Rite Aid Corporation (RAD) Q3 2021 Earnings Call Transcript

Rite Aid Corporation (NYSE: RAD) Q3 2021 earnings call dated Dec. 17, 2020.

Corporate Participants:

Trent Kruse — Senior Vice President, Investor Relations and Treasury

Heyward Donigan — President and Chief Executive Officer

Dan Robson — President, Elixir

Jim Peters — Chief Operating Officer

Matt Schroeder — Executive Vice President and Chief Financial Officer

Analysts:

Lisa Gill — JP Morgan — Analyst

Robert Jones — Goldman Sachs — Analyst

Glen Santangelo — Guggenheim Securities — Analyst

George Hill — Deutsche Bank — Analyst

Elizabeth Anderson — Evercore — Analyst

William Reuter — Bank of America Merrill Lynch — Analyst

Karru Martinson — Jefferies — Analyst

Carla Casella — JP Morgan — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Rite Aid Corporation Third Quarter 2021 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Trent Kruse, Senior Vice President of Investor Relations and Treasury. Please go ahead.

Trent Kruse — Senior Vice President, Investor Relations and Treasury

All right, thank you, Carol, and good morning everyone. We welcome you to our fiscal 2021 third quarter earnings conference call. On the call with me this morning are Heyward Donigan; Dan Robson; Jim Peters; and Matt Schroeder. As we mentioned in our release, we are providing slides related to the material we will be addressing today. These slides are provided on our website www.riteaid.com under the Investor Relations Information tab. While management will not be speaking directly to the slides, these slides are meant to facilitate your review of the company’s results and to be used as a reference document following the call.

Before we start, I’d like to remind you that today’s 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 SEC.

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 the reconciliation to the related GAAP measure are described in our press release and slides.

And with that let me turn the call over to Heyward. Heyward?

Heyward Donigan — President and Chief Executive Officer

Hey, thanks, Trent, and good morning everyone. We are really pleased with the results for the quarter. We continue to grow our business and achieve major milestones in our transformation through the RxEvolution strategy, all the while demonstrating essential role we play in our communities during this unprecedented global pandemic.

In Q3, we drove a 12% increase in total revenue. Growth was strong at Elixir which saw a revenue increase of 29% in Medicare Part D membership. In our Retail Pharmacy segment, we delivered another quarter of comp sales increases and continued growing market share in both the front end and pharmacy. We also delivered a 28% increase in Flu Shots from prior year’s third quarter. This growth occurred even as we faced the expected headwind from a soft cough, cold and flu season, since no one is out and about and continued pressure on acute script volume. Our teams continue to work tirelessly as you can imagine to serve our customers during this drawn out pandemic, and I remain very proud of how together we’re navigating this crisis and at the same time delivering growth in our key areas of our business.

I’m also proud that our teams are not only simultaneously executing on our quarterly goals, but also on the strategic plans to revolutionize our industry and elevate our role as an indispensable healthcare provider. At our Analyst Day in March, we told you that we would be a demonstrably different company within the next year. In just nine short months, we have delivered meaningfully on that promise, making substantial changes to position our company for profitable growth. We redefined the role of customer expectations and even the daily workflows of our pharmacists.

We’ve rebranded our Pharmacy Services segment Elixir to signal the move to crafted Rx solutions for our target customers. We’re launching the first phase of our exciting new member portal for Elixir customers on January 1, and we’re well on our way with the integration of the two legacy PBM solutions and upgrading our specialty medication solutions for our customers. We also successfully introduced our new Rite Aid brand to showcase our focus on delivering the perfect fusion of traditional medicine and alternative remedies. Every day we’re introducing new products to our stores that are on trend and reinforced our commitment to whole health. We changed out or replaced thousands of products over the last nine months and adjusted our merchandising presentation standards in the stores to showcase these new products and provide customer education on their ingredient benefits. We’re actively refreshing the exteriors all of our Rite Aid stores and have completed more than 700 to date and expect to complete all stores next year.

In the third quarter, we opened our first three Stores of the Future which completely re-imagined the drugstore experience and positioned our pharmacists for an even higher level of customer engagement. Jim will talk more about these stores, but we’re encouraged by the early results. We’re also lazering in on strategic markets and doubling down in markets where we want to strengthen our position as exemplified by the acquisition of Bartell in Seattle, which we identified as a key market for Rite Aid. With these key initiatives well underway, we’re becoming increasingly focused on elevating our already expanding role in health care. And as I’ve said before, we are a healthcare company, and going forward, we’re going to be demonstrating this in new ways.

In addition to their clinical training, our enhanced pharmacists training and certification has been expanded to now include holistic care, and our pharmacists are now actively engaging customers in key topics for their whole health, like sleep, anxiety, stress and immunity which are highly — especially during the pandemic and also to our new growth target customers. This engagement with our customers is already paying dividends, as we saw a lift in add-on sales in these important health categories.

In addition, the COVID crisis is a great example of how we are providing additional healthcare services in the communities we serve. Through our partnership with the US Department of Health and Human Services, we have conducted more than 1 million COVID test with quick turnaround times, averaging less than two days for result. These are PCR tests, the most reliable and there is no charge for our customers. Although there are many details still to be worked out, we’re partnering with the CDC to help administer COVID vaccines once they’re made available for the second phase of the rollout, which is the general population. We expect to play a significant role in providing vaccine to the public and those communities we serve. Providing COVID vaccines could be the most important public health initiative of our lifetime. We’re looking forward to this opportunity to help our communities in such a meaningful way that also showcases our essential role in healthcare.

Let me now talk about Elixir. I recently took part in multiple executive briefings with National Pharmacy Benefit Consulting firms. They in many ways validated our go-forward strategy. As we bring together and leverage Elixir, Health Dialog and our network of retail pharmacies, we’re able to craft and deliver differentiated solutions for employers and health plans that both lower costs and improve health outcome. Speaking of Health Dialog, we have an untapped asset here with strong capabilities and population health management and data analytics to support the Rite Aid and Elixir strategy. We look forward to sharing more on our vision for Health Dialog at a later date. So as a team we’re accelerating the key initiatives that will drive our transformation through the RxEvolution strategy, which focuses on establishing Elixir as a clearly differentiated market leader in managing pharmacy spend and total cost of care for health plan and employer clients as well as omnichannel member engagement that drives better health outcomes.

