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SEGMENT INFORMATION | 9 Months Ended
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Sep. 26, 2020
Segment Reporting [Abstract] |
SEGMENT INFORMATION | NOTE 5. SEGMENT INFORMATION At September 26, 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, digital imaging, 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 $5 million and $12 million for the third quarter and year-to-date 2020, respectively, and $3 million and $9 million for the third quarter and year-to-date 2019, respectively. 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. The accounting policies for each segment are the same as those described in Note 1 of the 2019 Form 10-K. 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 |
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Business Solutions Division |  | $ | 1,197 |  |  | $ | 1,350 |  |  | $ | 3,554 |  |  | $ | 4,022 |
Retail Division |  |  | 1,147 |  |  |  | 1,177 |  |  |  | 3,216 |  |  |  | 3,352 |
CompuCom Division |  |  | 197 |  |  |  | 252 |  |  |  | 646 |  |  |  | 758 |
Other |  |  | (2 | ) |  |  | 3 |  |  |  | 6 |  |  |  | 7 |
Total |  | $ | 2,539 |  |  | $ | 2,782 |  |  | $ | 7,422 |  |  | $ | 8,139 |
|  | Division Operating Income (Loss) |
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Business Solutions Division |  | $ | 45 |  |  | $ | 71 |  |  | $ | 98 |  |  | $ | 203 |
Retail Division |  |  | 119 |  |  |  | 84 |  |  |  | 224 |  |  |  | 160 |
CompuCom Division |  |  | 3 |  |  |  | 3 |  |  |  | 10 |  |  |  | (11 | )
Other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 167 |  |  | $ | 158 |  |  | $ | 332 |  |  | $ | 352 |
A reconciliation of the measure of Division operating income to Consolidated loss before income taxes is as follows:
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Total Divisions operating income |  | $ | 167 |  |  | $ | 158 |  |  | $ | 332 |  |  | $ | 352 |
Add/(subtract): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset impairments |  |  | (10 | ) |  |  | (5 | ) |  |  | (423 | ) |  |  | (50 | )
Merger and restructuring expenses, net |  |  | (26 | ) |  |  | (22 | ) |  |  | (107 | ) |  |  | (105 | )
Unallocated expenses |  |  | (29 | ) |  |  | (23 | ) |  |  | (75 | ) |  |  | (80 | )
Interest income |  |  | — |  |  |  | 5 |  |  |  | 3 |  |  |  | 16 |
Interest expense |  |  | (6 | ) |  |  | (22 | ) |  |  | (35 | ) |  |  | (68 | )
Loss on extinguishment and modification of debt |  |  | — |  |  |  | — |  |  |  | (12 | ) |  |  | — |
Other income, net |  |  | 3 |  |  |  | 2 |  |  |  | 7 |  |  |  | 7 |
Income (loss) before income taxes |  | $ | 99 |  |  | $ | 93 |  |  | $ | (310 | ) |  | $ | 72 |
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 |  |  | 21 |  |  |  | — |  |  |  | — |  |  |  | 21 |
Foreign currency rate impact |  |  | — |  |  |  | — |  |  |  | (8 | ) |  |  | (8 | )
Impairments |  |  | (115 | ) |  |  | — |  |  |  | (237 | ) |  |  | (352 | )
Balance as of September 26, 2020 |  | $ | 316 |  |  | $ | 78 |  |  | $ | 211 |  |  | $ | 605 |
Refer to Note 2 for additional information on the acquisitions made year-to-date 2020. Goodwill and indefinite-lived intangible assets are tested for impairment annually as of the first day of fiscal December or more frequently when events or changes in circumstances indicate that impairment may have occurred. During the second quarter of 2020, due to the macroeconomic impacts of COVID-19 on the Company's current and projected future results of operations, the Company determined that an indicator of potential impairment existed requiring an interim quantitative goodwill impairment test for its CompuCom and Contract reporting units. The Contract reporting unit is a component of the Business Solutions Division segment. The quantitative goodwill impairment test indicated that the carrying value of the CompuCom and Contract reporting units exceeded their fair value by $237 million and $115 million, respectively. As a result, the Company recorded partial goodwill impairment charges of $237 million and $115 million in the second quarter of 2020 associated with the CompuCom and Contract reporting units, respectively. These non-cash impairment charges are presented within the Asset impairments line for year-to-date 2020 in the accompanying Condensed Consolidated Statements of Operations. At September 26, 2020, the CompuCom reporting unit and the Contract reporting unit have goodwill of $211 million and $241 million, respectively. The decline in the fair values of the CompuCom and Contract reporting units resulted from macroeconomic impacts of COVID-19, particularly as it relates to the restrictions and closures imposed on their business customers, which lowered the projected revenue growth rates and profitability levels of the reporting units. The duration of the impacts of the pandemic became longer than anticipated in the first quarter of 2020, which significantly impacted the Company’s expectations on timing for its customers returning back to levels of historical operations. For its CompuCom reporting unit, the Company had begun to experience a decline in project-based service revenue due to customer-imposed deferrals late in the first quarter of 2020. During the second quarter of 2020, declines in project-based service revenue continued to deteriorate at a faster pace due to both customer-imposed deferrals and cancellations. The Company also started to experience declines in its annuity-based service revenue from reduced service volume and declines in its product revenue from deferred or cancelled customer spend on product purchases, due to the continued disruption in the activities of its business customers during the second quarter of 2020. For its Contract reporting unit, the Company had begun experiencing decreased demand for its core product and service offerings late in the first quarter of 2020, mainly as a result of 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. The disruption on the Contract reporting unit’s business customers continued through the second quarter of 2020 as a portion of these businesses are still operating at reduced activity levels or remain closed. During the second quarter, the opportunities related to increased sales in cleaning and breakroom supplies and personal protective equipment also did not materialize at levels that were anticipated. In addition, the consideration of incremental risk associated with the uncertainty related to the pace of the economic recovery was also a factor that contributed to the decline in the fair values of both reporting units. The fair value estimates for both reporting units were based on a blended analysis of the present value of future discounted cash flows and market value approach. The significant estimates used in the discounted cash flow model included the Company’s weighted average cost of capital, projected cash flows and the long-term rate of growth. The assumptions were based on the actual historical performance of the reporting units and took into account the recent and continued weakening of operating results as well as the anticipated rate of recovery, and implied risk premiums based on market prices of our equity and debt as of the assessment date. Significant estimates in the market approach model included identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting units. CompuCom’s tradename, which is an indefinite-lived intangible asset, was also tested for impairment using the relief from royalty method and was determined to be impaired as its carrying value exceeded its fair value by $11 million. Accordingly, the Company recorded an impairment charge of $11 million in the second quarter of 2020 related to this asset. During the third quarter of 2020, the CompuCom and Contract reporting units continued to experience the negative impacts of COVID-19, which are consistent with the factors discussed above that gave rise to the decline in their fair values. The CompuCom and Contract reporting units’ operating performance and future outlook are in line with the Company’s revised forecasts used in determining the fair value estimates in the second quarter quantitative impairment test. Accordingly, there are no impairment indicators identified for these reporting units as of September 26, 2020. The Company also did not identify indicators of impairment related to its other reporting units, which mainly serve consumers through our retail stores and eCommerce platform and have been performing in accordance with forecasts. The Company will continue to evaluate the recoverability of goodwill at the reporting unit level on an annual basis and whenever events or changes in circumstances indicate there may be a potential impairment.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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