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MERGER, RESTRUCTURING AND OTHER ACTIVITY | 3 Months Ended
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Mar. 27, 2021
Merger Restructuring And Other Activity [Abstract] |
MERGER, RESTRUCTURING AND OTHER ACTIVITY | NOTE 3. MERGER, RESTRUCTURING AND OTHER ACTIVITY Since 2017, the Company has taken actions to optimize its asset base and drive operational efficiencies. These actions include acquiring profitable businesses, closing underperforming retail stores and non-strategic distribution facilities, consolidating functional activities, eliminating redundant positions and disposing of non-strategic businesses and assets. The expenses and any income recognized directly associated with these actions are included in Merger, restructuring and other operating expenses, net on a separate line in the Condensed Consolidated Statements of Operations in order to identify these activities apart from the expenses incurred to sell to and service customers. These expenses are not included in the determination of Division operating income. The table below summarizes the major components of Merger, restructuring and other operating expenses, net.
|  | First Quarter |
(In millions) |  | 2021 |  |  | 2020 |
Merger and transaction related expenses |  |  |  |  |  |  |  |
Transaction and integration |  | $ | 1 |  |  | $ | 7 |
Total Merger and transaction related expenses |  |  | 1 |  |  |  | 7 |
Restructuring expenses |  |  |  |  |  |  |  |
Severance |  |  | 1 |  |  |  | — |
Professional fees |  |  | 1 |  |  |  | 6 |
Facility closure, contract termination, and other expenses, net |  |  | 9 |  |  |  | 3 |
Total Restructuring expenses |  |  | 11 |  |  |  | 9 |
Other operating expenses |  |  |  |  |  |  |  |
Professional fees |  |  | 2 |  |  |  | — |
Total Other operating expenses |  |  | 2 |  |  |  | — |
Total Merger, restructuring and other operating expenses, net |  | $ | 14 |  |  | $ | 16 |
MERGER AND TRANSACTION RELATED EXPENSES In the first quarters of 2021 and 2020, the Company incurred $1 million and $7 million of transaction and integration expenses, respectively. These expenses include legal, accounting, and other third-party expenses incurred in connection with acquisitions and business integration activities primarily related to the CompuCom Division in the first quarter of 2020, and to other acquisitions in the first quarter of 2021. RESTRUCTURING EXPENSES Maximize B2B Restructuring Plan In May 2020, the Company’s Board of Directors approved a restructuring plan to realign the Company’s operational focus to support its “business-to-business” solutions and IT services business units and improve costs (“Maximize B2B Restructuring Plan”). Implementation of the Maximize B2B Restructuring Plan is expected to be substantially completed by the end of 2023. The Maximize B2B Restructuring Plan aims to generate savings through optimizing the Company’s retail footprint, removing costs that directly support the Retail business and additional measures to implement a company-wide low-cost business model, which will then be invested in accelerating the growth of the Company’s business-to-business platform. The plan is broader than restructuring programs the Company has implemented in the past and includes closing and/or consolidating retail stores and distribution facilities and the reduction of up to 13,100 employee positions by the end of 2023. The Company is evaluating the number and timing of retail store and distribution facility closures and/or consolidations, however, it is generally understood that closures will approximate the store’s lease termination date. The Company closed 7 retail stores under the Maximize B2B Restructuring Plan during the first quarter of 2021. The Company had closed 70 retail stores and two distribution facilities prior to the first quarter of 2021 under the Maximize B2B Restructuring Plan. It is anticipated that additional retail stores will be closed in 2021. Total estimated restructuring costs related to the Maximize B2B Restructuring Plan are expected to be up to $143 million, comprised of:
| (a) | severance costs of approximately $55 million;
| (b) | facility closure costs of approximately $51 million, which are mainly related to retail stores; and
| (c) | other costs, including contract termination costs, to facilitate the execution of the Maximize B2B Restructuring Plan of approximately $37 million.