And in Retail, we’re unlocking the value of our pharmacists and revitalizing our retail and digital experiences. And we will continue working together to deliver the operational excellence needed to achieve strong results as we generate free cash flow, reduce our debt and improve our leverage ratio. While important work lies ahead of us, I’m inspired by the significant progress we’re making as a team and optimistic that we will achieve our goals through the RxEvolution.

And so, I’ll turn it over to Dan for an update on Elixir. Dan?

Dan Robson — President, Elixir

Thanks, Heyward. I’d like to provide an update on the meaningful progress we’re making on our core objectives, operational integration and modernization within our Pharmacy Services segment is doing well. And we will continue to make progress as we move into next year. Clinically, we are focused on consolidating our formulary offerings for our current employer clients and driving members to the most clinically effective and low cost options. This is a big undertaking and we’ll provide enhanced value for both Elixir and our clients moving forward.

In addition to improving the economics of managing overall client drug spend, we continue to drive towards intentional member focused clinical interventions. To this end, we have recently reorganized and integrated our clinical solutions team within our sister company Health Dialog. There are numerous benefits for Elixir, our clients and our members to a tighter alignment with Health Dialog by combining more focused drug spend management from Elixir, with an analytically driven omnichannel member engagement via Health Dialog, we see substantial opportunity to engage consumers in ways not before seen in the PBM space. We also have big plans in calendar year 2021 for our specialty pharmacy. Managing specialty is particularly important to our clients as it drives significant spend. By offering a new approach using our own specialty pharmacy and other best-in-class specialty pharmacies, we will deliver even more value for our clients and members through a solution that provides optionality.

I’ll also focus on the fastest growing area of drug spend. Heyward mentioned, we recently wrapped up a productive series of briefings with large pharmacy benefit consulting firms. During these briefings, we shared our vision for Elixir and had useful conversations as to how we might exceed expectations for our target customers. Numerous things came to light throughout these briefings. For example, we received very positive response to our near-term strategy, particularly our soon-to-launch member portal, which offers a distinct and improved user experience and our realignment with our client services team to better support and advise our health plan and the employer clients. And we validated our longer term vision for innovation, including our plans for a far more robust clinical solutions portfolio and our commitment to analytics and a more structured data driven consultation. We also learned pharmacy benefit consultants want to build stronger relationships with Elixir. They want Elixir to succeed and they want us to be a competitive force in the marketplace.

As we come out of COVID, we expect a solid business development pipeline with many regional health plan and employer opportunities. Elixir will deliver a competitively priced offering that both meets client and member needs. And the more that we leverage all the assets and synergies offered by Rite Aid and Health Dialog, the more competitive Elixir will be. We absolutely believe we are well positioned heading into the 2022 selling season and we are highly focused on capitalizing on the opportunity to win new business with mid-sized employers as well as regional health plans.

With that, I’ll now turn it over to Jim for some additional comments on our overall strategic progress in the Retail Pharmacy segment. Jim?

Jim Peters — Chief Operating Officer

Thanks, Dan. In the third quarter our teams once again delivered, growing our business and increasing share while also taking critical steps to advance our strategy and redefine our role in the broader healthcare ecosystem. As you know, a key pillar of the RxEvolution strategy is to unlock the value of our pharmacists and position them as the ultimate last mile connectors to the healthcare delivery system. We continue to move the needle in this area with encouraging early results as we look to aggressively accelerate these efforts heading forward.

Our pharmacists engage more deeply with customers around key focus areas of immunity, sleep, stress and anxiety and educated customers on a broad suite of holistic products. Early results from these efforts are positive. We posted strong growth in these areas and we’ve only just begun to focus on delivering the perfect fusion of traditional medicines and alternative remedies. Heading into Q4, our pharmacists are trained and prepared to expand to other targeted areas of engagement around healthy eating, cardiovascular health, aromatherapy and homeopathy. Our neighborhood pharmacists continue to establish themselves as the most trusted and accessible clinical touch points in their communities. They are embracing opportunities to further expand the scope of services they can provide as evidenced by COVID testing and shortly administration of the COVID vaccine.

As our strategy begins to take hold, our teams continue to drive growth in prescriptions, with Q3 same-store prescription count increasing 3.1%, when adjusted for 30 day equivalents. This growth came despite ongoing headwinds in acute prescription fills, which had started trending upward before added pressure from the soft, cough, cold and flu season and the recent uptick in COVID cases, which as you know, put pressure on acute scripts. A key driver of our results has been our teams focused on emphasizing with customers, the importance of getting a Flu Shot this year as the COVID-19 pandemic continues. As a result, Flu Shots are trending well above last year as we begin Q4. Ancillary immunizations are also continuing their rebound, since being reinstated by the CDC following the early days of COVID and were up 28% in the third quarter. The net result of these efforts led to us increasing our pharmacy market share in our operating area as measured by IQVIA.

On the front-end, we continue to revitalize our front-end to deliver a fresh holistic and relevant experience for our new target growth consumer. We achieved a key milestone in November as we officially launched our new brand media campaign, which allowed consumers to see Rite Aid’s new commitment to delivering whole health. Post campaign quantitative research has shown our new brand messaging is resonating strongly with consumers. Our fleet of stores is increasingly reflective of our bold new brand. As Heyward mentioned earlier, more than 700 stores have been refreshed with updated exteriors, signage and pylons featuring our new branding, with hundreds more slated for completion by the end of the fiscal year.

Through our re-merchandising initiatives, about 75% of our categories have been reset to our new elevated merchandising standards which support whole health and reflect on trend product. We’ve added more than 2,400 items that meet these new brand standards in the categories we’ve enhanced and expanded to our whole health focus, in particular vitamins, first aid, CBD are seeing strong growth. And we took significant steps forward by launching our first three Stores of the Future, located in Etters, Pennsylvania, Littleton, New Hampshire and Moscow, Pennsylvania. These stores are the ultimate physical embodiment of our new brand with a fresh and inviting look and feel, curated assortment of health and wellness products and beauty ambassadors to educate consumers of the latest trends and offer personalized guidance on beauty products.

Pharmacists are front and center and not walled off from their customers for unprecedented on-demand access. And we have our first deployment of virtual care rooms that connect our customers via telehealth to physicians, behavioral health counselors, sleep specialists and a wide spectrum of other clinicians. To make sure, customers don’t fall through the cracks between physician visits, we’re providing an easy frictionless way to refer them back to their care teams and care systems when our pharmacists see trouble.

