Albertsons 2014 Annual Report Download - page 112

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In connection with the Stock Purchase Agreement, the Company entered into various agreements with AB
Acquisition and its affiliates related to on-going operations, including a Transition Services Agreement with each
of NAI and Albertson’s LLC (collectively, the “TSA”) and operating and supply agreements. These
arrangements have initial terms that range from 12 months to 5 years, are generally subject to renewal upon
mutual agreement by the parties thereto and also include termination provisions that can be exercised by each
party. The Company recognized $240, $42 and $47 in TSA fees during fiscal 2014, 2013 and 2012, respectively,
including $60 under the first-year transitional fee provisions during fiscal 2014. The shared service center costs
incurred to support back office functions related to the NAI Banners represent administrative overhead and are
recorded in Selling and administrative expenses.
The Company has determined that the continuing cash flows generated by these arrangements are not significant
in proportion to the cash flows that the Company would have generated had the NAI Banner Sale not occurred,
and that the arrangements do not provide the Company the ability to significantly influence the operating or
financial policies of the NAI Banners. Accordingly, the above arrangements do not constitute significant
continuing involvement in the operations of the NAI Banners. The assets, liabilities, operating results, and cash
flows of the NAI Banners have been presented separately as discontinued operations in the Consolidated
Financial Statements for all periods presented.
During the fourth quarter of fiscal 2013, the Company presented the assets and liabilities of NAI as discontinued
operations and accordingly assessed the long-lived assets of the disposal group for impairment by comparing the
carrying value of the total net assets of discontinued operations to their estimated fair value based on the
proceeds expected to be received and debt expected to be assumed by AB Acquisition pursuant to the Stock
Purchase Agreement less the estimated costs to sell. The Company recorded a preliminary estimated pre-tax loss
on contract for the disposal of NAI of approximately $1,150, recorded as a component of Current liabilities of
discontinued operations, and a pre-tax property, plant and equipment-related impairment of $203, recorded as a
reduction of Long-term assets of discontinued operations, in the Consolidated Balance Sheets. The calculation
was finalized during fiscal 2014, including working capital finalization. The total loss on sale of NAI was $1,263,
comprised of $1,081 of contract loss and $182 of property, plant and equipment-related impairment, resulting in
a $90 pre-tax reduction to the preliminary estimated loss on sale of NAI during fiscal 2014, which was recorded
as a component of Income from discontinued operations, net of tax in the Consolidated Statements of Operations.
The Company determined the pre-tax property, plant and equipment-related impairment using Level 3 inputs.
The following is a summary of the Company’s operating results and certain other directly attributable expenses
that are included in discontinued operations:
February 22, 2014
(52 weeks)
February 23, 2013
(52 weeks)
February 25, 2012
(52 weeks)
Net sales $ 1,235 $ 17,230 $ 18,764
Income (loss) before income taxes from discontinued
operations 121 (1,238) (876)
Income tax (benefit) provision (55) (35) 54
Income (loss) from discontinued operations, net of tax $ 176 $ (1,203) $ (930)
The tax rate for the income tax benefit included as a component of Income from discontinued operations, net of
tax for fiscal 2014 included $105 of discrete tax benefits primarily resulting from the settlement of IRS audits for
the fiscal 2010, 2009 and 2008 tax years and an adjustment to decrease the loss on sale of NAI reported at
February 23, 2013.
The amounts of the intercompany sales, which approximate related costs and were eliminated upon
consolidation, were $19 and $236 for fiscal 2014 and 2013, respectively. The Company recorded $209 within
Net sales of continuing operations related to the NAI banners for fiscal 2014. The Company provides certain
back office support to the divested NAI Banners under the TSA. Fees earned under the TSA are reflected in Net
sales in the Consolidated Statements of Operations.
110