Acquisition (Tables)

6 Months Ended

Aug. 29, 2015

Acquisition

Schedule of purchase price allocation

Preliminary purchase price
Cash consideration	$	1,883,405
Stock consideration	240,907
Total	$	2,124,312
Preliminary purchase price allocation
Cash and cash equivalents	$	103,834
Accounts receivable	900,473
Inventories	7,276
Deferred tax assets	516
Prepaid expenses and other current assets	13,820
Total current assets	1,025,919
Property and equipment	13,196
Intangible assets(1)	842,585
Goodwill	1,457,703
Other assets	8,919
Total assets acquired	3,348,322
Accounts payable	491,672
Reinsurance funds held	381,225
Other current liabilities(2)	207,723
Total current liabilities	1,080,620
Other long term liabilities(3)	143,390
Total liabilities assumed	1,224,010
Net assets acquired	$	2,124,312

(1) Intangible assets are recorded at estimated fair value, as determined by management based on available information which includes a preliminary valuation prepared by an independent third party. The fair values assigned to identifiable intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods.  The major assumptions used in arriving at the estimated identifiable intangible asset values included management’s preliminary estimates of future cash flows, discounted at an appropriate rate of return which are based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets.  The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.  The estimated fair value of intangible assets and related useful lives as included in the preliminary purchase price allocation include:

	Estimated Fair Value		Estimated Useful Life (In Years)
Customer relationships	$	585,500	17
CMS license	108,000		25
Claims adjudication and other developed software	59,500		7
Trademarks	15,600		10
Backlog	12,500		3
Other	17,485		5
Trademarks	44,000		Indefinite
Total	$	842,585

(2) Other current liabilities includes $116,500 due to TPG under the terms of the Agreement, representing the amounts due to EnvisionRx from CMS, less corresponding amounts due to various reinsurance providers under certain reinsurance programs, for CMS activities that relate to the year ended December 31, 2014.

(3) Primarily relates to deferred tax liabilities.

Schedule of estimated fair value of intangible assets and related useful lives as included in the preliminary purchase price allocation

	Estimated Fair Value		Estimated Useful Life (In Years)
Customer relationships	$	585,500	17
CMS license	108,000		25
Claims adjudication and other developed software	59,500		7
Trademarks	15,600		10
Backlog	12,500		3
Other	17,485		5
Trademarks	44,000		Indefinite
Total	$	842,585

Schedule of unaudited pro forma combined financial data

	Thirteen week Periods Ended						Twenty-Six week Periods Ended
	August 29, 2015			August 30, 2014			August 29, 2015			August 30, 2014
	Pro forma			Pro forma			Pro forma			Pro forma
Net revenues as reported	$	7,664,776		$	6,522,584		$	14,312,337		$	12,988,115
EnvisionRx revenue, prior to the acquisition	364,159			997,946			1,735,635			1,986,324
Less pre-acquisition intercompany revenue	(23,777		)	(65,511		)	(104,731		)	(131,413		)
Pro forma combined revenues	$	8,005,158		$	7,455,019		$	15,943,241		$	14,843,026
Net income as reported	$	21,469		$	127,849		$	40,305		$	169,295
EnvisionRx net income (loss) before income taxes, prior to the acquisition	(56,544		)	3,467			(45,307		)	7,352
Incremental interest expense on the 6.125% Notes issued on April 2, 2015	—			(28,852		)	(11,097		)	(57,703		)
Incremental amortization resulting from fair value adjustments of the identifiable intangible assets	(3,778		)	(15,179		)	(16,509		)	(26,530		)
Transaction expenses incurred by both the Company and EnvisionRx	36,754			—			55,864			—
Debt extinguishment charges incurred by EnvisionRx	31,601			—			31,601			—
Income tax expense relating to pro forma adjustments	(3,294		)	—			(5,966		)	—
Pro forma net income	$	26,208		$	87,285		$	48,891		$	92,414
Basic income per share	$	0.03		$	0.09		$	0.05		$	0.09
Diluted income per share	$	0.02		$	0.08		$	0.05		$	0.09