Customer feedback to our pilot stores has been outstanding and we are pleased with the early initial results, both in terms of sales and margin performance. We plan to roll out our next wave of pilot stores in Q4. More broadly, we will continue to upgrade our entire fleet using an analytical approach that guides the type of investment, the level of investment and the timing of investment on a market-by-market and store-by-store basis as you know, industry-wide, we are experiencing a very soft cough, cold and flu season due to ongoing social distancing and mass requirements. In terms of the quarterly results this soft cough, cold and flu season impacted our front-end comps. On the other hand, we did see an increase in stock up behavior related to COVID-19 towards the end of the quarter as well as growth in vitamins, first aid, household chemicals and bath, which have all been influenced by COVID dynamics.

While we have seen some of uptick in stock-up, the dynamic is more muted than what we saw in the early part of the pandemic. And thanks, of course, to the extraordinary efforts of our team, we once again grew front-end market share as measured by IRI. And for the third consecutive quarter grew that market share in both dollars and units. Beyond the walls of our brick-and-mortar stores, we continue to push forward with initiatives to enhance the digital experience in ways never before offered or seen at Rite Aid.

In Q3, we saw strong sales growth across our digital channels, with digital revenue up 225% compared to the prior year period. This reflects sales not only from our elevated and redesigned website and mobile app, which now reflect our new branding and deliver an enhanced user experience, but also our growing partnerships with Amazon for own brand sales and Instacart for home delivery. With Instacart, we added alcohol delivery in eight states and topical CBD delivery in 14. Customers are responding positively to these additions and we look forward to continuing to expand on these programs. These efforts are critical as we continue to enhance our capabilities to deliver a unified experience that leverages our retail stores and digital channels to meet our customer whenever, wherever and however she needs us.

As we approach the holidays, I’d like to thank our associates. They have embodied and embraced the hustle, purpose and nimbleness that have become the defining trademarks of the new Rite Aid. And while we have a ways to go before we can claim victory, these factors have been critical drivers of our strong execution and performance over the past several quarters. And this bodes well as Rite Aid continues to emerge as a bright turnaround story in a very unusual calendar 2020. Together, we are taking critical first steps in growing with existing customers, attracting new consumers and setting the stage for a seismic shift and how neighborhood pharmacy serve their local communities and the broader healthcare system. I look forward to delivering a strong finish to the fiscal year and continuing to drive progress on our key strategic initiatives.

With that, I’ll now turn it over to Matt for some comments on our Q3 financial performance. Matt?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Thanks, Jim. Good morning, everyone. Revenues for the quarter were up $655 million or 12% from the prior year third quarter to $6.12 billion. We generated revenue growth in both our Pharmacy Services and Retail Pharmacy segments. Net income for the quarter was $4.3 million or $0.08 per diluted share, compared to net income of $52.3 million or $0.98 per diluted share in last year’s third quarter. The difference is primarily due to a $55.7 million gain on debt retirements that we recorded in the prior year’s third quarter. Adjusted net income was $21.6 million or $0.40 per diluted share, compared to adjusted net income of $29.1 million or $0.54 per diluted share in the prior year quarter. The decrease in our adjusted net income was due to lower adjusted EBITDA and increased lease termination and impairment charges, partially offset by lower interest expense and an increase in gain on sale of assets. The net improvement in gain on sale of assets was driven by a $33 million gain resulting from the sale leaseback of our Perryman, Maryland distribution center, partially offset by a loss of $19.2 million recognized in connection with the sale of a portion of our calendar year 2020 CMS receivable. Adjusted EBITDA was $137.4 million in the current quarter, compared to $158.1 million in the prior quarter.

Now, I’ll discuss the key drivers of operating results in our business segments. Retail Pharmacy segment revenue for the quarter was $4.1 billion, which was $200 million higher than last year’s third quarter driven by an increase in same-store sales of 4.3%. Pharmacy same-store sales increased by 6.1%, with same-store prescription count up 3.1%, due to a 4.4% increase in maintenance prescriptions offset by a reduction in acute prescriptions of 1.9%. Flu immunizations increased by 28% over the prior year quarter, which offset a 19% decline in acute scripts related to cough, cold and flu. We will continue to focus on driving script growth through our broad immunization initiatives and medication adherence interventions as well as continuing to pursue prescription file buys and working to gain further access to new networks in our markets.

Front-end same-store sales were up 30 basis points, after excluding cigarette and tobacco sales. We continue to see good results in immunity, paper and household care products, but our front-end sales were negatively impacted by a decline in sales of cough, cold and flu products and in sales of Halloween candy, due to the impact of social distancing requirements on that holiday. Retail Pharmacy segment gross profit dollars increased $8.9 million over the prior year’s third quarter. Adjusted EBITDA gross profit was favorable to last year’s third quarter by $7 million, about 115 basis points worse than prior year as a percent of revenues. These results were driven by incremental gross profit resulting from the increased sales volume, partially offset by pharmacy reimbursement rate pressure and the impact of reductions in over-the-counter front-end product sales on our front-end margins. Retail Pharmacy segment, SG&A expense for the quarter was $22.8 million higher, but 75 basis points lower as a percentage of revenues to last year’s third quarter.

Our adjusted EBITDA SG&A was $27 million higher, but 53 basis points lower than last year’s third quarter given the revenue growth. We incurred $16.5 million in incremental costs associated with COVID, which included pandemic pay, incremental cleaning cost and increases in pharmacy delivery expense. We also recorded $7.9 million of transition services income from Walgreens in the prior year quarter that did not recur as services under that agreement have been completed. After adjusting for these items, adjusted EBITDA SG&A would have been $2.6 million higher than prior year, but 113 basis points favorable as a percent of sales, as we have used the cost reduction initiatives that we launched earlier this year to help us leverage our revenue improvements. As announced earlier this year, we continue to expect to achieve an incremental $40 million in cost savings in fiscal 2021 across both Retail Pharmacy and Pharmacy Services segments through reductions to payroll, advertising, rent, travel and call center expenses.

I’ll now shift to our Pharmacy Services segment Elixir. Elixir saw revenue increases of $471 million or 29% to $2.1 billion due to an increase in revenues for Medicare Part D membership growth. Adjusted EBITDA was $48.8 million or 2.3% of revenues for the third quarter compared to last year’s third quarter adjusted EBITDA of $49.5 million or 3.1% of revenues. The reduction in adjusted EBITDA is due to increases in drug costs and SG&A expense related to our Medicare Part D business, partially offset by reductions in payroll and indirect spend in other parts of Elixir. For calendar year 2021, we are restructuring the Elixir insurance business to focus on more profitable Medicare Part D members, which we expect to result in a reduction in the number of Medicare Part D members, but improve the profitability of this business in fiscal 2022.

