Rite Aid 2016 Annual Report Download - page 100

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 27, 2016, February 28, 2015 and March 1, 2014
(In thousands, except per share amounts)
2. Acquisition (Continued)
directly or indirectly to future cash flows. The estimated fair value of intangible assets and related
useful lives as included in the preliminary purchase price allocation include:
Estimated
Estimated Useful Life
Fair Value (In Years)
Customer relationships ............................ $465,000 17
CMS license .................................... 57,500 25
Claims adjudication and other developed software ......... 59,000 7
Trademarks ..................................... 20,100 10
Backlog ....................................... 11,500 3
Trademarks ..................................... 33,500 Indefinite
Total .......................................... $646,600
(2) Other current liabilities includes $116,500 due to TPG under the terms of the Agreement,
representing the amounts due to EnvisionRx from CMS, less corresponding amounts due to
various reinsurance providers under certain reinsurance programs, for CMS activities that relate to
the year ended December 31, 2014. This liability was satisfied with a payment to TPG on
November 5, 2015.
(3) Primarily relates to deferred tax liabilities.
The above goodwill represents future economic benefits expected to be recognized from the
Company’s expansion into the pharmacy services market, as well as expected future synergies and
operating efficiencies from combining operations with EnvisionRx. Goodwill resulting from the
Acquisition of $1,637,351 has been allocated to the Pharmacy Services segment of which $1,360,156 is
deductible for tax purposes. At the time the financial statements were issued, initial accounting for the
business combination related to tax matters were preliminary and may be adjusted during the
measurement period. During the fourth quarter of fiscal 2016, the Company made measurement period
adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments
resulted in an increase in goodwill of $158,278, mostly due to a reduction of intangible assets of
$178,500 and offset by certain corresponding tax adjustments. As a result of the reduction of intangible
assets during the fourth quarter of fiscal 2016, the Company recorded a reduction to its amortization
expense of $4,739, which adjusts the amortization expense to the amount that would have been
recorded in previous interim reporting periods if the adjustment to the provisional amounts had been
recognized as of the acquisition date.
During fiscal 2016 and fiscal 2015, acquisition costs of $27,402 and $15,442, respectively, were
expensed as incurred. The following unaudited pro forma combined financial data gives effect to the
Acquisition as if it had occurred as of March 1, 2014.
These unaudited pro forma combined results have been prepared by combining the historical
results of the Company and historical results of EnvisionRx. The unaudited pro forma combined
financial data for all periods presented were adjusted to give effect to pro forma events that 1) are
directly attributable to the aforementioned transaction, 2) factually supportable, and 3) expected to
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