☒Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

☐Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At ~~May 1, 2019,~~April 29, 2020, there were ~~546,277,691~~ 526,338,390outstanding shares of Office Depot, Inc. Common Stock, $0.01 par value.

The order and presentation of this Quarterly Report on Form 10-Q (“Form 10-Q”) differ from that of the traditional U.S. Securities and Exchange Commission (“SEC”) Form 10-Q format. We believe our format better presents the relevant sections of this document and enhances readability. See “Form 10-Q Cross-Reference Index” within “Other Information” for a cross-reference index to the traditional SEC Form 10-Q format.

	13 Weeks Ended						13 Weeks Ended
	March 30,			March 31,			March 28,			March 30,
	2019			2018			2020			2019
Sales:
Products	$	2,361		$	2,423		$	2,337		$	2,361
Services		408			407			388			408
Total sales		2,769			2,830			2,725			2,769
Cost of goods and occupancy costs:
Products		1,841			1,891			1,828			1,841
Services		287			272			268			287
Total cost of goods and occupancy costs		2,128			2,163			2,096			2,128
Gross profit		641			667			629			641
Selling, general and administrative expenses		574			573			521			574
Asset impairments		29			—			12			29
Merger and restructuring expenses, net		14			17			16			14
Operating income		24			77			80			24
Other income (expense):
Interest income		6			6			3			6
Interest expense		(23	)		(29	)		(18	)		(23	)
Other income, net		2			1			1			2
Income from continuing operations before income taxes		9			55
Income before income taxes								66			9
Income tax expense		1			22			21			1
Net income from continuing operations		8			33
Discontinued operations, net of tax		—			8
Net income	$	8		$	41		$	45		$	8
Basic earnings per common share
Continuing operations	$	0.01		$	0.06
Discontinued operations		—			0.01
Net basic earnings per common share	$	0.01		$	0.07
Diluted earnings per common share
Continuing operations	$	0.01		$	0.06
Discontinued operations		—			0.01
Net diluted earnings per common share	$	0.01		$	0.07
Earnings per share
Basic							$	0.09		$	0.01
Diluted							$	0.08		$	0.01

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the Office Depot, Inc. Annual Report on Form 10-K filed on February ~~27, 2019~~26, 2020 (the ~~“2018~~“2019 Form 10-K”).

	13 Weeks Ended				13 Weeks Ended
	March 30, 2019		March 31, 2018		March 28, 2020			March 30, 2019
Net income	$	8	$	41	$	45		$	8
Other comprehensive income, net of tax, where applicable:
Other comprehensive income (loss), net of tax, where applicable:
Foreign currency translation adjustments		10		—		(41	)		10
Reclassification of foreign currency translation adjustments realized upon disposal of business		—		14
Other		1		—		(1	)		1
Total other comprehensive income, net of tax, where applicable		11		14
Total other comprehensive income (loss), net of tax, where applicable						(42	)		11
Comprehensive income	$	19	$	55	$	3		$	19

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2018~~2019 Form 10-K.

	March 30,			December 29,			March 28,			December 28,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	604		$	658		$	842		$	698
Receivables, net		944			885			850			823
Inventories		1,034			1,065			929			1,032
Prepaid expenses and other current assets		84			75			79			75
Timber notes receivable, current maturities		836			—
Timber notes receivable								—			819
Total current assets		3,502			2,683			2,700			3,447
Property and equipment, net		730			763			651			679
Operating lease right-of-use assets		1,398			—			1,368			1,413
Goodwill		922			914			940			944
Other intangible assets, net		409			422			379			388
Timber notes receivable		—			842
Deferred income taxes		244			284			160			183
Other assets		266			258			256			257
Total assets	$	7,471		$	6,166		$	6,454		$	7,311
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	1,098		$	1,110		$	1,006		$	1,026
Accrued expenses and other current liabilities		1,294			978			1,228			1,219
Income taxes payable		—			2			7			8
Short-term borrowings and current maturities of long-term debt		93			95			104			106
Non-recourse debt, current maturities		748			—
Non-recourse debt								—			735
Total current liabilities		3,233			2,185			2,345			3,094
Deferred income taxes and other long-term liabilities		181			300			167			176
Pension and postretirement obligations, net		111			111			82			85
Long-term debt, net of current maturities		632			690			548			575
Operating lease liabilities		1,208			—			1,177			1,208
Non-recourse debt		—			754
Total liabilities		5,365			4,040			4,319			5,138
Commitments and contingencies
Stockholders' equity:
Common stock — authorized 800,000,000 shares of $0.01 par value; issued shares — 620,103,134 at March 30, 2019 and 614,170,704 at December 29, 2018; outstanding shares — 546,192,558 at March 30, 2019 and 543,833,428 at December 29, 2018		6			6
Common stock — authorized 800,000,000 shares of $0.01 par value; issued shares — 624,690,687 at March 28, 2020 and 620,424,775 at December 28, 2019; outstanding shares — 526,342,832 at March 28, 2020 and 535,182,317 at December 28, 2019								6			6
Additional paid-in capital		2,664			2,677			2,637			2,647
Accumulated other comprehensive loss		(88	)		(99	)		(108	)		(66	)
Accumulated deficit		(180	)		(173	)		(45	)		(89	)
Treasury stock, at cost — 73,910,576 shares at March 30, 2019 and 70,337,276 shares at December 29, 2018		(296	)		(285	)
Treasury stock, at cost — 98,347,855 shares at March 28, 2020 and 85,242,458 shares at December 28, 2019								(355	)		(325	)
Total stockholders' equity		2,106			2,126			2,135			2,173
Total liabilities and stockholders’ equity	$	7,471		$	6,166		$	6,454		$	7,311

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2018~~2019 Form 10-K.

	13 Weeks Ended						13 Weeks Ended
	March 30,			March 31,			March 28,			March 30,
	2019			2018			2020			2019
Cash flows from operating activities of continuing operations:
Cash flows from operating activities:
Net income	$	8		$	41		$	45		$	8
Income from discontinued operations, net of tax		—			8
Net income from continuing operations		8			33
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49			47			49			49
Amortization of debt discount and issuance costs		2			2			2			2
Charges for losses on receivables and inventories		14			14			8			14
Asset impairments		29			—			12			29
Compensation expense for share-based payments		8			4			7			8
Deferred income taxes and deferred tax asset valuation allowances		—			19			24			—
Contingent consideration payments in excess of acquisition-date liability		(11	)		—			—			(11	)
Changes in working capital and other		(39	)		88
Net cash provided by operating activities of continuing operations		60			207
Cash flows from investing activities of continuing operations:
Changes in working capital and other operating activities								41			(39	)
Net cash provided by operating activities								188			60
Cash flows from investing activities:
Capital expenditures		(46	)		(37	)		(25	)		(46	)
Businesses acquired, net of cash acquired		(5	)		(30	)		(18	)		(5	)
Proceeds from collection of notes receivable								818			—
Other investing activities		(1	)		1			1			(1	)
Net cash used in investing activities of continuing operations		(52	)		(66	)
Cash flows from financing activities of continuing operations:
Net cash provided by (used in) investing activities								776			(52	)
Cash flows from financing activities:
Net payments on long and short-term borrowings		(24	)		(25	)		(25	)		(24	)
Debt retirement								(735	)		—
Cash dividends on common stock		(14	)		(14	)		(13	)		(14	)
Share purchases for taxes, net of proceeds from employee share-based transactions		(4	)		(3	)		(4	)		(4	)
Repurchase of common stock for treasury		(11	)		—			(30	)		(11	)
Contingent consideration payments up to amount of acquisition-date liability		(12	)		(2	)		(1	)		(12	)
Other financing activities		1			3			—			1
Net cash used in financing activities of continuing operations		(64	)		(41	)
Cash flows from discontinued operations:
Operating activities of discontinued operations		—			10
Investing activities of discontinued operations		—			30
Net cash provided by discontinued operations		—			40
Net cash used in financing activities								(808	)		(64	)
Effect of exchange rate changes on cash and cash equivalents		2			(2	)		(12	)		2
Net increase in cash and cash equivalents		(54	)		138
Net increase (decrease) in cash and cash equivalents								144			(54	)
Cash, cash equivalents and restricted cash at beginning of period		660			639			700			660
Cash, cash equivalents and restricted cash at end of period		606			777		$	844		$	606
Cash and cash equivalents of discontinued operations		—			(37	)
Cash, cash equivalents and restricted cash at end of period — continuing operations	$	606		$	740
Supplemental information
Right-of-use assets obtained in exchange for new finance lease liabilities							$	3		$	2
Right-of-use assets obtained in exchange for new operating lease liabilities								54			53

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2018~~2019 Form 10-K.

	13 Weeks Ended March 30, 2019																			13 Weeks Ended March 28, 2020
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity			Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 29, 2018		614,170,704	$	6	$	2,677		$	(99	)	$	(173	)	$	(285	)	$	2,126
Balance at December 28, 2019																					620,424,775	$	6	$	2,647		$	(66	)	$	(89	)	$	(325	)	$	2,173
Net income		—		—		—			—			8			—			8			—		—		—			—			45			—			45
Other comprehensive income		—		—		—			11			—			—			11
Other comprehensive loss																					—		—		—			(42	)		—			—			(42	)
Exercise and release of incentive stock (including income tax benefits and withholding)		5,932,430		—		(7	)		—			—			—			(7	)		4,265,912		—		(4	)		—			—			—			(4	)
Amortization of long-term incentive stock grants		—		—		8			—			—			—			8			—		—		7			—			—			—			7
Dividends paid on common stock ($0.025 per share)		—		—		(14	)		—			—			—			(14	)		—		—		(13	)		—			—			—			(13	)
Repurchase of common stock		—		—		—			—			—			(11	)		(11	)		—		—		—			—			—			(30	)		(30	)
Adjustment for adoption of accounting standard		—		—		—			—			(15	)		—			(15	)		—		—		—			—			(1	)		—			(1	)
Balance at March 30, 2019		620,103,134	$	6	$	2,664		$	(88	)	$	(180	)	$	(296	)	$	2,106
Balance at March 28, 2020																					624,690,687	$	6	$	2,637		$	(108	)	$	(45	)	$	(355	)	$	2,135

	13 Weeks Ended March 31, 2018																			13 Weeks Ended March 30, 2019
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity			Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 30, 2017		610,353,994	$	6	$	2,711		$	(78	)	$	(273	)	$	(246	)	$	2,120
Balance at December 29, 2018																					614,170,704	$	6	$	2,677		$	(99	)	$	(173	)	$	(285	)	$	2,126
Net income		—		—		—			—			41			—			41			—		—		—			—			8			—			8
Other comprehensive income		—		—		—			14			—			—			14			—		—		—			11			—			—			11
Exercise and release of incentive stock (including income tax benefits and withholding)		3,862,224		—		(3	)		—			—			—			(3	)		5,932,430		—		(7	)		—			—			—			(7	)
Amortization of long-term incentive stock grants		—		—		3			—			—			—			3			—		—		8			—			—			—			8
Dividends paid on common stock ($0.025 per share)		—		—		(14	)		—			—			—			(14	)		—		—		(14	)		—			—			—			(14	)
Repurchase of common stock																					—		—		—			—			—			(11	)		(11	)
Adjustment for adoption of accounting standard		—		—		—			—			(4	)		—			(4	)		—		—		—			—			(15	)		—			(15	)
Balance at March 31, 2018		614,216,218	$	6	$	2,697		$	(64	)	$	(236	)	$	(246	)	$	2,157
Balance at March 30, 2019																					620,103,134	$	6	$	2,664		$	(88	)	$	(180	)	$	(296	)	$	2,106

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2018~~2019 Form 10-K.

Office Depot, Inc. including its consolidated subsidiaries (“Office Depot” or the “Company”), is a leading provider of business services and supplies, products and technology ~~solutions.~~solutions to small, medium and enterprise businesses, through an integrated business-to-business (“B2B”) distribution platform of 1,295 retail stores, online presence, and dedicated sales professionals and technicians. Through its banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, the Company offers its customers the tools and resources they need to focus on starting, growing and running their business. The Company’s ~~common stock is traded on the NASDAQ Global Select Market under the ticker symbol ODP. The Company’s~~ corporate headquarters is located in Boca Raton, FL, and its primary website is www.officedepot.com.

~~As of~~At March ~~30, 2019,~~28, 2020, the Company had ~~three~~3 reportable segments (or “Divisions”): Business Solutions Division, Retail Division and the CompuCom Division. ~~The CompuCom Division was formed after the acquisition of CompuCom Systems, Inc. (“CompuCom”) on November 8, 2017 and reflects the operations of that business.~~

The Condensed Consolidated Financial Statements as of March ~~30, 2019,~~28, 2020, and for the 13-week period ended March 28, 2020 (also referred to as the “first quarter of 2020”) and March 30, 2019 (also referred to as the “first quarter of 2019”~~) and March 31, 2018 (also referred to as the “first quarter of 2018”~~) are unaudited. However, in management’s opinion, these Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature necessary to provide a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Business acquisitions in ~~2018~~2019 and ~~2019~~2020 are included prospectively from the date of acquisition, thus affecting the comparability of the Company’s financial statements for all periods presented in this report on Form 10-Q.

The Company has prepared the Condensed Consolidated Financial Statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Some information and note disclosures, which would normally be included in comprehensive annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), have been condensed or omitted pursuant to those SEC rules and regulations. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For a better understanding of the Company and its Condensed Consolidated Financial Statements, the Company recommends reading these Condensed Consolidated Financial Statements in conjunction with the audited financial statements, which are included in the Company’s ~~2018~~2019 Form 10-K. These interim results are not necessarily indicative of the results that should be expected for the full year.

