Ladies and gentlemen, thank you for standing by. My name is Carmen and I will be your conference operator today. At this time, I would like to welcome everyone to the Rite Aid Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Byron Purcell, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. We welcome you to our fiscal 2020 fourth quarter earnings conference call. On the call with me today are Heyward Donigan, President and Chief Executive Officer; Jim Peters, Chief Operating Officer; Dan Robson, President of Elixir; and Matt Schroeder, Chief Financial Officer. On today’s call, Heyward will provide introductory comments, and an update on our response to the COVID-19. Jim will provide an update on the retail business. Dan will provide an update on the pharmacy services business. Matt will provide an update on the fourth quarter results and COVID-19 financial impact and then we will take questions. As we mentioned in our release, we’re providing slides related to the material we will be discussing today. These slides are provided on our website, www.riteaid.com under the Investor Relations information tab. We will not be referring to them in our remarks, but hope you’ll find them helpful as they summarize some of the key points made on the call. Before we start, I’d like to remind you that today this conference call includes certain forward-looking statements. These forward-looking statements are presented in the context of certain risks and uncertainties that can cause actual results to differ. These risks and uncertainties are described in our press release, in Item 1A of our most recent Annual Report on Form 10-K, and in other documents that we file or furnish to the Securities and Exchange Commission. Also, we will be using certain non-GAAP measures in our release and in the accompanying slides. The definition of the non-GAAP measures, along with a reconciliation of the related GAAP measure are described in our press release and in the slides. With these remarks, I’d like to now turn it over to Heyward.

Thanks, Byron, and thanks to everyone for joining us. And since this is the first time we'll be doing the call all sitting in different states in our homes bear with us. So we're going to discuss our result for Q4 and the year in just a few moments. But make no mistake our top priority as a company right now is serving our communities, of course our Rite Aid customers, our EnvisionRxOptions, employer and health plan clients during this unprecedented COVID-19 crisis and I must say I have over 30 years of experience in the healthcare industry including dealing with SAARS and the swine flu which I will never forget. But I don't think any of us in healthcare has experienced something like this. So it is new territory for all of us and as a leader I've never been more proud than I am right now of our Rite Aid team. Together we're really working around the clock making sure that we can continue to serve our communities. And the importance of the supply chain has never been more evident and our distribution center teams are doing a good job despite the great difficulty we have getting as many essential supplies as we would really like to have for our customers. Despite that our teams are working really hard to ensure our shelves are stocked as quickly as those products are made available. Our retail stores associates are working together to implement our enhanced cleaning and social distancing procedures as they are doing their just important everyday work. So it’s really work on top of work. And our pharmacy [indiscernible] clinic teams are doing the same and they're also providing our customers with the medications, services and care they need during this challenging time. On more than 6,400 Rite Aid pharmacists are proving their role on the front lines of healthcare is crucial. And this crisis has showcased their essential role in healthcare and as well has been the cornerstone of our go forward strategy. And our field leadership and corporate team including EnvisionRxOptions, Health Dialogue and RediClinic are working tirelessly to help keep our associates safe and meet our customer’s needs. As a leadership team, we continue to take critical steps to protect the safety of our associates and customers. We have and will continue to ship masks for every front line associate install Plexiglas at every retail location and provide Hero Pay, Hero Bonus and Pandemic Pay programs. We're also working closely with the US Department of Health and Human Services to expand testing sites at our stores beyond our pilot location, Philadelphia. And just last week, the Rite Aid Foundation announced a $5 million contribution to support the nation's healthcare providers and first responders to support children, families and communities impacted by this outbreak to address the geographic pandemic hotspots, which is really where Rite Aid stores are located. We are deep in those communities, and also to support Rite Aid’s own associates as they continue to battle the COVID-19 pandemic themselves personally in many cases. The additional step that we've taken are highlighted in today's press release and we will continue to do more as we unite together in this ongoing battle against an invisible enemy. I'm really proud of the heroic and extraordinary efforts of our team. And as a leader of the organization, my top priority is to take care of our associates as we stand ready to serve our communities at a time when they need us most. So in turning to our results for Q4, I'm also equally proud of our team for continuing to deliver strong results that provide a foundation for achieving our new strategic objective. As a reminder, our fourth quarter ended on February 29, which is before the COVID-19 crisis really began to have a financial impact. Later on today’s call, Matt will provide an update about how COVID-19 has impacted our business and could impact it going forward. In terms of the quarter, we grew revenue across both segments and delivered our second consecutive quarter-over-quarter improvement in adjusted EBITDA. In our Retail Pharmacy, we increased same store sales in both the pharmacy and front end while generating strong script count growth. For EnvisionRxOptions, which is soon to be renamed Elixir, we drove strong revenue growth by increasing our Medicare Part D membership and grew adjusted EBITDA through improvements in managing our pharmacy network. Overall, this was a strong quarter for execution that helps to provide us with the important momentum heading forward. This quarter four performance is an acceleration of the crucial work we've been doing throughout the fiscal year. As we plan for the future, we also move with great urgency to turn this company around and begin growing again. So we built our new leadership team with top talent, a job that is still underway. We reduced expenses at Rite Aid corporate by [$65] [ph] million on an annual run rate basis. We extended 35% of our bond maturity out to 2025. We reduced our debt and reduced our leverage ratio by more than a full turn. We stabilized our retail business and [handled easy] [ph] our FY 2020 pharmacy plan. And we beat our [indiscernible] EBITDA plans while also controlling expense. As we said during analyst day all of this is important, very important, but it won't be enough to get our company thriving. As you know we recently presented our vision for reintroducing Rite Aid in the communities we serve. We are committed to redefining our industry by launching a bold pharmacy first strategy that we call Rx evolution. This strategy focuses on becoming the dominant mid-market PBM unlocking the value of our pharmacists and revitalizing our retail and digital experience. As the COVID-19 crisis has unfolded, it's magnified the importance of our go forward plans and the need for what we can and will offer in the communities we serve. Ironically it has reinforced that pharmacists are among the most trusted and accessible healthcare professionals and that we can empower our pharmacists to drive consumer engagement to levels not seen before in healthcare. And it's reminded us that the retail products and services we offer are essential to the communities we serve. So, we're hard at work not only in serving the immediate needs of our communities, but also in staying on course with our clear vision for the future. It's really a testament to our team, which is working literally around the clock to serve the immense needs of our communities while moving forward with our strategic plan. So at this time I'd like to introduce Jim Peters for additional updates on Q4 as well as our strategic plan. Jim?

