Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Oct. 29, 2016 | Dec. 02, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | FREDS INC | |
Entity Central Index Key | 724,571 | |
Document Type | 10-Q | |
Trading Symbol | FRED | |
Document Period End Date | Oct. 29, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-28 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 37,419,740 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Oct. 29, 2016 | Jan. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 5,692 | $ 5,917 |
Receivables, less allowance for doubtful accounts of $1,895 and $2,936, respectively | 52,740 | 53,171 |
Inventories | 366,575 | 340,730 |
Other non-trade receivables | 36,959 | 40,049 |
Prepaid expenses and other current assets | 12,634 | 11,494 |
Total current assets | 474,600 | 451,361 |
Property and equipment, at depreciated cost | 133,360 | 138,993 |
Goodwill | 41,490 | 41,490 |
Other intangibles, net | 90,377 | 97,153 |
Other noncurrent assets, net | 1,050 | 1,515 |
Total assets | 740,877 | 730,512 |
Current liabilities: | ||
Accounts payable | 214,818 | 184,657 |
Current portion of indebtedness | 59 | 621 |
Accrued expenses and other | 71,071 | 56,074 |
Total current liabilities | 285,948 | 241,352 |
Long-term portion of indebtedness | 77,234 | 52,527 |
Deferred income taxes | 9,724 | |
Other noncurrent liabilities | 21,797 | 22,698 |
Total liabilities | 384,979 | 326,301 |
Commitments and Contingencies (See Note 9 - Legal Contingencies) | ||
Shareholders' equity: | ||
Retained earnings | 243,354 | 294,140 |
Accumulated other comprehensive income | 475 | 475 |
Total shareholders' equity | 355,898 | 404,211 |
Total liabilities and shareholders' equity | 740,877 | 730,512 |
Nonvoting Preferred Stock [Member] | ||
Shareholders' equity: | ||
Preferred stock | ||
Nonvoting Series A Junior Preferred Stock [Member] | ||
Shareholders' equity: | ||
Preferred stock | ||
Common Class A [Member] | ||
Shareholders' equity: | ||
Common stock | 112,069 | 109,596 |
Nonvoting Common Class B [Member] | ||
Shareholders' equity: | ||
Common stock |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands | Oct. 29, 2016 | Jan. 30, 2016 |
Allowance for doubtful accounts | $ 1,895 | $ 2,936 |
Nonvoting Preferred Stock [Member] | ||
Preferred stock, par value (in dollars per share) | ||
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Nonvoting Series A Junior Preferred Stock [Member] | ||
Preferred stock, par value (in dollars per share) | ||
Preferred stock, authorized | 224,594 | 224,594 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Common Class A [Member] | ||
Common stock, par value (in dollars per share) | ||
Common stock, authorized | 60,000,000 | 60,000,000 |
Common stock, issued | 37,419,740 | 37,232,785 |
Common stock, outstanding | 37,419,740 | 37,232,785 |
Nonvoting Common Class B [Member] | ||
Common stock, par value (in dollars per share) | ||
Common stock, authorized | 11,500,000 | 11,500,000 |
Common stock, issued | ||
Common stock, outstanding |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 29, 2016 | Oct. 31, 2015 | Oct. 29, 2016 | Oct. 31, 2015 | |
Income Statement [Abstract] | ||||
Net sales | $ 516,645 | $ 540,996 | $ 1,595,696 | $ 1,596,126 |
Cost of goods sold | 405,439 | 398,733 | 1,215,030 | 1,184,855 |
Gross profit | 111,206 | 142,263 | 380,666 | 411,271 |
Depreciation and amortization | 12,002 | 11,397 | 35,326 | 33,787 |
Selling, general and administrative expenses | 143,266 | 128,457 | 397,882 | 382,778 |
Operating income (loss) | (44,062) | 2,409 | (52,542) | (5,294) |
Interest expense | 560 | 352 | 1,685 | 1,063 |
Income (loss) before income taxes | (44,622) | 2,057 | (54,227) | (6,357) |
Provision (benefit) for income taxes | (6,229) | 621 | (10,162) | (2,887) |
Net income (loss) | $ (38,393) | $ 1,436 | $ (44,065) | $ (3,470) |
Net income (loss) per share | ||||
Basic (in dollars per share) | $ (1.05) | $ 0.04 | $ (1.20) | $ (0.09) |
Diluted (in dollars per share) | $ (1.05) | $ 0.04 | $ (1.20) | $ (0.09) |
Weighted average shares outstanding | ||||
Basic (in shares) | 36,810 | 37,108 | 36,768 | 36,654 |
Effect of dilutive stock options (in shares) | 3 | |||
Diluted (in shares) | 36,810 | 37,111 | 36,768 | 36,654 |
Dividends per common share (in dollars per share) | $ 0.06 | $ 0.06 | $ 0.18 | $ 0.18 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 29, 2016 | Oct. 31, 2015 | Oct. 29, 2016 | Oct. 31, 2015 | |
Condensed Consolidated Statements Of Comprehensive Income Loss | ||||
Net income (loss) | $ (38,393) | $ 1,436 | $ (44,065) | $ (3,470) |
Other comprehensive income (expense), net of tax postretirement plan adjustment | ||||
Comprehensive income (loss) | $ (38,393) | $ 1,436 | $ (44,065) | $ (3,470) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 29, 2016 | Oct. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (44,065) | $ (3,470) |
Adjustments to reconcile net loss to net cash flows from operating activities: | ||
Depreciation and amortization | 35,326 | 33,787 |
Net gain on asset disposition | (391) | (2,657) |
Provision for store closures and asset impairment | 24,114 | 315 |
Stock-based compensation | 2,209 | 1,721 |
Provision (benefit) for uncollectible receivables | (1,041) | 403 |
LIFO reserve increase | 3,178 | 3,557 |
Deferred income tax benefit | (10,038) | (3,826) |
Income tax benefit (charge) upon exercise of stock options | 41 | (216) |
Amortization of debt issuance costs | 79 | 128 |
(Increase) decrease in operating assets: | ||
Trade and non-trade receivables | 4,481 | (5,811) |
Insurance receivables | (147) | (236) |
Inventories | (45,282) | (55,789) |
Other assets | (675) | 793 |
Increase (decrease) in operating liabilities: | ||
Accounts payable and accrued expenses | 45,158 | 96,562 |
Income taxes payable | 183 | 9,206 |
Other noncurrent liabilities | (901) | 2,394 |
Net cash provided by operating activities | 12,229 | 76,861 |
Cash flows provided by (used in) investing activities: | ||
Capital expenditures | (20,315) | (15,561) |
Proceeds from asset dispositions | 1,868 | 3,401 |
Insurance recoveries for replacement assets | 316 | |
Asset acquisition, net (primarily intangibles) | (11,934) | (12,720) |
Acquisition of Reeves-Sain Drug Store, Inc., net of cash | (42,750) | |
Net cash used in investing activities | (30,065) | (67,630) |
Cash flows provided by (used in) financing activities: | ||
Payments of indebtedness and capital lease obligations | (606) | (532) |
Proceeds from revolving line of credit | 689,853 | 628,617 |
Payments on revolving line of credit | (665,180) | (632,461) |
Debt issuance costs | (525) | |
Excess tax charges from stock-based compensation | (41) | 216 |
Proceeds from exercise of stock options and employee stock purchase plan | 305 | 2,343 |
Cash dividends paid | (6,720) | (6,686) |
Net cash provided by (used in) financing activities | 17,611 | (9,028) |
Increase (decrease) in cash and cash equivalents | (225) | 203 |
Cash and cash equivalents: | ||
Beginning of year | 5,917 | 6,440 |
End of period | 5,692 | 6,643 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 1,685 | 1,063 |
Income taxes refunded | (1,693) | (9,070) |
Non-cash investing and financial activities: | ||
Acquisition related note payable, see Note 11 - Business Combinations | $ 13,000 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Oct. 29, 2016 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | NOTE 1: BASIS OF PRESENTATION Fred's, Inc. and its subsidiaries ("Fred's", “We”, “Our”, “Us” or “Company”) operates, as of October 29, 2016, 648 discount general merchandise stores and three specialty pharmacy-only locations, in fifteen states in the Southeastern United States. Included in the count of discount general merchandise stores are 18 franchised locations. There are 370 full service pharmacy departments located within our discount general merchandise stores, including four within franchised locations. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q, and therefore, do not include all information and notes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP. The accompanying financial statements reflect all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of financial position in conformity with GAAP. The accompanying financial statements should be read in conjunction with the Notes to the Consolidated Financial Statements for the fiscal year ended January 30, 2016 included in our Annual Report on Form 10-K, which we filed with the Securities and Exchange Commission on April 14, 2016. Certain prior year amounts have been reclassified to conform to the 2016 presentation. The results of operations for the thirteen week and thirty-nine week periods ended October 29, 2016 are not necessarily indicative of the results to be expected for the full fiscal year. All references in this Report to 2015 and 2016 refer to the fiscal years ended January 30, 2016 and ending January 28, 2017, respectively. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers." This update will replace existing revenue recognition guidance in GAAP and requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In July 2015, the FASB deferred the effective date of the new standard to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date for public business entities (interim and annual reporting periods beginning after December 15, 2016). ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the impact of the new pronouncement on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 , |
