attributable to common stockholders—basic and diluted		—		(801)
Income attributable to common stockholders—basic and diluted	$	4,324	$	51,485
Basic income per share:
Continuing operations	$	0.08	$	0.98
Discontinued operations	$	—	$	(0.01)
Net basic income per share	$	0.08	$	0.97
Diluted income per share:
Continuing operations	$	0.08	$	0.98
Discontinued operations	$	—	$	(0.02)
Net diluted income per share	$	0.08	$	0.96

See accompanying notes to condensed consolidated financial statements.

6

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(unaudited)

	Thirteen Week Period Ended
	November 28, 2020		November 30, 2019
Net income	$	4,324	$	51,485
Other comprehensive income:
Defined benefit pension plans:
Amortization of net actuarial losses included in net periodic pension cost, net of $0 and $0 income tax expense		911		415
Change in fair value of interest rate cap		116		86
Total other comprehensive income		1,027		501
Comprehensive income	$	5,351	$	51,986

See accompanying notes to condensed consolidated financial statements.

7

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Revenues	$	18,126,384	$	16,201,151
Costs and expenses:
Cost of revenues		14,564,621		12,741,014
Selling, general and administrative expenses		3,469,644		3,433,036
Lease termination and impairment charges		22,734		2,115
Intangible asset impairment charges		29,852		—
Interest expense		151,389		176,228
Gain on debt modifications and retirements, net		(5,274)		(55,692)
Gain on sale of assets, net		(17,473)		(5,670)
		18,215,493		16,291,031
Loss from continuing operations before income taxes		(89,109)		(89,880)
Income tax (benefit) expense		(7,534)		35,878
Net loss from continuing operations		(81,575)		(125,758)
Net income (loss) from discontinued operations, net of tax		9,161		(1,695)
Net loss	$	(72,414)	$	(127,453)
Computation of loss attributable to common stockholders:
Loss from continuing operations attributable to common stockholders—basic and diluted	$	(81,575)	$	(125,758)
Income (loss) from discontinued operations attributable to common stockholders—basic and diluted		9,161		(1,695)
Loss attributable to common stockholders—basic and diluted	$	(72,414)	$	(127,453)
Basic and diluted loss per share:
Continuing operations	$	(1.52)	$	(2.37)
Discontinued operations	$	0.17	$	(0.03)
Net basic and diluted loss per share	$	(1.35)	$	(2.40)

See accompanying notes to condensed consolidated financial statements.

8

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Net loss	$	(72,414)	$	(127,453)
Other comprehensive income:
Defined benefit pension plans:
Amortization of net actuarial losses included in net periodic pension cost, net of $0 and $0 income tax expense		2,734		1,245
Change in fair value of interest rate cap		347		(587)
Total other comprehensive income		3,081		658
Comprehensive loss	$	(69,333)	$	(126,795)

See accompanying notes to condensed consolidated financial statements.

9

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share amounts)

(unaudited)

								Accumulated
				Additional				Other
	Common Stock			Paid-In		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
BALANCE FEBRUARY 29, 2020	54,716	$	54,716	$	5,890,903	$	(5,222,194)	$	(48,898)	$	674,527
Net loss							(63,541)				(63,541)
Other comprehensive loss:
Changes in Defined Benefit Plans, net of $0 tax expense									911		911
Change in fair value of interest rate cap									116		116
Comprehensive loss											(62,514)
Issuance of restricted stock	19		19		(19)						—
Exchange of restricted shares for taxes	(7)		(7)		(92)						(99)
Cancellation of restricted stock	(53)		(53)		53						—
Amortization of restricted stock balance					1,725						1,725
Stock-based compensation expense					150						150
BALANCE MAY 30, 2020	54,675	$	54,675	$	5,892,720	$	(5,285,735)	$	(47,871)	$	613,789
Net loss							(13,197)				(13,197)
Other comprehensive loss:
Changes in Defined Benefit Plans, net of $0 tax expense									912		912
Change in fair value of interest rate cap									115		115
Comprehensive loss											(12,170)
Issuance of restricted stock	717		717		(717)						—
Exchange of restricted shares for taxes	(131)		(131)		(1,872)						(2,003)
Cancellation of restricted stock	(37)		(37)		37						—
Amortization of restricted stock balance					3,272						3,272
Stock-based compensation expense					150						150
BALANCE AUGUST 29, 2020	55,224		55,224		5,893,590		(5,298,932)		(46,844)		603,038
Net income							4,324				4,324
Other comprehensive income:
Changes in Defined Benefit Plans, net of $0 tax expense									911		911
Change in fair value of interest rate cap									116		116
Comprehensive income											5,351
Issuance of restricted stock	30		30		(30)						—
Exchange of restricted shares for taxes	(6)		(6)		(58)						(64)
Cancellation of restricted stock	3		3		(3)						—
Amortization of restricted stock balance					2,060						2,060
Stock-based compensation expense	—		—		150						150
BALANCE NOVEMBER 28, 2020	55,251	$	55,251	$	5,895,709	$	(5,294,608)	$	(45,817)	$	610,535

See accompanying notes to condensed consolidated financial statements.

10

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share amounts)

(unaudited)

								Accumulated
				Additional				Other
	Common Stock			Paid-In		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
BALANCE MARCH 2, 2019	54,016	$	54,016	$	5,876,977	$	(4,713,244)	$	(31,059)	$	1,186,690
Net loss							(99,659)				(99,659)
Other comprehensive loss:
Changes in Defined Benefit Plans, net of $0 tax expense									415		415
Change in fair value of interest rate cap									(656)		(656)
Comprehensive loss											(99,900)
Adoption of ASU 2016-02							(56,776)				(56,776)
Exchange of restricted shares for taxes	(5)		(5)		(190)						(195)
Cancellation of restricted stock	(178)		(178)		178						—
Amortization of restricted stock balance					5,016						5,016
Stock-based compensation expense					382						382
BALANCE JUNE 1, 2019	53,833	$	53,833	$	5,882,363	$	(4,869,679)	$	(31,300)	$	1,035,217
Net loss							(79,279)				(79,279)
Other comprehensive loss:
Changes in Defined Benefit Plans, net of $0 tax expense									415		415
Change in fair value of interest rate cap									(17)		(17)
Comprehensive loss											(78,881)
Exchange of restricted shares for taxes	(134)		(134)		(656)						(790)
Issuance of restricted stock	1,257		1,257		(1,257)						—
Cancellation of restricted stock	(60)		(60)		60						—
Amortization of restricted stock balance					5,003						5,003
Stock-based compensation expense					37						37
BALANCE AUGUST 31, 2019	54,896		54,896		5,885,550		(4,948,958)		(30,902)		960,586
Net income							51,485				51,485
Other comprehensive income:
Changes in Defined Benefit Plans, net of $0 tax expense									415		415
Change in fair value of interest rate cap									86		86
Comprehensive income											51,986
Exchange of restricted shares for taxes	(66)		(66)		(521)						(587)
Issuance of restricted stock	114		114		(114)						—
Cancellation of restricted stock	(82)		(82)		82						—
Amortization of restricted stock balance					3,736						3,736
Stock-based compensation expense					137						137
BALANCE NOVEMBER 30, 2019	54,862	$	54,862	$	5,888,870	$	(4,897,473)	$	(30,401)	$	1,015,858

See accompanying notes to condensed consolidated financial statements.

11

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Operating activities:
Net loss	$	(72,414)	$	(127,453)
Net income (loss) from discontinued operations, net of tax		9,161		(1,695)
Net loss from continuing operations	$	(81,575)	$	(125,758)
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations:
Depreciation and amortization		249,556		248,977
Lease termination and impairment charges		22,734		2,115
Intangible asset impairment charges		29,852		—
LIFO (credit) charge		(30,303)		7,553
Gain on sale of assets, net		(17,473)		(5,670)
Stock-based compensation expense		8,677		13,598
Gain on debt modifications and retirements, net		(5,274)		(55,692)
Changes in deferred taxes		—		26,979
Changes in operating assets and liabilities:
Accounts receivable		(507,778)		99,498
Inventories		(19,532)		(92,657)
Accounts payable		1,460		(38,245)
Operating lease right-of-use assets and operating lease liabilities		(25,319)		22,803
Other assets		75,265		(42,715)
Other liabilities		45,867		32,889
Net cash (used in) provided by operating activities of continuing operations		(253,843)		93,675
Investing activities:
Payments for property, plant and equipment		(127,389)		(129,135)
Intangible assets acquired		(28,703)		(33,435)
Proceeds from insured loss		12,500		—
Proceeds from dispositions of assets and investments		9,086		55,971
Proceeds from sale-leaseback transactions		89,012		—
Net cash used in investing activities of continuing operations		(45,494)		(106,599)
Financing activities:
Proceeds from issuance of long-term debt		849,918		—
Net proceeds from revolver		341,000		260,000
Principal payments on long-term debt		(1,057,376)		(104,702)
Change in zero balance cash accounts		5,545		(11,749)
Payments for taxes related to net share settlement of equity awards		(2,165)		(1,573)
Financing fees paid for early debt redemption		(2,399)		(518)
Deferred financing costs paid		(14,674)		(315)
Net cash provided by financing activities of continuing operations		119,849		141,143
Cash flows from discontinued operations:
Operating activities of discontinued operations		(82,189)		(7,148)
Investing activities of discontinued operations		94,310		24,074
Financing activities of discontinued operations		—		—
Net cash provided by discontinued operations		12,121		16,926
(Decrease) increase in cash and cash equivalents		(167,367)		145,145
Cash and cash equivalents, beginning of period		218,180		144,353
Cash and cash equivalents, end of period	$	50,813	$	289,498

See accompanying notes to condensed consolidated financial statements.

12

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

1. Basis of Presentation and Significant Accounting Policies

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 and thirty-nine week periods ended November 28, 2020 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 2020 10-K.

Revenue Recognition

The following table disaggregates the Company’s revenue by major source in each segment for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
In thousands	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Retail Pharmacy segment:
Pharmacy sales	$	2,837,137	$	2,623,832	$	8,123,143	$	7,761,052
Front-end sales		1,245,340		1,250,946		4,033,739		3,767,796
Other revenue		27,115		35,168		93,893		94,010
Total Retail Pharmacy segment		4,109,592		3,909,946		12,250,775		11,622,858
Pharmacy Services segment		2,084,402		1,613,109		6,100,026		4,758,470
Intersegment elimination		(76,956)		(60,757)		(224,417)		(180,177)
Total revenue	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151

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.

Effective January 1, 2020, members reach specific wellness+ tiers based on points accumulated during the six calendar month periods between January 1^st and June 30^th, and July 1^st through December 31^st, which entitles such customers to certain future discounts and other benefits upon reaching that tier. For example, any customer that reaches 500 points during the six calendar month period between January 1^st and June 30^th 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 that six calendar month period and for the following six calendar months. There is also a similar “Silver” level with a lower threshold and benefit level. Prior to January 1, 2020, the wellness+ tiers were based on points accumulated for a full calendar year, and entitled such customers to wellness+ benefits for the remainder of that calendar year and also the next calendar year.

13

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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. For the thirteen week period ended November 28, 2020, the Company recognized $18,202 of deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $5,601 as of November 28, 2020, which is included in other current liabilities. The Retail Pharmacy segment had accrued contract liabilities of $52,668 as of February 29, 2020, which is included in other current liabilities.

The existing wellness+ program was terminated as of July 1, 2020, with benefits earned as of that date available to be used through the end of calendar 2020. In December 2020, the Company granted a temporary extension of benefits to previous members that were eligible for a discount as of December 31, 2020 such that those prior members will be eligible to continue to receive that discount on purchases made through June 30, 2021 with no additional purchase requirement. New and existing customers who were not already eligible for “Gold” benefits will still have the opportunity to earn additional discounts on purchases made through June 30, 2021.

Selling, General and Administrative Expenses

During the second quarter of fiscal 2021, the Company changed its compensated absence policy for certain associates.  Under the revised policy, benefits are earned and used within the same year, whereas previously benefits earned in one year could be used within a succeeding year.  The impact of this change resulted in a reduction in the Company’s associate paid time off “PTO” accrual of approximately $15,026 and $39,800 during the thirteen and thirty-nine weeks ended November 28, 2020, respectively.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which is intended to provide entities with additional guidance to determine which software implementation costs to capitalize and which costs to expense. The ASU will allow entities to capitalize costs for implementation activities during the application development stage. ASU No. 2018-15 is effective for fiscal years and interim periods within those years beginning after December 15, 2019 (fiscal 2021). Early adoption of ASU 2018-15 is permitted. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which adds to U.S. GAAP an impairment model (known as the current expected credit loss ("CECL") model), that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity will recognize, as an allowance, its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 impacts non-banks as most non-banks have financial instruments or other assets (e.g., trade, contract and lease receivables, financial guarantees, loans and loan commitments and held-to-maturity debt securities). The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

14

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the recognition of deferred tax liabilities and the methodology for calculating income taxes in the interim period. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 (fiscal 2022). The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement benefits (Topic 715-20). This ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

2. Restructuring

Beginning in fiscal 2019, the Company initiated a series of restructuring plans designed to reorganize its executive management team, reduce managerial layers, and consolidate roles. In March 2020, the Company announced the details of its RxEvolution strategy, which includes building tools to work with regional health plans to improve patient health outcomes, rationalizing SKU’s in its front-end offering to free up working capital and update its merchandise assortment, assessing its pricing and promotional strategy, rebranding its retail pharmacy and pharmacy services business, launching its Store of the Future format and further reducing SG&A and headcount, including integrating certain back office functions in the Pharmacy Services segment both within the segment and across Rite Aid.

For the thirteen week period ended November 28, 2020, the Company incurred total restructuring-related costs of $12,175, 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 ongoing reorganization efforts (a)	$	738	$	421	$	1,159
Non-executive retention costs associated with the March 2019 reorganization (b)		—		—		—
Professional and other fees relating to restructuring activities (c)		10,867		149		11,016
Total restructuring-related costs	$	11,605	$	570	$	12,175

15

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

For the thirteen week period ended November 30, 2019, the Company incurred total restructuring-related costs of $25,275, 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 ongoing reorganization efforts (a)	$	10,866	$	6,454	$	17,320
Non-executive retention costs associated with the March 2019 reorganization (b)		862		406		1,268
Professional and other fees relating to restructuring activities (c)		6,687		—		6,687
Total restructuring-related costs	$	18,415	$	6,860	$	25,275

For the thirty-nine week period ended November 28, 2020, the Company incurred total restructuring-related costs of $71,096, of which $45,333 is included as a component of SG&A and $25,763 is included as a component of cost of revenues. These costs are as follows:

	Retail Pharmacy		Pharmacy
	segment		Services segment		Total
Restructuring-related costs
Severance and related costs associated with ongoing reorganization efforts (a)	$	13,346	$	3,212	$	16,558
Non-executive retention costs associated with the March 2019 reorganization (b)		1,136		(124)		1,012
Professional and other fees relating to restructuring activities (c)		27,510		253		27,763
SKU optimization charges (d)		25,763		—		25,763
Total restructuring-related costs	$	67,755	$	3,341	$	71,096

In addition, during the thirteen week period ended May 30, 2020, the Company incurred intangible asset impairment charges of $29,852 in connection with its rebranding initiatives as described in Note 10, Goodwill and Other Intangible Assets.

16

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

For the thirty-nine week period ended November 30, 2019, the Company incurred total restructuring-related costs of $93,770, 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 ongoing reorganization efforts (a)	$	44,008	$	8,769	$	52,777
Non-executive retention costs associated with the March 2019 reorganization (b)		8,191		3,828		12,019
Professional and other fees relating to restructuring activities (c)		26,652		2,322		28,974
Total restructuring-related costs	$	78,851	$	14,919	$	93,770

A summary of activity for the thirty-nine week period ended November 28, 2020 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 February 29, 2020	$	36,228	$	6,432	$	2,394	$	45,054
Additions charged to expense		4,811		629		4,532		9,972
Cash payments		(13,055)		—		(5,046)		(18,101)
Balance at May 30, 2020	$	27,984	$	7,061	$	1,880	$	36,925
Additions charged to expense		10,588		383		12,215		23,186
Cash payments		(9,077)		(7,444)		(12,554)		(29,075)
Balance at August 29, 2020	$	29,495	$	—	$	1,541	$	31,036
Additions charged to expense		1,159		—		11,016		12,175
Cash payments		(11,770)		—		(7,473)		(19,243)
Balance at November 28, 2020	$	18,884	$	—	$	5,084	$	23,968

(a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts.

(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 initiatives associated with restructuring activities.

(d) – Inventory reserve on product lines the Company is exiting and will no longer carry as part of its rebranding initiative.

The Company anticipates incurring approximately $80,000 during fiscal 2021 in connection with its continued restructuring activities.

17

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

3. Asset Sale to WBA

On September 18, 2017, the Company entered into the Amended and Restated Asset Purchase Agreement with Walgreens Boots Alliance, Inc. (“WBA”) and Walgreen Co., an Illinois corporation and 100% owned subsidiary of WBA (“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 (the “Original Asset Purchase Agreement”). Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer purchased from the Company 1,932 stores (the “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 (the “Asset Sale” or “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 received cash proceeds of $4,156,686.

During fiscal 2019, 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. During fiscal 2020, the Company completed the sale of the second distribution center and related assets to WBA for proceeds of $62,774. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $19,268, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended February 29, 2020. During the first quarter of fiscal 2021, the Company completed the sale of the final distribution center and related assets to WBA for proceeds of $94,289. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $12,690, which was included in the results of operations and cash flows of discontinued operations during the thirteen week period ended May 30, 2020. The transfer of the final distribution center and related assets constitutes the final closing under the Amended and Restated Asset Purchase Agreement.

The Company had agreed to provide transition services to Buyer for up to three years after the initial closing of the Sale. Under the terms of the Transition Services Agreement (“TSA”), the Company provided 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 had been extended to October 17, 2020, unless earlier terminated. In connection with these services, the Company purchased the related inventory and incurred cash payments for the selling, general and administrative activities, which, the Company billed on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the thirteen and thirty-nine week periods ended November 28, 2020 were $0 and $35,167, respectively. Total billings for these items during the thirteen and thirty-nine week periods ended November 30, 2019 were $619,680 and $2,726,436, respectively, of which $105,431 is included in Accounts receivable, net. The Company recorded WBA TSA fees of $0 and $1,467 during the thirteen and thirty-nine week periods ended November 28, 2020, respectively, which are reflected as a reduction to selling, general and administrative expenses. The Company recorded WBA TSA fees of $7,870 and $33,403 during the thirteen and thirty-nine week periods ended November 30, 2019, respectively, which are reflected as a reduction to selling, general and administrative expenses. In conjunction with the transfer of the final distribution center during the quarter ended May 30, 2020, the Company has substantially completed its obligations under the TSA. On July 14, 2020, the Company entered into a letter agreement with WBA to terminate the services under the TSA, other than certain specified services relating to real estate, accounting, tax, and accounts receivable systems that continued until October 17, 2020 and certain specified services relating to human resources to be performed after October 17, 2020.

18

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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 November 28, 2020 and February 29, 2020, 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 to WBA, 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:

	November 28,		February 29,
	2020		2020
Inventories	$	—	$	13,719
Property and equipment		—		43,576
Operating lease right-of-use asset		—		34,983
Current assets held for sale	$	—	$	92,278
Current portion of operating lease liabilities	$	—	$	2,002
Long-term operating lease liabilities		—		35,061
Current liabilities held for sale	$	—	$	37,063

19

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Revenues	$	—	$	(13)	$	174	$	(136)
Costs and expenses:
Cost of revenues(a)		—		374		8		838
Selling, general and administrative expenses(a)		—		306		871		1,170
Loss (gain) on sale of assets, net		—		89		(14,149)		(433)
		—		769		(13,270)		1,575
(Loss) income from discontinued operations before income taxes		—		(782)		13,444		(1,711)
Income tax expense (benefit)		—		19		4,283		(16)
Net (loss) income from discontinued operations, net of tax	$	—	$	(801)	$	9,161	$	(1,695)

(a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations.

The operating results reflected above do not fully represent the Disposal Group’s historical operating results, as the results reported within net income (loss) from discontinued operations only include expenses that are directly attributable to the Disposal Group.

4. Income (Loss) Per Share

Basic income (loss) per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company, subject to anti-dilution limitations.

20

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Basic and diluted income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Net (loss) income from discontinued operations		—		(801)		9,161		(1,695)
Income (loss) attributable to common stockholders— basic and diluted	$	4,324	$	51,485	$	(72,414)	$	(127,453)
Denominator:
Basic weighted average shares		53,744		53,310		53,600		53,159
Outstanding options and restricted shares, net		335		274		—		—
Diluted weighted average shares		54,079		53,584		53,600		53,159
Basic income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.01)		0.17		(0.03)
Net basic income (loss) per share	$	0.08	$	0.97	$	(1.35)	$	(2.40)
Diluted income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.02)		0.17		(0.03)
Net diluted income (loss) per share	$	0.08	$	0.96	$	(1.35)	$	(2.40)

Due to their antidilutive effect, 171 and 820 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. Due to their antidilutive effect, 782 and 1,431 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. Also, excluded from the computation of diluted income (loss) per share for the thirteen week periods ended November 28, 2020 and November 30, 2019 are restricted shares of 0, which are included in shares outstanding. Excluded from the computation of diluted income (loss) per share for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 are restricted shares of 1,499 and 1,481, respectively, which are included in shares outstanding.

21

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

5. Lease Termination and Impairment Charges

Lease termination and impairment charges consist of amounts as follows:

	Thirteen Week Period				Thirty-Nine Week Period
	Ended				Ended
	November 28,			November 30,	November 28,		November 30,
	2020		2019		2020		2019
Impairment charges	$	3,797	$	121	$	15,230	$	1,533
Lease termination charges		—		—		—		—
Facility exit charges		3,656		45		7,504		582
	$	7,453	$	166	$	22,734	$	2,115

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 thirty-nine week period ended November 28, 2020, long-lived assets from continuing operations with a carrying value of $20,485, were written down to their fair value of $5,255, resulting in an impairment charge of $15,230 of which $3,797 relates to the thirteen week period ended November 28, 2020. Of the $15,230, $4,640 relates to a terminated software

22

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

project and the replacement of existing software, $4,995 relates to the closure of the remaining RediClinic operations and $5,595 relates to store and corporate assets. During the thirty-nine week period ended November 30, 2019, long-lived assets from continuing operations with a carrying value of $1,533, primarily store assets, were written down to their fair value of $0, resulting in an impairment charge of $1,533 of which $121 relates to the thirteen week period ended November 30, 2019. 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 November 28, 2020 and November 30, 2019:

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 28, 2020
Long-lived assets held for use	$	—	$	—	$	1,071	$	1,071	$	(12,635)
Long-lived assets held for sale	$	—	$	4,184	$	—	$	4,184	$	(2,595)
Total	$	—	$	4,184	$	1,071	$	5,255	$	(15,230)

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 30, 2019
Long-lived assets held for use	$	—	$	—	$	—	$	—	$	(1,533)
Long-lived assets held for sale	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	(1,533)

The above assets reflected in the caption Long-lived assets held for sale are separate and apart from the Assets to be Sold and due 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.

23

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

The following table reflects changes in the Company’s closed store liability relating to closed store and distribution center charges for new closures, changes in assumptions and interest accretion:

	Thirteen Week Period				Thirty-Nine Week Period
	Ended				Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Balance—beginning of period	$	2,605	$	6,341	$	2,253	$	124,046
Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset		—		—		—		(112,288)
Provision for present value of executory costs for closed stores		664		—		664		—
Changes in assumptions about future sublease income		(496)		—		—		—
Interest accretion		21		—		21		—
Cash payments, net of sublease income		(15)		(3,132)		(159)		(8,549)
Balance—end of period	$	2,779	$	3,209	$	2,779	$	3,209

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.

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 November 28, 2020 and February 29, 2020, the Company has $7,003 and $7,022, respectively, of investments carried at amortized cost as these investments are being held to maturity, which are included as a component of other assets. The Company believes the carrying value of these investments approximates their fair value.

The fair value for LIBOR-based borrowings under the Company’s senior secured credit facility 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 $3,200,577 and $3,212,995, respectively, as of November 28, 2020. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $3,077,268 and $3,021,385, respectively, as of February 29, 2020.

7. Income Taxes

The Company recorded an income tax expense from continuing operations of $437 and $876 for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. The Company recorded an income tax

24

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

benefit from continuing operations of $7,534 and an income tax expense from continuing operations of $35,878 for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. The effective tax rate for the thirteen week periods ended November 28, 2020 and November 30, 2019 was 9.2% and 1.6%, respectively. The effective tax rate for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 was 8.5% and (39.9)%, respectively. The effective tax rate for the thirteen and thirty-nine week periods ended November 28, 2020 was net of an adjustment of (61.0)% and (5.2)%, respectively, to increase the valuation allowance against deferred tax assets. The effective tax rate for the thirteen and thirty-nine week periods ended November 30, 2019 was net of an adjustment of (31.8)% and (61.0)%, respectively, to increase the valuation allowance against deferred tax assets.

The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

The Company believes that it is reasonably possible that a decrease of up to $13,210 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 $1,676,903 and $1,673,119, 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 November 28, 2020 and February 29, 2020, respectively.

8. Medicare Part D

The Company offers Medicare Part D benefits through EIC, which has contracted with CMS to be a Prescription Drug Plan (“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 $24,074 as of September 30, 2020. EIC was in excess of the minimum required amounts in these states as of November 28, 2020.

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,

25

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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.

On February 19, 2020, the Company entered into a receivable purchase agreement (the “2019 Receivable Purchase Agreement”) with Bank of America, N.A. (the “Purchaser”).

Pursuant to the terms and conditions set forth in the 2019 Receivable Purchase Agreement, the Company sold $501,422 of its calendar 2019 CMS receivable for $484,547, of which $449,949 was received on February 19, 2020. As of November 28, 2020, $3,293, which is included in accounts receivable, net, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $16,875, which was included as a component of loss on sale of assets, net in the fourth quarter of fiscal 2020.

On February 19, 2020, concurrent with the 2019 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “2019 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the 2019 Indemnity Agreement. Based on its evaluation of the 2019 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the 2019 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the 2019 Indemnity Agreement.

On November 12, 2020, the Company entered into a receivable purchase agreement (the “November 2020 Receivable Purchase Agreement”) with Purchaser, which was on terms similar to the 2019 Receivable Purchase Agreement.

Pursuant to the terms and conditions set forth in the November 2020 Receivable Purchase Agreement, the Company sold $464,019, a portion of its calendar 2020 CMS receivable, for $444,812, of which $412,795 was received on November 12, 2020. The remaining $32,017, which is included in accounts receivable, net as of November 28, 2020, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $19,207, which is included as a component of gain on sale of assets, net.

On November 12, 2020, concurrent with the November 2020 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “November 2020 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the November 2020 Indemnity Agreement. Based on its evaluation of the November 2020 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the November 2020 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the November 2020 Indemnity Agreement.

As of November 28, 2020, accounts receivable, net included $243,001 due from CMS. As of February 29, 2020, accrued salaries, wages and other current liabilities included $14,083 of amounts due to CMS.

26

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

9. Manufacturer Rebates Receivables

The Pharmacy Services Segment has manufacturer rebates receivables of $656,784 and $530,451 included in Accounts receivable, net, as of November 28, 2020 and February 29, 2020, respectively.

10. Goodwill and Other Intangible Assets

There was no goodwill impairment charge for the thirteen and thirty-nine week periods ended November 28, 2020. At November 28, 2020 and February 29, 2020, 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 November 28, 2020 and February 29, 2020.

	November 28, 2020								February 29, 2020
							Remaining								Remaining
							Weighted								Weighted
	Gross						Average		Gross						Average
	Carrying		Accumulated				Amortization		Carrying		Accumulated				Amortization
	Amount		Amortization		Net		Period		Amount		Amortization		Net		Period
Non-compete agreements and other(a)	$	194,195	$	(170,867)	$	23,328	3	years	$	186,183	$	(163,575)	$	22,608	3	years
Prescription files		968,617		(892,646)		75,971	3	years		950,887		(867,430)		83,457	3	years
Customer relationships(a)		388,000		(254,494)		133,506	11	years		388,000		(231,015)		156,985	12	years
CMS license		57,500		(12,497)		45,003	20	years		57,500		(10,772)		46,728	21	years
Claims adjudication and other developed software		58,985		(45,780)		13,205	2	years		58,985		(39,459)		19,526	3	years
Trademarks		—		—		—	0	years		20,100		(9,413)		10,687	6	years
Backlog		11,500		(11,500)		—	0	years		11,500		(11,500)		—	0	years
Total finite	$	1,678,797	$	(1,387,784)		291,013			$	1,673,155	$	(1,333,164)	$	339,991
Trademarks		—		—		—	Indefinite			19,500		—		19,500	Indefinite
Total	$	1,678,797	$	(1,387,784)	$	291,013			$	1,692,655	$	(1,333,164)	$	359,491

(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.

In connection with the RxEvolution initiatives previously announced on March 16, 2020, the Company rebranded its EnvisionRxOptions and MedTrak subsidiaries to its new brand name, Elixir. These trademarks qualify as Level 3 within the fair value hierarchy. Upon the implementation of the rebranding initiatives during the first quarter of fiscal 2021, the Company has determined that the carrying value exceeded the fair value and consequently the Company incurred an impairment charge of $29,852 for these trademarks, which is included within intangible asset impairment charges within the condensed consolidated statement of operations.

Amortization expense for these intangible assets and liabilities was $21,236 and $68,351 for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. Amortization expense for these intangible assets and liabilities was $24,920 and $79,176 for the thirteen and thirty-nine week periods ended November 30, 2019, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2021—$86,400; 2022—$67,155; 2023—$51,885; 2024—$38,220 and 2025—$26,938.

27

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

11. Indebtedness and Credit Agreements

Following is a summary of indebtedness and lease financing obligations at November 28, 2020 and February 29, 2020:

	November 28,		February 29,
	2020		2020
Secured Debt:
Senior secured revolving credit facility due December 2023 ($991,000 and $650,000 face value less unamortized debt issuance costs of $15,369 and $19,167)	$	975,631	$	630,833
FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $2,434 and $3,046)		447,566		446,954
		1,423,197		1,077,787
Second Lien Secured Debt:
7.5% senior notes due July 2025 ($600,000 face value less unamortized debt issuance costs of $9,388 and $10,927)		590,612		589,073
8.0% senior notes due November 2026 ($849,918 and $0 face value less unamortized debt issuance costs of $18,914 and $0)		831,004		—
		1,421,616		589,073
Guaranteed Unsecured Debt:
6.125% senior notes due April 2023 ($90,808 and $1,153,490 face value less unamortized debt issuance costs of $502 and $8,430)		90,306		1,145,060
		90,306		1,145,060
Unguaranteed Unsecured Debt:
7.70% notes due February 2027 ($237,386 face value less unamortized debt issuance costs of $809 and $908)		236,577		236,478
6.875% fixed-rate senior notes due December 2028 ($29,001 face value less unamortized debt issuance costs of $120 and $131)		28,881		28,870
		265,458		265,348
Lease financing obligations		24,195		28,166
Total debt		3,224,772		3,105,434
Current maturities of long-term debt and lease financing obligations		(7,097)		(8,840)
Long-term debt and lease financing obligations, less current maturities	$	3,217,675	$	3,096,594

Credit Facility

On December 20, 2018, the Company entered into a senior secured credit agreement (as amended by the First Amendment to Credit Agreement, dated as of January 6, 2020, the “Credit Agreement”), consisting of a $2,700,000 senior secured asset-based revolving credit facility (“Senior Secured Revolving Credit Facility”) and a $450,000 “first-in, last out” senior secured term loan facility (“Senior Secured Term Loan,” and together with the Senior Secured Revolving Credit Facility, collectively, the “Existing Facilities”). The Company used proceeds from the Existing Facilities to refinance its prior $2,700,000 existing credit agreement (the “Old Facility”). The Existing Facilities extend the Company’s debt maturity profile and provide additional liquidity. Borrowings under the Senior Secured Revolving

28

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

Credit Facility bear interest at a rate per annum between LIBOR plus 1.25% and LIBOR plus 1.75% based upon the Average ABL Availability (as defined in the Credit Agreement). Borrowings under the Senior Secured Term Loan bear interest at a rate per annum of LIBOR plus 3.00%. The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the commitments under the Senior Secured Revolving Credit Facility, depending on Average ABL Availability. The Existing Facilities mature on December 20, 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 (the “6.125% Notes”) prior to such date. The Company has refinanced the majority of its 6.125% Notes and intends to refinance or repay the remaining balance prior to the early maturity becoming effective.