Thank you, Heyward. I have been nothing short of inspired by the truly extraordinary efforts of our organization, our associates, and especially our store and distribution center associates. Rite Aid, we know, we're not the only ones battling this crisis right now but I can assure you we are all hands on deck to do our part and more to serve our associates and communities during this very challenging time. It almost seems trivial to be discussing financial results during a time like this but like other life sustaining businesses throughout the world we also know the importance of managing and executing on the day to day business so that Rite Aid can continue serving our communities well beyond this crisis and for generations to come. Fortunately our team had already been executing against our new Rx evolution strategy as we enter fiscal Q4 which helped us deliver a strong quarter throughout key areas of our business. As you know our pharmacy is at the heart with our new strategy which is designed to fundamentally change Rite Aid’s role in healthcare. As we reported at Analyst Day consumers visit Rite Aid stores upwards of 25 times to 30 times per year. And we believe there's a significant opportunity to leverage these interaction points to support consumers, health plans, and healthcare providers as a true partner a partner that helps guide and reinforce a more connected care journey. As we continue working to bring this vision to life, it's paramount that we continue building momentum with our pharmacy business to lay the foundation for Rite Aid’s Rx evolution. In the fourth quarter, we continued seeing strong script count and clinical service trends as we focus on providing an even higher level of care and engagement. We delivered 5% growth in same store prescription count adjusted to 30 day equivalents driven by strong execution notably in growing immunizations and medication adherence through personalized interventions, as well as prescription file buys and gaining access to new networks in markets where we have strong market presence. This year our pharmacy has increased our number of flu shots by more than 300,000 over the last year, for a total of more than 2.6 million. We also significantly grew ancillary immunizations by more than 500,000 for the year which pushed our total number of immunizations including flu to more than 4 million and of course we continued to engage more customers through medication therapy management services with our results exceeding both last year and our plan for FY 2020. These positive results lay the groundwork as we build a more robust set of capabilities that supports a connected care experience and whole being health solutions that include prescriptions, products and services. As Heyward mentioned earlier, revitalizing our retail and digital experience is key to providing a holistic connected experience that consumers want and expect. On the retail side in Q4, we delivered crucial front end growth in a challenging environment, which is providing us with key go forward momentum in another critical area of our business. Front end contrapositive and when excluding cigarettes and tobacco front end same store sales grew by 1.5% with strong results and in core categories such as upper respiratory pain care and first aid. We also saw strong growth its own brand penetration which increased 148 basis points to 20.69% quarter over quarter. Own brands will continue to be a critical priority as we launch additional better for you items to complement our focus on whole being health. Heading forward we continue to overhaul and curate our entire merchandise selection to fully compliment the elevated health and wellness experience that will differentiate Rite Aid from our competition. This new merchandising will be phased into all Rite Aid stores with our store of the future prototypes taking it to an even higher level as we prepared with originally launch our new brand in the fall. Speaking of our new brand, last month we unveiled our new Rite Aid logo and brand identity and we're excited to be working towards our formal launch this fall. As noted, we conducted extensive quantitative and qualitative research to develop a fresh and fun brand that resonates with the new target growth consumer, millennial and GenX women who care for multigenerational households including pets. As we work toward delighting these consumers, we're taking rapid steps to significantly enhance our digital experience. Earlier this week after months of research, development and testing we soft launched our new website and mobile app with an entirely new look and feel and an enhanced consumer experience. These new tools feature intuitive navigation, more transparent rewards and loyalty benefits and more user friendly online shopping cart, prescription reminders for digital pharmacy accounts and more. We’ll begin promoting this new site and app to consumers in just a few weeks and both will undoubtedly play a key role in creating a more personalized experience, experience that are seamlessly connected to our all touch points. This launch is of course not a launch and done but rather an early step in a digital journey that positions us to leapfrog our competition in delivering an omni-channel experience never before seen in the retail pharmacy segment. In Q4 our digital sales grew by 28% driven by digital refills and we are focused on driving continued growth heading forward. And in light of the current environment it's worthy to emphasize that we continue to strengthen our e-commerce capabilities to accelerate the growth we're already seeing. We've made bold moves in line with our strategy to ramp up consumer experience in e-commerce and COVID-19 accelerated the timeline for building these capabilities. And solid execution on our strategy prior to COVID-19 positioned as well to fight through our unprecedented online demands spike. For example we were already transitioning to a structure that treats e-commerce as a business not a cost center. We had already recruited the leader who now runs this e-commerce business and overall consumer experience and entrepreneur and digital retail executive who reports directly to me. And while it's a given that we have been battling through unprecedented online order volumes, our people have responded well and with urgency and with strength. We are a flatter and significantly more nimble company than when I came here just six months ago. And as the nimble company we've been short order ramped up e-commerce fulfillment. We've added capacity in our e-commerce distribution centers, added workstations, hired additional people, increased technology bandwidth. We've grown what feels like years’ worth of months and are working hard to bring down our backlog and making progress. And through all this we've handled this demand and growth responsibly. In addition to associate safety measures we've enacted quantity limits, reduced available assortments and transparently forewarn customers to the best of our ability a prolong ship types. As I said earlier our digital transformation will help fuel and elevate an omni-channel experience, both in store and online, which is taken on in even higher level of importance in light of the COVID-19 crisis. We have expanded self-checkouts at the 260 stores with plans for an additional 400 locations in FY 2021. Our prescription delivery and drive through capabilities continue to be meaningful options for our customers, especially during this crisis. We recently expanded our pilot with Instacart, and continue to explore additional convenient delivery options for our consumers purchasing merchandise from our stores. In addition, we recently completed a successful power to pay and go to expedite prescription pick up both in-store and at the drive through. We are now in the process of expanding this service across our store footprint with an expected completion date of April 30. And we continue to pursue new capabilities for consumers to buy online pick up in store. All of this is leading to a heightened consumer experience throughout all stores, particularly in store - in our store of the future. By default, all Rite Aid stores will feature improvements such as exterior clean up, new signage, merchandising changes, refreshed and caps and where needed Gondola changes. And for our store of the future, we will revolutionize our offering through features like wellness rooms, which will deliver localized all-being health solutions in a staggered free environment. Before I turn it over, I'm excited to continue our Rx evolution and we will continue pushing forward to bring this vision to life. At the same time, our top priority is leading and supporting our teams, so that we can keep our associates safe, healthy and ready to serve the customers in our communities. I'd like to sincerely thank our more than 50,000 Rite Aid associates for everything they everything they do day in, day out. They continue to respond in heroic ways and are making sure that we can continue providing essential care services and products during this never before same time. Thank you and now I'd like to turn it over to Dan Robson, for an update on the Elixir. Dan?