INVENTORIES
INVENTORIES | 9 Months Ended |
Oct. 29, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 2: INVENTORIES Merchandise inventories are valued at the lower of cost or market using the retail first-in, first-out (FIFO) inventory method for goods in our stores and the cost FIFO inventory method for goods in our distribution centers. The retail inventory method is a reverse mark-up, averaging method which has been widely used in the retail industry for many years. This method calculates a cost-to-retail ratio that is applied to the retail value of inventory to determine the cost value of inventory and the resulting cost of goods sold and gross margin. The assumptions that the retail inventory method provides for valuation at lower of cost or market and the inherent uncertainties therein are discussed in the following paragraphs. In order to assure valuation at the lower of cost or market, the retail value of our inventory is adjusted on a consistent basis to reflect current market conditions. These adjustments include increases to the retail value of inventory for initial markups to set the selling price of goods or additional markups to adjust pricing for inflation and decreases to the retail value of inventory for markdowns associated with promotional, seasonal or other declines in the market value. Because these adjustments are made on a consistent basis and are based on current prevailing market conditions, they approximate the carrying value of the inventory at net realizable value (market value). Therefore, after applying the cost to retail ratio, the cost value of our inventory is stated at the lower of cost or market as is prescribed by GAAP. Because the approximation of net realizable value (market value) under the retail inventory method is based on estimates such as markups, markdowns and inventory losses (shrink), there exists an inherent uncertainty in the final determination of inventory cost and gross margin. In order to mitigate that uncertainty, the Company has a formal review process, conducted by product class which considers such variables as current market trends, seasonality, weather patterns and age of merchandise to ensure that markdowns are taken currently, or a markdown reserve is established to cover future anticipated markdowns on a particular product class. This review also considers current pricing trends and inflation to ensure that markups are taken if necessary. The estimation of inventory losses (shrink) is a significant element in approximating the carrying value of inventory at net realizable value, and as such the following paragraph describes our estimation method as well as the steps we take to mitigate the risk of this estimate in the determination of the cost value of inventory. The Company calculates inventory losses (shrink) based on actual inventory losses occurring as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between yearly physical inventory counts. The estimate for shrink occurring in the interim period between physical counts is calculated on a store-specific basis and is based on history, as well as performance on the most recent physical count. It is calculated by multiplying each store’s shrink rate, which is based on the previously mentioned factors, by the interim period’s sales for each store. Additionally, the overall estimate for shrink is adjusted at the corporate level to a three-year historical average to ensure that the overall shrink estimate is the most accurate approximation of shrink based on the Company’s overall history of shrink. The three-year historical estimate is calculated by dividing the “book to physical” inventory adjustments for the trailing 36 months by the related sales for the same period. In order to reduce the uncertainty inherent in the shrink calculation, the Company first performs the calculation at the lowest practical level (by store) using the most current performance indicators. This ensures a more reliable number, as opposed to using a higher level aggregation or percentage method. The second portion of the calculation ensures that the extreme negative or positive performance of any particular store or group of stores does not skew the overall estimation of shrink. This portion of the calculation removes additional uncertainty by eliminating short-term peaks and valleys that could otherwise cause the underlying carrying cost of inventory to fluctuate unnecessarily. The methodology that we have applied in estimating shrink has resulted in variability that is not material to our financial statements. Management believes that the Company’s retail inventory method provides an inventory valuation which reasonably approximates cost and results in carrying inventory at the lower of cost or market. For pharmacy inventories, which were approximately $46.1 million and $49.9 million at October 29, 2016 and January 30, 2016, respectively, cost was determined using the retail last-in, first-out (LIFO) inventory method in which inventory cost is maintained using the retail inventory method, then adjusted by application of the Producer Price Index published by the U.S. Department of Labor for cumulative annual periods. The current cost of inventories exceeded LIFO cost by approximately $50.7 million at October 29, 2016 and $47.5 million at January 30, 2016. The Company has historically included an estimate of inbound freight and certain general and administrative costs in merchandise inventory as prescribed by GAAP. These costs include activities surrounding the procurement and storage of merchandise inventory such as merchandise planning and buying, warehousing, accounting, information technology and human resources, as well as inbound freight. The total amount of procurement and storage costs and inbound freight, inclusive of the accelerated recognition of freight capitalization expense, included in merchandise inventory at October 29, 2016 is $20.5 million, with the corresponding amount of $21.2 million at January 30, 2016. During 2016, the Company recorded impairment charges for inventory clearance of product that management identified as low-productive and does not fit our go-forward convenient and pharmacy healthcare services model. The Company recorded a below-cost inventory adjustment in accordance with FASB Accounting Standards Codification (“ASC”) 330, "Inventory," of approximately $13.0 million (including $1.6 million, for the accelerated recognition of freight capitalization expense) in cost of goods sold to value inventory at the lower of cost or market on inventory identified as low-productive, which the Company will begin to liquidate in the fourth quarter of 2016, in accordance with our strategic plan. At the end of 2015, there were $3.0 million (including $0.4 million, for the accelerated recognition of freight capitalization expense) of impairment charges recorded for inventory clearance of product related to 2014 strategic initiatives. The following table illustrates the inventory impairment charges related to the inventory clearance initiatives discussed in the previous paragraph (in millions): Balance at January 30, 2016 Additions Utilization Ending Balance October 29, 2016 Inventory markdown on low-productive inventory (2014 initiatives) $ 2.6 $ - $ (2.6 ) $ - Inventory markdown on low-productive inventory (2016 initiatives) $ - $ 11.4 $ - $ 11.4 Inventory provision for freight capitalization expense (2014 initiatives) $ 0.4 $ - $ (0.4 ) $ - Inventory provision for freight capitalization expense (2016 initiatives) $ - $ 1.6 $ - $ 1.6 Total $ 3.0 $ 13.0 $ (3.0 ) $ 13.0 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Oct. 29, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 3: STOCK-BASED COMPENSATION The Company accounts for its stock-based compensation plans in accordance with FASB ASC 718 “Compensation – Stock Compensation.” Under FASB ASC 718, stock-based compensation expense is based on awards ultimately expected to vest, and therefore has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant based on the Company’s historical forfeiture experience and will be revised in subsequent periods if actual forfeitures differ from those