BUSINESS COMBINATIONS

3 Months Ended

Apr. 30, 2016

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 11: BUSINESS COMBINATIONS

On April 10, 2015, we acquired 100% of the equity interests in Reeves-Sain Drug Store, Inc., a provider of retail and specialty pharmaceutical services. The acquisition expanded our presence in the specialty pharmacy arena – the largest growth area of the pharmacy industry. The total consideration for the purchase was approximately $66.0 million, less working capital adjustments of $10.3 million, which yielded an adjusted purchase consideration of $55.8 million. The Company incurred $0.5 million of transaction costs in connection with the acquisition.  The transaction expenses were expensed as incurred and were reflected in selling, general and administrative expenses in the consolidated statement of operations for the year ended January 30, 2016. The adjusted consideration consisted of $42.8 million in cash at the time of closing and $13.0 million in notes payable in three equal installments on January 31^st of 2021, 2022 and 2023. The notes payable have an adjustment mechanism based upon an earn-out provision that could result in an increase to the face value of the notes if certain financial metrics are achieved. No amounts have been reflected in the consolidated financial statements for this provision. When it appears to be probable that the provision will be met, the expense will be treated as compensation expense in that year.

A summary of the purchase price allocation for Reeves-Sain Drug Store, Inc. is as follows (dollars in thousands):

Total purchase consideration:
Cash	$	42,757
Notes payable		13,000
Total purchase consideration	$	55,757
Allocation of the purchase consideration:
Accounts receivables	$	14,474
Inventory		2,005
Other assets		307
Goodwill		41,403
Identifiable intangible assets		20,236
Total assets acquired	$	78,425
Accounts payable	$	21,448
Other current liabilities		1,220
Total liabilities assumed	$	22,668
Net assets acquired	$	55,757

The following are the identifiable intangible assets acquired and their respective weighted average useful lives, as determined based on valuations (dollars in thousands):

	Amount		Estimated Useful Lives (years)
Customer prescription files	$	9,476		4 - 7
Trade name		7,300		-
Non-compete agreements		1,800		8
Referral and relationships		1,400		2
Business licenses		260		1
	$	20,236

The following unaudited supplemental pro forma financial information includes the results of operations of the three Reeves-Sain Drug Store, Inc. locations in 2016 and 2015 and is presented as if the locations had been consolidated as of the beginning of the interim period of the earliest period presented. The unaudited supplemental pro forma financial information has been provided for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or of the results that may be achieved by the combined companies in the future. The unaudited supplemental pro forma financial information presented below has been prepared by adjusting the historical results of the Company to include the historical results of the acquisition described above. The 2015 unaudited pro forma historical results were adjusted (i) to increase amortization expense by $0.6 million resulting from the incremental intangible assets acquired and (ii) to increase interest expense by $0.2 million as a result of assumed debt financing for the transaction. The 2016 unaudited results were not adjusted as the three locations’ results were already included in our consolidated statement of operations.

The unaudited pro forma financial information does not include any adjustments to reflect the impact of cost savings or other synergies that may result from this acquisition.

	Thirteen Weeks Ended
	April 30,		May 2,
(in thousands, except per share data)	2016		2015
Revenue	$	549,548	$	556,398
Earnings		1,256		(725	)
Basic and diluted earnings per share	$	0.03	$	(0.02	)