Thanks Jim. I've served as President of EnvisionRxOptions and as Heyward mentioned soon to be Elixir for four months now. Our future continues to look bright. But before we talk about our key initiatives, I think it's important to mention both the immediate and future challenges presented by COVID 19. In regards to our business continuity, the business, the company quickly implemented our pandemic response plan and I am proud to report that we encountered virtually no disruption to daily operations. The team has really stepped up. Moving forward we will continue to keep a close eye on membership especially our commercial employer business. We have yet to see a measurable downturn that may change as clients are faced with economic decisions regarding the size of their workforce. As we all know it's a challenging time for the country. And I’ll now back to our key initiatives. With each passing week we make solid progress towards our objectives. First and foremost, we continue to build out our leadership team and after months of recruiting and vetting candidates, I am happy to report that our executive roster is all but complete. We have much work to do in the coming months and a seasoned forward thinking leadership team will take us down the right path. As we talked about last month integration with the Elixir and between Elixir and Rite Aid is a major initiative for 2020. We've completed a comprehensive analysis of existing organizational structures and we are already taking steps to eliminate operational redundancy and unnecessary expense. Throughout 2020, we will close the operational gaps between the Elixir companies and achieve tighter alignment with our parent company Rite Aid. We’re moving full steam ahead with strategic investments in our technology infrastructure, product innovation as well as member experience. These initiatives will clarify our value proposition to target markets and allow us to launch a more cohesive, more focused market strategy as we roll into Q2. And finally, we are hard at work preparing to implement our new name brand Elixir. We will run it. We run a complex business and a rollout like this takes time. Our plan is to complete this rollout in 2020. Now regarding fourth quarter performance, the Elixir team did a great job of delivering growth during a time of significant change. Fourth quarter results were strong with an adjusted EBITDA increasing by $12.6 million or 33.2% compared to the fourth quarter of the prior year. This increase was primarily driven by continued focus on improving margin including our significant efforts to optimize our network strategy. Revenue was favorable to prior year by $337.8 million or 23.1%. This increase in revenue was primarily due to an increase of Medicare Part D membership. Medicare Part D enrollment is up 39.2% year-over-year with a total year-over-year increase of approximately 244,000 members. In summary, we now have over 860,000 Medicare Part D members including over 450,000 choosers. Also at our Elixir Pharmacy specialty revenues are up 20.2% year-over-year and Medicare revenues were up 27.1% year-over-year. Finally, the 2020 commercial selling season was strong having closed over 300,000 new lives, which approximately three quarters are health plan lives. We've also secured renewals for many of our key clients and even with some losses that we consider outliers our membership retention rate is 90%. Our position has a strong independent mid-market PBM is resonating as an essential option in the marketplace for health plans, health systems, self-insured employers, and unions. We have a strong pipeline for the 2021 commercial and 2022 health plan selling season and at the same time there may be clients in this pipeline who are inclined to stay with our incumbent PBM in this environment. However if this happens that would also mean that Elixir would have a higher retention rate. Now, with that, I'll turn it over to Matt for some comments on Q4 financial performance. Matt?