On March 31, 2020, the Board of Directors of the Company approved proceeding with the implementation of a reorganization (the “Reorganization”) of the Company's corporate structure into a holding company structure. When implemented, Office Depot will become a wholly owned subsidiary of a new holding company, The ODP Corporation, which will replace Office Depot as the public company trading on the NASDAQ Stock Market under Office Depot’s current ticker symbol “ODP”. Outstanding shares of Office Depot will be automatically converted into shares of common stock of The ODP Corporation. The holding company reorganization is intended to simplify the Company’s legal entity and tax structure, more closely align the Company’s operating assets to their respective operating channels within the legal entity structure, and increase its operational flexibility. It is not expected to result in a change in the directors, executive officers, management or business of the Company.

The Reorganization is intended to be a tax-free transaction for U.S. federal income tax purposes for the Company’s shareholders, and subject to obtaining required approvals or any other intervening developments, is expected to be completed on or about the end of the 13-week period ending June 27, 2020 (also referred to as the “second quarter of 2020”).

The cash management process generally utilizes zero balance accounts which provide for the settlement of the related disbursement and cash concentration accounts on a daily basis. AsAmounts not yet presented for payment to zero balance disbursement accounts of $31 million and $25 million at March ~~30, 2019~~28, 2020 and December ~~29, 2018,~~28, 2019, respectively, are presented in Trade accounts payable and Accrued expenses and other current liabilities, in the aggregate, included $32 million and $27 million, respectively, of amounts not yet presented for payment drawn in excess of disbursement account book balances, after considering offset provisions.liabilities.

At March ~~30,~~28, 2020 and December 28, 2019, cash and cash equivalents ~~from continuing operations~~ held outside the United States amounted to ~~$145 million.~~

Restricted cash consists primarily of short-term cash deposits having original maturity dates of twelve months or less that serve as collateral to certain of the Company’s letters of credit. Restricted cash is valued at cost, which approximates fair value. At March ~~30, 2019~~28, 2020 and December ~~29, 2018,~~28, 2019, restricted cash amounted to $2 million and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

The Company conducts a substantial portion of its business in leased properties. Some of the Company’s leases contain escalation clauses and renewal options. The Company recognizes rental expense for operating leases that contain predetermined fixed escalation clauses on a straight-line basis over the expected term of the lease.

Prior to the adoption of the new lease accounting standard on the first day of fiscal 2019, the expected term of a lease was calculated from the date the Company first took possession of the facility, including any periods of free rent, and extended through the non-cancellable period and any option or renewal periods management believed were reasonably assured of being exercised. Rent abatements and escalations were considered in the calculation of minimum lease payments in the Company’s lease classification assessment and in determining straight-line rent expense for operating leases. Straight-line rent expense was also adjusted to reflect any allowances or reimbursements provided by the lessor. When required under lease agreements, estimated costs to return facilities to original condition were accrued over the lease period.

Subsequent to the adoption of the new lease accounting standard, the Company determines if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use (“ROU”) assets, Accrued expenses and other current liabilities, and Operating lease liabilities on the Condensed Consolidated Balance Sheet as of March 30, 2019. Finance leases are included in Property and equipment, net, Short-term borrowings and current maturities of long-term debt, and Long-term debt, net of current maturities on the Condensed Consolidated Balance Sheet as of March 30, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. As the rate implicit in the lease is not readily determinable for most of the leases, the Company has utilized its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company uses the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments made prior to commencement and excludes lease incentives and initial direct costs incurred. Certain leases include one or more options to renew, with renewal terms that can extend the lease from five to 25 years or more, which is generally at the Company’s discretion. Any option or renewal periods management believed were reasonably certain of being exercised are included in the lease term. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, for which it has made an accounting policy election to account for these as a single lease component. Refer to the “New Accounting Standards” section below for more information relating to the adoption of the new lease accounting standard.

Defined benefit plan: In August 2018, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update that provides guidance regarding the accounting for implementation costs in cloud computing arrangements. This accounting update is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact of this new standard and believes the adoption will not have a material impact on its Consolidated Financial Statements.

~~In August 2018, the FASB issued an accounting standard~~standards update that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This accounting update is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact of this new standard and believes the adoption will not have a material impact on its Condensed Consolidated Financial Statements.

Income Taxes: In ~~August 2018,~~December 2019, the FASB issued an accounting ~~standard~~standards update that ~~adds, removes, and modifies~~simplifies the ~~disclosure requirements~~accounting for income taxes by eliminating certain exceptions to the guidance related to ~~fair value measurements.~~the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The accounting standards update also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This accounting update is effective for fiscal years beginning after December 15, ~~2019~~2020 and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact of this new standard and believes the adoption will not have a material impact on its Condensed Consolidated Financial Statements.

Financial Instruments – Credit Losses: In ~~February~~June 2016, the FASB issued an accounting ~~standards~~standard update that ~~requires lessees to recognize~~modifies the measurement of expected credit losses for most ~~leases~~financial assets and certain other instruments that are not measured at fair value through net income. The update changes the accounting for credit impairment by adding an impairment model that is based on their balance sheets related to the rights and obligations created by those leases. The accounting treatment for finance leases and lessors remains relatively unchanged. The accounting standards update also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The initial standard required a modified retrospective transition approach, with application, including disclosures, in all comparative periods presented.expected losses rather than incurred losses. In July 2018, the FASB approved an amendment to the new guidance that ~~introduced~~provides transition relief to the adopting entities and allows for an ~~alternative modified retrospective transition approach granting companies the option of using the effective date~~election of the ~~new standard as the date of initial application.~~ fair value option on certain financial instruments.

The Company adopted ~~the~~this accounting standard on the first day of the first quarter of ~~2019 using~~2020, and recognized a cumulative effect adjustment of $1 million, net of tax, to its accumulated deficit related to increasing the allowance for doubtful accounts within its receivables. The adoption of this ~~alternative transition approach.~~new guidance did not result in any other changes and did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Cloud computing arrangements: In August 2018, the FASB issued an accounting standard update that provides guidance regarding the accounting for implementation costs in cloud computing arrangements. The Company adopted this accounting standard update on the first day of the first quarter of 2020 with no material impact on its Condensed Consolidated Financial Statements.

The Company elected the transition package of practical expedients that is permitted by the standard. The package of practical expedients allows the Company to not reassess previous accounting conclusions regarding whether existing arrangements are or contain leases, the classification of existing leases, and the treatment of initial direct costs. The Company did not elect the hindsight transition practical expedient allowed for by the new standard, which allows entities to use hindsight when determining lease term and impairment of ROU assets. Additionally, the Company elected certain other practical expedients offered by the new standard which it will apply to all asset classes, including the option not to separate lease and non-lease components and instead to account for them as a single lease component and the option not to recognize ROU assets and related liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise).

Substantially all of the Company’s retail store locations, supply chain facilities, certain corporate facilities and copy print equipment are subject to operating lease arrangements. As a result, the standard had material impacts on the Condensed Consolidated Balance Sheet, but did not have an impact on the Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows. The most significant impacts of the standard on the Condensed Consolidated Balance Sheet on the date of adoption were as follows:

As part of its adoption of the new lease accounting standard, the Company also implemented new internal controls and updated accounting policies and procedures, operational processes and documentation practices to enable the preparation of financial information on adoption. Refer to Note 8 for additional disclosures required as a result of the adoption of this new standard.

Since 2017, the Company has been undergoing a strategic business transformation to pivot into an integrated ~~business-to-business (“B2B”)~~B2B distribution platform, with the objective of expanding its product offerings to include value-added services for its customers and capture greater market share. As part of this transformation, the Company ~~acquired two~~has been acquiring businesses ~~during the first quarter of 2019. These two acquisitions consist of small independent regional~~ ~~office supply distribution businesses that continue~~ to expand ~~the Company’s~~its reach and distribution network into geographic areas that were previously underserved.

During the first quarter of 2020, the Company acquired 3 small independent regional office supply distribution businesses.

The aggregate total purchase consideration, including contingent consideration, for the three acquisitions completed in the first quarter of ~~2019~~2020 was approximately $7$20 million, subject to certain customary post-closing adjustments. The aggregate purchase price was primarily funded with cash on hand, with the remainder consisting of contingent consideration estimated to be ~~less than $1~~$2 million, towhich will be paid in two installments in the ~~first quarter~~second quarters of ~~2020.~~2021 and 2022, respectively. The acquisitions were treated as purchases in accordance with ASC 805, Business Combinations (“ASC 805”) which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the ~~transaction~~transactions including goodwill and other intangible assets. The Company has performed a preliminary purchase price allocation of the aggregate purchase price to the estimated fair values of assets and liabilities acquired in the transactions, including $1$4 million of customer relationship intangible assets and $5$10 million of goodwill. ~~The remaining~~An immaterial amount of the aggregate purchase price was ~~primarily~~ allocated to working capital accounts. These assets and liabilities are included in the ~~balance sheet~~Condensed Consolidated Balance Sheet as of March ~~30, 2019.~~28, 2020. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the dates of acquisition), the Company will refine its estimates of fair value to allocate the purchase price. ~~Changes in fair value of the contingent consideration may result in additional transaction related expenses.~~ The operating results of the acquired office supply distribution businesses are combined with the Company’s operating results subsequent to their purchase dates, and are included in the Business Solutions Division. Certain disclosures set forth under ASC 805, including supplemental pro forma financial information, are not disclosed because the operating results of the acquired businesses, individually and in the aggregate, are not material to the Company.

During 2018, the Company recognized a contingent consideration liability of $25 million in connection with the acquisition of an enterprise IT solutions integrator and managed services provider. In the first quarter of 2019, the Company paid $23 million of the contingent consideration liability, of which $12 million was treated as a financing cash outflow because it related to the acquisition-date accrual, and $11 million was presented as a cash outflow from operating activities as it was accrued subsequent to the acquisition date based on new information obtained on the financial performance of the acquired entity. The remaining $2 million of this contingent consideration liability will be paid in the fourth quarter of 2019 and will be treated as a cash outflow from operating activities.

Based on new information received, the preliminary purchase price allocations of the companies acquired in ~~2018~~2019 have been adjusted during the respective measurement periods. These adjustments were insignificant individually and in the aggregate to the Company’s Condensed Consolidated Financial Statements. The measurement periods for acquisitions completed in the first quarter of 2019 closed within the first quarter of 2020.

Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred, instead, they are accounted for as expenses in the period in which the costs are incurred. Transaction-related expenses are included in the Merger and restructuring ~~expense,~~expenses, net line in the Condensed Consolidated Statements of Operations. Refer to Note 3 for additional information about the merger and restructuring expenses incurred during the first quarter of ~~2019.~~2020.

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 and restructuring 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 its customers. These expenses are not included in the determination of Division operating income. The table below summarizes the major components of Merger and restructuring expenses, net.

	First Quarter				First Quarter
(In millions)	2019		2018		2020		2019
Merger and transaction related expenses, net
Merger and transaction related expenses
Severance and retention	$	1	$	2	$	—	$	1
Transaction and integration		7		7		7		7
Total Merger and transaction related expenses						7		8
Restructuring expenses
Professional fees						6		3
Facility closure, contract termination, and other expenses, net		—		3		3		3
Total Merger and transaction related expenses, net		8		12
Restructuring expenses
Facility closure, contract termination, professional fees and other expenses, net		6		5
Total Restructuring expenses		6		5		9		6
Total Merger and restructuring expenses, net	$	14	$	17	$	16	$	14

In the first quarter of 2020, the Company incurred $7 million of merger and transaction related ~~expenses, net~~

expenses. Severance and retention include expenses related to the integration of staff functions in connection with business acquisitions and are expensed through the severance and retention period. Transaction and integration ~~primarily~~ include legal, accounting, and other third-party expenses incurred in connection with acquisitions and business integration ~~activities.~~activities primarily related to CompuCom. Facility closure, contract termination, and other expenses, net ~~primarily~~ relate to facility closure accruals, contract termination costs, gains and losses on asset dispositions, and accelerated depreciation. ~~Also included in~~

In May 2019, the merger and transaction related expenses, net in the first quarter of 2018 are $3 million of integration expenses and $3 million of facility closure costs associated with the 2013 OfficeMax merger. All integration activities associated with the OfficeMax merger were completed in 2018.

~~On May 8, 2019, in connection with the earnings release and conference call for the first quarter 2019 results, the Company announced that its~~Company’s Board of Directors approved a company-wide, multi-year, cost reduction and business improvement program to systematically drive down costs, improve operational efficiencies, and enable future growth investments. Under this program (the “Business Acceleration Program”), the Company has made and will continue to make ~~several~~ organizational realignments stemming from process improvements, increased leverage of technology and accelerated use of automation. This has resulted and will continue to result in the elimination of certain positions and a flatter organization. In connection with ~~this program,~~the Business Acceleration Program, the Company also anticipates closing approximately 90 underperforming retail stores in 2020 and 2021, and 9 other facilities, consisting of distribution centers and sales offices. ~~As a result~~NaN retail stores were closed in the first quarter of ~~these changes,~~2020, and 7 other facilities were closed as of the ~~Company expects to realize savings~~end of ~~at least $40 million in 2019, and run-rate savings of at least $100 million when fully implemented.~~2019. Total estimated costs to implement the Business Acceleration Program are expected to be approximately $109 million, comprised of:

Of the aggregate costs to implement the Business Acceleration Program, approximately $102 million are expected to be cash expenditures through 2021 funded primarily with cash on hand and cash from operations. The Company incurred $90 million in restructuring expenses to implement the Business Acceleration Program since its inception in 2019 through the end of the first quarter of 2020.

In the first quarter of 2020, the Company incurred $8 million in restructuring expenses associated with the Business Acceleration Program which consisted of $5 million in third-party professional fees, and $3 million of retail store and facility closure costs and other. The Company made cash expenditures of $10 million for the Business Acceleration Program in the first quarter of 2020.

