Restructuring

6 Months Ended

Sep. 02, 2023

Restructuring

Restructuring

2. Restructuring

Beginning in fiscal 2019, the Company initiated a series of plans designed to reorganize its executive management team, improve its cost structure, free up working capital, rebrand its retail pharmacy and pharmacy services business, and launch its Store of the Future format. Other strategic initiatives included the expansion of the Company’s digital business, replacing and updating the Company’s financial systems to improve efficiency, and closing unprofitable stores. 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. This program has given the Company visibility into the profitability opportunities it can drive over the next three years by focusing on improvements and growth in its core businesses. These and future activities, including those designed to enhance the

Company’s liquidity and capital structure, are expected to provide future growth opportunities, expense efficiency benefits, as well as reduce its level of corporate leverage and are reflected into its plan of reorganization. The Company also engaged professional advisors to assist with the exploration of strategic alternatives, including the filing of the Chapter 11 Cases. In connection with the Chapter 11 Cases, the Company has incurred, and expects to continue to incur, significant professional fees and other costs. As part of its reorganization, the Company expects to implement a revised business plan to bolster core strengths, address operational challenges, reinforce liquidity, reduce leverage, optimize store footprint, and address litigation. As mentioned herein, there can be no assurance as to whether the Chapter 11 Cases will be successful, including the Company’s ability to achieve its operational, strategic, and financial goals.

For the thirteen week period ended September 2, 2023, the Company incurred total restructuring-related costs of $85,709, 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)	$	926	$	—	$	926
Professional and other fees relating to restructuring activities(b)		82,484		2,299		84,783
Total restructuring-related costs	$	83,410	$	2,299	$	85,709

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(c)		7,529		4,363		11,892
Total restructuring-related costs	$	8,442	$	4,363	$	12,805

For the twenty-six week period ended September 2, 2023, the Company incurred total restructuring-related costs of $163,839, 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)	$	1,366	$	—	$	1,366
Professional and other fees relating to restructuring activities(b)		158,513		3,960		162,473
Total restructuring-related costs	$	159,879	$	3,960	$	163,839

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(c)		13,612		9,022		22,634
Total restructuring-related costs	$	25,813	$	9,638	$	35,451

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 as of March 4, 2023	$	7,658	$	42,154	$	49,812
Additions charged to expense		440		77,690		78,130
Cash payments		(2,738)		(33,962)		(36,700)
Balance as of June 3, 2023	$	5,360	$	85,882	$	91,242
Additions charged to expense		926		84,783		85,709
Cash payments		(2,052)		(106,782)		(108,834)
Balance as of September 2, 2023	$	4,234	$	63,883	$	68,117

(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, including its performance acceleration programs as well as costs incurred in connection with preparation for the Chapter 11 Cases.

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