estimates. FASB ASC 718 also requires the benefits of income tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required prior to FASB ASC 718. A summary of the Company’s stock-based compensation (a component of selling, general and administrative expenses) and related income tax benefit is as follows: (in thousands) Thirteen Weeks Ended Thirty-Nine Weeks Ended October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015 Stock option expense $ 468 $ 352 $ 349 $ 158 Restricted stock expense 185 391 1,698 1,417 ESPP expense 60 49 162 146 Total stock-based compensation $ 713 $ 792 $ 2,209 $ 1,721 Income tax benefit on stock-based compensation $ 131 $ 148 $ 510 $ 350 The fair value of each option granted during the thirteen and thirty-nine week periods ended October 29, 2016 and October 31, 2015 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Thirteen Weeks Ended Thirty-Nine Weeks Ended October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015 Stock Options Expected volatility 33.4 % 30.7 % 33.3 % 30.4 % Risk-free interest rate 1.3 % 1.9 % 1.4 % 1.8 % Expected option life (in years) 5.84 5.84 5.84 5.84 Expected dividend yield 1.81 % 1.75 % 1.80 % 1.67 % Weighted average fair value at grant date $ 3.33 $ 3.90 $ 3.87 $ 4.29 Employee Stock Purchase Plan Expected volatility 57.4 % 29.7 % 59.0 % 31.1 % Risk-free interest rate 0.9 % 0.3 % 0.9 % 0.3 % Expected option life (in years) 0.75 0.75 0.50 0.50 Expected dividend yield 1.19 % 1.15 % 0.79 % 0.76 % Weighted average fair value at grant date $ 4.01 $ 4.15 $ 3.74 $ 3.88 The following is a summary of the methodology applied to develop each assumption: Expected Volatility Risk-free Interest Rate Expected Lives Dividend Yield Employee Stock Purchase Plan The 2004 Employee Stock Purchase Plan (the “2004 Plan”), which was approved by Fred’s shareholders, permits eligible employees to purchase shares of our common stock through payroll deductions at the lower of 85% of the fair market value of the stock at the time of grant, or 85% of the fair market value at the time of exercise. There were 47,660 shares issued during the thirty-nine weeks ended October 29, 2016. There are 1,410,928 shares approved to be issued under the 2004 Plan and as of October 29, 2016, there were 697,941 shares available. Stock Options The following table summarizes stock option activity during the thirty-nine weeks ended October 29, 2016: Options Weighted Weighted Average Aggregate Outstanding at January 30, 2016 839,859 $ 15.38 4.5 $ 1,371 Granted 928,681 $ 14.10 Forfeited / Cancelled (467,226 ) $ 15.33 Exercised (1,300 ) $ 13.06 Outstanding at October 29, 2016 1,300,014 $ 14.49 6.1 $ 1.5 Exercisable at October 29, 2016 120,867 $ 15.42 4.1 $ - The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Fred’s closing stock price on the last trading day of the period ended October 29, 2016 and the exercise price of the option multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date. As of October 29, 2016, total unrecognized stock-based compensation expense net of estimated forfeitures related to non-vested stock options was approximately $3.3 million, which is expected to be recognized over a weighted average period of approximately 4.4 years. The total fair value of options vested during the thirty-nine weeks ended October 29, 2016 was $230.5 thousand. Restricted Stock The following table summarizes restricted stock activity during the thirty-nine weeks ended October 29, 2016: Number of Shares Weighted Average Grant Date Fair Value Non-vested Restricted Stock at January 30, 2016 517,143 $ 15.61 Granted 175,130 $ 13.64 Forfeited / Cancelled (24,858 ) $ 15.85 Vested (57,838 ) $ 14.09 Non-vested Restricted Stock at October 29, 2016 609,577 $ 15.19 The aggregate pre-tax intrinsic value of restricted stock outstanding as of October 29, 2016 is $5.5 million with a weighted average remaining contractual life of 6.5 years. The unrecognized compensation expense net of estimated forfeitures, related to the outstanding stock is approximately $5.0 million, which is expected to be recognized over a weighted average period of approximately 5.3 years. The total fair value of restricted stock awards that vested during the thirty-nine weeks ended October 29, 2016 was $723.4 thousand. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Oct. 29, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 4 — FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. • Level 1, defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. • Level 2, defined as inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. • Level 3, defined as unobservable inputs for the asset or liability, which are based on an entity’s own assumptions as there is little, if any, observable activity in identical assets or liabilities. Due to their short-term nature, the Company’s financial instruments, which include cash and cash equivalents, receivables and accounts payable, are presented on the condensed consolidated balance sheets at a reasonable estimate of their fair value as of October 29, 2016 and January 30, 2016. There were $63.0 million and $38.3 million of borrowings on the Company’s revolving line of credit as of October 29, 2016 and January 30, 2016, respectively. Refer to Note 10 – Indebtedness. The fair value of the revolving lines of credit and our mortgage loans are estimated using Level 2 inputs based on the Company's current incremental borrowing rate for comparable borrowing arrangements. The table below details the fair value and carrying values for the revolving line of credit, notes payable and mortgage loans as of the following dates: October 29, 2016 January 30, 2016 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Revolving line of credit $ 63,000 $ 63,000 $ 38,327 $ 38,327 Notes Payable 13,000 12,949 13,000 12,425 Mortgage loans on land & buildings 1,653 1,849 2,259 2,451 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Oct. 29, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 5: PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of assets. Improvements to leased premises are amortized using the straight-line method over the shorter of the initial term of the lease or the useful life of the improvement. Leasehold improvements added late in the lease term are amortized over the shorter of the remaining term of the lease (including the upcoming renewal option, if the renewal is reasonably assured) or the useful life of the improvement. Assets under capital leases are amortized in accordance with the Company’s normal depreciation policy for owned assets or over the lease term (regardless of renewal options), if shorter, and the charge to earnings is included in depreciation expense in the consolidated financial statements. Gains or losses on the sale of assets are recorded as a component of selling, general and administrative expenses. The following illustrates the breakdown of the major categories within property and equipment (in thousands): October 29, 2016 January 30, 2016 Property and equipment, at cost: Buildings and building improvements $ 117,147 $ 118,907 Leasehold improvements 85,152 82,344 Automobiles and vehicles 5,446 5,433 Airplane 4,697 4,697 Furniture, fixtures and equipment 285,264 277,812 497,706 489,193 Less: Accumulated depreciation and amortization (377,440 ) (361,608 ) 120,266 127,585 Construction in progress 4,513 2,765 Land 8,581 8,643 Total Property and equipment, at depreciated cost $ 133,360 $ 138,993 |
EXIT AND DISPOSAL ACTIVITIES
EXIT AND DISPOSAL ACTIVITIES | 9 Months Ended |
Oct. 29, 2016 | |
Restructuring and Related Activities [Abstract] | |
