Albertsons 2016 Annual Report Download - page 104

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operating profit is centrally managed. Reported segment information is presented on the same basis as it is reviewed by
executive management.
NOTE 16—DISCONTINUED OPERATIONS
NAI Banner Sale
On March 21, 2013, the Company sold NAI to AB Acquisition, which resulted in the sale of the NAI banners, including
Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market and related Osco and Sav-on in-store pharmacies (collectively, the
“NAI Banners”).
The Company received net proceeds of approximately $100 and a short-term note receivable of approximately $44 for the
stock of NAI. AB Acquisition assumed approximately $3,200 of debt and capital leases, excluding original issue discounts. In
addition, AB Acquisition assumed the underfunded status of NAI’s related share of the multiemployer pension plans to which
the Company contributed. AB Acquisition’s portion of the underfunded status of the multiemployer pension plans was
estimated to be approximately $1,138 before tax, based on the Company’s estimated “proportionate share” of underfunding
calculated as of February 23, 2013.
In connection with the sale of NAI, the Company entered into various agreements with AB Acquisition 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. 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. For additional discussion of the TSA and this letter agreement, see “Risk Factors—The Company’s
relationships with NAI, Albertson’s LLC and Haggen are winding down, which could adversely impact the Company’s results
of operations"” in Part I, Item 1A of this Annual Report on Form 10-K and Note 14—Commitments, Contingencies and Off-
Balance Sheet Arrangements.
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 has
exercised its first extension option, subject to such termination rights.
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 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: