Segment Reporting

12 Months Ended

Mar. 03, 2018

Segment Reporting

Segment Reporting

21. 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, collectively the "Parent Company".

        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, Chief Operating Officer, Chief Financial Officer, Chief Operating Officer—Retail Pharmacy, and the Chief Executive Officer—Pharmacy Services, (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 March 3, 2018, March 4, 2017 and February 27, 2016:

	Retail Pharmacy		Pharmacy Services		Intersegment Eliminations(1)			Consolidated
March 3, 2018:
Revenues	$	15,832,625	$	5,896,669	$	(200,326	)	$	21,528,968
Gross Profit		4,372,373		407,732		—			4,780,105
Adjusted EBITDA(2)		388,360		171,534		—			559,894
March 4, 2017:
Revenues	$	16,766,620	$	6,393,884	$	(232,964	)	$	22,927,540
Gross Profit		4,671,975		392,732		—			5,064,707
Adjusted EBITDA(2)		551,816		188,235		—			740,051
February 27, 2016:
Revenues	$	16,820,388	$	4,103,513	$	(153,664	)	$	20,770,237
Gross Profit		4,761,153		230,826		—			4,991,979
Adjusted EBITDA(2)		747,910		101,357		—			849,267

(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 (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures" in MD&A for additional details.

        The following is a reconciliation of net (loss) income to Adjusted EBITDA for fiscal 2018, 2017 and 2016:

	March 3, 2018 (52 weeks)			March 4, 2017 (53 weeks)			February 27, 2016 (52 weeks)
Net (loss) income from continuing operations	$	(349,532	)	$	4,080		$	102,088
Interest expense		202,768			200,065			186,132
Income tax expense		305,987			44,438			49,512
Depreciation and amortization expense		386,057			407,366			361,134
LIFO (credit) charge		(28,827	)		(3,721	)		7,892
Lease termination and impairment charges		58,765			45,778			40,477
Goodwill impairment		261,727			—			—
Loss on debt retirements, net		—			—			33,205
Walgreens Boots Alliance merger termination fee		(325,000	)
Other		47,949			42,045			68,827
Adjusted EBITDA from continuing operations	$	559,894		$	740,051		$	849,267

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

	Retail Pharmacy		Pharmacy Services		Eliminations(2)			Consolidated
March 3, 2018:
Total Assets	$	6,089,343	$	2,954,953	$	(54,969	)	$	8,989,327
Goodwill		43,492		1,377,628		—			1,421,120
Additions to property and equipment and intangible assets		199,437		15,327		—			214,764
March 4, 2017:
Total Assets	$	8,664,216	$	3,087,143	$	(157,607	)	$	11,593,752
Goodwill		43,492		1,639,355		—			1,682,847
Additions to property and equipment and intangible assets		281,072		12,725		—			293,797

(2)           As of March 3, 2018 and March 4, 2017, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $38,713 and $140,865, respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $16,256 and $16,742, respectively, 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.