Restructuring

12 Months Ended

Mar. 04, 2023

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 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 the enterprise. 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. In December 2022, the Company announced a new multi-year performance acceleration program, which allows it to fast-track initiatives that will improve sales, script volume and operating margins, and free up cash. The Company is partnering with a leading consulting firm that has worked with several Fortune 150 firms to execute the turnaround model. This program has given the Company visibility to the profitability opportunities it can drive over the next three years by focusing on improvements and growth in its core businesses. 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 year ended March 4, 2023, the Company incurred total restructuring-related costs of $108,626, 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)	$	15,342	$	4,088	$	19,430
Professional and other fees relating to restructuring activities(c)		71,142		18,054		89,196
Total restructuring-related costs	$	86,484	$	22,142	$	108,626

For the year ended February 26, 2022, the Company incurred total restructuring-related costs of $35,121, 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)	$	—	$	2,502	$	2,502
Professional and other fees relating to restructuring activities(c)		12,237		20,382		32,619
Total restructuring-related costs	$	12,237	$	22,884	$	35,121

For the year ended February 27, 2021, the Company incurred total restructuring-related costs of $84,552, of which $63,613 is included as a component of SG&A and $20,939 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)	$	13,443	$	4,353	$	17,796
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)		40,053		4,752		44,805
SKU optimization charges(d)		20,939		—		20,939
Total restructuring-related costs	$	75,571	$	8,981	$	84,552

In addition, during the fiscal year ended February 27, 2021, the Company incurred intangible asset impairment charges of $29,852 in connection with its rebranding initiatives as described in Note 14, Goodwill and Other Intangibles.

A summary of activity for the year ended March 4, 2023 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 (c)		Total
Balance as of 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 as of 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 as of August 27, 2022	$	9,061	$	5,304	$	14,365
Additions charged to expense		4,800		21,700		26,500
Cash payments		(4,452)		(18,297)		(22,749)
Balance as of November 26, 2022	$	9,409	$	8,707	$	18,116
Additions charged to expense		1,813		44,862		46,675
Cash payments		(3,564)		(11,415)		(14,979)
Balance as of March 4, 2023	$	7,658	$	42,154	$	49,812

(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.