I’ll now turn to our cash flows and balance sheet. Our cash flow statement for the quarter shows a source of cash from operating activities of $2. — of $223 million. We generated positive cash flow from the sale of a portion of our calendar 2020 CMS receivable. This was partially offset by a build in the remainder of the CMS receivable, a build in retail inventory levels in advance of the holiday season and changes in other operating assets and liabilities. We have sold the CMS receivable generated from January 1, 2020, through September 30, 2020 and received proceeds of $413 million on that sale. We recognized a loss in the sale of $19.2 million, which is our cost of funding and financing fees. We expect to sell the portion of the CMS receivable that falls between October 1 and December 31, 2020 prior to the end of fiscal 2021. In addition we completed the sale leaseback of our Perryman, Maryland distribution center as well as a few additional store sale leaseback transactions that generated total proceeds of $80.6 million. We continue to explore additional sale leaseback options on own distribution centers and stores, where we see attractive cost of funds to generate cash to pay down debt.

Our debt balance is approximately $3.2 billion at the end of our third quarter and our adjusted leverage ratio at the end of the quarter was 5.97 times adjusted EBITDA. We expect our leverage ratio to improve by the end of the year due to the sale of the remainder of our CMS receivable and declines in retail inventory levels from the current pre-holiday builds. During the quarter, we repaid over $300 million in our revolver and our quarter-end liquidity was $1.6 billion, which gives us ample flexibility and runway to execute our strategic initiatives.

Now let’s turn to our fiscal 2021 guidance which we narrowed this morning. Key guidance assumptions are our expectations to benefit from our initiatives to drive retail sales growth, benefit in increased Medicare Part D membership at Elixir through the end of December, continued improvement in pharmacy network management at Elixir and good expense control. We expect these benefits to be offset by continued reimbursement rate pressure, the impact of a less severe cough, cold and flu season on over-the-counter products and related prescriptions, and additional retail operating expenses caused by the recent increase in COVID-19 — in COVID cases in many of our markets.

We expect total revenues to be between $23.9 billion and $24.2 billion, and same-store sales increases in the range of 3.5% to 4.5%. We expect net loss to be between $114 million and $89 million. Adjusted EBITDA is expected to be between $490 million and $520 million, and we expect adjusted net income per share to be between $0.45 and $0.85 per share. Our fiscal 2021 capital expenditures are estimated to be $325 million, which includes our previously announced acquisition of Bartell Drugs and we expect to generate between $50 million and $100 million in free cash flow. And finally we expect our year-end leverage ratio to be approximately 5.3 times adjusted EBITDA.

This completes our prepared remarks. Please open the phone lines for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question this morning comes from Lisa Gill from JP Morgan. Please go ahead.

Lisa Gill — JP Morgan — Analyst

Good morning and thank you and thanks for all the detail. So let me just start first with your role in the COVID-19 vaccine. I think Heyward I heard you say that you’re expected to be part of the second rollout which will start hopefully in February. But I just really want to understand a couple of things. I know we have and others have written about this, but one, how many vaccines do you think that that you can do? Two, how do we think about the probability should it be kind of similar to the Flu Shot. And then thirdly, did you have to hire any incremental pharmacy tax or other personnel in anticipation of this vaccine?

Heyward Donigan — President and Chief Executive Officer

Hey, Lisa, thanks for the question. Although we’re not a player in the very first phase due to not being a national chain and the fact that we do not have existing partners with long-term care facilities. So we are among others in the major player in the phase two part of this through our partnership with CDC. As you said, hopefully in February, actually, we are going to potentially be working with one or two states earlier than that to help them out as they are rolling out their 1b Phase to people 65 and over, who are in vulnerable demographics or communities. And we’re really more than letting to play our role as we’ve been working on this for quite some time. We’ve learned a lot about how to prepare, how to adapt quickly. We’ve been through this with flu before in the early days and then we were sort of an early adopter on the COVID testing side and have been a big part of that solution.

Of course, we also have a long history of administering vaccines in our pharmacy. We will hire any additional resources we need to make this successful. We’re talking about hiring retired pharmacists, we’re talking about interns. We have also freed up and we’ll continue to free up a significant amount of capacity for our pharmacists and our techs through our lean initiatives that we’ve been working on for over a year. Our pharmacists will be paid an administrative fee to cover the cost of dispensing and we’re still working through the economics that expect a net EBITDA benefit from administering the vaccines and really pleased with the potential value this will create provided, and we anticipate there is going to be a COVID vaccine forever probably, because it’s not this mutation possibly more mutations. So we look at this as both the short-term opportunity to help the country, but a longer term opportunity for Rite Aid. And Matt, you can just comment on the numbers, if you would?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Sure, thanks, Heyward. As Heyward said, we certainly expect this to be profitable for us. I think we’re still working through the final quantification of the economics, which we would provide at a later date, probably when we provide guidance for fiscal ’22. I think kind of looking at flu immunization volume and flu gross profit per script is not a bad proxy to use for modeling at this point, though we’re still obviously working through the final numbers.

Lisa Gill — JP Morgan — Analyst

Matt can you give us the total number of flu vaccines that you did for 2020, just to give us kind of a baseline?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Yes, I don’t think we’ve thrown that number out there probably Lisa, so I want to be a little careful. But I think we’re expecting something in the range of 3.5 million.

Lisa Gill — JP Morgan — Analyst

Okay, great. And if I can just ask…

Matt Schroeder — Executive Vice President and Chief Financial Officer

I guess just to put it out there publicly, but anyway yes, that’s the number.

Lisa Gill — JP Morgan — Analyst

Okay, great. And then if I can just ask a quick question to Dan on the PBM side. Dan, I just want, the first PBM opportunity that we’ve had since Rutledge versus PCM. I’m just curious, your overall thoughts as to how this could potentially change things from a PBM contracting perspective and your actual thoughts on what this does, specifically with the relationships around spread. And I know you have a number of different models on your PBM, but any thoughts you can give us there would be helpful?

Dan Robson — President, Elixir

Yes, we’ve been watching this case with interest and the result is not surprising. I believe Heyward, you would like to take a stab at this, when you take a stab, I will take over after you.

