Goodwill and Other Intangibles

12 Months Ended

Feb. 27, 2016

12. Goodwill and Other Intangibles

Goodwill and indefinitely-lived assets, such as certain trademarks acquired in connection with acquisition transactions, are not amortized, but is 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 performs a qualitative assessment in the fourth quarter of the fiscal year to determine if it is more likely than not that the carrying value of the goodwill exceeds the fair value of the goodwill. During the Company's qualitative assessment it 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 the Company's share price, and forecasts of revenue, profit, working capital requirements, and cash flows. The Company considers its two reporting units', the Retail Pharmacy segment and the Pharmacy Services segment, historical results and operating trends when determining these assumptions. If the Company determines that it is more likely than not that the carrying value of the goodwill exceeds the fair value of the goodwill, it performs the first step of the impairment process, which compares the fair value of a reporting unit to its carrying amount, including the goodwill. The Company estimates the fair value of its reporting units using a combination of a future discounted cash flow valuation model and a comparable market transaction model. If the carrying value of a reporting unit exceeds the fair value, the second step of the impairment process is performed and the implied fair value of a reporting unit is compared to the carrying amount of the goodwill. The implied fair value of the goodwill is determined the same way as the goodwill recognized in a business combination. The Company assigns the fair value of a reporting unit to all of the assets and liabilities of that unit (including unrecognized intangible assets) and any excess goes to the goodwill (its implied fair value). Any excess carrying amount of the goodwill over the implied fair value of the goodwill, is the amount of the impairment loss recognized.

In the fiscal fourth quarter the Company completed a qualitative goodwill impairment assessment, and after evaluating the results, events and circumstances of the reporting units, the Company concluded that sufficient evidence existed to assert qualitatively that it is more likely than not that the fair values of the reporting units exceeded their carrying values. Therefore, a two- step impairment assessment was not necessary and no goodwill impairment charge was assessed for the fiscal years ended February 27, 2016 and February 28, 2015.

Below is a summary of the changes in the carrying amount of goodwill by segment for the fiscal years ended February 27, 2016 and February 28, 2015:

	Retail Pharmacy		Pharmacy Services		Total
Balance, March 1, 2014	$	—		—		—
Acquisitions		76,124		—		76,124

Balance, February 28, 2015	$	76,124	$	—	$	76,124
Acquisition (see Note 2. Acquisition)		—		1,637,351		1,637,351

Balance, February 27, 2016	$	76,124	$	1,637,351	$	1,713,475

The Company's intangible assets are finite-lived and amortized over their useful lives. Following is a summary of the Company's finite-lived and indefinitely-lived intangible assets as of February 27, 2016 and February 28, 2015.

	2016								2015
	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	$	665,197	$	(507,776	)	$	157,421	8 years	$	653,377	$	(481,041	)	$	172,336	8 years
Prescription files		1,541,518		(1,285,633	)		255,885	3 years		1,440,154		(1,191,010	)		249,144	3 years
Customer relationships(a)		465,000		(44,203	)		420,797	17 years		—		—			—
CMS license		57,500		(1,572	)		55,928	25 years		—		—			—
Claims adjudication and other developed software		59,000		(5,760	)		53,240	7 years		—		—			—
Trademarks		20,100		(1,373	)		18,727	10 years		—		—			—
Backlog		11,500		(2,619	)		8,881	3 years		—		—			—

Total finite	$	2,819,815	$	(1,848,936	)		970,879		$	2,093,531	$	(1,672,051	)	$	421,480
Trademarks		33,500		—			33,500	Indefinite		—		—			—

Total	$	2,853,315	$	(1,848,936	)	$	1,004,379		$	2,093,531	$	(1,672,051	)	$	421,480


(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 February 27, 2016 and February 28, 2015 are unfavorable lease intangibles with a net carrying amount of $46,947 and $55,571, respectively. These intangible liabilities are amortized over their remaining lease terms at time of acquisition.

Amortization expense for these intangible assets and liabilities was $186,816, $118,105 and $119,138 for fiscal 2016, 2015 and 2014, respectively. The anticipated annual amortization expense for these intangible assets and liabilities is 2017—$211,622; 2018—$168,788; 2019—$131,417; 2020—$101,961 and 2021—$69,252.

- 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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