Assets and Liabilities Held for Sale and Discontinued Operations

12 Months Ended

Jan. 03, 2015

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale and Discontinued Operations

Assets and Liabilities Held for Sale and Discontinued Operations

Assets and Liabilities Held for Sale In the fourth quarter of 2013, the Company announced its intention to exit the Chicago market, where it operated 72 Dominick's stores. During the fourth quarter of 2013, the Company sold or closed its Dominick's stores. Certain Dominick's properties were classified as held for sale at December 28, 2013, and some Dominick's properties continued to be classified as held for sale at January 3, 2015. Additionally, the Company had other real estate assets held for sale. Assets and liabilities held for sale at January 3, 2015 and December 28, 2013 were as follows (in millions):

		January 3, 2015		December 28, 2013
Assets held for sale:
	Dominick's property, net, held for sale	$	5.6	$	136.7
	Other United States real estate assets held for sale	33.9		7.2
	Total assets held for sale	$	39.5	$	143.9

			January 3, 2015		December 28, 2013
Liabilities held for sale:
	Dominick's
		Deferred gain on property dispositions	$	—	$	9.0
		Obligations under capital leases	—		5.2
		Deferred rent	—		2.6
		Other liabilities	—		1.4
		Total liabilities held for sale (1)	$	—	$	18.2

⁽¹⁾ Included in Other Accrued Liabilities on the consolidated balance sheet.

Discontinued Operations The notes to the consolidated financial statements exclude discontinued operations, unless otherwise noted. Historical financial information for CSL, Dominick's and Blackhawk presented in the consolidated income statements has been reclassified to discontinued operations to conform to current-year presentation. The historical operating results of Genuardi's stores have not been reflected in discontinued operations because the historical financial operating results were not material to the Company's consolidated financial statements for all periods presented. Financial information for discontinued operations is shown below (in millions):

		2014			2013			2012
Sales and other revenue:
	CSL (1)	$	—		$	5,447.9		$	6,695.8
	Dominick's	7.3			1,394.8			1,465.2
	Blackhawk (1)	305.6			1,074.2			906.8
	Total	$	312.9		$	7,916.9		$	9,067.8
(Loss) income from discontinued operations, before income taxes:
	CSL (1)	$	—		$	286.2		$	442.3
	Dominick's (2)	(186.8		)	(92.0		)	(50.4		)
	Blackhawk (1)	(4.4		)	84.4			74.2
	Total	$	(191.2	)	$	278.6		$	466.1
Gain (loss) on sale or disposal of operations, net of lease exit costs and transaction costs, before income taxes:
	CSL (3)	$	(6.8	)	$	4,783.1		$	—
	Dominick's (4)	140.9			(493.1		)	—
	Blackhawk	(5.9		)	—			—
	Genuardi's	—			—			52.4
	Total	$	128.2		$	4,290.0		$	52.4
Total (loss) income from discontinued operations, before income taxes		$	(63.0	)	$	4,568.6		$	518.5
Income taxes on discontinued operations		72.3			(1,263.5		)	(169.6		)
Income from discontinued operations, net of tax		$	9.3		$	3,305.1		$	348.9

⁽¹⁾ For CSL, 2013 reflects 44 weeks of activity compared to 52 weeks in 2012.For Blackhawk, 2014 reflects 15 weeks of activity compared to 52 weeks in the prior years.

⁽²⁾ 2014 includes charges of $159.4 million to increase the multiemployer pension withdrawal liability.

⁽³⁾ In accordance with ASU No. 2013-05, "Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity," the Company transferred the cumulative translation adjustment relating to Canadian operations from Accumulated Other Comprehensive Loss on the balance sheet to gain on the Sale of Canadian Operations.

(4) 2013 includes a charge of $310.8 million for the estimated multiemployer pension plan withdrawal liability.

Sale of Canadian Operations On November 3, 2013, Safeway completed the Sale of Canadian Operations to Sobeys for CAD5.8 billion (USD5.6 billion) in cash plus the assumption of certain liabilities.

