Discontinued Operations

9 Months Ended

Nov. 29, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

On March 21, 2013, the Company sold NAI to AB Acquisition, which resulted in the sale of the NAI banners, including Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market and related Osco and Sav-on in-store pharmacies (collectively, the “NAI Banners”). The 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.

In connection with the sale of NAI, the Company entered into various agreements with AB Acquisition and its affiliates related to on-going operations, including the TSA and operating and supply agreements. These arrangements had initial terms ranging 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. Each TSA had an initial term expiring on September 21, 2015, subject to annual renewal by notice given at least 12 months prior to expiration of the then current term. On September 12, 2014, NAI and Albertson’s LLC each notified the Company that it was exercising its right to renew the term of its respective TSA for an additional year. In addition to providing services under the TSA, the Company also receives services from NAI and Albertson’s LLC under the TSA. On September 17, 2014, the Company notified each of NAI and Albertson’s LLC that it was exercising its right to renew the terms of the TSA for an additional year. Pursuant to these notices, the TSA will now expire on September 21, 2016 unless renewed again by notice given no later than September 21, 2015. The TSA may be extended further in one year increments with a one year notice. The Company recognized $43 and $48 in TSA fees earned during the third quarters of fiscal 2015 and 2014, respectively, including$4under the first-year transitional fee provisions recognized during the third quarter of fiscal 2014. The Company recognized $145 and $194 in TSA fees earned during the year-to-date periods ended November 29, 2014 and November 30, 2013, respectively, including $58 under the first-year transitional fee provisions recognized during the year-to-date period ended November 30, 2013. TSA fees earned are reflected in Net sales in the Condensed Consolidated Statements of Operations. 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.

During the year-to-date period ended November 30, 2013, the Company received net proceeds of approximately $100 and a short-term note receivable of approximately $44 for the stock of NAI. During fiscal 2013, the Company recorded a preliminary estimated pre-tax loss on contract for the disposal of NAI of approximately $1,150 and a pre-tax property, plant and equipment-related impairment of $203. The loss on sale calculation was finalized during fiscal 2014, including the finalization of the working capital adjustment. 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 pre-tax reductions to the preliminary estimated loss on sale of NAI of $85 and $5 during the first and second quarters of fiscal 2014, respectively, which was recorded as a component of Income (loss) from discontinued operations, net of tax in the Condensed 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:

	Third Quarter Ended						Year-To-Date Ended
	November 29,   2014   (12 weeks)			November 30,   2013   (12 weeks)			November 29,   2014   (40 weeks)			November 30,   2013   (40 weeks)
Net sales	$	—		$	—		$	—		$	1,235
Income before income taxes from discontinued operations	—			5			5			125
Income tax (benefit) provision	(69		)	6			(63		)	(65		)
Income (loss) from discontinued operations, net of tax	$	69		$	(1	)	$	68		$	190

Income before income taxes from discontinued operations for the year-to-date period ended November 29, 2014 primarily reflects $5 of property tax refunds and interest income resulting from settlement of income tax audits.

The income tax benefit included as a component of Income from discontinued operations, net of tax for the third quarter and year-to-date period ended November 29, 2014 includes $69 and $65 of net discrete tax benefits, respectively, primarily related to tangible property repair regulations and other deduction-related changes. In connection with discussions on a possible amendment to the TSA, the Company is in discussions with NAI and Albertson’s LLC on whether the Company will pay an amount equivalent to any portion of the related tax refund to NAI and Albertson’s LLC.  The discussions on a possible amendment to the TSA are to address operational considerations that could arise as a result of the Safeway Merger and certain other matters related to the TSA. See Note 12—Commitments, Contingencies and Off-Balance Sheet Arrangements. The income tax benefit included as a component of income from discontinued operations, net of tax for the third quarter and year-to-date periods ended November 30, 2013 included $5 of discrete tax expenses and $112 of net discrete tax benefits, respectively, primarily resulting from the settlement of Internal Revenue Service audits for the fiscal 2010, 2009 and 2008 tax years.

The Company recorded $0 and $52 within Net sales of continuing operations related to wholesale distribution to certain NAI Banners during the third quarters of fiscal 2015 and 2014, respectively, and $38 and $153 during the year-to-date periods ended November 29, 2014 and November 30, 2013, respectively. In addition, the Company recorded $42 within Net Sales of continuing operations during the third quarters of fiscal 2015 and 2014, and $136 and $134 during the year-to-date periods ended November 29, 2014 and November 30, 2013, respectively, related to wholesale distribution of certain products to stores owned by Albertson’s LLC that were not part of AB Acquisition’s purchase of NAI.