BUSINESS COMBINATIONS

12 Months Ended

Feb. 03, 2018

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 14 – 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 (now classified as Assets Held-for-Sale). 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 costs were expensed as incurred and are reflected in selling, general and administrative expenses in the consolidated statement of operations. 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 2016 or 2017 consolidated financial statements for this provision. If and when the provision is met, the expense will be treated as compensation expense in that year. Refer to Note 2 – Discontinued Operations for additional discussion surrounding the specialty pharmacy business.

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

Total purchase consideration for continuing operations:
Cash	$	42,757
Notes payable		13,000
Total purchase consideration	$	55,757

Allocation of the purchase price consideration for continuing operations:

Accounts receivables	$	752
Inventory		741
Other assets		189
Goodwill		-
Identifiable intangible assets		2,320
Total assets acquired	$	4,002
Accounts payable		48
Other current liabilities		76
Total liabilities assumed	$	124
Net assets acquired	$	3,878

Allocation of the purchase price consideration for discontinued operations:

Accounts receivables	$	13,722
Inventory		1,264
Other assets		118
Goodwill		41,403
Identifiable intangible assets		17,916
Total assets acquired	$	74,423
Accounts payable		21,400
Other current liabilities		1,144
Total liabilities assumed	$	22,544
Net assets acquired	$	51,879

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

Continuing Operations
	Amount		Weighted Average Life (Years)
Customer prescription files	$	2,320		7
	$	2,320

Discontinued Operations
	Amount		Weighted Average Life (Years)
Customer prescription files	$	7,156		4
Trade name	$	7,300		-
Referral and relationships	$	1,400		2
Non-compete agreements	$	1,800		4
Business licenses	$	260		1
	$	17,916

The following unaudited supplemental pro forma financial information includes the results of operations of the three Reeves-Sain Drug Store, Inc. locations (now classified as Assets Held-for-Sale) in 2017, 2016, and 2015 and is presented as if the locations had been consolidated as of the beginning of the year immediately preceding the date of acquisition. 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 remove one-time acquisition costs of $0.5 million, (ii) to increase amortization expense by $0.6 million resulting from the incremental intangible assets acquired and (iii) to increase interest expense by $0.2 million as a result of assumed debt financing for the transaction.

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. This has been broken out for continuing operations and discontinued operations.

Continuing Operations
(in thousands, except per share data)	2017			2016			2015
Revenue	$	1,805,405		$	1,886,241		$	1,945,152
Earnings		(139,267	)		(68,125	)		(8,945	)
Basic and diluted earnings per share	$	(3.72	)	$	(1.84	)	$	(0.24	)

Discontinued Operations
(in thousands, except per share data)	2017			2016		2015
Revenue	$	275,952		$	239,183	$	252,902
Earnings		(10,918	)		1,594		1,167
Basic and diluted earnings per share	$	(0.29	)	$	0.04	$	0.03