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DISCONTINUED OPERATIONS | 9 Months Ended
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May 02, 2020
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | NOTE 18—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. As of May 2, 2020, the Company held the remaining Shoppers stores and the Cub Foods business for sale. As discussed in more detail in Note 19—Subsequent Events, subsequent to the end of the third quarter of fiscal 2020, the Company determined it would no longer classify the Cub Foods business and the majority of the remaining Shoppers locations (collectively “Remaining Retail”) as discontinued operations. The Company may incur additional costs and charges in the future related to the Remaining Retail business if these locations are subsequently sold, if indicators exist that the business may be impaired while classified as held and used as continuing operations, or if the Company incurs additional wind-down or employee-related costs or charges. In the second quarter of fiscal 2020, the Company entered into agreements to sell 13 Shoppers stores and decided to close six locations. During fiscal 2020 year-to-date, within discontinued operations the Company incurred approximately $39.1 million in pre-tax aggregate costs and charges related to Shoppers, consisting of $14.2 million of operating losses and transaction costs during the period of wind-down, $15.1 million of property and equipment impairment charges related to impairment reviews, $8.7 million of severance costs and $1.1 million of losses on sale. The Company expects to incur additional related costs and charges in the fourth quarter of fiscal 2020. In the second and third quarters of fiscal 2020, the Company reviewed the recoverability of the remaining assets held for sale and assessed the remaining composition of the Shoppers disposal group based on updated fair values. In fiscal 2019, the Company completed the sale of seven of its eight Hornbacher's locations, as well as Hornbacher’s newest store in West Fargo, North Dakota, to Coborn's Inc. (“Coborn’s”). The Company did not incur a gain or loss on the sale of this disposal group. The Hornbacher’s store in Grand Forks, North Dakota was not included in the sale to Coborn’s and has closed pursuant to the terms of the definitive agreement. As part of the sale, Coborn's entered 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. In the fourth quarter of fiscal 2019, the Company completed the sale of the pharmacy prescription files and inventory of the Shoppers disposal group. As of May 2, 2020, only the Cub Foods and Shoppers disposal groups continue to be classified as operations held for sale as discontinued operations. Operating results of discontinued operations are summarized below:
| 13-Week Period Ended |  | 39-Week Period Ended
(In thousands) | May 2, 2020 |  | April 27, 2019 |  | May 2, 2020 |  | April 27, 2019(1)
Net sales | $ | 667,003 |  |  | $ | 640,121 |  |  | $ | 1,891,529 |  |  | $ | 1,413,756 |
Cost of sales | 479,175 |  |  | 463,157 |  |  | 1,371,253 |  |  | 1,031,330 |
Gross profit | 187,828 |  |  | 176,964 |  |  | 520,276 |  |  | 382,426 |
Operating expenses | 128,232 |  |  | 144,547 |  |  | 394,080 |  |  | 310,751 |
Restructuring expenses and charges | 8,091 |  |  | 644 |  |  | 40,304 |  |  | 11,026 |
Operating income | 51,505 |  |  | 31,773 |  |  | 85,892 |  |  | 60,649 |
Other expense (income), net | 2,242 |  |  | (369 | ) |  | 1,192 |  |  | (957 | )
Income from discontinued operations before income taxes | 49,263 |  |  | 32,142 |  |  | 84,700 |  |  | 61,606 |
Income tax provision | 12,071 |  |  | 7,772 |  |  | 20,447 |  |  | 13,759 |
Income from discontinued operations, net of tax | $ | 37,192 |  |  | $ | 24,370 |  |  | $ | 64,253 |  |  | $ | 47,847 |
(1) | These results reflect retail operations from the Supervalu acquisition date of October 22, 2018 to April 27, 2019.
The Company recorded $273.2 million and $227.1 million within Net sales from continuing operations attributable to discontinued operations inter-company product purchases in the third quarters of fiscal 2020 and 2019, respectively, and $756.9 million and $505.5 million in fiscal 2020 and 2019 year-to-date, respectively, which the Company expects 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 $99.3 million and $134.9 million in the third quarters of fiscal 2020 and 2019, respectively, and $320.0 million and $308.0 million in fiscal 2020 and 2019 year-to-date, respectively. 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.
(In thousands) |  | May 2, 2020 |  | August 3, 2019
Current assets |  |  |  |
Cash and cash equivalents |  | $ | 2,312 |  |  | $ | 2,917 |
Receivables, net |  | 11,822 |  |  | 1,471 |
Inventories |  | 110,449 |  |  | 129,142 |
Other current assets |  | 4,272 |  |  | 10,199 |
Total current assets of discontinued operations |  | 128,855 |  |  | 143,729 |
Long-term assets |  |  |  |
Property and equipment |  | 269,272 |  |  | 301,395 |
Intangible assets |  | 49,687 |  |  | 48,788 |
Other assets |  | 2,297 |  |  | 1,882 |
Total long-term assets of discontinued operations |  | 321,256 |  |  | 352,065 |
Total assets of discontinued operations |  | $ | 450,111 |  |  | $ | 495,794 |
Current liabilities |  |  |  |
Accounts payable |  | $ | 73,546 |  |  | $ | 61,634 |
Accrued compensation and benefits |  | 42,679 |  |  | 45,887 |
Other current liabilities |  | 19,278 |  |  | 14,744 |
Total current liabilities of discontinued operations |  | 135,503 |  |  | 122,265 |
Long-term liabilities |  |  |  |
Other long-term liabilities |  | 8,899 |  |  | 1,923 |
Total liabilities of discontinued operations |  | 144,402 |  |  | 124,188 |
Net assets of discontinued operations |  | $ | 305,709 |  |  | $ | 371,606 |
As of May 2, 2020, the fair value of disposal groups were estimated based on each group’s expected consideration less costs to sell. Estimated fair values include indications of values that are based on the stand-alone fair values of the long-lived assets of the disposal group exclusive of transferring multiemployer pension plan obligations. The sale of the Company’s retail disposal groups may result in charges that may be materially different than the Company’s prior estimates. Estimates most sensitive to changes that could result in material charges include expected consideration, including the extent to which the Company is able transfer multiemployer pension plan obligations, and the potential sale of the disposal groups at a lower level.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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