Included in restructuring expenses in the first quarter of 2019 were costs incurred in connection with the Comprehensive Business Review, a program the Company announced in 2016 and concluded at the end of 2019. These costs include severance, facility closure costs, contract termination, accelerated depreciation, relocation and disposal gains and losses, as well as other costs associated with retail store closures.

~~$106 million to $116 million comprised of (1) severance and related employee costs of $38 million to $40 million,~~ (2) recruitment and relocation costs of $2 million to $4 million, (3) retail store and facility closure costs of $25 million to $27 million, (4) third-party costs to facilitate the execution of the program of $35 million to $37 million, and (5) other costs of approximately $6 million to $8 million. Of the aggregate costs to implement the Business Acceleration Program, $99 million to $101 million are expected to be cash expenditures through 2021. For the remainder of fiscal 2019, the Company expects to incur approximately $85 million, of which approximately $70 million will be cash, for severance and related employee costs, recruitment and relocation, and third-party costs including legal and consulting fees under the Business Acceleration Program.

Included in restructuring expenses in the first quarter of 2019 and 2018 are costs incurred in connection with the Comprehensive Business Review, a program the Company announced in 2016. These costs include severance, facility closure costs, contract termination, accelerated depreciation, professional fees, relocation and disposal gains and losses, as well as other costs associated with retail store closures. In the first quarter of 2019, the Company closed 2 retail stores, and expects to close approximately 57 additional stores through the end of the Comprehensive Business Review program in 2019.

The activity in the merger and restructuring accruals in the first quarter of ~~2019~~2020 is presented in the table below. Certain merger and restructuring 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 29,

Charges

Cash

Adjustments

March 30,

(In millions)

2018

Incurred

Payments

(a)

2019

Termination benefits:

Merger-related accruals

$
3

$
1

$
(2
)

$
—

$
2

Comprehensive Business Review

—

1

—

—

1

Lease and contract obligations, accruals for facilities
closures and other costs:

Merger-related accruals

10

—

—

(10
)

—

Comprehensive Business Review

5

5

—

(3
)

7

Total

$
18

$
7

$
(2
)

$
(13
)

$
10

~~(a)~~

Represents reclassification of operating lease obligations associated with facility closures to Operating lease right-of-use assets on the Consolidated Balance Sheet in accordance with the new lease accounting standard.

	Balance as of							Balance as of
	December 28,		Charges		Cash			March 28,
(In millions)	2019		Incurred		Payments			2020
Termination benefits:
Merger-related accruals	$	1	$	—	$	—		$	1
Business Acceleration Program		13		—		(2	)		11
Lease and contract obligations, accruals for facilities closures and other costs:
Merger-related accruals		—		—		—			—
Comprehensive Business Review		3		—		(1	)		2
Business Acceleration Program		5		8		(8	)		5
Total	$	22	$	8	$	(11	)	$	19

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.

The following table provides information about disaggregated revenue by Division, and major products and services categories.

	First Quarter of 2019											First Quarter of 2020
(In millions)	Business Solutions Division		Retail Division		CompuCom Division		Other			Total		Business Solutions Division		Retail Division		CompuCom Division		Other			Total
Major products and services categories
Products
Supplies	$	771	$	443	$	—	$	3		$	1,217	$	754	$	420	$	—	$	2		$	1,176
Technology		326		485		62		1			874		317		482		63		—			862
Furniture and other		171		98		—		1			270		176		122		—		1			299
Services
Technology		—		8		182		(2	)		188		—		9		169		(3	)		175
Copy, print, and other		76		141		3		—			220		87		123		3		—			213
Total	$	1,344	$	1,175	$	247	$	3		$	2,769	$	1,334	$	1,156	$	235	$	—		$	2,725

	First Quarter of 2018											First Quarter of 2019
(In millions)	Business Solutions Division		Retail Division		CompuCom Division		Other			Total		Business Solutions Division		Retail Division		CompuCom Division		Other			Total
Major products and services categories
Products
Supplies	$	735	$	468	$	—	$	1		$	1,204	$	771	$	443	$	—	$	3		$	1,217
Technology		354		539		46		—			939		326		485		62		1			874
Furniture and other		172		108		—		—			280		171		98		—		1			270
Services
Technology		—		9		210		—			219		—		8		182		(2	)		188
Copy, print, and other		67		120		1		—			188		76		141		3		—			220
Total	$	1,328	$	1,244	$	257	$	1		$	2,830	$	1,344	$	1,175	$	247	$	3		$	2,769

~~Products revenue~~ includes the sale of (1) supplies such as paper, writing instruments, office supplies, cleaning and breakroom items, (2) technology related products such as toner and ink, printers, computers, tablets and accessories, electronic storage, and (3) furniture and other products such as desks, seating, and luggage.of:

The Company sells its supplies, furniture and other products through its Business Solutions and Retail Divisions, and its technology products through all ~~three~~3 Divisions. Customers can purchase products through the Company’s ~~call centers,~~retail stores, electronically through its Internet websites, or through its ~~retail stores.~~call centers. Revenues from supplies, technology, and furniture and other product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer.

Furniture and other products also include arrangements where customers can make special furniture interior design and installation orders that are customized to their needs. The performance obligations related to these arrangements are satisfied over time.

~~Services revenue~~ includes ~~(1) technology service offerings provided through~~ the Company’s CompuCom Division, such as end user computing support, managed IT services, data center monitoring and management, service desk, network infrastructure, IT workforce solutions, mobile device management and cloud services, as well as technology service offerings provided in the Company’s retail stores, such as installation and repair, and (2) copy, print, and other service offerings such as managed print and fulfillment services, product subscriptions, and sales of third party software, gift cards, warranties, remote support as well as rental income on operating lease arrangements where the Company conveys to its customers the right to use devices and other equipment for a stated period.sale of:

The largest offering in the technology service ~~technology~~ category is end user computing, which provides on-site services to assist corporate end users with their ~~information technology~~IT needs. Services are either billed on a rate per hour or per user, or on a fixed monthly retainer basis. For the majority of technology service offerings contracts, the Company has the right to invoice the customer infor an amount that directly corresponds with the value to the customer of the Company’s performance to date and as such the Company recognizes revenue based on the amount billable to the customer in accordance with the practical expedient provided by the current revenue guidance.

Substantially all of the Company’s other service offerings are satisfied at a point in time and revenue is recognized as such. The largest other service offering is copy and print services, which includes printing, copying, and digital imaging. The majority of copy and print services are fulfilled through retail stores and the related performance obligations are satisfied within a short period of time (generally within the same day).

~~Revenue Recognition and Significant Judgments~~REVENUE RECOGNITION AND SIGNIFICANT JUDGMENTS

Revenue is recognized upon transfer of control of promised products or services to customers infor an amount that reflects the consideration the Company is entitled to receive in exchange for those products or services. For product sales, transfer of control occurs at a point in time, typically upon delivery to the customer. For service offerings, the transfer of control and satisfaction of the performance obligation is either over time or at a point in time. When performance obligations are satisfied over time, the Company evaluates the pattern of delivery and progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Revenue is recognized net of allowance for returns and net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs are considered fulfillment activities and are recognized within the Company’s cost of goods sold.

Contracts with customers could include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Determining the standalone selling price also requires judgment. The Company did not have significant revenues generated from such contracts ~~during~~in the first ~~quarter~~quarters of 2020 and 2019.

Products are generally sold with a right of return and the Company may provide other incentives, such as rebates and coupons, which are accounted for as variable consideration when estimating the amount of revenue to recognize. The Company estimates returns and incentives at contract inception and includes the amount in the transaction price for which significant reversal is not probable. These estimates are updated at the end of each reporting period as additional information becomes available.

The Company offers a customer loyalty program that provides customers with rewards that can be applied to future purchases or other incentives. Loyalty rewards are accounted for as a separate performance obligation and a deferred ~~liability~~revenue is recorded in the amount of the transaction price allocated to the rewards, inclusive of the impact of estimated breakage. The estimated breakage of loyalty rewards is based on historical redemption rates experienced under the loyalty program. Revenue is recognized when the loyalty

rewards are redeemed or expire. As of March ~~30,~~28, 2020 and December 28, 2019, the Company had $9$7 million and $12 million of deferred ~~liability~~revenue related to the loyalty program, respectively, which is included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

The Company recognizes revenue in certain circumstances before product delivery occurs (commonly referred to as bill-and-hold transactions). Revenue from bill-and-hold transactions is recognized when all specific requirements for transfer of control under a bill-and-hold arrangement have been met which include, among other things, a request from the customer that the product be held for future scheduled delivery. For these bill-and-hold arrangements, the associated product inventory is identified separately as belonging to the customer and is ready for physical transfer.

The timing of revenue recognition may differ from the timing of invoicing to customers. A receivable is recognized in the period the Company delivers goods or provides services, and is recorded at the invoiced amount, net of an allowance for doubtful accounts. A receivable is also recognized for unbilled services where the Company’s right to consideration is unconditional, and is recorded based on an estimate of time and materials. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 20 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services.

The Company receives payments from customers based upon contractual billing schedules. Contract assets include amounts related to deferred contract acquisition costs (refer to the section “Costs to Obtain a Contract” below) and if applicable, the Company’s conditional right to consideration for completed performance under a contract. The short and long-term components of contract assets in the table below are included in Prepaid expenses and other current assets, and Other assets, respectively, in the Condensed Consolidated Balance Sheets. Contract liabilities include payments received in advance of performance under the contract, ~~and~~which are recognized as revenue when the performance obligation is completed under the contract, as well as accrued contract acquisition costs,

liabilities related to the Company’s loyalty program and gift cards. The short and long-term components of contract liabilities in the table below 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.

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:

	March 30,		December 29,		March 28,		December 28,
(In millions)	2019		2018		2020		2019
Trade receivables, net	$	669	$	655	$	646	$	599
Short-term contract assets		25		22		21		23
Long-term contract assets		18		17		19		17
Short-term contract liabilities		48		52		44		52
Long-term contract liabilities		1		1		2		1

~~During~~In the first ~~quarter~~quarters of 2020 and 2019, the Company did not have any contract assets related to conditional rights. The Company recognized revenues of $18 million and $19 million ~~during~~in the first ~~quarter~~quarters of 2020 and 2019, respectively, which were included in the short-term contract liability balance at the beginning of ~~the~~each respective period. There were no0 contract assets and liabilities that were recognized ~~during~~in the first ~~quarter~~quarters of 2020 and 2019 as a result of business combinations. There were no0 significant adjustments to revenue from performance obligations satisfied in previous periods and there were no0 contract assets recognized at the beginning of ~~the~~each respective period that transferred to receivables ~~during~~in the first ~~quarter~~quarters of2020 and 2019.

~~Substantially all~~A majority of the purchase orders and statements of work related to contracts with customers require delivery of the product or service within one year or less. For certain service contracts that exceed one year, the Company recognizes revenue at the amount to which it has the right to invoice for services performed. Accordingly, the Company has applied the optional exemption provided by the new revenue recognition standard relating to unsatisfied performance obligations and does not disclose the value of unsatisfied performance obligations for its contracts.

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain rebate incentive programs meet the requirements to be capitalized. These costs are periodically reviewed for impairment, and are amortized on a straight-line basis over the expected period of benefit. As of both March ~~30,~~28, 2020 and December 28, 2019, capitalized acquisition costs amounted to ~~$43~~ $40million ~~which is~~and are reflected in short-term contract assets and long-term contract assets in the table above. ~~During~~In the first ~~quarter~~quarters of 2020 and 2019, amortization expense was $7million and $9 million, ~~and there was no impairment loss in relation to costs capitalized.~~respectively. The Company had no0 asset impairment charges related to contract assets in the

periods presented herein. There is uncertainty regarding the impacts of COVID-19, the novel coronavirus disease that has been declared a pandemic by the World Health Organization on March 11, 2020, on the global and national economies, which could negatively affect our customers and result in future impairments of contract assets.

AtMarch ~~30, 2019,~~28, 2020, the Company had ~~three~~3 reportable segments: Business Solutions Division, Retail Division and the 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 ~~forces,~~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 ~~offer~~sell office supplies, technology products and solutions, business machines and related supplies, ~~print,~~ cleaning, breakroom and facilities products, and office furniture as well as offer business services including copying, printing, 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 ~~sells information technology (“IT”) outsourcing~~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 ~~support, managed IT services, data center~~and collaboration, service desk, remote technology monitoring and management, ~~service desk, network infrastructure,~~and IT workforce ~~solutions, mobile device management and cloud services.~~solutions.

The retained global sourcing operations previously included in the former International Division are not significant and have been presented as Other. Also included in Other is the elimination of intersegment revenues of $3$4 million ~~for~~in the first quarter of ~~2019~~2020, and $1$3 million ~~for~~in the first quarter of ~~2018.~~2019.

The ~~office supply~~ 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~~3 operating segments are ~~the three~~its 3 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, and they are managed accordingly. The accounting policies for each segment are the same as those described in Note 1. 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 ~~and~~or the CompuCom Division, including ~~Asset~~asset impairments and ~~Merger~~merger and restructuring expenses, ~~net,~~ 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, after the elimination of the discontinued operations for all periods.~~totals.