Thanks, Dan. On this morning’s call, I will walk through our fourth quarter results, provide an update on the recent impacts of COVID-19 on our business and review our fiscal 2021 guidance. Revenues for the quarter were $5.7 billion which roughly approximately $348 million from the prior year's fourth quarter. Net loss for the quarter was $343.5 billion or $6.43 per diluted share compared to $255.6 million or $4.83 per diluted share in the last year’s fourth quarter. The increase in our net loss is due mostly to higher income tax expense partially offset by a $72.4 million LIFO credit in the current year compared to a LIFO charge of $4 million in the prior year. Income tax expense was negatively impacted by $320.6 million charge relating to an increase in the valuation allowance against our net deferred tax asset. The increase to the valuation allowance was based on our most recent assessment that it is more likely than not, that sufficient taxable income will not be generated to realize the benefit of the net deferred tax asset. Adjusted net loss in the current quarter was $19.9 million or $0.37 per diluted share versus adjusted net loss of $13.3 million or $0.25 per diluted share in the prior-year quarter. The increase in our adjusted net loss was due primarily to a current year loss and the sale of our 2019 CMS receivable compared to a gain on sale of assets in the prior-year fourth quarter. This is partially offset by an increase in adjusted EBITDA which was $135.6 million in the current quarter compared to $134.1 million in the prior-year quarter. Retail pharmacy segment revenue for the quarter was $4 billion, which was $22 million higher than the last year's fourth quarter. Our increase in retail pharmacy segment revenue was driven by an increase in same-store sales, partially offset by a reduction in store count since the end of fiscal 2019. Same-store sales increased to 160 basis points in the quarter. Front-end same-store sales were up 150 basis points after excluding cigarette and tobacco sales, driven by strong results in core categories such as upper respiratory, pain care, and First Aid. Pharmacy same store sales increased by 160 basis points with same store prescription count of 5% on a 30 day adjusted basis due to strong execution notably in growing immunizations and medication adherence through personalized interventions as well as prescription file buys and gaining access to new networks to markets where we have strong market presence. Total retail pharmacy gross profit dollars in the quarter were $83 million better than last year's fourth quarter and gross margin was a 193 basis points better as a percent of revenues. Retail pharmacy segment gross profit for the fourth quarter includes the LIFO credit I mentioned earlier which resulted from deflation and generic drug cost partially offset by brand drug inflation. Adjusted EBITDA gross profit was favorable to last year's fourth quarter by $1.5 million and a 11 basis points worse than prior year as a percent of revenues. Our increasing adjusted EBITDA gross profit was driven by an improvement in pharmacy gross profit due to prescription growth partially offset by lower reimbursement rates. The improvement in pharmacy gross profit was partially offset by lower front end gross profit due to a decline in vendor promotional allowances. Retail pharmacy segment SG&A expense for the quarter was $5 million higher and flat as a percent of revenues to last year's fourth quarter. Our adjusted EBITDA SG&A was $12.6 million and 17 basis points worse than last year. The increase in adjusted EBITDA SG&A was driven primarily by reduced TSA fee income from Walgreens. Our pharmacy services segment Elixir had revenues of $1.8 billion which was an increase of $338 million or 23% due to an increase in our Medicate Part D revenues as we continue to grow our membership. Adjusted EBITDA for the Pharmacy Services segment of $50.4 million was $12.6 million better than last year's fourth quarter adjusted EBITDA Pharmacy Services segment adjusted EBITDA benefited from increased revenues and improvements in pharmacy network management, partially offset by increases in SG&A expense related to our growth in Medicare Part D lives. Our cash flow statement for the quarter shows a source of cash from operating activities of $417 million in the current year quarter compared to a use of cash from operating activities of $216 million in the prior year quarter. The cash from operating activities in the quarter benefited from the sale of our calendar year 2019 Medicare Part D receivable from CMS and the result of initiatives to reduce front-end inventory. Our debt balance net of cash was approximately $2.8 billion at the end of our fourth quarter and our pro forma leverage ratio is 5.3 times adjusted EBITDA, which takes into account the impact of proceeds from the sale of the remaining distribution center to Walgreens, which is expected to be completed subsequent to year-end. As previously announced, during the quarter, we completed an exchange of $600 million of our 608% notes to April 2023 to 7.5% second lien secured notes due July of 2025, which improves our debt maturity profile. Our liquidity of $2 billion at quarter end is very strong and with no debt maturing until 2023 we had the flexibility and runway to execute our strategic initiatives. Before discussing our guidance for fiscal 2021, let me spend a few minutes providing an update on how COVID-19 has impacted our business through the first several weeks of fiscal 2021. We saw a significant increase in revenues during the month of March with same-store frontend sales increasing by 33%. These increases were impacted by demand for general cleaning products, sanitizers, wipes, paper products and OTC items. The demand has moderated in the first few weeks of April. Same-store for script counts are 8.3% for the month of March driven by the acceleration of 90 days fills of maintenance prescriptions. We view this as a timing item and expect this phenomenon to have a negative impact on script trends in April and May. There is also a risk that delay in elective medical procedures could have a negative short-term impact on acute prescriptions sales. The benefit that we have seen from increased sales has been largely offset by investments made related COVID-19 that Hayward described earlier including pay adjustments for store and distribution center hourly associates, bonuses for store managers and pharmacists, increased charges to clean stores and other expense increases in related to our increased volume such as supply costs and credit and debit card fees. Regarding supply chain, our current supply for the majority of our branded and generic drugs is good. However, we've seen increased demand for certain generic products such as inhalers and hydroxychloroquine and are closely monitoring the supply of these and other generic products. We've had issues in restocking of our front-end products with heavy demand similar to others in the industry. We're working diligently with our supplier partners to get back inside. At Elixir, we've seen an increase in mail order prescriptions and drug utilization which has a favorable impact on the business. Offsetting this is a negative impact of higher utilization on our medical loss ratio at Invision Insurance, our Medicare Part D plan. So far we have not seen any negative changes in total membership for our PBM clients. However, there is a risk that extended layoffs could negatively impact PBM membership and related gross margin and we will continue to monitor this closely. Our cash and liquidity position is very strong. The current liquidity is $1.9 billion with a slight decline from the $2 billion dollars at year end due to expected timing differences of receipts and payments. We've had no issue accessing our revolving credit facility and out of an abundance of caution have drawn an additional $180 million on our revolving credit facility to holding cash during these uncertain times. At this time, the company does not have enough information about the ultimate impact of Covid-19 on fiscal 2021 results to justify changing the fiscal 2021 guidance that we issued on March 16 during our Analyst Day presentation. It is important to note that the impacts of Covid-19 on our business are fluid and difficult to predict and these estimates could materially change. Factors that could cause our estimates for fiscal 2021 to materially change include a deterioration in front-end sales and prescriptions due to prolong social dismissing measures, a reduction in members at a Pharmacy Services segment, commercial clients, and disruptions to our front-end or pharmaceutical supply chain. Our guidance assumptions for the retail pharmacy segment reflect expectations for continued prescription count growth and continued reimbursement rate pressure, partially offset by generic drug cost savings and strong SG&A expense control. Our guidance for the Pharmacy Services segment assumes sustained improvements in pharmacy network management and benefits from SG&A reduction and other integration activities and expense reduction initiatives. Our guidance also assumes restructuring charges of approximately $60 million which are not included in adjusted EBITDA. These charges include the estimated cost to re-launch the Rite Aid and Elixir brands as well as transitioning certain merchandise lines in the retail stores. We expect total revenues to be between $22.5 billion and $22.9 billion including PBM revenues of $6.75 billion to $6.85 billion. We expect same-store sales to be in a range of an increase of 1.5% to 2.5%. We expect net loss to be between $91 million and $190 million and expected adjusted EBITDA to be between $500 million and $540 million. We expected adjusted net income per share to be between a loss of $0.22 and income of $0.19 per share. Our fiscal 2021 capital expenditures are expected to be $350 million. It will be concentrated on investments and technology. Our store rebranding initiatives and prescription file buys that will drive growth. There is a risk that restrictions on construction activity and closures of local governmental permitting offices could delay our plans to roll out new sites to our stores and could impact the number of stores in the future remodels that we perform in fiscal 2021. However it's too early to update our guidance for capital expenditures. This completes my portion of the presentation. And with that, we will now be opening the phone lines for your questions.