Heyward Donigan — President and Chief Executive Officer

Let me, this is interesting and I’ll hand it back to you to answer the question about spread Dan. But this is one, it’s nice to have a dual portfolio of a Retail Pharmacy and the PBM, because you know, any — if there is any pricing floors that are established as a result of this rule similarly to what might be going on in Arkansas, that actually is a benefit for the Retail Pharmacy side of the business. Also we’re very familiar, I mean, I come from the health plan business as many of the members of our teams do. We’re very familiar with state regulation and have dealt with state-by-state regulations my whole career, and we will adapt as required to work in that environment. Specifically though, Dan you can answer the question about spreads.

Dan Robson — President, Elixir

Yes, absolutely. So currently Lisa, over 30 states have some iteration of a MAC law, not completely just similar to the law question in the Retludge case. And we believe that we set our prices at Elixir for MAC prices in an equitable manner, in a way that correlates to wholesale prices available in the market and which fairly reimbursed pharmacies well, so incentivizing them to continuously and effectively managing their acquisition of prescription drugs. We have standard processes leases in place to address Pharmacy Mac appeals and we will review these processes for pharmacies in Arkansas in light of the Retludge decision.

Lisa Gill — JP Morgan — Analyst

Okay, great. Thanks. I appreciate all the comments.

Heyward Donigan — President and Chief Executive Officer

Thank you, Lisa.

Operator

Your next question comes from Robert Jones from Goldman Sachs. Please go ahead.

Robert Jones — Goldman Sachs — Analyst

Great, thanks for the questions. I guess maybe just to look at the implied 4Q guide. I know you guys pointed out some of the cross-currents there, but it looks like it’s expected to be down 20% year-over-year. Just wanted to get a little bit of a better sense of what’s driving that? And then you mentioned on the COVID vaccine that you do anticipate playing a role in the second rollout of this, which would be in February, which would be captured somewhat at least in your 4Q, in your fiscal 4Q. Is there anything factored in there? And beyond that, again, just to push a little bit more, any order of magnitude, Matt, I know you mentioned that you expect it to be profitable, but there is some wide-ranging expectations out there around the vaccine. Just curious if you could give us any guiderails, guardrails around expectations around the vaccine?

Heyward Donigan — President and Chief Executive Officer

Matt, you take that.

Matt Schroeder — Executive Vice President and Chief Financial Officer

Sure. So, thanks Bob. I’ll go through our Q4 first. I think as you think about Q4 compared to last year’s fourth quarter and the guidance we gave, there’s really three factors — a couple factors that weigh on the quarter. One is the soft cough, cold and flu season. Last year’s fourth quarter we actually benefited from a pretty robust cough, cold and flu season. We’re seeing exactly opposite this year as we talked about in the third quarter results. And I think we expect those trends to continue into Q4. And the other thing is that it’s going to weigh on the quarter performance compared to last year is, I think there are some great light at the end of the tunnel with the vaccine, but we see a pretty rough quarter from the standpoint of the COVID conditions in the markets that we’re in and the related expense that we’re going to have to incur to take care of our associates and our stores. I think those two things are really the main things that drag the numbers down from what we saw last year.

As far as the vaccine quantification, besides giving out kind of the proxy to the Flu Shots in the last question is really not more we can talk about this point Bob. There is just too many moving parts. So, I certainly understand the need to want to get more there. But we — there’s just too many unknowns to really give a good guardrail there. I think the other question you asked, is there any vaccine benefit in our Q4 guidance. And the answer is no.

Robert Jones — Goldman Sachs — Analyst

Okay. No, that’s helpful Matt. I appreciate it. And I guess just maybe to ask a follow-up on Lisa’s question around the Rutledge ruling from the Supreme Court. Again some widely varying views on what this could mean? I mean can you maybe just share a little bit more on both sides of the house? How much does this change the landscape if in fact, a similar law is uptaken by more states nationally? How does that affect the TBMs ability to make profit? And then Heyward you commented on the Retail side, which I think is interesting. Does this shift the tides at all as far as the ever-present reimbursement rate pressure, does this help combat that to some degree?

Heyward Donigan — President and Chief Executive Officer

Well, I think it’s very early. So we’ve been watching this case with interest, of course, and there are really two areas that we think about this, it’s just PBM is being regulated on state-by-state basis by the state as health plans are. And then the second area is, this whole area of MAC law and as advanced over 30 states already have some iteration of that. We believe that we set our MAC prices in an equitable manner and in a way that correlates to the whole fair sale prices available in the market and we have historically had two sides of our business, one that has spread and one that doesn’t. And so we are probably as prepared to deal with ever which way this goes with anybody, because of that and also if there were some pressure to limit how much you can push down pharmacy pricing that would obviously benefit us. So I see it is sort of net neutral in terms of our competitive positioning with the PBMs, because everybody is going to be dealing with this and yes, you could argue that maybe there’ll be some longer term potential on the issue on the spreads. But we don’t see that, because we’re dealing with this already and we don’t see — we’re not anticipating that that’s a big problem for us. But I think it’s also too early to tell.

Robert Jones — Goldman Sachs — Analyst

Okay, great. Thank you.

Operator

Our next question comes from Glen Santangelo from Guggenheim Securities. Please go ahead.

Glen Santangelo — Guggenheim Securities — Analyst

Yes, thanks for taking my questions. Heyward I just wanted to also follow-up on the COVID dynamics a little bit. I think with a lot of investors you’re trying to, it says here, they’re trying to pull all the pieces related to COVID apart and try to understand how that may be impacting your near-term results. As we discussed, there’s clearly some underlying benefits from all the testing you’re doing, potentially ultimately the vaccines, but as Matt laid out there is a lot of incremental costs as well and so how do you assess the positives and negatives here in aggregate? And how do you think about that impact and the transient nature of that impact on your business?

Heyward Donigan — President and Chief Executive Officer

Yes, we think about this a lot. You know, a lot of the cost impact was upfront and has tapered off during the course of the year until recently, actually now because we’re in these hotspots. We’ve got COVID cases ramping up and therefore our cleaning costs are ramping up again. But it does kind of ebb and flow. We also — we’re going to talk about this later, but we just announced another round of Hero Pay. So those are examples of the cost issues with COVID. Then there is the other transitory nature, which I don’t know, truthfully, whether this is long standing or whether this is short-term, but its the pressure on cough and cold and the soft flu season this year. So obviously we did extremely well on Flu Shots and everybody knew the importance of getting Flu Shot.

However, when the doctors’ offices and elective surgery shut down that really put a lot of pressure on us from an acute script perspective and we’ve seen that dissipate a bit, but the stock reality for the short-term is that no one is getting really sick, I mean people are getting cough, cold, they’re not getting the flu as much as normally, although we do have some cases. And so they’re not buying as many of those over-the-counter products and aren’t getting Tamiflu, so and aren’t even getting some of the regular infections that one would have. Now this is mostly due to the schools being closed and people not being together which after a vaccine one would argue that everyone’s rushing back out to have parties and go to schools and be together and the minute that happens the cough, cold stuff comes back with a vengeance. So that’s kind of my current thinking right now.

