20. Segment Reporting

The Company has 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 PBM 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, 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 is balance sheet information for the Company’s reportable segments:


	Retail		Pharmacy
	Pharmacy		Services		Eliminations(1)		Consolidated
March 2, 2019:
Total Assets	$	5,071,055	$	2,534,771	$	(14,459)	$	7,591,367
Goodwill		43,492		1,064,644		—		1,108,136
Additions to property and equipment and intangible assets		228,079		16,610		—		244,689
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

(1)

As of March 2, 2019 and March 3, 2018, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 and $38,713 , respectively, against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $14,459 and $16,256, 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.

The following table is a reconciliation of the Company’s business segments to the consolidated financial statements for the fiscal years ended March 2, 2019, March 3, 2018 and March 4, 2017:


	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
March 2, 2019:
Revenues	$	15,757,152	$	6,093,688	$	(211,283)	$	21,639,557
Gross Profit		4,258,716		417,636		—		4,676,352
Adjusted EBITDA(2)		405,206		158,238		—		563,444
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)		388,320		171,534		—		559,854
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)		559,653		188,235		—		747,888

(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 the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations—Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share and Other Non-GAAP Measures” for additional details.

The following is a reconciliation of net (loss) income to Adjusted EBITDA for fiscal 2019, 2018 and 2017:


	March 2,		March 3,		March 4,
	2019		2018		2017
	(52 weeks)		(52 weeks)(a)		(53 weeks)(a)
Net (loss) income from continuing operations	$	(666,954)	$	(349,532)	$	4,080
Interest expense		227,728		202,768		200,065
Income tax expense		77,477		305,987		44,438
Depreciation and amortization		357,882		386,057		407,366
LIFO charge (credit)		23,354		(28,827)		(3,721)
Lease termination and impairment charges		107,994		58,765		45,778
Goodwill and intangible asset impairment charges		375,190		261,727		—
Loss on debt retirements, net		554		—		—
Merger and Acquisition-related costs		37,821		24,283		14,066
Stock-based compensation expense		12,115		25,793		23,482
Restructuring-related costs		4,704		—		—
Inventory write-downs related to store closings		13,487		7,586		5,925
Litigation settlement		18,000		—		—
Gain on sale of assets, net		(38,012)		(25,872)		(6,649)
Walgreens Boots Alliance merger termination fee		—		(325,000)		—
Other		12,104		16,119		13,058
Adjusted EBITDA from continuing operations	$	563,444	$	559,854	$	747,888

(a)

During fiscal 2019, the Company revised its definition of Adjusted EBITDA to no longer exclude the impact of revenue deferrals related to its customer loyalty program and further revised its disclosure by presenting certain amounts previously included within Other as separate reconciling items. Consequently, the Company revised Adjusted EBITDA for fiscal 2018 and fiscal 2017 to conform with the revised definition and present separate reconciling items previously included in Other.