Thank you. [Operator Instructions] So our first question will come from the line of Robert Jones with Goldman Sachs. Please go ahead with your questions.

Great. Thanks. Thanks for taking the questions. You know Matt, you just talked about some of the strength you saw in March in both front end and scripts. But I was hoping you could share maybe a little bit more with us on the type of comps that you're observing in the more recent weeks end of march into the first couple of weeks in April, I know you mentioned it moderating. But is there any more of a sense you can give us on the order of magnitude as far as what you saw in the way of a drop off as it relates to consumers changing behavior in the recent weeks?

Yeah. Yeah. Probably I can't give you a precise numbers Bob, but what I would tell you is we are still seeing positive front end comp trends, positive trends on the front end and on the scripts that we are seeing in the last couple of weeks slightly negative trends as we see kind of the impact of that 90 - accelerated 90 day fill kind of come back.

Well, also lower acute medication because people aren’t really going to the doctor right now.

Yeah.

No, that's helpful. And then I guess as it relates to the comments you made around generic drug purchasing savings not offsetting the expected reimbursement decline. Could you give us any more detail here, are you seeing higher than expected generic pricing than what you had previously anticipated And I guess, if that is the case, could you maybe help us think through what’s causing that? How the disruptions in the system might be resulting in changing in the generic pricing market.

Yeah, Bob, as you clarify that really the comments around generic drug cost not completely offsetting reimbursement rate pressures are really in the context of when we initially set our guidance and just our expectations that we're going to have reimbursement rate reductions in fiscal 2021 that are above and beyond the savings we would expect to get just in kind of general market conditions, I think it's too early to really determine whether or not anything with COVID-19 is going to have an impact on generic pricing.

Great. I guess just one last follow-up if I could. Heyward, you mentioned the difference in acute and chronic. It's something that we've been getting questions on. I mean, is there any more you can share there just as far as the trends you're seeing if you parsed out folks getting chronic medications versus acute in both the pharmacy and also at the PBM?

Yeah. Well, actually this has been – we've seen a huge uptick in the PBM in terms of mail-order for sure. And we're seeing people of course, stocking up on their 90-day medication because they don't really want to be going back to the pharmacies as much because they're just worried about the closure. So if they can get 90 days in one trip through a drive through that’s the awesome and then people aren't - doctors aren't open for business right now, there's been a 40% I think decline in primary care physicians business. And so people don't want to go to the emergency room right now. And so we are saying what I believe is the temporary decline in acute care meds, I think this will pick up in earnest when markets start to open and Tele Health really start to see its full impact. So my view is this is potentially just temporary. So maintenance medications do make up the majority of the scripts that we fill.

Okay. Great.

Bob, I would just add to what Heyward said and just give you just a data point. You know in March alone we've seen about an 8.3% increase in 30-day comp adjusted script count for those maintenance meds led really by anti-asthmatics, cardiovascular, hyperglycemic medications. So that just does give the data point, we don't rely on that much because it's a short window of time but at least directionally gives you a sense of the driver.

Appreciate that. Thank you.

Your next question comes from the line of Glen Santangelo with Guggenheim. Please go ahead with your question.

Oh. Yeah. Thanks for taking my question. I just wanted to follow up quickly on Bob's question regarding April. If I heard you correctly it kind of sounds like that even in the current environment your front store sales are still trending positive and I think you seemed to suggest that scripts may be down a little bit but that is due to an accelerated adoption of 90-day scripts maybe kind of implying that the current foot traffic is not down materially year-over-year despite the social distancing guidelines. Is that a correct characterization?

Maybe, this is Dan. Maybe I can take that one. So foot traffic you know it's interesting the way we define it has changed. Right. So online traffic combined with in-store traffic is different from just traditional in-store traffic. So we've seen trips reduced because of social distancing but we've seen basket size increased. So on the front end you see -- you've got the stockpiling effect early on. But as Matt indicated or implied earlier you know while we're not seeing the hyper growth that we saw end of February beginning of March, we're still at levels that are certainly outpacing year-over-year on the front end.

Okay. Thanks. And maybe if I just ask Matt a quick follow up on the balance sheet, a fair amount of debt restructuring over the past handful of months, I'm kind of curious is there more to go there and how do you think about the changes in the yield curve in the credit markets and how that may impact any sort of balance sheet restructuring going forward?

Yeah, certainly there's more work to do, Glen, and we still – and we've made a lot of progress in our 2023 maturities but we still have a sizable bond maturity due in 2023 that that's going to be top of mind for us as we move throughout the year. I think obviously what this disruption in the credit markets over the last month, I think we've kind of taken a pause in some of our activities but certainly thinking hard about how we handle those 23 maturities and I think as the market stabilize, we would want to try to handle that maturity sooner rather than later.

Could the lower rates be a benefit to you obviously?

I think lower rates could, I think some of it depends quite honestly on what's the appetite for our credit versus like versus investment grade credit. I think initially in mid-to-late March you know the markets probably were relatively close for a credit profile like ours. But my guess is that’s starting to change in recent weeks. We'll take a harder look at it, once we kind of let us – let things settle down here.

Okay. Thanks for the comments.

Your next question is from the line of Lisa Gill with JPMorgan. Please go ahead with your question.

