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DISCONTINUED OPERATIONS | 9 Months Ended
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Sep. 24, 2022
Discontinued Operations And Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | NOTE 11. DISCONTINUED OPERATIONS The Company sold its former CompuCom Division through a single disposal group on December 31, 2021. The transaction was structured and accounted for as an equity sale. The related Securities Purchase Agreement (“SPA”) provides for consideration consisting of a cash purchase price equal to $125 million (subject to customary adjustments, including for cash, debt and working capital), an interest-bearing promissory note in the amount of $55 million, and a holding fee (“earn-out”) provision providing for payments of up to $125 million in certain circumstances. The promissory note accrues interest at six percent per annum, payable on a quarterly basis in cash or in-kind, and is due in full on June 30, 2027. Under the earn-out provision, if the purchaser receives dividends or sale proceeds from the CompuCom business equal to (i) three (3) times its initial capital investment in the CompuCom business plus (ii) 15% per annum on subsequent capital investments, the Company will be entitled to 50% of any subsequent dividends or sale proceeds up to and until the Company has received an aggregate of $125 million. The Company also agreed to provide certain transitional services to the purchaser for a period of three to twelve months under a separate agreement after closing. The SPA contains customary warranties of the Company and the purchaser. CompuCom was presented as held for sale as of December 25, 2021, and the loss from classification to held for sale was measured at the lower of its carrying amount or estimated fair value less costs to sell and was included in the valuation allowance of current assets held for sale as of December 25, 2021. The estimated fair value of CompuCom was based on the terms of the SPA, and amounted to $190 million, which included $126 million for cash purchase price after adjusting for cash, debt and working capital, $55 million for the promissory note, and $9 million for the earn-out. Of the cash purchase price, $30 million was related to adjustments for cash, debt and working capital, and is a current receivable as of September 24, 2022. The promissory note and the earn-out are non-current receivables as of September 24, 2022. The earn-out provision was identified to be a derivative in accordance with ASC 815, and its fair value was determined using Monte Carlo simulation. The resulting loss from classification to held for sale was $170 million in the fourth quarter of 2021. During year-to-date 2022, the Company incurred further loss on disposal of $1 million in third-party professional fees related to the sale of CompuCom. In addition, during year-to-date 2022, the Company received $7 million of insurance proceeds for the malware incident that occurred in 2021 reflected in gain on disposal of discontinued operations. Merger and restructuring expenses incurred by the former CompuCom Division, that were previously presented as Corporate expenses, are included in the measurement and presentation of discontinued operations in all periods presented. The following table represents a reconciliation of the major components of discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations.
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Major components of discontinued operations before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales |  | $ | — |  |  | $ | 201 |  |  | $ | — |  |  | $ | 610 |
Cost of goods and occupancy costs: |  |  | — |  |  |  | 161 |  |  |  | — |  |  |  | 491 |
Gross profit |  |  | — |  |  |  | 40 |  |  |  | — |  |  |  | 119 |
Selling, general and administrative expenses |  |  | — |  |  |  | 29 |  |  |  | — |  |  |  | 117 |
Asset impairments |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 114 |
Merger, restructuring and other operating expenses, net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2 | )
Operating income (loss) |  |  | — |  |  |  | 11 |  |  |  | — |  |  |  | (110 | )
Other income (expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other income, net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1 | )
Income (loss) from major components of discontinued operations before income taxes |  |  | — |  |  |  | 11 |  |  |  | — |  |  |  | (111 | )
Gain (loss) on disposal of discontinued operations |  |  | — |  |  |  | (1 | ) |  |  | 6 |  |  |  | (1 | )
Income (loss) from discontinued operations before income taxes |  |  | — |  |  |  | 10 |  |  |  | 6 |  |  |  | (112 | )
Income tax benefit |  |  | — |  |  |  | (18 | ) |  |  | (1 | ) |  |  | (23 | )
Discontinued operations, net of tax |  | $ | — |  |  | $ | 28 |  |  | $ | 7 |  |  | $ | (89 | )
The following table represents the major classes of assets and liabilities of the disposal group classified as held for sale presented in the Condensed Consolidated Balance Sheets as of December 25, 2021. The Company completed the sale of CompuCom on December 31, 2021, and therefore no assets or liabilities are included in discontinued operations as of September 24, 2022.
|  | December 25, |
(In millions) |  | 2021 |
Major classes of assets included in discontinued operations: |  |  |  |
Cash and cash equivalents |  | $ | 23 |
Receivables, net |  |  | 221 |
Inventories |  |  | 20 |
Prepaid expenses and other current assets |  |  | 15 |
Property and equipment, net |  |  | 25 |
Operating lease right-of-use assets |  |  | 66 |
Other intangible assets, net |  |  | 255 |
Other assets |  |  | 14 |
Less: valuation allowance |  |  | (170 | )
Total assets of the disposal group classified as held for sale |  | $ | 469 |
Major classes of liabilities included in discontinued operations: |  |  |  |
Trade accounts payable |  | $ | 83 |
Accrued expenses and other current liabilities |  |  | 86 |
Deferred income taxes and other long-term liabilities |  |  | 75 |
Operating lease liabilities |  |  | 46 |
Total liabilities of the disposal group classified as held for sale |  | $ | 290 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI https://asc.fasb.org/topic&trid=2155823 Reference 2: 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 + Details
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