Albertsons 2016 Annual Report Download - page 41

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charges of $9, severance costs and accelerated stock-based compensation charges of $8 and contract breakage costs of $2. The
remaining $26 increase in Retail’s operating earnings is primarily due to $25 of lower depreciation expense and occupancy costs,
$8 of contracted services, $7 of lower logistics costs and $5 of higher earnings from increased sales, offset in part by $11 of a
higher LIFO charge and $10 of incremental investments to lower prices to customers.
Corporate operating loss for fiscal 2015 was $94, compared with $56 for fiscal 2014. Corporate expenses for fiscal 2015 included
charges and costs of $71, comprised of $64 of non-cash pension settlement charges, a $5 benefit plan charge and $2 of
information technology intrusion costs, net of insurance recoverable. Corporate expenses for fiscal 2014 included charges of $24,
comprised of severance costs and accelerated stock-based compensation charges of $19, contract breakage and other costs of $3
and asset impairment charges of $2. The remaining $9 net decrease in Corporate operating loss was primarily due to $42 of lower
net periodic pension expense, $12 of lower occupancy costs and $7 of lower employee-related costs, offset in part by $46 of
lower TSA fees primarily due to the one-year transition fee recognized in fiscal 2014 and $4 of higher other administrative and
other costs of sales.
Interest Expense, Net
Interest expense, net for fiscal 2015 was $243, compared with $407 for fiscal 2014. Interest expense, net for fiscal 2015 included
$37 of debt refinancing costs related to the redemption of $350 of the 2016 Notes and costs related to the expense of the 2022
Notes outstanding during the 30-day redemption period, and $6 of non-cash unamortized financing cost charges related to the
2016 Notes redemption and the amendments to the Revolving ABL Credit Facility. Interest expense, net for fiscal 2014 included
$99 of unamortized financing cost charges and original issue discount acceleration and $75 of debt refinancing costs related to
refinancing activities in conjunction with the sale of NAI and subsequent refinancing activities. When adjusted for these items,
the remaining $33 decrease in Interest expense, net is primarily due to lower average interest rates on lower outstanding debt
balances.
Income Tax Provision
Income tax expense on earnings from continuing operations for fiscal 2015 was $58, or 31.2 percent of earnings from continuing
operations before income taxes, compared with $5, or 30.9 percent for fiscal 2014. The change in the effective tax rate is
primarily due to $22 of discrete tax benefits, primarily related to audit settlements, partnership income and the pension settlement
charge, and $10 of discrete tax expenses related to insignificant discrete tax items recorded in fiscal 2015. The tax rate for fiscal
2014 included certain insignificant discrete tax items that together gave rise to the difference between the combined federal and
state statutory tax rates and the effective tax rate.
Net Earnings from Continuing Operations
Net earnings from continuing operations for fiscal 2015 were $127, compared with $13 for fiscal 2014. Net earnings from
continuing operations for fiscal 2015 included $70 of after-tax charges and costs related to the non-cash pension settlement
charges, debt refinancing costs, unamortized financing cost charges, store closure charges, a benefit plan charge, net information
technology intrusion costs and severance costs as discussed above. Net earnings from continuing operations for fiscal 2014
included $144 of after-tax net charges and costs primarily related to the debt refinancing activities, severance costs and
acceleration of stock-based compensation charges, asset impairment, contract breakage costs, a legal settlement charge and a
multiemployer pension plan withdrawal charge, offset in part by the gain on sale of property as discussed above. When adjusted
for these items, the remaining $40 after-tax increase in Net earnings from continuing operations is primarily due to the variances
as discussed in the Operating Earnings, Interest Expense, Net, and Income Tax Provision sections above.
Income from Discontinued Operations, Net of Taxes
Income from discontinued operations, net of tax, for fiscal 2015 was $72, compared with $176 for fiscal 2014. Income from
discontinued operations for fiscal 2015 reflects net tax benefits of $66 primarily related to recognition of tangible property repair
regulations and other deduction related changes, property tax refunds, and interest income resulting from the settlement of income
tax audits.
Discontinued operations results for fiscal 2014 reflected the completion of the sale of NAI on March 21, 2013, net discrete tax
benefits of $105 and a reduction to the loss on sale of NAI of $90, offset in part by severance and other costs of $13.