EXIT AND DISPOSAL ACTIVITIES | NOTE 6: EXIT AND DISPOSAL ACTIVITIES Fixed Assets The Company’s policy is to review the carrying value of all long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We measure impairment losses of fixed assets and leasehold improvements as the amount by which the carrying amount of a long-lived asset exceeds its fair value as prescribed by FASB ASC 360, "Impairment or Disposal of Long-Lived Assets." If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The fair value is based on estimated market values for similar assets or other reasonable estimates of fair market value based upon a discounted cash flow model. In the third quarter, a decision was made to close 40 underperforming stores, which included 19 underperforming pharmacies within those stores and 5 freestanding Xpress pharmacies. As a result, the Company recorded charges in the amount of $1.9 million in selling, general and administrative expense for the impairment of fixed assets associated with the closing stores and pharmacies and $2.3 million for the accelerated recognition of amortization of intangible assets associated with the closing pharmacies. Additional impairment charges of $3.1 million were recorded in the third quarter resulting from a decision to relocate the corporate headquarters. No charges were recorded in the third quarter of 2015 related to planned store closures. In the first quarter of 2016, the Company recorded an additional impairment charge of less than $0.1 million for fixed assets related to planned store closures. The Company utilized the full amount of this charge in the second quarter of 2016. In 2015, the Company recorded an additional charge of $0.3 million for fixed assets and leasehold improvements related to the 2014 store closures and $0.5 million of impairment charges for 2015 planned store closures. In the first nine months of 2016, the Company utilized $0.5 million of the impairment charges related to the 2015 store closures and utilized $0.2 million related to the 2014 store closures, leaving $0.5 million of impairment charges for fixed assets recorded pertaining to fiscal 2014 store closures as of October 29, 2016. Inventory As discussed in Note 2 - Inventories, we adjust inventory values on a consistent basis to reflect current market conditions. In accordance with FASB ASC 330, "Inventories," we write down inventory to net realizable value in the period in which conditions giving rise to the write-downs are first recognized. In the fourth quarter of 2015, in association with the planned closure of five identified stores that were not meeting the Company's operational performance targets, we recorded a below-cost inventory adjustment of $0.7 million to value inventory at the lower of cost or market. These stores were closed by the end of the second quarter of fiscal 2016 and the full amount of this charge was utilized in the second quarter of fiscal 2016. In the third quarter of 2016, we recorded a below-cost inventory adjustment of approximately $3.2 million (including $1.3 million for the accelerated recognition of freight capitalization expense) to value inventory at the lower of cost or market in 40 stores that are planned for closure in 2017. The following table illustrates the exit and disposal reserves, related to the store closures, inventory strategic initiatives, and the corporate relocation discussed in the previous paragraphs (in millions): Balance at January 30, 2016 Additions Utilization Ending Balance October 29, 2016 Impairment charge for the disposal of fixed assets for 2016 planned closures $ - $ 1.9 $ - $ 1.9 Impairment charge for the disposal of intangible assets for 2016 planned closures $ - $ 2.3 $ - $ 2.3 Impairment charge for the disposal of fixed assets for corporate office $ - $ 3.1 $ - $ 3.1 Impairment charge for the disposal of fixed assets for 2014 planned closures $ 0.7 $ - $ (0.2 ) $ 0.5 Impairment charge for the disposal of fixed assets for 2015 planned closures $ 0.5 $ - $ (0.5 ) $ - Inventory markdowns for 2014 discontinuance of exit categories $ 0.3 $ - $ (0.3 ) $ - Inventory markdowns for 2015 planned closures $ 0.7 $ - $ (0.7 ) $ - Inventory markdowns for 2016 planned closures $ - $ 1.9 $ - $ 1.9 Inventory provision for freight capitalization expense, 2016 planned closures $ - $ 1.3 $ - $ 1.3 Total $ 2.2 $ 10.5 $ (1.7 ) $ 11.0 |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 9 Months Ended |
Oct. 29, 2016 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | NOTE 7: ACCUMULATED OTHER COMPREHENSIVE INCOME Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income pursuant to GAAP. The Company’s accumulated other comprehensive income includes the unrecognized prior service costs, transition obligations and actuarial gains/losses associated with our post-retirement benefit plan. The following table illustrates the activity in accumulated other comprehensive income: Thirteen Weeks Ended Year Ended (in thousands) October 29, 2016 October 31, 2015 January 30, 2016 Accumulated other comprehensive income $ 475 $ 570 $ 570 Amortization of postretirement benefit - - (95 ) Ending balance $ 475 $ 570 $ 475 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Oct. 29, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 8: RELATED PARTY TRANSACTIONS Atlantic Retail Investors, LLC, which is partially owned by Michael J. Hayes, a director of the Company, owns the land and buildings occupied by three Fred’s stores. Richard H. Sain, Senior Vice President of Retail Pharmacy Business Development, owns the land and building occupied by one of Fred's Xpress Pharmacy locations. The terms and conditions regarding the leases on these locations were consistent in all material respects with other stores’ leases of the Company with unrelated landlords. The total rental payments made to related party leases were $396.8 thousand and $394.4 thousand for the thirty-nine weeks ended October 29, 2016 and October 31, 2015, respectively. The increase is due to partial period payments for Mr. Sain’s Xpress pharmacy location in 2015, with acquisition commencing on April 10, 2015. On April 10, 2015, the Company completed the acquisition of Reeves-Sain Drug Store, Inc., a provider of retail and specialty pharmaceutical services. As part of the total consideration for the purchase, Fred’s provided notes payable totaling $13.0 million to the sellers of Reeves-Sain Drug Store, Inc., who became employees of Fred’s as part of the acquisition. The notes payable are due in three equal installments to be paid on January 31 st |
LEGAL CONTINGENCIES
LEGAL CONTINGENCIES | 9 Months Ended |
Oct. 29, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL CONTINGENCIES | NOTE 9: LEGAL CONTINGENCIES On August 10, 2015, following an investigation by a third-party cyber-security firm, the Company reported that there had been unauthorized access to two Company servers through which payment card data is routed. The investigation uncovered malware on the two servers beginning on March 23, 2015, and that malware operated on one server until April 8, 2015 and on the other server until April 24, 2015. The malware was designed to search only for "track 2" data—data from the magnetic stripe of payment cards that contains only the card number, expiration date and verification code. During this time period, track 2 data was at risk of disclosure; however, the third-party cyber-security firm did not find evidence that track 2 data was removed from the Company’s system. No other customer information was involved. The malware has been removed from the Company’s system, and the Company has implemented and is continuing to implement enhanced security measures to prevent similar events from occurring in the future. On October 22, 2015, the Company received an assessment from MasterCard relating to this incident in the amount of approximately $2.9 million. The Company paid the assessment on February 26, 2016 after its appeal was denied. The Company has reached a settlement with Discover to make certain security improvements, which if made, will not require the Company to make any payment to Discover related to the incident. The Company is in the process of making these security improvements. American Express has also issued an assessment related to the incident of $0.1 million. The Company successfully settled American Express’s claim for less than $0.1 million. The Company has not yet received an assessment from Visa. The Company expects to incur future probable losses in connection with the claims made by Visa. The range of these losses is estimated to be $0.1 million to $4.6 million. In accordance with FASB ASC 450, “Contingencies,” the Company has recorded an accrual for the minimum amount in the range of the estimable probable losses as no amount within the range was a better estimate than any other amount. It is reasonably possible that future losses may exceed amounts currently accrued, and the Company will record any future losses at the time such losses become probable. On October 15, 2015, a lawsuit entitled Southern Independent Bank v. Fred’s, Inc. was filed in the United States District Court, Middle District of Alabama related to the data security incident. The complaint includes allegations made by the plaintiff on behalf of itself and financial institutions similarly situated (“alleged class of financial institutions”) that the Company was negligent in failing to use reasonable care in obtaining, retaining, securing and deleting the personal and financial information of customers who use debit cards issued by the plaintiff and alleged class of financial institutions to make purchases at Fred’s stores. The complaint also includes allegations that the Company made negligent misrepresentations that the Company possessed and maintained adequate data security measures and systems that were sufficient to protect the personal and financial information of shoppers using debit cards issued by the plaintiff and alleged class of financial institutions. The complaint seeks monetary damages and equitable relief to be proved at trial as well as attorneys’ fees and costs. The Company has denied the allegations and has filed a motion to dismiss all claims. This motion has since been denied, and the Company has now filed a motion to reconsider by certifying the question to the Alabama Supreme Court for clarity, which is still pending before the court. Future costs or liabilities related to the incident may have a material adverse effect on the Company. The Company has not made an accrual for future losses related to these claims at this time as the future losses are not considered probable. The Company has general liability policy with a $10 million limit and $350,000 deductible. The $350,000 deductible represents the Company’s estimate of potential exposure related to this matter. On January 21, 2016, a lawsuit styled as Stephanie Bryant, on behalf of herself and others similarly situated v. Fred’s Stores of Tennessee, Inc. was filed in the United States District Court, Southern District of Mississippi. The complaint alleges that plaintiff and other store managers were improperly classified as exempt employees under the Fair Labor Standards Act. The complaint seeks declaratory and monetary relief for overtime compensation that plaintiff alleges was not paid as well as costs and attorneys’ fees. The Company denies the allegations and believes that its managers are appropriately classified as exempt employees. The Company has not made an accrual for future losses related to these claims as future losses are not considered probable. The Company has an employment practices policy with a $10 million limit and $250,000 deductible. The $250,000 deductible represents the Company’s estimate of potential exposure related to this matter. On July 24, 2016, a lawsuit entitled First Tennessee Bank National Association v Fred’s Inc. was filed in the Chancery Court of Shelby County, Tennessee for the Thirtieth Judicial District in Memphis related to the data security incident. The complaint includes allegations that the Company failed to comply with Payment Card Industry Data Security Standards (“PCI DSS”), and that the Company was then in breach of a duty owed to the plaintiff, as an alleged third-party beneficiary of the Company’s contract with Visa. The complaint also alleges that the Company breached an implied covenant of good faith and fair dealing as well as a violation of the Tennessee Consumer Protection Act. Lastly, the complaint alleges that the Company acted negligently and made negligent misrepresentations regarding PCI DSS. The plaintiff seeks declaratory and monetary relief for damages, including reasonable attorney fees. The Company has denied all allegations and filed a motion to dismiss all claims, which is currently pending before the court. Future costs and liabilities related to this case may have a material adverse effect on the Company. The Company has not made an accrual for future losses related to these claims at this time as the future losses are not considered probable. The Company has general liability policy with a $10 million limit and $350,000 deductible. The $350,000 deductible represents the Company’s estimate of potential exposure related to this matter. On July 27, 2016, a lawsuit entitled The State of Mississippi vs. Fred’s Inc., et al was filed in the Chancery Court of Desoto County, Mississippi, Third Judicial District. The complaint alleges that the Company fraudulently reported their usual and customary prices to Mississippi’s Division of Medicaid in order to receive higher reimbursements for prescription drugs. The complaint seeks declaratory and monetary relief for the profits alleged to have been unfairly earned as well as attorney costs. The Company denies these allegations and believes it acted appropriately in its dealings with the Mississippi Division of Medicaid. As such, the Company has filed a number of motions, including a motion for judgment on the pleadings, which is still pending before the court. Future costs and liabilities related to this case may have a material adverse effect on the Company; however, the Company has not made an accrual for future probable losses related to these claims as future losses are not considered probable and an estimate is unavailable. The Company has multiple director and officer policies which will limit potential exposure. In addition to the matters disclosed above, the Company is party to several pending legal proceedings and claims arising in the normal course of business. Although the outcomes of these proceedings and claims against the Company cannot be determined with certainty, management of the Company is of the opinion that these proceedings and claims should not have a material adverse effect on the Company’s financial statements as a whole. However, litigation involves an element of uncertainty. Future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial statements as a whole. The Company has not made an accrual for future losses related to these proceedings and claims as future losses are not considered probable at this time and estimates are unavailable. |
INDEBTEDNESS
INDEBTEDNESS | 9 Months Ended |
Oct. 29, 2016 | |
Debt Disclosure [Abstract] | |
INDEBTEDNESS | NOTE 10: INDEBTEDNESS On April 9, 2015, the Company entered an agreement with Regions Bank and Bank of America (the “Agreement”) to replace the January 25, 2013 Revolving Loan and Credit Agreement that the Company had previously entered into with Regions Bank and Bank of America (the “Previous Agreement”). The proceeds from the Agreement were used in part to refinance the Previous Agreement and to support acquisitions and the Company’s working capital needs. The Agreement provides for a $150.0 million secured revolving line of credit, which includes a sublimit for letters of credit and swingline loans. The Agreement matures on April 9, 2020 and bears interest at 1.25% or 1.50% plus either LIBOR or the LIBOR index rate, depending on our FIFO inventory balance. Commitment fees for the unused portion of the credit line are 20.0 basis points. The Agreement also included an up-front credit facility fee which is amortized over the agreement term. There were $63.0 million of borrowings outstanding and $73.7 million, net of borrowings and letters of credit, remaining available under the Agreement at October 29, 2016. The weighted average interest rate on borrowings outstanding at October 29, 2016 was 1.81%. During the second and third quarter of fiscal 2007, the Company acquired the land and buildings occupied by seven Fred's stores which we had previously leased. In consideration for the seven properties, the Company assumed debt that has fixed interest rates from 6.31% to 7.40%. Mortgages remain on two locations with a combined balance of $1.6 million outstanding at October 29, 2016. The weighted average interest rate on mortgages outstanding at October 29, 2016 was 7.40%. The debt is collateralized by the land and buildings. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Oct. 29, 2016 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | NOTE 11: BUSINESS COMBINATIONS On April 10, 2015, we acquired 100% of the equity interest in Reeves-Sain Drug Store, Inc., a provider of retail and specialty pharmaceutical services. The acquisition expanded our presence in the specialty pharmacy arena – the largest growth area of the pharmacy industry. The total consideration for the purchase was approximately $66.0 million, less working capital adjustments of $10.3 million, which yielded an adjusted purchase consideration of $55.8 million. The Company incurred $0.5 million of transaction costs in connection with the acquisition. The transaction expenses were expensed as incurred and were reflected in selling, general and administrative expenses in the consolidated statement of operations for the year ended January 30, 2016. The adjusted consideration consisted of $42.8 million in cash at the time of closing and $13.0 million in notes payable in three equal installments on January 31 st A summary of the purchase price allocation for Reeves-Sain Drug Store, Inc. is as follows (dollars in thousands): Total purchase consideration: Cash $ 42,750 Notes payable $ 13,000 Contingent liability $ 1,000 Total purchase consideration $ 56,750 Allocation of the purchase consideration: Accounts receivables $ 14,474 Inventory $ 2,005 Other assets $ 298 Goodwill $ 44,385 Identifiable intangible assets $ 18,180 Total assets acquired $ 79,342 Accounts payable $ 21,448 Other current liabilities $ 1,144 Total liabilities assumed $ 22,592 Net assets acquired $ 56,750 The following are the identifiable intangible assets acquired and their respective weighted average useful lives, as determined based on valuations (dollars in thousands): Amount Weighted Customer prescription files $ 7,820 4 Referral and relationships $ 1,400 2 Trade