	Sales				Sales
	First Quarter				First Quarter
(In millions)	2019		2018		2020		2019
Business Solutions Division	$	1,344	$	1,328	$	1,334	$	1,344
Retail Division		1,175		1,244		1,156		1,175
CompuCom Division		247		257		235		247
Other		3		1		—		3
Total	$	2,769	$	2,830	$	2,725	$	2,769

	Division Operating Income (Loss)					Division Operating Income (Loss)
	First Quarter					First Quarter
(In millions)	2019			2018		2020		2019
Business Solutions Division	$	46		$	55	$	40	$	46
Retail Division		67			72		87		67
CompuCom Division		(15	)		5		3		(15	)
Other		—			—		—		—
Total	$	98		$	132	$	130	$	98

A reconciliation of the measure of Division operating income to Consolidated income ~~from continuing operations~~ before income taxes is as follows:

	First Quarter						First Quarter
(In millions)	2019			2018			2020			2019
Total Divisions operating income	$	98		$	132		$	130		$	98
Add/(subtract):
Asset impairments		(29	)		—			(12	)		(29	)
Merger and restructuring expenses, net		(14	)		(17	)		(16	)		(14	)
Unallocated expenses		(31	)		(38	)		(22	)		(31	)
Interest income		6			6			3			6
Interest expense		(23	)		(29	)		(18	)		(23	)
Other income, net		2			1			1			2
Income from continuing operations before income taxes	$	9		$	55
Income before income taxes							$	66		$	9

	Business Solutions		Retail		CompuCom				Business Solutions		Retail		CompuCom
(In millions)	Division		Division		Division		Total		Division		Division		Division			Total
Balance as of December 29, 2018	$	387	$	78	$	449	$	914
Balance as of December 28, 2019									$	410	$	78	$	456		$	944
Acquisitions		5		—		—		5		10		—		—			10
Foreign currency rate impact		—		—		3		3		—		—		(14	)		(14	)
Balance as of March 30, 2019	$	392	$	78	$	452	$	922
Balance as of March 28, 2020									$	420	$	78	$	442		$	940

Refer to Note 2 for additional information on the acquisitions made during the first quarter of ~~2019.~~2020.

As of March ~~30, 2019,~~28, 2020, the Company believes, based on an evaluation of events and circumstances, that an interim impairment test has not been triggered and that its goodwill and indefinite-lived intangible assets ~~are~~continue to be recoverable for all reporting units. The Company ~~continues to monitor~~is monitoring the performance of its Contract reporting unit, a component of the Business Solutions Division segment, and its CompuCom ~~Division,~~reporting unit, which ~~reported an operating loss for~~both passed the ~~first quarter~~quantitative assessments performed in 2019 with margins in excess of ~~2019 mainly driven by lower than expected revenue from existing customer contracts, compounded by less than commensurate reductions~~those determined in ~~associated expenses.~~the Company’s 2018 annual assessment. The Company believes that the revenue and profitability shortfall in the first quarter of 2019 at CompuCom were temporary, and the long-term projections management used in the last goodwill recoverability assessment are still achievable. This is supported by the fact that CompuCom’s business has ~~not fundamentally changed since the last goodwill impairment analysis. In addition, the Company has undertaken~~taken several actions to improve the future operating performance of CompuCom, including ~~streamlining its operational structure~~the use of automation and technology to ~~increase~~further improve service efficiency, simplifying organizational structures to improve service velocity, and ~~efficiency, reorganizing its customer-facing organization~~aligning sales efforts to better ~~align with customer needs, and realigning~~serve its ~~sales team to more effectively identify new opportunities to increase penetration of existing~~ customers and accelerate cross-selling opportunities. ~~However,~~The anticipated impacts of these actions were reflected in key assumptions used in the 2019 quantitative assessment, and if ~~the Company’s actions do~~ not realized, could result in ~~improved financial performance at CompuCom, there is a reasonable possibility of~~ future impairment of goodwill and indefinite-lived intangible assets for the CompuCom ~~Division~~ reporting unit.

The CompuCom reporting unit has experienced a decline in project-based service revenue late in the first quarter of 2020 due to the impacts of COVID-19 on its customers. This decrease is primarily due to customer-imposed deferrals of projects into future periods and the Company does not expect it to result in a significant impact on its long-term forecast. However, its total operations could be impacted further depending on the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. Accordingly, the Company has performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic, the possibility of declines in revenue beyond the deferral of project revenue and assumptions of the business returning to normal level of operations in future years. Based on the weighted evaluation of these different scenarios, which included adjusted risk profiles, the Company believes that it is not more likely than not that the fair value of its CompuCom reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $442 million.

The Contract reporting unit, which is a key part of the Company’s integrated B2B platform, has been negatively impacted by the varying degrees of restrictions imposed late in the first quarter of 2020 by federal, state and local authorities, in response to the rapid spread of the novel coronavirus. The restrictions include the temporary closure of nonessential businesses, which constitute a portion of this reporting unit’s customers, along with the transition of many other business customers to a work-from-home environment and has resulted in decreased demand for the Contract reporting unit’s core product and service offerings. The extent to which the COVID-19 pandemic will impact the operating results of the Contract Reporting unit in the future will depend on numerous evolving factors and future developments, including the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. The Company has performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic and timing for its business-to-business customers returning back to levels of historical operations, as well as opportunities to increase sales in its cleaning and breakroom product category. Based on the weighted evaluation of these

different scenarios which included adjusted risk profiles, the Company believes that it is not more likely than not that the fair value of its Contract reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $345 million.

The Company’s effective rate for the first quarter of ~~2019~~2020 differs from the statutory rate of 21% ~~enacted as part of the Tax Cuts and Jobs Act~~ primarily due to the impact of state taxes, excess tax deficiencies associated with stock-based compensation awards ~~the impact of state taxes~~ and certain nondeductible items, adjustments to certain tax ~~credit~~ benefits and the mix of income and losses across U.S. and non-U.S. jurisdictions. Some of these discrete items were particularly larger compared to the income reported in the first quarter of 2019, thus causing the effective tax rate for the period to be significantly lower than the statutory rate. As prior years’ equity awards granted at a higher fair value vest, previously recognized deferred tax benefits on the excess compensation expense are reversed, thus causing a tax deficiency. The Company’s effective tax rates in prior periods have varied considerably as a result of ~~two~~several primary factors 1)including the mix of income and losses across U.S. and non-U.S. jurisdictions, the impact of excess tax deficiencies associated with stock-based compensation awards and 2) the derecognition of valuation allowances against deferred tax assets that were not more-likely-than-not realizable in the U.S. and certain non-U.S. jurisdictions. During ~~2019~~2020 and ~~2018,~~2019, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing the Company’s effective tax rates due to the dispositions of the international businesses and improved operating results. As a result, the Company’s effective tax rates ~~were~~are 32% for the first quarter of 2020, and 11% for the first quarter of ~~2019 and 40% for the first quarter of 2018.~~2019. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters.

The Tax Cuts and Jobs Act repealed the corporate Alternative Minimum Tax (“AMT”) and allows unutilized AMT credits to be refunded. For tax years 2018 through 2020, taxpayers ~~may~~could receive 50% of their uncredited balances as a cash refund with any remaining amounts refunded in full in 2021. ~~The~~As of the year end 2019, the Company determined it is more-likely-than-not that ~~$45~~$22 million of its AMT credits will be refunded and is ~~estimated~~expected to ~~occur~~be received in the fourth quarter of 2020. During the first quarter of 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. The CARES Act allows for the Company to refund 100% of its remaining AMT credits in 2020. The Company anticipates filing for the remaining $22 million in the second quarter of 2020 for a total refund of $44 million. The Company continues to evaluate the other provisions of the CARES Act to determine if they would have any material impact.

During the first quarter of 2020, the Company net settled its Timber notes receivable and Non-recourse debt. The Company has previously recorded a deferred tax liability related to the taxes deferred from the original transaction. The deferred liability was realized in the first quarter of 2020. ~~Accordingly,~~It is anticipated that certain capital loss carryforwards, available tax credits and net operating losses will offset the ~~Company reclassified $45 million from non-current deferred tax assets to~~resulting gain and no material cash income ~~tax receivables in~~taxes will be due upon the ~~first quarter of 2019.~~realization.

The Company continues to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods.

The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years prior to 2017 and 2013, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal income tax examination, and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years prior to 2013. The Company’s U.S. federal income tax return for 2017 is currently under review. Generally, the Company is subject to routine examination for years 2012 and forward in its international tax jurisdictions.

It is ~~not reasonably possible~~anticipated that ~~certain~~$2 million of tax positions will be resolved within the next 12 months. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

The following table represents the calculation of ~~net~~ earnings per common share – basic and diluted:

	First Quarter				First Quarter
(In millions, except per share amounts)	2019		2018		2020		2019
Basic Earnings Per Share
Numerator:
Net income from continuing operations	$	8	$	33
Income from discontinued operations, net of tax		—		8
Net income	$	8	$	41	$	45	$	8
Denominator:
Weighted-average shares outstanding		543		555		529		543
Basic earnings per share:
Continuing operations	$	0.01	$	0.06
Discontinued operations		—		0.01
Net earnings per share	$	0.01	$	0.07
Basic earnings per share					$	0.09	$	0.01
Diluted Earnings Per Share
Numerator:
Net income from continuing operations	$	8	$	33
Income from discontinued operations, net of tax		—		8
Net income	$	8	$	41	$	45	$	8
Denominator:
Weighted-average shares outstanding		543		555		529		543
Effect of dilutive securities:
Stock options and restricted stock		18		8		13		18
Diluted weighted-average shares outstanding		561		563		542		561
Diluted earnings per share:
Continuing operations	$	0.01	$	0.06
Discontinued operations		—		0.01
Net diluted earnings per share	$	0.01	$	0.07
Diluted earnings per share					$	0.08	$	0.01

Awards of stock options and nonvested shares representing ~~approximately 4~~5 million additional shares of common stock were outstanding for the first quarter of ~~2019~~2020, and ~~approximately 8~~4 million for the first quarter of ~~2018,~~2019, but were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive.

The Company leases retail stores and other facilities, vehicles, and equipment under operating lease agreements. Facility leases typically are for a fixed non-cancellable term with one or more renewal options. In addition to rent payments, the Company is required to pay certain variable lease costs such as real estate taxes, insurance and common area maintenance on most of the facility leases. For leases beginning in 2019 and later, the Company accounts for lease components (e.g., fixed payments including rent) and non-lease components (e.g., real estate taxes, insurance costs and common-area maintenance costs) as a single lease component. Many lease agreements contain tenant improvement allowances, rent holidays, and/or rent escalation clauses. Certain leases contain provisions for additional rent to be paid if sales exceed a specified amount, though such payments have been immaterial during the periods presented. The Company subleases certain real estate to third parties, consisting mainly of operating leases for space within the retail stores.

March 30, 2019

Operating

Finance

(In millions)

Leases⁽¹⁾

Leases

2019 (excluding the first quarter of 2019)

$
546

$
16

2020

479

16

2021

338

14

2022

254

12

2023

178

11

Thereafter

132

15

1,927

84

Less imputed interest

(349
)

(15
)
Total

$
1,578

$
69

Reported as of March 30, 2019

Accrued expenses and other current liabilities

$
370

$
—

Short-term borrowings and current maturities of long-term debt

—

16

Long-term debt, net of current maturities

—

53

Operating lease liabilities

1,208

—

Total

$
1,578

$
69

Adoption of the new lease accounting standard using the alternative transition method required the Company to provide relevant disclosures in accordance with ASC 840, Leases for all prior periods presented. The table below represents future minimum lease payments due under the non-cancelable portions of leases including facility leases that were accrued as store closure costs as of December 29, 2018. The table was updated from the version previously includedAs disclosed in the Company’s ~~Annual Report~~definitive proxy statement filed on ~~Form 10-K for~~March 26, 2020, if approved by the ~~fiscal year ended December 29, 2018 within the Notes to Consolidated Financial Statements to adjust for certain inconsistencies~~

~~that management identified in the first quarter of fiscal year 2019 during the implementation of ASC 842, Leases. Specifically,~~Company’s shareholders, the Company ~~corrected~~may implement a reverse stock split substantially concurrently with the ~~schedule~~consummation of the Reorganization. If implemented, all share and per share amounts will be retroactively adjusted to ~~include additional lease commitments for option periods at~~reflect the ~~time of execution as opposed~~reverse stock split. The Reorganization is not a condition to the ~~original extension date.~~

In connection with the consummation of the acquisition of CompuCom, the Company entered into a credit agreement, dated as of November 8, 2017 (the “Term Loan Credit Agreement”), which provides for a $750 million term loan facility with a maturity date of November 8, 2022. The Term Loan Credit Agreement was amended in November 2018. The Company was in compliance with all applicable financial covenants associated with the Term Loan Credit Agreement at March ~~30, 2019.~~28, 2020.

In May 2011, the Company entered into an amended and restated credit agreement, which was amended and restated in May 2016 for an additional five years, and was further amended in December 2016 and November 2017 (the Amended and Restated Credit Agreement including all amendments is referred to as the “Amended Credit Agreement”). The Amended Credit Agreement provides for a revolving credit facility of up to $1.2 billion and will mature on May 13, 2021. As provided in the Amended Credit Agreement, available amounts that can be borrowed are based on percentages of certain outstanding accounts receivable, credit card receivables, and inventory of the Company. At March ~~30, 2019,~~28, 2020, the Company had ~~$943~~$851 million of available credit, and letters of credit outstanding totaling ~~$72~~$62 million under the Amended Credit Agreement. There were no0 borrowings under the Amended Credit Agreement in the first quarter of ~~2019~~2020 and the Company was in compliance with all applicable financial covenants at March ~~30, 2019.~~28, 2020.

~~Non-recourse~~On April 17, 2020, the Company entered into the Third Amended and Restated Credit Agreement, which provides for a $1.2 billion asset-based revolving credit facility and a $100 million asset-based first-in, last-out term loan facility, for an aggregate principal amount of up to $1.3 billion (the “New Facilities”). The New Facilities mature in April 2025. The Third Amended and Restated Credit Agreement replaces the Company’s existing Amended Credit Agreement that was due to mature in May 2021. Upon the closing of the transaction, the Company made an initial borrowing in the amount of $400 million under the New Facilities. These proceeds, along with available cash on hand, were used to repay in full the remaining $388 million balance under the Term Loan Credit Agreement and terminate it and to repay approximately $66 million of other debt. The Company recognized $12 million of loss from extinguishment of debt related to this transaction in the second quarter of 2020, which primarily includes the amortization of the remaining discount and debt issuance costs of the Term Loan Credit Agreement as of the closing date of the transaction.

