Segment Reporting

12 Months Ended

Feb. 27, 2016

Segment Reporting

Segment Reporting

20. Segment Reporting

        Prior to June 24, 2015, the Company's operations were within one reportable segment. As a result of the completion of the Acquisition, the Company has realigned its internal management reporting to reflect two reportable segments, its retail drug stores ("Retail Pharmacy"), and its pharmacy services ("Pharmacy Services") segments.

        The Retail Pharmacy segment's primary business is the sale of prescription drugs and related consultation to its customers. Additionally, the Retail Pharmacy segment sells a full selection of health and beauty aids and personal care products, seasonal merchandise and a large private brand product line. The Pharmacy Services segment offers a full range of pharmacy benefit management services including plan design and administration, on both a transparent pass-through model and traditional model, formulary management and claims processing. Additionally, the Pharmacy Services segment offers specialty and mail order services, infertility treatment, and drug benefits to eligible beneficiaries under the federal government's Medicare Part D program.

        The Parent Company's chief operating decision makers are its Parent Company Chief Executive Officer, Parent Company President and CEO—Retail Pharmacy, CEO—Pharmacy Services, Chief Financial Officer and its Senior Executive Vice Presidents (collectively the "CODM"). The CODM has ultimate responsibility for enterprise decisions. The CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise, the Retail Pharmacy segment and the Pharmacy Services segment. The Retail Pharmacy and Pharmacy Services segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. The CODM relies on internal management reporting that analyzes enterprise results on certain key performance indicators, namely, revenues, gross profit, and Adjusted EBITDA.

        The following table is a reconciliation of the Company's business segments to the consolidated financial statements for the fiscal years ended February 27, 2016, February 28, 2015 and March 1, 2014:

	Retail Pharmacy		Pharmacy Services		Intersegment Eliminations(1)			Consolidated
February 27, 2016:
Revenues	$	26,865,931	$	4,103,513	$	(232,787	)	$	30,736,657
Gross Profit		7,595,429		230,826		—			7,826,255
Adjusted EBITDA(2)		1,300,905		101,357		—			1,402,262
February 28, 2015:
Revenues	$	26,528,377	$	—	$	—		$	26,528,377
Gross Profit		7,576,732		—		—			7,576,732
Adjusted EBITDA(2)		1,322,843		—		—			1,322,843
March 1, 2014:
Revenues	$	25,526,413	$	—	$	—		$	25,526,413
Gross Profit		7,323,734		—		—			7,323,734
Adjusted EBITDA(2)		1,324,959		—		—			1,324,959

(1)	Intersegment eliminations include intersegment revenues and corresponding cost of revenues that occur when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products. When this occurs, both the Retail Pharmacy and Pharmacy Services segments record the revenue on a stand-alone basis.
(2)	See "Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per Diluted Share and Other Non-GAAP Measures" in MD&A for additional details.

        The following is a reconciliation of net income to Adjusted EBITDA for fiscal 2016, 2015 and 2014:

	February 27, 2016 (52 weeks)			February 28, 2015 (52 weeks)			March 1, 2014 (52 weeks)
Net income	$	165,465		$	2,109,173		$	249,414
Interest expense		449,574			397,612			424,591
Income tax expense		139,297			158,951			161,883
Income tax valuation allowance reduction		(26,358	)		(1,841,304	)		(161,079	)
Depreciation and amortization expense		509,212			416,628			403,741
LIFO charge (credit)		11,163			(18,857	)		104,142
Lease termination and impairment charges		48,423			41,945			41,304
Loss on debt retirements, net		33,205			18,512			62,443
Other		72,281			40,183			38,520
Adjusted EBITDA	$	1,402,262		$	1,322,843		$	1,324,959

        The following is balance sheet information for the Company's reportable segments:

	Retail Pharmacy		Pharmacy Services		Eliminations(2)			Consolidated
February 27, 2016:
Total Assets	$	8,468,186	$	2,948,548	$	(139,724	)	$	11,277,010
Goodwill		76,124		1,637,351		—			1,713,475
Additions to property and equipment and intangible assets		667,719		2,276		—			669,995
February 28, 2015:
Total Assets	$	8,777,425	$	—	$	—		$	8,777,425
Goodwill		76,124		—		—			76,124
Additions to property and equipment and intangible assets		539,386		—		—			539,386

(2)           Intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $116,027 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $23,697, as of February 27, 2016, that represents amounts owed from the Pharmacy Services segment to the Retail Pharmacy segment that are created when Pharmacy Services segment customers use Retail Pharmacy segment stores to purchase covered products.