name $ 6,900 - Non-compete agreements $ 1,800 8 Business licenses $ 260 1 $ 18,180 The following unaudited supplemental pro forma financial information includes the results of operations of the three Reeves-Sain Drug Store, Inc. locations in 2016 and 2015 and is presented as if the locations had been consolidated as of the beginning of the interim period of the earliest period presented. The unaudited supplemental pro forma financial information has been provided for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or of the results that may be achieved by the combined companies in the future. The unaudited supplemental pro forma financial information presented below has been prepared by adjusting the historical results of the Company to include the historical results of the acquisition described above. The 2015 unaudited pro forma historical results were adjusted (i) to increase amortization expense by $0.6 million resulting from the incremental intangible assets acquired and (ii) to increase interest expense by $0.2 million as a result of assumed debt financing for the transaction. The 2016 unaudited results were not adjusted as the three locations’ results were already included in our consolidated statement of operations. Thirty-Nine Weeks Ended October 29, October 31, (in thousands, except per share data) 2016 2015 Revenue $ 1,595,696 $ 1,643,477 Earnings (44,065 ) (4,166 ) Basic and diluted earnings per share $ (1.20 ) $ (0.11 ) The unaudited pro forma financial information does not include any adjustments to reflect the impact of cost savings or other synergies that may result from this acquisition. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Oct. 29, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 12: INCOME TAXES The Company accounts for its income taxes in accordance with FASB ASC 740 “Income Taxes.” Pursuant to FASB ASC 740, the Company must consider all positive and negative evidence regarding the realization of deferred tax assets including past operating results and future sources of taxable income. A cumulative loss in recent years is a significant piece of negative evidence when evaluating the need for a valuation allowance. Under the provisions of FASB ASC 740, the Company determined that a full valuation allowance is needed given the cumulative loss in recent years. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Inventories Tables | |
Schedule of inventory impairment charges | The following table illustrates the inventory impairment charges related to the inventory clearance initiatives discussed in the previous paragraph (in millions): Balance at January 30, 2016 Additions Utilization Ending Balance October 29, 2016 Inventory markdown on low-productive inventory (2014 initiatives) $ 2.6 $ - $ (2.6 ) $ - Inventory markdown on low-productive inventory (2016 initiatives) $ - $ 11.4 $ - $ 11.4 Inventory provision for freight capitalization expense (2014 initiatives) $ 0.4 $ - $ (0.4 ) $ - Inventory provision for freight capitalization expense (2016 initiatives) $ - $ 1.6 $ - $ 1.6 Total $ 3.0 $ 13.0 $ (3.0 ) $ 13.0 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of company's stock-based compensation | A summary of the Company’s stock-based compensation (a component of selling, general and administrative expenses) and related income tax benefit is as follows: (in thousands) Thirteen Weeks Ended Thirty-Nine Weeks Ended October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015 Stock option expense $ 468 $ 352 $ 349 $ 158 Restricted stock expense 185 391 1,698 1,417 ESPP expense 60 49 162 146 Total stock-based compensation $ 713 $ 792 $ 2,209 $ 1,721 Income tax benefit on stock-based compensation $ 131 $ 148 $ 510 $ 350 |
Schedule of stock option granted using the Black-Scholes option-pricing model | The fair value of each option granted during the thirteen and thirty-nine week periods ended October 29, 2016 and October 31, 2015 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Thirteen Weeks Ended Thirty-Nine Weeks Ended October 29, 2016 October 31, 2015 October 29, 2016 October 31, 2015 Stock Options Expected volatility 33.4 % 30.7 % 33.3 % 30.4 % Risk-free interest rate 1.3 % 1.9 % 1.4 % 1.8 % Expected option life (in years) 5.84 5.84 5.84 5.84 Expected dividend yield 1.81 % 1.75 % 1.80 % 1.67 % Weighted average fair value at grant date $ 3.33 $ 3.90 $ 3.87 $ 4.29 Employee Stock Purchase Plan Expected volatility 57.4 % 29.7 % 59.0 % 31.1 % Risk-free interest rate 0.9 % 0.3 % 0.9 % 0.3 % Expected option life (in years) 0.75 0.75 0.50 0.50 Expected dividend yield 1.19 % 1.15 % 0.79 % 0.76 % Weighted average fair value at grant date $ 4.01 $ 4.15 $ 3.74 $ 3.88 |
Schedule of stock option activity | The following table summarizes stock option activity during the thirty-nine weeks ended October 29, 2016: Options Weighted Weighted Average Aggregate Outstanding at January 30, 2016 839,859 $ 15.38 4.5 $ 1,371 Granted 928,681 $ 14.10 Forfeited / Cancelled (467,226 ) $ 15.33 Exercised (1,300 ) $ 13.06 Outstanding at October 29, 2016 1,300,014 $ 14.49 6.1 $ 1.5 Exercisable at October 29, 2016 120,867 $ 15.42 4.1 $ - |
Schedule of restricted stock activity | The following table summarizes restricted stock activity during the thirty-nine weeks ended October 29, 2016: Number of Shares Weighted Average Grant Date Fair Value Non-vested Restricted Stock at January 30, 2016 517,143 $ 15.61 Granted 175,130 $ 13.64 Forfeited / Cancelled (24,858 ) $ 15.85 Vested (57,838 ) $ 14.09 Non-vested Restricted Stock at October 29, 2016 609,577 $ 15.19 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value and carrying values for the revolving line of credit, notes payable and mortgage loans | The table below details the fair value and carrying values for the revolving line of credit, notes payable and mortgage loans as of the following dates: October 29, 2016 January 30, 2016 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Revolving line of credit $ 63,000 $ 63,000 $ 38,327 $ 38,327 Notes Payable 13,000 12,949 13,000 12,425 Mortgage loans on land & buildings 1,653 1,849 2,259 2,451 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property plant and equipment | The following illustrates the breakdown of the major categories within property and equipment (in thousands): October 29, 2016 January 30, 2016 Property and equipment, at cost: Buildings and building improvements $ 117,147 $ 118,907 Leasehold improvements 85,152 82,344 Automobiles and vehicles 5,446 5,433 Airplane 4,697 4,697 Furniture, fixtures and equipment 285,264 277,812 497,706 489,193 Less: Accumulated depreciation and amortization (377,440 ) (361,608 ) 120,266 127,585 Construction in progress 4,513 2,765 Land 8,581 8,643 Total Property and equipment, at depreciated cost $ 133,360 $ 138,993 |
EXIT AND DISPOSAL ACTIVITIES (T
EXIT AND DISPOSAL ACTIVITIES (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Exit And Disposal Activities Tables | |
Schedule of exit and disposal reserves | The following table illustrates the exit and disposal reserves, related to the store closures, inventory strategic initiatives, and the corporate relocation discussed in the previous paragraphs (in millions): Balance at January 30, 2016 Additions Utilization Ending Balance October 29, 2016 Impairment charge for the disposal of fixed assets for 2016 planned closures $ - $ 1.9 $ - $ 1.9 Impairment charge for the disposal of intangible assets for 2016 planned closures $ - $ 2.3 $ - $ 2.3 Impairment charge for the disposal of fixed assets for corporate office $ - $ 3.1 $ - $ 3.1 Impairment charge for the disposal of fixed assets for 2014 planned closures $ 0.7 $ - $ (0.2 ) $ 0.5 Impairment charge for the disposal of fixed assets for 2015 planned closures $ 0.5 $ - $ (0.5 ) $ - Inventory markdowns for 2014 discontinuance of exit categories $ 0.3 $ - $ (0.3 ) $ - Inventory markdowns for 2015 planned closures $ 0.7 $ - $ (0.7 ) $ - Inventory markdowns for 2016 planned closures $ - $ 1.9 $ - $ 1.9 Inventory provision for freight capitalization expense, 2016 planned closures $ - $ 1.3 $ - $ 1.3 Total $ 2.2 $ 10.5 $ (1.7 ) $ 11.0 |
ACCUMULATED OTHER COMPREHENSI24
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Equity [Abstract] | |
Schedule of accumulated other comprehensive income | Thirteen Weeks Ended Year Ended (in thousands) October 29, 2016 October 31, 2015 January 30, 2016 Accumulated other comprehensive income $ 475 $ 570 $ 570 Amortization of postretirement benefit - - (95 ) Ending balance $ 475 $ 570 $ 475 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Oct. 29, 2016 | |
Business Combinations [Abstract] | |
