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MERGER, RESTRUCTURING, AND OTHER ACCRUALS | 3 Months Ended
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Mar. 28, 2015
MERGER, RESTRUCTURING, AND OTHER ACCRUALS | NOTE 3. MERGER, RESTRUCTURING, AND OTHER ACCRUALS In recent years, the Company has taken actions to adapt to changing and competitive conditions. These actions include closing facilities, consolidating functional activities, eliminating redundant positions, disposing of businesses and assets, and taking actions to improve process efficiencies. In 2013, the OfficeMax, Incorporated merger (the “Merger”) was completed and integration activities similar to the actions described above began and are expected to continue through 2016. The Company assumed certain restructuring liabilities previously recorded by OfficeMax, Incorporated (“OfficeMax”). Merger, restructuring, and other operating expenses, net The Company presents Merger, restructuring and other operating expenses, net on a separate line in the Condensed Consolidated Statements of Operations to identify these activities apart from the expenses incurred to sell to and service its customers. These expenses are not included in the determination of Division operating income. The table below and narrative that follows summarize the major components of Merger, restructuring and other operating expenses, net.
|  | First Quarter |
(In millions) |  | 2015 |  |  | 2014 |
Merger related expenses |  |  |  |  |  |  |  |
Severance, retention, and relocation |  | $ | 5 |  |  | $ | 71 |
Transaction and integration |  |  | 24 |  |  |  | 21 |
Other related expenses (gain) |  |  | (14 | ) |  |  | 4 |
Total Merger related expenses |  |  | 15 |  |  |  | 96 |
International restructuring and certain other expenses |  |  | 13 |  |  |  | 5 |
Staples Acquisition expenses |  |  | 15 |  |  |  | — |
Total Merger, restructuring and other operating expenses, net |  | $ | 43 |  |  | $ | 101 |
Severance, retention, and relocation reflect expenses incurred for the integration of staff functions. Since the second quarter of 2014, the Real Estate Strategy has been sufficiently developed to provide a basis for estimating termination benefits for certain retail and supply chain closures that are expected to extend through 2016. Such benefits are being accrued through the anticipated employee full eligibility date. Because the specific identity of retail locations to be closed is subject to change as implementation of the Real Estate Strategy progresses, estimates are used for the store closure severance accrual. The calculation considers factors such as the expected timing of store closures, terms of existing severance plans, expected employee turnover and attrition. As the integration evolves and additional decisions about the identity and timing of closures are made, more current information will be available and assumptions used in estimating the termination benefits accrual may change. Transaction and integration expenses include integration-related professional fees, incremental temporary contract labor, salary and benefits for employees dedicated to the Merger activity, travel costs, non-capitalizable software integration costs, and other direct costs to combine the companies. Such costs are being recognized as incurred. Other related expenses (gain) primarily relate to facility closure accruals, gains and losses on asset dispositions, and accelerated depreciation. Facility closure expenses include amounts incurred by the Company to close retail stores in the United States as part of the Real Estate Strategy. The Company expects to close approximately 135 retail stores in 2015 and at least 100 stores in 2016. The specific sites to close over this period may be influenced by real estate and other market conditions and, therefore, a reasonable estimate of future facility closure accruals cannot be made at this time. During the first quarter of 2015, the Company sold a warehouse facility that was classified as an asset held for sale at December 27, 2014. The gain of $19 million is included in Merger, restructuring and other operating expenses, net, as the disposition was part of the supply chain integration associated with the Merger. International restructuring and certain other expenses in 2015 include charges related to the European restructuring plan approved in 2014 to realign the organization from a geographic-focus to a business channel-focus (the European restructuring plan). Both the 2015 and 2014 periods include charges related to international organizational changes and facility closures which were started prior to the European restructuring plan. The costs recognized in the first quarter of 2015 include $5 million associated with lease obligations, $5 million of severance and employee benefits, and $3 million of professional fees and other restructuring costs. The European restructuring plan has been approved by all countries’ works councils, with the largest component approved subsequent to March 28, 2015. Approximately $54 million of severance (at current exchange rates) is expected to be accrued over the remainder of 2015. Expenses for facility closures and restructuring activity will be recognized as the related accounting criteria are met. Staples Acquisition expenses for the first quarter of 2015 includes retention accruals and costs associated with regulatory filings. The retention amounts will be paid regardless of whether the transaction is approved and will continue to be accrued through the anticipated closing date which is expected to be before the end of 2015. Asset impairments are not included in the table above. Refer to Note 10 for further information. Merger and restructuring accruals Of the total $43 million Merger, restructuring and other expenses recognized in the first quarter 2015 Condensed Consolidated Statement of Operations, $22 million relates to Merger and restructuring balance sheet accruals and are included as Charges incurred in the table below. The remaining $21 million is excluded from the table below because these items are expensed as incurred, non-cash, or otherwise not associated with Merger and restructuring balance sheet accounts.
(In millions) |  | Beginning Balance |  |  | Charges Incurred |  |  | Cash Payments |  |  | Currency, Lease Accretion and Other Adjustments |  |  | Ending Balance |
2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Termination benefits |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Merger-related accruals |  | $ | 31 |  |  | $ | 7 |  |  | $ | (11 | ) |  | $ | (1 | ) |  | $ | 26 |
European restructuring plan |  |  | 26 |  |  |  | 1 |  |  |  | (1 | ) |  |  | (4 | ) |  |  | 22 |
Other restructuring accruals |  |  | 8 |  |  |  | 3 |  |  |  | (5 | ) |  |  | — |  |  |  | 6 |
|  |  | 65 |  |  |  | 11 |  |  |  | (17 | ) |  |  | (5 | ) |  |  | 54 |
Lease and contract obligations, accruals for facilities closures and other costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Merger-related accruals |  |  | 71 |  |  |  | — |  |  |  | (14 | ) |  |  | — |  |  |  | 57 |
European restructuring plan |  |  | — |  |  |  | 1 |  |  |  | (1 | ) |  |  | 1 |  |  |  | 1 |
Other restructuring accruals |  |  | 35 |  |  |  | 3 |  |  |  | (4 | ) |  |  | 1 |  |  |  | 35 |
Acquired entity accruals |  |  | 36 |  |  |  | 1 |  |  |  | (3 | ) |  |  | — |  |  |  | 34 |
Staples Acquisition related accruals |  |  | — |  |  |  | 6 |  |  |  | — |  |  |  | — |  |  |  | 6 |
|  |  | 142 |  |  |  | 11 |  |  |  | (22 | ) |  |  | 2 |  |  |  | 133 |
Total |  | $ | 207 |  |  | $ | 22 |  |  | $ | (39 | ) |  | $ | (3 | ) |  | $ | 187 |
The $21 million not included in the balance sheet accrual table is comprised of $24 million Merger transaction and integration expenses, $8 million Staples Acquisition transaction and integration expenses, $2 million European restructuring transaction and integration expenses, $6 million primarily related to fixed assets and rent expenses, partially offset by the $19 million gain on the disposition of the warehouse facility associated with the supply chain integration.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 5.P.3) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140864-122747 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 5 -Section P -Subsection 3, 4 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 5.P.4) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 + Details
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