Thanks very much. And thank you. Matt, I just really want to start with your guidance for 2021 and the anticipation around how this all plays out too. So, in the current guidance are you looking at what you're seeing currently and saying okay we think things are going to get better. Are you looking at this and saying you lived through what happened back in 2008 to 2010 with the economic downturn clearly Rite Aid was in a completely different position than they are today from a liquidity standpoint. But are you making assumptions within that guidance that we do see more of a prolonged economic downturn and look at what the potential impact to your business could be it - I just want to understand kind of some of the puts and takes. I know we've talked about it on roughly a month ago at the Analyst Day. But I just want to better understand how you're thinking about an economic downturn?

You know Lisa, I think there is a lot of ways this could play out. I think from the - one thing I think we try to be careful about in our language around guidance is you know given what we see and know today there wasn't a reason for us to change the guidance. I still think there's a ton of uncertainty that could come from COVID 19 and I think we're being pretty careful to try to let investors know that there is that that uncertainty out there. So I think in the past recessionary environments what I would tell you is that we would see some pressure on front end comps, you see scripts stay relatively stable on the PBM side which we didn't have back in 2008. I think there's the risk of loss of commercial membership somewhat offset by probably a potential for increases in Medicaid membership and we do have a sizable amount of Medicaid lives. I think from a guidance standpoint we've tried to take a snapshot of what's our best estimate of where things stand today. But again I think there's just a ton of undefined risk here of COVID 19 and we tried to be pretty kind of candid about that in our release.

That's helpful. And then just in an unrelated question, you talked a little bit about telehealth and talked about the potential impact from telehealth, two things I just want to understand one is it a telehealth relationship with that you have with an outside vendor and if so can you share with us who that is? And then secondly, I think it may have been either Jim or Heyward that made the comment around potential future opportunities with telehealth and prescription volume. What have you seen thus far with people utilizing telehealth? Are they then in turn having a prescription filled at Rite Aid or are they coming through the drive-through or they having it delivered to their home in some way? I just want to understand how you think about the future trends of telemedicine as I believe that that trend is here to stay?

Yeah, I would like to comment on that. But I do want to just say that I think it's a bit early to know how telehealth is going to reflect out into the medications into the stores even though there has been telehealth activity in the past. I think we're I think that's something that's about to hit us. Jim, you want to talk about our overall strategy.

Yeah, sure. Thanks. Hi, Lisa. Yes, the telehealth certainly I also believe will take a significantly increased role as we move forward. And I think for all the obvious reasons this COVID-19 crisis has pushed regulators and others to kind of expand their view of what pharmacists and nurse practitioners ought to be able to do through telehealth. It is too early to tell. All I could say is that we took all of our nurse practitioners and we're early in sending them home as opposed to having them essentially be magnets for sick people coming into our stores and as we did that we very rapidly stood up our own ready clinic at home line, which is telehealth and we've done that with the current technology partner which is Teladoc. And we have had we've had a technology relationship with InTouch which was recently acquired by Teladoc. And so you know using that technology and others that we use to allow our own nurse practitioners to from the comforts of their own home and frankly for patients the comforts of their own homes be able to connect and you know we don't see any aberration as it relates to percent of those visits that result in scripts, but for us it's early days for telehealth and we only expect it to become a much stronger in part of our offering.

Great. Thanks very much.

Your next question is from the line of Elizabeth Anderson with Evercore. Please go ahead with your question.

Hi, guys. Good morning. I got two sort of minor questions. Can you talk about the PBM pharmacy network management improvement that you guys saw in the quarter?

Matt?

Yeah, Elizabeth this is Matt. I think what we've seen is we've just been able to do a better job of kind of managing the balance between the contractual commitments that we have on our clients and kind of how we manage rates on the on the retail side.

Okay. That's helpful. And one of the things you've been saying is that pharmacists have been authorized to give COVID test. Is that something that you guys are sort of contemplating for working on your end?

Well we're very heavy into that right now. We've been a part of the White House task force on this. Jim Dan do you want to give us an update?

Yeah, absolutely. We're working directly or have been working directly with the White House and HHS on establishing testing sites. We view ourselves as a kind of pilot partner a key pilot partner to the government as they attempt to roll out a scalable model of testing. So we were part of the initial testing site. So, we had a location in Philadelphia. This week we converted our original Philadelphia site and opened up an additional three sites in Pennsylvania using the new self-testing model. We have partnered with a number of vendors to provide it and testing led by our pharmacists and our goal as part of the second wave of government-driven testing is to stand up 25 of these sites in eight states and I think as importantly is all of what we have done, I would say that perhaps the most substantial, I think, movement that we've seen as a result of Covid is Rite Aid being squarely at the table in policy shaping discussions that lead to things like expansion of our ability -- pharmacist's ability to test.

Noting out the status that in some states we actually do flu and strep tests and in those states we’re actually able to prescribe as well. So, we do see and are really trying to advocate for pharmacists to be able to continue to be an extension of service delivery given their intense amount of consumer engagement. We think that there's more services that we can provide in our retail pharmacy.

Got it. Thank you.

Your next question is from the line of George Hill with Deutsche Bank. Please go ahead with your question.

Yeah. Good morning, guys, and thanks for taking the questions. I guess my first is a little bit of a follow-up on Bob's question regarding the generic drug pricing comments and I guess is the – is what we should read between the lines there is that most of the gross margin pressure that comes from reimbursement will not have offset, so we should just think of the reimbursement pressure flowing all the way to the gross margin line?

Yeah. George…

Kind of a modeling question, of course.

I think most as a strong word, I think we'll be able to offset some of the reimbursement rate pressure with generic drug savings, but certainly we won't be able to offset all of it.

Okay. That’s helpful. And then maybe just talking about business mix, I guess can you provide any color on the degree to which you guys over index to Medicaid now. And I guess I would ask at what point does that mix need to shift to put the guidance for the year at risk or I think most of us are expecting to see a sharp increase kind of as we go through the years as it relates to the Medicaid enrollment versus commercial in the next?

Yeah. Let me comment on that. So this is for the PBM business and our TGM business is a mixture of what we formerly called net track and what we formally called envision now all one PBM called Elixir. And I think we're very fortunate that we have a significant amount of health plan business is in the Medicaid business as well as we have a significant Medicare Advantage business along with our Medicare Part D business and of course commercial business which is heavily in that toward public sector and labor as well as small group business and so we feel that we have as much of an opportunity for upside as we do have some risk on the commercial small group business just given the economy. So I don't know if that answers your question, but we do anticipate that the Medicaid rules will expand.