And so then once you get the vaccine out, you’re going to have less stress on the system with regard to the cost of quarantining and pandemic pay and all of that. So, but it is so dynamic right now. I mean, I don’t know whether people are going to permanently change their hygiene habits, wear masks all the time and wash their hands continuously. So there is a couple of scenarios that we don’t have clear visibility into, and then of course, you’ve got the benefit of the testing and the vaccine in the sense out — overcoming, maybe not overcoming, but at least offsetting some of these other pressures. So, Matt, anything else you want to add?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Yes, I think just maybe to put — to emphasize some of the things that are kind of a near-term impact, obviously we quantified the COVID related cost this quarter. I expect a similar type of drag in the fourth quarter based upon the things Heyward talked about, and I expect that to continue probably into fiscal ’22 to some point until the vaccine really gets kind of a pretty heavy adoption. Exactly when that stops, it’s a little hard to tell, but I think it goes someone — and those cost increases go somewhat into fiscal ’22. And then I do think Heyward pointed out, but I think you got to think about the impact of this had on our acute scripts over the full year. Our scripts have definitely been softer what they were last year and it’s related to the impact of COVID on deferral like to procedure shut down doctor’s office, a soft cough, cold and flu and so while it’s hard to predict exactly what’s going to happen next year you think that comes back at some point. I think the timing and the amount of that come back is still to be determined.

Glen Santangelo — Guggenheim Securities — Analyst

Yes, listen I appreciate all the comments. It is clearly there is a lot of cross-currents here, but my only follow-up would be, and I know you don’t want to give any guidance on fiscal ’22 at this point. But when you put all those elements in the mixing bowl, I mean do you view this as a positive tailwind for fiscal ’22 or you view it more as a headwind?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Yes, Glen. A great question and a very fair one, but I think we need to be answering that in the context of giving fiscal ’22 guidance as opposed to try to — it’s hard to answer now without giving ’22 guidance. So I think we’re just kind of the wait till then.

Glen Santangelo — Guggenheim Securities — Analyst

Okay, thank you very much.

Operator

Your next question comes from George Hill from Deutsche Bank. Please go ahead.

George Hill — Deutsche Bank — Analyst

Yes, good morning guys, and thanks for taking the question. I have two. I guess the first one is for Matt. Matt the Q4 EBITDA guidance range is still pretty wide and I guess could you talk about or maybe even rank order both the puts and takes as you think about them as you’ve laid them out? And then maybe a follow-up for Heyward is, just kind of strategically Heyward, we saw kind of Amazon rollout a larger pharmacy offering in — during the quarter, with the new drug benefit card and stuff like that. I guess just how are you thinking — I know that you guys have a relationship with Amazon, but just kind of how are you thinking about them as kind of frenemy of friend versus fellow competitor. I would appreciate that.

Heyward Donigan — President and Chief Executive Officer

Sure, Matt do you want to start?

Matt Schroeder — Executive Vice President and Chief Financial Officer

I’ll jump — yes, I’ll jump into the first one, George. I think we — I talked about in one of the earlier questions, where I think some of the weights are on Q4, from the standpoint of comparison in the last year. I think the biggest variability in my mind is what happens on the top line. I think there’s just with the pressure on cough, cold and the flu, with the pressure on acutes with some uncertainty about what happens with COVID cases here over the next few months while we wait for a more fulsome rollout of the vaccine, I think there’s just a lot of variability left about what can happen on the top line here. And I think that’s something that probably drives the biggest — as we look at it internally, what the biggest factor is to kind of a low-end and the high end of the guidance range. And really the reason why we’ve got a $30 million range on the EBITDA guidance.

Heyward Donigan — President and Chief Executive Officer

Yes. And on the Amazon, we recognize Amazon is a formidable competitor and they launched PillPack over two years ago. And interesting my first reaction was well Amazon during this really validates the continued growth opportunity in the Pharmacy space. So that was my first reaction. And then there is a connection between the pharmacist and the customers that’s more than a transaction-by-mail and our Rite Aid pharmacists are trusted, accessible, in-store via the phone and other omnichannel types of engagements. Currently mail order in the industry has plateaued. This is really more about the PillPack opportunity to an estimated 10% to 15% of prescriptions filled. Amazon’s new focus is on the cash market, which is about 5% of the total market and the discount card market, i.e., the good Rx and Elixir offered both mail order and its own discount card program, and this will continue to evolve as we evolve our strategy with Elixir.

And in the Retail space, I mean we order same-day delivery from all of our stores and two-day delivery in mail order. So we really feel that we have the delivery and engagement capabilities that are beyond what an Amazon can do. And now that we’re improving our digital capabilities, we think it’s just going to continue to get better and better and more easy and convenient for our customers, but we never take our eye off Amazon.

George Hill — Deutsche Bank — Analyst

Yes, Matt, maybe a quick follow-up. A quick housekeeping question. Did you guys detail the percent of sales in pharmacy that came from the back of the store. I didn’t see that in the presentation.

Matt Schroeder — Executive Vice President and Chief Financial Officer

We said a percent of sales in pharmacy for the back of the store you mean just a prescription count increase.

George Hill — Deutsche Bank — Analyst

No the percent of revenue, pharmacy versus front store?

Matt Schroeder — Executive Vice President and Chief Financial Officer

I don’t know if we detailed it or not. I think it’s — Trent can give you — follow-up with you with an exact number, but it’s in the same zip code normally, it’s like close to 70%.

George Hill — Deutsche Bank — Analyst

Great, thank you.

Operator

Your next question comes from Elizabeth Anderson from Evercore. Please go ahead.

Elizabeth Anderson — Evercore — Analyst

Hi. Thanks so much for the questions, guys. I had two questions, specifically around the sort of continuation of impact from some of the more recent care initiatives, including the testing and some of the telehealth benefits. Are you seeing any early indication that that’s changing people’s perception about the type of care that can be provided at Rite Aid stores? And then secondly, in terms of the store remodels that you mentioned. I know it’s still early in the process, but if there’s any details you could give us about the relative performance of those stores post the remodels versus the rest of the store base? That would be very helpful. Thanks.

Heyward Donigan — President and Chief Executive Officer

Yes, thanks and I’ll let Jim answer both of those questions.