The total costs of up to $143 million above are expected to be cash expenditures through 2023 and funded primarily with cash on hand and cash from operations. The Company incurred $92 million in restructuring expenses to implement the Maximize B2B Restructuring Plan since its inception in 2020 through the end of the first quarter of 2021, of which $33 million were cash expenditures funded primarily with cash on hand and cash from operations. In the first quarter of 2021, the Company incurred $11 million in restructuring expenses associated with the Maximize B2B Restructuring Plan which consisted of $1 million in employee severance, $1 million in third-party professional fees, and $9 million of facility closure, contract termination and other costs. The facility closure costs were mainly related to retail store closure accruals, and other costs mainly related to gains and losses on asset dispositions, and accelerated depreciation. Of these amounts, $5 million were cash expenditures in the first quarter of 202 1. Other Included in restructuring expenses in the first quarter of 2020 were costs incurred in connection with the Business Acceleration Program, a program which was announced in 2019 and concluded at the end of 2020. These costs included third-party professional fees, retail and facility closure costs and other. OTHER OPERATING EXPENSES CompuCom strategic alternatives review In January 2021, the Company’s Board of Directors announced that as a result of a business review of CompuCom, management has initiated a process to explore a value-maximizing sale of the Company’s CompuCom Division to maximize CompuCom’s full potential and drive forward its future value and success. The Company incurred $1 million in third-party professional fees associated with exploring the sale of CompuCom in the first quarter of 2021. USR Parent, Inc. proposals During the first quarter of 2021, the Company received two proposals from USR Parent, Inc., the parent company of Staples Inc. and a portfolio company of Sycamore Partners, to acquire 100% of the Company’s issued and outstanding stock or certain assets of the Company. After careful review and consideration of the proposals and in consultation with the Company’s financial and legal advisors, the Company’s Board of Directors unanimously concluded that the transactions described in the proposals were not in the best interest of the Company and its shareholders, and that there was a more compelling path forward to create value. The Company filed statements on Schedule 14D-9 with the SEC on January 19, 2021 and March 15, 2021 containing its Board of Directors’ recommendation. The Company incurred $1 million in third-party professional fees related to the evaluation of USR Parent, Inc.’s proposals in the first quarter of 2021, including expenses incurred in connection with a Civil Investigative Demand (“CID”) from the U.S. Federal Trade Commission (“FTC”), which is conducting an investigation of USR Parent, Inc.’s proposals. On March 31, 2021, USR Parent, Inc. publicly announced that it decided to defer the March 2021 launch of a tender offer for the Company’s common stock while reserving the right to commence one in the future. The Company has received no additional communications from USR Parent, Inc. since USR Parent Inc.’s March 31 public communication. Accordingly, in order to relieve the Company from the continuation of a costly and burdensome process, the FTC has agreed to defer requiring further responses from the Company unless and until USR Parent, Inc. formally launches a tender offer or the parties execute a negotiated agreement. Additionally, on May 4, 2021 the Canadian Competition Bureau (the “Bureau”) advised the Company that it has determined that USR Parent, Inc.’s proposed acquisition of the Company would likely result in a substantial lessening or prevention of competition in the sale of business essentials to enterprise customers in Canada. While it is not known for certain what the Bureau would do if USR Parent, Inc. actually launches a tender offer in the future, the Bureau’s determination signals that the Bureau would likely challenge the acquisition. The Company cannot be certain that USR Parent, Inc. will not commence a tender offer in the future. The Company anticipates that it will incur additional significant legal and other expenses in the future if USR Parent, Inc. pursues a tender offer. MERGER, RESTRUCTURING AND OTHER ACCRUALS The activity in the merger, restructuring and other accruals in the first quarter of 2021 is presented in the table below. Certain merger, restructuring and other charges are excluded from the table because they are paid as incurred or non-cash, such as accelerated depreciation and gains and losses on asset dispositions.
|  | Balance as of |  |  |  |  |  |  |  |  |  |  | Balance as of |
|  | December 26, |  |  | Charges |  |  | Cash |  |  | March 27, |
(In millions) |  | 2020 |  |  | Incurred |  |  | Payments |  |  | 2021 |
Termination benefits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Maximize B2B Restructuring Plan |  |  | 30 |  |  |  | — |  |  |  | (2 | ) |  |  | 28 |
Business Acceleration Program |  |  | 8 |  |  |  | — |  |  |  | — |  |  |  | 8 |
Lease and contract obligations, accruals for facilities closures and other costs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Merger-related accruals |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Maximize B2B Restructuring Plan |  |  | 10 |  |  |  | 5 |  |  |  | (3 | ) |  |  | 12 |
Business Acceleration Program |  |  | 1 |  |  |  | — |  |  |  | (1 | ) |  |  | — |
Comprehensive Business Review |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
CompuCom strategic alternatives review |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
USR Parent, Inc. proposals |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Total |  | $ | 52 |  |  | $ | 7 |  |  | $ | (6 | ) |  | $ | 53 |
The short-term and long-term components of these liabilities are included in Accrued expenses and other current liabilities and Deferred income taxes and other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheets.

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