The Installment Notes (the “Timber ~~Notes Receivable”~~notes receivable”) and the related ~~Securitization Notes~~Bridge Loan (the ~~“Non-Recourse Debt”~~“Non-recourse debt”), as defined in the ~~2018~~2019 Form 10-K, ~~are scheduled to mature~~both matured on January 29, 2020. The Company received a net principal cash payment of $82.5 million upon maturity of the Installment Notes and the Bridge Loan on January 29, 2020, ~~and October 31, 2019, respectively. As described in~~which were net settled as they were with the ~~indenture governing~~same third-party financial institution. Refer to Note 6 for additional information related to the ~~Non-Recourse Debt, if the Company does not provide a redemption notice in September 2019, the maturity date~~tax impact of the Non-Recourse Debt will extend to January 29, 2020, provided that the majority holders of the Non-Recourse Debt do not disallow the extension by October 21, 2019. The extension of the maturity date of the Non-Recourse Debt will result in an increase in the interest rate for the extension period at the greater of 7.42% or LIBOR plus 2.55%, capped at 13%.this transaction.

Accumulated other comprehensive ~~income (loss)~~loss activity, net of tax, where applicable, is provided in the following table:

Foreign

Change in

Currency

Deferred

Translation

Pension and

(In millions)

Adjustments

Other

Total

Balance at December 29, 2018

$
(50
)

$
(49
)

$
(99
)
Other comprehensive income activity before reclassifications

10

1

11

Balance at March 30, 2019

$
(40
)

$
(48
)

$
(88
)

	Foreign			Change in
	Currency			Deferred
	Translation			Pension and
(In millions)	Adjustments			Other			Total
Balance at December 28, 2019	$	(29	)	$	(37	)	$	(66	)
Other comprehensive loss activity		(41	)		(1	)		(42	)
Balance at March 28, 2020	$	(70	)	$	(38	)	$	(108	)

In November 2018, the Board of Directors approved a stock repurchase program of up to $100 million of its common stock effective January 1, 2019, which extends until the end of 2020 and may be suspended or discontinued at any time. ~~The~~In November 2019, the Board of Directors approved an increase in the authorization of the existing stock repurchase program of up to $200 million and extended the program through the end of 2021. The current authorization ~~permits~~includes the ~~Company to repurchase stock from time-to-time through a combination of open market repurchases,~~

~~privately negotiated transactions, 10b5-1 trading plans, accelerated~~remaining authorized amount under the existing stock repurchase ~~transactions and/or other derivative transactions.~~program. The exact ~~number and~~ timing of share repurchases will depend on market conditions and other factors, and will be funded through available cash balances. ~~However,~~

Under the ~~Company’s ability to~~stock repurchase ~~its common stock in 2019 is subject to certain restrictions under the Company’s Term Loan Credit Agreement.~~

~~During the first quarter of 2019,~~program, the Company purchased approximately 413 million shares of its common stock at a cost of ~~$10~~$30 million ~~excluding commissions, and as~~in the first quarter of 2020. As of March ~~30, 2019,~~28, 2020, approximately ~~$90~~$131 million remains available for ~~share~~stock repurchases under the current stock repurchase authorization.

At March 28, 2020, there were 98 million common shares held in treasury. The Company’s Term Loan Credit Agreement and Amended Credit Facility included certain covenants on restricted payments such as common stock repurchases, based on the Company’s liquidity and borrowing availability. The Company’s ability to repurchase its common stock was also subject to certain restrictions under the Term Loan Credit Agreement prior to its termination in the second quarter of 2020. Refer to ~~Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” in Part II, “Other Information”~~Note 8 for additional ~~information.~~information about the termination of the Term Loan Credit Agreement.

In ~~February 2019,~~the first quarter of 2020, the Company’s Board of Directors declared a quarterly cash dividend in the amount of $0.025 per share on its common stock, resulting in total cash payments of ~~$14~~$13 million. Dividends have been recorded as a reduction to additional paid-in capital as the Company is in an accumulated deficit position. Payment of dividends is permitted under the Company’s Amended Credit Agreement provided that the Company has the required minimum liquidity or fixed charge coverage ratio, but may be limited if the Company does not meet the necessary requirements. Additionally, under the Company’s Term Loan Credit Agreement, payment of dividends iswas permitted subject to compliance with an annual ~~limit.~~limit, prior to its termination in the second quarter of 2020. Refer to Note 8 for additional information about the termination of the Term Loan Credit Agreement.

~~Pension and Other Postretirement Benefit Plans~~PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS – ~~North America~~NORTH AMERICA

The components of net periodic pension expense (benefit) for the Company’s North America pension plans are as follows:

	First Quarter						First Quarter
(In millions)	2019			2018			2020			2019
Service cost	$	2		$	1		$	—		$	2
Interest cost		9			9			7			9
Expected return on plan assets		(10	)		(11	)		(8	)		(10	)
Net periodic pension expense (benefit)	$	1		$	(1	)	$	(1	)	$	1

During the first quarter of ~~2019,~~2020, $2 million of cash contributions were made to the North America pension ~~plans were not significant.~~plans. The Company expects to make additional cash contributions of approximately $2$8 million to the North America pension plans during the remainder of ~~2019.~~2020.

The components of net periodic pension benefit for the Company’s UK pension plan are as follows:

	First Quarter						First Quarter
(In millions)	2019			2018			2020			2019
Service cost	$	—		$	—		$	—		$	—
Interest cost		2			2			1			2
Expected return on plan assets		(2	)		(2	)		(1	)		(2	)
Net periodic pension benefit	$	—		$	—		$	—		$	—

The UK pension plan is in a net asset position. During the first quarter of ~~2019,~~2020, cash contributions of $1million were made to the UK pension plan. The Company is required to make an additional cash contribution of $1 million to the UK pension plan during the remainder of ~~2019.~~2020.

Net periodic pension benefits for the North America and UK pension and other postretirement benefit plans (the “Plans”) are recorded at the ~~corporate~~Corporate level. The service cost for the Plans are reflected in Selling, general and administrative expenses, and the other components of net periodic pension benefitsare reflected in Other income, net, in the Condensed Consolidated Statements of Operations.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In developing its fair value estimates, the Company uses the following hierarchy:

In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company’s assets and liabilities that are adjusted to fair value on a recurring basis are money market funds that qualify as cash equivalents, and derivative financial ~~instruments. As of March 30, 2019 and December 29, 2018, the Company did not have any money market funds that had floating net asset values that required measurement.~~

~~The fair values of the Company’s~~instruments, which may be entered into to mitigate risks associated with changes in foreign currency ~~contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current~~ exchange rates, fuel and other commodity ~~prices. The values are based on market-based inputs or unobservable inputs that are corroborated by market data.~~prices and interest rates. Amounts associated with ~~these~~ derivative ~~financial~~ instruments ~~are considered Level 1 measurements, and~~ were not significant for the reported periods. At March 30, 2019, Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet included less than $1 million related to derivative foreign currency and fuel contracts. At December 29, 2018, Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet included less than $1 million related to derivative foreign currency and fuel contracts.significant.

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. In the first quarter of ~~2019,~~2020, the Company recognized an asset impairment ~~charge~~charges of $~~29 million associated with continuing operations.~~12 million. Of ~~this $29 million~~these asset impairment ~~charge, $25~~charges, $10 million, ~~was~~were related to impairment of ~~ROU~~operating lease right-of-use (“ROU”) assets ~~for~~associated with the Company’s retail store ~~locations.~~locations, with the remainder primarily relating to impairment of fixed assets. All impairment charges discussed in the sections below are presented in Asset impairments in the Condensed Consolidated Statements of Operations.

The Company regularly reviews retail store ~~long-lived~~ assets for impairment indicators at the individual store level, as this represents the lowest level of identifiable cash flows. When indicators of impairment are present, a recoverability analysis is performed which considers the estimated undiscounted cash flows over the retail store’s remaining life and uses input from retail operations and accounting and finance personnel. These inputs include management’s best estimates of retail store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows, by their nature, include judgments about how current initiatives will impact future performance. In the first quarter of ~~2019,~~2020, the assumptions used within the

recoverability analysis for the retail stores were updated to consider current quarter retail store operational results and formal plans for ~~additional~~future retail store closures. These assumptions reflected declining sales over the forecast period, and gross margin and operating cost assumptions that are consistent with recent actual results and consider plans for future initiatives.The Company also analyzed the impact of the COVID-19 pandemic on store asset recoverability. Due to the nature of products sold, the retail stores were considered to be essential retail commerce by most local jurisdictions and as a result, the substantial majority of these stores remain open and operational with the appropriate safety measures in place during the COVID-19 outbreak. Late in the first quarter of 2020, the Company determined to temporarily reduce retail location hours by two hours daily and provide the option of curbside pickup at all locations, with a small number of locations solely providing curbside pickup. The Company’s recoverability assessment included evaluating the impact of these developments under scenarios of varying store-level sales and operating costs.

If the undiscounted cash flows of a retail store cannot support the carrying amount of its assets, the assets are impaired if necessary and written down to estimated fair value. The fair value of retail store assets is determined using a discounted cash flow analysis which uses Level 2 unobservable inputs that are corroborated by market data ~~where available,~~ such as real estate broker’s opinions. Specifically, the analysis uses assumptions of potential rental rates for each retail store location which are based on market data for comparable locations. These estimated cash flows used in the first quarter of ~~2019~~2020 impairment calculation were discounted at a weighted average discount rate of 7%8%. ~~For retail store locations for which Level 2 inputs are not readily available, the Company uses Level 3 unobservable inputs to determine fair value.~~

The Company will continue to evaluate initiatives to improve performance and lower operating costs. There is uncertainty regarding the impact of the COVID-19 pandemic on the future results of operations, including the forecast period used in the recoverability analysis. To the extent that forward-looking sales and operating assumptions are not achieved and are subsequently reduced, additional impairment charges may result. However, at the end of the first quarter of ~~2019,~~2020, the impairment recognized reflects the Company’s best estimate of future performance.

The fair values of cash and cash equivalents, receivables, trade accounts payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

The following table presents information about financial instruments at the balance sheet dates indicated.

	March 30,				December 29,				March 28,				December 28,
	2019				2018				2020				2019
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
(In millions)	Amount		Value		Amount		Value		Amount		Value		Amount		Value
Financial assets:
Timber notes receivable	$	836	$	835	$	842	$	835	$	—	$	—	$	819	$	819
Company-owned life insurance		92		92		91		91		92		92		91		91
Financial liabilities:
Recourse debt:
Term Loan, due 2022		445		470		463		490		376		361		393		409
Revenue bonds, due in varying amounts periodically through 2029		186		186		186		184		186		183		186		186
American & Foreign Power Company, Inc. 5% debentures, due 2030		14		14		14		14		15		15		15		14
Non-recourse debt — Timber notes		748		747		754		750		—		—		735		735

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

The Company is involved in litigation arising in the normal course of business. While, from time to time, claims are asserted that make demands for a large sum of money (including, from time to time, actions which are asserted to be maintainable as class action suits), the Company does not believe that contingent liabilities related to these matters (including the matters discussed below), either individually or in the aggregate, will materially affect the Company’s financial position, results of operations or cash flows.

In addition, in the ordinary course of business, sales to and transactions with government customers may be subject to lawsuits, investigations, audits and review by governmental authorities and regulatory agencies, with which the Company cooperates. Many of these lawsuits, investigations, audits and reviews are resolved without material impact to the Company. While claims in these matters may at times assert large demands, the Company does not believe that contingent liabilities related to these matters, either individually or in the aggregate, will materially affect its financial position, results of operations or cash flows.

In ~~December 2016,~~May 2017, the ~~Federal Trade Commission ("FTC'~~Office of Attorney General, State of Texas (''Texas AG'') issued a Civil Investigative Demand (“CID”) to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to ~~the Company’s use of the product~~ PC Healthcheck, a software program manufactured by a third-party vendor and provided to the Company for its customers prior to December 31, 2016. ~~Since issuing the CID, the FTC has sought additional written and testimonial evidence from the~~The Company ~~and the Company has cooperated~~continues to cooperate with the ~~investigation from its inception.~~

On July 19, 2018, the Company was notified by the FTC that it would like to engage in settlement discussions. Based on the ongoing discussions with the FTC, on December 29, 2018, the Company accrued $25 million for potential liabilities associated with this claim.

In March 2019, the FTC Commissioners approved the proposed settlement between the FTC and the Company. The Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment, or the “Consent Order,” was filed with the U.S. District Court for the Southern District of Florida (the “Court”) and entered by the Court on March 29, 2019.

Under the terms of the Consent Order, wherein the Company neither admitted nor denied the FTC’s allegations (except as to the Court having jurisdiction over the matter), the FTC Commissioners agreed to accept payment of $25 million to compensate affected Company customers (the “settlement payment”). The settlement payment was paid on April 12, 2019, fourteen (14) days after final entry of the Consent ~~Order by the Court. The Consent Order also requires the Company to implement a compliance certification, record creation and maintenance program~~.

Additionally, in January 2017 and May 2017, the Consumer Protection Divisions of each of the Office of Attorney General, State of Washington ("Washington AG'') and the Office of Attorney General, State of Texas (''Texas AG''), respectively, each issued a CID to the Company requiring the Company to produce certain documents and materials and to answer certain interrogatories relating to PC Healthcheck. The Company is cooperating with the Washington AG and Texas AG with respect to ~~these matters.~~its investigation. At this time, it is difficult to predict the timing, the likely outcome, and/or potential range of loss, if any, of ~~these state matters.~~this matter.