The Company’s borrowing capacity under the Senior Secured Revolving Credit Facility is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At November 28, 2020, the Company had $1,441,000 of borrowings outstanding under the Existing Facilities and had letters of credit outstanding against the Senior Secured Revolving Credit Facility of $107,739 which resulted in additional borrowing capacity under the Senior Secured Revolving Credit Facility of $1,601,261. If at any time the total credit exposure outstanding under the Existing Facilities and the principal amount of our other senior obligations exceed the borrowing base, the Company will be required to make certain other mandatory prepayments to eliminate such shortfall.

The Credit Agreement restricts the Company and all of its subsidiaries that guarantee its obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes (collectively, the “Subsidiary Guarantors”) from accumulating cash on hand in excess of $200,000 at any time when revolving loans are outstanding (not including cash located in store and lockbox deposit accounts and cash necessary to cover current liabilities). The Credit Agreement also states that if at any time (other than following the exercise of remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority debt) either (i) an event of default exists under the Existing Facilities or (ii) the sum of the Company’s borrowing capacity under the Senior Secured Revolving Credit Facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $275.0 million for three consecutive business days or less than or equal to $200.0 million on any day (a “cash sweep period”), the funds in the Company’s deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the Existing Facilities, and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of the Existing Facilities.

With the exception of EIC, substantially all of Rite Aid Corporation’s 100% owned subsidiaries guarantee the obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes. The Company’s obligations under the Existing Facilities and the Subsidiary Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivable, inventory, prescription files (including eligible script lists), intellectual property (prior to the repayment of the Senior Secured Term Loan) and certain other assets arising therefrom or related thereto (including substantially all of their deposit accounts, collectively, the “ABL priority collateral”) and (ii) a second-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and all other assets that do not constitute ABL priority collateral, in each case, subject to customary exceptions and limitations. The subsidiary guarantees related to the Company’s Existing Facilities, the secured guaranteed notes 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

29

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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 Existing Facilities and applicable notes, are minor.

The Credit Agreement allows the Company to have outstanding, at any time, up to an aggregate principal amount of $1,500,000 in secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Existing Facilities and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest maturity date of any Term Loan or Other Revolving Commitment (each as defined in the Credit Agreement) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date). Subject to the limitations described in clauses (i) and (ii) of the immediately preceding sentence, the Credit Agreement additionally allows the Company to issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a Financial Covenant Effectiveness Period (as defined in the Credit Agreement) 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 Credit Agreement also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Credit Agreement also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Existing Facilities are not in default and the Company maintains availability under its revolver of more than $365,000.

The Credit Agreement has 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 Senior Secured Revolving Credit Facility is less than $200,000 or (ii) on the third consecutive business day on which availability under the Senior Secured Revolving Credit Facility is less than $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolver is equal to or greater than $250,000. As of November 28, 2020, the Company’s fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the Credit Agreement’s financial covenant. The Credit Agreement also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, the making of investments, sale of assets, mergers and acquisitions and the granting of liens.

The Credit Agreement provides for customary events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if the Company fails to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of such debt to accelerate the maturity or require the repayment, repurchase, redemption or defeasance of such debt.

Fiscal 2020 and 2021 Transactions

On October 11, 2019, the Company completed a privately negotiated purchase from a noteholder and its affiliated funds of $84,097 aggregate principal amount of the 7.70% Notes due 2027 (the “7.70% Notes”) and 6.875% fixed-rate Senior Notes due 2028 (the “6.875% Notes”) for $51,300. In connection therewith, the Company recorded a gain on debt retirement of $32,416, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

30

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

On October 15, 2019, the Company commenced an offer to purchase up to $100,000 of its outstanding 7.70% Notes and its 6.875% Notes. In November 2019, the Company accepted for payment $18,075 aggregate principal amount of the 7.70% Notes and $39,441 aggregate principal amount of the 6.875% Notes for $38,392. In connection therewith, the Company recorded a gain on debt retirement of $18,510, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

During November 2019, the Company made additional purchases of $15,000 aggregate principal amount of the 7.70% Notes for $10,012. In connection therewith, the Company recorded a gain on debt retirement of $4,766, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

On January 6, 2020, the Company commenced an offer to exchange up to $600,000 aggregate principal amount of the outstanding 6.125% Notes for newly issued 7.500% Senior Secured Notes due 2025 (the “7.500% Notes”). On February 5, 2020, the Company announced that the exchange offer was oversubscribed and accepted for payment $600,000 aggregate principal amount of the 6.125% Notes in exchange for newly issued 7.500% Notes. The Company accounted for the exchange as a debt modification and accordingly did not record a loss on debt retirement.

The 7.500% Notes mature on July 1, 2025, and are guaranteed on a senior secured basis by the same Subsidiary Guarantors that guarantee the Existing Facilities and the 6.125% Notes. The 7.500% Notes and the obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and other collateral to the extent it does not constitute ABL priority collateral (as defined below), and (ii) a second-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivables, payment intangibles, inventory, prescription files (including eligible script lists) and, intellectual property (prior to the repayment of the Senior Secured Term Loan (collectively, the “ABL priority collateral”), which, in each case, also secure the Existing Facilities.

On June 25, 2020, the Company commenced an offer to exchange (the “June 25, 2020 Exchange Offer”) up to $750,000 aggregate principal amount of the outstanding 6.125% Notes for a combination of $600,000 newly issued 8.0% Senior Secured Notes due 2026 (the “8.0% Notes”) and $145,500 cash. On July 10, 2020, the Company increased the maximum amount of 6.125% Notes that may be accepted for exchange from $750,000 to $1,125,000 and, on July 24, 2020, the Company announced that it accepted for payment $1,062,682 aggregate principal amount of the 6.125% Notes in exchange for $849,918 aggregate principal amount of newly issued 8.0% Notes and $206,373 in cash. In connection therewith, the Company recorded a gain on debt modification of $5,274 which is included in the results of operations and cash flows of continuing operations. The 8.0% Notes are secured on an equal and ratable basis by the same assets that secure the 7.500% Notes. The 8.0% Notes are guaranteed on a senior secured basis by the same subsidiaries that guarantee the 7.500% Notes. In conjunction with the June 25, 2020 Exchange Offer, the Company also commenced a solicitation of consents from the holders of outstanding 6.125% Notes to certain proposed amendments to the indenture governing the 6.125% Notes. On July 9, 2020, following the receipt of the requisite number of consents, the Company entered into a supplemental indenture, which modified certain limitations in the debt covenant to allow for the creation of the 8.0% Notes.

31

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

Maturities

The aggregate annual principal payments of long-term debt for the remainder of fiscal 2021 and thereafter are as follows: 2021—$0; 2022—$0; 2023—$0; 2024—$1,531,808; 2025—$0 and $1,716,305 thereafter. These aggregate annual principal payments of long-term debt assume that the Company has repaid or refinanced its existing 6.125% Notes prior to December 31, 2022.

12. Leases

The Company leases most of its retail stores and certain distribution facilities under noncancelable operating and finance 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 noncancelable 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 and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Operating lease cost	$	160,794	$	163,035	$	483,558	$	492,020
Financing lease cost:
Amortization of right-of-use asset		1,092		1,419		3,316		4,463
Interest on long-term finance lease liabilities		595		775		1,927		2,536
Total finance lease costs	$	1,687	$	2,194	$	5,243	$	6,999
Short-term lease costs		476		445		913		561
Variable lease costs		42,949		42,723		128,078		126,037
Less: sublease income		(3,511)		(5,195)		(11,530)		(16,353)
Net lease cost	$	202,395	$	203,202	$	606,262	$	609,264

Supplemental cash flow information related to leases for the thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	507,989	$	469,207
Operating cash flows paid for interest portion of finance leases		1,927		2,536
Financing cash flows paid for principal portion of finance leases		3,613		4,939
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		342,915		265,612
Finance leases		—		—

32

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

Supplemental balance sheet information related to leases as of November 28, 2020 and February 29, 2020 (in thousands, except lease term and discount rate):

	November 28,			February 29,
	2020			2020
Operating leases:
Operating lease right-of-use asset	$	2,892,445		$	2,903,256
Short-term operating lease liabilities	$	489,867		$	490,161
Long-term operating lease liabilities		2,676,153			2,710,347
Total operating lease liabilities	$	3,166,020		$	3,200,508
Finance leases:
Property, plant and equipment, net	$	17,031		$	19,904
Current maturities of long-term debt and lease financing obligations	$	7,097		$	8,840
Lease financing obligations, less current maturities		17,098			19,326
Total finance lease liabilities	$	24,195		$	28,166
Weighted average remaining lease term
Operating leases		7.7			7.8
Finance leases		8.8			8.9
Weighted average discount rate
Operating leases		6.1	%		6.1	%
Finance leases		9.9	%		10.2	%

The following table summarizes the maturity of lease liabilities under finance and operating leases as of November 28, 2020:

	November 28, 2020
	Finance		Operating
Fiscal year	Leases		Leases (1)		Total
2021 (remaining thirteen weeks)	$	5,040	$	167,984	$	173,024
2022		7,823		651,961		659,784
2023		3,470		604,610		608,080
2024		3,278		545,123		548,401
2025		2,922		450,389		453,311
Thereafter		14,540		1,553,990		1,568,530
Total lease payments		37,073		3,974,057		4,011,130
Less: imputed interest		(12,878)		(808,037)		(820,915)
Total lease liabilities	$	24,195	$	3,166,020	$	3,190,215

(1) – Future operating lease payments have not been reduced by minimum sublease rentals of $43 million due in the future under noncancelable leases.

33

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

During the thirteen week period ended November 28, 2020, the Company sold six owned and operating properties, including the Company’s Perryman, MD distribution center and five retail stores to independent third parties. In addition, during the thirty-nine week period ended November 28, 2020, the Company also sold one owned and operating property, the Company’s Ice Cream Plant, to an independent third party. Net proceeds from the sales were $80,551 and $89,012 for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. Concurrent with these sales, the Company entered into agreements to lease the properties back from the purchasers over minimum lease terms between 15 and 20 years. The Company accounted for these leases as operating lease right-of-use assets and corresponding operating lease liabilities in accordance with the Lease Standard. The transactions resulted in a gain of $33,092 and $39,311 which is included in the gain on sale of assets, net for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. During the thirteen and thirty-nine week periods ended November 30, 2019, the Company did not enter into any sale-leaseback transactions. The Company has additional capacity under its outstanding debt agreements to enter into additional sale-leaseback transactions.

As of November 28, 2020, the Company has identified certain distribution center and store assets which it intends to sell and leaseback. The carrying amount of these assets of $42,231, comprised of land, buildings and improvements, were included in the Retail Pharmacy segment, and have been reclassified from their historical balance sheet presentation to current assets held for sale. There can be no assurance if or when the Company will enter into such transactions or the final terms thereof.

13. Stock Options and Stock Awards

The Company recognizes share-based compensation expense over the requisite service period of the award, net of an estimate for the impact of forfeitures. Operating results for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 include $8,677 and $13,598, respectively, of compensation costs related to the Company’s stock-based compensation arrangements.

The Company provides certain of its associates with performance based incentive plans under which the associates will receive a certain number of shares of the Company’s common stock or cash based on the Company meeting certain financial and performance goals. If such goals are not met, no stock-based compensation expense is recognized and any recognized stock-based compensation expense is reversed. During the thirty-nine week periods ended November 28, 2020 and November 30, 2019, the Company incurred expense of $1,170 compared to a benefit of $715 related to these performance based incentive plans, respectively, which is recorded as a component of stock-based compensation expense.

The total number and type of newly awarded grants and the related weighted average fair value for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 are as follows:

	November 28, 2020			November 30, 2019
	Shares	Weighted Average Fair Value		Shares	Weighted Average Fair Value
Stock options granted	—	$	N/A	612	$	3.66
Restricted stock awards granted	766	$	17.70	1,345	$	7.70
Total awards	766			1,957

34

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

Typically, stock options granted vest, and are subsequently exercisable in equal annual installments over a four-year period for employees. Restricted stock awards typically vest in equal annual installments over a three-year period.

The Company calculates the fair value of stock options using the Black-Scholes-Merton option pricing model.

As of November 28, 2020, the total unrecognized pre-tax compensation costs related to unvested stock options and restricted stock awards granted, net of estimated forfeitures and the weighted average period of cost amortization are as follows:

	November 28, 2020
	Unvested		Unvested		Unvested
	stock		restricted		performance
	options		stock		shares
Unrecognized pre-tax costs	$	1,468	$	16,335	$	6,323
Weighted average amortization period		2.5 years		2.3 years		2.3 years

14. Retirement Plans

Net periodic pension expense for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019, for the Company’s defined benefit plan includes the following components:

	Defined Benefit				Defined Benefit
	Pension Plan				Pension Plan
	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Service cost	$	144	$	143	$	432	$	428
Interest cost		1,199		1,556		3,598		4,667
Expected return on plan assets		(1,177)		(1,214)		(3,531)		(3,641)
Amortization of unrecognized net loss		911		415		2,734		1,245
Net periodic pension expense	$	1,077	$	900	$	3,233	$	2,699

During the thirteen and thirty-nine week periods ended November 28, 2020 the Company contributed $4,597 and $5,451, respectively to the Defined Benefit Pension Plan. During the remainder of fiscal 2021, the Company expects to contribute $854 to the Defined Benefit Pension Plan.

15. Segment Reporting

The Company has two reportable segments, its retail drug stores (“Retail Pharmacy”), and its pharmacy services (“Pharmacy Services”) segments.

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

35

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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, and drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program.

The Company’s chief operating decision makers are its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and the President—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
November 28, 2020:
Total Assets	$	6,696,953	$	2,750,031	$	(17,581)	$	9,429,403
Goodwill		43,492		1,064,644		—		1,108,136
February 29, 2020:
Total Assets	$	6,757,196	$	2,709,737	$	(14,564)	$	9,452,369
Goodwill		43,492		1,064,644		—		1,108,136

(1) As of November 28, 2020 and February 29, 2020, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $17,581 and $14,564, 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.

36

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

The following table is a reconciliation of the Company’s business segments to the consolidated financial statements for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
Thirteen Week Period Ended
November 28, 2020:
Revenues	$	4,109,592	$	2,084,402	$	(76,956)	$	6,117,038
Gross Profit		1,079,708		123,391		—		1,203,099
Adjusted EBITDA(2)		88,557		48,848		—		137,405
Additions to property and equipment and intangible assets		67,727		2,708		—		70,435
November 30, 2019:
Revenues	$	3,909,946	$	1,613,109	$	(60,757)	$	5,462,298
Gross Profit		1,070,852		118,123		—		1,188,975
Adjusted EBITDA(2)		108,579		49,511		—		158,090
Additions to property and equipment and intangible assets		58,546		4,256		—		62,802
Thirty-Nine Week Period Ended
November 28, 2020:
Revenues	$	12,250,775	$	6,100,026	$	(224,417)	$	18,126,384
Gross Profit		3,223,157		338,606		—		3,561,763
Adjusted EBITDA(2)		273,879		122,521		—		396,400
Additions to property and equipment and intangible assets		146,455		9,637		—		156,092
November 30, 2019:
Revenues	$	11,622,858	$	4,758,470	$	(180,177)	$	16,201,151
Gross Profit		3,133,791		326,346		—		3,460,137
Adjusted EBITDA(2)		285,260		117,367		—		402,627
Additions to property and equipment and intangible assets		146,118		16,452		—		162,570

(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.

37

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

The following is a reconciliation of net income (loss) to Adjusted EBITDA for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Interest expense		50,835		57,856		151,389		176,228
Income tax expense (benefit)		437		876		(7,534)		35,878
Depreciation and amortization		83,336		82,007		249,556		248,977
LIFO (credit) charge		(9,487)		(7,440)		(30,303)		7,553
Lease termination and impairment charges		7,453		166		22,734		2,115
Intangible asset impairment charges		—		—		29,852		—
Gain on debt modifications and retirements, net		—		(55,692)		(5,274)		(55,692)
Merger and Acquisition-related costs		1,136		—		1,136		3,599
Stock-based compensation expense		2,867		3,506		8,677		13,598
Restructuring-related costs		12,175		25,275		71,096		93,770
Inventory write-downs related to store closings		704		93		2,596		4,083
Gain on sale of assets, net		(16,305)		(1,371)		(17,473)		(5,670)
Other		(70)		528		1,523		3,946
Adjusted EBITDA from continuing operations	$	137,405	$	158,090	$	396,400	$	402,627

16. Commitments, Contingencies and Guarantees

Legal Matters and Regulatory Proceedings

The Company is involved in numerous legal matters including litigation, arbitration, and other claims, and is subject to regulatory proceedings including 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.

38

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

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 or advanced; (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.

California Employment Litigation.

The Company is currently a defendant in several lawsuits filed in courts in California that contain allegations regarding violations of the California Business and Professions Code, various California employment laws and regulations, industry wage orders, wage-and-hour laws, rules and regulations pertaining primarily to failure to pay overtime, failure to pay premiums for missed meals and rest periods, failure to provide accurate wage statements, and failure to reimburse business expenses (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. These single-plaintiff and multi-plaintiff California Cases in the aggregate, seek substantial damages. The Company believes that its defenses and assertions in the California Cases have merit. The Company has aggressively challenged the merits of the lawsuits and, where applicable, 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 defending itself against these claims.

Usual and Customary and Code 1 Litigation.

In January 2017, qui tam plaintiff Azam Rahimi (“Relator”) filed a sealed False Claims Act (“FCA”) lawsuit in the United States District Court for the Eastern District of Michigan. The United States Attorney’s Office for the Eastern District of Michigan, 18 states, and the District of Columbia declined to intervene. The unsealed lawsuit alleges that the Company failed to report Rite Aid’s Rx Savings Program prices as its usual and customary charges under the Medicare Part D program, federal and state Medicaid programs, and other publicly funded health care programs, and that the Company is thus liable under the federal FCA and similar state statutes. On December 12, 2019, the court granted the Company’s motion to dismiss and judgment on the pleadings based upon the FCA’s public disclosure bar. The Relator filed a motion for reconsideration which was denied. The Relator has appealed from the order granting the Company’s motion to dismiss and for judgment on the pleadings, and also from the order denying his motion for reconsideration. 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 defending itself against these claims.

The State of Mississippi, by and through its Attorney General, filed a lawsuit against the Company and various purported related entities on September 27, 2016 alleging the Company failed to accurately report usual and customary prices to Mississippi’s Division of Medicaid. At this stage of the proceedings, the Company is not able to either predict

39

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

the outcome of this lawsuit or estimate a potential range of loss with respect to the lawsuit, and is defending itself against these claims.

The Company is involved in a putative consumer class action lawsuit in the United States District Court for the Southern District of California captioned Byron Stafford v. Rite Aid Corp. A separate lawsuit, Robert Josten v. Rite Aid Corp., was consolidated with this lawsuit in November, 2019. The lawsuit contains allegations 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 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. At this stage of the proceedings, the Company is not able to either predict the outcome or estimate a potential range of loss and is defending itself against these claims.

On February 6, 2019, Humana, Inc., filed an arbitration claim alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program pricing to Humana. At this stage of the proceedings, the Company is not able to either predict the outcome of this arbitration proceeding or estimate a potential range of loss, and is defending itself against these claims.

The Company is a defendant in a lawsuit filed by North Carolina, North Dakota, Alabama, Utah, Oregon, Washington and New Jersey Blue Cross/Blue Shield plans alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program pricing to several Pharmacy Benefit Managers with which Rite Aid and the insurers had independent contracts. On October 8, 2020, two Minnesota Blue Cross/Blue Shield entities filed a similar action in the same court asserting the same claims against the Company. At this stage of the proceedings, the Company is not able to either predict the outcome of this litigation proceeding or estimate a potential range of loss, and is defending itself against these claims.

In June 2012, qui tam plaintiff, Loyd F. Schmuckley (“Relator”) filed a complaint under seal against the Company alleging that it failed to comply with certain requirements of California’s Medicaid program between 2007 and 2014. Specifically, the Relator alleged that the Company did not perform special verification and documentation for certain medications known as “Code 1” drugs. While the complaint remained under seal, the United States Department of Justice conducted an extensive investigation and ultimately declined to intervene. Although numerous states declined to intervene, in September 2017, the State of California filed a complaint in intervention. 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 defending itself against these claims.

Controlled Substances Litigation, Audits and Investigations

The Company along with various other defendants are named in multiple opioid-related lawsuits filed by counties, cities, municipalities, Native American tribes, hospitals, third-party payers, and others across the United States. In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated and transferred more than a thousand federal opioid-related lawsuits that name the Company and/or a related entity as a defendant to the multi-district litigation (“MDL”) pending in the United States District Court for the Northern District of Ohio before Judge Dan Polster under In re National Prescription Opiate Litigation (Case No. 17-MD-2804). A significant number of similar cases that are not part of the MDL and name the Company and/or a related entity or entities as a defendant in also are pending in state courts. The plaintiffs in all of these opioid-related lawsuits generally allege claims concerning the

40

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

impacts of widespread opioid abuse against defendants along the pharmaceutical supply chain, including manufacturers, wholesale distributors, and retail pharmacies. At this stage of the proceedings, the Company is not able to predict the outcome of the opioid-related lawsuits or estimate a potential range of loss regarding the lawsuits. The Company is defending itself against all relevant claims.

The Company also has received warrants, subpoenas, CIDs, and other requests for documents and information from, and is being investigated by, the federal and state governments regarding opioids and other controlled substances. The Company has been cooperating with and responding to these investigatory inquiries.

Miscellaneous Litigation and Investigations.

The U.S. Securities and Exchange Commission (“SEC”) is investigating trading in the Company’s securities that occurred in or around January 2017, and has subpoenaed information from the Company in connection with that investigation. The Company is cooperating with the SEC in this matter. 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.

These other legal proceedings include claims of improper disclosure of personal information, anticompetitive practices, general contractual matters, product liability, professional malpractice, non-compliance with state and federal regulatory regimes, marketing misconduct, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

17. Supplementary Cash Flow Data

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for interest(a)	$	101,668	$	134,302
Cash payments for income taxes, net(a)	$	6,945	$	6,564
Equipment financed under capital leases	$	1,682	$	2,119
Gross borrowings from revolver(a)	$	6,233,000	$	2,430,000
Gross repayments to revolver(a)	$	5,892,000	$	2,170,000

(a) — Amounts are presented on a total company basis.

Significant components of cash provided by Other Liabilities of $45,867 for the thirty-nine week period ended November 28, 2020 include cash provided from the employer payroll tax payment deferral under the CARES act of $82,827 and an increase in accrued interest of $39,949, partially offset by a reduction in the wellness+ loyalty program revenue deferral of $47,068 and a decrease in benefit and other operating expense related accruals of $35,809.

41

RITE AID CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 28, 2020 and November 30, 2019

(Dollars and share information in thousands, except per share amounts)

(unaudited)

18. Subsequent Events

On December 18, 2020, pursuant to that certain stock purchase agreement, dated as of October 7, 2020, by and between the Company and Bartell Drug Company (“Bartell”), the Company acquired Bartell, a Washington corporation, for approximately $95,000 in cash, subject to certain customary post-closing working capital adjustments.  The Company has not yet completed its valuation procedures relative to the Acquisition, and consequently, is unable to provide a preliminary purchase price allocation.  Bartell operates 67 retail drug stores and one distribution center in the greater Seattle Washington area.  Bartell will operate as a 100 percent owned subsidiary of the Company within its Retail Pharmacy segment.

42

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations

Overview

We are a healthcare company with a retail footprint, providing our customers and communities with a high level of care and service through various programs we offer through our two reportable business segments, our Retail Pharmacy segment and our Pharmacy Services segment. We accomplish our goal of delivering comprehensive care to our customers through our retail drugstores and our transparent and traditional PBM, Elixir. We also offer fully integrated mail-order and specialty pharmacy services through Elixir Pharmacy. Additionally, through Elixir Insurance, Elixir also serves one of the fastest-growing demographics in healthcare: seniors enrolled in Medicare Part D. When combined with our retail platform, this comprehensive suite of services allows us to provide value and choice to customers, patients and payors and allows us to compete in today's evolving healthcare marketplace.

Retail Pharmacy Segment

Our Retail Pharmacy segment sells brand and generic prescription drugs and various other pharmacy services, as well as an assortment of front-end products including health and beauty aids, personal care products, seasonal merchandise, and a large private brand product line. Our Retail Pharmacy segment generates the majority of its revenue through the sale of prescription drugs and front-end products at our over 2,400 retail pharmacy locations across 18 states. We replenish our retail stores through a combination of direct store delivery of pharmaceutical products facilitated through our pharmaceutical Purchasing and Delivery Agreement with McKesson, and the majority of our front-end products through our network of distribution centers.

Pharmacy Services Segment

Our Pharmacy Services segment provides a full range of pharmacy benefit services through Elixir. The Pharmacy Services segment provides both transparent and traditional PBM options through its Elixir PBM. Elixir also offers fully integrated mail-order and specialty pharmacy services through Elixir Pharmacy; an innovative claims adjudication software platform in Laker Software; and a national Medicare Part D prescription drug plan through Elixir Insurance’s product offering. The segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, Managed Medicaid plans, Medicare plans, other sponsors of health benefit plans and individuals throughout the United States.

Restructuring

Beginning in Fiscal 2019, we initiated a series of restructuring plans designed to reorganize our executive management team, reduce managerial layers, and consolidate roles. In March 2020, we announced the details of our RxEvolution strategy, which includes building tools to work with regional health plans to improve patient health outcomes, rationalizing SKU’s in our front-end offering to free up working capital and update our merchandise assortment, assessing our pricing and promotional strategy, rebranding our retail pharmacy and pharmacy services business, launching our Store of the Future format and further reducing SG&A and headcount, including integrating certain back office functions in the Pharmacy Services segment both within the segment and across Rite Aid.

As a result of the restructuring that we announced in March 2019, we achieved annual cost savings of approximately $55.0 million. These savings offset the reduction in TSA fees that we experienced in fiscal 2020. We have implemented further restructuring activities in support of our RxEvolution and other initiatives, which resulted in additional restructuring charges due to further reductions in corporate staffing levels, charges associated with rationalizing SKU’s in our front-end offering and other operational changes. These restructuring activities are expected to provide future growth and expense efficiency benefits. We anticipate our total fiscal 2021 restructuring-related costs to be approximately $80.0 million and expect to realize annualized cost savings of approximately $55.0 million over the next two years, as well as benefits to sales, productivity and working capital from our remerchandise initiatives, although a prolonged impact of COVID-19 could impact the amount and timing of the benefit recognized. There can be no

43

assurance that we will not incur additional restructuring charges or that we will achieve the cost savings and remerchandising benefits in the amounts or time anticipated.

Asset Sale to WBA

On September 18, 2017, we entered into the Amended and Restated Asset Purchase Agreement with WBA and Buyer, which amended and restated in its entirety the previously disclosed Original Asset Purchase Agreement. Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer purchased from Rite Aid 1,932 Acquired Stores, three distribution centers, related inventory and other specified assets and liabilities related thereto for a purchase price of approximately $4.375 billion, on a cash-free, debt-free basis, in the Sale. We 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 received cash proceeds of $4.157 billion.

During fiscal 2019, we completed the sale of one of our distribution centers and related assets to WBA for proceeds of $61.2 million. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $14.2 million, 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. During fiscal 2020, we completed the sale of the second distribution center and related assets to WBA for proceeds of $62.8 million. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $19.3 million, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended February 29, 2020. During the first quarter of fiscal 2021, we completed the sale of the final distribution center and related assets to WBA for proceeds of $94.3 million. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $12.7 million, which has been included in the results of operations and cash flows of discontinued operations during the thirteen week period ended May 30, 2020. The transfer of the final distribution center and related assets constitutes the final closing under the Amended and Restated Asset Purchase Agreement.

We had 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, we provided 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 had been extended to October 17, 2020, unless earlier terminated. In connection with these services, we purchased the related inventory and incurred cash payments for the selling, general and administrative activities, which, we billed on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the thirteen and thirty-nine week periods ended November 28, 2020 were $0.0 million and $35.2 million, respectively. Total billings for these items during the thirteen and thirty-nine week periods ended November 30, 2019 were $0.6 billion and $2.7 billion, respectively, of which $105.4 million is included in Accounts receivable, net. We recorded WBA TSA fees of $0 million and $1.5 million during the thirteen and thirty-nine week periods ended November 28, 2020, respectively, which are reflected as a reduction to selling, general and administrative expenses. We recorded WBA TSA fees of $7.9 million and $33.4 million during the thirteen and thirty-nine week periods ended November 30, 2019, respectively, which are reflected as a reduction to selling, general and administrative expenses. In conjunction with the transfer of the final distribution center during the quarter ended May 30, 2020, we have substantially completed our obligations under the TSA. On July 14, 2020, we entered into a letter agreement with WBA to terminate the services under the TSA, other than certain specified services relating to real estate, accounting, tax, and accounts receivable systems that continued until October 17, 2020 and certain specified services relating to human resources to be performed after October 17, 2020.

Based on its magnitude and because we exited certain markets, the Sale represented a significant strategic shift that has a material effect on our operations and financial results. Accordingly, we have applied discontinued operations treatment for the Sale as required by GAAP.

Overview of Financial Results from Continuing Operations

Our net income from continuing operations for the thirteen week period ended November 28, 2020 was $4.3 million or $0.08 per basic and diluted share compared to net income of $52.3 million or $0.98 per basic and diluted share for the thirteen week period ended November 30, 2019. The decline in net income for the thirteen week period ended November 28, 2020 was due primarily to a $55.7 million gain on debt retirements in the prior year and a decrease in

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Adjusted EBITDA, partially offset by lower restructuring-related costs and a higher gain on sale of assets resulting from the sale-leaseback of our Perryman, MD distribution center.

Our net loss from continuing operations for the thirty-nine week period ended November 28, 2020 was $81.6 million or $1.52 per basic and diluted share compared to a net loss of $125.8 million or $2.37 per basic and diluted share for the thirty-nine week period ended November 30, 2019. The improvement in net loss for the thirty-nine week period ended November 28, 2020 was due primarily to decreases in income tax and interest expense and a LIFO credit in the current year compared to a LIFO charge in the prior year. These benefits were partially offset by a gain on debt retirements in the prior year, current year intangible asset impairment charges associated with the rebranding of Elixir and higher lease termination and impairment charges caused by the wind down of our RediClinic business.