Schedule of preliminary purchase price allocation | A summary of the purchase price allocation for Reeves-Sain Drug Store, Inc. is as follows (dollars in thousands): Total purchase consideration: Cash $ 42,750 Notes payable $ 13,000 Contingent liability $ 1,000 Total purchase consideration $ 56,750 Allocation of the purchase consideration: Accounts receivables $ 14,474 Inventory $ 2,005 Other assets $ 298 Goodwill $ 44,385 Identifiable intangible assets $ 18,180 Total assets acquired $ 79,342 Accounts payable $ 21,448 Other current liabilities $ 1,144 Total liabilities assumed $ 22,592 Net assets acquired $ 56,750 |
Schedule of identifiable intangible assets acquired | The following are the identifiable intangible assets acquired and their respective weighted average useful lives, as determined based on valuations (dollars in thousands): Amount Weighted Customer prescription files $ 7,820 4 Referral and relationships $ 1,400 2 Trade name $ 6,900 - Non-compete agreements $ 1,800 8 Business licenses $ 260 1 $ 18,180 |
Schedule of earning per share | The 2016 unaudited results were not adjusted as the three locations’ results were already included in our consolidated statement of operations. Thirty-Nine Weeks Ended October 29, October 31, (in thousands, except per share data) 2016 2015 Revenue $ 1,595,696 $ 1,643,477 Earnings (44,065 ) (4,166 ) Basic and diluted earnings per share $ (1.20 ) $ (0.11 ) |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Narrative) | Oct. 29, 2016Number |
Number of pharmacy facilities | 3 |
Number of states | 15 |
Franchised Fred's Stores [Member] | |
Number of franchisee | 18 |
General Merchandise [Member] | |
Number of retail store | 648 |
Number of pharmacy | 370 |
INVENTORIES (Details)
INVENTORIES (Details) $ in Thousands | 9 Months Ended |
Oct. 29, 2016USD ($) | |
Balance at beginning | $ 3,000 |
Additions | 13,000 |
Utilization | (3,000) |
Balance at ending | 13,000 |
Inventory Markdown on Low Productive Inventory (2014 Initiatives) [Member] | |
Balance at beginning | 2,600 |
Additions | |
Utilization | (2,600) |
Balance at ending | |
Inventory Markdown on Low Productive Inventory (2016 Initiatives) [Member] | |
Balance at beginning | |
Additions | 11,400 |
Utilization | |
Balance at ending | 11,400 |
Inventory Provision For Freight Capitalization Expense (2014 Initiatives) [Member] | |
Balance at beginning | 400 |
Additions | |
Utilization | (400) |
Balance at ending | |
Inventory Provision For Freight Capitalization Expense (2016 initiatives) [Member] | |
Balance at beginning | |
Additions | 1,600 |
Utilization | |
Balance at ending | $ 1,600 |
INVENTORIES (Details Narrative)
INVENTORIES (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | ||
Oct. 29, 2016 | Oct. 31, 2015 | Jan. 30, 2016 | |
Inventory | $ 366,575 | $ 340,730 | |
Inventory adjustments | 13,000 | $ 3,000 | |
Freight capitalization expense | 16,000 | $ 400 | |
Merchandise Inventory [Member] | |||
Procurement and storage costs and inbound freight cost | 20,500 | 21,200 | |
Pharmacy Department [Member] | |||
Inventory | 46,100 | 49,900 | |
LIFO inventory amount | $ 50,700 | $ 47,500 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - Selling, General and Administrative Expenses [Member] - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Oct. 29, 2016 | Oct. 31, 2015 | Oct. 29, 2016 | Oct. 31, 2015 | |
Total stock-based compensation | $ 713 | $ 792 | $ 2,209 | $ 1,721 |
Income tax benefit on stock-based compensation | 131 | 148 | 510 | 350 |
2004 Employee Stock Purchase Plan [Member] | ||||
Total stock-based compensation | 60 | 49 | 162 | 146 |
Stock Option [Member] | ||||
Total stock-based compensation | 468 | 352 | 349 | 158 |
Restricted Stock [Member] | ||||
Total stock-based compensation | $ 185 | $ 391 | $ 1,698 | $ 1,417 |
STOCK-BASED COMPENSATION (Det30
STOCK-BASED COMPENSATION (Details 1) - $ / shares | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Oct. 29, 2016 | Oct. 31, 2015 | Oct. 29, 2016 | Oct. 31, 2015 | |
2004 Employee Stock Purchase Plan [Member] | ||||
Expected volatility | 57.40% | 29.70% | 59.00% | 31.10% |
Risk-free interest rate | 0.90% | 0.30% | 0.90% | 0.30% |
Expected option life (in years) | 9 months | 9 months | 6 months | 6 months |
Expected dividend yield | 1.19% | 1.15% | 0.79% | 0.76% |
Weighted average fair value at grant date | $ 4.01 | $ 4.15 | $ 3.74 | $ 3.88 |
Stock Option [Member] | ||||
Expected volatility | 33.40% | 30.70% | 33.30% | 30.40% |
Risk-free interest rate | 1.30% | 1.90% | 1.40% | 1.80% |
Expected option life (in years) | 5 years 10 months 2 days | 5 years 10 months 2 days | 5 years 10 months 2 days | 5 years 10 months 2 days |
Expected dividend yield | 1.81% | 1.75% | 1.80% | 1.67% |
Weighted average fair value at grant date | $ 3.33 | $ 3.90 | $ 3.87 | $ 4.29 |
STOCK-BASED COMPENSATION (Det31
STOCK-BASED COMPENSATION (Details 2) - Stock Option [Member] $ / shares in Units, $ in Thousands | 9 Months Ended |
Oct. 29, 2016USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Outstanding, beginning | shares | 839,859 |
Granted | shares | 928,681 |
Forfeited / Cancelled | shares | (467,226) |
Exercised | shares | (1,300) |
Outstanding, ending | shares | 1,300,014 |
Exercisable, ending | shares | 120,867 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Outstanding, beginning | $ / shares | $ 15.38 |
Granted | $ / shares | 14.77 |
Forfeited / Cancelled | $ / shares | 15.33 |
Exercised | $ / shares | 13.06 |
Outstanding, ending | $ / shares | 14.49 |
Exercisable, ending | $ / shares | $ 15.42 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Weighted Average Remaining Contractual Life [Roll Forward] | |
Outstanding, beginning | 4 years 6 months |
Outstanding, ending | 6 years 1 month 6 days |
Exercisable, ending | 4 years 1 month 6 days |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value [Roll Forward] | |
Outstanding, beginning | $ | $ 1,371 |
Outstanding, ending | $ | $ 1,500 |
STOCK-BASED COMPENSATION (Det32
STOCK-BASED COMPENSATION (Details 3) - Restricted Stock [Member] | 9 Months Ended |
Oct. 29, 2016$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |
Non-vested Restricted Stock at Beginning | shares | 517,143 |
Granted | shares | 175,130 |
Forfeited / Cancelled | shares | (24,858) |
Vested | shares | (57,838) |
Non-vested Restricted Stock at Ending | shares | 609,577 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward] | |
Non-vested Restricted Stock at Beginning | $ / shares | $ 15.61 |
Granted | $ / shares | 13.64 |
Forfeited / Cancelled | $ / shares | 15.85 |
Vested | $ / shares | 14.09 |
Non-vested Restricted Stock at Ending | $ / shares | $ 15.19 |
STOCK-BASED COMPENSATION (Det33
STOCK-BASED COMPENSATION (Details Narrative) | 9 Months Ended |
Oct. 29, 2016USD ($)shares | |
Stock Option [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares granted | shares | 928,681 |
Unrecognized compensation expense | $ 3,300,000 |
Amount recognition period | 4 years 4 months 24 days |
Fair value of awards vested | $ 230,500 |
Restricted Stock [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation expense | $ 5,000 |
Amount recognition period | 5 years 3 months 18 days |
Intrinsic value | $ 5,500,000 |
Contractual term | 6 years 6 months |
Fair value of awards vested | $ 723,400 |
2004 Employee Stock Purchase Plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares authorized | shares | 1,410,928 |
Number of shares available for grant | shares | 697,941 |
Description of plan | Purchase shares of our common stock through payroll deductions at the lower of 85% of the fair market value of the stock at the time of grant, or 85% of the fair market value at the time of exercise. |
Number of shares granted | shares | 47,660 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | Oct. 29, 2016 | Jan. 30, 2016 |
Revolving Line of Credit [Member] | ||
Short-term Debt [Line Items] | ||
Carrying Value | $ 63,000 | $ 38,327 |
Fair Value | 63,000 | 38,327 |
Notes Payable [Member] | ||
Short-term Debt [Line Items] | ||
Carrying Value | 13,000 | 13,000 |
Fair Value | 12,949 | 12,425 |
Mortgage Loans On Land & Buildings [Member] | ||
Short-term Debt [Line Items] | ||
Carrying Value | 1,653 | 2,259 |
Fair Value | $ 1,849 | $ 2,451 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Oct. 29, 2016 | Jan. 30, 2016 |
Property and equipment, at cost: | ||
Total Property and equipment, at depreciated cost | $ 133,360 | $ 138,993 |
Buildings and Building Improvements [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 117,147 | 118,907 |
Leasehold Improvements [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 85,152 | 82,344 |
Automobiles and Vehicles [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 5,446 | 5,433 |
Airplane [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 4,697 | 4,697 |
Furniture, Fixtures and Equipment [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 285,264 | 277,812 |
Construction In Progress [Member] | ||
Property and equipment, at cost: | ||
Total Property and equipment, at depreciated cost | 4,513 | 2,765 |
Land [Member] | ||
