Albertsons 2015 Annual Report Download - page 39

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includes 160 basis points from net charges and costs of $275 described immediately above. After adjusting for the above items,
the remaining 80 basis points net reduction in Selling and administrative expenses as a percent of Net sales is primarily due to
cost reduction initiatives, including occupancy related costs including lower depreciation expense, reduced consulting fees and
lower employee-related costs, offset in part by increased insurance costs. As described in Part II, Item 8 of this Annual Report on
Form 10-K, Note 1—Summary of Significant Accounting Policies, Selling and administrative expenses in all periods presented
no longer include reductions attributable to TSA fees earned.
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 $423, compared with an Operating loss of $150 for fiscal 2013, an increase of $573 or
382.0 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 $353 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 for fiscal 2013. 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 for fiscal 2013. 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.
Retail Food operating earnings for fiscal 2014 were $77, or 1.7 percent of Retail Food net sales, compared with an operating loss
of $153 or 3.2 percent of Retail Food net sales for fiscal 2013. Retail Food operating earnings for fiscal 2014 include charges and
costs of $19, comprised of asset impairment and other charges of $9, severance costs and accelerated stock-based compensation
charges of $8 and contract breakage costs of $2. Retail Food operating loss for fiscal 2013 included net charges of $202,
comprised of asset impairment and other charges of $203, severance costs and accelerated stock-based compensation charges of