Jim Peters — Chief Operating Officer

Thanks, Heyward. Thanks, Elizabeth. Yes the perception continues to evolve and I think it involves not simply from a consumer perspective, but also from a health system perspective. So you think about large organizations that represent physician groups and health systems, they are increasingly embracing pharmacies role in the front lines of health care, because their own front doors have lines going outside of them during COVID peaks that we’re seeing now. So we’ve proven that we can be that trusted and accessible touch point within the everyday workflow and journey of consumers life and that really does. I think it is becoming a hallmark of the pharmacy industry and I think Rite Aid has taken the forefront role in continuing to push that boundary.

The second question around Store of the Future, we do have three offers, as I mentioned earlier and we’re really — we’re thrilled about the early read that we’re getting both from a consumer experience perspective where we have markedly improved consumer experience scores from those stores, but also from a performance perspective. So very early days, but when we look at year-over-year performance and do our best to tease out through modeling the impact of COVID and give ourselves the most fair look at year-over-year performance, we’re doing very well from both a front-end and a pharmacy perspective, from both a sales and a margin perspective. So we’re beginning to see the intended effects of not only the physical design which is really the physical embodiment of our brand, but the whole brand relaunch and merchandising overhaul come to full bear within these early numbers of stores in the future.

Elizabeth Anderson — Evercore — Analyst

That’s perfect. And just one quick follow-up question. I apologize if I missed it, but did you give any updates in terms of the timing of the Bartell close?

Heyward Donigan — President and Chief Executive Officer

Matt, why don’t you give an update?

Matt Schroeder — Executive Vice President and Chief Financial Officer

We did not give an update Elizabeth. We did not give an update. We still expect the transaction to close by the end of our fiscal year.

Elizabeth Anderson — Evercore — Analyst

Okay, perfect. Thank you.

Operator

Your next question comes from William Reuter from Bank of America. Please go ahead.

William Reuter — Bank of America Merrill Lynch — Analyst

Good morning. In terms of the reduction in acute prescriptions, can you remind us what percentage of your prescriptions are acute? And then trying to think about how much pent-up demand there may be by all of these deferred procedures. I guess what types of increases do you expect to see once we get through COVID?

Heyward Donigan — President and Chief Executive Officer

Matt, do you want to answer that.

Matt Schroeder — Executive Vice President and Chief Financial Officer

Yes, Bill, the split between maintenance and acute is about 75% maintenance, 25% acute in kind of a broad brush. And then I’m sorry, your second question was, I apologize.

Heyward Donigan — President and Chief Executive Officer

He was talking about the pent-up demand. Yes, and I think — let me just start and then you can follow-up. I think this is obviously anyone’s best guess, because I don’t think anyone has a crystal ball on this. I personally think and there’s been several articles about this that whatever that — well, first of all, some of the demand wasn’t — isn’t pent-up, some of the demand was related to the fact that people just weren’t getting sick, because they weren’t want out and about, so that won’t come back and so people are out and about again. Anything related to like elective surgeries and dental care and stuff like that will certainly come back to normal, I believe, and there will be a pent-up demand actually in Virginia Beach where I live, which is a Rite Aid market. The doctors’ offices are chock full of patients trying to get back to all of the services that they were — couldn’t receive during COVID. I think — I don’t think we know how to quantify that yet, because it’s still early and we know that a lot of people just didn’t get care and some died from it. But, Matt unless you have a better crystal ball.

Matt Schroeder — Executive Vice President and Chief Financial Officer

I do not Heyward. I think this is that the right, Heyward touched on all the factors that could drive demand of next year Bill, but it’s too early to try to quantify this.

William Reuter — Bank of America Merrill Lynch — Analyst

Okay. And then just one follow-up. After the sale of the DC, do you have an estimate of what the market value of the remaining real estate you have, you mentioned you may continue to pursue additional sale leasebacks in the future?

Matt Schroeder — Executive Vice President and Chief Financial Officer

I — Bill, I don’t have that number off top of my head, it is something we can look to potentially disclose. But I don’t have that number.

William Reuter — Bank of America Merrill Lynch — Analyst

All right, I’ll pass it to others. Thank you.

Operator

Your next question comes from Karru Martinson from Jefferies. Please go ahead.

Karru Martinson — Jefferies — Analyst

Good morning. If we look at the 700 store external remodels, the new Store of the Future, when do we start kind of communicating the new Rite Aid to the customer and what’s the timeframe for getting that growth back in your mind?

Heyward Donigan — President and Chief Executive Officer

Jim, can you handle that?

Jim Peters — Chief Operating Officer

Sure. Well, we’ve just begun our formal communication to the customer. We officially launched our new brand on November 8 in a media campaign. It was kind of surround sound and had very strong resonate with our consumer base. Remember the physical remodel is very important, because we have a number of stores in our fleet that just need it. But then the reality is that we’re in the early phase of all of these next-generation remodels and we’re evaluating in a test and learn way, what’s working with our remodel and what isn’t. And we’re modularising its remodel. So if you look at our Stores of the Future, they are actually broken down in our own playbook into various modules that we will plug and play depending on the specific needs of a particular community. And so this is going to be an evolving process of value engineering and analysis, and early indications that our testing model that is not COVID testing, but the way we’re testing and learning with these, they’re really giving us the right insights to be able to roll out our remodel plan in a way that is or what size fits all, but rather very much tailored and personalized to local community to make sure that we get it right, not only from a consumer perspective, but from a return perspective.

Karru Martinson — Jefferies — Analyst

And when you approach those remodels, I mean, I realize it’s early days, but what’s kind of the average cost of doing that and how much of your store fleet, do you feel that needs to be refreshed that needs a physical remodel?

Heyward Donigan — President and Chief Executive Officer

Matt can you give your answer on the cost side and then Jim can answer on the need side.

Matt Schroeder — Executive Vice President and Chief Financial Officer

Well, I think on the cost side Karru, it’s still too early to give a number. The first three that we did were — had a great result from the standpoint of how they look and the results they are giving, but, so you kind of honed in on some of the specifics around the design and skilled at designs multiple amount of stores, if you do, you really don’t have the right type of read on the costs. I think, more to come from us on the cost of returns of these remodels as we get more of them done and start to scale this.

