Segment Reporting

3 Months Ended

Jun. 03, 2023

Segment Reporting

Segment Reporting

13. 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 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
June 3, 2023:
Total Assets	$	5,762,566	$	1,897,726	$	(9,874)	$	7,650,418
Goodwill		43,492		312,944		—		356,436
March 4, 2023:
Total Assets	$	5,487,845	$	2,049,107	$	(9,590)	$	7,527,362
Goodwill		43,492		464,444		—		507,936

(1) As of June 3, 2023 and March 4, 2023, intersegment eliminations include intersegment accounts receivable of $9,874 and $9,590, 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 week periods ended June 3, 2023 and May 28, 2022:

	Retail		Pharmacy		Intersegment
	Pharmacy		Services		Eliminations(1)		Consolidated
Thirteen Week Period Ended
June 3, 2023:
Revenues	$	4,492,329	$	1,196,154	$	(35,321)	$	5,653,162
Gross Profit		1,086,863		91,663		—		1,178,526
Adjusted EBITDA(2)		70,049		21,666		—		91,715
Depreciation and amortization		55,469		10,426		—		65,895
LIFO charge		7,500		—		—		7,500
Stock-based compensation expense		723		358		—		1,081
Additions to property and equipment and intangible assets		40,439		7,064		—		47,503
May 28, 2022:
Revenues	$	4,345,356	$	1,725,857	$	(56,630)	$	6,014,583
Gross Profit		1,097,357		99,372		—		1,196,729
Adjusted EBITDA(2)		73,682		26,448		—		100,130
Depreciation and amortization		56,108		13,965		—		70,073
LIFO charge		—		—		—		—
Stock-based compensation expense		3,102		232		—		3,334
Additions to property and equipment and intangible assets		78,551		6,873		—		85,424

(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 MD&A for additional details.

The following is a reconciliation of net loss to Adjusted EBITDA for the thirteen week periods ended June 3, 2023 and May 28, 2022:

	June 3,		May 28,
	2023		2022
	(13 weeks)		(13 weeks)
Net loss	$	(306,409)	$	(85,441)
Interest expense		65,220		48,119
Income tax expense		1,493		3,497
Depreciation and amortization		65,895		70,073
LIFO charge		7,500		—
Facility exit and impairment charges		19,692		41,821
Goodwill and intangible asset impairment charges		151,500		—
Stock-based compensation expense		1,081		3,334
Restructuring-related costs		78,130		22,646
Inventory write-downs related to store closings		2,057		7,955
Litigation and other contractual settlements		11,050		18,271
Gain on sale of assets, net		(8,193)		(29,196)
Other		2,699		(949)
Adjusted EBITDA	$	91,715	$	100,130