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SEGMENT INFORMATION | 6 Months Ended
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Jun. 26, 2021
Segment Reporting [Abstract] |
SEGMENT INFORMATION | NOTE 5. SEGMENT INFORMATION At June 26, 2021, the Company had three reportable segments: Business Solutions Division, Retail Division and 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, personal protective equipment, 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. On June 29, 2021, management obtained the Board of Directors’ alignment and committed to a plan to sell its CompuCom Division through a single disposal group. The CompuCom disposal group has met the accounting criteria to be classified as held for sale as of June 29, 2021 and will be presented as such in the third quarter of 2021. In addition, the Company intends to present the operating results and cash flows of its CompuCom Division as discontinued operations for all periods presented in future filings. Refer to Note 13 for additional information. The retained global sourcing operations previously included in the former International Division are not significant and have been presented as Other. The operating results of BuyerQuest are not significant in the second quarter and first half of 2021 and are included in Other since its acquisition on January 29, 2021. Also included in Other is the elimination of intersegment revenues of $6 million and $10 million for the second quarter and first half of 2021, respectively, and $3 million and $7 million for the second quarter and first half of 2020, 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 2020 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, restructuring and other operating 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 |
|  | Second Quarter |  |  | First Half |
(In millions) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Business Solutions Division |  | $ | 1,146 |  |  | $ | 1,024 |  |  | $ | 2,274 |  |  | $ | 2,358 |
Retail Division |  |  | 914 |  |  |  | 912 |  |  |  | 1,953 |  |  |  | 2,069 |
CompuCom Division |  |  | 222 |  |  |  | 214 |  |  |  | 418 |  |  |  | 450 |
Other |  |  | 4 |  |  |  | 8 |  |  |  | 7 |  |  |  | 6 |
Total |  | $ | 2,286 |  |  | $ | 2,158 |  |  | $ | 4,652 |  |  | $ | 4,883 |
|  | Division Operating Income (Loss) |
|  | Second Quarter |  |  | First Half |
(In millions) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Business Solutions Division |  | $ | 31 |  |  | $ | 13 |  |  | $ | 48 |  |  | $ | 53 |
Retail Division |  |  | 44 |  |  |  | 18 |  |  |  | 145 |  |  |  | 106 |
CompuCom Division |  |  | 3 |  |  |  | 4 |  |  |  | 2 |  |  |  | 7 |
Other |  |  | (2 | ) |  |  | — |  |  |  | (2 | ) |  |  | — |
Total |  | $ | 76 |  |  | $ | 35 |  |  | $ | 193 |  |  | $ | 166 |
A reconciliation of the measure of Division operating income to Consolidated loss before income taxes is as follows:
|  | Second Quarter |  |  | First Half |
(In millions) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Total Divisions operating income |  | $ | 76 |  |  | $ | 35 |  |  | $ | 193 |  |  | $ | 166 |
Add/(subtract): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset impairments |  |  | (115 | ) |  |  | (401 | ) |  |  | (127 | ) |  |  | (413 | )
Merger, restructuring and other operating expenses, net |  |  | (7 | ) |  |  | (65 | ) |  |  | (21 | ) |  |  | (81 | )
Unallocated expenses |  |  | (32 | ) |  |  | (25 | ) |  |  | (67 | ) |  |  | (48 | )
Interest income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |
Interest expense |  |  | (6 | ) |  |  | (11 | ) |  |  | (14 | ) |  |  | (29 | )
Loss on extinguishment and modification of debt |  |  | — |  |  |  | (12 | ) |  |  | — |  |  |  | (12 | )
Other income, net |  |  | 5 |  |  |  | 4 |  |  |  | 16 |  |  |  | 5 |
Loss before income taxes |  | $ | (79 | ) |  | $ | (475 | ) |  | $ | (20 | ) |  | $ | (409 | )
The components of goodwill by segment are provided in the following table:
|  | Business Solutions |  |  | Retail |  |  | CompuCom |  |  |  |  |  |  |  |  |
(In millions) |  | Division |  |  | Division |  |  | Division |  |  | Other |  |  | Total |
Balance as of December 26, 2020 |  | $ | 316 |  |  | $ | 78 |  |  | $ | 215 |  |  | $ | — |  |  | $ | 609 |
Acquisitions |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 67 |  |  |  | 68 |
Impairments |  |  | — |  |  |  | — |  |  |  | (103 | ) |  |  | — |  |  |  | (103 | )
Foreign currency rate impact |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Balance as of June 26, 2021 |  | $ | 317 |  |  | $ | 78 |  |  | $ | 113 |  |  | $ | 67 |  |  | $ | 575 |