Our Adjusted EBITDA from continuing operations for the thirteen and thirty-nine week periods ended November 28, 2020 was $137.4 million or 2.3% of revenues and $396.4 million or 2.2% of revenues, respectively, compared to $158.1 million or 2.9% of revenues and $402.6 million or 2.5% of revenues, respectively, for the thirteen and thirty-nine week periods ended November 30, 2019. The decrease in Adjusted EBITDA for the thirteen week period ended November 28, 2020 was due to a decrease in both the Retail Pharmacy and Pharmacy Services segments. Adjusted EBITDA decreased $20.0 million in the Retail Pharmacy segment due primarily to higher SG&A expenses, partially offset by increased gross profit. SG&A expenses were negatively impacted by incremental costs associated with the COVID-19 pandemic and the absence of TSA income in the current quarter, as services under that agreement have been completed. Gross profit benefited from increased revenue, partially offset by continued pharmacy reimbursement rate pressure and the impact of the reduction in over-the-counter front-end sales on front-end margin. Adjusted EBITDA decreased by $0.7 million in the Pharmacy Services segment.

The decrease in Adjusted EBITDA for the thirty-nine week period ended November 28, 2020 was due to a decrease in the Retail Pharmacy segment, partially offset an increase in the Pharmacy Services segment. Adjusted EBITDA decreased $11.4 million in the Retail Pharmacy segment due primarily to an increase in SG&A expenses, incremental costs associated with the COVID-19 pandemic and the completion of services provided under the TSA. Adjusted EBITDA increased by $5.2 million in the Pharmacy Services segment due primarily to increased revenues and improved pharmacy network management, partially offset by reduced rebates resulting from the change in rebate aggregator at our MedTrak subsidiary. Please see the sections entitled “Segment Analysis” and “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” below for additional details.

Consolidated Results of Operations-Continuing Operations

Revenues and Other Operating Data

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands except per share amounts)
Revenues(a)	$	6,117,038		$	5,462,298		$	18,126,384		$	16,201,151
Revenue growth (decline)		12.0	%		0.2	%		11.9	%		(0.4)	%
Net income (loss)	$	4,324		$	52,286		$	(81,575)		$	(125,758)
Net income (loss) per diluted share	$	0.08		$	0.98		$	(1.52)		$	(2.37)
Adjusted EBITDA(b)	$	137,405		$	158,090		$	396,400		$	402,627
Adjusted Net Income (b)	$	21,578		$	29,135		$	33,104		$	27,904
Adjusted Net Income per Diluted Share(b)	$	0.40		$	0.54		$	0.61		$	0.52

(a) Revenues for the thirteen and thirty-nine week periods ended November 28, 2020 exclude $76,956 and $224,417, respectively, of inter-segment activity that is eliminated in consolidation. Revenues for the thirteen and thirty-nine

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week periods ended November 30, 2019 exclude $60,757 and $180,177, respectively, of inter-segment activity that is eliminated in consolidation.

(b) See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

Revenues

Revenues increased 12.0% and 11.9% for the thirteen and thirty-nine weeks ended November 28, 2020, respectively, compared to an increase of 0.2% and a decrease of 0.4% for the thirteen and thirty-nine weeks ended November 30, 2019, respectively. Revenues for the thirteen week period ended November 28, 2020 were positively impacted by a $199.6 million increase in Retail Pharmacy segment revenues and a $471.3 million increase in Pharmacy Services segment revenues. Revenues for the thirty-nine week period ended November 28, 2020 were positively impacted by a $627.9 million increase in Retail Pharmacy segment revenues and a $1,341.6 million increase in Pharmacy Services segment revenues.

Please see the section entitled “Segment Analysis” below for additional details regarding revenues.

Costs and Expenses

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands)
Cost of revenues(a)	$	4,913,939		$	4,273,323		$	14,564,621		$	12,741,014
Gross profit		1,203,099			1,188,975			3,561,763			3,460,137
Gross margin		19.7	%		21.8	%		19.6	%		21.4	%
Selling, general and administrative expenses	$	1,156,355		$	1,134,854		$	3,469,644		$	3,433,036
Selling, general and administrative expenses as a percentage of revenues		18.9	%		20.8	%		19.1	%		21.2	%
Lease termination and impairment charges		7,453			166			22,734			2,115
Intangible asset impairment charges		—			—			29,852			—
Interest expense		50,835			57,856			151,389			176,228
Gain on debt modifications and retirements, net		—			(55,692)			(5,274)			(55,692)
Gain on sale of assets, net		(16,305)			(1,371)			(17,473)			(5,670)

(a) Cost of revenues for the thirteen and thirty-nine week periods ended November 28, 2020 exclude $76,956 and $224,417, respectively, of inter-segment activity that is eliminated in consolidation. Cost of revenues for the thirteen and thirty-nine week periods ended November 30, 2019 exclude $60,757 and $180,177, respectively, of inter-segment activity that is eliminated in consolidation.

Gross Profit and Cost of Revenues

Gross profit increased by $14.1 million for the thirteen week period ended November 28, 2020 compared to the thirteen week period ended November 30, 2019. Gross profit increased by $101.6 million for the thirty-nine week period ended November 28, 2020 compared to the thirty-nine week period ended November 30, 2019. Gross profit for the thirteen week period ended November 28, 2020 includes an increase of $8.9 million in our Retail Pharmacy segment and an increase of $5.3 million in our Pharmacy Services segment. Gross profit for the thirty-nine week period ended

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November 28, 2020 includes an increase of $89.4 million in our Retail Pharmacy segment and an increase of $12.3 million in our Pharmacy Services segment. Gross margin was 19.7% for the thirteen week period ended November 28, 2020 compared to 21.8% for the thirteen week period ended November 30, 2019. Gross margin was 19.6% for the thirty-nine week period ended November 28, 2020 compared to 21.4% for the thirty-nine week period ended November 30, 2019. Please see the section entitled “Segment Analysis” for a more detailed description of gross profit and gross margin results by segment.

Selling, General and Administrative Expenses

SG&A increased by $21.5 million and increased by $36.6 million for the thirteen and thirty-nine week periods ended November 28, 2020, respectively, compared to the thirteen and thirty-nine week periods ended November 30, 2019. The increase in SG&A for the thirteen week period ended November 28, 2020 includes an increase of $22.8 million relating to our Retail Pharmacy segment, partially offset by a decrease of $1.3 million relating to our Pharmacy Services segment. The increase in SG&A for the thirty-nine week period ended November 28, 2020 includes an increase of $45.7 million relating to our Retail Pharmacy segment, partially offset by a decrease of $9.1 million relating to our Pharmacy Services segment. Please see the section entitled “Segment Analysis” below for additional details regarding SG&A.

Lease Termination and Impairment Charges

Lease termination and impairment charges consist of amounts as follows:

	Thirteen Week				Thirty-Nine Week
	Period Ended				Period Ended
	November 28,			November 30,	November 28,		November 30,
	2020		2019		2020		2019
Impairment charges	$	3,797	$	121	$	15,230	$	1,533
Lease termination charges		—		—		—		—
Facility exit charges		3,656		45		7,504		582
	$	7,453	$	166	$	22,734	$	2,115

During the thirty-nine week period ended November 28, 2020, we recorded impairment charges of $15.2 million of which $4.6 million relates to a terminated software project and the replacement of existing software, $5.0 million relates to the closure of the remaining RediClinic operations and $5.6 million relates to store and corporate assets.

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations—Lease Termination and Impairment Charges” included in our Fiscal 2020 10-K for a detailed description of our impairment and lease termination methodology for fiscal 2020.

Interest Expense

Interest expense was $50.8 million and $151.4 million for the thirteen and thirty-nine week periods ended November 28, 2020 respectively, compared to $57.9 million and $176.2 million for the thirteen and thirty-nine week periods ended November 30, 2019, respectively. The weighted average interest rate on our indebtedness for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 was 4.7% and 5.1%, respectively.

Income Taxes

We recorded an income tax expense from continuing operations of $0.4 million and $0.9 million for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. We recorded an income tax benefit from continuing operations of $7.5 million and an income tax expense from continuing operations of $35.9 million for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. The effective tax rate for the thirteen week periods ended November 28, 2020 and November 30, 2019 was 9.2% and 1.6%, respectively. The effective tax rate for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 was 8.5% and (39.9)%, respectively. The effective tax rate for the thirteen and thirty-nine week periods ended November 28, 2020 was

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net of an adjustment of (61.0)% and (5.2)%, respectively, to increase the valuation allowance against deferred tax assets. The effective tax rate for the thirteen and thirty-nine week periods ended November 30, 2019 was net of an adjustment of (31.8)% and (61.0)%, respectively, to increase the valuation allowance against deferred tax assets.

We recognize 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.

We believe that it is reasonably possible that a decrease of up to $13.2 million 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.

We regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain. We 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. We continue to maintain a valuation allowance against net deferred tax assets of $1,676.9 million and $1,673.1 million, which relates to federal and state deferred tax assets that may not be realized based on our future projections of taxable income at November 28, 2020 and February 29, 2020, respectively.

Segment Analysis

We evaluate the Retail Pharmacy and Pharmacy Services segments’ performance based on revenue, gross profit, and Adjusted EBITDA. The following is a reconciliation of our segments to the condensed consolidated financial statements:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
Thirteen Week Period Ended
November 28, 2020:
Revenues	$	4,109,592	$	2,084,402	$	(76,956)	$	6,117,038
Gross Profit		1,079,708		123,391		—		1,203,099
Adjusted EBITDA(*)		88,557		48,848		—		137,405
November 30, 2019:
Revenues	$	3,909,946	$	1,613,109	$	(60,757)	$	5,462,298
Gross Profit		1,070,852		118,123		—		1,188,975
Adjusted EBITDA(*)		108,579		49,511		—		158,090
Thirty-Nine Week Period Ended
November 28, 2020:
Revenues	$	12,250,775	$	6,100,026	$	(224,417)	$	18,126,384
Gross Profit		3,223,157		338,606		—		3,561,763
Adjusted EBITDA(*)		273,879		122,521		—		396,400
November 30, 2019:
Revenues	$	11,622,858	$	4,758,470	$	(180,177)	$	16,201,151
Gross Profit		3,133,791		326,346		—		3,460,137
Adjusted EBITDA(*)		285,260		117,367		—		402,627

(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.

(*)   See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

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Retail Pharmacy Segment Results of Operations

Revenues and Other Operating Data

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands)
Revenues	$	4,109,592		$	3,909,946		$	12,250,775		$	11,622,858
Revenue growth (decline)		5.1	%		(1.7)	%		5.4	%		(1.4)	%
Same store sales growth (decline)		4.3	%		(0.1)	%		4.8	%		0.6	%
Pharmacy sales growth (decline)		8.1	%		(1.5)	%		4.8	%		(0.5)	%
Same store prescription count growth, adjusted to 30-day equivalents		3.1	%		2.8	%		2.0	%		3.1	%
Same store pharmacy sales growth		6.1	%		0.1	%		3.5	%		1.3	%
Pharmacy sales as a % of total retail sales		69.5	%		67.7	%		66.8	%		67.3	%
Front-end sales (decline) growth		(0.4)	%		(2.0)	%		7.1	%		(2.7)	%
Same store front-end sales (decline) growth		(0.7)	%		(0.5)	%		6.1	%		(0.9)	%
Front-end sales as a % of total retail sales		30.5	%		32.3	%		33.2	%		32.7	%
Adjusted EBITDA(*)	$	88,557		$	108,579		$	273,879		$	285,260
Store data:
Total stores (beginning of period)		2,450			2,464			2,461			2,469
New stores		—			—			—			1
Store acquisitions		—			—			—			—
Closed stores		(3)			—			(14)			(6)
Total stores (end of period)		2,447			2,464			2,447			2,464
Relocated stores		—			1			—			2
Remodeled and expanded stores		3			14			4			65

(*)   See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

Revenues

Revenues increased 5.1% for the thirteen weeks ended November 28, 2020 compared to a decrease of 1.7% for the thirteen weeks ended November 30, 2019. The increase in revenues for the thirteen week period ended November 28, 2020 was primarily a result of an increase in same store sales.

Pharmacy same store sales increased by 6.1% for the thirteen week period ended November 28, 2020 compared to an increase of 0.1% in the thirteen week period ended November 30, 2019. The increase in pharmacy same store sales is due to the increase in same store prescription count. Same store prescription count, adjusted to 30-day equivalents, increased 3.1% for the thirteen week period ended November 28, 2020 driven by increases in maintenance prescriptions, supported by personalized Medication Therapy Management interventions and home deliveries. Flu immunizations increased by 28% over the prior year period, which offset a 19% decline in acute scripts related to cough cold and flu. In total, acute prescriptions decreased by 1.9%.

Front-end same store sales decreased 0.7% during the thirteen week period ended November 28, 2020 compared to a decrease of 0.5% during the thirteen week period ended November 30, 2019. Front-end same store sales, excluding cigarettes and tobacco products, increased 0.3%, driven by increases in immunity, first aid and paper products, offset by decreases in over-the-counter products related to cough, cold and flu and Halloween candy sales.

Revenues increased 5.4% for the thirty-nine weeks ended November 28, 2020 compared to a decrease of 1.4% for the thirty-nine weeks ended November 30, 2019. The increase in revenues for the thirty-nine week period ended November 28, 2020 was primarily a result of an increase in same store sales.

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Pharmacy same store sales increased by 3.5% for the thirty-nine week period ended November 28, 2020 compared to an increase of 1.3% in the thirty-nine week period ended November 30, 2019. The increase in pharmacy same store sales is due to the increase in same store prescription count. Same store prescription count, adjusted to 30-day equivalents, increased 2.0% for the thirty-nine week period ended November 28, 2020 driven by increases in maintenance medication fills, supported by personalized Medication Therapy Management interventions and home deliveries, partially offset by a reduction in acute prescriptions of 7.1% resulting from the postponement of outpatient medical visits and elective surgical procedures in connection with the COVID-19 pandemic.

Front-end same store sales increased 6.1% during the thirty-nine week period ended November 28, 2020 compared to a decrease of 0.9% during the thirty-nine week period ended November 30, 2019. Front-end same store sales, excluding cigarettes and tobacco products, increased 7.5%, driven by increases in general cleaning products, sanitizers, wipes, paper products, liquor, over-the-counter products, and summer and other seasonal items, which were driven by the COVID-19 pandemic.

We include in same store sales all stores that have been open at least one year. Relocation stores are not included in same store sales until one year has lapsed.

Costs and Expenses

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands)
Cost of revenues	$	3,029,884		$	2,839,094		$	9,027,618		$	8,489,067
Gross profit		1,079,708			1,070,852			3,223,157			3,133,791
Gross margin		26.3	%		27.4	%		26.3	%		27.0	%
FIFO gross profit(*)		1,070,221			1,063,412			3,192,854			3,141,344
FIFO gross margin(*)		26.0	%		27.2	%		26.1	%		27.0	%
Selling, general and administrative expenses	$	1,067,027		$	1,044,236			3,206,078			3,160,379
Selling, general and administrative expenses as a percentage of revenues		26.0	%		26.7	%		26.2	%		27.2	%

(*)  See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

Gross Profit and Cost of Revenues

Gross profit increased $8.9 million for the thirteen week period ended November 28, 2020 compared to the thirteen week period ended November 30, 2019, driven by higher sales volume and an increase in maintenance prescriptions, partially offset by a reduction in acute prescriptions and continued pharmacy reimbursement rate pressure.

Gross profit increased $89.4 million for the thirty-nine week period ended November 28, 2020 compared to the thirty-nine week period ended November 30, 2019, driven by an increase in front-end gross profit resulting from the increase in same store sales, partially offset by a restructuring charge of $25.8 million to establish an inventory reserve on product lines we are exiting and will no longer carry as part of our rebranding initiative and continued pharmacy reimbursement rate pressure.

Gross margin was 26.3% of sales for the thirteen week period ended November 28, 2020 compared to 27.4% of sales for the thirteen week period ended November 30, 2019. The decline in gross margin as a percentage of revenues is due primarily to continued pharmacy reimbursement rate pressure and the impact of the reduction in over-the-counter front-end sales.

Gross margin was 26.3% of sales for the thirty-nine week period ended November 28, 2020 compared to 27.0% of sales for the thirty-nine week period ended November 30, 2019. The decline in gross margin as a percentage of revenues is due primarily to higher markdowns related to increased sales volume to our wellness+ members, continued

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pharmacy reimbursement rate pressures and higher discounts on front-end merchandise provided to our associates in response to the COVID-19 pandemic.

We use the last-in, first-out (“LIFO”) method of inventory valuation, which is estimated on a quarterly basis and is finalized at year end when inflation rates and inventory levels are final. Therefore, LIFO costs for interim period financial statements are estimated. LIFO credits were $9.5 million and $30.3 million for the thirteen and thirty-nine week periods ended November 28, 2020, respectively, compared to LIFO credits of $7.4 million for the thirteen week period ended November 30, 2019 and LIFO charges of $7.6 million for the thirty-nine week period ended November 30, 2019. The LIFO credit in the thirteen week period ended November 28, 2020 was mostly due to the planned reduction in front-end inventory resulting from our rebranding initiative and lower expected pharmacy inflation.

Selling, General and Administrative Expenses

SG&A expenses improved as a percentage of sales, but SG&A dollars increased $22.8 million for the thirteen week period ended November 28, 2020 due primarily to incremental costs associated with the COVID-19 pandemic and the absence of TSA income in the current quarter, as services under that agreement have been completed.

SG&A expenses increased $45.7 million for the thirty-nine week period ended November 28, 2020 due primarily to a reduction in WBA TSA fees and the current year incurrence of COVID-19 related expenses, including our Hero Pay and Hero Bonus programs, store cleaning and sanitation and related measures to keep our associates and customers safe, partially offset by the changes to modernize our associate PTO plans. SG&A expenses as a percentage of revenues for the thirty-nine week period ended November 28, 2020 was 26.2% compared to 27.2% for the thirty-nine week period ended November 30, 2019 due to the associate PTO plan change and increased sales leverage, partially offset by higher COVID-19 related expenses.

Pharmacy Services Segment Results of Operations

Revenues and Other Operating Data

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands)
Revenues	$	2,084,402		$	1,613,109		$	6,100,026		$	4,758,470
Revenue growth		29.2	%		5.7	%		28.2	%		2.8	%
Adjusted EBITDA(*)	$	48,848		$	49,511		$	122,521		$	117,367

(*)   See “Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

Revenues

Pharmacy Services segment revenues for the thirteen week period ended November 28, 2020 were $2,084.4 million as compared to revenues of $1,613.1 million for the thirteen week period ended November 30, 2019. Pharmacy Services segment revenues for the thirty-nine week period ended November 28, 2020 were $6,100.0 million as compared to revenues of $4,758.5 million for the thirty-nine week period ended November 30, 2019. The increase in revenues for the segment is primarily due to an increase in Medicare Part D membership.

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Costs and Expenses

	Thirteen Week Period Ended						Thirty-Nine Week Period Ended
	November 28,			November 30,			November 28,			November 30,
	2020			2019			2020			2019
	(dollars in thousands)
Cost of revenues	$	1,961,011		$	1,494,986		$	5,761,420		$	4,432,124
Gross profit		123,391			118,123			338,606			326,346
Gross margin		5.9	%		7.3	%		5.6	%		6.9	%
Selling, general and administrative expenses	$	89,328		$	90,618			263,566			272,657
Selling, general and administrative expenses as a percentage of revenues		4.3	%		5.6	%		4.3	%		5.7	%

Gross Profit and Cost of Revenues

Gross profit for the thirteen week period ended November 28, 2020 was $123.4 million as compared to gross profit of $118.1 million for the thirteen week period ended November 30, 2019. Gross profit for the thirty-nine week period ended November 28, 2020 was $338.6 million as compared to gross profit of $326.3 million for the thirty-nine week period ended November 30, 2019. The increase in the thirteen and thirty-nine week period gross profit for the segment is primarily due to increased revenues and improved pharmacy network management.

Gross margin was 5.9% of sales for the thirteen week period ended November 28, 2020 compared to 7.3% of sales for the thirteen week period ended November 30, 2019. Gross margin was 5.6% of sales for the thirty-nine week period ended November 28, 2020 compared to 6.9% of sales for the thirty-nine week period ended November 30, 2019. The decline in gross margin is due primarily to an increase in Medicare Part D drug costs and the change in rebate aggregator at our MedTrak subsidiary in the second quarter of fiscal 2021.

Selling, General and Administrative Expenses

Pharmacy Services segment selling, general and administrative expenses for the thirteen week period ended November 28, 2020 was $89.3 million as compared to $90.6 million for the thirteen week period ended November 30, 2019. Pharmacy Services segment selling, general and administrative expenses for the thirty-nine week period ended November 28, 2020 was $263.6 million as compared to $272.7 million for the thirty-nine week period ended November 30, 2019. Selling, general and administrative expenses as a percentage of Pharmacy Services segment revenue was 4.3% and 5.6% for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. Selling, general and administrative expenses as a percentage of Pharmacy Services segment revenue was 4.3% and 5.7% for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. The decrease in the thirteen and thirty-nine week periods selling, general and administrative expenses is primarily the result of reductions in payroll and indirect spend overall, partially offset by higher costs associated with supporting the increased Medicare Part D membership.

Liquidity and Capital Resources

General

We have two primary sources of liquidity: (i) cash provided by operating activities and (ii) borrowings under our revolving credit facility. Our principal uses of cash are to provide working capital for operations, to service our obligations to pay interest and principal on debt and to fund capital expenditures. Total liquidity as of November 28, 2020 was $1,602.7 million, which consisted of revolver borrowing capacity of $1,601.3 million and invested cash of $1.4 million.

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Credit Facilities

On December 20, 2018, we entered into a senior secured credit agreement (as amended by the First Amendment to Credit Agreement, dated as of January 6, 2020, the “Credit Agreement”), consisting of a $2.7 billion senior secured asset-based revolving credit facility (“Senior Secured Revolving Credit Facility”) and a $450.0 million “first-in, last out” senior secured term loan facility (“Senior Secured Term Loan,” and together with the Senior Secured Revolving Credit Facility, collectively, the “Existing Facilities”). We used proceeds from the Existing Facilities to refinance our prior $2.7 billion existing credit agreement (the “Old Facility”). The Existing Facilities extend our debt maturity profile and provide additional liquidity. Borrowings under the Senior Secured Revolving Credit Facility bear interest at a rate per annum between LIBOR plus 1.25% and LIBOR plus 1.75% based upon the Average ABL Availability (as defined in the Credit Agreement).  Borrowings under the Senior Secured Term Loan bear interest at a rate per annum of LIBOR plus 3.00%.  We are required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the commitments under the Senior Secured Revolving Credit Facility, depending on Average ABL Availability.  The Existing Facilities mature on December 20, 2023, subject to an earlier maturity on December 31, 2022 if we have not repaid or refinanced our existing 6.125% Notes prior to such date.  We have been engaged in efforts to refinance our existing 6.125% Notes and we intend to repay or refinance any of such outstanding notes prior to the early maturity becoming effective, although we cannot assure you what impact the recent disruption in the financial markets will have on any such efforts.

Our borrowing capacity under the Senior Secured Revolving Credit Facility is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At November 28, 2020, we had approximately $1,441.0 million of borrowings outstanding under the Existing Facilities and had letters of credit outstanding against the Senior Secured Revolving Credit Facility of approximately $107.7 million, which resulted in additional borrowing capacity under the Senior Secured Revolving Credit Facility of $1,601.3 million. If at any time the total credit exposure outstanding under the Existing Facilities and the principal amount of our other senior obligations exceed the borrowing base, we will be required to make certain other mandatory prepayments to eliminate such shortfall.

The Credit Agreement restricts us and all of our subsidiaries, including the subsidiaries that guarantee our obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes (collectively, the “Subsidiary Guarantors”) from accumulating cash on hand in excess of $200.0 million at any time when revolving loans are outstanding (not including cash located in our store and lockbox deposit accounts and cash necessary to cover our current liabilities). The Credit Agreement also states that if at any time (other than following the exercise of remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority debt) either (i) an event of default exists under the Existing Facilities or (ii) the sum of our borrowing capacity under our Senior Secured Revolving Credit Facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $275.0 million for three consecutive business days or less than or equal to $200.0 million on any day (a “cash sweep period”), the funds in our deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the Existing Facilities, and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of the Existing Facilities.

Our obligations under the Existing Facilities and the Subsidiary Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivable, inventory, prescription files (including eligible script lists), intellectual property (prior to the repayment of the Senior Secured Term Loan) and certain other assets arising therefrom or related thereto (including substantially all of their deposit accounts, collectively, the “ABL priority collateral”) and (ii) a second-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and all other assets that do not constitute ABL priority collateral, in each case, subject to customary exceptions and limitations.

The Credit Agreement allows us to have outstanding, at any time, up to an aggregate principal amount of $1.5 billion in secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Existing Facilities and other existing indebtedness, provided that not in excess of $750.0 million of such secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock

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shall mature or require scheduled payments of principal prior to 90 days after the latest maturity date of any Term Loan or Other Revolving Commitment (each as defined in the Credit Agreement) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date). Subject to the limitations described in the immediately preceding sentence, the Credit Agreement additionally allows us 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 Credit Agreement) is not in effect; provided, however, that certain of our 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 Credit Agreement also contains certain restrictions on the amount of secured first priority debt we are able to incur. The Credit Agreement also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Existing Facilities are not in default and we maintain availability under our revolver of more than $365.0 million.

The Credit Agreement has a financial covenant that requires us to maintain a minimum fixed charge coverage ratio of 1.00 to 1.00 (i) on any date on which availability under the Senior Secured Revolving Credit Facility is less than $200.0 million or (ii) on the third consecutive business day on which availability under the Senior Secured Revolving Credit Facility is less than $250.0 million and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolver is equal to or greater than $250.0 million. As of November 28, 2020, our fixed charge coverage ratio was greater than 1.00 to 1.00, and we were in compliance with the Credit Agreement’s financial covenant. The Credit Agreement also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, the making of investments, sale of assets, mergers and acquisitions and the granting of liens.

The Credit Agreement provides for customary events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if we fail to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of such debt to accelerate the maturity or require the repayment repurchase, redemption or defeasance of such debt.

The indentures that govern our guaranteed unsecured notes and our guaranteed secured notes contain restrictions on the amount of additional secured and unsecured debt that we may incur. As of November 28, 2020, we had the ability to (i) draw the full amount under our revolving credit facility, or (ii) incur additional secured debt. In addition, we have the ability to enter into certain sale and leaseback transactions.  The ability to issue additional unsecured debt under the indenture is generally governed by an interest coverage ratio test. As of November 28, 2020, we had the ability to issue additional secured and unsecured debt under the indentures governing our unguaranteed unsecured notes.

Guarantor Summarized Financial Information

Certain of our subsidiaries, which are listed on Exhibit 22 to this Quarterly Report on Form 10-Q, have guaranteed our obligations under the 6.125% Notes and the 7.500% Notes (collectively, the "Guaranteed Notes"). As discussed in Note 11 to the consolidated financial statements, the Guaranteed Notes were issued by us, as the parent company, and are guaranteed by substantially all of the parent company’s consolidated subsidiaries (the “guarantors” or “Subsidiary Guarantors”) except for EIC (the “non-guarantor”). The parent company and guarantors are referred to as the “obligor group”. The Subsidiary Guarantors fully and unconditionally and jointly and severally guarantee the Guaranteed Notes. The 6.125% Notes and the obligations under the related guarantees are unsecured. The 7.500% Notes and the obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and other collateral to the extent it does not constitute ABL priority collateral (as defined below), and (ii) a second-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivables, payment intangibles, inventory, prescription files (including eligible script lists) and, intellectual property (prior to the repayment of the Senior Secured Term Loan) (collectively, the “ABL priority collateral”), which, in each case, also secure the Existing Facilities.

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Under certain circumstances, subsidiaries may be released from their guarantees without consent of the note holders. Our subsidiaries conduct substantially all of our operations and have significant liabilities, including trade payables. If the subsidiary guarantees are invalid or unenforceable or are limited by fraudulent conveyance or other laws, the registered debt will be structurally subordinated to the substantial liabilities of our subsidiaries.

Condensed Combined Financial Information

The following tables include summarized financial information of the obligor group. Investments in and the equity in the earnings of EIC, which is not a member of the obligor group, have been excluded. The summarized financial information of the obligor group is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. The obligor group’s amounts due to/from and transactions with EIC have been presented in separate line items, if material.

	November 28,		February 29,
In millions	2020		2020
Due from EIC	$	270.9	$	—
Other current assets		3,645.4		3,657.0
Total current assets	$	3,916.3	$	3,657.0
Operating lease right-of-use assets	$	2,892.4	$	2,903.3
Goodwill		1,108.1		1,108.1
Other noncurrent assets		1,490.4		1,753.9
Total noncurrent assets	$	5,490.9	$	5,765.3
Due to EIC	$	—	$	13.3
Other current liabilities		2,642.0		2,731.1
Total current liabilities	$	2,642.0	$	2,744.4
Long-term debt less current maturities	$	3,200.6	$	3,077.3
Long-term operating lease liabilities		2,676.2		2,710.3
Other noncurrent liabilities		278.1		215.8
Total noncurrent liabilities	$	6,154.9	$	6,003.4

	Thirteen Week Period Ended		Thirty-Nine Week Period Ended
In millions	November 28, 2020		November 28, 2020
Revenues (a)	$	5,967.6	$	17,667.2
Cost of revenues (b)		4,763.1		14,125.1
Gross profit		1,204.5		3,542.1
Net income (loss) from continuing operations		15.2		(71.7)
Net income from discontinued operations		—		9.2
Net income (loss)	$	15.2	$	(62.5)
Net income (loss) attributable to Rite Aid	$	4.3	$	(72.4)

(a) Includes $43.2 million and $7.4 million of revenues generated from the non-guarantor for the thirteen and thirty-nine week periods ended November 28, 2020, respectively.

(b) Includes $43.1 million and $7.1 million of cost of revenues incurred in transactions with the non-guarantor for the thirteen and thirty-nine week periods ended November 28, 2020, respectively.

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Net Cash Provided by/Used in Operating, Investing and Financing Activities

Cash used in operating activities was $253.8 million compared to cash provided by operating activities of $93.7 million for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. Operating cash flow was negatively impacted by the growth in our CMS receivable, timing differences in the receipt of our monthly capitation payment from CMS, timing of receipts from pharmacy third-party payors, and lower employee benefit related accruals and wellness+ deferral, partially offset by the $82.8 million benefit from the payroll tax deferral under the CARES act and higher accrued liabilities relating to Elixir’s pharmacy network due to timing.

Cash used in investing activities was $45.5 million and $106.6 million for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. Cash used for the purchase of property, plant, and equipment was lower than the prior year due to less store remodels in the current year. During the thirty-nine week period ended November 28, 2020, we remodeled four stores, spent $28.7 million on prescription file purchases and received proceeds of $89.0 million from sale-leaseback transactions. Proceeds from insured loss includes cash proceeds associated with civil unrest.

Cash flow provided by financing activities was $119.8 million and $141.1 million for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. Cash provided by financing activities for the thirty-nine weeks ended November 28, 2020 reflects net revolver borrowings, in addition to borrowings to facilitate the June 25, 2020 Exchange Offer.