Property and equipment, at cost: | ||
Total Property and equipment, at depreciated cost | 8,581 | 8,643 |
Property, Plant and Equipment [Member] | ||
Property and equipment, at cost: | ||
Property and equipment, gross | 497,706 | 489,193 |
Less: Accumulated depreciation and amortization | (377,440) | (361,608) |
Total Property and equipment, at depreciated cost | $ 120,266 | $ 127,585 |
EXIT AND DISPOSAL ACTIVITIES (D
EXIT AND DISPOSAL ACTIVITIES (Details) $ in Thousands | 9 Months Ended |
Oct. 29, 2016USD ($) | |
Beginning Balance | $ 2,200 |
Additions | 10,500 |
Utilization | (1,700) |
Ending Balance | 11,000 |
Impairment Charge For The Disposal Of Fixed Assets For 2016 Planned Closures [Member] | |
Beginning Balance | |
Additions | 1,900 |
Utilization | |
Ending Balance | 1,900 |
Impairment Charge For The Disposal Of Intangible Assets For 2016 Planned Closures [Member] | |
Beginning Balance | |
Additions | 2,300 |
Utilization | |
Ending Balance | 2,300 |
Impairment Charge For The Disposal Of Fixed Assets For Corporate Office [Member] | |
Beginning Balance | |
Additions | 3,100 |
Utilization | |
Ending Balance | 3,100 |
Impairment Charge For The Disposal Of Fixed Assets For 2014 Planned Closures [Member] | |
Beginning Balance | 700 |
Additions | |
Utilization | (200) |
Ending Balance | 500 |
Impairment Charge For The Disposal Of Fixed Assets For 2015 Planned Closures [Member] | |
Beginning Balance | 500 |
Additions | |
Utilization | (500) |
Ending Balance | |
Inventory markdowns for 2014 discontinuance of exit categories [Member] | |
Beginning Balance | 300 |
Utilization | (300) |
Inventory Markdowns For 2015 Planned Closures [Member] | |
Beginning Balance | 700 |
Utilization | (700) |
Inventory Markdowns For 2016 Planned Closures [Member] | |
Beginning Balance | |
Additions | 1,900 |
Utilization | |
Ending Balance | 1,900 |
Inventory Provision For Freight Capitalization Expense, 2016 Planned Closures [Member] | |
Beginning Balance | |
Additions | 1,300 |
Utilization | |
Ending Balance | $ 1,300 |
EXIT AND DISPOSAL ACTIVITIES 37
EXIT AND DISPOSAL ACTIVITIES (Details Narrative) $ in Thousands | Jul. 30, 2015USD ($) | Oct. 29, 2016USD ($)Number | Apr. 30, 2016USD ($) | Jan. 30, 2016Number | Oct. 31, 2015USD ($) | Oct. 29, 2016USD ($) | Oct. 31, 2015USD ($) | Jan. 30, 2016USD ($) |
Number of underperforming stores | Number | 40 | |||||||
Number of underperforming pharmacies | Number | 19 | |||||||
Number of underperforming freestanding xpress pharmacies | Number | 5 | |||||||
Asset impairment charges | $ 24,114 | $ 315 | ||||||
Freight capitalization expense | $ 16,000 | $ 400 | ||||||
Pharmacy closures [Member] | ||||||||
Amortization of intangible assets | 2,300 | |||||||
Corporate Headquarters [Member] | ||||||||
Asset impairment charges | 3,100 | |||||||
Store Closures [Member] | ||||||||
Asset impairment charges | $ 500 | $ 100 | ||||||
Number of stores under operational performance targets | Number | 5 | |||||||
Below cost inventory adjustment | 3,200 | 3,200 | ||||||
Number of stores plan for closure | Number | 5 | |||||||
Freight capitalization expense | $ 1,300 | |||||||
2014 Store Closures [Member] | ||||||||
Asset impairment charges | 200 | $ 300 | ||||||
2015 Store Closures [Member] | ||||||||
Asset impairment charges | $ 500 | $ 500 | ||||||
Selling, General and Administrative Expenses [Member] | ||||||||
Asset impairment charges | $ 1,900 |
ACCUMULATED OTHER COMPREHENSI38
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Oct. 29, 2016 | Oct. 31, 2015 | Oct. 29, 2016 | Oct. 31, 2015 | Jan. 30, 2016 | |
Equity [Abstract] | |||||
Accumulated other comprehensive income | $ 475 | $ 570 | $ 475 | $ 570 | $ 570 |
Amortization of post-retirement benefit | (95) | ||||
Ending balance | $ 475 | $ 570 | $ 475 | $ 570 | $ 475 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands | Apr. 10, 2015 | Oct. 29, 2016 | Oct. 31, 2015 |
Reeves-Sain Drug Store, Inc [Member] | |||
Adjusted purchase consideration in notes payable | $ 13,000,000 | ||
Description of notes payable | Three equal installments on January 31st of 2021, 2022 and 2023. | ||
Atlantic Retail Investors ( Partially owned by Michael J. Hayes) [Member] | |||
Total rental payments | $ 396,800 | $ 394,400 |
LEGAL CONTINGENCIES (Details Na
LEGAL CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | Oct. 22, 2015 | Oct. 29, 2016 |
Defined Contribution Plan Disclosure [Line Items] | ||
General liability policy limit | $ 10,000 | |
General liability deductible amount | 350 | |
American Express [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Litigation settlement | 100 | |
Future probable losses | 4,600 | |
MasterCard [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Litigation settlement | $ 2,900 | |
First Tennessee Bank National Association [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
General liability policy limit | 10,000 | |
General liability deductible amount | 350 | |
Stephanie Bryant [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
General liability policy limit | 10,000 | |
General liability deductible amount | $ 250 |
INDEBTEDNESS (Details Narrative
INDEBTEDNESS (Details Narrative) - USD ($) $ in Thousands | Oct. 29, 2016 | Apr. 09, 2015 | Oct. 31, 2007 |
Weighted average interest rate | 7.40% | ||
Purchase of mortgage debt | $ 1,600 | ||
Description of collateral | Land and buildings. | ||
Minimum [Member] | |||
Fixed interest rates | 6.31% | ||
Maximum [Member] | |||
Fixed interest rates | 7.40% | ||
Revolving Line of Credit [Member] | |||
Maximum line of credit | $ 150,000 | ||
Maturity date of agreement | Apr. 9, 2020 | ||
Description of interest terms | Bears interest at 1.25% or 1.50% plus either LIBOR or the LIBOR index rate, depending on our FIFO inventory balance. | ||
Commitment fees for unsued portion | 0.20% | ||
Current borrowing line of credit | $ 63,000 | ||
Aggregate line of credit | $ 73,700 | ||
Weighted average interest rate | 1.81% |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands | Oct. 29, 2016 | Jan. 30, 2016 | Apr. 10, 2015 |
Allocation of the purchase consideration: | |||
Goodwill | $ 41,490 | $ 41,490 | |
Identifiable intangible assets | 18,180 | ||
Reeves-Sain Drug Store, Inc [Member] | |||
Total purchase consideration: | |||
Cash | 42,750 | ||
Notes payable | 13,000 | ||
Contingent liability | 1,000 | ||
Total purchase consideration | 56,750 | $ 55,800 | |
Allocation of the purchase consideration: | |||
Accounts receivables | 14,474 | ||
Inventory | 2,005 | ||
Other assets | 298 | ||
Goodwill | 44,385 | ||
Identifiable intangible assets | 18,180 | ||
Total assets acquired | 79,342 | ||
Accounts payable | 21,448 | ||
Other current liabilities | 1,144 | ||
Total liabilities assumed | 22,592 | ||
Net assets acquired | $ 56,750 | $ 55,800 |
BUSINESS COMBINATIONS (Details
BUSINESS COMBINATIONS (Details 1) $ in Thousands | 9 Months Ended |
Oct. 29, 2016USD ($) | |
Business Acquisition [Line Items] | |
Business combination total | $ 18,180 |
Trade Name [Member] | |
Business Acquisition [Line Items] | |
Indefinite-lived intangible assets acquired | 6,900 |
Customer Prescription Files [Member] | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired | $ 7,820 |
Weighted average life (years) | 4 years |
Referral and Relationships [Member] | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired | $ 1,400 |
Weighted average life (years) | 2 years |
Non-Compete Agreements [Member] | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired | $ 1,800 |
Weighted average life (years) | 8 years |
Business Licenses [Member] | |
Business Acquisition [Line Items] | |
Finite-lived intangible assets acquired | $ 260 |
Weighted average life (years) | 1 year |
BUSINESS COMBINATIONS (Detail44
BUSINESS COMBINATIONS (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Oct. 29, 2016 | Oct. 31, 2015 | |
Business Combinations Details 2 | ||
Revenue | $ 1,595,696 | $ 1,643,477 |
Earnings | $ (44,065) | $ (4,166) |
Basic and diluted earnings per share | $ (1.20) | $ (0.11) |
BUSINESS COMBINATIONS (Detail45
BUSINESS COMBINATIONS (Details Narrative) - Reeves-Sain Drug Store, Inc [Member] - USD ($) $ in Thousands | Apr. 10, 2015 | Jul. 31, 2015 | Oct. 29, 2016 |
Business Acquisition [Line Items] | |||
Percentage of interest acquired | 100.00% | ||
Description of acquired entity | Provider of retail and specialty pharmaceutical services. | ||
Total purchase consideration gross | $ 66,000 | ||
Working capital adjustments | 10,300 | ||
Total purchase consideration | 55,800 | $ 56,750 | |
Business acqusition cost | 500 | ||
Adjusted consideration in cash | 42,800 | ||
Adjusted consideration in notes payable | $ 13,000 | ||
Description about notes payable | Three equal installments on January 31st of 2021, 2022 and 2023. | ||
Increase in amortization cost | $ 600 | ||
Increase in interest expense | $ 200 |