Well, Heyward that's great color. I was actually thinking about it from the retail side assuming that your margin prescript in commercial was better than your margin prescript in Medicaid, so thinking about the pharmacy payer is?

Sure. I'll let Matt answer that.

Yeah. So we've probably already over index a little bit to Medicare compared to our competitors George has given the markets that we are in and certainly I think there is probably some risk that mix could further over to a extent that that you get people who are coming or getting laid off or have access to commercial insurance and now are taking advantage of Medicare Medicaid expansion or ACA. I guess so I would say that while Medicaid scripts are less margin than commercial that gap is maybe not as great as you would think on an overall basis.

Okay, that's helpful. Thank you.

Your next question is from the line of William Reuter with BoA Securities.

Good morning, guys. I was wondering if you were seeing any shortages in terms of pharmacist and some are obviously facing a lot with people and I was wondering if there were any challenges there in terms of keeping them healthy.

Well, actually, I couldn't be more amazed and proud of our Pharmacy Retail. Our pharmacists have lower callout rates right now than they’ve ever had. So these folks are – they're there on the ground. They're doing what they were trying to do and more importantly what the purpose and mission of what they want to do. We have had just an amazing response from our pharmacy teams. They're the ones that are also involved with our clinical teams doing the testing. We have had not only no issues. We've seen them show up like never before. Now, I will say that in general we are in New York City. We're in California. We're in Washington. We're in Pennsylvania. We are in the nation's hotspot. And we have been impacted mostly on the tech end front-end side in terms of quarantines and call-outs but we have not had to close any stores for anything other than cleaning. So it's been pretty remarkable.

That's great to hear. And then with regard to the Elixir you're commercialized. You mentioned you've added 300,000 gross lives. Sounds like you're going to lose some. Do you know what you expect that number to be for the 2020 season?

Matt, do you want to comment?

Yeah I think for basically for fiscal 2021 so for the season that has already been done I think commercials are going to be when you take the lives that we've gotten versus the losses of recycling commercials probably relatively flat. And I would expect most of the growth for calendar 2020, fiscal 2021 to be in mid D.

Great. I’ll turn it to others. Thank you.

Thank you. Your next question comes from the line of Karru Martinson with Jefferies. Please go ahead with your question.

Good morning. Certainly very strong digital growth and I was just wondering you know what percentage are we digital today and given the store base how do you feel that digital can grow in the near 6 to 12 months?

Dan, can you comment on that?

Yeah. Thanks, Karru. You know we started from a position of almost having virtually no digital e-commerce business on a relative basis to our revenues. So it's really inconsequential to even give a figure for that. But I can tell you that we've never focused on it either until recently. Over the past six months it's become a high point of our strategy and we believe that because of our footprint, we’re not rate limited by any means by the existing footprint because of course e-commerce can deliver product and in some case service we believe in the future to people regardless of whether they are core geographic footprint. What I can tell you that our revenue has grown substantially over last year and again our efforts to focus on growing that business are only quite recent. So we view it as a core part of our strategy. We think it will be a very good growth engine over time and we actually think we're very well-positioned to do things in a way that will measure ourselves based on best-in-class e-commerce vendors not just those in Retail Pharmacy.

And then one, you talked about the reset of the online mobile app and everything else and the focus on the rewards members, it's been a while since I've heard of an update of where we stand on rewards members and how they're spending is relative to the rest of the customer base?

Sure. We've been not only looking hard at our rewards program. But trying to solve for one of the challenges that we recognized several months ago, which is because we're a – a lot of people weren't aware of the real benefit they're getting from being in our rewards program. So we offer 20% plus for many of our wellness plus members. And historically many of those members we learned weren't even aware that they are getting that benefit. Conversely, they were very aware when they see kind of high level promotional pricing strategy that we've historically had aware of those products that are priced higher sometimes on shelves to balance the great discounts that we actually give through the wellness plus. So in any case, we're doing a very good job maintaining our gold and silver members. Our challenge is really to drive new households and that's kind of where we focus like a laser and we've actually hired someone who's got strong experience working with other best-in-class loyalty programs on the retail side about four months ago and we're making very strong progress there.

Okay. And just lastly when we look back at my notes from the Analyst Day, you talked about addressing the 2023 is hopefully in the next 12 to 18 months, how should we square that with the handle sooner rather than later with the markets reopening comment?

I think I would square with if market conditions are right, Karru, I'd like to be closer to that 12 months and 18 months.

Okay. Thank you very much. Appreciate it.

Your next question is from the line of Bryan Hunt with Wells Fargo Securities. Please go ahead.

Thank you for your time. And a long cruise line of questioning. When you look at the surge and same-store sales in the front end you've seen over the last six weeks or call it, how many opportunities did you have to sign up new customers and how many of those customers were unique?

Yeah, I'll answer that. It's interesting, when we look at our online, we actually took measures as appropriately to ensure that we kept backlog under control at least as defined by the market under control metrics that are come to be realized through Covid-19 and so one of those measures in controlling our online was to actually to focus on providing online order opportunities and restricting those opportunities to Wellness Plus members. So, it’s kind of one way that we were able to ensure that, number one, we could provide level of personalization to our growing base of customers and also frankly restrict the orders until we got the backlog down to reasonable levels. We did see a large influx of Ron's shoppers throughout this period and that those trends continue to hold up.

And how do you plan like capturing that unique data and those unique customers that you - that have experienced at Rite Aid over the last six weeks. I mean what's the plan to go back after them?

Well, I mean look I think the step one is actually enrolling them, keep providing enough value and clarity around our loyalty program to have them want to enroll them in our loyalty program. And as I said earlier we've already designed changes in our program and actually we'll be launching a refresh program next year, but we're not just kind of turning on their light switch next year. We've already begun to change it. So the brands are already wellness plus shoppers who shop relatively infrequently. So this was really an opportunity to reengage them in ways that we probably wouldn't have asked and kind of despite that we've seen with COVID 19.