Capital Expenditures

During the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019 capital expenditures were as follows:

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
New store construction, store relocation and store remodel projects	$	45,511	$	15,628	$	62,207	$	52,962
Technology enhancements, improvements to distribution centers and other corporate requirements		18,793		29,447		65,182		76,173
Purchase of prescription files from other retail pharmacies		6,131		17,727		28,703		33,435
Total capital expenditures	$	70,435	$	62,802	$	156,092	$	162,570

Future Liquidity

We are highly leveraged. Our high level of indebtedness could: (i) limit our ability to obtain additional financing; (ii) limit our flexibility in planning for, or reacting to, changes in our business and the industry; (iii) place us at a competitive disadvantage relative to our competitors with less debt; (iv) render us more vulnerable to general adverse economic and industry conditions, including those resulting from COVID-19; and (v) require us to dedicate a substantial portion of our cash flow to service our debt. Based upon our current levels of operations, we believe that cash flow from operations together with available borrowings under the revolver and other sources of liquidity will be adequate to meet our requirements for working capital, debt service, capital expenditures and other strategic investments at least for the next twelve months. Based on our liquidity position, which we expect to remain strong, we do not expect to be subject to the minimum fixed charge covenant in the Existing Facilities in the next twelve months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in light of our operating performance, and other relevant circumstances, and we may evaluate alternative sources of liquidity, including further opportunities related to any receivable due to us from CMS, sale and leaseback transactions, and other transactions to optimize our asset base. From time to time, we may seek additional deleveraging or refinancing transactions, including entering into transactions to exchange debt for shares of common stock or other debt securities (including additional

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secured debt), issuance of equity (including preferred stock and convertible securities), repurchase or redemption of outstanding indebtedness, or seek to refinance our outstanding debt (including the Existing Facilities) or may otherwise seek transactions to reduce interest expense and extend debt maturities. We may also look to make additional investments in our business to further our strategic objectives, including targeted acquisitions. Any of these transactions could impact our financial results.

Critical Accounting Policies and Estimates

For a description of the critical accounting policies that require the use of significant judgments and estimates by management, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations—Critical Accounting Policies and Estimates” included in our Fiscal 2020 10-K, which we filed with the SEC on April 27, 2020.

Factors Affecting Our Future Prospects

For a discussion of risks related to our financial condition, operations and industry, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” included herein and in our Fiscal 2020 10-K, “Part I – Item 1A. Risk Factors” in our Fiscal 2020 10-K and “Part II – Item 1A. Risk Factors” in our First Quarter Fiscal 2021 10-Q.

Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures

In addition to net income (loss) determined in accordance with GAAP, we use certain non-GAAP measures, such as “Adjusted EBITDA”, in assessing our operating performance. We believe the non-GAAP measures serve as an appropriate measure in evaluating the performance of our business. We define Adjusted EBITDA as net income (loss) excluding the impact of income taxes, interest expense, depreciation and amortization, LIFO adjustments (which removes the entire impact of LIFO, and effectively reflects the results as if we were on a FIFO inventory basis), charges or credits for facility closing and impairment, goodwill and intangible asset impairment charges, inventory write-downs related to store closings, gains or losses on debt modifications and retirements, the WBA merger termination fee, and other items (including stock-based compensation expense, merger and acquisition-related costs, a non-recurring litigation settlement, severance, restructuring-related costs and costs related to facility closures and gain or loss on sale of assets). We reference this particular non-GAAP financial measure frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical periods and external comparisons to competitors. In addition, incentive compensation is primarily based on Adjusted EBITDA and we base certain of our forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA.

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The following is a reconciliation of our net income (loss) to Adjusted EBITDA for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(dollars in thousands)
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Interest expense		50,835		57,856		151,389		176,228
Income tax expense (benefit)		437		876		(7,534)		35,878
Depreciation and amortization		83,336		82,007		249,556		248,977
LIFO (credit) charge		(9,487)		(7,440)		(30,303)		7,553
Lease termination and impairment charges		7,453		166		22,734		2,115
Intangible asset impairment charges		—		—		29,852		—
Gain on debt modifications and retirements, net		—		(55,692)		(5,274)		(55,692)
Merger and Acquisition‑related costs		1,136		—		1,136		3,599
Stock-based compensation expense		2,867		3,506		8,677		13,598
Restructuring-related costs		12,175		25,275		71,096		93,770
Inventory write-downs related to store closings		704		93		2,596		4,083
Gain on sale of assets, net		(16,305)		(1,371)		(17,473)		(5,670)
Other		(70)		528		1,523		3,946
Adjusted EBITDA from continuing operations	$	137,405	$	158,090	$	396,400	$	402,627

The following is a reconciliation of our net income (loss) from continuing operations to Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Diluted Share for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019. Adjusted Net Income (Loss) is defined as net income (loss) excluding the impact of amortization expense, merger and acquisition-related costs, a non-recurring litigation settlement, gains or losses on debt modifications and retirements, LIFO adjustments (which removes the entire impact of LIFO, and effectively reflects the results as if we were on a FIFO inventory basis), goodwill and intangible asset impairment charges, restructuring-related costs and the WBA merger termination fee. We calculate Adjusted Net Income (Loss) per Diluted Share using our above-referenced definition of Adjusted Net Income (Loss). We believe Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share are useful indicators of our operating performance over

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multiple periods. Adjusted Net Income (Loss) per Diluted Share is calculated using our above-referenced definition of Adjusted Net Income (Loss):

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(dollars in thousands)
Net income (loss)	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Add back - Income tax expense (benefit)		437		876		(7,534)		35,878
Income (loss) before income taxes		4,761		53,162		(89,109)		(89,880)
Adjustments:
Amortization expense		21,236		24,920		68,351		79,176
LIFO (credit) charge		(9,487)		(7,440)		(30,303)		7,553
Intangible asset impairment charges		—		—		29,852		—
Gain on debt modifications and retirements, net		—		(55,692)		(5,274)		(55,692)
Merger and Acquisition‑related costs		1,136		—		1,136		3,599
Restructuring-related costs		12,175		25,275		71,096		93,770
Adjusted income before income taxes		29,821		40,225		45,749		38,526
Adjusted income tax expense (a)		8,243		11,090		12,645		10,622
Adjusted net income		21,578	$	29,135	$	33,104	$	27,904
Net income (loss) per diluted share	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Adjusted net income per diluted share	$	0.40	$	0.54	$	0.61	$	0.52

(a) The fiscal year 2021 and 2020 annual effective tax rates, calculated using a federal rate plus a net state rate that excluded the impact of state NOL’s, state credits and valuation allowance, was used for the thirteen and thirty-nine weeks ended November 28, 2020 and November 30, 2019, respectively.

In addition to Adjusted EBITDA, Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Diluted Share, we occasionally refer to several other Non-GAAP measures, on a less frequent basis, in order to describe certain components of our business and how we utilize them to describe our results. These measures include but are not limited to Adjusted EBITDA Gross Margin and Gross Profit (gross margin/gross profit excluding non-Adjusted EBITDA items), Adjusted EBITDA SG&A (SG&A expenses excluding non-Adjusted EBITDA items), FIFO Gross Margin and FIFO Gross Profit (gross margin/gross profit before LIFO charges), and Free Cash Flow (Adjusted EBITDA less cash paid for interest, rent on closed stores, capital expenditures, restructuring-related costs and the change in working capital).

We include these non-GAAP financial measures in our earnings announcements in order to provide transparency to our investors and enable investors to better compare our operating performance with the operating performance of our competitors including with those of our competitors having different capital structures. Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share or other non-GAAP measures should not be considered in isolation from, and are not intended to represent an alternative measure of, operating results or of cash flows from operating activities, as determined in accordance with GAAP. Our definition of these non-GAAP measures may not be comparable to similarly titled measurements reported by other companies.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our future earnings, cash flow and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our major market risk exposure is changing interest rates. Increases in interest rates would increase our interest expense. We enter into debt obligations to support capital expenditures, acquisitions, working capital needs and general corporate purposes. Our policy is to manage interest rates through the use of a combination of variable-rate credit facilities, fixed-rate long-term obligations and derivative transactions.

The table below provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal payments and the related weighted average interest rates by expected maturity dates as

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of November 28, 2020 and assumes that we have repaid or refinanced our existing 6.125% Notes prior to December 31, 2022.

																						Fair Value at
	2021			2022			2023			2024			2025			Thereafter			Total			November 28, 2020
	(Dollars in thousands)
Long-term debt, including current portion, excluding financing lease obligations
Fixed Rate	$	—		$	—		$	—		$	90,808		$	—		$	1,716,305		$	1,807,113		$	1,771,995
Average Interest Rate		0.00	%		0.00	%		0.00	%		6.13	%		0.00	%		7.76	%		7.68	%
Variable Rate	$	—		$	—		$	—		$	1,441,000		$	—		$	—		$	1,441,000		$	1,441,000
Average Interest Rate		0.00	%		0.00	%		0.00	%		2.14	%		0.00	%		0.00	%		2.14	%

Our ability to satisfy interest payment obligations on our outstanding debt will depend largely on our future performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. If we do not have sufficient cash flow to service our interest payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those obligations, our business and results of operations could be materially adversely affected. We cannot be assured that any replacement borrowing or equity financing could be successfully completed.

The interest rate on our variable rate borrowings, which include our revolving credit facility and our term loan facility, are based on LIBOR. If the market rates of interest for LIBOR changed by 100 basis points as of November 28, 2020, our annual interest expense would change by approximately $14.4 million.

A change in interest rates does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures, however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures. Increases in interest rates would also impact our ability to refinance existing maturities on favorable terms.

ITEM 4.  Controls and Procedures

(a)  Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

(b)  Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings

The information in response to this item is incorporated herein by reference to Note 16, Commitments, Contingencies and Guarantees, of the Consolidated Condensed Financial Statements of this Quarterly Report.

ITEM 1A.  Risk Factors

In addition to the information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Part I — Item 1A. Risk Factors” in our Fiscal 2020 10-K and in “Part II – Item 1A. Risk Factors” in our First Quarter Fiscal 2021 Form 10-Q, which could materially affect our business, financial condition or future results.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases of Equity Securities. The table below is a listing of repurchases of common stock during the third quarter of fiscal 2021.

	Total			Total Number of Shares	Maximum Number of
	Number of	Average		Purchased as Part of	Shares that may yet be
	Shares	Price Paid		Publicly Announced	Purchased under the
Fiscal period:	Repurchased	Per Share		Plans or Programs	Plans or Programs
August 30 to September 26, 2020	—	$	—	—	—
September 27 to October 24, 2020	6	$	10.31	—	—
October 25 to November 28, 2020	—	$	—	—	—

ITEM 3.  Defaults Upon Senior Securities

Not applicable.

ITEM 4.  Mine Safety Disclosures

Not applicable.

ITEM 5.  Other Information

Not applicable.

ITEM 6.  Exhibits

(a) The following exhibits are filed as part of this report.

Exhibit Numbers	Description	Incorporation By Reference To
2.1	Amended and Restated Asset Purchase Agreement, dated September 18, 2017, among Rite Aid Corporation, Walgreens Boots Alliance, Inc. and Walgreen Co.**	Exhibit 2.1 to Form 8-K, filed on September 19, 2017
2.2	Receivable Purchase Agreement, dated as of February 19, 2020, by and between Envision Insurance Company and Part D Receivable Trust 2020-1 (Series A)	Exhibit 2.1 to Form 8-K, filed on February 21, 2020
2.3	Indemnity Agreement, dated as of February 19, 2020 by and between Rite Aid Corporation and Part D Receivable Trust 2020-1 (Series A)	Exhibit 2.2 to Form 8-K, filed on February 21, 2020
3.1	Amended and Restated Certificate of Incorporation	Exhibit 3.1 to Form 8-K, filed on April 18, 2019

61

Exhibit Numbers	Description	Incorporation By Reference To
3.2	Amended and Restated By-Laws	Exhibit 3.1 to Form 8-K, filed on April 17, 2020
4.1	Indenture, dated as of August 1, 1993, between Rite Aid Corporation, as issuer, and Morgan Guaranty Trust Company of New York, as trustee, related to the Company’s 7.70% Notes due 2027	Exhibit 4A to Registration Statement on Form S-3, File No. 033-63794, filed on June 3, 1993
4.2	Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Corporation and U.S. Bank Trust National Association (as successor trustee to Morgan Guaranty Trust Company of New York) to the Indenture dated as of August 1, 1993, between Rite Aid Corporation and Morgan Guaranty Trust Company of New York, relating to the Company’s 7.70% Notes due 2027	Exhibit 4.1 to Form 8-K filed on February 7, 2000
4.3	Indenture, dated as of December 21, 1998, between Rite Aid Corporation, as issuer, and Harris Trust and Savings Bank, as trustee, related to the Company’s 6.875% Notes due 2028	Exhibit 4.1 to Registration Statement on Form S-4, File No. 333-74751, filed on March 19, 1999
4.4	Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Corporation and Harris Trust and Savings Bank to the Indenture, dated December 21, 1998, between Rite Aid Corporation and Harris Trust and Savings Bank, related to the Company’s 6.875% Notes due 2028	Exhibit 4.4 to Form 8-K, filed on February 7, 2000
4.5	Indenture, dated as of April 2, 2015, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 6.125% Senior Notes due 2023	Exhibit 4.1 to Form 8-K, filed on April 2, 2015
4.6	Supplemental Indenture, dated as of August 23, 2018, among Rite Aid Corporation, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of April 2, 2015, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 6.125% Senior Notes due 2023	Exhibit 4.1 to Form 8-K filed on August 23, 2018
4.7	Supplemental Indenture, dated as of February 8, 2019, among Rite Aid Corporation, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of April 2, 2015, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 6.125% Senior Notes due 2023	Exhibit 4.9 to Form 10-K filed on April 25, 2019
4.8	Indenture, dated as of February 5, 2020, among Rite Aid Corporation, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 7.500% Senior Secured Notes due 2025	Exhibit 4.1 to Form 8-K filed on February 5, 2020
4.9	Description of the Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934	Exhibit 4.9 to Form 10-K filed on April 27, 2020
4.10	Indenture, dated as of July 27, 2020, among Rite Aid Corporation, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 8.000% Senior Secured Notes due 2026	Exhibit 4.1 to Form 8-K filed on July 27, 2020

62

Exhibit Numbers	Description	Incorporation By Reference To
4.11	Supplemental Indenture, dated as of July 9, 2020, among Rite Aid Corporation, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of April 2, 2015, among Rite Aid Corporation, as issuer, the subsidiary guarantors named therein and The Bank of New York Mellon Trust Company, N.A., related to the Company’s 6.125% Senior Notes due 2023	Exhibit 4.3 to Form 8-K filed on July 27, 2020
10.1	2010 Omnibus Equity Plan	Exhibit 10.1 to Form 8-K, filed on June 25, 2010
10.2	Amendment No. 1, dated September 21, 2010, to the 2010 Omnibus Equity Plan	Exhibit 10.7 to Form 10-Q, filed on October 7, 2010
10.3	Amendment No. 2, dated January 16, 2013, to the 2010 Omnibus Equity Plan	Exhibit 10.8 to Form 10-K, filed on April 23, 2013
10.4	2012 Omnibus Equity Plan	Exhibit 10.1 to Form 8-K, filed on June 25, 2012
10.5	Amendment No. 1, dated January 16, 2013, to the 2012 Omnibus Equity Plan	Exhibit 10.10 to Form 10-K, filed on April 23, 2013
10.6	2014 Omnibus Equity Plan	Exhibit 10.1 to Form 8-K, filed on June 23, 2014
10.7	Form of Award Agreement	Exhibit 10.2 to Form 8-K, filed on May 15, 2012
10.8	Supplemental Executive Retirement Plan	Exhibit 10.6 to Form 10-K, filed on April 28, 2010
10.9	Executive Incentive Plan for Officers of Rite Aid Corporation	Exhibit 10.1 to Form 8-K, filed on February 24, 2012
10.10	Amended and Restated Employment Agreement by and between Rite Aid Corporation and John T. Standley, dated as of January 21, 2010	Exhibit 10.7 to Form 10-K, filed on April 28, 2010
10.11	Employment Agreement, dated as of July 24, 2014, by and between Rite Aid Corporation and Darren W. Karst	Exhibit 10.2 to Form 10-Q, filed on October 2, 2014
10.12	Letter Agreement, dated October 26, 2015, to the Employment Agreement by and between Rite Aid Corporation and Darren W. Karst, dated as of July 24, 2014	Exhibit 10.1 to Form 8-K, filed on October 28, 2015
10.13	Employment Agreement by and between Rite Aid Corporation and Jocelyn Konrad dated as of August 18, 2015	Exhibit 10.1 to Form 10-Q, filed on January 6, 2016
10.14	Employment Agreement by and between Rite Aid Corporation and Bryan Everett dated as of June 22, 2015	Exhibit 10.2 to Form 10-Q, filed on January 6, 2016
10.15	Credit Agreement, dated as of December 20, 2018, among Rite Aid Corporation, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent and collateral agent.	Exhibit 10.1 to Form 8-K, filed on December 20, 2018
10.16	Amended and Restated Collateral Trust and Intercreditor Agreement, including the related definitions annex, dated as of June 5, 2009, among Rite Aid Corporation, each subsidiary named therein or which becomes a party thereto, Wilmington Trust Company, as collateral trustee, Citicorp North America, Inc., as senior collateral processing agent, The Bank of New York Trust Company, N.A., as trustee under the 2017 7.5% Note Indenture (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee under the 2016 10.375% Note Indenture (as defined therein), and each other Second Priority Representative and Senior Representative which becomes a party thereto	Exhibit 10.3 to Form 8-K, filed on June 11, 2009

63

Exhibit Numbers	Description	Incorporation By Reference To
10.17	Employment Agreement by and between RxOptions, LLC and its affiliates operating the EnvisionRXOptions business and Ben Bulkley dated February 15, 2019	Exhibit 10.27 to Form 10-K, filed on April 25, 2019
10.18	Separation Agreement by and between Rite Aid Corporation and John T. Standley, dated as of March 12, 2019	Exhibit 10.28 to Form 10-Q, filed on July 11, 2019
10.19	Separation Agreement by and between Rite Aid Corporation and Darren Karst, dated as of March 12, 2019	Exhibit 10.29 to Form 10-Q, filed on July 11, 2019
10.20	Separation Agreement by and between Rite Aid Corporation and Kermit Crawford, dated as of March 12, 2019	Exhibit 10.30 to Form 10-Q, filed on July 11, 2019
10.21	Amendment to Employment Agreement by and between Rite Aid Corporation and Bryan Everett, dated as of March 12, 2019	Exhibit 10.31 to Form 10-Q, filed on July 11, 2019
10.22	Amendment to Employment Agreement by and between Rite Aid Corporation and Jocelyn Z. Konrad, dated as of March 12, 2019	Exhibit 10.32 to Form 10-Q, filed on July 11, 2019
10.23	Amendment to Employment Agreement by and between Rite Aid Corporation and Matthew C. Schroeder, dated as of March 12, 2019	Exhibit 10.33 to Form 10-Q, filed on July 11, 2019
10.24	Amendment to Employment Agreement by and between Rite Aid Corporation and Brian Hoover, dated as of March 12, 2019	Exhibit 10.34 to Form 10-Q, filed on July 11, 2019
10.25	Amendment to Employment Agreement by and between Rite Aid Corporation and Brian Hoover, dated as of December 5, 2017	Exhibit 10.35 to Form 10-Q, filed on July 11, 2019
10.26	Amendment to Employment Agreement by and between Rite Aid Corporation and Brian Hoover, dated as of August 10, 2016	Exhibit 10.36 to Form 10-Q, filed on July 11, 2019
10.27	Employment Agreement by and between Rite Aid Corporation and Brian Hoover, dated as of January 1, 2001	Exhibit 10.37 to Form 10-Q, filed on July 11, 2019
10.28	Eleventh Amendment to Supply Agreement by and between Rite Aid Corporation and McKesson Corporation, dated as of February 28, 2019*	Exhibit 10.38 to Form 10-Q, filed on July 11, 2019
10.29	Employment Agreement by and between Rite Aid Corporation and Heyward Donigan, dated August 8, 2019**	Exhibit 10.1 to Form 8-K, filed on August 12, 2019
10.30	Employment Inducement Award Agreement by and between Rite Aid Corporation and Heyward Donigan, dated August 12, 2019	Exhibit 10.2 to Form 8-K, filed on August 12, 2019
10.31	Consulting Agreement by and between Rite Aid Corporation and Avalon Retail Consulting, Inc., through its president, John T. Standley, dated August 14, 2019	Exhibit 10.1 to Form 8-K, filed on August 16, 2019
10.32	Employment Agreement dated October 2, 2019 by and between Rite Aid Corporation and James Peters	Exhibit 10.1 to Form 8-K, filed on October 2, 2019
10.33	Separation Agreement dated October 2, 2019 by and between Rite Aid Corporation and Bryan Everett	Exhibit 10.2 to Form 8-K, filed on October 2, 2019
10.34	Consulting Agreement dated October 2, 2019 by and between Rite Aid Corporation and Bryan Everett	Exhibit 10.3 to Form 8-K, filed on October 2, 2019
10.35	Employment Agreement by and between Rite Aid Corporation and James J. Comitale, dated as of October 26, 2015	Exhibit 10.41 to Form 10-K filed on April 27, 2020
10.36	Amendment to Employment Agreement by and between James J. Comitale, dated November 6, 2019	Exhibit 10.42 to Form 10-K filed on April 27, 2020

64

Exhibit Numbers	Description	Incorporation By Reference To
10.37	Employment Agreement by and between Rite Aid Corporation and Jessica Kazmaier, dated as of March 12, 2019	Exhibit 10.43 to Form 10-K filed on April 27, 2020
10.38	Amendment to Employment Agreement by and between Jessica Kazmaier, dated November 6, 2019	Exhibit 10.44 to Form 10-K filed on April 27, 2020
10.39	Employment Agreement by and between Justin Mennen, dated as of December 7, 2018	Exhibit 10.45 to Form 10-K filed on April 27, 2020
10.40	Amendment to Employment Agreement by and between Justin Mennen, dated November 6, 2019	Exhibit 10.46 to Form 10-K filed on April 27, 2020
10.41	Employment Agreement by and between Rite Aid Corporation and Andre Persaud, dated as of January 28, 2020	Exhibit 10.47 to Form 10-K filed on April 27, 2020
10.42	Employment Agreement by and between RxOptions, LLC and Dan Robson, dated as of December 12, 2019	Exhibit 10.48 to Form 10-K filed on April 27, 2020
10.43	Separation Agreement by and between Rite Aid Corporation and James C. Comitale, as of May 21, 2020	Exhibit 10.45 to Form 10-Q filed on July 2, 2020
10.44	Employment Agreement by and between Rite Aid Corporation and Paul D. Gilbert, as of July 29, 2020	Exhibit 10.46 to Form 10-Q filed on October 6, 2020
22	List of Subsidiary Guarantors	Filed herewith
31.1	Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended	Filed herewith
31.2	Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended	Filed herewith
32	Certification of CEO and CFO pursuant to 18 United States Code, Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document.	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed herewith
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	Filed herewith

*     Confidential portions of this Exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K and Rite Aid Corporation agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request.

**   Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and Rite Aid Corporation agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request.

65

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: January 6, 2021	RITE AID CORPORATION
	By:	/s/ MATTHEW C. SCHROEDER
		Matthew C. Schroeder
		Executive Vice President and Chief Financial Officer
Date: January 6, 2021	By:	/s/ BRIAN T. HOOVER
		Brian T. Hoover
		Senior Vice President and Chief Accounting Officer

66

EX-22

Exhibit 22

List of Guarantor Subsidiaries

The Guaranteed Notes are jointly and severally guaranteed on a full and unconditional basis by Rite Aid Corporation (incorporated in Delaware) and the following 100% owned subsidiaries of Rite Aid Corporation as of November 28, 2020:

Entity	Jurisdiction of Incorporation or Organization
Harco, Inc.	Alabama
K & B Alabama Corporation	Alabama
Rite Aid Lease Management Company (a California corporation)	California
Thrifty Corporation (a California corporation)	California
Thrifty PayLess, Inc. (a California corporation)	California
Rite Aid of Connecticut, Inc.	Connecticut
1515 West State Street Boise, Idaho, LLC (a Delaware limited liability company)	Delaware
Ascend Health Technology, LLC (a Delaware limited liability company)	Delaware
Design Rx Holdings, LLC (a Delaware limited liability company)	Delaware
Eckerd Corporation (a Delaware corporation)	Delaware
Envision Pharmaceutical Holdings LLC (a Delaware limited liability company)	Delaware
EnvisionRx Puerto Rico, Inc. (a Delaware corporation)	Delaware
Genovese Drug Stores, Inc. (a Delaware corporation)	Delaware
Health Dialog Services Corporation (a Delaware corporation)	Delaware
Hunter Lane, LLC (a Delaware limited liability company)	Delaware
JCG (PJC) USA, LLC (a Delaware limited liability company)	Delaware
JCG Holdings (USA), Inc. (a Delaware corporation)	Delaware
K & B, Incorporated (a Delaware corporation)	Delaware
Maxi Drug North, Inc. (a Delaware corporation)	Delaware
Maxi Drug South, L.P. (a Delaware limited partnership)	Delaware
Maxi Drug, Inc. (a Delaware corporation)	Delaware
Munson & Andrews, LLC (a Delaware limited liability company)	Delaware
Name Rite, LLC (a Delaware limited liability company)	Delaware
P.J.C. Distribution, Inc. (a Delaware corporation)	Delaware
P.J.C. Realty Co., Inc. (a Delaware corporation)	Delaware
PJC Lease Holdings, Inc. (a Delaware corporation)	Delaware
PJC Manchester Realty LLC (a Delaware limited liability company)	Delaware
PJC Revere Realty LLC (a Delaware limited liability company)	Delaware
PJC Special Realty Holdings, Inc. (a Delaware corporation)	Delaware
RediClinic Associates, Inc. (a Delaware corporation)	Delaware
RediClinic LLC (a Delaware limited liability company)	Delaware

Entity	Jurisdiction of Incorporation or Organization
RediClinic of PA, LLC (a Delaware limited liability company)	Delaware
Rite Aid Corporation (PARENT)	Delaware
Rite Aid Drug Palace, Inc. (a Delaware corporation)	Delaware
Rite Aid Hdqtrs. Corp. (a Delaware corporation)	Delaware
Rite Aid Hdqtrs. Funding, Inc. (a Delaware corporation)	Delaware
Rite Aid of Delaware, Inc. (a Delaware corporation)	Delaware
Rite Aid Online Store Inc. (a Delaware corporation)	Delaware
Rite Aid Payroll Management Inc. (a Delaware corporation)	Delaware
Rite Aid Realty Corp. (a Delaware corporation)	Delaware
Rite Aid Specialty Pharmacy LLC (a Delaware limited liability company)	Delaware
Rite Aid Transport, Inc. (a Delaware corporation)	Delaware
Rite Investments Corp. (a Delaware corporation)	Delaware
Rite Investments Corp., LLC (a Delaware limited liability company)	Delaware
Rx Choice, Inc. (a Delaware corporation)	Delaware
The Jean Coutu Group (PJC) USA, Inc. (a Delaware corporation)	Delaware
Thrift Drug Inc. (a Delaware corporation)	Delaware
Advance Benefits, LLC	Florida
Envision Medical Solutions, LLC	Florida
First Florida Insurers of Tampa, LLC	Florida
Rite Aid of Georgia, Inc.	Georgia
Rite Aid of Indiana, Inc.	Indiana
Rite Aid of Kentucky, Inc.	Kentucky
K & B Louisiana Corporation	Louisiana
K & B Services, Incorporated	Louisiana
Rite Aid of Maine, Inc.	Maine
GDF, Inc.	Maryland
READ'S, Inc.	Maryland
Rite Aid of Maryland, Inc.	Maryland
PJC of Massachusetts, Inc. (a Massachusetts corporation)	Massachusetts
PJC Realty MA, Inc. (a Massachusetts corporation)	Massachusetts
1740 Associates, LLC	Michigan
Apex Drug Stores, Inc.	Michigan
PDS-1 Michigan, Inc.	Michigan
Perry Distributors, Inc.	Michigan
Perry Drug Stores, Inc.	Michigan
RDS Detroit, Inc.	Michigan
Rite Aid of Michigan, Inc.	Michigan
Laker Software, LLC	Minnesota
K & B Mississippi Corporation	Mississippi
MedTrak Services, L.L.C.	Missouri
Envision Pharmaceutical Services, LLC	Nevada
Rite Aid of New Hampshire, Inc.	New Hampshire
Lakehurst and Broadway Corporation	New Jersey

Entity	Jurisdiction of Incorporation or Organization
Rite Aid of New Jersey, Inc.	New Jersey
Rite Aid of New York, Inc. (a New York corporation)	New York
Rite Aid Rome Distribution Center, Inc. (a New York corporation)	New York
EDC Drug Stores, Inc.	North Carolina
Rite Aid of North Carolina, Inc.	North Carolina
4042 Warrensville Center Road - Warrensville Ohio, Inc.	Ohio
5600 Superior Properties, Inc.	Ohio
Broadview and Wallings-Broadview Heights Ohio, Inc.	Ohio
Envision Pharmaceutical Services, LLC	Ohio
Gettysburg and Hoover - Dayton, Ohio, LLC	Ohio
Orchard Pharmaceutical Services, LLC	Ohio
Rite Aid of Ohio, Inc.	Ohio
RX Options, LLC	Ohio
The Lane Drug Company	Ohio
Rite Aid of Pennsylvania, LLC (Formerly Rite Aid of Pennsylvania, Inc.)	Pennsylvania
PJC of Rhode Island, Inc.	Rhode Island
Rite Aid of South Carolina, Inc.	South Carolina
K & B Tennessee Corporation	Tennessee
Rite Aid of Tennessee, Inc.	Tennessee
K & B Texas Corporation (a Texas corporation)	Texas
RCMH, LLC (a Texas limited liability company)	Texas
Rx Initiatives, L.L.C.	Utah
Maxi Green, Inc.	Vermont
PJC of Vermont, Inc.	Vermont
Rite Aid of Vermont, Inc.	Vermont
Rite Aid of Virginia, Inc.	Virginia
Rite Aid of Washington, D.C., Inc.	Wash. D.C.
5277 Associates, Inc.	Washington
Rite Aid of West Virginia, Inc.	West Virginia
Design Rx, LLC	Wyoming
Design Rxclusives, LLC	Wyoming

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Heyward Donigan, President and Chief Executive Officer, certify that:

1.            I have reviewed this quarterly report on Form 10-Q of Rite Aid Corporation (the “Registrant”);

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.            The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.            Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.            Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.            Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.            The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

a.            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.            Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: January 6, 2021
	By:	/s/ HEYWARD DONIGAN
		Heyward Donigan
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Matthew C. Schroeder, Executive Vice President and Chief Financial Officer, certify that:

1.            I have reviewed this quarterly report on Form 10-Q of Rite Aid Corporation (the “Registrant”);

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.            The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.            Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.            Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d.            Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.            The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

a.            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.            Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: January 6, 2021
	By:	/s/ MATTHEW C. SCHROEDER
		Matthew C. Schroeder
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification of CEO and CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Rite Aid Corporation (the “Company”) for the quarterly period ended November 28, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Heyward Donigan, as President and Chief Executive Officer of the Company, and Matthew C. Schroeder, as Executive Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ HEYWARD DONIGAN
Name:	Heyward Donigan
Title:	President and Chief Executive Officer
Date:	January 6, 2021
/s/ MATTHEW C. SCHROEDER
Name:	Matthew C. Schroeder
Title:	Executive Vice President and Chief Financial Officer
Date:	January 6, 2021

