DISCONTINUED OPERATIONS

4 Months Ended

Jun. 15, 2013

Discontinued Operations And Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 11 – DISCONTINUED OPERATIONS

On January 10, 2013, the Company, AB Acquisition and NAI entered into the Stock Purchase Agreement providing for the sale by the Company of its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market banners and related Osco and Sav-on in-store pharmacies (collectively, the “NAI Banners”) to AB Acquisition. The NAI Banner Sale was completed on March 21, 2013. The Company received net proceeds of approximately $100 and a short-term note receivable of approximately $44 in exchange for the stock of NAI. AB Acquisition also assumed approximately $3,200 of debt and capital leases. In addition, AB Acquisition also assumed the underfunded status of NAI related share of the multiemployer pension plans to which the Company contributes. AB Acquisition’s portion of the unfunded 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 Stock Purchase Agreement, the Company entered into various agreements with AB Acquisition and its affiliates related to on-going operations, including a Transition Services Agreement (“TSA”) with each of NAI and Albertson’s LLC and operating and supply agreements. The initial terms of these arrangements vary from 12 months to 5 years, are generally subject to renewal upon mutual agreement by the parties thereto and also includes termination provisions that can be exercised by each party. The Company expects to earn $182 in fiscal 2014 under the TSA agreements and a further $60 under the transitional TSA in place for the first year only. This reflects incremental TSA fees of approximately $140 during fiscal 2014, net of TSA fees historically recognized under its previous TSA agreement with Albertson’s LLC and an incremental $60 under the transitional TSA. The Company recognized $84 in TSA fees during the first quarter ended June 15, 2013 including $36 (of the $60 total) under the transitional TSA provisions. The Company expects to recognize $18 of the transitional TSA fees during the second quarter of fiscal 2014, $4 during the third quarter of fiscal 2014 and $2 during the fourth quarter of fiscal 2014. During the first quarter ended June 16, 2012 the Company recognized TSA fees totaling $13. The historical shared service center costs incurred to support back office functions related to the NAI Banners were incurred as administrative overhead and are recorded in Selling and administrative expenses, net of the related TSA fees.

The Company has determined that the continuing cash flows generated by these arrangements are not significant in proportion to the cash flows of the Company had the NAI Banner Sale not occurred and that the arrangements do not provide the Company the ability to 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 net assets, operating results, and cash flows of the NAI Banners have been presented separately as discontinued operations in the Condensed 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 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, recorded as a component of Current liabilities of discontinued operations, and a pre-tax Property, plant and equipment related impairment of $203, recorded as a reduction of Long-term assets of discontinued operations, in the Condensed Consolidated Balance Sheets. For the quarter ended June 15, 2013, the finalization of the loss on sale of NAI resulted in a reduction to the preliminary estimated loss of $76 pre-tax or $68 after tax, which was recorded as a component of Income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations. The total loss on sale of NAI was $1,246, comprised of $1,064 of contract loss and $182 of Property, plant and equipment related impairment. 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 for the first quarter ended June 15, 2013 and June 16, 2012:

	June 15, 2013 (16 weeks)			June 16, 2012 (16 weeks)
Net sales	$	1,235		$	5,353
Income before income taxes from discontinued operations		117			93
Income tax provision (benefit)		(73	)		34
Income from discontinued operations, net of tax	$	190		$	59

The tax rate for the income tax provision included as a component of Income from discontinued operations, net of tax for the first quarter ended June 15, 2013 included $118 of discrete tax benefits primarily resulting from the settlement of IRS audits for the fiscal 2010, 2009 and 2008 tax years and an adjustment to decrease the loss on sale of NAI reported at fiscal year ended 2013, which are non-recurring.

The Company will continue to sell certain products to the NAI Banners subsequent to the NAI Banner Sale. The amounts of the intercompany sales, which approximate related costs and are eliminated upon consolidation, were $19 and $72 for the first quarter ended June 15, 2013 and June 16, 2012, respectively. Subsequent to the NAI Banner Sale, the Company recorded $53 within Net sales related to the NAI banners. The Company provides certain back office support to the divested NAI Banners under the TSA agreements. TSA administrative reimbursement fees are reflected in the Condensed Consolidated Statement of Operations as a reduction of Selling and administrative expenses.