NOTE 18—DISCONTINUED OPERATIONS

During the fourth quarter of fiscal 2018, we announced that we are pursuing the sale of certain of our corporately owned and operated retail operations consisting of Farm Fresh, Shop ‘n Save, and Shop ‘n Save East. The results of operations, financial position and cash flows of these banners have been presented as discontinued operations and the related assets and liabilities have been reclassified as held-for-sale for all periods presented. These three retail banners were previously separate components included in our Retail reporting segment. We entered into agreements to sell a majority of our Farm Fresh retail stores and pharmacy assets for a total of $53 in March 2018.

During the third quarter of fiscal 2017, we determined the Save-A-Lot business met the criteria to be held-for-sale and classified as a discontinued operation. The Save-A-Lot business was previously disclosed as a separate reporting segment. 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

Operating results of discontinued operations are summarized below:



	2018			2017			2016
Net sales	$	1,522		$	5,097		$	6,245
Cost of sales	1,141			4,145			5,132
Gross profit	381			952			1,113
Selling and administrative expenses	409			854			909
Goodwill impairment charge	—			39			—
Gain on sale	—			(637		)	—
Operating (loss) earnings	(28		)	696			204
Interest expense (income), net	—			(4		)	(5		)
(Loss) earnings from discontinued operations before income taxes	(28		)	700			209
Income tax (benefit) provision	(25		)	81			72
(Loss) income from discontinued operations, net of tax	$	(3	)	$	619		$	137

The carrying amounts of major classes of assets and liabilities that were classified as held-for-sale on the Consolidated Balance Sheets were as follows:



	February 24, 2018		February 25, 2017
Current assets
Cash and cash equivalents	$	7	$	5
Receivables, net	8		10
Inventories, net	109		119
Other current assets	6		4
Total current assets of discontinued operations	130		138
Long-term assets
Property, plant and equipment, net	74		128
Intangible assets, net	1		2
Deferred tax assets	8		2
Other assets	1		2
Total long-term assets of discontinued operations	84		134
Total assets held for sale	$	214	$	272

Current liabilities
Accounts payable	$	51	$	59
Accrued vacation, compensation and benefits	20		18
Current maturities of capital lease obligations	2		2
Other current liabilities	9		10
Total current liabilities of discontinued operations	82		89
Long-term liabilities
Long-term capital lease obligations	14		17
Other long-term liabilities	3		—
Total long-term liabilities of discontinued operations	17		17
Total liabilities of discontinued operations	99		106
Net assets of discontinued operations	$	115	$	166

Gain on Save-A-Lot Sale

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 was paid in fiscal 2018.

Goodwill and Long-Lived Asset Impairment Charges

Prior to the classification of the Save-A-Lot business as held-for-sale, we assessed the carrying value of the Save-A-Lot business for impairment in accordance with GAAP 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. Our 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. We 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. Additionally, in fiscal 2017 we conducted an impairment review of the remaining carrying value of our reporting units due to declines in sales and cash flows within Retail. As a result, we recorded an additional non-cash goodwill impairment charge of $2, which was allocated to Retail banners classified as discontinued operations as of February 24, 2018. 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.

In fiscal 2018, two retail asset groups, which consisted of two separate retail banners, indicated a decline in their results of operations and the cash flow projections of these two retail asset groups declined compared to prior projections. As a result, the two retail asset groups were selected for an undiscounted cash flow review. Both of these retail asset groups failed the long-lived asset recoverability test. Accordingly, a fair value assessment using the income approach was performed over each retail group’s long-lived assets. The carrying value of both asset groups exceeded the estimated fair value and were reduced to the lower of the carrying value or fair value, resulting in an impairment charge of $47, within Selling and administrative expenses of discontinued operations.

In fiscal 2017, one retail asset group indicated a decline in their results of operations and the cash flow projections declined compared to prior projections. As a result, the retail asset group was selected for an undiscounted cash flow review. The retail asset group failed the long-lived asset recoverability test. Accordingly, a fair value assessment using the income approach was performed over the retail asset group’s long-lived assets. The carrying value of the assets within this asset group exceeded the estimated fair value and was reduced until all long-lived assets were recorded at the lower of their carrying value or fair value, resulting in an impairment charge of $41 within Selling and administrative expenses of discontinued operations.

Multiemployer Plans

We contributed $6 for each fiscal year 2018, 2017 and 2016, respectively, to multiemployer pension plans included in discontinued operations. We contributed $2 for each fiscal year 2018, 2017 and 2016, respectively to Central States Southeast and Southwest Areas Pension Fund. See Note 11—Benefit Plans, for additional information regarding this plan.