Rite Aid 2016 Annual Report Download - page 43

We review key performance results for active stores on a quarterly basis and approve certain stores
for closure. Impairment for closed stores, if any (many stores are closed on lease expiration), are
recorded in the quarter the closure decision is approved. Closure decisions are made on an individual
store or regional basis considering all of the macro-economic, industry and other factors, in addition to,
the operating store’s individual operating results. We currently have no plans to close a significant
number of active stores in future periods. We recorded impairment charges for closed facilities of
$1.1 million in fiscal 2016, $2.3 million in fiscal 2015 and $1.3 million in fiscal 2014.
The following table summarizes the impairment charges and number of locations, segregated by
closed facilities and active stores that have been recorded in fiscal 2016, 2015 and 2014:
Year Ended
February 27, 2016 February 28, 2015 March 1, 2014
Number Charge Number Charge Number Charge
(in thousands, except number of stores)
Active stores:
Stores previously impaired(1) .......... 357 $ 9,183 376 $ 6,949 378 $ 4,162
New, relocated and remodeled stores(2) . . . 3 1,649 2 1,108 1 4,028
Remaining stores not meeting the
recoverability test(3) ............... 29 5,274 16 4,069 17 3,558
Total impairment charges-active stores ...... 389 16,106 394 12,126 396 11,748
Total impairment charges-closed facilities . . . 27 1,113 35 2,312 38 1,329
Total impairment charges-all locations ...... 416 $17,219 429 $14,438 434 $13,077
(1) These charges are related to stores that were impaired for the first time in prior periods. Most
active stores, requiring an impairment charge, are fully impaired in the first period that they do
not meet their asset recoverability test. However, we do often make ongoing capital additions to
certain stores to improve their operating results or to meet geographical competition, which if later
are deemed to be unrecoverable, will be impaired in future periods. Of this total, 351, 369 and
375 stores for fiscal years 2016, 2015 and 2014, respectively have been fully impaired. Also
included in these charges are an insignificant number of stores, which were only partially impaired
in prior years based on our analysis that supported a reduced net book value greater than zero,
but now require additional charges.
(2) These charges are related to new stores (open at least 3 years) and relocated stores (relocated in
the last 2 years) and significant strategic remodels (remodeled in the last year) that did not meet
their recoverability test during the current period. These stores have not met our original return on
investment projections and have a historical loss of at least 2 years. Their future cash flow
projections do not recover their current carrying value. Of this total, 3, 1 and 1 stores for fiscal
years 2016, 2015 and 2014, respectively have been fully impaired.
(3) These charges are related to the remaining active stores that did not meet the recoverability test
during the current period. These stores have a historical loss of at least 2 years. Their future cash
flow projections do not recover their current carrying value. Of this total, 27, 14 and 14 stores for
fiscal years 2016, 2015 and 2014, respectively have been fully impaired.
The primary drivers of our impairment charges are each store’s current and historical operating
performance and the assumptions that we make about each store’s operating performance in future
periods. Projected cash flows are updated based on the next year’s operating budget which includes the
qualitative factors noted above. We are unable to predict with any degree of certainty which individual
stores will fall short or exceed future operating plans. Accordingly, we are unable to describe future
trends that would affect our impairment charges, including the likely stores and their related asset
values that may fail their recoverability test in future periods.
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