Jim Peters — Chief Operating Officer

The only thing I’ll add Matt is that again, because we’re not taking a copy and paste approach where we’re developing a prototype and then just pasting it across our fleet, there won’t be a single point of cost. There will be an average cost obviously across the portfolio, but there won’t be a single point of cost, because the cost that we deploy in a particular store in one market, maybe very — will be very different from the cost of a store that we deploy in another market. So we’ll be looking at return not only from a portfolio standpoint but again modulating the investment, according to the consumer localized demand.

Karru Martinson — Jefferies — Analyst

Okay. And just lastly, when we look at the year-end 5.3 times leverage guidance implies basically round numbers here $2.7 billion of debt — net debt at the year-end. I mean is the difference from where we stand today that CMS receivable remainder. And then the inventory or is there another put and take to that?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Karru this is Matt, those are the two biggest differences.

Karru Martinson — Jefferies — Analyst

All right, thank you very much. Appreciate it.

Operator

We have time for one final question. It comes from Carla Casella from JP Morgan. Please go ahead.

Carla Casella — JP Morgan — Analyst

Hi, my question is really the stores as well as your sale leaseback. You mentioned the sale leaseback in the quarter and looking at additional opportunities. So how many owned DCs and stores do you have at this point? And are you seeing any changes in rent negotiations or are there other reasons that are making these sale leasebacks more attractive now. Is it just rates in the market. And what kind of opportunities could we see there?

Matt Schroeder — Executive Vice President and Chief Financial Officer

Heyward shall I take this one?

Heyward Donigan — President and Chief Executive Officer

Matt, yes.

Matt Schroeder — Executive Vice President and Chief Financial Officer

Yes. So on from an own DC, good morning, Carla. From an own DC standpoint, we’ve got four more facilities that are — four or five more facilities that around in from a store standpoint, I think the number is around 125. Not all of them are going to be the right candidates for sale-leasebacks. I think we do need to be selective about which ones we would do over time. We’re getting good execution from a cost of fund standpoint on these. And I think a lot of it is market demand. I think just given the low rate environment, this is a very attractive form of investment for folks and we’re taking advantage of that environment.

Carla Casella — JP Morgan — Analyst

Okay, great. And then on the reimbursement rate pressure, you talked about. I know you’ve answered some questions on it already but, how can you attribute, how much of that is related to growth in that Medicare Part D. And is that any part of your assumption that you’ll add more profitable Medicare Part D customers, is that anything to do with the reimbursement rate on different plans?

Matt Schroeder — Executive Vice President and Chief Financial Officer

It’s really kind of…

Heyward Donigan — President and Chief Executive Officer

Well…

Matt Schroeder — Executive Vice President and Chief Financial Officer

Carla, I think from the standpoint of lease reimbursement rate pressure in the retail business versus the impact of thinking about how we do things differently in the Med D from the Elixir business, which is really where that has an impact.

Carla Casella — JP Morgan — Analyst

Okay…

Heyward Donigan — President and Chief Executive Officer

Did you ask anything about the Medicare, the list of Medicare Part D business or were you asking on the retail pharmacy side?

Carla Casella — JP Morgan — Analyst

Well, I guess I’m trying to understand the — and forgive me for not being, I’m not the expert on the PBM side of the business, but the growth, you talked about in Medicare Part D, you did mention that you expect to grow more profitably going forward. I’m wondering if the pressure we’re seeing on that Elixir margin year-over-year, is that from just the Medicare Part D growth or does that have to do with the reimbursement rate pressure around that comes with the Medicare Part D?

Heyward Donigan — President and Chief Executive Officer

[Speech Overlap] Yes, well, the Medicare Part D business is a complicated one for us, because it provides more benefit to us than just the actual membership and drug costs associated with the membership. So Medicare Part D has been a very significant growth engine for Elixir. However, the mix of membership hasn’t been ideal and it has generated a higher CMS receivable than we’d like and fortunately, we’ve been able to securitize that. So it hasn’t really affected us from a leverage ratio as much as it used to. There — it also provides — the growth in the membership provides a benefit in the sense that these are heavy users of our mail order facility and so we get really good mail order volume from these members. However, the mix of the membership right now is causing the medical loss ratio or the MLR on this business to be higher than we would like. And it’s really about the mix of members and also the distribution channel is expensive for us.

So when we redid for the January 1, New Year, we specifically focused on changing the benefit plan design, increasing the premiums and leveraging a more efficient distribution channel, and so that has and will result in lower membership. But we believe it will be a more profitable book of business for us going forward, while simultaneously yielding continued good results on mail order. Does that answer your question. Hello?

Carla Casella — JP Morgan — Analyst

Sorry. That was great. But also I just — one clarification on the CMS receivable. Did all of the proceeds come in fourth quarter versus — much was third and how much was fourth? I may have missed that.

Heyward Donigan — President and Chief Executive Officer

Matt?

Matt Schroeder — Executive Vice President and Chief Financial Officer

So, Carla, we had about $430 million of proceeds come in this — in the third quarter, the quarter just ended. And that was from selling the receivable that had built up between the beginning of the calendar year in September 30. There will be another tranche of proceeds that come in, in the fourth quarter where we’re able to sell basically in the last three months of that receivable build.

Carla Casella — JP Morgan — Analyst

Okay, great. Thanks.

Operator

This concludes the Q&A portion of our call. And I would like to turn it back to Heyward Donigan for final comments.

Heyward Donigan — President and Chief Executive Officer

Thanks everyone for your questions and before we end the call, I do want to once again recognize our associates on the front lines. As you know, we operate in many of the hotspots that are seeing a significant recent increase in COVID cases, and our associates continue to rise to the challenge. Our frontline associates have been both the face and the heart of our RxEvolution transformation. And we served our business, our customers and our communities with great kindness and compassion under unimaginably challenging circumstances. Because of their tireless efforts we are truly demonstrated the essential Rite Aid plays in the communities we serve. On top of their heroic everyday effort, we completed well over 1 million COVID test and are preparing to play a significant role and administering COVID vaccines in the communities we serve.

To thank our teams as I mentioned earlier, we’re pleased to announce that our frontline associates will receive a year-end appreciation bonus. Our customers and communities depend on us. Just as we in turn depend on our frontline associates and we’ve been able to do a lot of good for a lot of people and our store, our mail order facility and distribution center associates have really helped drive those efforts. And so we’re really grateful to them and for them and we could not be more proud of their performance. So with that I want to say happy holidays to everyone here 2021 like no other, here is the 2021 that I’ve ever been excited about and let’s get this vaccine out and have everybody get back out and about. So, thanks for joining us and we’ll talk again in January when we participate in the virtual JP Morgan Healthcare Conference.

Operator

[Operator Closing Remarks]