XML

Document and Entity Information - shares	9 Months Ended
	Nov. 28, 2020	Dec. 16, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Nov. 28, 2020
Entity File Number	1-5742
Entity Registrant Name	RITE AID CORP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	23-1614034
Entity Address, Address Line One	30 Hunter Lane
Entity Address, City or Town	Camp Hill
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	17011
City Area Code	717
Local Phone Number	761-2633
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	RAD
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		55,224,363
Current Fiscal Year End Date	--02-27
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000084129
Amendment Flag	false

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Current assets:
Cash and cash equivalents	$ 50,813	$ 218,180
Accounts receivable, net	1,770,691	1,286,785
Inventories, net of LIFO reserve of $509,337 and $539,640	1,971,250	1,921,604
Prepaid expenses and other current assets	116,463	181,794
Current assets held for sale	42,231	92,278
Total current assets	3,951,448	3,700,641
Property, plant and equipment, net	1,045,682	1,215,838
Operating lease right-of-use asset	2,892,445	2,903,256
Goodwill	1,108,136	1,108,136
Other intangibles, net	291,013	359,491
Deferred tax assets	16,680	16,680
Other assets	123,999	148,327
Total assets	9,429,403	9,452,369
Current liabilities:
Current maturities of long-term debt and lease financing obligations	7,097	8,840
Accounts payable	1,482,521	1,484,081
Accrued salaries, wages and other current liabilities	676,582	746,318
Current portion of operating lease liabilities	489,867	490,161
Current liabilities held for sale		37,063
Total current liabilities	2,656,067	2,766,463
Long-term debt, less current maturities	3,200,577	3,077,268
Long-term operating lease liabilities	2,676,153	2,710,347
Lease financing obligations, less current maturities	17,098	19,326
Other noncurrent liabilities	268,973	204,438
Total liabilities	8,818,868	8,777,842
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1 per share; 75,000 shares authorized; shares issued and outstanding 55,251 and 54,716	55,251	54,716
Additional paid-in capital	5,895,709	5,890,903
Accumulated deficit	(5,294,608)	(5,222,194)
Accumulated other comprehensive loss	(45,817)	(48,898)
Total stockholders' equity	610,535	674,527
Total liabilities and stockholders' equity	$ 9,429,403	$ 9,452,369

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Inventory, LIFO Reserve	$ 509,337	$ 539,640
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized	75,000	75,000
Common stock, shares issued	55,251	54,716
Common stock, shares outstanding	55,251	54,716

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues	$ 6,117,038	$ 5,462,298	$ 18,126,384	$ 16,201,151
Costs and expenses:
Cost of revenues	4,913,939	4,273,323	14,564,621	12,741,014
Selling, general and administrative expenses	1,156,355	1,134,854	3,469,644	3,433,036
Lease termination and impairment charges	7,453	166	22,734	2,115
Intangible asset impairment charges			29,852
Interest expense	50,835	57,856	151,389	176,228
Gain on debt modifications and retirements, net		(55,692)	(5,274)	(55,692)
Gain on sale of assets, net	(16,305)	(1,371)	(17,473)	(5,670)
Total costs and expenses	6,112,277	5,409,136	18,215,493	16,291,031
Income (loss) from continuing operations before income taxes	4,761	53,162	(89,109)	(89,880)
Income tax (benefit) expense	437	876	(7,534)	35,878
Net income (loss) from continuing operations	4,324	52,286	(81,575)	(125,758)
Net income (loss) from discontinued operations, net of tax		(801)	9,161	(1,695)
Net income (loss)	4,324	51,485	(72,414)	(127,453)
Computation of income (loss) attributable to common stockholders:
Income (loss) from continuing operations attributable to common stockholders-basic and diluted	4,324	52,286	(81,575)	(125,758)
Income (loss) from discontinued operations attributable to common stockholders-basic and diluted		(801)	9,161	(1,695)
Income (loss) attributable to common stockholders-basic and diluted	$ 4,324	$ 51,485	$ (72,414)	$ (127,453)
Basic income (loss) per share:
Continuing operations	$ 0.08	$ 0.98	$ (1.52)	$ (2.37)
Discontinued operations		(0.01)	0.17	(0.03)
Net basic income (loss) per share	0.08	0.97	(1.35)	(2.40)
Diluted income (loss) per share:
Continuing operations	0.08	0.98	(1.52)	(2.37)
Discontinued operations		(0.02)	0.17	(0.03)
Net diluted income (loss) per share	$ 0.08	$ 0.96	(1.35)	(2.40)
Basic and diluted loss per share:
Continuing operations			(1.52)	(2.37)
Discontinued operations			0.17	(0.03)
Net basic and diluted loss per share			$ (1.35)	$ (2.40)

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$ 4,324	$ 51,485	$ (72,414)	$ (127,453)
Defined benefit pension plans:
Amortization of net actuarial losses included in net periodic pension cost, net of $0 and $0 tax expense	911	415	2,734	1,245
Change in fair value of interest rate cap	116	86	347	(587)
Total other comprehensive income	1,027	501	3,081	658
Comprehensive loss	$ 5,351	$ 51,986	$ (69,333)	$ (126,795)

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Nov. 28, 2020	Aug. 29, 2020	May 30, 2020	Nov. 30, 2019	Aug. 31, 2019	Jun. 01, 2019	Nov. 28, 2020	Nov. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Amortization of net actuarial losses included in net periodic pension cost, income tax expense	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Cumulative Effect, Period of Adoption, Adjustment [Member] Accumulated Deficit	Cumulative Effect, Period of Adoption, Adjustment [Member]	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Balance - beginning of period at Mar. 02, 2019	$ (56,776)	$ (56,776)	$ 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					(99,659)		(99,659)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						415	415
Change in fair value of interest rate cap						(656)	(656)
Comprehensive loss							(99,900)
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
Balance - beginning of period at Mar. 02, 2019	$ (56,776)	$ (56,776)	$ 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							(127,453)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense							1,245
Change in fair value of interest rate cap							(587)
Comprehensive loss							(126,795)
Balance - end of period at Nov. 30, 2019			$ 54,862	5,888,870	(4,897,473)	(30,401)	1,015,858
BALANCE (in shares) at Nov. 30, 2019			54,862
Balance - beginning 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
Increase (Decrease) in Stockholders' Deficit
Net loss					(79,279)		(79,279)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						415	415
Change in fair value of interest rate cap						(17)	(17)
Comprehensive loss							(78,881)
Exchange of restricted shares for taxes			$ (134)	(656)			(790)
Exchange of restricted shares for taxes (in shares)			(134)
Issuance of restricted stock			$ 1,257	(1,257)
Issuance of restricted stock (in shares)			1,257
Cancellation of restricted stock			$ (60)	60
Cancellation of restricted stock (in shares)			(60)
Amortization of restricted stock balance				5,003			5,003
Stock-based compensation expense				37			37
Balance - end of period at Aug. 31, 2019			$ 54,896	5,885,550	(4,948,958)	(30,902)	960,586
BALANCE (in shares) at Aug. 31, 2019			54,896
Increase (Decrease) in Stockholders' Deficit
Net loss					51,485		51,485
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						415	415
Change in fair value of interest rate cap						86	86
Comprehensive loss							51,986
Exchange of restricted shares for taxes			$ (66)	(521)			(587)
Exchange of restricted shares for taxes (in shares)			(66)
Issuance of restricted stock			$ 114	(114)
Issuance of restricted stock (in shares)			114
Cancellation of restricted stock			$ (82)	82
Cancellation of restricted stock (in shares)			(82)
Amortization of restricted stock balance				3,736			3,736
Stock-based compensation expense				137			137
Balance - end of period at Nov. 30, 2019			$ 54,862	5,888,870	(4,897,473)	(30,401)	1,015,858
BALANCE (in shares) at Nov. 30, 2019			54,862
Balance - beginning of period at Feb. 29, 2020			$ 54,716	5,890,903	(5,222,194)	(48,898)	674,527
BALANCE (in shares) at Feb. 29, 2020			54,716
Increase (Decrease) in Stockholders' Deficit
Net loss					(63,541)		(63,541)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						911	911
Change in fair value of interest rate cap						116	116
Comprehensive loss							(62,514)
Exchange of restricted shares for taxes			$ (7)	(92)			(99)
Exchange of restricted shares for taxes (in shares)			(7)
Issuance of restricted stock			$ 19	(19)
Issuance of restricted stock (in shares)			19
Cancellation of restricted stock			$ (53)	53
Cancellation of restricted stock (in shares)			(53)
Amortization of restricted stock balance				1,725			1,725
Stock-based compensation expense				150			150
Balance - end of period at May. 30, 2020			$ 54,675	5,892,720	(5,285,735)	(47,871)	613,789
BALANCE (in shares) at May. 30, 2020			54,675
Balance - beginning of period at Feb. 29, 2020			$ 54,716	5,890,903	(5,222,194)	(48,898)	674,527
BALANCE (in shares) at Feb. 29, 2020			54,716
Increase (Decrease) in Stockholders' Deficit
Net loss							(72,414)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense							2,734
Change in fair value of interest rate cap							347
Comprehensive loss							(69,333)
Balance - end of period at Nov. 28, 2020			$ 55,251	5,895,709	(5,294,608)	(45,817)	610,535
BALANCE (in shares) at Nov. 28, 2020			55,251
Balance - beginning of period at May. 30, 2020			$ 54,675	5,892,720	(5,285,735)	(47,871)	613,789
BALANCE (in shares) at May. 30, 2020			54,675
Increase (Decrease) in Stockholders' Deficit
Net loss					(13,197)		(13,197)
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						912	912
Change in fair value of interest rate cap						115	115
Comprehensive loss							(12,170)
Exchange of restricted shares for taxes			$ (131)	(1,872)			(2,003)
Exchange of restricted shares for taxes (in shares)			(131)
Issuance of restricted stock			$ 717	(717)
Issuance of restricted stock (in shares)			717
Cancellation of restricted stock			$ (37)	37
Cancellation of restricted stock (in shares)			(37)
Amortization of restricted stock balance				3,272			3,272
Stock-based compensation expense				150			150
Balance - end of period at Aug. 29, 2020			$ 55,224	5,893,590	(5,298,932)	(46,844)	603,038
BALANCE (in shares) at Aug. 29, 2020			55,224
Increase (Decrease) in Stockholders' Deficit
Net loss					4,324		4,324
Other comprehensive income:
Changes in Defined Benefit Plans, net of tax expense						911	911
Change in fair value of interest rate cap						116	116
Comprehensive loss							5,351
Exchange of restricted shares for taxes			$ (6)	(58)			(64)
Exchange of restricted shares for taxes (in shares)			(6)
Issuance of restricted stock			$ 30	(30)
Issuance of restricted stock (in shares)			30
Cancellation of restricted stock			$ 3	(3)
Cancellation of restricted stock (in shares)			3
Amortization of restricted stock balance				2,060			2,060
Stock-based compensation expense				150			150
Balance - end of period at Nov. 28, 2020			$ 55,251	$ 5,895,709	$ (5,294,608)	$ (45,817)	$ 610,535
BALANCE (in shares) at Nov. 28, 2020			55,251

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Nov. 28, 2020	Aug. 29, 2020	May 30, 2020	Nov. 30, 2019	Aug. 31, 2019	Jun. 01, 2019	Nov. 28, 2020	Nov. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Changes in defined benefit plans, tax expense	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Operating activities:
Net loss	$ 51,485	$ (72,414)	$ (127,453)
Net income (loss) from discontinued operations, net of tax	(801)	9,161	(1,695)
Net loss from continuing operations	52,286	(81,575)	(125,758)
Adjustments to reconcile to net cash (used in) provided by operating activities of continuing operations :
Depreciation and amortization	82,007	249,556	248,977
Lease termination and impairment charges	166	22,734	2,115
Intangible asset impairment charges		29,852
LIFO (credit) charge	(7,440)	(30,303)	7,553
Gain on sale of assets, net		(17,473)	(5,670)
Stock-based compensation expense		8,677	13,598
Gain on debt modifications and retirements, net	(55,692)	(5,274)	(55,692)
Changes in deferred taxes			26,979
Changes in operating assets and liabilities:
Accounts receivable		(507,778)	99,498
Inventories		(19,532)	(92,657)
Accounts payable		1,460	(38,245)
Operating lease right-of-use assets and operating lease liabilities		(25,319)	22,803
Other assets		75,265	(42,715)
Other liabilities		45,867	32,889
Net cash (used in) provided by operating activities of continuing operations		(253,843)	93,675
Investing activities:
Payments for property, plant and equipment		(127,389)	(129,135)
Intangible assets acquired		(28,703)	(33,435)
Proceeds from insured loss		12,500
Proceeds from dispositions of assets and investments		9,086	55,971
Proceeds from sale-leaseback transactions, ASC842		89,012
Net cash used in investing activities of continuing operations		(45,494)	(106,599)
Financing activities:
Proceeds from issuance of long-term debt		849,918
Net proceeds from revolver		341,000	260,000
Principal payments on long-term debt		(1,057,376)	(104,702)
Change in zero balance cash accounts		5,545	(11,749)
Payments for taxes related to net share settlement of equity awards		(2,165)	(1,573)
Financing fees paid for early debt redemption		(2,399)	(518)
Deferred financing costs paid		(14,674)	(315)
Net cash provided by financing activities of continuing operations		119,849	141,143
Cash flows from discontinued operations:
Operating activities of discontinued operations		(82,189)	(7,148)
Investing activities of discontinued operations		94,310	24,074
Financing activities of discontinued operations		0	0
Net cash provided by discontinued operations		12,121	16,926
(Decrease) increase in cash and cash equivalents		(167,367)	145,145
Cash and cash equivalents, beginning of period		218,180	144,353
Cash and cash equivalents, end of period	$ 289,498	$ 50,813	$ 289,498

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Basis of Presentation and Significant Accounting Policies

9 Months Ended

Nov. 28, 2020

Basis of Presentation

Basis of Presentation and Significant Accounting Policies

1. Basis of Presentation and Significant Accounting Policies

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 and thirty-nine week periods ended November 28, 2020 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 2020 10-K.

Revenue Recognition

The following table disaggregates the Company’s revenue by major source in each segment for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
In thousands	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Retail Pharmacy segment:
Pharmacy sales	$	2,837,137	$	2,623,832	$	8,123,143	$	7,761,052
Front-end sales		1,245,340		1,250,946		4,033,739		3,767,796
Other revenue		27,115		35,168		93,893		94,010
Total Retail Pharmacy segment		4,109,592		3,909,946		12,250,775		11,622,858
Pharmacy Services segment		2,084,402		1,613,109		6,100,026		4,758,470
Intersegment elimination		(76,956)		(60,757)		(224,417)		(180,177)
Total revenue	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151

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.

Effective January 1, 2020, members reach specific wellness+ tiers based on points accumulated during the six calendar month periods between January 1^st and June 30^th, and July 1^st through December 31^st, which entitles such customers to certain future discounts and other benefits upon reaching that tier. For example, any customer that reaches 500 points during the six calendar month period between January 1^st and June 30^th 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 that six calendar month period and for the following six calendar months. There is also a similar “Silver” level with a lower threshold and benefit level. Prior to January 1, 2020, the wellness+ tiers were based on points accumulated for a full calendar year, and entitled such customers to wellness+ benefits for the remainder of that calendar year and also the next calendar year.

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. For the thirteen week period ended November 28, 2020, the Company recognized $18,202 of deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $5,601 as of November 28, 2020, which is included in other current liabilities. The Retail Pharmacy segment had accrued contract liabilities of $52,668 as of February 29, 2020, which is included in other current liabilities.

The existing wellness+ program was terminated as of July 1, 2020, with benefits earned as of that date available to be used through the end of calendar 2020. In December 2020, the Company granted a temporary extension of benefits to previous members that were eligible for a discount as of December 31, 2020 such that those prior members will be eligible to continue to receive that discount on purchases made through June 30, 2021 with no additional purchase requirement. New and existing customers who were not already eligible for “Gold” benefits will still have the opportunity to earn additional discounts on purchases made through June 30, 2021.

Selling, General and Administrative Expenses

During the second quarter of fiscal 2021, the Company changed its compensated absence policy for certain associates.  Under the revised policy, benefits are earned and used within the same year, whereas previously benefits earned in one year could be used within a succeeding year.  The impact of this change resulted in a reduction in the Company’s associate paid time off “PTO” accrual of approximately $15,026 and $39,800 during the thirteen and thirty-nine weeks ended November 28, 2020, respectively.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which is intended to provide entities with additional guidance to determine which software implementation costs to capitalize and which costs to expense. The ASU will allow entities to capitalize costs for implementation activities during the application development stage. ASU No. 2018-15 is effective for fiscal years and interim periods within those years beginning after December 15, 2019 (fiscal 2021). Early adoption of ASU 2018-15 is permitted. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which adds to U.S. GAAP an impairment model (known as the current expected credit loss ("CECL") model), that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity will recognize, as an allowance, its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 impacts non-banks as most non-banks have financial instruments or other assets (e.g., trade, contract and lease receivables, financial guarantees, loans and loan commitments and held-to-maturity debt securities). The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the recognition of deferred tax liabilities and the methodology for calculating income taxes in the interim period. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 (fiscal 2022). The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement benefits (Topic 715-20). This ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

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Restructuring

9 Months Ended

Nov. 28, 2020

Restructuring

Restructuring

2. Restructuring

Beginning in fiscal 2019, the Company initiated a series of restructuring plans designed to reorganize its executive management team, reduce managerial layers, and consolidate roles. In March 2020, the Company announced the details of its RxEvolution strategy, which includes building tools to work with regional health plans to improve patient health outcomes, rationalizing SKU’s in its front-end offering to free up working capital and update its merchandise assortment, assessing its pricing and promotional strategy, rebranding its retail pharmacy and pharmacy services business, launching its Store of the Future format and further reducing SG&A and headcount, including integrating certain back office functions in the Pharmacy Services segment both within the segment and across Rite Aid.

For the thirteen week period ended November 28, 2020, the Company incurred total restructuring-related costs of $12,175, 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 ongoing reorganization efforts (a)	$	738	$	421	$	1,159
Non-executive retention costs associated with the March 2019 reorganization (b)		—		—		—
Professional and other fees relating to restructuring activities (c)		10,867		149		11,016
Total restructuring-related costs	$	11,605	$	570	$	12,175

For the thirteen week period ended November 30, 2019, the Company incurred total restructuring-related costs of $25,275, 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 ongoing reorganization efforts (a)	$	10,866	$	6,454	$	17,320
Non-executive retention costs associated with the March 2019 reorganization (b)		862		406		1,268
Professional and other fees relating to restructuring activities (c)		6,687		—		6,687
Total restructuring-related costs	$	18,415	$	6,860	$	25,275

For the thirty-nine week period ended November 28, 2020, the Company incurred total restructuring-related costs of $71,096, of which $45,333 is included as a component of SG&A and $25,763 is included as a component of cost of revenues. These costs are as follows:

	Retail Pharmacy		Pharmacy
	segment		Services segment		Total
Restructuring-related costs
Severance and related costs associated with ongoing reorganization efforts (a)	$	13,346	$	3,212	$	16,558
Non-executive retention costs associated with the March 2019 reorganization (b)		1,136		(124)		1,012
Professional and other fees relating to restructuring activities (c)		27,510		253		27,763
SKU optimization charges (d)		25,763		—		25,763
Total restructuring-related costs	$	67,755	$	3,341	$	71,096

In addition, during the thirteen week period ended May 30, 2020, the Company incurred intangible asset impairment charges of $29,852 in connection with its rebranding initiatives as described in Note 10, Goodwill and Other Intangible Assets.

For the thirty-nine week period ended November 30, 2019, the Company incurred total restructuring-related costs of $93,770, 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 ongoing reorganization efforts (a)	$	44,008	$	8,769	$	52,777
Non-executive retention costs associated with the March 2019 reorganization (b)		8,191		3,828		12,019
Professional and other fees relating to restructuring activities (c)		26,652		2,322		28,974
Total restructuring-related costs	$	78,851	$	14,919	$	93,770

A summary of activity for the thirty-nine week period ended November 28, 2020 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 February 29, 2020	$	36,228	$	6,432	$	2,394	$	45,054
Additions charged to expense		4,811		629		4,532		9,972
Cash payments		(13,055)		—		(5,046)		(18,101)
Balance at May 30, 2020	$	27,984	$	7,061	$	1,880	$	36,925
Additions charged to expense		10,588		383		12,215		23,186
Cash payments		(9,077)		(7,444)		(12,554)		(29,075)
Balance at August 29, 2020	$	29,495	$	—	$	1,541	$	31,036
Additions charged to expense		1,159		—		11,016		12,175
Cash payments		(11,770)		—		(7,473)		(19,243)
Balance at November 28, 2020	$	18,884	$	—	$	5,084	$	23,968

(a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts.

(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 initiatives associated with restructuring activities.

(d) – Inventory reserve on product lines the Company is exiting and will no longer carry as part of its rebranding initiative.

The Company anticipates incurring approximately $80,000 during fiscal 2021 in connection with its continued restructuring activities.

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Asset Sale to WBA

9 Months Ended

Nov. 28, 2020

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 Walgreens Boots Alliance, Inc. (“WBA”) and Walgreen Co., an Illinois corporation and 100% owned subsidiary of WBA (“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 (the “Original Asset Purchase Agreement”). Pursuant to the terms and subject to the conditions set forth in the Amended and Restated Asset Purchase Agreement, Buyer purchased from the Company 1,932 stores (the “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 (the “Asset Sale” or “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 received cash proceeds of $4,156,686.

During fiscal 2019, 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. During fiscal 2020, the Company completed the sale of the second distribution center and related assets to WBA for proceeds of $62,774. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $19,268, which has been included in the results of operations and cash flows of discontinued operations during the fifty-two week period ended February 29, 2020. During the first quarter of fiscal 2021, the Company completed the sale of the final distribution center and related assets to WBA for proceeds of $94,289. The impact of the sale of the distribution center and related assets resulted in a pre-tax gain of $12,690, which was included in the results of operations and cash flows of discontinued operations during the thirteen week period ended May 30, 2020. The transfer of the final distribution center and related assets constitutes the final closing under the Amended and Restated Asset Purchase Agreement.

The Company had agreed to provide transition services to Buyer for up to three years after the initial closing of the Sale. Under the terms of the Transition Services Agreement (“TSA”), the Company provided 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 had been extended to October 17, 2020, unless earlier terminated. In connection with these services, the Company purchased the related inventory and incurred cash payments for the selling, general and administrative activities, which, the Company billed on a cash neutral basis to WBA in accordance with terms as outlined in the TSA. Total billings for these items during the thirteen and thirty-nine week periods ended November 28, 2020 were $0 and $35,167, respectively. Total billings for these items during the thirteen and thirty-nine week periods ended November 30, 2019 were $619,680 and $2,726,436, respectively, of which $105,431 is included in Accounts receivable, net. The Company recorded WBA TSA fees of $0 and $1,467 during the thirteen and thirty-nine week periods ended November 28, 2020, respectively, which are reflected as a reduction to selling, general and administrative expenses. The Company recorded WBA TSA fees of $7,870 and $33,403 during the thirteen and thirty-nine week periods ended November 30, 2019, respectively, which are reflected as a reduction to selling, general and administrative expenses. In conjunction with the transfer of the final distribution center during the quarter ended May 30, 2020, the Company has substantially completed its obligations under the TSA. On July 14, 2020, the Company entered into a letter agreement with WBA to terminate the services under the TSA, other than certain specified services relating to real estate, accounting, tax, and accounts receivable systems that continued until October 17, 2020 and certain specified services relating to human resources to be performed after October 17, 2020.

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 November 28, 2020 and February 29, 2020, 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 to WBA, 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:

	November 28,		February 29,
	2020		2020
Inventories	$	—	$	13,719
Property and equipment		—		43,576
Operating lease right-of-use asset		—		34,983
Current assets held for sale	$	—	$	92,278
Current portion of operating lease liabilities	$	—	$	2,002
Long-term operating lease liabilities		—		35,061
Current liabilities held for sale	$	—	$	37,063

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:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Revenues	$	—	$	(13)	$	174	$	(136)
Costs and expenses:
Cost of revenues(a)		—		374		8		838
Selling, general and administrative expenses(a)		—		306		871		1,170
Loss (gain) on sale of assets, net		—		89		(14,149)		(433)
		—		769		(13,270)		1,575
(Loss) income from discontinued operations before income taxes		—		(782)		13,444		(1,711)
Income tax expense (benefit)		—		19		4,283		(16)
Net (loss) income from discontinued operations, net of tax	$	—	$	(801)	$	9,161	$	(1,695)

(a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations.

The operating results reflected above do not fully represent the Disposal Group’s historical operating results, as the results reported within net income (loss) from discontinued operations only include expenses that are directly attributable to the Disposal Group.

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Income (Loss) Per Share

9 Months Ended

Nov. 28, 2020

Income (Loss) Per Share

Income (Loss) Per Share

4. Income (Loss) Per Share

Basic income (loss) per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company, subject to anti-dilution limitations.

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Basic and diluted income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Net (loss) income from discontinued operations		—		(801)		9,161		(1,695)
Income (loss) attributable to common stockholders— basic and diluted	$	4,324	$	51,485	$	(72,414)	$	(127,453)
Denominator:
Basic weighted average shares		53,744		53,310		53,600		53,159
Outstanding options and restricted shares, net		335		274		—		—
Diluted weighted average shares		54,079		53,584		53,600		53,159
Basic income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.01)		0.17		(0.03)
Net basic income (loss) per share	$	0.08	$	0.97	$	(1.35)	$	(2.40)
Diluted income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.02)		0.17		(0.03)
Net diluted income (loss) per share	$	0.08	$	0.96	$	(1.35)	$	(2.40)

Due to their antidilutive effect, 171 and 820 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. Due to their antidilutive effect, 782 and 1,431 potential common shares related to stock options have been excluded from the computation of diluted income (loss) per share for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. Also, excluded from the computation of diluted income (loss) per share for the thirteen week periods ended November 28, 2020 and November 30, 2019 are restricted shares of 0, which are included in shares outstanding. Excluded from the computation of diluted income (loss) per share for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 are restricted shares of 1,499 and 1,481, respectively, which are included in shares outstanding.

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Lease Termination and Impairment Charges

9 Months Ended

Nov. 28, 2020

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				Thirty-Nine Week Period
	Ended				Ended
	November 28,			November 30,	November 28,		November 30,
	2020		2019		2020		2019
Impairment charges	$	3,797	$	121	$	15,230	$	1,533
Lease termination charges		—		—		—		—
Facility exit charges		3,656		45		7,504		582
	$	7,453	$	166	$	22,734	$	2,115

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 thirty-nine week period ended November 28, 2020, long-lived assets from continuing operations with a carrying value of $20,485, were written down to their fair value of $5,255, resulting in an impairment charge of $15,230 of which $3,797 relates to the thirteen week period ended November 28, 2020. Of the $15,230, $4,640 relates to a terminated software

project and the replacement of existing software, $4,995 relates to the closure of the remaining RediClinic operations and $5,595 relates to store and corporate assets. During the thirty-nine week period ended November 30, 2019, long-lived assets from continuing operations with a carrying value of $1,533, primarily store assets, were written down to their fair value of $0, resulting in an impairment charge of $1,533 of which $121 relates to the thirteen week period ended November 30, 2019. 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 November 28, 2020 and November 30, 2019:

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 28, 2020
Long-lived assets held for use	$	—	$	—	$	1,071	$	1,071	$	(12,635)
Long-lived assets held for sale	$	—	$	4,184	$	—	$	4,184	$	(2,595)
Total	$	—	$	4,184	$	1,071	$	5,255	$	(15,230)

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 30, 2019
Long-lived assets held for use	$	—	$	—	$	—	$	—	$	(1,533)
Long-lived assets held for sale	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	(1,533)

The above assets reflected in the caption Long-lived assets held for sale are separate and apart from the Assets to be Sold and due 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 changes in the Company’s closed store liability relating to closed store and distribution center charges for new closures, changes in assumptions and interest accretion:

	Thirteen Week Period				Thirty-Nine Week Period
	Ended				Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Balance—beginning of period	$	2,605	$	6,341	$	2,253	$	124,046
Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset		—		—		—		(112,288)
Provision for present value of executory costs for closed stores		664		—		664		—
Changes in assumptions about future sublease income		(496)		—		—		—
Interest accretion		21		—		21		—
Cash payments, net of sublease income		(15)		(3,132)		(159)		(8,549)
Balance—end of period	$	2,779	$	3,209	$	2,779	$	3,209

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Fair Value Measurements

9 Months Ended

Nov. 28, 2020

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.

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 November 28, 2020 and February 29, 2020, the Company has $7,003 and $7,022, respectively, of investments carried at amortized cost as these investments are being held to maturity, which are included as a component of other assets. The Company believes the carrying value of these investments approximates their fair value.

The fair value for LIBOR-based borrowings under the Company’s senior secured credit facility 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 $3,200,577 and $3,212,995, respectively, as of November 28, 2020. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $3,077,268 and $3,021,385, respectively, as of February 29, 2020.

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Income Taxes

9 Months Ended

Nov. 28, 2020

Income Taxes

Income Taxes

7. Income Taxes

The Company recorded an income tax expense from continuing operations of $437 and $876 for the thirteen week periods ended November 28, 2020 and November 30, 2019, respectively. The Company recorded an income tax

benefit from continuing operations of $7,534 and an income tax expense from continuing operations of $35,878 for the thirty-nine week periods ended November 28, 2020 and November 30, 2019, respectively. The effective tax rate for the thirteen week periods ended November 28, 2020 and November 30, 2019 was 9.2% and 1.6%, respectively. The effective tax rate for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 was 8.5% and (39.9)%, respectively. The effective tax rate for the thirteen and thirty-nine week periods ended November 28, 2020 was net of an adjustment of (61.0)% and (5.2)%, respectively, to increase the valuation allowance against deferred tax assets. The effective tax rate for the thirteen and thirty-nine week periods ended November 30, 2019 was net of an adjustment of (31.8)% and (61.0)%, respectively, to increase the valuation allowance against deferred tax assets.

The Company recognizes tax liabilities in accordance with the guidance for uncertain tax positions and management adjusts these liabilities with changes in judgment as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

The Company believes that it is reasonably possible that a decrease of up to $13,210 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 $1,676,903 and $1,673,119, 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 November 28, 2020 and February 29, 2020, respectively.

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Medicare Part D

9 Months Ended

Nov. 28, 2020

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 Prescription Drug Plan (“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 $24,074 as of September 30, 2020. EIC was in excess of the minimum required amounts in these states as of November 28, 2020.

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.

On February 19, 2020, the Company entered into a receivable purchase agreement (the “2019 Receivable Purchase Agreement”) with Bank of America, N.A. (the “Purchaser”).

Pursuant to the terms and conditions set forth in the 2019 Receivable Purchase Agreement, the Company sold $501,422 of its calendar 2019 CMS receivable for $484,547, of which $449,949 was received on February 19, 2020. As of November 28, 2020, $3,293, which is included in accounts receivable, net, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $16,875, which was included as a component of loss on sale of assets, net in the fourth quarter of fiscal 2020.

On February 19, 2020, concurrent with the 2019 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “2019 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the 2019 Indemnity Agreement. Based on its evaluation of the 2019 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the 2019 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the 2019 Indemnity Agreement.

