Restructuring

3 Months Ended

May 29, 2021

Restructuring

Restructuring

3. 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. Other strategic initiatives include the expansion of the Company’s digital business, movement to a common client platform at Elixir and investments in talent in sales and underwriting at Elixir.

For the thirteen week period ended May 29, 2021, the Company incurred total restructuring-related costs of $5,932, 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)	$	—	$	506	$	506
Non-executive retention costs associated with the March 2019 reorganization (b)		—		—		—
Professional and other fees relating to restructuring activities (c)		1,621		3,805		5,426
Total restructuring-related costs	$	1,621	$	4,311	$	5,932

For the thirteen week period ended May 30, 2020, the Company incurred total restructuring-related costs of $35,735, of which $9,972 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)	$	4,559	$	252	$	4,811
Non-executive retention costs associated with the March 2019 reorganization (b)		855		(226)		629
Professional and other fees relating to restructuring activities (c)		4,532		—		4,532
SKU optimization charges (d)		25,763		—		25,763
Total restructuring-related costs	$	35,709	$	26	$	35,735

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 11, Goodwill and Other Intangible Assets.

A summary of activity for the thirteen week period ended May 29, 2021 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 27, 2021	$	12,657	$	—	$	2,833	$	15,490
Additions charged to expense		506		—		5,426		5,932
Cash payments		(4,826)		—		(7,636)		(12,462)
Balance at May 29, 2021	$	8,337	$	—	$	623	$	8,960

(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 $30,000 during fiscal 2022 in connection with its continued restructuring activities.