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Restructuring

6 Months Ended

Aug. 27, 2022

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, reduce corporate administration expenses, improve efficiencies in worked payroll and other store labor costs, engage in a comprehensive review of purchasing and other business processes in both the Retail Pharmacy and Pharmacy Services segments in order to identify areas of opportunity, 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 August 27, 2022, the Company incurred total restructuring-related costs of $12,805, 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)	$	913	$	—	$	913
Professional and other fees relating to restructuring activities^(b)		7,529		4,363		11,892
Total restructuring-related costs	$	8,442	$	4,363	$	12,805

For the thirteen week period ended August 28, 2021, the Company incurred total restructuring-related costs of $9,584, 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)	$	—	$	495	$	495
Professional and other fees relating to restructuring activities^(b)		2,584		6,505		9,089
Total restructuring-related costs	$	2,584	$	7,000	$	9,584

For the twenty-six week period ended August 27, 2022, the Company incurred total restructuring-related costs of $35,451, 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)	$	12,201	$	616	$	12,817
Professional and other fees relating to restructuring activities^(b)		13,612		9,022		22,634
Total restructuring-related costs	$	25,813	$	9,638	$	35,451

For the twenty-six week period ended August 28, 2021, the Company incurred total restructuring-related costs of $15,516, 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)	$	—	$	1,001	$	1,001
Professional and other fees relating to restructuring activities^(b)		4,205		10,310		14,515
Total restructuring-related costs	$	4,205	$	11,311	$	15,516

A summary of restructuring-related liabilities associated with the programs noted above, which are 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
Additions charged to expense		913		11,892		12,805
Cash payments		(2,782)		(10,066)		(12,848)
Balance at August 27, 2022	$	9,061	$	5,304	$	14,365

(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 $72,000 during fiscal 2023 in connection with its continued restructuring activities.