In addition to the foregoing, OfficeMax is named as a defendant in a number of lawsuits, claims, and proceedings arising out of the operation of certain paper and forest products assets prior to those assets being sold in 2004, for which OfficeMax agreed to retain responsibility. Also, as part of that sale, OfficeMax agreed to retain responsibility for all pending or threatened proceedings and future proceedings alleging asbestos-related injuries arising out of the operation of the paper and forest products assets prior to the closing of the sale. The Company has made provision for losses with respect to the pending proceedings. Additionally, as of March ~~30, 2019,~~28, 2020, the Company has made provision for environmental liabilities with respect to certain sites where hazardous substances or other contaminants are or may be located. For these liabilities, our estimated range of reasonably possible losses was approximately $10 million to ~~$25~~$20 million. The Company regularly monitors its estimated exposure to these liabilities. As additional information becomes known, these estimates may change, however, the Company does not believe any of these OfficeMax retained proceedings are material to the Company’s financial position, results of operations or cash flows.

In the third quarter of 2016, the Company’s Board of Directors approved a plan to sell substantially all operations of the former International Division through four disposal groups (Europe, South Korea, Oceania and mainland China) (the “International Operations”). Collectively, these dispositions represent a strategic shift that has a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations. As of the end of fiscal 2018, the sale of the International Operations was complete, and there are no further discontinued operations in 2019.

~~For the first quarter of 2018, the major components of Discontinued operations, net of tax presented were as follows:~~

~~Item 2. Management’s Discussion and Analysis of~~ ~~Financial Condition and Results of Operations.~~

When using this report, the terms “Office Depot,” “Company,” “we,” “us” and “our” mean Office Depot, Inc. and all entities included in our Condensed Consolidated Financial Statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist readers in better understanding and evaluating our financial condition and results of operations. We recommend reading this MD&A in conjunction with our Condensed Consolidated Financial Statements and the Notes to those statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our 2018 Form 10-K.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a leading provider of business services and supplies, products and technology solutions through our fully integrated business-to-business (“B2B”) distribution platform of 1,359 retail stores, online presence, and dedicated sales professionals and technicians to small, medium and enterprise businesses. Through our banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, we offer our customers the tools and resources they need to focus on their passion of starting, growing and running their business.

~~As of March 30, 2019, our operations are organized into three reportable segments (or “Divisions”): Business Solutions Division, Retail Division and CompuCom Division.~~

The Business Solutions Division, or BSD, provides customers with office supply products and services in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada through dedicated sales forces, catalogs, telesales, and electronically through our Internet websites.

The Retail Division includes our chain of retail stores in the United States, Puerto Rico and the U.S. Virgin Islands where we sell office supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom supplies and facilities products, and furniture. In addition, our Retail Division offers a range of business-related services targeted to small businesses, technology support services as well as printing, copying, mailing and shipping services.

The CompuCom Division was formed during the fourth quarter of 2017 as a result of the acquisition of CompuCom Systems, Inc. (“CompuCom”). The CompuCom Division provides information technology (“IT”) outsourcing services and products to enterprise organizations in the United States and Canada, and offers a broad range of solutions including end user computing support, managed IT services, data center monitoring and management, service desk, network infrastructure, IT workforce solutions, mobile device management and cloud services.

As part of this transformation, we acquired CompuCom in 2017 and an enterprise IT solutions integrator and managed services provider in 2018. The latter gives us access to a platform for selling or providing Internet of Things (“IoT”) related hardware and projects to the education market. IoT refers to the connection of intelligent systems and devices to allow them to automatically share information so that systems and devices work intelligently together to develop and enhance solutions and reduce human intervention.

To strengthen our core operations, since 2017, we have continued to expand our reach and distribution network by identifying and acquiring profitable regional office supply distribution businesses serving small and mid-market customers in geographic areas that were previously underserved by our network. During the first quarter of 2019, we acquired two small independent regional office supply distribution businesses. This has allowed, and will continue to allow, for an effective and accretive means to expand our distribution reach, target new business customers and grow our offerings beyond traditional office supplies.

The aggregate total purchase consideration, including contingent consideration, for the two acquisitions completed in the first quarter of 2019 was approximately $7 million, subject to certain customary post-closing adjustments. The aggregate purchase price was primarily funded with cash on hand, with the remainder consisting of contingent consideration estimated to be less than $1 million, to be paid in the first quarter of 2020.

The operating results of these companies are combined with our operating results subsequent to their purchase dates. The operating results of the recently acquired office supply distribution businesses are included in the Business Solutions Division, whereas the

~~operating results of CompuCom and the~~ ~~enterprise IT solutions integrator and managed services provider~~ ~~are included in the CompuCom Division. Refer to Note 2. “Acquisitions,” in Notes to Condensed Consolidated Financial Statements for additional information.~~

The following summarizes the more significant factors impacting our operating results from continuing operations for the 13-week period ended March 30, 2019 (also referred to as the “first quarter of 2019”) and March 31, 2018 (also referred to as the “first quarter of 2018”).

Our consolidated sales were 2% lower in the first quarter of 2019 compared to the same period of the prior year. This period-over-period decrease was primarily driven by lower sales in our Retail Division, which decreased 6% as a result of lower comparable store sales and store closures. Our CompuCom Division also experienced lower sales of 4% when compared to the prior year period, primarily due to a decline in sales of project-related services as a result of reduced business volume from existing customers. This decrease was partially offset by higher sales in the Business Solutions Division, which represented an improvement from the comparative prior year period of 1% primarily from acquisitions and a 13% increase in sales of services.

Product sales in the first quarter of 2019 decreased 3% from the comparative prior year period, while sales of services remained flat. The decrease in product revenue was primarily driven by lower comparable store sales and store closures in the Retail Division. On a consolidated basis, services represented approximately 15% of our total sales in the first quarter of 2019, as compared to 14% in the first quarter of 2018. While period-over-period sales of services declined by $26 million in our CompuCom Division, this decline was more than offset by the continued expansion of our services in the Retail and Business Solutions Divisions. The expansion of our services in these divisions was mainly driven by our service and product subscriptions which contributed an additional $25 million in revenues in the first quarter of 2019.

Total gross margin for the first quarter of 2019 was approximately 40 basis points lower than the comparative prior year period. The decline in gross margin was primarily attributable to lower gross margin in our CompuCom Division, partially offset by improved gross margin in our Retail Division as a result of improvements in distribution and inventory management costs.

~~Discussion of additional income and expense items, including material charges and credits and changes in interest and income taxes follows our review of segment results.~~

~~Product sales~~ in our Business Solutions Division increased 1% in the first quarter of 2019 compared to the same period in the prior year, primarily due to acquisitions and growth in adjacency categories, such as cleaning/breakroom supplies, partially offset by lower online sales and other product categories, including toner, ink and office supplies. Improved sales from the omni-channel programs that we report under our Retail Division also partially offset growth in product sales from our Business Solutions Division – see discussion on order online for pick up in stores (“BOPIS”) under the Retail Division below.

~~Sales of services~~ in our Business Solutions Division increased 13% in the first quarter of 2019 compared to the same period in the prior year, primarily due to the expansion of our product subscriptions for paper, toner and ink.

Business Solutions Division operating income was $46 million in the first quarter of 2019 as compared to $55 million in the first quarter of 2018. As a percentage of sales, operating income declined 70 basis points period-over-period. The decrease in operating income for the Business Solutions Division was primarily driven by paper-related cost increases that could not be completely passed through to our customers due to the timing of contractual limitations. While we expect this trend to continue in the near term, we are pursuing mitigation strategies to reduce this exposure and improve margins in the future. In addition, lower online sales coupled with investments in demand generation and eCommerce capabilities adversely impacted results in the quarter.

~~Product sales~~ in our Retail Division decreased 8% in the first quarter of 2019 compared to the same period in 2018. The decrease was primarily the result of closing underperforming retail stores coupled with fewer transactions in the existing locations, a trend that we have partially offset by gradually increasing the volume of omni-channel transactions, whereby our Business Solutions Division customers order online for pick up in our stores. These transactions are included in our Retail Division’s sales as they are fulfilled with store inventory and serviced by Retail Division employees, and have increased 16% year-over-year.

~~Sales of services~~ ~~within our Retail Division increased 16% in the first quarter of 2019 compared to the same period in 2018.~~ This positive trend is the reflection of the expansion of our copy and print services, subscription services, and the introduction of new technology services offered to our retail customers by our store associates.

~~Comparable store sales~~ ~~in the first quarter of 2019 decreased 4% reflecting lower store traffic and transaction counts, partially offset by an increase in~~ ~~conversion rate and higher volume of omni-channel, online transactions for pick up in stores described above.~~ ~~Comparable store sales declined across most of our primary product categories, including supplies, furniture, computers and technology related products. However, sales of~~ ~~paper, ink and toner increased by 2% and revenues related to our copy and print services increased by 3% in the first quarter of 2019 when compared to the same period in 2018.~~

Our comparable store sales relate to stores that have been open for at least one year. Stores are removed from the comparable sales calculation one month prior to closing, as sales during that period are largely non-comparable clearance activity. Stores are also removed from the comparable sales calculation during periods of store remodeling, store closures due to hurricanes or natural disasters, or if significantly downsized. Our measure of comparable store sales has been applied consistently across periods, but may differ from measures used by other companies.

The Retail Division operating income declined 7% in the first quarter of 2019 but remained relatively consistent at 6% of total sales in both interim periods. The period-over-period decrease in the Division’s operating income was mostly attributable to the flow-through impact of lower sales and deleveraging related to store closures, partially offset by higher gross margin rate stemming from improvements in distribution and inventory management costs, and lower operating lease costs recognized as a result of the new lease accounting standard. Operating income for the Division also reflects lower dollars spent for selling, general, and administrative expenses, including marketing and professional fees, and the impact of investments in additional service delivery capabilities. We continue to evaluate and implement additional initiatives in our retail footprint, improving conversion and product assortment mix, and exploring store-within-a-store and co-working opportunities.

~~As of March 30, 2019, the Retail Division operated 1,359 retail stores in the United States, Puerto Rico and the U.S. Virgin Islands compared to 1,376 stores at the end of the first quarter of 2018.~~ Charges associated with store closures are reported as appropriate in Merger and restructuring expenses, net in the Condensed Consolidated Statements of Operations. In addition, as part of our periodic recoverability assessment of owned retail stores and distribution center assets, and operating lease right-of-use assets, we recognize impairment charges in the Asset impairments line item of our Condensed Consolidated Statements of Operations. These charges are reflected in Corporate reporting and are not included in the determination of Division income. Refer to “Corporate” discussion below for additional information of expenses incurred to date.

~~Product sales~~ in our CompuCom Division increased 35% in the first quarter of 2019 compared to the same period in 2018. This growth was driven by a combination of higher demand in the corporate sector for computer and computer-related products, including desktops, portable computers and peripherals, partially offset by lower sales volume of enterprise network technology products, including servers, storage and expansion devices. Strong product sales growth was driven by increased discipline in our selling process, improved relationships with our product manufacturer partners, and higher demand for iOS products in the enterprise. To capture the growing opportunity in the cloud storage and advanced technologies markets, we continue to invest in specialized resources dedicated to the advanced technology space.

~~Sales of services~~ decreased 12% in the first quarter of 2019 compared to the same period in 2018. This was due, in part, to lower business volume from existing customers, whereby some projects were delayed and some were reduced in scope, and in part to customer attrition. However, as further discussed in the following paragraph, we continue to invest in targeted business development activities to increase sales of services.

The CompuCom Division reported an operating loss of $15 million in the first quarter of 2019 compared to an operating income of $5 million in the first quarter of 2018. The period-over-period decrease in this Division’s operating profitability was primarily driven by lower than expected revenue from existing customer contracts compounded by less than commensurate reductions in associated expenses. Profitability was further impacted by ongoing expenditures to develop and market additional service offerings. We have undertaken several actions to improve the future operating performance of the CompuCom Division, including streamlining its operational structure to increase service velocity and efficiency, reorganizing its customer-facing organization to better align with customer needs, and realigning its sales team to more effectively identify new opportunities to increase penetration of existing customers and accelerate cross-selling opportunities.

As of March 30, 2019, we believe that our goodwill and indefinite-lived intangible assets are recoverable for all reporting units. We continue to monitor the performance of its CompuCom Division, which reported an operating loss for the first quarter of 2019 as discussed above. We believe that the revenue and profitability shortfall in the first quarter of 2019 at CompuCom were temporary, and the long-term projections management used in the last goodwill recoverability assessment are still achievable. This is supported by the fact that CompuCom’s business has not fundamentally changed since the last goodwill impairment analysis. However, if the Company’s actions to improve the future operating performance of the CompuCom Division as discussed above do not result in improved financial performance at CompuCom, there is a reasonable possibility of future impairment of goodwill and indefinite-lived intangible assets for the CompuCom reporting unit.

Certain operations previously included in the International Division, including our global sourcing and trading operations in the Asia/Pacific region, which we have retained, are presented as Other. The operations primarily relate to the sale of products to former joint venture partners, and are not material in any period. Also included in Other is the elimination of intersegment revenues of $3 million for the first quarter of 2019 and $1 million for the first quarter of 2018.

The line items in our Condensed Consolidated Statements of Operations included as corporate activities are Merger and restructuring expenses, net and Asset impairments. These activities are managed at the Corporate level and, accordingly, are not included in the determination of Division income for management reporting or external disclosures. In addition to these charges and credits, certain selling, general and administrative expenses are not allocated to the Divisions and are managed at the Corporate level. Those expenses are addressed in the section “Unallocated Expenses” below.