Additions to goodwill relate to acquisitions made during the first half of 2021, as well as the impact of purchase accounting adjustments associated with 2020 acquisitions. As disclosed in Note 2, these adjustments were insignificant individually and in the aggregate to the Company’s Condensed Consolidated Financial Statements. Refer to Note 2 for additional information on the acquisitions made during the first half of 2021. 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. The most recent annual impairment assessment was performed during the fourth quarter of 2020, using a quantitative assessment for all reporting units. The quantitative assessment combined the income approach and the market approach valuation methodologies and concluded that the fair value of all the Company’s reporting units exceed their carrying amounts. The margin of passage for the CompuCom and Contract reporting units during this assessment were approximately 12%. The Contract reporting unit is a component of the Business Solutions Division segment. During the second quarter of 2021, the Company determined that an indicator of potential impairment existed to require an interim quantitative goodwill impairment test for its CompuCom reporting unit, due to the continued macroeconomic impacts of COVID-19 on CompuCom’s current and projected future results of operations as further described below. The quantitative goodwill impairment test, which combined the income approach and market approach valuation methodologies, indicated that the carrying value of the CompuCom reporting unit exceeded its fair value by $103 million. As a result, the Company recorded a partial goodwill impairment charge of $103 million in the second quarter of 2021 associated with the CompuCom reporting unit. This non-cash impairment charge is presented within the Asset Impairment line in the accompanying Condensed Consolidated Statements of Operations. After the impairment charge, the CompuCom reporting unit has remaining goodwill of $113 million as of June 26, 2021. The decline in the fair value of the CompuCom reporting unit resulted from continued macroeconomic impacts of COVID-19, particularly as it relates to the disruptions to the operations of its business customers, which lowered the projected revenue growth rate and profitability level of the reporting unit. The duration of the impacts of the pandemic are expected to be longer than previously anticipated for CompuCom, which has significantly impacted the Company’s expectations on timing for its customers returning back to levels of historical operations, impacting annuity-based and project-based service revenues, as well as product revenues. In addition, the Company has experienced an increase in product costs due to supply constraints, which had a negative impact on its profitability levels, and is expected to further impact future periods. In addition, the consideration of incremental risk associated with the continued uncertainty related to the pace of the economic recovery was also a factor that contributed to the decline in the fair value of the reporting unit. The fair value estimate for the reporting unit was 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 unit 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 the Company’s 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 unit. CompuCom’s tradename, which is an indefinite-lived intangible asset, was also tested for impa irment 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 m illion in the second quarter of 2021 related to this asset. The Company is monitoring the performance of its Contract reporting unit. The Company’s Contract reporting unit, which had also been negatively impacted by COVID-19, has experienced partial recovery as the impacts of the pandemic on its business customers have begun to recede in the second quarter of 2021. The Contract reporting units’ operating performance and future outlook are in line with the Company’s forecasts used in determining the fair value estimates in the most recent quantitative annual impairment test. Accordingly, there are no impairment indicators identified for this reporting unit as of June 26, 2021. The Company also did not identify indicators of impairment related to its other reporting units, which mainly serve consumers through its 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. If the operating results of the Company’s reporting units deteriorate in the future, it may cause the fair value of one or more of the reporting units to fall below their carrying amount, resulting in additional goodwill impairment charges.

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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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