And then my last question is if we go to the - kind of your original hotspot in Washington State. Can you talk about to any degree, what's going on and with sales there relative to the rest of your geographies and that's it for me. Thank you.

Yeah. We’re actively watching Washington State because we consider them to be on the front of this as I thought why you’re asking the question is that we see them as a leading indicator of what our life is going to be like in New York and California and Pennsylvania when this starts to have -- Matt, do you want to comment on some of those metrics?

Yeah, Brian, I would say that in Washington state probably over the last week or so while we we’re still seeing decent front-end comps there, we probably seen a bit of a -- little bit more of a slowdown in Washington compared to the activity that we’re seeing in some of the other hotspots not unsurprisingly.

We've also…

Because it is right drug, so I think about why is after COVID -- after the peak COVID?

As Matt and Heyward said we do view that as kind of a leading indicator to some degree as a result as I mentioned earlier in my remarks that we expanded our work with Instacart and that expansion actually started in the Pacific Northwest with Washington and the cross hairs. We've already seen substantial pickup as a result of store to home delivery.

Very good. I’ll hand it off to somebody else. Thanks for your time.

We have time for one last question and your last question will come from the line of Carla Casella with JPMorgan. Please go ahead.

Hi. Just a couple of follow-ups. Are you commented on adding some people to the stores under COVID and some bonus payments, can you quantify any of the added employee labor that we’ll see in 2021 and if this is something that’s permanent or is, are they permanent hires or are they six months, three months, temporary how you’re looking at that?

Well, the first thing I would say is that the hiring is really to show up the stores so we can keep them open and you know we were rightsize that as this passes on a market by market basis. It’s also to keep our distribution center highly functional. We don’t anticipate that we will – we’ll keep our hiring tied to our volumes when this passes, when the peak issues pass and then Matt if you can comment on the pay and the timing of the pay?

Right. So we – really there's two elements to pay. One is we had a temporary increase in our wage rates for store and distribution center hourly associates that is going to at this point we would expect to extend through sometime in May. We also had a onetime bonus for pharmacists and store managers. Those costs along with some of the other incremental costs side, I mentioned on the call we expect to pretty much offset the sales benefit that we saw in March. So I think those are going to largely offset each other at least from what we see to this point. Obviously, things could change as depending on how things of COVID-19 developed.

Okay, great. And then did you say how much you spent on TSA in the quarter and then how we should think about TSA for 2021 now, I think you've completed if I’m correct all the distribution center transfers to Walgreens?

So I think what we referenced was that we had a $12 million increase in retailers SG&A and pretty much all that was due to TSA in the fourth quarter of 2020. Fiscal 21, there will be very limited TSA income as you know in the order of magnitude maybe $1 million.

Okay. Just one the one other clarification. The Pharmacy Services business was a lot stronger in the quarter and you mentioned adding a bunch of lives. Is that something that’s choppier or do you actually see an increase in the quarter added and then it tails off or is that a good run rate under the new for Life or Cover Life, sorry.

Yeah. I don't know if I want to – I think if you will probably look to some of the PBM revenue guidance for 2021, you get an idea of kind of what we think for the overall revenue increase in the PBM business, I would tell you correlate that in the Med D business you basically have a pretty decent idea where you're going to be on January 1 and that's where a lot of that growth came in. I mean obviously utilization particularly as it moves into some of the mail order business is going to have an impact, but you – in Med D, you do a bid, you get your lives in it for January 1 and then that number stays relatively constant throughout the year.

Okay. Great. And then just one clarification on some language, you talked about the prolong acute farm prescription decline and you did clarify a bit that just Covid and people stocking up, but do you think there's any risk that you're losing market shares to pharmacies that have either further online distribution or other online distribution?

Yeah, Mike…

Yeah.

I’ll start and let Heyward and Jim help me out, but I – but of the comments that were never really more around kind of what we think is going to happen in the marketplace as opposed to us thinking we're losing share.

Yeah. Correct. If anything we anticipate picking up share both and we have seen actually share – we pick up share on front-end and so Jim, you can talk about pharmacy.

Yeah. Sam, I would echo Matt's comments. We were not at all implying a thing about share as much as we were just trying to outline the potential risk of doctor’s offices remaining closed, elective surgeries and procedures doctors’ offices remaining closed, elective surgeries and procedures continuing beyond a reasonable time period of being continued. So it was more just out of abundance of caution that we wanted to at least highlight that as a potential, but certainly no implication about share.

Great. That's really helpful. Thanks so much.

And at this time, I will turn the call back over to Hayward for any closing remarks.

Thank you. Thanks everyone for your questions. Before we end the call, I just wanted to thank our team. Since the COVID-19 crisis began, we've been hearing incredible stories about our frontline associates showing care and concern for our customers and clients. And we've heard these inspiring stories from all areas of our business whether it's Rite Aid, Elixir, RediClinic or Health Dialog, all of those companies. I'd like to share one of these stories with you before we end the call. Last week, we mailed care packages to all of our associates, which included hand sanitizer, vitamin C support, the coveted paper products as well as a note of thanks and encouragement to each associate and we distribute them to the stores to distribute to their associates. And as you know, hand sanitizer is really hard to come by these days. At one of our stores in Pelham, New Hampshire, there was a customer who was looking for hand sanitizer. But the store was out of stock in that moment as they fly right off the shelves. In an incredible act of kindness, Ursula Romana, one of our store associates took the sanitizer from her care kits and gave it to the customer who possibly contacted our customer support team to let us know. Acts of kindness like this are happening throughout the world not just at Rite Aid support team to let us know acts of kindness like this are happening throughout the world not just at Rite Aid. As our first responders and frontline workers support our communities and in these tough times I really encourage all of us to recognize and celebrate those acts of kindness as we face these unprecedented challenges together. So that concludes today's call. Thanks for joining us and we'll talk again in June when we report our Q1 results.

Thank you. Thank you again for joining today's call. You may now disconnect.