Goodwill and Other Intangibles

12 Months Ended

Mar. 03, 2018

13. Goodwill and Other Intangibles

Goodwill and indefinitely-lived assets, such as certain trademarks acquired in connection with acquisition transactions, are not amortized, but are instead evaluated for impairment on an annual basis at the end of the fiscal year, or more frequently if events or circumstances indicate that impairment may be more likely. When evaluating goodwill for possible impairment, the Company typically performs a qualitative assessment in the fourth quarter of the fiscal year to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value. However, as part of this qualitative assessment, the Company performs a quantitative assessment at least once every three years to re-establish a baseline fair value that can be used in its current and future qualitative assessments. During the qualitative assessment the Company makes significant estimates, assumptions, and judgments, including, but not limited to, the overall economy, industry and market conditions, financial performance of the Company, changes in its share price, and forecasts of revenue, profit, working capital requirements, and cash flows. The Company considers each reporting unit's historical results and operating trends when determining these assumptions; however, the estimates and projections can be affected by a number of factors and it is possible that actual results could differ from the assumptions used in the impairment assessment. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, the Company performs a quantitative goodwill impairment test. Fair value estimates used in the quantitative impairment test are calculated using an average of the income and market approaches. The income approach is based on the present value of future cash flows of each reporting unit, while the market approach is based on certain multiples of selected guideline public companies or selected guideline transactions. The approaches incorporate a number of market participant assumptions including future growth rates, discount rates, income tax rates and market activity in assessing fair value and are reporting unit specific. If the carrying amount exceeds the reporting unit's fair value, the Company recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. In addition, the Company considers the income tax effect of any tax deductible goodwill when measuring a goodwill impairment loss.

In the fiscal fourth quarter the Company completed a qualitative goodwill impairment assessment, at which time it was determined after evaluating results, events and circumstances that a quantitative assessment was necessary for the Pharmacy Services segment. The quantitative assessment concluded that the carrying amount of the Pharmacy Services segment exceeded its fair value principally due to the impact of a change in the composition of the Medicare Part D membership and a decline in the commercial business. This resulted in a goodwill impairment charge of $261,727 ($191,000 net of the related income tax benefit) for the fiscal year ended March 3, 2018. There was no impairment charge for the fiscal year ended March 4, 2017 as the Company determined that the fair value of the reporting units exceeded their carrying amounts.

Below is a summary of the changes in the carrying amount of goodwill by segment for the fiscal years ended March 3, 2018 and March 4, 2017:

	Retail Pharmacy		Pharmacy Services			Total
Balance, February 27, 2016	$	43,492	$	1,637,351		$	1,680,843
Acquisition (see Note 2. Acquisition)
Change in goodwill resulting from changes to the final purchase price allocation		—		2,004			2,004

Balance, March 4, 2017		43,492		1,639,355			1,682,847

Goodwill impairment		—		(261,727	)		(261,727	)

Balance, March 3, 2018	$	43,492	$	1,377,628		$	1,421,120

The Company's intangible assets are primarily finite-lived and amortized over their useful lives. Following is a summary of the Company's finite-lived and indefinite-lived intangible assets as of March 3, 2018 and March 4, 2017.

	2018								2017
	Gross Carrying Amount		Accumulated Amortization			Net		Remaining Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net		Remaining Weighted Average Amortization Period
Favorable leases and other(a)	$	379,355	$	(316,798	)	$	62,557	7 years	$	386,636	$	(308,766	)	$	77,870	7 years
Prescription files		900,111		(801,706	)		98,405	3 years		894,330		(764,840	)		129,490	3 years
Customer relationships(a)		465,000		(172,635	)		292,365	15 years		465,000		(110,653	)		354,347	16 years
CMS license		57,500		(6,172	)		51,328	23 years		57,500		(3,872	)		53,628	24 years
Claims adjudication and other developed software		58,985		(22,617	)		36,368	5 years		58,995		(14,188	)		44,807	6 years
Trademarks		20,100		(5,394	)		14,706	8 years		20,100		(3,383	)		16,717	9 years
Backlog		11,500		(10,286	)		1,214	1 year		11,500		(6,453	)		5,047	2 years

Total finite	$	1,892,551	$	(1,335,608	)	$	556,943		$	1,894,061	$	(1,212,155	)	$	681,906
Trademarks		33,500		—			33,500	Indefinite		33,500		—			33,500	Indefinite

Total	$	1,926,051	$	(1,335,608	)	$	590,443		$	1,927,561	$	(1,212,155	)	$	715,406


(a)	Amortized on an accelerated basis which is determined based on the remaining useful economic lives of the customer relationships that are expected to contribute directly or indirectly to future cash flows.

Also included in other non-current liabilities as of March 3, 2018 and March 4, 2017 are unfavorable lease intangibles with a net carrying amount of $18,888 and $23,703, respectively. These intangible liabilities are amortized over their remaining lease terms at time of acquisition.

Amortization expense for these intangible assets and liabilities was $147,739, $165,579 and $131,374 for fiscal 2018, 2017 and 2016, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2019—$122,024; 2020—$98,113; 2021—$74,205; 2022—$52,416 and 2023—$36,175.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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