Restructuring

3 Months Ended

May 28, 2022

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, replacing and updating the Company’s financial systems to improve efficiency, and movement to a common client platform at Elixir. In April 2022, the Company announced further strategic initiatives to reduce costs through the closure of unprofitable stores, reducing corporate administration expenses and improving efficiencies in worked payroll and other store labor costs as well as expense reductions at the Pharmacy Services segment. These and future restructuring activities are expected to provide future growth and expense efficiency benefits. There can be no assurance that the Company’s current and future restructuring charges will achieve the cost savings and remerchandising benefits in the amounts or time anticipated.

For the thirteen week period ended May 28, 2022, the Company incurred total restructuring-related costs of $22,646, 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)	$	11,288	$	616	$	11,904
Professional and other fees relating to restructuring activities (b)		6,083		4,659		10,742
Total restructuring-related costs	$	17,371	$	5,275	$	22,646

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
Professional and other fees relating to restructuring activities (b)		1,621		3,805		5,426
Total restructuring-related costs	$	1,621	$	4,311	$	5,932

A summary of activity for the thirteen week period ended May 28, 2022 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)		other fees (b)		Total
Balance at February 26, 2022	$	4,257	$	4,463	$	8,720
Additions charged to expense		11,904		10,742		22,646
Cash payments		(5,231)		(11,727)		(16,958)
Balance at May 28, 2022	$	10,930	$	3,478	$	14,408

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

(b) – Professional and other fees include costs incurred in connection with the identification and implementation of initiatives associated with restructuring activities.

The Company anticipates incurring approximately $60,000 during fiscal 2023 in connection with its continued restructuring activities.