On November 12, 2020, the Company entered into a receivable purchase agreement (the “November 2020 Receivable Purchase Agreement”) with Purchaser, which was on terms similar to the 2019 Receivable Purchase Agreement.

Pursuant to the terms and conditions set forth in the November 2020 Receivable Purchase Agreement, the Company sold $464,019, a portion of its calendar 2020 CMS receivable, for $444,812, of which $412,795 was received on November 12, 2020. The remaining $32,017, which is included in accounts receivable, net as of November 28, 2020, is payable to the Company, subject to final CMS claim reconciliation adjustments, upon receipt of the final remittance from CMS. In connection therewith, the Company recognized a loss of $19,207, which is included as a component of gain on sale of assets, net.

On November 12, 2020, concurrent with the November 2020 Receivable Purchase Agreement, the Company entered into an indemnity agreement (the “November 2020 Indemnity Agreement”), whereby the Company has agreed to indemnify, reimburse and hold Purchaser harmless from certain liabilities and expenses actually suffered or incurred by the Purchaser resulting from the occurrence of certain events as specified in the November 2020 Indemnity Agreement. Based on its evaluation of the November 2020 Indemnity Agreement, the Company has determined that it is highly unlikely that the events covered under the November 2020 Indemnity Agreement would occur, and consequently, the Company has not recorded any indemnification liability associated with the November 2020 Indemnity Agreement.

As of November 28, 2020, accounts receivable, net included $243,001 due from CMS. As of February 29, 2020, accrued salaries, wages and other current liabilities included $14,083 of amounts due to CMS.

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Manufacturer Rebates Receivables

9 Months Ended

Nov. 28, 2020

Manufacturer Rebates Receivables

Manufacturer Rebates Receivables

9. Manufacturer Rebates Receivables

The Pharmacy Services Segment has manufacturer rebates receivables of $656,784 and $530,451 included in Accounts receivable, net, as of November 28, 2020 and February 29, 2020, respectively.

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Goodwill and Other Intangible Assets

9 Months Ended

Nov. 28, 2020

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

10. Goodwill and Other Intangible Assets

There was no goodwill impairment charge for the thirteen and thirty-nine week periods ended November 28, 2020. At November 28, 2020 and February 29, 2020, 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 November 28, 2020 and February 29, 2020.

	November 28, 2020								February 29, 2020
							Remaining								Remaining
							Weighted								Weighted
	Gross						Average		Gross						Average
	Carrying		Accumulated				Amortization		Carrying		Accumulated				Amortization
	Amount		Amortization		Net		Period		Amount		Amortization		Net		Period
Non-compete agreements and other(a)	$	194,195	$	(170,867)	$	23,328	3	years	$	186,183	$	(163,575)	$	22,608	3	years
Prescription files		968,617		(892,646)		75,971	3	years		950,887		(867,430)		83,457	3	years
Customer relationships(a)		388,000		(254,494)		133,506	11	years		388,000		(231,015)		156,985	12	years
CMS license		57,500		(12,497)		45,003	20	years		57,500		(10,772)		46,728	21	years
Claims adjudication and other developed software		58,985		(45,780)		13,205	2	years		58,985		(39,459)		19,526	3	years
Trademarks		—		—		—	0	years		20,100		(9,413)		10,687	6	years
Backlog		11,500		(11,500)		—	0	years		11,500		(11,500)		—	0	years
Total finite	$	1,678,797	$	(1,387,784)		291,013			$	1,673,155	$	(1,333,164)	$	339,991
Trademarks		—		—		—	Indefinite			19,500		—		19,500	Indefinite
Total	$	1,678,797	$	(1,387,784)	$	291,013			$	1,692,655	$	(1,333,164)	$	359,491

(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.

In connection with the RxEvolution initiatives previously announced on March 16, 2020, the Company rebranded its EnvisionRxOptions and MedTrak subsidiaries to its new brand name, Elixir. These trademarks qualify as Level 3 within the fair value hierarchy. Upon the implementation of the rebranding initiatives during the first quarter of fiscal 2021, the Company has determined that the carrying value exceeded the fair value and consequently the Company incurred an impairment charge of $29,852 for these trademarks, which is included within intangible asset impairment charges within the condensed consolidated statement of operations.

Amortization expense for these intangible assets and liabilities was $21,236 and $68,351 for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. Amortization expense for these intangible assets and liabilities was $24,920 and $79,176 for the thirteen and thirty-nine week periods ended November 30, 2019, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2021—$86,400; 2022—$67,155; 2023—$51,885; 2024—$38,220 and 2025—$26,938.

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Indebtedness and Credit Agreements

9 Months Ended

Nov. 28, 2020

Indebtedness and Credit Agreements

Indebtedness and Credit Agreements

11. Indebtedness and Credit Agreements

Following is a summary of indebtedness and lease financing obligations at November 28, 2020 and February 29, 2020:

	November 28,		February 29,
	2020		2020
Secured Debt:
Senior secured revolving credit facility due December 2023 ($991,000 and $650,000 face value less unamortized debt issuance costs of $15,369 and $19,167)	$	975,631	$	630,833
FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $2,434 and $3,046)		447,566		446,954
		1,423,197		1,077,787
Second Lien Secured Debt:
7.5% senior notes due July 2025 ($600,000 face value less unamortized debt issuance costs of $9,388 and $10,927)		590,612		589,073
8.0% senior notes due November 2026 ($849,918 and $0 face value less unamortized debt issuance costs of $18,914 and $0)		831,004		—
		1,421,616		589,073
Guaranteed Unsecured Debt:
6.125% senior notes due April 2023 ($90,808 and $1,153,490 face value less unamortized debt issuance costs of $502 and $8,430)		90,306		1,145,060
		90,306		1,145,060
Unguaranteed Unsecured Debt:
7.70% notes due February 2027 ($237,386 face value less unamortized debt issuance costs of $809 and $908)		236,577		236,478
6.875% fixed-rate senior notes due December 2028 ($29,001 face value less unamortized debt issuance costs of $120 and $131)		28,881		28,870
		265,458		265,348
Lease financing obligations		24,195		28,166
Total debt		3,224,772		3,105,434
Current maturities of long-term debt and lease financing obligations		(7,097)		(8,840)
Long-term debt and lease financing obligations, less current maturities	$	3,217,675	$	3,096,594

Credit Facility

On December 20, 2018, the Company entered into a senior secured credit agreement (as amended by the First Amendment to Credit Agreement, dated as of January 6, 2020, the “Credit Agreement”), consisting of a $2,700,000 senior secured asset-based revolving credit facility (“Senior Secured Revolving Credit Facility”) and a $450,000 “first-in, last out” senior secured term loan facility (“Senior Secured Term Loan,” and together with the Senior Secured Revolving Credit Facility, collectively, the “Existing Facilities”). The Company used proceeds from the Existing Facilities to refinance its prior $2,700,000 existing credit agreement (the “Old Facility”). The Existing Facilities extend the Company’s debt maturity profile and provide additional liquidity. Borrowings under the Senior Secured Revolving

Credit Facility bear interest at a rate per annum between LIBOR plus 1.25% and LIBOR plus 1.75% based upon the Average ABL Availability (as defined in the Credit Agreement). Borrowings under the Senior Secured Term Loan bear interest at a rate per annum of LIBOR plus 3.00%. The Company is required to pay fees between 0.250% and 0.375% per annum on the daily unused amount of the commitments under the Senior Secured Revolving Credit Facility, depending on Average ABL Availability. The Existing Facilities mature on December 20, 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 (the “6.125% Notes”) prior to such date. The Company has refinanced the majority of its 6.125% Notes and intends to refinance or repay the remaining balance prior to the early maturity becoming effective.

The Company’s borrowing capacity under the Senior Secured Revolving Credit Facility is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files. At November 28, 2020, the Company had $1,441,000 of borrowings outstanding under the Existing Facilities and had letters of credit outstanding against the Senior Secured Revolving Credit Facility of $107,739 which resulted in additional borrowing capacity under the Senior Secured Revolving Credit Facility of $1,601,261. If at any time the total credit exposure outstanding under the Existing Facilities and the principal amount of our other senior obligations exceed the borrowing base, the Company will be required to make certain other mandatory prepayments to eliminate such shortfall.

The Credit Agreement restricts the Company and all of its subsidiaries that guarantee its obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes (collectively, the “Subsidiary Guarantors”) from accumulating cash on hand in excess of $200,000 at any time when revolving loans are outstanding (not including cash located in store and lockbox deposit accounts and cash necessary to cover current liabilities). The Credit Agreement also states that if at any time (other than following the exercise of remedies or acceleration of any senior obligations or second priority debt and receipt of a triggering notice by the senior collateral agent from a representative of the senior obligations or the second priority debt) either (i) an event of default exists under the Existing Facilities or (ii) the sum of the Company’s borrowing capacity under the Senior Secured Revolving Credit Facility and certain amounts held on deposit with the senior collateral agent in a concentration account is less than $275.0 million for three consecutive business days or less than or equal to $200.0 million on any day (a “cash sweep period”), the funds in the Company’s deposit accounts will be swept to a concentration account with the senior collateral agent and will be applied first to repay outstanding revolving loans under the Existing Facilities, and then held as collateral for the senior obligations until such cash sweep period is rescinded pursuant to the terms of the Existing Facilities.

With the exception of EIC, substantially all of Rite Aid Corporation’s 100% owned subsidiaries guarantee the obligations under the Existing Facilities, the secured guaranteed notes and unsecured guaranteed notes. The Company’s obligations under the Existing Facilities and the Subsidiary Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivable, inventory, prescription files (including eligible script lists), intellectual property (prior to the repayment of the Senior Secured Term Loan) and certain other assets arising therefrom or related thereto (including substantially all of their deposit accounts, collectively, the “ABL priority collateral”) and (ii) a second-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and all other assets that do not constitute ABL priority collateral, in each case, subject to customary exceptions and limitations. The subsidiary guarantees related to the Company’s Existing Facilities, the secured guaranteed notes 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 Existing Facilities and applicable notes, are minor.

The Credit Agreement allows the Company to have outstanding, at any time, up to an aggregate principal amount of $1,500,000 in secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock in addition to borrowings under the Existing Facilities and existing indebtedness, provided that not in excess of $750,000 of such secured second priority debt, split-priority debt, unsecured debt and disqualified preferred stock shall mature or require scheduled payments of principal prior to 90 days after the latest maturity date of any Term Loan or Other Revolving Commitment (each as defined in the Credit Agreement) (excluding bridge facilities allowing extensions on customary terms to at least the date that is 90 days after such date). Subject to the limitations described in clauses (i) and (ii) of the immediately preceding sentence, the Credit Agreement additionally allows the Company to issue or incur an unlimited amount of unsecured debt and disqualified preferred stock so long as a Financial Covenant Effectiveness Period (as defined in the Credit Agreement) 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 Credit Agreement also contains certain restrictions on the amount of secured first priority debt the Company is able to incur. The Credit Agreement also allows for the voluntary repurchase of any debt or other convertible debt, so long as the Existing Facilities are not in default and the Company maintains availability under its revolver of more than $365,000.

The Credit Agreement has 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 Senior Secured Revolving Credit Facility is less than $200,000 or (ii) on the third consecutive business day on which availability under the Senior Secured Revolving Credit Facility is less than $250,000 and, in each case, ending on and excluding the first day thereafter, if any, which is the 30th consecutive calendar day on which availability under the revolver is equal to or greater than $250,000. As of November 28, 2020, the Company’s fixed charge coverage ratio was greater than 1.00 to 1.00, and the Company was in compliance with the Credit Agreement’s financial covenant. The Credit Agreement also contains covenants which place restrictions on the incurrence of debt, the payments of dividends, the making of investments, sale of assets, mergers and acquisitions and the granting of liens.

The Credit Agreement provides for customary events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if the Company fails to make any required payment on debt having a principal amount in excess of $50.0 million or any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of such debt to accelerate the maturity or require the repayment, repurchase, redemption or defeasance of such debt.

Fiscal 2020 and 2021 Transactions

On October 11, 2019, the Company completed a privately negotiated purchase from a noteholder and its affiliated funds of $84,097 aggregate principal amount of the 7.70% Notes due 2027 (the “7.70% Notes”) and 6.875% fixed-rate Senior Notes due 2028 (the “6.875% Notes”) for $51,300. In connection therewith, the Company recorded a gain on debt retirement of $32,416, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

On October 15, 2019, the Company commenced an offer to purchase up to $100,000 of its outstanding 7.70% Notes and its 6.875% Notes. In November 2019, the Company accepted for payment $18,075 aggregate principal amount of the 7.70% Notes and $39,441 aggregate principal amount of the 6.875% Notes for $38,392. In connection therewith, the Company recorded a gain on debt retirement of $18,510, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

During November 2019, the Company made additional purchases of $15,000 aggregate principal amount of the 7.70% Notes for $10,012. In connection therewith, the Company recorded a gain on debt retirement of $4,766, which included unamortized debt issuance costs. The debt repayment and related gain on debt retirement is included in the results of operations and cash flows of continuing operations.

On January 6, 2020, the Company commenced an offer to exchange up to $600,000 aggregate principal amount of the outstanding 6.125% Notes for newly issued 7.500% Senior Secured Notes due 2025 (the “7.500% Notes”). On February 5, 2020, the Company announced that the exchange offer was oversubscribed and accepted for payment $600,000 aggregate principal amount of the 6.125% Notes in exchange for newly issued 7.500% Notes. The Company accounted for the exchange as a debt modification and accordingly did not record a loss on debt retirement.

The 7.500% Notes mature on July 1, 2025, and are guaranteed on a senior secured basis by the same Subsidiary Guarantors that guarantee the Existing Facilities and the 6.125% Notes. The 7.500% Notes and the obligations under the related guarantees are secured by (i) a first-priority lien on all of the Subsidiary Guarantors’ equipment, fixtures, investment property (other than equity interests in subsidiaries), intellectual property (following the repayment of the Senior Secured Term Loan) and other collateral to the extent it does not constitute ABL priority collateral (as defined below), and (ii) a second-priority lien on all of the Subsidiary Guarantors’ cash and cash equivalents, accounts receivables, payment intangibles, inventory, prescription files (including eligible script lists) and, intellectual property (prior to the repayment of the Senior Secured Term Loan (collectively, the “ABL priority collateral”), which, in each case, also secure the Existing Facilities.

On June 25, 2020, the Company commenced an offer to exchange (the “June 25, 2020 Exchange Offer”) up to $750,000 aggregate principal amount of the outstanding 6.125% Notes for a combination of $600,000 newly issued 8.0% Senior Secured Notes due 2026 (the “8.0% Notes”) and $145,500 cash. On July 10, 2020, the Company increased the maximum amount of 6.125% Notes that may be accepted for exchange from $750,000 to $1,125,000 and, on July 24, 2020, the Company announced that it accepted for payment $1,062,682 aggregate principal amount of the 6.125% Notes in exchange for $849,918 aggregate principal amount of newly issued 8.0% Notes and $206,373 in cash. In connection therewith, the Company recorded a gain on debt modification of $5,274 which is included in the results of operations and cash flows of continuing operations. The 8.0% Notes are secured on an equal and ratable basis by the same assets that secure the 7.500% Notes. The 8.0% Notes are guaranteed on a senior secured basis by the same subsidiaries that guarantee the 7.500% Notes. In conjunction with the June 25, 2020 Exchange Offer, the Company also commenced a solicitation of consents from the holders of outstanding 6.125% Notes to certain proposed amendments to the indenture governing the 6.125% Notes. On July 9, 2020, following the receipt of the requisite number of consents, the Company entered into a supplemental indenture, which modified certain limitations in the debt covenant to allow for the creation of the 8.0% Notes.

Maturities

The aggregate annual principal payments of long-term debt for the remainder of fiscal 2021 and thereafter are as follows: 2021—$0; 2022—$0; 2023—$0; 2024—$1,531,808; 2025—$0 and $1,716,305 thereafter. These aggregate annual principal payments of long-term debt assume that the Company has repaid or refinanced its existing 6.125% Notes prior to December 31, 2022.

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Leases

9 Months Ended

Nov. 28, 2020

Leases

Leases

12. Leases

The Company leases most of its retail stores and certain distribution facilities under noncancelable operating and finance 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 noncancelable 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 and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Operating lease cost	$	160,794	$	163,035	$	483,558	$	492,020
Financing lease cost:
Amortization of right-of-use asset		1,092		1,419		3,316		4,463
Interest on long-term finance lease liabilities		595		775		1,927		2,536
Total finance lease costs	$	1,687	$	2,194	$	5,243	$	6,999
Short-term lease costs		476		445		913		561
Variable lease costs		42,949		42,723		128,078		126,037
Less: sublease income		(3,511)		(5,195)		(11,530)		(16,353)
Net lease cost	$	202,395	$	203,202	$	606,262	$	609,264

Supplemental cash flow information related to leases for the thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	507,989	$	469,207
Operating cash flows paid for interest portion of finance leases		1,927		2,536
Financing cash flows paid for principal portion of finance leases		3,613		4,939
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		342,915		265,612
Finance leases		—		—

Supplemental balance sheet information related to leases as of November 28, 2020 and February 29, 2020 (in thousands, except lease term and discount rate):

	November 28,			February 29,
	2020			2020
Operating leases:
Operating lease right-of-use asset	$	2,892,445		$	2,903,256
Short-term operating lease liabilities	$	489,867		$	490,161
Long-term operating lease liabilities		2,676,153			2,710,347
Total operating lease liabilities	$	3,166,020		$	3,200,508
Finance leases:
Property, plant and equipment, net	$	17,031		$	19,904
Current maturities of long-term debt and lease financing obligations	$	7,097		$	8,840
Lease financing obligations, less current maturities		17,098			19,326
Total finance lease liabilities	$	24,195		$	28,166
Weighted average remaining lease term
Operating leases		7.7			7.8
Finance leases		8.8			8.9
Weighted average discount rate
Operating leases		6.1	%		6.1	%
Finance leases		9.9	%		10.2	%

The following table summarizes the maturity of lease liabilities under finance and operating leases as of November 28, 2020:

	November 28, 2020
	Finance		Operating
Fiscal year	Leases		Leases (1)		Total
2021 (remaining thirteen weeks)	$	5,040	$	167,984	$	173,024
2022		7,823		651,961		659,784
2023		3,470		604,610		608,080
2024		3,278		545,123		548,401
2025		2,922		450,389		453,311
Thereafter		14,540		1,553,990		1,568,530
Total lease payments		37,073		3,974,057		4,011,130
Less: imputed interest		(12,878)		(808,037)		(820,915)
Total lease liabilities	$	24,195	$	3,166,020	$	3,190,215

(1) – Future operating lease payments have not been reduced by minimum sublease rentals of $43 million due in the future under noncancelable leases.

During the thirteen week period ended November 28, 2020, the Company sold six owned and operating properties, including the Company’s Perryman, MD distribution center and five retail stores to independent third parties. In addition, during the thirty-nine week period ended November 28, 2020, the Company also sold one owned and operating property, the Company’s Ice Cream Plant, to an independent third party. Net proceeds from the sales were $80,551 and $89,012 for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. Concurrent with these sales, the Company entered into agreements to lease the properties back from the purchasers over minimum lease terms between 15 and 20 years. The Company accounted for these leases as operating lease right-of-use assets and corresponding operating lease liabilities in accordance with the Lease Standard. The transactions resulted in a gain of $33,092 and $39,311 which is included in the gain on sale of assets, net for the thirteen and thirty-nine week periods ended November 28, 2020, respectively. During the thirteen and thirty-nine week periods ended November 30, 2019, the Company did not enter into any sale-leaseback transactions. The Company has additional capacity under its outstanding debt agreements to enter into additional sale-leaseback transactions.

As of November 28, 2020, the Company has identified certain distribution center and store assets which it intends to sell and leaseback. The carrying amount of these assets of $42,231, comprised of land, buildings and improvements, were included in the Retail Pharmacy segment, and have been reclassified from their historical balance sheet presentation to current assets held for sale. There can be no assurance if or when the Company will enter into such transactions or the final terms thereof.

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Stock Options and Stock Awards

9 Months Ended

Nov. 28, 2020

Stock Option and Stock Award Plans

Stock Options and Stock Awards

13. Stock Options and Stock Awards

The Company recognizes share-based compensation expense over the requisite service period of the award, net of an estimate for the impact of forfeitures. Operating results for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 include $8,677 and $13,598, respectively, of compensation costs related to the Company’s stock-based compensation arrangements.

The Company provides certain of its associates with performance based incentive plans under which the associates will receive a certain number of shares of the Company’s common stock or cash based on the Company meeting certain financial and performance goals. If such goals are not met, no stock-based compensation expense is recognized and any recognized stock-based compensation expense is reversed. During the thirty-nine week periods ended November 28, 2020 and November 30, 2019, the Company incurred expense of $1,170 compared to a benefit of $715 related to these performance based incentive plans, respectively, which is recorded as a component of stock-based compensation expense.

The total number and type of newly awarded grants and the related weighted average fair value for the thirty-nine week periods ended November 28, 2020 and November 30, 2019 are as follows:

	November 28, 2020			November 30, 2019
	Shares	Weighted Average Fair Value		Shares	Weighted Average Fair Value
Stock options granted	—	$	N/A	612	$	3.66
Restricted stock awards granted	766	$	17.70	1,345	$	7.70
Total awards	766			1,957

Typically, stock options granted vest, and are subsequently exercisable in equal annual installments over a four-year period for employees. Restricted stock awards typically vest in equal annual installments over a three-year period.

The Company calculates the fair value of stock options using the Black-Scholes-Merton option pricing model.

As of November 28, 2020, the total unrecognized pre-tax compensation costs related to unvested stock options and restricted stock awards granted, net of estimated forfeitures and the weighted average period of cost amortization are as follows:

	November 28, 2020
	Unvested		Unvested		Unvested
	stock		restricted		performance
	options		stock		shares
Unrecognized pre-tax costs	$	1,468	$	16,335	$	6,323
Weighted average amortization period		2.5 years		2.3 years		2.3 years

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Retirement Plans

9 Months Ended

Nov. 28, 2020

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Retirement Plans

14. Retirement Plans

Net periodic pension expense for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019, for the Company’s defined benefit plan includes the following components:

	Defined Benefit				Defined Benefit
	Pension Plan				Pension Plan
	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Service cost	$	144	$	143	$	432	$	428
Interest cost		1,199		1,556		3,598		4,667
Expected return on plan assets		(1,177)		(1,214)		(3,531)		(3,641)
Amortization of unrecognized net loss		911		415		2,734		1,245
Net periodic pension expense	$	1,077	$	900	$	3,233	$	2,699

During the thirteen and thirty-nine week periods ended November 28, 2020 the Company contributed $4,597 and $5,451, respectively to the Defined Benefit Pension Plan. During the remainder of fiscal 2021, the Company expects to contribute $854 to the Defined Benefit Pension Plan.

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Segment Reporting

9 Months Ended

Nov. 28, 2020

Segment Reporting

Segment Reporting

15. Segment Reporting

The Company has two reportable segments, its retail drug stores (“Retail Pharmacy”), and its pharmacy services (“Pharmacy Services”) segments.

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, and drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program.

The Company’s chief operating decision makers are its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and the President—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
November 28, 2020:
Total Assets	$	6,696,953	$	2,750,031	$	(17,581)	$	9,429,403
Goodwill		43,492		1,064,644		—		1,108,136
February 29, 2020:
Total Assets	$	6,757,196	$	2,709,737	$	(14,564)	$	9,452,369
Goodwill		43,492		1,064,644		—		1,108,136

(1) As of November 28, 2020 and February 29, 2020, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $17,581 and $14,564, 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 and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
Thirteen Week Period Ended
November 28, 2020:
Revenues	$	4,109,592	$	2,084,402	$	(76,956)	$	6,117,038
Gross Profit		1,079,708		123,391		—		1,203,099
Adjusted EBITDA(2)		88,557		48,848		—		137,405
Additions to property and equipment and intangible assets		67,727		2,708		—		70,435
November 30, 2019:
Revenues	$	3,909,946	$	1,613,109	$	(60,757)	$	5,462,298
Gross Profit		1,070,852		118,123		—		1,188,975
Adjusted EBITDA(2)		108,579		49,511		—		158,090
Additions to property and equipment and intangible assets		58,546		4,256		—		62,802
Thirty-Nine Week Period Ended
November 28, 2020:
Revenues	$	12,250,775	$	6,100,026	$	(224,417)	$	18,126,384
Gross Profit		3,223,157		338,606		—		3,561,763
Adjusted EBITDA(2)		273,879		122,521		—		396,400
Additions to property and equipment and intangible assets		146,455		9,637		—		156,092
November 30, 2019:
Revenues	$	11,622,858	$	4,758,470	$	(180,177)	$	16,201,151
Gross Profit		3,133,791		326,346		—		3,460,137
Adjusted EBITDA(2)		285,260		117,367		—		402,627
Additions to property and equipment and intangible assets		146,118		16,452		—		162,570

(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 income (loss) to Adjusted EBITDA for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Interest expense		50,835		57,856		151,389		176,228
Income tax expense (benefit)		437		876		(7,534)		35,878
Depreciation and amortization		83,336		82,007		249,556		248,977
LIFO (credit) charge		(9,487)		(7,440)		(30,303)		7,553
Lease termination and impairment charges		7,453		166		22,734		2,115
Intangible asset impairment charges		—		—		29,852		—
Gain on debt modifications and retirements, net		—		(55,692)		(5,274)		(55,692)
Merger and Acquisition-related costs		1,136		—		1,136		3,599
Stock-based compensation expense		2,867		3,506		8,677		13,598
Restructuring-related costs		12,175		25,275		71,096		93,770
Inventory write-downs related to store closings		704		93		2,596		4,083
Gain on sale of assets, net		(16,305)		(1,371)		(17,473)		(5,670)
Other		(70)		528		1,523		3,946
Adjusted EBITDA from continuing operations	$	137,405	$	158,090	$	396,400	$	402,627

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Commitments, Contingencies and Guarantees

9 Months Ended

Nov. 28, 2020

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

16. Commitments, Contingencies and Guarantees

Legal Matters and Regulatory Proceedings

The Company is involved in numerous legal matters including litigation, arbitration, and other claims, and is subject to regulatory proceedings including 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 or advanced; (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.

California Employment Litigation.

The Company is currently a defendant in several lawsuits filed in courts in California that contain allegations regarding violations of the California Business and Professions Code, various California employment laws and regulations, industry wage orders, wage-and-hour laws, rules and regulations pertaining primarily to failure to pay overtime, failure to pay premiums for missed meals and rest periods, failure to provide accurate wage statements, and failure to reimburse business expenses (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. These single-plaintiff and multi-plaintiff California Cases in the aggregate, seek substantial damages. The Company believes that its defenses and assertions in the California Cases have merit. The Company has aggressively challenged the merits of the lawsuits and, where applicable, 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 defending itself against these claims.

Usual and Customary and Code 1 Litigation.

In January 2017, qui tam plaintiff Azam Rahimi (“Relator”) filed a sealed False Claims Act (“FCA”) lawsuit in the United States District Court for the Eastern District of Michigan. The United States Attorney’s Office for the Eastern District of Michigan, 18 states, and the District of Columbia declined to intervene. The unsealed lawsuit alleges that the Company failed to report Rite Aid’s Rx Savings Program prices as its usual and customary charges under the Medicare Part D program, federal and state Medicaid programs, and other publicly funded health care programs, and that the Company is thus liable under the federal FCA and similar state statutes. On December 12, 2019, the court granted the Company’s motion to dismiss and judgment on the pleadings based upon the FCA’s public disclosure bar. The Relator filed a motion for reconsideration which was denied. The Relator has appealed from the order granting the Company’s motion to dismiss and for judgment on the pleadings, and also from the order denying his motion for reconsideration. 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 defending itself against these claims.

The State of Mississippi, by and through its Attorney General, filed a lawsuit against the Company and various purported related entities on September 27, 2016 alleging the Company failed to accurately report usual and customary prices to Mississippi’s Division of Medicaid. 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 defending itself against these claims.

The Company is involved in a putative consumer class action lawsuit in the United States District Court for the Southern District of California captioned Byron Stafford v. Rite Aid Corp. A separate lawsuit, Robert Josten v. Rite Aid Corp., was consolidated with this lawsuit in November, 2019. The lawsuit contains allegations 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 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. At this stage of the proceedings, the Company is not able to either predict the outcome or estimate a potential range of loss and is defending itself against these claims.

On February 6, 2019, Humana, Inc., filed an arbitration claim alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program pricing to Humana. At this stage of the proceedings, the Company is not able to either predict the outcome of this arbitration proceeding or estimate a potential range of loss, and is defending itself against these claims.

The Company is a defendant in a lawsuit filed by North Carolina, North Dakota, Alabama, Utah, Oregon, Washington and New Jersey Blue Cross/Blue Shield plans alleging that the Company improperly submitted various usual and customary overcharges by failing to report its Rx Savings Program pricing to several Pharmacy Benefit Managers with which Rite Aid and the insurers had independent contracts. On October 8, 2020, two Minnesota Blue Cross/Blue Shield entities filed a similar action in the same court asserting the same claims against the Company. At this stage of the proceedings, the Company is not able to either predict the outcome of this litigation proceeding or estimate a potential range of loss, and is defending itself against these claims.

In June 2012, qui tam plaintiff, Loyd F. Schmuckley (“Relator”) filed a complaint under seal against the Company alleging that it failed to comply with certain requirements of California’s Medicaid program between 2007 and 2014. Specifically, the Relator alleged that the Company did not perform special verification and documentation for certain medications known as “Code 1” drugs. While the complaint remained under seal, the United States Department of Justice conducted an extensive investigation and ultimately declined to intervene. Although numerous states declined to intervene, in September 2017, the State of California filed a complaint in intervention. 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 defending itself against these claims.

Controlled Substances Litigation, Audits and Investigations

The Company along with various other defendants are named in multiple opioid-related lawsuits filed by counties, cities, municipalities, Native American tribes, hospitals, third-party payers, and others across the United States. In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated and transferred more than a thousand federal opioid-related lawsuits that name the Company and/or a related entity as a defendant to the multi-district litigation (“MDL”) pending in the United States District Court for the Northern District of Ohio before Judge Dan Polster under In re National Prescription Opiate Litigation (Case No. 17-MD-2804). A significant number of similar cases that are not part of the MDL and name the Company and/or a related entity or entities as a defendant in also are pending in state courts. The plaintiffs in all of these opioid-related lawsuits generally allege claims concerning the

impacts of widespread opioid abuse against defendants along the pharmaceutical supply chain, including manufacturers, wholesale distributors, and retail pharmacies. At this stage of the proceedings, the Company is not able to predict the outcome of the opioid-related lawsuits or estimate a potential range of loss regarding the lawsuits. The Company is defending itself against all relevant claims.

The Company also has received warrants, subpoenas, CIDs, and other requests for documents and information from, and is being investigated by, the federal and state governments regarding opioids and other controlled substances. The Company has been cooperating with and responding to these investigatory inquiries.

Miscellaneous Litigation and Investigations.

The U.S. Securities and Exchange Commission (“SEC”) is investigating trading in the Company’s securities that occurred in or around January 2017, and has subpoenaed information from the Company in connection with that investigation. The Company is cooperating with the SEC in this matter. 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.

