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DISCONTINUED OPERATIONS | 3 Months Ended
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Oct. 27, 2018
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | DISCONTINUED OPERATIONS In conjunction with the Supervalu acquisition, the Company announced its plan to sell the remaining acquired retail operations of Supervalu (“Retail”). The results of operations, financial position and cash flows of Cub Foods, Hornbacher’s, Shoppers and Shop ‘n Save St. Louis and Shop ‘n Save East retail operations have been presented as discontinued operations and the related assets and liabilities have been classified as held-for-sale. On November 7, 2018, the Company announced it had entered into a definitive agreement to sell five of its eight Shop ‘n Save East stores to GIANT Food Store, LLC. The transaction is expected to close in late calendar 2018 or early 2019, subject to customary closing conditions, including compliance with certain federal and state level requirements. The Company continues to pursue the sale of the remaining stores. Subsequent to the first quarter of fiscal 2019, the Company closed the remaining Shop ‘n Save St. Louis retail stores and the distribution center that were not sold prior to the acquisition date. On November 30, 2018, the Company announced that it had entered into a definitive agreement to sell seven of its eight Hornbacher's locations, as well as Hornbacher's newest store currently under development in West Fargo, ND, to Coborn's Inc. (“Coborn’s”). The Hornbacher's store in Grand Forks, ND is not included in the sale to Coborn's and will close pursuant to the terms of the definitive agreement. The transaction is currently expected to close before December 25, 2018, subject to customary closing conditions. As part of the sale, Coborn's will enter into a long-term agreement for the Company to serve as the primary supplier of the Hornbacher's locations and expand its existing supply arrangements for other Coborn’s locations. Operating results of discontinued operations (in thousands) are summarized below:
| Period Ended
| October 27, 2018(1)
Net sales | $ | 46,598 |
Cost of sales | 34,534 |
Gross profit | 12,064 |
Operating expenses | 9,494 |
Operating income | 2,570 |
Interest income | (208 | )
Net periodic benefit income, excluding service cost | (11 | )
Equity in earnings of unconsolidated subsidiaries | (30 | )
Income from discontinued operations before income taxes | 2,819 |
Income tax provision | 749 |
Income from discontinued operations, net of tax | $ | 2,070 |
(1) | These results reflect retail operations from the Supervalu acquisition date of October 22, 2018 to October 27, 2018.
For the first quarter of fiscal 2019, the Company recorded $21.8 million within Net sales from continuing operations attributable to discontinued operations inter-company product purchases, which we expect will continue subsequent to the sale of certain retail banners. These amounts were recorded at gross margin rates consistent with sales to other similar wholesale customers of the acquired Supervalu business. No sales were recorded within continuing operations for retail banners that the Company expects to dispose of without a supply agreement, which were eliminated upon consolidation within continuing operations and amounted to $9.8 million. The carrying amounts (in thousands) of major classes of assets and liabilities that were classified as held-for-sale on the Condensed Consolidated Balance Sheets follows in the table below. The assets and liabilities of discontinued operations were acquired as part of the Supervalu acquisition, and as of October 27, 2018, the purchase price allocation related to these assets and liabilities was preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. Due to the recent closing of the transaction, some amounts reported are provisional pending the review of valuations obtained from third parties. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible asset acquired and liabilities assumed. The fair value of discontinued operations includes estimated consideration expected to be received, less costs to sell. Within the Company’s determination of fair value of the respective disposal groups, the Company incorporates the impact of the fair value of off-balance sheet multiemployer pension plan obligations that it expects to sell so that long-lived assets are not reduced below their fair value.
(in thousands) | October 27, 2018
Current assets |
Cash and cash equivalents | $ | 4,633 |
Receivables, net | 3,504 |
Inventories | 174,835 |
Other current assets | 8,807 |
Total current assets of discontinued operations | 191,779 |
Long-term assets |
Property, plant and equipment, net | 298,707 |
Goodwill | 45,400 |
Intangible assets, net | 76,700 |
Other assets | 1,520 |
Total long-term assets of discontinued operations | 422,327 |
Total assets of discontinued operations | $ | 614,106 |
Current liabilities |
Accounts payable | $ | 61,704 |
Accrued compensation and benefits | 47,045 |
Other current liabilities | 31,861 |
Total current liabilities of discontinued operations | 140,610 |
Long-term liabilities |
Other long-term liabilities | 1,361 |
Total long-term liabilities of discontinued operations | 1,361 |
Total liabilities of discontinued operations | 141,971 |
Net assets of discontinued operations | $ | 472,135 |
Additional Retail Accounting Policies Revenues from retail product sales are recognized at the point of sale upon customer check-out. Sales tax is excluded from Net sales. Limited rights of return exist with our customers due to the nature of the products we sell. Advertising income earned from franchisees that participate in the Company’s retail advertising program are recognized as Net sales. Loyalty program expense in the form of fuel rewards is recognized as a reduction of Net sales. Franchise agreement revenue is recognized within Net sales. Retail advertising expenses are included in cost of sales of discontinued operations, net of cooperative advertising reimbursements. Operating expenses of discontinued operations include employee-related costs, such as salaries and wages, incentive compensation, health and welfare and workers’ compensation, and occupancy costs, including utilities and operating costs of retail stores, and depreciation and amortization expense, impairment charges on property, plant and equipment and other administrative costs. Rent expense on operating leases and capital lease amortization expense of retail stores have not been included in discontinued operations, as we expect to remain primarily obligated under these leases. Refer to Note 14. “Leases” for additional information. Retail inventories are valued at the lower of cost or market under LIFO. Substantially all of our inventory consists of finished goods and are valued under the retail inventory method (“RIM”) or replacement cost method to value discrete inventory items at lower of cost or market under the FIFO method before application of any LIFO reserve.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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