We regularly conduct a detailed store impairment analysis which uses input from retail store operations and accounting and finance personnel. The analysis includes estimates of store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows and, by their nature, include judgments about how current initiatives will impact future performance. In connection with our impairment analysis in the first quarter of 2019, we recognized Asset impairments of $29 million, $25 million of which related to impairment of operating lease right-of-use assets recognized under the new lease accounting standard. The ~~assumptions used within the impairment analysis considered current quarter store operational results and formal plans for store closures.~~ For the first quarter of 2019 impairment analysis, a 100 basis point decrease in the next twelve months’ sales combined with a 50 basis point decrease in the next twelve months’ gross margin would have increased the impairment charge by less than $1 million. Further, a 100 basis point decrease in sales for all future periods would have increased the impairment charge by less than $1 million.

Since 2017, we have taken actions to optimize our 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 and restructuring 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 our customers. These expenses are not included in the determination of Division operating income.

On May 8, 2019, in connection with the earnings release and conference call for the first quarter 2019 results, we announced that our Board of Directors approved a company-wide, multi-year, cost reduction and business improvement program to systematically drive down costs, improve operational efficiencies, and enable future growth investments. Under this program (the “Business Acceleration Program”), we will make several organizational realignments stemming from process improvements, increased leverage of technology and accelerated use of automation. This will result in the elimination of certain positions and a flatter organization. ~~In connection with this program, we anticipate closing approximately 90 underperforming retail stores in 2020 and 2021, and 9 other facilities, consisting of distribution centers and sales offices.~~ ~~As a result of these changes, we expect to realize~~ ~~savings of at least $40 million in 2019, and run-rate savings of at least $100 million when fully implemented~~. Total estimated costs to implement the Business Acceleration Program are expected to be approximately $106 million to $116 million comprised of (1) severance and related employee costs of $38 million to $40 million, (2) recruitment and relocation costs of $2 million to $4 million, (3) retail store and facility closure costs of $25 million to $27 million, (4) third-party costs ~~to facilitate the execution of the program~~ of $35 million to $37 million, and (5) other costs of approximately $6 million to $8 million. Of the aggregate costs to implement the Business Acceleration Program, $99 million to $101 million are expected to be cash expenditures through 2021. For the remainder of fiscal 2019, we expect to incur approximately $85 million, of which approximately $70 million will be cash, for severance and related employee costs, recruitment and relocation, and third-party costs including legal and consulting fees ~~under the Business Acceleration Program~~.

Merger and restructuring expenses, net was $14 million in the first quarter of 2019 compared to $17 million in the first quarter of 2018. Merger and restructuring expenses in the first quarter of 2019 include $8 million of severance, retention, transaction and integration costs associated with our acquisitions, and restructuring expenses incurred in connection with our Comprehensive Business Review, a program we announced in 2016. In the first quarter of 2019, we closed 2 retail stores, and expect to close approximately 57 additional stores through the end of the Comprehensive Business Review program in 2019.

We allocate to our Divisions functional support expenses that are considered to be directly or closely related to segment activity. These allocated expenses are included in the measurement of Division operating income. Other companies may charge more or less for functional support expenses to their segments, and our results, therefore, may not be comparable to similarly titled measures used by other companies. The unallocated expenses primarily consist of the buildings used for our corporate headquarters and personnel not directly supporting the Divisions, including certain executive, finance, legal, audit and similar functions. Unallocated expenses also include the pension credit related to the frozen OfficeMax pension and other benefit plans.

Unallocated expenses were $31 million and $38 million in the first quarters of 2019 and 2018, respectively. The decrease in the first quarter of 2019 compared to the first quarter of 2018 was primarily due to a reduction in professional fees.

In the fourth quarter of 2017, we entered into a $750 million Term Loan Credit Agreement, due 2022. Borrowings under the Term Loan Credit Agreement were issued with an original issue discount, at an issue price of 97.00%, and incurred interest at a rate per annum equal to LIBOR plus 7.00%. In the fourth quarter of 2018, we entered into the First Amendment to reduce the interest rate from LIBOR plus 7.00% to LIBOR plus 5.25%. We recorded $11 million and $18 million of interest expense in the first quarters of 2019 and 2018, respectively, related to the Term Loan Credit Agreement.

Our effective rate for the first quarter of 2019 differs from the statutory rate of 21% enacted as part of the Tax Cuts and Jobs Act primarily due to the impact of excess tax deficiencies associated with stock-based compensation awards, the impact of state taxes and certain nondeductible items, adjustments to tax credit benefits, and the mix of income and losses across U.S. and non-U.S. jurisdictions. Some of these discrete items were particularly larger compared to the income reported in the first quarter of 2019, thus

causing the effective tax rate for the period to be significantly lower than the statutory rate. As prior years’ equity awards granted at a higher fair value vest, previously recognized deferred tax benefits on the excess compensation expense are reversed, thus causing a tax deficiency. The Company’s effective tax rates in prior periods have varied considerably as a result of two primary factors, 1) the mix of income and losses across U.S. and non-U.S. jurisdictions, and 2) the derecognition of valuation allowances against deferred tax assets that were not more-likely-than-not realizable in the U.S. and certain non-U.S. jurisdictions. During 2019 and 2018, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing the Company’s effective tax rates due to the dispositions of the international businesses and improved operating results. As a result, the Company’s effective tax rates were 11% for the first quarter of 2019 and 40% for the first quarter of 2018. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters.

The Tax Cuts and Jobs Act repealed the corporate Alternative Minimum Tax (“AMT”) and allows unutilized AMT credits to be refunded. For tax years 2018 through 2020, taxpayers may receive 50% of their uncredited balances as a cash refund with any remaining amounts refunded in full in 2021. We determined it is more-likely-than-not that $45 million of our AMT credits will be refunded and is estimated to occur in the first quarter of 2020. Accordingly, we reclassified $45 million from non-current deferred tax assets to income tax receivables in the first quarter of 2019.

We continue to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. We will continue to assess the realizability of our deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods.

We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal and state and local income tax examinations for years prior to 2017 and 2013, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal income tax examination and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years prior to 2013. Our U.S. federal income tax return for 2017 is currently under review. Generally, we are subject to routine examination for years 2012 and forward in our international tax jurisdictions.

It is not reasonably possible that certain tax positions will be resolved within the next 12 months. Additionally, we anticipate that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

For a description of new applicable accounting standards, refer to Note 1. “Summary of Significant Accounting Policies,” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

At March 30, 2019 and December 29, 2018, we had $604 million and $658 million in cash and cash equivalents, respectively, and $943 million and $947 million, respectively, of available credit under the Amended Credit Agreement (as defined in Note 9. “Debt,” in Notes to Condensed Consolidated Financial Statements), for a total liquidity of approximately $1.5 billion and $1.6 billion, respectively. We currently believe that our cash and cash equivalents on hand, availability of funds under the Amended Credit Agreement, and full year cash flows generated from operations will be sufficient to fund our working capital, capital expenditures, debt repayments, common stock repurchases, cash dividends on common stock, merger integration and restructuring expenses, and future acquisitions consistent with our strategic growth initiatives for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. As disclosed in Note 9. “Debt,” in Notes to Condensed Consolidated Financial Statements, we expect to receive approximately $80 million when the Timber Notes Receivable and the Non-Recourse debt will be net settled in the next twelve months. In addition, as previously noted in the Income Taxes section discussion, we expect to receive a refund of unutilized AMT credits of $45 million in the first quarter of 2020.

No amounts were drawn under the Amended Credit Agreement during the first quarter of 2019. There were letters of credit outstanding under the Amended Credit Agreement at the end of the first quarter of 2019 totaling $72 million, and we were in compliance with all applicable financial covenants at March 30, 2019.

In addition to the acquisitions disclosed herein, we have evaluated, and expect to continue to evaluate, possible acquisitions and dispositions of businesses and assets. Such transactions may be material and may involve cash, our securities or the incurrence of additional indebtedness (Refer to Note 2. “Acquisitions,” in Notes to Condensed Consolidated Financial Statements for additional information). To drive further operational and cost efficiencies throughout the entire organization, we are implementing the Business Acceleration Program and anticipate incurring additional costs over the next few years including legal and consulting fees, severance and other related costs.

In 2019, we expect capital expenditures to be up to approximately $175 million, including investments to support our critical priorities and redesign the layout of certain retail stores to enhance our in-store customer experience. These expenditures will be funded through available cash on hand and operating cash flows.

In November 2018, our Board of Directors approved a stock repurchase program of up to $100 million of our common stock effective January 1, 2019, which extends until the end of 2020 and may be suspended or discontinued at any time. The stock repurchase authorization permits us to repurchase stock from time-to-time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions and/or other derivative transactions. The exact number and timing of share repurchases will depend on market conditions and other factors, and will be funded through available cash balances. However, our ability to repurchase our common stock in 2019 is subject to certain restrictions under the Term Loan Credit Agreement. In the first quarter of 2019, we purchased approximately 4 million shares of our common stock at a cost of $10 million, excluding commissions ~~and, as of March 30, 2019,~~ ~~$90million remains available for share repurchase under the current stock repurchase authorization.~~

~~Cash provided by (used in) operating, investing and financing activities of continuing operations is summarized as follows:~~

During the first quarter of 2019, cash provided by operating activities of continuing operations was $60 million, compared to $207 million during the same period last year. This decrease in cash flows from operating activities was primarily driven by lower net income from continuing operations of $25 million and changes in working capital levels when compared to the prior year period, mainly as a result of a decrease in accounts payable. Working capital is influenced by a number of factors, including period end sales, the flow of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. The first quarter of 2019 also includes an $11 million acquisition contingent consideration paid in excess of the original acquisition-date liability established for one of our 2018 acquisitions. Cash flows from operating activities reflect outflows related to merger, restructuring, and integration activity. For our accounting policy ~~on cash management, refer to Note 1. “Summary of Significant Accounting Policies,” in Notes to Condensed Consolidated Financial Statements.~~

Cash used in investing activities of continuing operations was $52 million in the first quarter of 2019, compared to $66 million in the first quarter of 2018. The cash outflow in the first quarter of 2019 was driven by $46 million in capital expenditures associated with our service platform, distribution network, retail experience, and eCommerce capabilities. In addition, we spent $5 million in business acquisitions, net of cash acquired. The cash outflow in the first quarter of 2018 was driven by $37 million in capital expenditures and $30 million in business acquisitions, net of cash acquired.

Cash used in financing activities of continuing operations was $64 million in the first quarter of 2019, as compared to $41 million in the first quarter of 2018. The cash outflow in the first quarter of 2019 reflects $24 million in repayments on long and short-term borrowings, $14 million in cash dividends, $11 million in repurchases of common stock, and a $12 million acquisition contingent consideration payment up to the amount of the acquisition-date liability. The cash outflow in the first quarter of 2018 primarily consisted of $25 million in repayments on long and short-term borrowings and $14 million in cash dividends.

~~Cash provided by operating and investing activities of discontinued operations is summarized as follows:~~

~~The cash flows of discontinued operations in the first quarter of 2018 reflect the impact of the sale of the Company’s Australia business which was completed in that quarter.~~ ~~As of the end of fiscal 2018, the disposition of the international businesses was complete, and there are no further discontinued operations in 2019.~~

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2018 Form 10-K, in Note 1 of the Notes to the Consolidated Financial Statements and the Critical Accounting Policies and Estimates section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Except for our accounting policy update on leases described in Note 1 “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting policies since December 29, 2018.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This document, including the following discussion and analysis, contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. Without limitation, when we use the words “believe,” “estimate,” “plan,” “expect,” “intend,” “anticipate,” “continue,” “may,” “project,” “probably,” “should,” “could,” “will” and similar expressions in this Quarterly Report on Form 10-Q, we are identifying forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations, the potential impact of the COVID-19 pandemic on our business, our liquidity, suppliers, consumers, customers, and employees, disruptions or inefficiencies in our supply chain, our ability to mitigate or manage disruptions posed by COVID-19, changes in worldwide and U.S. economic conditions that materially impact consumer spending and employment and the demand for our products and services, and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth herein under “Risk Factors,” found in Other Information which supplements our discussion of ~~Risk Factors, found~~“Risk Factors” within Other Key Information in ~~Item 1A of~~ our Annual Report on Form 10-K filed on February 26, 2020 (the “2019 Form 10-K”) with the ~~U.S. Securities and Exchange Commission (the “SEC”) on February 27, 2019 (the “2018 Form 10-K”),~~SEC, and Forward-Looking Statements, found in ~~Part I~~our 2019 Form 10-K.

Throughout this report, the terms “Office Depot,” “Company,” “we,” “us” and “our” mean Office Depot, Inc. and all entities included in our Condensed Consolidated Financial Statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist readers in better understanding and evaluating our financial condition and results of operations. We recommend reading this MD&A in conjunction with our Condensed Consolidated Financial Statements and the Notes to those statements included in the “Financial Statements” section of this Quarterly Report on Form 10-Q, as well as our 2019 Form 10-K.

We are a leading provider of business services and supplies, products and technology solutions to small, medium and enterprise businesses, through our integrated business-to-business (“B2B”) distribution platform of 1,295 retail stores, online presence, and dedicated sales professionals and technicians. Through our banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, we offer our customers the tools and resources they need to focus on starting, growing and running their business.

As of March 28, 2020, our operations are organized into three reportable segments (or “Divisions”): Business Solutions Division, Retail Division and CompuCom Division.

The Business Solutions Division, or BSD, is the largest component of our ~~2018 Form 10-K.~~integrated B2B platform and provides our customers with nationally branded as well as our private branded office supply products and services. Additionally, BSD provides adjacency products and services including cleaning and breakroom supplies, technology services, copy and print services, and office furniture products and services in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada through a dedicated sales force, catalogs, telesales, and electronically through our Internet websites. BSD includes the distribution businesses we have acquired as part of our strategic transformation described in the section below.