These other legal proceedings include claims of improper disclosure of personal information, anticompetitive practices, general contractual matters, product liability, professional malpractice, non-compliance with state and federal regulatory regimes, marketing misconduct, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

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Supplementary Cash Flow Data

9 Months Ended

Nov. 28, 2020

Supplementary Cash Flow Data

Supplementary Cash Flow Data

17. Supplementary Cash Flow Data

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for interest(a)	$	101,668	$	134,302
Cash payments for income taxes, net(a)	$	6,945	$	6,564
Equipment financed under capital leases	$	1,682	$	2,119
Gross borrowings from revolver(a)	$	6,233,000	$	2,430,000
Gross repayments to revolver(a)	$	5,892,000	$	2,170,000

(a) — Amounts are presented on a total company basis.

Significant components of cash provided by Other Liabilities of $45,867 for the thirty-nine week period ended November 28, 2020 include cash provided from the employer payroll tax payment deferral under the CARES act of $82,827 and an increase in accrued interest of $39,949, partially offset by a reduction in the wellness+ loyalty program revenue deferral of $47,068 and a decrease in benefit and other operating expense related accruals of $35,809.

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Subsequent Events

9 Months Ended

Nov. 28, 2020

Subsequent Event.

Subsequent Events

18. Subsequent Events

On December 18, 2020, pursuant to that certain stock purchase agreement, dated as of October 7, 2020, by and between the Company and Bartell Drug Company (“Bartell”), the Company acquired Bartell, a Washington corporation, for approximately $95,000 in cash, subject to certain customary post-closing working capital adjustments.  The Company has not yet completed its valuation procedures relative to the Acquisition, and consequently, is unable to provide a preliminary purchase price allocation.  Bartell operates 67 retail drug stores and one distribution center in the greater Seattle Washington area.  Bartell will operate as a 100 percent owned subsidiary of the Company within its Retail Pharmacy segment.

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Nov. 28, 2020

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 and thirty-nine week periods ended November 28, 2020 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 2020 10-K.

Revenue Recognition

Revenue Recognition

The following table disaggregates the Company’s revenue by major source in each segment for the thirteen and thirty-nine week periods ended November 28, 2020 and November 30, 2019:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
In thousands	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Retail Pharmacy segment:
Pharmacy sales	$	2,837,137	$	2,623,832	$	8,123,143	$	7,761,052
Front-end sales		1,245,340		1,250,946		4,033,739		3,767,796
Other revenue		27,115		35,168		93,893		94,010
Total Retail Pharmacy segment		4,109,592		3,909,946		12,250,775		11,622,858
Pharmacy Services segment		2,084,402		1,613,109		6,100,026		4,758,470
Intersegment elimination		(76,956)		(60,757)		(224,417)		(180,177)
Total revenue	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151

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.

Effective January 1, 2020, members reach specific wellness+ tiers based on points accumulated during the six calendar month periods between January 1^st and June 30^th, and July 1^st through December 31^st, which entitles such customers to certain future discounts and other benefits upon reaching that tier. For example, any customer that reaches 500 points during the six calendar month period between January 1^st and June 30^th 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 that six calendar month period and for the following six calendar months. There is also a similar “Silver” level with a lower threshold and benefit level. Prior to January 1, 2020, the wellness+ tiers were based on points accumulated for a full calendar year, and entitled such customers to wellness+ benefits for the remainder of that calendar year and also the next calendar year.

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. For the thirteen week period ended November 28, 2020, the Company recognized $18,202 of deferred contract liability into revenue. The Retail Pharmacy segment had accrued contract liabilities of $5,601 as of November 28, 2020, which is included in other current liabilities. The Retail Pharmacy segment had accrued contract liabilities of $52,668 as of February 29, 2020, which is included in other current liabilities.

The existing wellness+ program was terminated as of July 1, 2020, with benefits earned as of that date available to be used through the end of calendar 2020. In December 2020, the Company granted a temporary extension of benefits to previous members that were eligible for a discount as of December 31, 2020 such that those prior members will be eligible to continue to receive that discount on purchases made through June 30, 2021 with no additional purchase requirement. New and existing customers who were not already eligible for “Gold” benefits will still have the opportunity to earn additional discounts on purchases made through June 30, 2021.

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses

During the second quarter of fiscal 2021, the Company changed its compensated absence policy for certain associates.  Under the revised policy, benefits are earned and used within the same year, whereas previously benefits earned in one year could be used within a succeeding year.  The impact of this change resulted in a reduction in the Company’s associate paid time off “PTO” accrual of approximately $15,026 and $39,800 during the thirteen and thirty-nine weeks ended November 28, 2020, respectively.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which is intended to provide entities with additional guidance to determine which software implementation costs to capitalize and which costs to expense. The ASU will allow entities to capitalize costs for implementation activities during the application development stage. ASU No. 2018-15 is effective for fiscal years and interim periods within those years beginning after December 15, 2019 (fiscal 2021). Early adoption of ASU 2018-15 is permitted. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which adds to U.S. GAAP an impairment model (known as the current expected credit loss ("CECL") model), that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity will recognize, as an allowance, its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 impacts non-banks as most non-banks have financial instruments or other assets (e.g., trade, contract and lease receivables, financial guarantees, loans and loan commitments and held-to-maturity debt securities). The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the recognition of deferred tax liabilities and the methodology for calculating income taxes in the interim period. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020 (fiscal 2022). The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement benefits (Topic 715-20). This ASU amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial position.

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Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Nov. 28, 2020

Basis of Presentation

Schedule of revenues

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
In thousands	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Retail Pharmacy segment:
Pharmacy sales	$	2,837,137	$	2,623,832	$	8,123,143	$	7,761,052
Front-end sales		1,245,340		1,250,946		4,033,739		3,767,796
Other revenue		27,115		35,168		93,893		94,010
Total Retail Pharmacy segment		4,109,592		3,909,946		12,250,775		11,622,858
Pharmacy Services segment		2,084,402		1,613,109		6,100,026		4,758,470
Intersegment elimination		(76,956)		(60,757)		(224,417)		(180,177)
Total revenue	$	6,117,038	$	5,462,298	$	18,126,384	$	16,201,151

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Restructuring (Tables)

9 Months Ended

Nov. 28, 2020

Restructuring

Schedule of restructuring-related costs

For the thirteen week period ended November 28, 2020, the Company incurred total restructuring-related costs of $12,175, 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 ongoing reorganization efforts (a)	$	738	$	421	$	1,159
Non-executive retention costs associated with the March 2019 reorganization (b)		—		—		—
Professional and other fees relating to restructuring activities (c)		10,867		149		11,016
Total restructuring-related costs	$	11,605	$	570	$	12,175

For the thirteen week period ended November 30, 2019, the Company incurred total restructuring-related costs of $25,275, 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 ongoing reorganization efforts (a)	$	10,866	$	6,454	$	17,320
Non-executive retention costs associated with the March 2019 reorganization (b)		862		406		1,268
Professional and other fees relating to restructuring activities (c)		6,687		—		6,687
Total restructuring-related costs	$	18,415	$	6,860	$	25,275

For the thirty-nine week period ended November 28, 2020, the Company incurred total restructuring-related costs of $71,096, of which $45,333 is included as a component of SG&A and $25,763 is included as a component of cost of revenues. These costs are as follows:

	Retail Pharmacy		Pharmacy
	segment		Services segment		Total
Restructuring-related costs
Severance and related costs associated with ongoing reorganization efforts (a)	$	13,346	$	3,212	$	16,558
Non-executive retention costs associated with the March 2019 reorganization (b)		1,136		(124)		1,012
Professional and other fees relating to restructuring activities (c)		27,510		253		27,763
SKU optimization charges (d)		25,763		—		25,763
Total restructuring-related costs	$	67,755	$	3,341	$	71,096

For the thirty-nine week period ended November 30, 2019, the Company incurred total restructuring-related costs of $93,770, 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 ongoing reorganization efforts (a)	$	44,008	$	8,769	$	52,777
Non-executive retention costs associated with the March 2019 reorganization (b)		8,191		3,828		12,019
Professional and other fees relating to restructuring activities (c)		26,652		2,322		28,974
Total restructuring-related costs	$	78,851	$	14,919	$	93,770

Schedule of restructuring-related liabilities

	Severance and related				Professional and
	costs (a)		Retention costs (b)		other fees (c)		Total
Balance at February 29, 2020	$	36,228	$	6,432	$	2,394	$	45,054
Additions charged to expense		4,811		629		4,532		9,972
Cash payments		(13,055)		—		(5,046)		(18,101)
Balance at May 30, 2020	$	27,984	$	7,061	$	1,880	$	36,925
Additions charged to expense		10,588		383		12,215		23,186
Cash payments		(9,077)		(7,444)		(12,554)		(29,075)
Balance at August 29, 2020	$	29,495	$	—	$	1,541	$	31,036
Additions charged to expense		1,159		—		11,016		12,175
Cash payments		(11,770)		—		(7,473)		(19,243)
Balance at November 28, 2020	$	18,884	$	—	$	5,084	$	23,968

(a) – Severance and related costs reflect severance accruals, executive search fees, outplacement services and other similar charges associated with ongoing reorganization efforts.

(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 initiatives associated with restructuring activities.

(d) – Inventory reserve on product lines the Company is exiting and will no longer carry as part of its rebranding initiative.

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Asset Sale to WBA (Tables)

9 Months Ended

Nov. 28, 2020

Asset Sale to WBA

Schedule of assets and operating results of discontinued operations

	November 28,		February 29,
	2020		2020
Inventories	$	—	$	13,719
Property and equipment		—		43,576
Operating lease right-of-use asset		—		34,983
Current assets held for sale	$	—	$	92,278
Current portion of operating lease liabilities	$	—	$	2,002
Long-term operating lease liabilities		—		35,061
Current liabilities held for sale	$	—	$	37,063

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:

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Revenues	$	—	$	(13)	$	174	$	(136)
Costs and expenses:
Cost of revenues(a)		—		374		8		838
Selling, general and administrative expenses(a)		—		306		871		1,170
Loss (gain) on sale of assets, net		—		89		(14,149)		(433)
		—		769		(13,270)		1,575
(Loss) income from discontinued operations before income taxes		—		(782)		13,444		(1,711)
Income tax expense (benefit)		—		19		4,283		(16)
Net (loss) income from discontinued operations, net of tax	$	—	$	(801)	$	9,161	$	(1,695)

(a) Cost of revenues and selling, general and administrative expenses for the discontinued operations excludes corporate overhead. These charges are reflected in continuing operations.

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Income (Loss) Per Share (Tables)

9 Months Ended

Nov. 28, 2020

Income (Loss) Per Share

Schedule of calculation of basic and diluted income (loss) per share

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Basic and diluted income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Net (loss) income from discontinued operations		—		(801)		9,161		(1,695)
Income (loss) attributable to common stockholders— basic and diluted	$	4,324	$	51,485	$	(72,414)	$	(127,453)
Denominator:
Basic weighted average shares		53,744		53,310		53,600		53,159
Outstanding options and restricted shares, net		335		274		—		—
Diluted weighted average shares		54,079		53,584		53,600		53,159
Basic income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.01)		0.17		(0.03)
Net basic income (loss) per share	$	0.08	$	0.97	$	(1.35)	$	(2.40)
Diluted income (loss) per share:
Continuing operations	$	0.08	$	0.98	$	(1.52)	$	(2.37)
Discontinued operations		-		(0.02)		0.17		(0.03)
Net diluted income (loss) per share	$	0.08	$	0.96	$	(1.35)	$	(2.40)

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Lease Termination and Impairment Charges (Tables)

9 Months Ended

Nov. 28, 2020

Lease Termination and Impairment Charges

Schedule of amounts relating to lease termination and impairment charges

	Thirteen Week Period				Thirty-Nine Week Period
	Ended				Ended
	November 28,			November 30,	November 28,		November 30,
	2020		2019		2020		2019
Impairment charges	$	3,797	$	121	$	15,230	$	1,533
Lease termination charges		—		—		—		—
Facility exit charges		3,656		45		7,504		582
	$	7,453	$	166	$	22,734	$	2,115

Schedule of fair value of long-lived assets measured on recurring and non-recurring basis

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 28, 2020
Long-lived assets held for use	$	—	$	—	$	1,071	$	1,071	$	(12,635)
Long-lived assets held for sale	$	—	$	4,184	$	—	$	4,184	$	(2,595)
Total	$	—	$	4,184	$	1,071	$	5,255	$	(15,230)

							Fair Values		Total
							as of		Charges
	Level 1		Level 2		Level 3		Impairment Date		November 30, 2019
Long-lived assets held for use	$	—	$	—	$	—	$	—	$	(1,533)
Long-lived assets held for sale	$	—	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—	$	(1,533)

Schedule of closed store and distribution center charges related to new closures, changes in assumptions and interest accretion

	Thirteen Week Period				Thirty-Nine Week Period
	Ended				Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Balance—beginning of period	$	2,605	$	6,341	$	2,253	$	124,046
Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset		—		—		—		(112,288)
Provision for present value of executory costs for closed stores		664		—		664		—
Changes in assumptions about future sublease income		(496)		—		—		—
Interest accretion		21		—		21		—
Cash payments, net of sublease income		(15)		(3,132)		(159)		(8,549)
Balance—end of period	$	2,779	$	3,209	$	2,779	$	3,209

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Nov. 28, 2020

Goodwill and Other Intangible Assets

Schedule of Indefinite-Lived Intangible Assets [Table Text Block]

	November 28, 2020								February 29, 2020
							Remaining								Remaining
							Weighted								Weighted
	Gross						Average		Gross						Average
	Carrying		Accumulated				Amortization		Carrying		Accumulated				Amortization
	Amount		Amortization		Net		Period		Amount		Amortization		Net		Period
Non-compete agreements and other(a)	$	194,195	$	(170,867)	$	23,328	3	years	$	186,183	$	(163,575)	$	22,608	3	years
Prescription files		968,617		(892,646)		75,971	3	years		950,887		(867,430)		83,457	3	years
Customer relationships(a)		388,000		(254,494)		133,506	11	years		388,000		(231,015)		156,985	12	years
CMS license		57,500		(12,497)		45,003	20	years		57,500		(10,772)		46,728	21	years
Claims adjudication and other developed software		58,985		(45,780)		13,205	2	years		58,985		(39,459)		19,526	3	years
Trademarks		—		—		—	0	years		20,100		(9,413)		10,687	6	years
Backlog		11,500		(11,500)		—	0	years		11,500		(11,500)		—	0	years
Total finite	$	1,678,797	$	(1,387,784)		291,013			$	1,673,155	$	(1,333,164)	$	339,991
Trademarks		—		—		—	Indefinite			19,500		—		19,500	Indefinite
Total	$	1,678,797	$	(1,387,784)	$	291,013			$	1,692,655	$	(1,333,164)	$	359,491

(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.

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	November 28, 2020								February 29, 2020
							Remaining								Remaining
							Weighted								Weighted
	Gross						Average		Gross						Average
	Carrying		Accumulated				Amortization		Carrying		Accumulated				Amortization
	Amount		Amortization		Net		Period		Amount		Amortization		Net		Period
Non-compete agreements and other(a)	$	194,195	$	(170,867)	$	23,328	3	years	$	186,183	$	(163,575)	$	22,608	3	years
Prescription files		968,617		(892,646)		75,971	3	years		950,887		(867,430)		83,457	3	years
Customer relationships(a)		388,000		(254,494)		133,506	11	years		388,000		(231,015)		156,985	12	years
CMS license		57,500		(12,497)		45,003	20	years		57,500		(10,772)		46,728	21	years
Claims adjudication and other developed software		58,985		(45,780)		13,205	2	years		58,985		(39,459)		19,526	3	years
Trademarks		—		—		—	0	years		20,100		(9,413)		10,687	6	years
Backlog		11,500		(11,500)		—	0	years		11,500		(11,500)		—	0	years
Total finite	$	1,678,797	$	(1,387,784)		291,013			$	1,673,155	$	(1,333,164)	$	339,991
Trademarks		—		—		—	Indefinite			19,500		—		19,500	Indefinite
Total	$	1,678,797	$	(1,387,784)	$	291,013			$	1,692,655	$	(1,333,164)	$	359,491

(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.

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Indebtedness and Credit Agreements (Tables)

12 Months Ended

Feb. 29, 2020

Indebtedness and Credit Agreements

Summary of indebtedness and lease financing obligations

	November 28,		February 29,
	2020		2020
Secured Debt:
Senior secured revolving credit facility due December 2023 ($991,000 and $650,000 face value less unamortized debt issuance costs of $15,369 and $19,167)	$	975,631	$	630,833
FILO term loan due December 2023 ($450,000 face value less unamortized debt issuance costs of $2,434 and $3,046)		447,566		446,954
		1,423,197		1,077,787
Second Lien Secured Debt:
7.5% senior notes due July 2025 ($600,000 face value less unamortized debt issuance costs of $9,388 and $10,927)		590,612		589,073
8.0% senior notes due November 2026 ($849,918 and $0 face value less unamortized debt issuance costs of $18,914 and $0)		831,004		—
		1,421,616		589,073
Guaranteed Unsecured Debt:
6.125% senior notes due April 2023 ($90,808 and $1,153,490 face value less unamortized debt issuance costs of $502 and $8,430)		90,306		1,145,060
		90,306		1,145,060
Unguaranteed Unsecured Debt:
7.70% notes due February 2027 ($237,386 face value less unamortized debt issuance costs of $809 and $908)		236,577		236,478
6.875% fixed-rate senior notes due December 2028 ($29,001 face value less unamortized debt issuance costs of $120 and $131)		28,881		28,870
		265,458		265,348
Lease financing obligations		24,195		28,166
Total debt		3,224,772		3,105,434
Current maturities of long-term debt and lease financing obligations		(7,097)		(8,840)
Long-term debt and lease financing obligations, less current maturities	$	3,217,675	$	3,096,594

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Leases (Tables)

9 Months Ended

Nov. 28, 2020

Leases

Schedule of components of net lease cost

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019
Operating lease cost	$	160,794	$	163,035	$	483,558	$	492,020
Financing lease cost:
Amortization of right-of-use asset		1,092		1,419		3,316		4,463
Interest on long-term finance lease liabilities		595		775		1,927		2,536
Total finance lease costs	$	1,687	$	2,194	$	5,243	$	6,999
Short-term lease costs		476		445		913		561
Variable lease costs		42,949		42,723		128,078		126,037
Less: sublease income		(3,511)		(5,195)		(11,530)		(16,353)
Net lease cost	$	202,395	$	203,202	$	606,262	$	609,264

Schedule of supplemental cash flow information related to leases

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	507,989	$	469,207
Operating cash flows paid for interest portion of finance leases		1,927		2,536
Financing cash flows paid for principal portion of finance leases		3,613		4,939
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		342,915		265,612
Finance leases		—		—

Schedule of supplemental balance sheet information related to leases

	November 28,			February 29,
	2020			2020
Operating leases:
Operating lease right-of-use asset	$	2,892,445		$	2,903,256
Short-term operating lease liabilities	$	489,867		$	490,161
Long-term operating lease liabilities		2,676,153			2,710,347
Total operating lease liabilities	$	3,166,020		$	3,200,508
Finance leases:
Property, plant and equipment, net	$	17,031		$	19,904
Current maturities of long-term debt and lease financing obligations	$	7,097		$	8,840
Lease financing obligations, less current maturities		17,098			19,326
Total finance lease liabilities	$	24,195		$	28,166
Weighted average remaining lease term
Operating leases		7.7			7.8
Finance leases		8.8			8.9
Weighted average discount rate
Operating leases		6.1	%		6.1	%
Finance leases		9.9	%		10.2	%

Schedule of minimum lease payments, financing leases, ASC842

	November 28, 2020
	Finance		Operating
Fiscal year	Leases		Leases (1)		Total
2021 (remaining thirteen weeks)	$	5,040	$	167,984	$	173,024
2022		7,823		651,961		659,784
2023		3,470		604,610		608,080
2024		3,278		545,123		548,401
2025		2,922		450,389		453,311
Thereafter		14,540		1,553,990		1,568,530
Total lease payments		37,073		3,974,057		4,011,130
Less: imputed interest		(12,878)		(808,037)		(820,915)
Total lease liabilities	$	24,195	$	3,166,020	$	3,190,215

(1) – Future operating lease payments have not been reduced by minimum sublease rentals of $43 million due in the future under noncancelable leases.

Schedule of minimum lease payments, operating leases, ASC842

	November 28, 2020
	Finance		Operating
Fiscal year	Leases		Leases (1)		Total
2021 (remaining thirteen weeks)	$	5,040	$	167,984	$	173,024
2022		7,823		651,961		659,784
2023		3,470		604,610		608,080
2024		3,278		545,123		548,401
2025		2,922		450,389		453,311
Thereafter		14,540		1,553,990		1,568,530
Total lease payments		37,073		3,974,057		4,011,130
Less: imputed interest		(12,878)		(808,037)		(820,915)
Total lease liabilities	$	24,195	$	3,166,020	$	3,190,215

(1) – Future operating lease payments have not been reduced by minimum sublease rentals of $43 million due in the future under noncancelable leases.

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Stock Options and Stock Awards (Tables)

9 Months Ended

Nov. 28, 2020

Stock Option and Stock Award Plans

Schedule of total number and type of newly awarded grants and the related weighted average fair value

	November 28, 2020			November 30, 2019
	Shares	Weighted Average Fair Value		Shares	Weighted Average Fair Value
Stock options granted	—	$	N/A	612	$	3.66
Restricted stock awards granted	766	$	17.70	1,345	$	7.70
Total awards	766			1,957

Schedule of unrecognized pre-tax compensation costs, net of estimated forfeitures and the weighted average period of cost amortization

	November 28, 2020
	Unvested		Unvested		Unvested
	stock		restricted		performance
	options		stock		shares
Unrecognized pre-tax costs	$	1,468	$	16,335	$	6,323
Weighted average amortization period		2.5 years		2.3 years		2.3 years

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Retirement Plans (Tables)

9 Months Ended

Nov. 28, 2020

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Summary of net periodic pension expense for the defined benefit plans

	Defined Benefit				Defined Benefit
	Pension Plan				Pension Plan
	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
Service cost	$	144	$	143	$	432	$	428
Interest cost		1,199		1,556		3,598		4,667
Expected return on plan assets		(1,177)		(1,214)		(3,531)		(3,641)
Amortization of unrecognized net loss		911		415		2,734		1,245
Net periodic pension expense	$	1,077	$	900	$	3,233	$	2,699

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Segment Reporting (Tables)

9 Months Ended

Nov. 28, 2020

Segment Reporting

Schedule of balance sheet information for the Company's reportable segments

	Retail		Pharmacy
	Pharmacy		Services		Eliminations(1)		Consolidated
November 28, 2020:
Total Assets	$	6,696,953	$	2,750,031	$	(17,581)	$	9,429,403
Goodwill		43,492		1,064,644		—		1,108,136
February 29, 2020:
Total Assets	$	6,757,196	$	2,709,737	$	(14,564)	$	9,452,369
Goodwill		43,492		1,064,644		—		1,108,136

(1) As of November 28, 2020 and February 29, 2020, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $17,581 and $14,564, 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
Thirteen Week Period Ended
November 28, 2020:
Revenues	$	4,109,592	$	2,084,402	$	(76,956)	$	6,117,038
Gross Profit		1,079,708		123,391		—		1,203,099
Adjusted EBITDA(2)		88,557		48,848		—		137,405
Additions to property and equipment and intangible assets		67,727		2,708		—		70,435
November 30, 2019:
Revenues	$	3,909,946	$	1,613,109	$	(60,757)	$	5,462,298
Gross Profit		1,070,852		118,123		—		1,188,975
Adjusted EBITDA(2)		108,579		49,511		—		158,090
Additions to property and equipment and intangible assets		58,546		4,256		—		62,802
Thirty-Nine Week Period Ended
November 28, 2020:
Revenues	$	12,250,775	$	6,100,026	$	(224,417)	$	18,126,384
Gross Profit		3,223,157		338,606		—		3,561,763
Adjusted EBITDA(2)		273,879		122,521		—		396,400
Additions to property and equipment and intangible assets		146,455		9,637		—		156,092
November 30, 2019:
Revenues	$	11,622,858	$	4,758,470	$	(180,177)	$	16,201,151
Gross Profit		3,133,791		326,346		—		3,460,137
Adjusted EBITDA(2)		285,260		117,367		—		402,627
Additions to property and equipment and intangible assets		146,118		16,452		—		162,570

(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

	November 28,		November 30,		November 28,		November 30,
	2020		2019		2020		2019
	(13 weeks)		(13 weeks)		(39 weeks)		(39 weeks)
Net income (loss) from continuing operations	$	4,324	$	52,286	$	(81,575)	$	(125,758)
Interest expense		50,835		57,856		151,389		176,228
Income tax expense (benefit)		437		876		(7,534)		35,878
Depreciation and amortization		83,336		82,007		249,556		248,977
LIFO (credit) charge		(9,487)		(7,440)		(30,303)		7,553
Lease termination and impairment charges		7,453		166		22,734		2,115
Intangible asset impairment charges		—		—		29,852		—
Gain on debt modifications and retirements, net		—		(55,692)		(5,274)		(55,692)
Merger and Acquisition-related costs		1,136		—		1,136		3,599
Stock-based compensation expense		2,867		3,506		8,677		13,598
Restructuring-related costs		12,175		25,275		71,096		93,770
Inventory write-downs related to store closings		704		93		2,596		4,083
Gain on sale of assets, net		(16,305)		(1,371)		(17,473)		(5,670)
Other		(70)		528		1,523		3,946
Adjusted EBITDA from continuing operations	$	137,405	$	158,090	$	396,400	$	402,627

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Supplementary Cash Flow Data (Tables)

9 Months Ended

Nov. 28, 2020

Supplementary Cash Flow Data

Schedule of supplementary cash flow data

	Thirty-Nine Week Period Ended
	November 28, 2020		November 30, 2019
Cash paid for interest(a)	$	101,668	$	134,302
Cash payments for income taxes, net(a)	$	6,945	$	6,564
Equipment financed under capital leases	$	1,682	$	2,119
Gross borrowings from revolver(a)	$	6,233,000	$	2,430,000
Gross repayments to revolver(a)	$	5,892,000	$	2,170,000

(a) — Amounts are presented on a total company basis.

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Basis of Presentation and Significant Accounting Policies (Details) $ in Thousands		3 Months Ended		9 Months Ended
	Jan. 02, 2020 item	Nov. 28, 2020 USD ($)	Nov. 30, 2019 USD ($)	Nov. 28, 2020 USD ($)	Nov. 30, 2019 USD ($)	Feb. 29, 2020 USD ($)
Disaggregation of Revenue [Abstract]
Total revenue		$ 6,117,038	$ 5,462,298	$ 18,126,384	$ 16,201,151
Measurement period	6 months
Number of points for Gold status | item	500
Percentage discount on qualifying purchases of front end merchandise on achieving "Gold" tier	20.00%
Liability recognized into revenue		18,202
Reduction in accrued benefits		15,026		39,800
Intersegment elimination
Disaggregation of Revenue [Abstract]
Revenue from contract with customer		(76,956)	(60,757)	(224,417)	(180,177)
Total revenue		(76,956)	(60,757)	(224,417)	(180,177)
Retail Pharmacy
Disaggregation of Revenue [Abstract]
Other revenue		27,115	35,168	93,893	94,010
Total revenue		4,109,592	3,909,946	12,250,775	11,622,858
Accrued contract liabilities		5,601		5,601		$ 52,668
Pharmacy sales
Disaggregation of Revenue [Abstract]
Revenue from contract with customer		2,837,137	2,623,832	8,123,143	7,761,052
Front end sales
Disaggregation of Revenue [Abstract]
Revenue from contract with customer		1,245,340	1,250,946	4,033,739	3,767,796
Pharmacy Services
Disaggregation of Revenue [Abstract]
Revenue from contract with customer		$ 2,084,402	$ 1,613,109	$ 6,100,026	$ 4,758,470

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Restructuring (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Nov. 28, 2020	Aug. 29, 2020	May 30, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Restructuring related liabilities
Anticipated restructuring-related costs	$ 80,000				$ 80,000
Trademarks
Restructuring related liabilities
Impairment of intangible assets			$ 29,852
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member]
Restructuring related liabilities
Balance-beginning of period	31,036	$ 36,925	45,054		45,054
Restructuring expense	12,175	23,186		$ 25,275	71,096	$ 93,770
Cash payments	(19,243)	(29,075)	(18,101)
Balance-end of period	23,968	31,036	36,925		23,968
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | Selling, general and administrative expenses
Restructuring related liabilities
Restructuring expense	12,175		9,972	25,275	45,333	93,770
Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member] | Cost of revenues
Restructuring related liabilities
Restructuring expense					25,763
Severance and related costs
Restructuring related liabilities
Balance-beginning of period	29,495	27,984	36,228		36,228
Restructuring expense	1,159	10,588		17,320	16,558	52,777
Cash payments	(11,770)	(9,077)	(13,055)
Balance-end of period	18,884	29,495	27,984		18,884
Severance and related costs | Selling, general and administrative expenses
Restructuring related liabilities
Restructuring expense			4,811
Non-executive retention costs
Restructuring related liabilities
Balance-beginning of period		7,061	6,432		6,432
Restructuring expense		383		1,268	1,012	12,019
Cash payments		(7,444)
Balance-end of period			7,061
Non-executive retention costs | Selling, general and administrative expenses
Restructuring related liabilities
Restructuring expense			629
Professional and other fees
Restructuring related liabilities
Balance-beginning of period	1,541	1,880	2,394		2,394
Restructuring expense	11,016	12,215		6,687	27,763	28,974
Cash payments	(7,473)	(12,554)	(5,046)
Balance-end of period	5,084	$ 1,541	1,880		5,084
Professional and other fees | Selling, general and administrative expenses
Restructuring related liabilities
Restructuring expense			$ 4,532
SKU Optimization [Member]
Restructuring related liabilities
Restructuring expense					25,763
Retail Pharmacy | Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member]
Restructuring related liabilities
Restructuring expense	11,605			18,415	67,755	78,851
Retail Pharmacy | Severance and related costs
Restructuring related liabilities
Restructuring expense	738			10,866	13,346	44,008
Retail Pharmacy | Non-executive retention costs
Restructuring related liabilities
Restructuring expense				862	1,136	8,191
Retail Pharmacy | Professional and other fees
Restructuring related liabilities
Restructuring expense	10,867			6,687	27,510	26,652
Retail Pharmacy | SKU Optimization [Member]
Restructuring related liabilities
Restructuring expense					25,763
Pharmacy Services | Reorganization Of Executive Management Team, Ongoing Workforce Reduction And Consolidation, And Transformation Initiatives [Member]
Restructuring related liabilities
Restructuring expense	570			6,860	3,341	14,919
Pharmacy Services | Severance and related costs
Restructuring related liabilities
Restructuring expense	421			6,454	3,212	8,769
Pharmacy Services | Non-executive retention costs
Restructuring related liabilities
Restructuring expense				$ 406	(124)	3,828
Pharmacy Services | Professional and other fees
Restructuring related liabilities
Restructuring expense	$ 149				$ 253	$ 2,322

