Assets and Liabilities Held for Sale and Discontinued Operations

6 Months Ended

Jun. 15, 2013

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale and Discontinued Operations

ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS

Canada Safeway Limited ("CSL")

In June 2013, Safeway announced that it has entered into an agreement to sell its Canadian operations through a sale of substantially all of the net assets of CSL to Sobeys Inc., a Canadian food retailer and wholly owned subsidiary of Empire Company Limited, for C$5.8 billion in cash (about C$4.0 billion after taxes and expenses).

As a result of the agreement, the assets and liabilities of CSL are reported as held for sale in the condensed consolidated balance sheet at June 15, 2013, and the operating results of CSL have been classified as discontinued operations on the condensed consolidated statements of income for the 12 and 24 weeks ended June 15, 2013. Consistent with this presentation, the notes to condensed consolidated financial statements exclude discontinued operations as of June 15, 2013, unless otherwise noted. Historical financial information for CSL presented in the condensed consolidated income statements has been reclassified to discontinued operations to conform to current year presentation. The transaction is anticipated to close in the fourth quarter of 2013 and is subject to customary closing conditions, including approval under the Competition Act (Canada).

As a result of this transaction, any unremitted earnings of CSL are no longer considered indefinitely reinvested in Canada and, accordingly, Safeway has accrued deferred taxes of $106.7 million on those earnings in the second quarter of 2013.

Genuardi's

In 2012, Safeway sold or closed its Genuardi's stores. The Company recorded impairment charges, lease exit losses and a gain from the sale of Genuardi's stores as discontinued operations for the 12 and 24 weeks ended June 16, 2012. However, the historical operating results of these stores are not reflected in discontinued operations because the historical financial operating results are not material to the condensed consolidated income statements for the 12 and 24 weeks ended June 16, 2012.

Assets and liabilities held for sale at June 15, 2013 were as follows (in millions):

			June 15, 2013
Assets held for sale:
	CSL
		Cash in stores	$	5.5
		Receivables	67.3
		Merchandise inventories	434.8
		Prepaid and other current assets	24.9
		Net property, plant and equipment	1,111.6
		Goodwill	95.4
		Other assets	4.4
		Total CSL assets held for sale	$	1,743.9
	Other United States real estate assets held for sale		26.2
	Total assets held for sale		$	1,770.1
Liabilities held for sale:
	CSL
		Obligations under capital leases	$	39.7
		Accounts payable	267.7
		Accrued salaries and wages	71.6
		Other accrued liabilities	50.7
		Pension and post-retirement benefit obligations	188.2
		Accrued claims and other liabilities	30.6
	Total liabilities held for sale		$	648.5

The financial results of discontinued operations for the 12 and 24 weeks ended June 15, 2013 and June 16, 2012 were as follows (in millions):

		12 weeks ended
		June 15, 2013			June 16, 2012
CSL
	Sales and other revenue	$	1,522.3		$	1,558.2
	Income from discontinued operations before income taxes	84.7			108.1
	Income tax expense	(134.0		)	(34.0		)
	(Loss) income from discontinued operations, net of income taxes	(49.3		)	74.1
Genuardi's
	Gain on property dispositions and lease exit costs	—			2.0
	Income tax expense	—			(0.8		)
	Gain from discontinued operations of Genuardi's	—			1.2
(Loss) income from discontinued operations, net of income taxes		$	(49.3	)	$	75.3

		24 weeks ended
		June 15, 2013			June 16, 2012
CSL
	Sales and other revenue	$	3,015.5		$	3,063.1
	Income from discontinued operations before income taxes	158.1			185.5
	Income tax expense	(143.5		)	(60.0		)
	Income from discontinued operations, net of income taxes	14.6			125.5
Genuardi's
	Lease exit costs, net of gains on property dispositions	—			(4.9		)
	Property impairment charges	—			(7.3		)
	Income tax benefit	—			4.7
	Loss from discontinued operations of Genuardi's	—			(7.5		)
Income from discontinued operations, net of income taxes		$	14.6		$	118.0