Segment Reporting

6 Months Ended

Aug. 27, 2022

Segment Reporting

Segment Reporting

15. Segment Reporting

The Company has two reportable segments, its retail drug stores (“Retail Pharmacy”), and its pharmacy services (“Pharmacy Services”) segments.

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, 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 Company’s chief operating decision makers are its Chief Executive Officer, Chief Financial Officer and several other members of the Executive Leadership Team, (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
August 27, 2022:
Total Assets	$	6,124,452	$	2,255,466	$	(12,793)	$	8,367,125
Goodwill		43,492		583,444		—		626,936
February 26, 2022:
Total Assets	$	6,068,594	$	2,482,232	$	(21,823)	$	8,529,003
Goodwill		43,492		835,644		—		879,136

(1) As of August 27, 2022 and February 26, 2022, intersegment eliminations include netting of the Pharmacy Services segment long-term deferred tax liability of $0 against the Retail Pharmacy segment long-term deferred tax asset for consolidation purposes in accordance with ASC 740, and intersegment accounts receivable of $12,793 and $21,823, 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 thirteen and twenty-six week periods ended August 27, 2022 and August 28, 2021:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
Thirteen Week Period Ended
August 27, 2022:
Revenues	$	4,231,791	$	1,727,241	$	(57,963)	$	5,901,069
Gross Profit		1,043,036		111,459		—		1,154,495
Adjusted EBITDA(2)		31,484		47,065		—		78,549
Additions to property and equipment and intangible assets		46,343		5,832		—		52,175
August 28, 2021:
Revenues	$	4,277,218	$	1,898,213	$	(62,431)	$	6,113,000
Gross Profit		1,140,362		105,562		—		1,245,924
Adjusted EBITDA(2)		69,369		36,791		—		106,160
Additions to property and equipment and intangible assets		50,548		4,687		—		55,235
Twenty-Six Week Period Ended
August 27, 2022:
Revenues	$	8,577,147	$	3,453,098	$	(114,593)	$	11,915,652
Gross Profit		2,140,393		210,831		—		2,351,224
Adjusted EBITDA(2)		105,166		73,513		—		178,679
Additions to property and equipment and intangible assets		124,894		12,705		—		137,599
August 28, 2021:
Revenues	$	8,628,900	$	3,770,495	$	(125,410)	$	12,273,985
Gross Profit		2,310,296		220,503		—		2,530,799
Adjusted EBITDA(2)		164,283		80,754		—		245,037
Additions to property and equipment and intangible assets		111,441		8,394		—		119,835

(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 Management’s Discussion and Analysis of Financial Condition and Results for additional details.

The following is a reconciliation of net loss to Adjusted EBITDA for the thirteen and twenty-six week periods ended August 27, 2022 and August 28, 2021:

	August 27,		August 28,		August 27,		August 28,
	2022		2021		2022		2021
	(13 weeks)		(13 weeks)		(26 weeks)		(26 weeks)
Net loss	$	(331,290)	$	(100,301)	$	(441,481)	$	(113,358)
Interest expense		52,533		48,592		100,652		97,713
Income tax expense		11,967		3,310		15,464		4,090
Depreciation and amortization		68,564		73,859		138,637		149,718
LIFO charge (credit)		10,121		(3,993)		10,121		(7,986)
Facility exit and impairment charges		45,845		11,353		112,416		20,184
Goodwill and intangible asset impairment charges		252,200		—		252,200		—
(Gain) loss on debt modifications and retirements, net		(41,312)		2,839		(41,312)		3,235
Merger and Acquisition-related costs		—		4,591		—		8,477
Stock-based compensation expense		4,735		5,792		8,069		8,603
Restructuring-related costs		12,805		9,584		35,451		15,516
Inventory write-downs related to store closings		1,094		798		9,049		1,270
Litigation and other contractual settlements		20,093		34,212		38,364		48,212
(Gain) loss on sale of assets, net		(29,001)		12,378		(58,197)		5,820
Other		195		3,146		(754)		3,543
Adjusted EBITDA	$	78,549	$	106,160	$	178,679	$	245,037