Rite Aid 2016 Annual Report Download - page 88

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)
1. Summary of Significant Accounting Policies (Continued)
front end merchandise purchases and qualifying prescriptions. One point is awarded for each dollar
spent towards front end merchandise and 25 points are awarded for each qualifying prescription.
Members reach specific wellness + tiers based on the points accumulated during the calendar year,
which entitles such customers to certain future discounts and other benefits upon reaching that tier. For
example, any customer that reaches 1,000 points in a calendar year achieves the ‘‘Gold’’ tier, enabling
them to receive a 20% discount on qualifying purchases of front end merchandise for the remaining
portion of the calendar year and also the next calendar year. There are also similar ‘‘Silver’’ and
‘‘Bronze’’ levels with lower thresholds and benefit levels.
As wellness + customers accumulate points, the Retail Pharmacy segment defers the value of the
points earned as deferred revenue (included in other current and noncurrent liabilities, based on the
expected usage). The amount deferred is based on historic and projected customer activity (e.g., tier
level, spending level). As customers receive discounted front end merchandise, the Retail Pharmacy
segment recognizes an allocable portion of the deferred revenue. The Retail Pharmacy segment
deferred $110,208 as of February 27, 2016 of which $88,470 is included in other current liabilities and
$21,738 is included in noncurrent liabilities. The Retail Pharmacy segment deferred $111,208 as of
February 28, 2015 of which $89,657 is included in other current liabilities and $21,551 is included in
noncurrent liabilities.
During fiscal 2016, the Company partnered with American Express Travel Related Services
Company, Inc. to be part of a coalition loyalty program titled Plenti. This awards program allows a
customer to earn points based on qualifying purchases at participating retailers. Each Plenti point is
worth the equivalent of $0.01. The customer has the opportunity to redeem their accumulated points
on a future purchase at any of the participating retailers. All points are redeemed using a FIFO
methodology (e.g., first points earned are the first to be redeemed). Points expire on December 31st of
each year for any point that has aged a minimum of two years that has not been redeemed by the
customer. For a majority of the Plenti point issuances, funding is provided by our vendors through
contractual arrangements. This funding is treated as deferred revenue and remains in deferred revenue
until a customer redeems their points. Upon redemption, the deferred revenue account is decremented
with an offsetting credit to sales. For Plenti point redemptions that are not vendor funded, deferred
revenue is recorded and not recognized until the points are redeemed. As of February 27, 2016, the
Company had deferred revenue of $39,253 relating to the Plenti program which is included in other
current liabilities.
Pharmacy Services Segment
The Pharmacy Services segment (‘‘Pharmacy Services’’) sells prescription drugs indirectly through
its retail pharmacy network and directly through its mail service dispensing pharmacy. The Pharmacy
Services segment recognizes revenue from prescription drugs sold by (i) its mail service dispensing
pharmacy and (ii) under retail pharmacy network contracts where it is the principal using the gross
method at the contract prices negotiated with its clients, primarily employers, insurance companies,
unions, government employee groups, health plans, Managed Medicaid plans, Medicare plans, and
other sponsors of health benefit plans, and individuals throughout the United States. Revenues include:
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