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SEGMENT INFORMATION | 3 Months Ended
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Mar. 28, 2020
Segment Reporting [Abstract] |
SEGMENT INFORMATION | NOTE 5. SEGMENT INFORMATION At March 28, 2020, the Company had three reportable segments: Business Solutions Division, Retail Division and the CompuCom Division. The Business Solutions Division sells nationally branded as well as the Company’s private branded office supply and adjacency products and services to customers in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada. Business Solutions Division customers are served through a dedicated sales force, catalogs, telesales, and electronically through the Company’s Internet websites. The Retail Division includes a chain of retail stores in the United States, Puerto Rico and the U.S. Virgin Islands, which sell office supplies, technology products and solutions, business machines and related supplies, cleaning, breakroom and facilities products, and office furniture as well as offer business services including copying, printing, mailing, shipping and technology support services. In addition, the print needs for retail and business customers are also facilitated through the Company’s regional print production centers. The CompuCom Division provides IT services and products to enterprise organizations in the United States and Canada, and offers a broad range of solutions including technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions. The retained global sourcing operations previously included in the former International Division are not significant and have been presented as Other. Also included in Other is the elimination of intersegment revenues of $4 million in the first quarter of 2020, and $3 million in the first quarter of 2019. The products and services offered by the Business Solutions Division and the Retail Division are similar, but the CompuCom Division’s offerings are focused on IT services and related products. The Company’s three operating segments are its three reportable segments. The Business Solutions Division, the Retail Division and the CompuCom Division are managed separately as they represent separate channels in the way the Company serves its customers, and they are managed accordingly. The accounting policies for each segment are the same as those described in Note 1. Division operating income is determined based on the measure of performance reported internally to manage the business and for resource allocation. This measure charges to the respective Divisions those expenses considered directly or closely related to their operations and allocates support costs. Certain operating expenses and credits are not allocated to the Business Solutions Division, the Retail Division or the CompuCom Division, including asset impairments and merger and restructuring expenses, as well as expenses and credits retained at the Corporate level, including certain management costs and legacy pension and environmental matters. Other companies may charge more or less of these items to their segments and results may not be comparable to similarly titled measures used by other entities. In addition, the Company regularly evaluates the appropriateness of the reportable segments based on how the business is managed, including decision-making about resources allocation and assessing performance of the segments, particularly in light of organizational changes, merger and acquisition activity and changing laws and regulations. Therefore, the current reportable segments may change in the future. The following is a summary of sales and operating income (loss) by each of the Divisions and Other, reconciled to consolidated totals.
|  | Sales |
|  | First Quarter |
(In millions) |  | 2020 |  |  | 2019 |
Business Solutions Division |  | $ | 1,334 |  |  | $ | 1,344 |
Retail Division |  |  | 1,156 |  |  |  | 1,175 |
CompuCom Division |  |  | 235 |  |  |  | 247 |
Other |  |  | — |  |  |  | 3 |
Total |  | $ | 2,725 |  |  | $ | 2,769 |
|  | Division Operating Income (Loss) |
|  | First Quarter |
(In millions) |  | 2020 |  |  | 2019 |
Business Solutions Division |  | $ | 40 |  |  | $ | 46 |
Retail Division |  |  | 87 |  |  |  | 67 |
CompuCom Division |  |  | 3 |  |  |  | (15 | )
Other |  |  | — |  |  |  | — |
Total |  | $ | 130 |  |  | $ | 98 |
A reconciliation of the measure of Division operating income to Consolidated income before income taxes is as follows:
|  | First Quarter |
(In millions) |  | 2020 |  |  | 2019 |
Total Divisions operating income |  | $ | 130 |  |  | $ | 98 |
Add/(subtract): |  |  |  |  |  |  |  |
Asset impairments |  |  | (12 | ) |  |  | (29 | )
Merger and restructuring expenses, net |  |  | (16 | ) |  |  | (14 | )
Unallocated expenses |  |  | (22 | ) |  |  | (31 | )
Interest income |  |  | 3 |  |  |  | 6 |
Interest expense |  |  | (18 | ) |  |  | (23 | )
Other income, net |  |  | 1 |  |  |  | 2 |
Income before income taxes |  | $ | 66 |  |  | $ | 9 |
The components of goodwill by segment are provided in the following table:
|  | Business Solutions |  |  | Retail |  |  | CompuCom |  |  |  |  |
(In millions) |  | Division |  |  | Division |  |  | Division |  |  | Total |
Balance as of December 28, 2019 |  | $ | 410 |  |  | $ | 78 |  |  | $ | 456 |  |  | $ | 944 |
Acquisitions |  |  | 10 |  |  |  | — |  |  |  | — |  |  |  | 10 |
Foreign currency rate impact |  |  | — |  |  |  | — |  |  |  | (14 | ) |  |  | (14 | )
Balance as of March 28, 2020 |  | $ | 420 |  |  | $ | 78 |  |  | $ | 442 |  |  | $ | 940 |
Refer to Note 2 for additional information on the acquisitions made during the first quarter of 2020. As of March 28, 2020, the Company believes, based on an evaluation of events and circumstances, that an interim impairment test has not been triggered and that its goodwill and indefinite-lived intangible assets continue to be recoverable for all reporting units. The Company is monitoring the performance of its Contract reporting unit, a component of the Business Solutions Division segment, and its CompuCom reporting unit, which both passed the quantitative assessments performed in 2019 with margins in excess of those determined in the Company’s 2018 annual assessment. The Company has taken several actions to improve the future operating performance of CompuCom, including the use of automation and technology to further improve service efficiency, simplifying organizational structures to improve service velocity, and aligning sales efforts to better serve its customers and accelerate cross-selling opportunities. The anticipated impacts of these actions were reflected in key assumptions used in the 2019 quantitative assessment, and if not realized, could result in future impairment of goodwill and indefinite-lived intangible assets for the CompuCom reporting unit. The CompuCom reporting unit has experienced a decline in project-based service revenue late in the first quarter of 2020 due to the impacts of COVID-19 on its customers. This decrease is primarily due to customer-imposed deferrals of projects into future periods and the Company does not expect it to result in a significant impact on its long-term forecast. However, its total operations could be impacted further depending on the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. Accordingly, the Company has performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic, the possibility of declines in revenue beyond the deferral of project revenue and assumptions of the business returning to normal level of operations in future years. Based on the weighted evaluation of these different scenarios, which included adjusted risk profiles, the Company believes that it is not more likely than not that the fair value of its CompuCom reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $442 million. The Contract reporting unit, which is a key part of the Company’s integrated B2B platform, has been negatively impacted by the varying degrees of restrictions imposed late in the first quarter of 2020 by federal, state and local authorities, in response to the rapid spread of the novel coronavirus. The restrictions include the temporary closure of nonessential businesses, which constitute a portion of this reporting unit’s customers, along with the transition of many other business customers to a work-from-home environment and has resulted in decreased demand for the Contract reporting unit’s core product and service offerings. The extent to which the COVID-19 pandemic will impact the operating results of the Contract Reporting unit in the future will depend on numerous evolving factors and future developments, including the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. The Company has performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic and timing for its business-to-business customers returning back to levels of historical operations, as well as opportunities to increase sales in its cleaning and breakroom product category. Based on the weighted evaluation of these different scenarios which included adjusted risk profiles, the Company believes that it is not more likely than not that the fair value of its Contract reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $345 million.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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