NOTE 14—DISCONTINUED OPERATIONS AND DIVESTITURES

Discontinued Operations

On March 21, 2013, the Company sold 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 Company received net proceeds of approximately $100 and a short-term note receivable of approximately $44 for the stock of NAI. AB Acquisition assumed approximately $3,200 of debt and capital leases, excluding original issue discounts. In addition, AB Acquisition assumed the underfunded status of NAI’s related share of the multiemployer pension plans to which the Company contributed. AB Acquisition’s portion of the underfunded 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 with each of NAI and Albertson’s LLC (collectively, the “TSA”) and operating and supply agreements. These arrangements have initial terms that range from 12 months to 5 years, are generally subject to renewal upon mutual agreement by the parties thereto and also include termination provisions that can be exercised by each party. The Company recognized $240, $42 and $47 in TSA fees during fiscal 2014, 2013 and 2012, respectively, including $60 under the first-year transitional fee provisions during fiscal 2014. The shared service center costs incurred to support back office functions related to the NAI Banners represent administrative overhead and are recorded in Selling and administrative expenses.

The Company has determined that the continuing cash flows generated by these arrangements are not significant in proportion to the cash flows that the Company would have generated had the NAI Banner Sale not occurred, and that the arrangements do not provide the Company the ability to significantly 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 assets, liabilities, operating results, and cash flows of the NAI Banners have been presented separately as discontinued operations in the 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 expected to be 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 Consolidated Balance Sheets. The calculation was finalized during fiscal 2014, including working capital finalization. The total loss on sale of NAI was $1,263, comprised of $1,081 of contract loss and $182 of property, plant and equipment-related impairment, resulting in a $90 pre-tax reduction to the preliminary estimated loss on sale of NAI during fiscal 2014, which was recorded as a component of Income from discontinued operations, net of tax in the Consolidated Statements of Operations. 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:


	February 22, 2014 (52 weeks)			February 23, 2013 (52 weeks)			February 25, 2012 (52 weeks)
Net sales	$	1,235		$	17,230		$	18,764

Income (loss) before income taxes from discontinued operations		121			(1,238	)		(876	)
Income tax (benefit) provision		(55	)		(35	)		54

Income (loss) from discontinued operations, net of tax	$	176		$	(1,203	)	$	(930	)

The tax rate for the income tax benefit included as a component of Income from discontinued operations, net of tax for fiscal 2014 included $105 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 February 23, 2013.

The amounts of the intercompany sales, which approximate related costs and were eliminated upon consolidation, were $19 and $236 for fiscal 2014 and 2013, respectively. The Company recorded $209 within Net sales of continuing operations related to the NAI banners for fiscal 2014. The Company provides certain back office support to the divested NAI Banners under the TSA. Fees earned under the TSA are reflected in Net sales in the Consolidated Statements of Operations.

The following is a summary of the assets and liabilities of discontinued operations as of February 23, 2013:


	February 23, 2013
Assets
Cash and cash equivalents	$	77
Receivables, net		215
Inventories, net		1,155
Other current assets		47

Total current assets		1,494

Property, plant and equipment, net		3,767
Intangible assets, net		555
Other assets		655

Total assets	$	6,471

Liabilities
Accounts payable	$	652
Accrued vacation, compensation and benefits		217
Current maturities of long-term debt and capital lease obligations		212
Accrued loss on contract		1,140
Other current liabilities		480

Total current liabilities of discontinued operations		2,701

Long-term debt and capital lease obligations		2,832
Pension and other postretirement benefit obligations		109
Other long-term liabilities		850

Total liabilities		6,492

Net liabilities of discontinued operations	$	(21	)

Divestitures

During fiscal 2012, the Company sold 107 fuel centers which were part of the Retail Food segment, including 97 discontinued operations fuel centers. The Company received $89 in cash, primarily through discontinued operations, and recognized a pre-tax loss of $7, of which $1 and $6 of the pre-tax loss is presented as continuing operations and discontinued operations, respectively, related to the sale of the fuel centers.