Discontinued Operations

9 Months Ended

Dec. 03, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 14—DISCONTINUED OPERATIONS

The Company determined that the Save-A-Lot business met the criteria to be held-for-sale and classified as a discontinued operation during the third quarter of fiscal 2017. The Save-A-Lot business was previously disclosed as a separate reporting segment of the Company. The assets, liabilities, operating results, and cash flows of the Save-A-Lot business as provided under the Merger Agreement and the Separation Agreement have been presented separately as discontinued operations in the Condensed Consolidated Financial Statements for all periods presented. In addition, discontinued operations include the results of operations and cash flows attributed to the assets and liabilities of the NAI business.

The major classes of operating results classified as discontinued operations within the Condensed Consolidated Statements of Operations were as follows:

	Third Quarter Ended					Year-To-Date Ended
	December 3,   2016   (12 weeks)			December 5,   2015   (12 weeks)		December 3,   2016   (40 weeks)		December 5,   2015   (40 weeks)
Net sales	$	1,038		$	1,069	$	3,529	$	3,567
Cost of sales	874			905		2,969		3,016
Gross profit	164			164		560		551
Selling and administrative expenses	135			129		454		430
Goodwill impairment charge	37			—		37		—
Operating (loss) earnings	(8		)	35		69		121
Interest expense (income), net	—			—		1		(6		)
(Loss) earnings from discontinued operations before income taxes	(8		)	35		68		127
Income tax provision	6			16		35		49
(Loss) income from discontinued operations, net of tax	$	(14	)	$	19	$	33	$	78

The carrying amounts of major classes of assets and liabilities that were classified as discontinued operations on the Condensed Consolidated Balance Sheets were as follows:

	December 3, 2016			February 27, 2016
Current assets
Cash and cash equivalents	$	17		$	15
Receivables, net	37			45
Inventories, net	321			298
Other current assets	19			18
Total current assets of discontinued operations	394			376
Long-term assets
Property, plant and equipment, net	473			460
Goodwill	106			142
Intangible assets, net	8			8
Deferred tax assets	(8		)	(10		)
Other assets	12			13
Total long-term assets of discontinued operations	591			613
Total assets of discontinued operations	$	985		$	989
Current liabilities
Accounts payable	$	244		$	289
Accrued vacation, compensation and benefits	35			34
Current maturities of capital lease obligations	1			1
Other current liabilities	25			22
Total current liabilities of discontinued operations	305			346
Long-term liabilities
Long-term capital lease obligations	9			9
Long-term tax liabilities	7			6
Other long-term liabilities	29			27
Total long-term liabilities of discontinued operations	45			42
Total liabilities of discontinued operations	350			388
Net assets of discontinued operations	$	635		$	601

Gain on Sale

The Company will record a gain on the Sale in an amount the Company estimates to be between $560 and $580 in the fourth quarter of fiscal 2017, which will be classified within discontinued operations. Income taxes on the gain are estimated to be recorded at a significantly reduced effective rate due to the anticipated utilization of capital loss carryforwards and the release of valuation allowances of approximately $255 to $275.

Impairment Charge

Prior to the classification of the Save-A-Lot business as held-for-sale, the Company assessed the carrying value of the Save-A-Lot business for impairment in accordance with generally accepted accounting principles to determine if the carrying value of the Save-A-Lot assets exceeded their estimated fair value, prior to measuring the held-for-sale business at fair value less cost to sell. The carrying value of the total net assets of the Save-A-Lot reporting units were compared to their estimated fair value based on the proceeds expected to be received pursuant to the Merger Agreement. The Company's review of goodwill indicated that the estimated fair value of the Save-A-Lot licensee distribution reporting unit was in excess of its carrying value, but that the carrying value of the Save-A-Lot corporate stores reporting unit exceeded its estimated fair value. The Company recorded a non-cash goodwill impairment charge of $37 before tax during the third quarter of fiscal 2017, which was included as a component of (Loss) income from discontinued operations, net of tax, resulting from a decline in discounted cash flows under the income approach and indicated reporting unit fair values under the market approach. The calculation of the impairment charge contains significant judgments and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.