Albertsons 2014 Annual Report Download - page 36

Goodwill and Intangible Asset Impairment Charges
The Company applies a fair value based impairment test to the net book value of goodwill and intangible assets
with indefinite useful lives on an annual basis and on an interim basis if certain events or circumstances indicate
that an impairment loss may have occurred.
During fiscal 2014 and 2013, the Company performed reviews of goodwill and intangible assets with indefinite
useful lives for impairment. The fiscal 2014 reviews indicated that the carrying value of goodwill and intangible
assets with indefinite useful lives had fair values in excess of their carrying values. The fiscal 2013 reviews
indicated that goodwill had fair value in excess of its carrying value, but that an Independent Business indefinite-
lived tradename was impaired, which resulted in a non-cash impairment charge of $6.
Operating Earnings (Loss)
Operating earnings for fiscal 2014 were $418, compared with an Operating loss of $157 last year, an increase of
$575 or 366 percent. Operating earnings for fiscal 2014 include net charges and costs of $61, comprised of
severance costs and accelerated stock-based compensation costs, asset impairment and other charges, contract
breakage and other costs, a legal settlement charge and a multi-employer pension plan withdrawal charge, offset
in part by a gain on sale of property. Operating earnings for fiscal 2013 included net charges and costs of $281,
comprised of asset impairment and other charges, severance costs and a multi-employer pension plan withdrawal
charge, store closure charges and an intangible asset impairment charge, offset in part by a cash settlement
received from credit card companies. When adjusted for these items, the remaining $355 increase in Operating
earnings is primarily due to $198 of incremental TSA fees earned related to administrative support of divested
NAI banner operations, $178 of benefits from cost reduction initiatives including lower occupancy costs,
employee-related costs and reduced consulting fees, $29 of lower logistics costs, $13 of a LIFO charge decrease,
$7 of higher fees from new product introductions net of lower independent retail customer fees, $6 of lower other
administrative expense and $6 of higher professional services income from services provided to independent
retail customers, offset in part by $30 of incremental investments to lower prices to customers, $28 of higher
shrink, $16 of increased insurance costs, $6 of higher advertising costs and $2 of lower sales volume.
Independent Business operating earnings for fiscal 2014 were $235, or 2.9 percent of Independent Business net
sales, compared with $199, or 2.4 percent of Independent Business net sales last year. Independent Business
operating earnings for fiscal 2014 include net charges and costs of $8, comprised of severance costs and
accelerated stock-based compensation costs of $17, a multi-employer pension plan withdrawal charges of $3,
asset impairment and other charges of $2 and contract breakage costs of $1, offset in part by a gain on sale of
property of $15. Independent Business operating earnings for fiscal 2013 included severance costs and
accelerated stock-based compensation charges of $12, non-cash intangible asset impairment charges of $6 and
asset impairment and other charges of $5. When adjusted for these items, the remaining $21 increase in
Independent Business operating earnings is primarily due to $21 of lower logistics and occupancy costs, $7 of
higher fees from new product introductions net of lower independent retail customer fees, $6 of higher
professional services income from services provided to independent retail customers, $3 of lower bad debt
expense and $2 of a LIFO charge decrease, offset in part by $14 of higher allocated corporate overhead costs,
including employee-related costs, and $4 of lower sales volume.
Save-A-Lot operating earnings for fiscal 2014 were $167, or 3.9 percent of Save-A-Lot net sales, compared with
$143, or 3.4 percent of Save-A-Lot net sales last year. Save-A-Lot operating earnings for fiscal 2014 include
charges and costs of $10, comprised of a legal settlement charge of $5, asset impairment charges of $3 and
severance costs of $2. Save-A-Lot operating earnings for fiscal 2013 included store closure and asset impairment
charges of $35. When adjusted for these items, the remaining $1 decrease in Save-A-Lot’s operating earnings is
primarily due to $12 of incremental investments to lower prices to customers, $8 of higher shrink and $3 of
higher advertising costs, offset in part by $13 of cost reduction initiatives, including reduced consulting fees, and
$9 of other lower administrative expenses.
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