Dominick's During the fourth quarter of 2013, Safeway sold or closed all Dominick's stores. Cash proceeds on the sale of these stores sold in fiscal 2013 were $72.2 million. Stores closed in 2013 but sold in fiscal 2014 had cash proceeds of $246.3 million. The sale of these stores resulted in a a pre-tax gain of $140.9 million in fiscal 2014 and a pre-tax loss of $493.1 million in fiscal 2013, which includes a charge of $310.8 million for the estimated multiemployer pension plan withdrawal liability. During fiscal 2014, the Company increased the estimated multiemployer pension plan withdrawal liability by $159.4 million, which is included in loss from discontinued operations in the following table. See Note O for a discussion and reconciliation of this withdrawal liability.

Blackhawk On March 24, 2014, Safeway's Board of Directors declared a special stock dividend to its stockholders of all of the 37.8 million shares of Class B common stock of Blackhawk owned by Safeway, representing approximately 94.2% of the total outstanding shares of Blackhawk's Class B common stock and approximately 72% of the total number of shares of Blackhawk common stock of all classes outstanding. On April 14, 2014, Safeway distributed the special stock dividend to all Safeway stockholders of record as of April 3, 2014 (the "Record Date"). The distribution took place in the form of a pro rata dividend of Blackhawk Class B common stock to each Safeway stockholder of record as of the Record Date.

With the completion of the Merger subsequent to year-end, Safeway’s distribution of Blackhawk shares is taxable. Based on Safeway’s preliminary estimates and after the application of $82 million in tax payments previously made in connection with Safeway's sale of shares in the initial public offering of Blackhawk's Class A common stock in April 2013, Safeway expects that the distribution of Blackhawk shares will result in an incremental tax liability of approximately $360 million, which Safeway is required to fund. In accordance with generally accepted accounting principles, Safeway did not consider the probability of the Merger occurring and, therefore, has not recorded a liability for its obligation to fund Blackhawk’s tax obligation. During 2014, Safeway paid approximately $355 million of the incremental tax liability.

In addition, during 2014, Blackhawk made certain estimated tax payments to certain state tax jurisdictions. Safeway advanced approximately $27.7 million to Blackhawk to fund these estimated tax payments. Safeway recorded these advances as receivables on the condensed consolidated balance sheet because, in accordance with generally accepted accounting principles, Safeway did not consider the probability of the Merger occurring. In the event the Merger did not occur, Blackhawk would have been required to repay these advances to Safeway.

Genuardi's In January 2012, Safeway announced the planned sale or closure of its Genuardi’s stores, located in the Eastern United States. These transactions were completed during 2012 with cash proceeds of $107.0 million and a pre-tax gain of $52.4 million ($31.9 million after tax).

Property Development Centers

On December 23, 2014, Safeway and its wholly owned real estate development subsidiary, PDC, sold substantially all of the net assets of PDC to Terramar. PDC’s assets were comprised of shopping centers that are completed or under development. Most of these centers included a grocery store that was leased back to Safeway. The sale was consummated pursuant to an Asset Purchase Agreement dated as of December 22, 2014 by and among Safeway, PDC and Terramar.

The following table summarizes the gain on this transaction (in millions).

Total cash proceeds	$	759.0
Less proceeds for development properties recorded as Other Notes Payable	(120.1		)
Less cash paid for prorates	(1.7		)
Total cash proceeds classified as investing activities	637.2
Net book value	(464.9		)
Total gain on sale of PDC	172.3
Less gain deferred on sale leasebacks (1)	(150.3		)
Gain on sale of PDC	$	22.0

⁽¹⁾  Current portion of $25.3 million is included in other accrued liabilities, and the long-term portion of $125.0 million is included in accrued claims and other liabilities in the consolidated balance sheet at year-end 2014.

Due to leasing back certain of these properties, Safeway has significant continuing involvement with a number of the properties subsequent to the sale. As a result, Safeway deferred the gain on the sale of those properties. Under GAAP, Safeway is still considered the owner of certain properties consisting primarily of the properties under development. Consequently, proceeds of $120.1 million received for those properties have been recorded as Other Notes Payable and classified as a cash inflow from financing activities.

Safeway undertook the sale of PDC in connection with the Merger. See Note V.