NOTE 2—BUSINESS AND ASSET ACQUISITIONS

Associated Grocers of Florida, Inc.

On December 8, 2017, we completed the acquisition of Associated Grocers of Florida, Inc. (“AG Florida”) pursuant to the terms of an Agreement and Plan of Merger dated October 17, 2017 by and among Supervalu, a then wholly owned subsidiary of Supervalu (“AG Merger Sub”), and AG Florida. AG Florida was a retailer-owned cooperative. AG Florida distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia.

At the closing of the transaction, AG Merger Sub merged with and into AG Florida and AG Florida became a wholly owned subsidiary of Supervalu. The transaction was valued at $193, comprised of $131 in cash for 100 percent of the outstanding stock of AG Florida plus the assumption and payoff of AG Florida’s net debt of $62 at closing. We incurred merger and integration costs of $5 in fiscal 2018 related to the AG Florida acquisition.

Acquisition of Unified Grocers, Inc.

On June 23, 2017, we completed the acquisition of Unified Grocers, Inc. (“Unified”) pursuant to the terms of an Agreement and Plan of Merger dated April 10, 2017 by and among Supervalu, West Acquisition Corporation, a then wholly owned subsidiary of Supervalu (“Merger Sub”), and Unified. The transaction was valued at $390, comprised of $114 in cash for 100 percent of the outstanding stock of Unified plus the assumption and payoff of Unified’s net debt of $276 at closing.

At the closing of the transaction, Merger Sub merged with and into Unified. As a result of the transaction, Unified became a wholly owned subsidiary of Supervalu. We incurred merger and integration costs of $32 in fiscal 2018 related to the Unified acquisition.

The tables immediately below summarize the preliminary fair values assigned to Unified’s and AG Florida’s net assets acquired. As of February 24, 2018, the fair value allocation for each of the acquisitions was preliminary and will be finalized when the valuation is completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. Our estimates and assumptions are subject to change during the measurement period (up to one year from the applicable acquisition date), as we finalize the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisitions. The primary areas of the purchase price allocations that are not yet finalized relate to real and personal property, identifiable intangible assets, goodwill, income taxes and deferred taxes.



	Unified						AG Florida
	As Originally Reported			As Revised			As Originally Reported
Cash and cash equivalents	$	9		$	9		$	1
Accounts receivable	176			178			49
Inventories	237			237			48
Other current assets	31			24			4
Property, plant and equipment	285			285			84
Goodwill	29			26			44
Intangible assets	54			56			52
Deferred tax assets	(19		)	(13		)	(28		)
Other assets	65			65			4
Accounts payable	(255		)	(255		)	(53		)
Other current liabilities	(89		)	(89		)	(13		)
Long-term debt and capital lease obligations	(270		)	(270		)	(60		)
Pension and other postretirement benefit obligations	(103		)	(101		)	—
Other liabilities assumed	(36		)	(38		)	(1		)
Total fair value of net assets acquired	114			114			131
Assumed obligations to make patronage payments to member-owners	—			—			5
Less cash acquired	(9		)	(9		)	(1		)
Total consideration for acquisition, less cash acquired	$	105		$	105		$	135

Recognized goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition.

As part of the acquisitions of Unified and AG Florida we recognized the following finite lived intangible assets:



	Estimated Useful Life (in years)	Amounts Acquired
Customer relationships	15 years	$	41
Favorable operating leases	3-14 years	7
Trade names	14 years	8
Total Unified finite-lived intangibles acquired		$	56
Customer relationships and supply agreements	15 years	47
Favorable operating leases	2-5 years	5
Total AG Florida finite-lived intangibles acquired		$	52

Combined Results

The following unaudited pro forma consolidated condensed financial results of operations are presented as if the AG Florida and Unified acquisitions were consummated on February 28, 2016, the beginning of the comparable prior annual reporting period:



	2018		2017⁽¹⁾
Net sales	$	15,892	$	15,323
Net earnings from continuing operations attributable to SUPERVALU INC.	$	48	$	20
Basic net earnings from continuing operations per share attributable to SUPERVALU INC.	$	1.24	$	0.52
Diluted net earnings from continuing operations per share attributable to SUPERVALU INC.	$	1.24	$	0.52


(1)	This unaudited pro forma financial information is based on Unified’s and AG Florida’s historical reporting periods. The results reflect Unified’s and AG Florida’s 52-week fiscal periods ended December 31, 2016 and January 14, 2017, respectively.

As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined companies would have been had the acquisitions occurred at the beginning of the period being presented, nor are they indicative of future results of operations.

Cub Foods Franchised Stores

In fiscal 2018, we paid $6 to acquire the minority equity interests of six limited liability companies that own and operate six Cub Foods stores. We now own 100 percent of these companies. The results from these companies will continue to be presented on a consolidated basis in our consolidated financial statements.

Distribution Center Asset Acquisitions

In fiscal 2018, we paid $61 to acquire the land and building for a distribution center located in Joliet, IL, and we also paid $37 to acquire the land and building for a distribution center located in Harrisburg, PA. The consideration paid for the acquired assets was allocated based on the proportionate fair value of the underlying acquired assets prior to the facilities being placed into service.

Other Acquisitions

The Consolidated Financial Statements reflect the final purchase accounting allocations of the acquisitions discussed below. Pro forma information for the acquisitions discussed below are not presented since the results of operations of the acquired businesses, both individually and in the aggregate, are not material to our Consolidated Financial Statements.

During fiscal 2016, we paid $7 to acquire equipment and leasehold improvements, identifiable finite-lived intangible assets and inventories of four retail stores from multiple Wholesale customers. The purchase price was allocated to the acquired store assets and such assets were recognized at their estimated fair values and included inventories, property, plant and equipment, and goodwill.