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Asset Sale to WBA (Details) $ in Thousands		1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 18, 2017 USD ($) store item	Mar. 31, 2018 USD ($) store	Nov. 28, 2020 USD ($) facility	May 30, 2020 USD ($)	Nov. 30, 2019 USD ($)	Nov. 28, 2020 USD ($) facility	Nov. 30, 2019 USD ($)	Feb. 29, 2020 USD ($)	Mar. 02, 2019 USD ($) item
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores | facility			5			5
Accounts receivable, net			$ 1,770,691			$ 1,770,691		$ 1,286,785
Discontinued Operation, Name of Segment [Extensible List]						Retail Pharmacy [Member]		Retail Pharmacy [Member]
Walgreens Boots Alliance WBA [Member] | Walgreens
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Ownership interest (as a percent)	100.00%
Assets held for sale | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores | store	1,932
Number of distribution centers | item	3
Purchase price per agreement	$ 4,375,000
Discontinued Operations, Disposed of by Sale [Member] | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores | store		1,932
Number of distribution centers | item									1
Proceeds from assets sold		$ 4,156,686		$ 94,289				$ 62,774	$ 61,251
Pre-tax gain on sale				$ 12,690				$ 19,268	$ 14,151
Period of transition	3 years
Payments for inventory and selling, general and administrative activities			0		$ 619,680	$ 35,167	$ 2,726,436
Accounts receivable, net					105,431		105,431
TSA fees			$ 0		$ 7,870	$ 1,467	$ 33,403

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Asset Sale to WBA - Carrying amount of assets to be sold (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Current assets held for sale
Current assets held for sale	$ 42,231	$ 92,278
Current liabilities held for sale
Current liabilities held for sale		37,063
Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member] | Assets held for sale
Current assets held for sale
Inventories		13,719
Property and equipment		43,576
Operating lease right-of-use asset		34,983
Current assets held for sale		92,278
Current liabilities held for sale
Current portion of operating lease liabilities		2,002
Long-term operating lease liabilities		35,061
Current liabilities held for sale		$ 37,063

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Asset Sale to WBA - Operating results of discontinued operations (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Costs and expenses:
Net income from discontinued operations, net of tax	$ (801)	$ 9,161	$ (1,695)
Discontinued Operations, Disposed of by Sale [Member] | Sale Of Assets To Walgreens Boots Alliance WBA And Buyer [Member]
Income statement disclosures
Revenues	(13)	174	(136)
Costs and expenses:
Cost of revenues	374	8	838
Selling, general and administrative expenses	306	871	1,170
Gain on sale of assets, net	89	(14,149)	(433)
Net expenses and non-operating income	769	(13,270)	1,575
Income from discontinued operations before income taxes	(782)	13,444	(1,711)
Income tax (benefit) expense, discontinued operation	19	4,283	(16)
Net income from discontinued operations, net of tax	$ (801)	$ 9,161	$ (1,695)

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Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Numerator:
Income (loss) from continuing operations attributable to common stockholders-basic and diluted	$ 4,324	$ 52,286	$ (81,575)	$ (125,758)
Income (loss) from discontinued operations attributable to common stockholders-basic and diluted		(801)	9,161	(1,695)
Income (loss) attributable to common stockholders-basic and diluted	$ 4,324	$ 51,485	$ (72,414)	$ (127,453)
Denominator:
Basic weighted average shares	53,744	53,310	53,600	53,159
Outstanding options and restricted shares, net (in shares)	335	274
Diluted weighted average shares	54,079	53,584	53,600	53,159
Continuing operations			$ (1.52)	$ (2.37)
Discontinued operations			0.17	(0.03)
Net basic and diluted loss per share			(1.35)	(2.40)
Basic income (loss) per share:
Continuing operations	$ 0.08	$ 0.98	(1.52)	(2.37)
Discontinued operations		(0.01)	0.17	(0.03)
Net basic income (loss) per share	0.08	0.97	(1.35)	(2.40)
Diluted income (loss) per share:
Continuing operations	0.08	0.98	(1.52)	(2.37)
Discontinued operations		(0.02)	0.17	(0.03)
Net diluted income (loss) per share	$ 0.08	$ 0.96	$ (1.35)	$ (2.40)
Stock options
Antidilutive securities excluded from computation of income per share
Shares excluded from the computation of diluted income per share	171	820	782	1,431
Restricted shares
Antidilutive securities excluded from computation of income per share
Shares excluded from the computation of diluted income per share	0	0	1,499	1,481

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Lease Termination and Impairment Charges (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020 USD ($) facility	Nov. 30, 2019 USD ($)	Nov. 28, 2020 USD ($) facility	Nov. 30, 2019 USD ($)	Feb. 29, 2020 USD ($)
Lease termination and impairment charges
Lease termination and impairment charges	$ 7,453	$ 166	$ 22,734	$ 2,115
Carrying value of long-lived assets	$ 20,485	1,533	$ 20,485	1,533
Number of stores | facility	5		5
Operating right-of-use assets	$ 2,892,445		$ 2,892,445		$ 2,903,256
Impairment related to terminated software project			4,640
Impairment charges, joint venture			4,995
Impairment charges, store assets			5,595
Impairment charges
Lease termination and impairment charges
Lease termination and impairment charges	3,797	121	15,230	1,533
Facility Closing
Lease termination and impairment charges
Lease termination and impairment charges	$ 3,656	$ 45	$ 7,504	$ 582

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Lease Termination and Impairment Charges - Fair value (Details) - Nonrecurring basis - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Non Financial Assets Measured on a Non Recurring Basis
Fair value of Long-lived assets held for use	$ 1,071		$ 1,071
Fair value of Long-lived assets held for sale	4,184		4,184
Fair value of Total	5,255		5,255
Long-lived assets held and used, impairment charges			(12,635)	$ (1,533)
Long-lived assets held for sale, impairment charges			(2,595)
Total Charges	(3,797)	$ (121)	(15,230)	(1,533)
Fair Value
Non Financial Assets Measured on a Non Recurring Basis
Fair value of Total	5,255	$ 0	5,255	$ 0
Level 2
Non Financial Assets Measured on a Non Recurring Basis
Fair value of Long-lived assets held for sale	4,184		4,184
Fair value of Total	4,184		4,184
Level 3
Non Financial Assets Measured on a Non Recurring Basis
Fair value of Long-lived assets held for use	1,071		1,071
Fair value of Total	$ 1,071		$ 1,071

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Lease Termination and Impairment Charges - Closures (Details) - Lease termination charges - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Closed store and distribution center charges
Balance-beginning of period	$ 2,605	$ 6,341	$ 2,253	$ 124,046
Existing Topic 420 liabilities eliminated by recording a reduction to the ROU asset				(112,288)
Provision for present value of executory costs for closed stores	664		664
Changes in assumptions about future sublease income, terminations and changes in interest rates	(496)
Interest accretion	21		21
Cash payments, net of sublease income	(15)	(3,132)	(159)	(8,549)
Balance-end of period	$ 2,779	$ 3,209	$ 2,779	$ 3,209

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Other Financial Instruments
Held to maturity investments	$ 7,003	$ 7,022
Level 1
Other Financial Instruments
Carrying value of total long-term indebtedness	3,200,577	3,077,268
Estimated fair value of total long-term indebtedness	$ 3,212,995	$ 3,021,385

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019	Feb. 29, 2020
Income Taxes
Income tax (benefit) expense	$ 437	$ 876	$ (7,534)	$ 35,878
Estimated effective tax rate (as a percent)	9.20%	1.60%	8.50%	39.90%
Increase in valuation allowance to offset the current year deferred state tax benefits (as a percent)	(61.00%)	(31.80%)	(5.20%)	(61.00%)
Decrease in unrecognized tax benefits related to state exposures	$ 13,210		$ 13,210
Valuation allowance against net deferred tax assets	$ 1,676,903		$ 1,676,903		$ 1,673,119

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Medicare Part D (Details) - USD ($) $ in Thousands			3 Months Ended
	Nov. 12, 2020	Feb. 19, 2020	Nov. 28, 2020	Feb. 29, 2020	Sep. 30, 2020
Statutory Accounting Practices [Line Items]
Minimum amount of capital and surplus required by regulatory requirements					$ 24,074
Accounts receivable, net			$ 1,770,691	$ 1,286,785
Medicare Part D
Accrued salaries, wages and other current liabilities			676,582	746,318
November 2020 Receivable Purchase Agreement
Medicare Part D
Amount of receivables sold under Receivable Purchase Agreement	$ 464,019
Sale price for receivables sold	444,812
Receipts from sale of receivables	$ 412,795
Remaining receivable for receivables sold to third party			32,017
Loss on sale of receivable			19,207
2019 Receivable Purchase Agreement
Medicare Part D
Amount of receivables sold under Receivable Purchase Agreement		$ 501,422
Sale price for receivables sold		484,547
Receipts from sale of receivables		$ 449,949
Remaining receivable for receivables sold to third party			3,293
Loss on sale of receivable				16,875
EIC
Statutory Accounting Practices [Line Items]
Accounts receivable, net			$ 243,001
Medicare Part D
Accrued salaries, wages and other current liabilities				$ 14,083

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Manufacturer Rebates Receivables (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Manufacturer Rebates Receivables
Manufacturer rebates receivables	$ 656,784	$ 530,451

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Goodwill and Other Intangibles - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 28, 2020	Nov. 28, 2020	Feb. 29, 2020
Goodwill
Accumulated impairment losses	$ 574,712	$ 574,712	$ 574,712
Carrying amount of goodwill
Beginning Balance		1,108,136
Goodwill impairment	0	0
Ending Balance	$ 1,108,136	$ 1,108,136

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Goodwill and Other Intangible Assets - Intangibles (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended	12 Months Ended
	Nov. 28, 2020	May 30, 2020	Nov. 28, 2020	Feb. 29, 2020
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Goodwill impairment	$ 0		$ 0
Accumulated impairment losses	574,712		574,712	$ 574,712
Gross Carrying Amount, Finite Lived	1,678,797		1,678,797	1,673,155
Accumulated Amortization	(1,387,784)		(1,387,784)	(1,333,164)
Net	291,013		291,013	339,991
Gross Carrying Amount, Total	1,678,797		1,678,797	1,692,655
Net, Total	291,013		291,013	359,491
Other intangibles, net	291,013		291,013	359,491
Trademarks
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Indefinite Lived				19,500
Impairment of intangible assets		$ 29,852
Noncompete agreements and other
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	194,195		194,195	186,183
Accumulated Amortization	(170,867)		(170,867)	(163,575)
Net	23,328		$ 23,328	$ 22,608
Remaining Weighted Average Amortization Period			3 years	3 years
Prescription files
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	968,617		$ 968,617	$ 950,887
Accumulated Amortization	(892,646)		(892,646)	(867,430)
Net	75,971		$ 75,971	$ 83,457
Remaining Weighted Average Amortization Period			3 years	3 years
Customer relationships
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	388,000		$ 388,000	$ 388,000
Accumulated Amortization	(254,494)		(254,494)	(231,015)
Net	133,506		$ 133,506	$ 156,985
Remaining Weighted Average Amortization Period			11 years	12 years
CMS license
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	57,500		$ 57,500	$ 57,500
Accumulated Amortization	(12,497)		(12,497)	(10,772)
Net	45,003		$ 45,003	$ 46,728
Remaining Weighted Average Amortization Period			20 years	21 years
Claims adjudication and other developed software
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	58,985		$ 58,985	$ 58,985
Accumulated Amortization	(45,780)		(45,780)	(39,459)
Net	13,205		$ 13,205	$ 19,526
Remaining Weighted Average Amortization Period			2 years	3 years
Trademarks
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived				$ 20,100
Accumulated Amortization				(9,413)
Net				$ 10,687
Remaining Weighted Average Amortization Period			0 years	6 years
Backlog
Finite Lived And Indefinite Lived Intangible Assets By Major Class
Gross Carrying Amount, Finite Lived	11,500		$ 11,500	$ 11,500
Accumulated Amortization	$ (11,500)		$ (11,500)	$ (11,500)
Remaining Weighted Average Amortization Period			0 years	0 years

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Goodwill and Other Intangible Assets - Unfavorable lease intangibles and amortization expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Goodwill and Other Intangible Assets
Amortization expense for intangible assets and liabilities	$ 21,236	$ 24,920	$ 68,351	$ 79,176
Anticipated annual amortization expense for intangible assets and liabilities
2021	86,400		86,400
2022	67,155		67,155
2023	51,885		51,885
2024	38,220		38,220
2025	$ 26,938		$ 26,938

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Indebtedness and Credit Agreements - Indebtedness and lease financing obligations (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Jul. 24, 2020	Jul. 10, 2020	Jul. 09, 2020	Jun. 25, 2020	Feb. 29, 2020	Feb. 05, 2020	Jan. 06, 2020	Nov. 30, 2019	Oct. 15, 2019	Oct. 11, 2019	Dec. 20, 2018
Indebtedness and credit agreements
Lease financing obligations, ASC842	$ 24,195					$ 28,166
Total Debt	3,224,772					3,105,434
Current maturities of long-term debt and lease financing obligations	(7,097)					(8,840)
Long-term debt and lease financing obligations, less current maturities	3,217,675					3,096,594
Senior Secured Debt [Member]
Indebtedness and credit agreements
Long-term debt	1,423,197					1,077,787
Senior secured revolving credit facility due December 2023
Indebtedness and credit agreements
Long-term debt	975,631					630,833
Principal amount of debt	991,000					650,000
Unamortized debt issuance costs	15,369					19,167
FILO term loan due December 2023
Indebtedness and credit agreements
Long-term debt	447,566					446,954
Principal amount of debt	450,000					450,000						$ 450,000
Unamortized debt issuance costs	2,434					3,046
Second Lien Secured Debt
Indebtedness and credit agreements
Long-term debt	1,421,616					589,073
7.5% senior notes due July 2025
Indebtedness and credit agreements
Long-term debt	$ 590,612					$ 589,073
Debt instrument, stated interest rate (as a percent)	7.50%				7.50%	7.50%	7.50%	7.50%
Principal amount of debt	$ 600,000					$ 600,000
Unamortized debt issuance costs	9,388					10,927
8.0% senior secured notes due 2026
Indebtedness and credit agreements
Long-term debt	$ 831,004
Debt instrument, stated interest rate (as a percent)	8.00%	8.00%		8.00%	8.00%
Principal amount of debt	$ 849,918	$ 849,918			$ 600,000	0
Unamortized debt issuance costs	18,914					0
Guaranteed Unsecured Debt
Indebtedness and credit agreements
Long-term debt	90,306					1,145,060
6.125% senior notes due April 2023
Indebtedness and credit agreements
Long-term debt	$ 90,306					$ 1,145,060
Debt instrument, stated interest rate (as a percent)	6.125%	6.125%	6.125%		6.125%	6.125%	6.125%	6.125%
Principal amount of debt	$ 90,808					$ 1,153,490
Unamortized debt issuance costs	502					8,430
Unguaranteed Unsecured Debt
Indebtedness and credit agreements
Long-term debt	265,458					265,348
7.7% notes due February 2027
Indebtedness and credit agreements
Long-term debt	$ 236,577					$ 236,478
Debt instrument, stated interest rate (as a percent)	7.70%					7.70%			7.70%	7.70%	7.70%
Principal amount of debt	$ 237,386					$ 237,386
Unamortized debt issuance costs	809					908
6.875% fixed-rate senior notes due December 2028
Indebtedness and credit agreements
Long-term debt	$ 28,881					$ 28,870
Debt instrument, stated interest rate (as a percent)	6.875%					6.875%			6.875%	6.875%	6.875%
Principal amount of debt	$ 29,001					$ 29,001
Unamortized debt issuance costs	$ 120					$ 131

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Indebtedness and Credit Agreement - Credit Facility (Details) - USD ($) $ in Thousands	9 Months Ended
	Nov. 28, 2020	Jul. 24, 2020	Jul. 10, 2020	Jun. 25, 2020	Feb. 29, 2020	Feb. 05, 2020	Jan. 06, 2020	Dec. 20, 2018
Credit facility
Cash sweep, 3-day minimum threshold	$ 275,000
Cash sweep, 1-day minimum threshold	$ 200,000
Rite Aid Subsidiaries [Member]
Credit facility
Ownership interest (as a percent)	100.00%
Existing Facilities
Credit facility
Outstanding borrowings	$ 1,441,000
Maximum amount of accumulated cash on hand	200,000
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
Minimum principal balance for which non-payment causes default	$ 50,000
Existing Facilities | Minimum
Credit facility
Fixed charge coverage ratio	1.00
Senior secured revolving credit facility due December 2023
Credit facility
Maximum borrowing capacity								$ 2,700,000
Principal amount of debt	$ 991,000				$ 650,000
Letters of credit outstanding	107,739
Additional borrowing capacity	$ 1,601,261
Senior secured revolving credit facility due December 2023 | Minimum
Credit facility
Credit facility commitment fee (as a percent)	0.25%
Additional borrowing capacity	$ 365,000
Threshold availability on thirtieth consecutive day	$ 250,000
Senior secured revolving credit facility due December 2023 | Maximum
Credit facility
Credit facility commitment fee (as a percent)	0.375%
Threshold availability on revolving credit facility to trigger fixed charge coverage requirements	$ 200,000
Threshold availability on the third consecutive business day	$ 250,000
Senior secured revolving credit facility due 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			450,000
FILO term loan due December 2023 | LIBOR
Credit facility
Percentage points added to the reference rate	0.03%
Senior secured revolving credit facility due January 2020
Credit facility
Maximum borrowing capacity								$ 2,700,000
6.125% senior notes due April 2023
Credit facility
Principal amount of debt	$ 90,808				$ 1,153,490
Debt instrument, stated interest rate (as a percent)	6.125%	6.125%	6.125%	6.125%	6.125%	6.125%	6.125%

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Indebtedness and Credit Agreement - Transactions and Maturity (Details) - USD ($) $ in Thousands					1 Months Ended	3 Months Ended
	Jul. 24, 2020	Jul. 10, 2020	Jun. 25, 2020	Oct. 11, 2019	Nov. 30, 2019	Aug. 29, 2020	Nov. 28, 2020	Jul. 09, 2020	Feb. 29, 2020	Feb. 05, 2020	Jan. 06, 2020	Oct. 15, 2019
Indebtedness and credit agreements
Proceeds from issuance of debt	$ 206,373
Gain on debt modification						$ 5,274
Maturities
2021							$ 0
2022							0
2023							0
2024							1,531,808
2025							0
thereafter							$ 1,716,305
6.125% senior notes due April 2023
Indebtedness and credit agreements
Notes redeemed and discharged		$ 1,125,000	$ 750,000
Debt instrument, stated interest rate (as a percent)	6.125%	6.125%	6.125%				6.125%		6.125%	6.125%	6.125%
Face amount of debt repurchased	$ 1,062,682									$ 600,000	$ 600,000
Principal amount of debt							$ 90,808		$ 1,153,490
Proceeds from issuance of debt			$ 145,500
Senior Notes 7.70 Percent And 6.875 Percent [Member]
Indebtedness and credit agreements
Notes redeemed and discharged				$ 84,097
Early redemption of debt				51,300	$ 38,392
Gain (loss) on debt retirements, net				$ 32,416	18,510
Senior Notes 7.70 Percent And 6.875 Percent [Member] | Maximum
Indebtedness and credit agreements
Face amount of debt repurchased												$ 100,000
6.875% fixed-rate senior notes due December 2028
Indebtedness and credit agreements
Notes redeemed and discharged					$ 39,441
Debt instrument, stated interest rate (as a percent)				6.875%	6.875%		6.875%		6.875%			6.875%
Principal amount of debt							$ 29,001		$ 29,001
7.7% notes due February 2027
Indebtedness and credit agreements
Notes redeemed and discharged					$ 18,075
Debt instrument, stated interest rate (as a percent)				7.70%	7.70%		7.70%		7.70%			7.70%
Early redemption of debt					$ 10,012
Gain (loss) on debt retirements, net					4,766
Face amount of debt repurchased					$ 15,000
Principal amount of debt							$ 237,386		$ 237,386
7.5% senior notes due July 2025
Indebtedness and credit agreements
Debt instrument, stated interest rate (as a percent)			7.50%				7.50%		7.50%	7.50%	7.50%
Principal amount of debt							$ 600,000		$ 600,000
8.0% senior secured notes due 2026
Indebtedness and credit agreements
Debt instrument, stated interest rate (as a percent)	8.00%		8.00%				8.00%	8.00%
Principal amount of debt	$ 849,918		$ 600,000				$ 849,918		0
Senior secured revolving credit facility due December 2023
Indebtedness and credit agreements
Principal amount of debt							$ 991,000		$ 650,000

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Property, Plant and Equipment [Line Items]
Operating lease cost	$ 160,794	$ 163,035	$ 483,558	$ 492,020
Financing lease cost:
Amortization of right-of-use asset	1,092	1,419	3,316	4,463
Interest on long-term finance lease liabilities	595	775	1,927	2,536
Total finance lease costs	1,687	2,194	5,243	6,999
Short-term lease costs	476	445	913	561
Variable lease costs	42,949	42,723	128,078	126,037
Less: sublease income	(3,511)	(5,195)	(11,530)	(16,353)
Net lease cost	$ 202,395	$ 203,202	$ 606,262	$ 609,264
Buildings | Minimum
Property, Plant and Equipment [Line Items]
Initial terms of noncancellable operating leases	5 years		5 years
Initial terms of noncancellable finance leases	5 years		5 years
Buildings | Maximum
Property, Plant and Equipment [Line Items]
Initial terms of noncancellable operating leases	22 years		22 years
Initial terms of noncancellable finance leases	22 years		22 years
Equipment | Minimum
Property, Plant and Equipment [Line Items]
Initial terms of noncancellable operating leases	3 years		3 years
Equipment | Maximum
Property, Plant and Equipment [Line Items]
Initial terms of noncancellable operating leases	10 years		10 years

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Leases - Supplemental cash flow information related to leases (Details) - USD ($) $ in Thousands	9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$ 507,989	$ 469,207
Operating cash flows paid for interest portion of finance leases	1,927	2,536
Financing cash flows paid for principal portion of finance leases	3,613	4,939
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	342,915	265,612
Finance leases	$ 0	$ 0

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Leases - Supplemental B/S Information (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Operating leases:
Operating lease right-of-use asset	$ 2,892,445	$ 2,903,256
Short-term operating lease liabilities	489,867	490,161
Long-term operating lease liabilities	2,676,153	2,710,347
Total operating lease liabilities	3,166,020	3,200,508
Finance leases:
Property, plant and equipment, net	1,045,682	1,215,838
Current maturities of long-term debt and lease financing obligations	7,097	8,840
Lease financing obligations, less current maturities	17,098	19,326
Total finance lease liabilities, ASC842	$ 24,195	$ 28,166
Weighted average remaining lease term
Operating leases (in years)	7 years 8 months 12 days	7 years 9 months 18 days
Finance leases (in years)	8 years 9 months 18 days	8 years 10 months 24 days
Weighted average discount rate
Operating leases (as a percent)	6.10%	6.10%
Finance leases (as a percent)	9.90%	10.20%
Finance Leased Assets [Member]
Finance leases:
Property, plant and equipment, net	$ 17,031	$ 19,904

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Leases - Maturity of lease liabilities under finance and operating leases (Details) - USD ($) $ in Thousands	Nov. 28, 2020	Feb. 29, 2020
Finance Leases, ASC842
2021	$ 5,040
2022	7,823
2023	3,470
2024	3,278
2025	2,922
Thereafter	14,540
Total lease payments	37,073
Less: imputed interest	(12,878)
Total finance lease liabilities, ASC842	24,195	$ 28,166
Operating Leases, ASC842
2021	167,984
2022	651,961
2023	604,610
2024	545,123
2025	450,389
Thereafter	1,553,990
Total lease payments	3,974,057
Less: imputed interest	(808,037)
Total operating lease liabilities	3,166,020	$ 3,200,508
Minimum sublease rentals	43,000
Operating and finance leases, ASC842
2021	173,024
2022	659,784
2023	608,080
2024	548,401
2025	453,311
Thereafter	1,568,530
Total lease payments	4,011,130
Less: imputed interest	(820,915)
Total lease liabilities	$ 3,190,215

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Leases - Sale/Leaseback (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Nov. 28, 2020 USD ($) facility	Nov. 28, 2020 USD ($) facility
Sale Leaseback Transaction [Line Items]
Number of facilities in sale/leaseback | facility	6
Number of Stores | facility	5	5
Number of Facilities | facility	1	1
Sale/leaseback proceeds | $	$ 80,551	$ 89,012
Gain on sale-leaseback transactions | $	$ 33,092	39,311
Amount reclassified to assets held for sale | $		$ 42,231
Minimum
Sale Leaseback Transaction [Line Items]
Leaseback term		15 years
Maximum
Sale Leaseback Transaction [Line Items]
Leaseback term		20 years

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Stock Options and Stock Awards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Stock options and stock award Plans
Stock-based compensation costs	$ 2,867	$ 3,506	$ 8,677	$ 13,598
Stock options
Stock options and stock award Plans
Term of options			4 years
Performance based awards
Stock options and stock award Plans
Stock-based compensation costs			$ 1,170	$ (715)

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Stock Options and Stock Awards - Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019
Stock options and stock award Plans
Weighted average fair value of options granted (in dollars per share)		$ 3.66
Options, Shares activity
Granted (in shares)		612
Stock options
Unrecognized pre-tax compensation costs related to unvested stock options and restricted stock grants
Unrecognized pre-tax costs	$ 1,468
Weighted average amortization period	2 years 6 months

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Stock Options and Stock Awards- Restricted Stock, etc. (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Restricted stock, Shares activity
Granted (in shares)			766	1,345
Restricted stock, Fair value
Granted (in dollars per share)			$ 17.70	$ 7.70
Additional General Disclosures
Stock-based compensation costs	$ 2,867	$ 3,506	$ 8,677	$ 13,598
Total awards (in shares)			766	1,957
Restricted shares
Stock options and stock award Plans
Vesting period			3 years
Unrecognized pre-tax compensation costs related to unvested stock options and restricted stock grants
Unrecognized pre-tax costs	16,335		$ 16,335
Weighted average amortization period			2 years 3 months 18 days
Performance based awards
Unrecognized pre-tax compensation costs related to unvested stock options and restricted stock grants
Unrecognized pre-tax costs	$ 6,323		$ 6,323
Weighted average amortization period			2 years 3 months 18 days
Additional General Disclosures
Stock-based compensation costs			$ 1,170	$ (715)

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Retirement Plans - Net periodic cost (Details) - Pension Plan - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Net periodic pension expense
Service cost	$ 144	$ 143	$ 432	$ 428
Interest cost	1,199	1,556	3,598	4,667
Expected return on plan assets	(1,177)	(1,214)	(3,531)	(3,641)
Amortization of unrecognized net loss	911	415	2,734	1,245
Net periodic pension expense	$ 1,077	$ 900	$ 3,233	$ 2,699

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Retirement Plans - Benefit obligation and funded status (Details) - Pension Plan - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Change in benefit obligations:
Service cost	$ 144	$ 143	$ 432	$ 428
Interest cost	1,199	$ 1,556	3,598	$ 4,667
Change in plan assets:
Employer contributions	$ 4,597		$ 5,451

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Retirement Plans - Assumptions and assets (Details) $ in Thousands	Nov. 28, 2020 USD ($)
Pension Plan
Defined benefit plans estimated future employer contributions
Expected employer contribution during next fiscal year	$ 854

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Segment Reporting - Balance Sheet information (Details) $ in Thousands	9 Months Ended
	Nov. 28, 2020 USD ($) segment	Feb. 29, 2020 USD ($)
Segment Reporting
Number of reportable segments | segment	2
Total assets	$ 9,429,403	$ 9,452,369
Goodwill	1,108,136	1,108,136
Accounts receivable	1,770,691	1,286,785
Operating segments | Retail Pharmacy
Segment Reporting
Total assets	6,696,953	6,757,196
Goodwill	43,492	43,492
Operating segments | Pharmacy Services
Segment Reporting
Total assets	2,750,031	2,709,737
Goodwill	1,064,644	1,064,644
Intersegment elimination
Segment Reporting
Total assets	(17,581)	(14,564)
Long-term deferred tax liability	0	0
Accounts receivable	$ 17,581	$ 14,564

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Segment Reporting - Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Segment Reporting
Revenues	$ 6,117,038	$ 5,462,298	$ 18,126,384	$ 16,201,151
Gross Profit	1,203,099	1,188,975	3,561,763	3,460,137
Adjusted EBITDA from continuing operations	137,405	158,090	396,400	402,627
Additions to property and equipment and intangible assets	70,435	62,802	156,092	162,570
Retail Pharmacy
Segment Reporting
Revenues	4,109,592	3,909,946	12,250,775	11,622,858
Operating segments | Retail Pharmacy
Segment Reporting
Revenues	4,109,592	3,909,946	12,250,775	11,622,858
Gross Profit	1,079,708	1,070,852	3,223,157	3,133,791
Adjusted EBITDA from continuing operations	88,557	108,579	273,879	285,260
Additions to property and equipment and intangible assets	67,727	58,546	146,455	146,118
Operating segments | Pharmacy Services
Segment Reporting
Revenues	2,084,402	1,613,109	6,100,026	4,758,470
Gross Profit	123,391	118,123	338,606	326,346
Adjusted EBITDA from continuing operations	48,848	49,511	122,521	117,367
Additions to property and equipment and intangible assets	2,708	4,256	9,637	16,452
Intersegment elimination
Segment Reporting
Revenues	$ (76,956)	$ (60,757)	$ (224,417)	$ (180,177)

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Segment Reporting - Adjusted EBITDA (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019	Nov. 28, 2020	Nov. 30, 2019
Segment Reporting
Net income (loss) from continuing operations	$ 4,324	$ 52,286	$ (81,575)	$ (125,758)
Interest expense	50,835	57,856	151,389	176,228
Income tax expense (benefit)	437	876	(7,534)	35,878
Depreciation and amortization	83,336	82,007	249,556	248,977
LIFO (credit) charge	(9,487)	(7,440)	(30,303)	7,553
Lease termination and impairment charges	7,453	166	22,734	2,115
Intangible asset impairment charges			29,852
Gain on debt modifications and retirements, net		(55,692)	(5,274)	(55,692)
Merger and Acquisition-related costs	1,136		1,136	3,599
Stock-based compensation expense	2,867	3,506	8,677	13,598
Restructuring-related costs	12,175	25,275	71,096	93,770
Inventory write-downs related to store closings	704	93	2,596	4,083
Gain on sale of assets, net	(16,305)	(1,371)	(17,473)	(5,670)
Other	(70)	528	1,523	3,946
Adjusted EBITDA from continuing operations	$ 137,405	$ 158,090	$ 396,400	$ 402,627

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Commitments, Contingencies and Guarantees (Details)	Oct. 08, 2020 item	Jan. 31, 2017 state
Commitments, Contingencies and Guarantees
Number of states failed to report Rx savings prices | state		18
Number of claims | item	2

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Supplementary Cash Flow Data (Details) - USD ($) $ in Thousands	9 Months Ended
	Nov. 28, 2020	Nov. 30, 2019
Supplementary Cash Flow Data
Cash paid for interest	$ 101,668	$ 134,302
Cash payments for income taxes, net	6,945	6,564
Equipment financed under capital leases	1,682	2,119
Gross borrowings from revolver	6,233,000	2,430,000
Gross repayments to revolver	5,892,000	2,170,000
Significant components of cash provided by Other Liabilities
Other liabilities	45,867	$ 32,889
Tax payment deferral	82,827
Accrued interest	39,949
Reduction in deferred revenue	47,068
Decrease in benefit and other operating expense accruals	$ 35,809

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Subsequent Events (Details) $ in Thousands	Dec. 18, 2020 USD ($) item	Nov. 28, 2020 facility
Subsequent Event [Line Items]
Number of Stores | facility		5
Subsequent Event | Bartell Drug Company [Member]
Subsequent Event [Line Items]
Purchase price | $	$ 95,000
Number of Stores	67
Number Of Distribution Centers	1
Ownership interest (as a percent)	100.00%