DISCONTINUED OPERATIONS

12 Months Ended

Feb. 25, 2017

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

Supervalu 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 Supervalu. The assets, liabilities, operating results, and cash flows of the Save-A-Lot business have been presented separately as discontinued operations in the Consolidated Financial Statements for all periods presented in a manner consistent with the SAL Merger Agreement and the Separation Agreement. In addition, discontinued operations include the results of operations and cash flows attributed to the assets and liabilities of the NAI business.

Results of Discontinued Operations

The following table provides the composition of the gain on the sale of Save-A-Lot:

	2017
Purchase price	$	1,304
Disposed of balance sheet assets and liabilities, net	(635		)
Transaction costs and other	(32		)
Pre-tax gain on sale	637
Income tax provision	(60		)
After-tax gain on sale	$	577

Income taxes on the gain were recorded at a significantly reduced effective rate due to the anticipated utilization of capital loss carryforwards and the release of valuation allowances of approximately $244. Income tax on the gain on sale of Save-A-Lot are expected to be paid in Supervalu’s first quarter of fiscal 2018. The closing adjustments under the SAL Merger Agreement are still subject to finalization, which may impact the final calculation of the purchase price and gain on sale. Supervalu believes that any potential adjustment to the purchase price from the closing adjustments will be insignificant.

The following is a summary of Supervalu’s operating results and certain other directly attributable expenses that are included in discontinued operations:

	2017			2016			2015
Net sales	$	3,529		$	4,621		$	4,639
Cost of sales	2,969			3,911			3,949
Gross profit	560			710			690
Selling and administrative expenses	452			563			514
Goodwill impairment charge	37			—			—
Gain on sale	(637		)	—			—
Operating earnings	708			147			176
Interest income, net	(5		)	(7		)	(3		)
Earnings from discontinued operations before income taxes	713			154			179
Income tax provision	86			52			5
Income from discontinued operations, net of tax	$	627		$	102		$	174

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

	February 27, 2016
Current assets
Cash and cash equivalents	$	15
Receivables, net	45
Inventories, net	298
Other current assets	18
Total current assets of discontinued operations	376
Long-term assets
Property, plant and equipment, net	460
Goodwill	142
Intangible assets, net	8
Deferred tax assets	(10		)
Other assets	13
Total long-term assets of discontinued operations	613
Total assets of discontinued operations	$	989
Current liabilities
Accounts payable	$	289
Accrued vacation, compensation and benefits	34
Current maturities of capital lease obligations	1
Other current liabilities	22
Total current liabilities of discontinued operations	346
Long-term liabilities
Long-term capital lease obligations	9
Long-term tax liabilities	6
Other long-term liabilities	27
Total long-term liabilities of discontinued operations	42
Total liabilities of discontinued operations	388
Net assets of discontinued operations	$	601

Impairment Charge

Prior to the classification of the Save-A-Lot business as held-for-sale, Supervalu 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 SAL Merger Agreement. Supervalu’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. Supervalu 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 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.

Income Taxes

Income before income taxes from discontinued operations for fiscal 2015 primarily reflects $6 of property tax refunds and interest income resulting from settlement of income tax audits. The income tax benefit included as a component of Income from discontinued operations, net of tax for fiscal 2015 includes $66 of net tax benefits, primarily related to tangible property repair regulations and other deduction-related changes.