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MERGER, RESTRUCTURING AND OTHER ACTIVITY | 9 Months Ended
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Sep. 24, 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.
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Merger and transaction related expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transaction and integration |  | $ | (7 | ) |  | $ | (1 | ) |  |  | (7 | ) |  |  | — |
Total Merger and transaction related expenses |  |  | (7 | ) |  |  | (1 | ) |  |  | (7 | ) |  |  | — |
Restructuring expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Severance |  |  | (1 | ) |  |  | (1 | ) |  |  | (2 | ) |  |  | (2 | )
Professional fees |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |
Facility closure, contract termination, and other expenses, net |  |  | 2 |  |  |  | 5 |  |  |  | 4 |  |  |  | 14 |
Total Restructuring expenses, net |  |  | 1 |  |  |  | 4 |  |  |  | 2 |  |  |  | 13 |
Other operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Professional fees |  |  | 14 |  |  |  | 10 |  |  |  | 47 |  |  |  | 24 |
Total Other operating expenses |  |  | 14 |  |  |  | 10 |  |  |  | 47 |  |  |  | 24 |
Total Merger, restructuring and other operating expenses, net |  | $ | 8 |  |  | $ | 13 |  |  | $ | 42 |  |  | $ | 37 |
MERGER AND TRANSACTION RELATED EXPENSES In the third quarter of 2022, the Company recognized $7 million income related to earn-out adjustment on the acquisition of BuyerQuest Holdings, Inc. In year-to-date 2022, the Company did not incur any additional transaction and integration expenses. In the third quarter and year-to-date 2021 the Company did not incur any transaction and integration expenses. The $1 million income represents the impact of earnout adjustments on acquisitions made in prior periods. 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 10 and 28 retail stores in the third quarter and year-to-date 2022, respectively, 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. 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 $97 million in restructuring expenses to implement the Maximize B2B Restructuring Plan since its inception in 2020 and through the third quarter of 2022, of which $58 million were cash expenditures. In the third quarter and year-to-date 2022, the Company incurred $2 million and $4 million, respectively, in facility closure and other costs associated with the Maximize B2B Restructuring Plan. The Company also reversed $1 million and $2 million of employee severance accruals in the third quarter and year-to-date 2022 due to changes in estimates. The Company had $2 million and $5 million of cash expenditures in the third quarter and year-to-date 2022, respectively, associated with the Maximize B2B Restructuring Plan. In the third quarter of 2021, the Company incurred $4 million, net, in restructuring expenses associated with the Maximize B2B Restructuring Plan, which consisted of $5 million of facility closure, contract termination and other costs, partially offset by $1 million in reversal of employee severance accruals due to changes in estimates. Year-to-date 2021, the Company incurred $13 million in restructuring expenses associated with the Maximize B2B Restructuring Plan, which consisted of $1 million in third-party professional fees, $15 million of facility closure, contract termination and other costs, partially offset by $2 million in reversal of employee severance accruals due to changes in estimates and a $1 million gain on sale of retail store assets. Of these amounts, $2 million and $17 million were cash expenditures in the third quarter and year-to-date 2021, respectively. OTHER OPERATING EXPENSES Other operating expenses represent costs incurred that are incremental to those related to running the Company’s core operations, which are presented within Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. As described in Note 1 above, the Company had been evaluating the separation of its consumer business, first through a spin-off and subsequently through a potential sale. On June 21, 2022, the Company’s Board of Directors, with the assistance of its financial and legal advisors, completed its review of both proposals received by the Company to acquire its consumer business and unanimously determined it to be in the best interests of the Company and its shareholders not to divest the consumer business at this time. Further, due to current market conditions, the Company’s Board of Directors also determined not to resume the Company’s previously planned separation of its consumer business at this time and instead to maintain all of its businesses under common ownership. The Company incurred $33 million in third-party professional fees in year-to-date 2022 related to separation activities, which was all incurred in the first half of 2022. The Company had incurred $9 million and $20 million in third-party professional fees associated with separation activities in the third quarter and year-to-date 2021, respectively, related to separation activities. Also as described in Note 1 above, during the third quarter of 2022, the Company re-aligned its operations into four Divisions, which also represent its new reportable segments. The Company incurred $14 million in third-party professional fees in connection with the re-alignment in the third quarter of 2022. At September 24, 2022, the Company continues to perform certain activities related to the re-alignment, which is expected to be substantially completed in 2022. The costs incurred in the third quarter of 2022 represent trailing costs to complete activities that were previously started as part of the separation process discussed above, and leveraged to achieve the re-alignment. The Company does not expect to have a re-alignment of its businesses in the future. Accordingly, the Company has presented the costs associated with the re-alignment as Other operating expenses, as they represent incremental operating expenses that are not part of its core costs to support its operations. Other operating expenses in the third quarter and year-to-date 2021 also included $1 million and $4 million, respectively, of third-party professional fees incurred related to the evaluation of USR Parent, Inc.’s proposals received during the first half of 2021. MERGER, RESTRUCTURING AND OTHER ACCRUALS The activity in the merger, restructuring and other accruals in year-to-date 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 |  |  | September 24, |
(In millions) |  | 2021 |  |  | Incurred |  |  | Payments |  |  | 2022 |
Termination benefits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Maximize B2B Restructuring Plan |  |  | 19 |  |  |  | (2 | ) |  |  | — |  |  |  | 17 |
Lease and contract obligations, accruals for facilities closures and other costs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Maximize B2B Restructuring Plan |  |  | 6 |  |  |  | 5 |  |  |  | (5 | ) |  |  | 6 |
Comprehensive Business Review |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Previously planned separation of consumer business and realignment |  |  | 2 |  |  |  | 44 |  |  |  | (37 | ) |  |  | 9 |
Total |  | $ | 28 |  |  | $ | 47 |  |  | $ | (42 | ) |  | $ | 33 |
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 https://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 https://asc.fasb.org/topic&trid=2303972 + Details
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