Segment Reporting

12 Months Ended

Mar. 04, 2023

Segment Reporting

Segment Reporting

21. Segment Reporting

The Company has two reportable segments, Retail Pharmacy Segment and Pharmacy Services Segment.

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, 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
March 4, 2023:
Total Assets	$	5,487,845	$	2,049,107	$	(9,590)	$	7,527,362
Goodwill		43,492		464,444		—		507,936
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 March 4, 2023 and February 26, 2022, intersegment eliminations include intersegment accounts receivable of $9,590 and $21,823, respectively, that represent 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 4, 2023, February 26, 2022 and February 27, 2021:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
March 4, 2023:
Revenues	$	17,785,067	$	6,522,299	$	(215,467)	$	24,091,899
Gross Profit		4,394,850		409,090		—		4,803,940
Adjusted EBITDA(2)		288,077		141,103		—		429,180
Depreciation and amortization		229,380		47,203		—		276,583
LIFO charge		53,028		—		—		53,028
Stock-based compensation expense		10,604		933		—		11,537
Additions to property and equipment and intangible assets		226,563		21,122		—		247,685
February 26, 2022:
Revenues	$	17,494,816	$	7,323,125	$	(249,686)	$	24,568,255
Gross Profit		4,722,075		384,420		—		5,106,495
Adjusted EBITDA(2)		392,633		113,272		—		505,905
Depreciation and amortization		244,122		51,564		—		295,686
LIFO charge		1,314		—		—		1,314
Stock-based compensation expense		12,282		768		—		13,050
Additions to property and equipment and intangible assets		202,386		18,327		—		220,713
February 27, 2021:						—		—
Revenues	$	16,365,260	$	7,970,137	$	(292,157)	$	24,043,240
Gross Profit		4,255,791		448,531		—		4,704,322
Adjusted EBITDA(2)		279,896		157,769		—		437,665
Depreciation and amortization		269,985		57,139		—		327,124
LIFO credit		(51,692)		—		—		(51,692)
Stock-based compensation expense		11,594		1,409		—		13,003
Restructuring-related costs–SKU optimization charges		20,939		—		—		20,939
Additions to property and equipment and intangible assets		204,290		20,651		—		224,941

(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 to Adjusted EBITDA for fiscal 2023, 2022 and 2021:

	March 4,		February 26,		February 27,
	2023		2022		2021
	(53 weeks)		(52 weeks)		(52 weeks)
Net loss from continuing operations	$	(719,188)	$	(522,372)	$	(99,381)
Interest expense		224,399		191,601		201,388
Income tax benefit		(6,467)		(3,780)		(20,157)
Depreciation and amortization		276,583		295,686		327,124
LIFO charge (credit)		53,028		1,314		(51,692)
Facility exit and impairment charges		180,637		164,084		57,714
Goodwill and intangible asset impairment charges		371,200		229,000		29,852
(Gain) loss on debt modifications and retirements, net		(80,142)		3,235		(5,274)
Merger and Acquisition-related costs		—		12,797		10,549
Stock-based compensation expense		11,537		13,050		13,003
Restructuring-related costs		108,626		35,121		84,552
Inventory write-downs related to store closings		14,270		5,298		3,709
Litigation and other contractual settlements		53,882		50,212		—
(Gain) loss on sale of assets, net		(68,586)		5,505		(69,300)
Loss (gain) on Bartell acquisition		—		5,346		(47,705)
Change in estimate related to manufacturer rebate receivables		—		15,068		—
Other		9,401		4,740		3,283
Adjusted EBITDA from continuing operations	$	429,180	$	505,905	$	437,665