Albertsons 2015 Annual Report Download - page 98

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Agreements with NAI
In connection with the sale of NAI, the Company entered into various agreements with AB Acquisition LLC and its affiliates
related to on-going operations, including the TSA and operating and supply agreements. At the time of the sale of NAI, these
arrangements had initial terms ranging from 12 months to five years, and 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 $192, $240 and $42 in TSA fees during fiscal 2015, 2014 and 2013, respectively, including $60 under the first-year
transitional fee provisions during fiscal 2014. On April 16, 2015, following discussions with NAI and Albertson’s LLC
regarding the impact of Albertson’s LLC’s acquisition of Safeway, Inc. (the “Safeway Acquisition”) and their plans around
winding down the TSA, the Company entered into a letter agreement regarding the TSA with NAI and Albertson’s LLC
pursuant to which the Company will provide services to NAI and Albertson’s LLC as needed to transition and wind down the
TSA. For additional discussion of the TSA and this letter agreement, see “Risk Factors—Changes in the Company’s
relationships with NAI, Albertson’s LLC or Haggen could adversely impact the Company’s results of operations” in Part I,
Item 1A of this Annual Report on Form 10-K. TSA fees earned are reflected in Net sales in the Consolidated Statements of
Operations. 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 operates a distribution center owned by NAI for an initial term of five years, subject to renewal at the Company's
option for two additional five-year terms and certain termination rights for each of the Company and NAI.
The Company recorded $177, $174, and $178 within Net sales related to wholesale distribution of certain products to stores
owned by Albertson’s LLC that were not NAI banners for fiscal 2015, 2014 and 2013, respectively. Subsequent to the sale of
NAI, the Company recorded $38 and $209 within Net sales of continuing operations in the Independent Business segment
related to the NAI banners for fiscal 2015 and 2014, respectively. Before the sale of NAI and while NAI was still part of the
Company, intercompany sales from the Independent Business segment related to the NAI banners were $19 and $236 for fiscal
2014 and 2013, respectively, which were eliminated upon consolidation.
In fiscal 2014, the Company provided certain additional finance and accounting services to NAI and Albertson’s LLC under the
TSA. NAI and Albertson’s LLC paid the Company approximately $13 for these services, most of which the Company provided
through third parties.
Results of Discontinued Operations
The Company 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 and a pre-tax
property, plant and equipment-related impairment of $203. The loss on sale calculation was finalized during fiscal 2014,
including the finalization of the working capital adjustment. 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 (loss) 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:
2015 2014 2013
Net sales $ — $ 1,235 $ 17,230
Income (loss) before income taxes from discontinued operations 6 121 (1,238)
Income tax benefit (66)(55)(35)
Income (loss) from discontinued operations, net of tax $ 72 $ 176 $ (1,203)