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MERGER, RESTRUCTURING AND OTHER ACTIVITY | 3 Months Ended
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Mar. 26, 2022
Merger Restructuring And Other Activity [Abstract] |
MERGER, RESTRUCTURING AND OTHER ACTIVITY | NOTE 2. MERGER, RESTRUCTURING AND OTHER ACTIVITY 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) |  | 2022 |  |  | 2021 |
Merger and transaction related expenses |  |  |  |  |  |  |  |
Transaction and integration |  | $ | — |  |  | $ | 1 |
Total Merger and transaction related expenses |  |  | — |  |  |  | 1 |
Restructuring expenses |  |  |  |  |  |  |  |
Severance |  |  | — |  |  |  | 1 |
Professional fees |  |  | — |  |  |  | 1 |
Facility closure, contract termination, and other expenses, net |  |  | 1 |  |  |  | 9 |
Total Restructuring expenses, net |  |  | 1 |  |  |  | 11 |
Other operating expenses |  |  |  |  |  |  |  |
Professional fees |  |  | 9 |  |  |  | 1 |
Total Other operating expenses |  |  | 9 |  |  |  | 1 |
Total Merger, restructuring and other operating expenses, net |  | $ | 10 |  |  | $ | 13 |
MERGER AND TRANSACTION RELATED EXPENSES In the first quarter of 2022, the Company did not incur any transaction and integration expenses. In the first quarter of 2021, the Company incurred transaction and integration expenses of $1 million, primarily related to its acquisition of BuyerQuest Holdings, Inc. (“BuyerQuest”), which is part of its Varis Division. 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 6 retail stores during the first quarter of 2022, 111 retail stores in 2021, and 70 retail stores and two distribution facilities in 2020 under the Maximize B2B Restructuring Plan. It is anticipated that additional retail stores will be closed in 2022. Total estimated restructuring costs related to the Maximize B2B Restructuring Plan are expected to be up to $111 million, comprised of:
| (a) | severance costs of approximately $49 million;
| (b) | facility closure costs of approximately $34 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 $28 million.
The total costs of up to $111 million above are less than the Company’s estimate of total costs for this restructuring plan when it commenced, mainly as a result of the reduction in the number of expected retail store and distribution facility closures based upon the Company’s most recent evaluation of economic factors that influence expected store closures. There could be further fluctuations in the estimate of total expected costs in the future and timing of such costs as a result of an assessment of general market conditions and changes in the Company’s business strategy, including the potential sale of the consumer business or the Separation described in Note 1 above. In addition, the reduction of employee positions may also be impacted as a result of fewer retail store closures and the changes in the Company’s business strategy. The $111 million of total costs are expected to be incurred as cash expenditures through 2023 and funded primarily with cash on hand and cash from operations. The Company incurred $96 million in restructuring expenses to implement the Maximize B2B Restructuring Plan since its inception in 2020 and through the first quarter of 202 2, of which $55 million were cash expenditures. In the first quarter of 2022, the Company incurred $1 million, net, in restructuring expenses associated with the Maximize B2B Restructuring Plan, which consisted of facility closure and other costs. The Company had $2 million of cash expenditures in the first quarter of 2022 associated with the Maximize B2B Restructuring Plan. In the first quarter of 2021, the Company incurred $11 m illion 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 retail store and facility closure costs, contract termination and other that were mainly related to closure accruals, gains and losses on asset dispositions, and accelerated depreciation. Of these amounts, $4 million was cash expenditures in the first quarter of 2021. OTHER OPERATING EXPENSES In May 2021, the Company’s Board of Directors unanimously approved a plan to pursue a separation of the Company into two independent, publicly traded companies, through a spin-off of its consumer business. Since then, the Company has incurred costs related to activities to separate its consumer business, which included third-party professional fees, as well as costs associated with the operational separation of the two companies, such as those related to human resources, brand management, real estate and IT infrastructure. As described in Note 1 above, on January 14, 2022, the Company announced that its Board of Directors determined to delay the previously announced public company separation to evaluate a potential sale of the Company’s consumer business and that it had received a non-binding proposal from another third party, in addition to the previously received proposal from USR Parent, Inc., to acquire the Company’s consumer business. The Company’s Board of Directors is carefully reviewing these proposals with the assistance of its financial and legal advisors to determine the course of action that it believes is in the best interests of the Company and its shareholders. The Company incurred $9 million in third party professional fees in the first quarter of 2022 related to separation activities. The Company had incurred $32 million in third-party professional fees associated with separation activities in 2021. The Company expects to continue to incur additional costs for separation activities in the event such potential sale transaction is completed or the spin-off resumes, and currently estimates that total costs related to the separation activities will exceed $100 million, although such estimate is subject to a number of assumptions and uncertainties. Other operating expenses of $1 million in the first quarter of 2021 represent third-party professional fees incurred related to the evaluation of USR Parent, Inc.’s proposals received during the first quarter of 2021. MERGER, RESTRUCTURING AND OTHER ACCRUALS The activity in the merger, restructuring and other accruals in the first quarter of 2022 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 25, |  |  | Charges (credits) |  |  | Cash |  |  | March 26, |
(In millions) |  | 2021 |  |  | Incurred |  |  | Payments |  |  | 2022 |
Termination benefits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Maximize B2B Restructuring Plan |  |  | 19 |  |  |  | — |  |  |  | — |  |  |  | 19 |
Lease and contract obligations, accruals for facilities closures and other costs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Maximize B2B Restructuring Plan |  |  | 6 |  |  |  | 1 |  |  |  | (2 | ) |  |  | 5 |
Comprehensive Business Review |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Planned separation of consumer business |  |  | 2 |  |  |  | 9 |  |  |  | (5 | ) |  |  | 6 |
Total |  | $ | 28 |  |  | $ | 10 |  |  | $ | (7 | ) |  | $ | 31 |
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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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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