The CompuCom Division was formed during the fourth quarter of 2017 as a result of our acquisition of CompuCom Systems, Inc. (“CompuCom”). The CompuCom Division is a technology services provider supporting the distributed technology needs of enterprise organizations in the United States and Canada. With a vision of connecting people, technology, and the edge with a seamless experience, CompuCom enables enterprise employees to be productive. CompuCom 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.

Since 2017, we have been undergoing a strategic business transformation to pivot Office Depot into an integrated B2B distribution platform, with the objective of expanding our product offerings to include value-added services for our customers and capture greater market share.As part of this transformation, we acquired CompuCom in 2017 and an enterprise IT solutions integrator and managed services provider in 2018.

We continue to expand our reach and distribution network through acquisitions of profitable regional office supply distribution businesses, serving small and mid-market customers. Many of these customers are in geographic areas that were previously underserved by our network. During the first quarter of 2020, we acquired threesmall independent regional office supply distribution businesses which has allowed for an effective and accretive means to expand our distribution reach, target new business customers and grow our offerings beyond traditional office supplies.

The aggregate total purchase consideration, including contingent consideration, for the three acquisitions completed in the first quarter of 2020 was approximately $20 million, subject to certain customary post-closing adjustments. The aggregate purchase price was primarily funded with cash on hand, with the remainder consisting of contingent consideration estimated to be $2 million, which will be paid in two installments in the second quarters of 2021 and 2022, respectively.

The operating results of the acquired office supply distribution businesses are combined with our operating results subsequent to their purchase dates, and are included in the Business Solutions Division, and the operating results of CompuCom and the enterprise IT solutions integrator and managed services provider are included in the CompuCom Division. Refer to Note 2. “Acquisitions” in Notes to Condensed Consolidated Financial Statements for additional information.

On March 11, 2020, the World Health Organization declared the current outbreak of a novel coronavirus disease (“COVID-19”) as a global pandemic. In response to this declaration and with the rapid spread of COVID-19 globally and throughout the United States, federal, state and local authorities have declared states of emergency and imposed varying degrees of restrictions on social and commercial activities, including travel restrictions and curfews, in order to promote social distancing in an effort to prevent and slow the spread of the disease. These restrictive measures have had significant adverse impacts on the national economy during the first quarter of 2020 and have continued into the second quarter of 2020.

From the beginning of the COVID-19 pandemic, we have made supporting the health and wellness of our employees and customers a priority. Due to the nature of products sold in our retail locations and integrated business-to-business distribution platform, such as cleaning and breakroom supplies, printers, computers, tablets and accessories, toner, ink, furniture and other work-from-home enabling and virtual learning products, which facilitate virtual connectivity and learning and support hospitals and healthcare providers and the mailing and shipping services we provide, our business is considered to be essential retail commerce by most local jurisdictions and has remained open and operational. Based upon the guidance of U.S. Centers for Disease Control (“CDC”) and local health authorities, we have put appropriate measures in place to maintain a healthy environment for our employees and customers, including the institution of social distancing protocols and increased frequency of cleaning and sanitizing in those facilities. Since March 2020, employees who are able to, have been working from home, with only essential employees in customer support and distribution centers working on site at our facilities. We have also limited employee travel to only essential business needs.

During the first quarter of 2020, we have experienced higher than forecasted demand at our retail locations and on our eCommerce platform. However, as of the end of April 2020, we are seeing volatility in consumer and business demand and corresponding declining sales patterns due to the promotion of social distancing and the adoption of shelter-in-place orders. In anticipation of potential future shortages, we have created contingency plans for those merchandise categories that may be in high demand, including those sourced internationally. We continue to review and update our contingency plans as circumstances evolve.

We continue to assess our outlook on a daily basis, but we are unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration or any future recurrence of the outbreak, actions that may be taken by governmental authorities and other unforeseeable consequences. We may experience additional disruptions in our supply chain as the pandemic continues, though we cannot reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact. As a result, weaker global economic conditions and increased unemployment, including continued business disruption relating to the COVID-19 outbreak and resulting governmental actions may negatively impact our business and results of operations in future quarters of 2020 and beyond.

The following summarizes the more significant factors impacting our operating results for the 13-week period ended March 28, 2020 (also referred to as the “first quarter of 2020”) and March 30, 2019 (also referred to as the “first quarter of 2019”).

Our consolidated sales were 2% lower in the first quarter of 2020 compared to the same period of the prior year. This period-over-period decrease was primarily driven by lower sales in our Retail Division, which decreased 2% in the first quarter of 2020 primarily due to planned store closures, partially offset by higher comparable store sales as a result of increased demand for essential products and services by consumers and businesses during the COVID-19 outbreak. Our CompuCom Division also experienced 5% lower sales in the first quarter 2020 when compared to the prior year period, primarily due to certain customer mandated delays of previously scheduled projects as a result of COVID-19 business disruption and a decline in service volume. Sales in our Business Solutions Division also decreased 1% in the first quarter of 2020 when compared to the prior year period, primarily due to temporary closures of certain enterprise customers and a transition to a work-from-home environment in response to the restrictions imposed by local authorities to prevent and reduce the spread of COVID-19, which was partially offset by higher revenue generated by our eCommerce platform.

Product sales in the first quarter of 2020 decreased 1% from the comparative prior year period, primarily driven by lower sales in the Business Solutions Division as a result of temporary closures and transition to work-from-home and learn-from-home environments of certain business-to-business customers due to COVID-19, as described above. This decline was partially offset by an increase in product sales generated by our eCommerce platform, which is also included in our Business Solutions Division.

Sales of services in the first quarter of 2020 decreased 5%, primarily driven by a decline in sales of services in our CompuCom Division as a result of customer imposed delays of projects and reduced business volume, as well as a decline of our copy and print services in our Retail Division due to the impacts of COVID-19, including shelter-in-place orders and the temporary closures of nonessential businesses. The declines were partially offset by higher sales of services in our Business Solutions Division, primarily due to managed print services provided to our business-to-business customers, prior to the impacts of COVID-19 described above. On a consolidated basis, services represented approximately 14% of our total sales in the first quarter of 2020, as compared to 15% in the first quarter of 2019.

Discussion of additional income and expense items, including material charges and credits and changes in interest and income taxes follows our review of segment results.

Product sales in our Business Solutions Division decreased 2% in the first quarter of 2020 compared to the corresponding period in 2019. Both periods reflect the positive impact of acquisitions and growth in certain adjacency categories such as cleaning and breakroom supplies. The first quarter of 2020 was impacted by lower demand, especially in product categories such as toner, ink and office supplies due to a portion of our business-to-business customers having to temporarily transition into a work-from-home environment or pause operations as a result of restrictions imposed by federal, state and local authorities during March 2020 which aim to prevent and reduce the spread of COVID-19. This was partially offset by higher sales in our e-Commerce platform, which experienced increased demand during this period as more customers preferred to get purchases delivered, the positive impact of acquisitions, and growth in certain adjacency categories such as cleaning and breakroom supplies.

Sales of services in our Business Solutions Division increased 14% in the first quarter of 2020 compared to prior period. This increase is primarily due to higher demand for our managed print and fulfillment services, copy and print services, and shipping services.

The impacts of the COVID-19 outbreak on future quarters of 2020 is unknown at this time because we are unable to estimate the magnitude by which sales of products and services of our Business Solutions Division will be affected, which will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact may be material to the second quarter results of the Business Solutions Division.

The Business Solutions Division operating income was $40 million in the first quarter of 2020 compared to $46 million in the first quarter of 2019, a decrease of 13% period-over-period. Operating income margin was 3% in both comparable periods. The decrease in operating income in the first quarter of 2020 was related to the flow through impact of lower product sales coupled with a lower gross profit margin, which was partially offset by a reduction in selling, general and administrative expenses achieved through our Business Acceleration Program.

Product sales in our Retail Division were flat in the first quarter of 2020 compared to the corresponding period in 2019. The decrease in product sales from closing underperforming retail stores was offset by increased demand in essential products such as cleaning and breakroom supplies, technology products, furniture and other work-from-home and learn-from-home enabling products. The increased demand for these product categories was primarily driven by the immediate needs of our customers to help address their challenges derived from the COVID-19 outbreak. Additionally, the increased demand was driven by needs of customers who transitioned into remote work and virtual learning environments in March 2020 as a result of restrictions imposed by federal, state and local authorities in order to prevent and reduce the spread of COVID-19. This demand is likely to decrease in the near term related to numerous factors, among others, weaker U.S. economy and higher unemployment that materially impact consumer spending, the demand for our products and services and the availability of supply. Specifically, we have recently experienced supply constraints in our cleaning and breakroom product category, and we may face delays or difficulty sourcing these products.

For the reasons described in the “Recent Developments” section, our business is considered to be essential retail commerce by most local jurisdictions, and as a result, the substantial majority of our retail locations remain open and operational with the appropriate safety measures in place during the COVID-19 outbreak, including the introduction of a curbside pickup option. Late in the first quarter of 2020, we determined to temporarily reduce all our retail location hours by two hours daily with certain locations solely providing curbside pickup to our customers. We believe sales in our Retail Division may be adversely impacted due to the COVID-19 outbreak in future quarters in 2020. As there is uncertainty of the extent and duration of the impacts of the outbreak, we are unable to estimate the impact at this time.

Product sales were also positively impacted during the quarter by the increase in the volume of transactions where our customers buy online for pick up in our stores (“BOPIS”). BOPIS transactions are included in our Retail Division results because they are fulfilled with retail store inventory and serviced by our retail store associates. Our BOPIS sales have increased 26% in the first quarter of 2020 from the corresponding prior year period.

Sales of services in our Retail Division decreased 11% in the first quarter of 2020 compared to the corresponding period in 2019. The positive momentum we have experienced over the past several quarters from the expansion of our copy and print services and subscription volume was negatively impacted by a reduction in demand due to temporary closures of nonessential businesses, as well as the transition of a significant portion of our customers to a remote work and virtual learning environment, due to COVID-19.

Comparable store sales in the first quarter of 2020 increased 2% reflecting higher average order values and year-over-year growth in BOPIS transactions. Our comparable store sales in the first quarter of 2020 reflects the increased demand we experienced in cleaning and breakroom, computer and technology related products, furniture, and other remote work solutions due to COVID-19, as described above. Our comparable store sales relate to stores that have been open for at least one year. Stores are removed from the comparable sales calculation one month prior to closing, as sales during that period are mostly related to clearance activity. Stores are also removed from the comparable sales calculation during periods of store remodeling, store closures due to hurricanes, natural disasters or epidemics/pandemics, or if significantly downsized. Our measure of comparable store sales has been applied consistently across periods, but may differ from measures used by other companies.

The Retail Division operating income increased 30% in the first quarter of 2020. As a percentage of sales this reflects a period-over-period increase of approximately 180 basis points. The comparative quarterly increase in operating income was mostly attributable to a higher gross margin from improvements in distribution and inventory management costs and lower operating lease costs recognized as a result of store impairments, and lower selling, general and administrative expenses resulting from continuous efforts to optimize costs. These improvements more than offset the flow-through impact of lower sales.

As of March 28, 2020, the Retail Division operated 1,295 retail stores in the United States, Puerto Rico and the U.S. Virgin Islands compared to 1,359 stores at the end of the first quarter of 2019. Charges associated with store closures are reported as appropriate in Merger and restructuring expenses, net in the Condensed Consolidated Statements of Operations. In addition, as part of our periodic recoverability assessment of owned retail stores and distribution center assets, and operating lease ROU assets, we recognize impairment charges in the Asset impairments line item of our Condensed Consolidated Statements of Operations. These charges are reflected in Corporate reporting and are not included in the determination of Division operating income. Refer to “Corporate” discussion below for additional information of expenses incurred to date.

Product sales in our CompuCom Division increased 2% in the first quarter of 2020 compared to the corresponding period in 2019. We experienced strong growth in end user computing product sales which was driven by increased discipline in our selling process and improved relationships with our product manufacturer partners and stronger enterprise demand for computer and computer-related products as many businesses temporarily shifted to a work-from-home environment amid the COVID-19 outbreak. This increase in customer orders was partially mitigated by supply constraints encountered for certain internationally sourced products, which we expect to fulfill in future periods.

Sales of services in our CompuCom Division decreased 7% in the first quarter of 2020 compared to the corresponding period in 2019. This was primarily due to lower project-related revenue from existing customer accounts and lower overall business volume. The reduction in project-related revenue is due to our customers pausing discretionary project spending amidst the COVID-19 outbreak and the uncertainty of its impact on the economy. Although sales of services have been declining since the beginning of 2019, we are continuing our efforts to stabilize and grow revenue under our new leadership at this Division. In connection with these efforts, we are strategically focusing on our strengths and placing greater emphasis on our core digital workplace offerings. We continue to expand our value proposition and capitalize on our unique market position to serve remote workforces through our capabilities to provision hardware, provide virtual or call center support and dispatch our field technicians as needed.

The CompuCom Division operating income was $3 million in the first quarter of 2020 compared to operating loss of $15 million in the first quarter of 2019. Operating income has been increasing sequentially since the first quarter of 2019, which is mostly attributable to improved cost efficiencies as a result of our Business Acceleration Program. The increase in operating profitability despite the flow through impact of lower service sales volume was achieved through a reduction in associated labor-related expenses and ongoing expenditures to develop and market additional service offerings. We continue to take actions to improve future operating performance at our CompuCom Division, which include increasing the use of automation and technology to further improve service efficiency, simplifying organizational structures to improve service velocity, and aligning sales efforts to better serve our customers and accelerate cross-selling opportunities.

Certain operations previously included in the International Division, including our global sourcing and trading operations in the Asia/Pacific region, which we have retained, are presented as Other. These operations primarily relate to the sale of products to former joint venture partners, and are not material in any period. Also included in Other is the elimination of intersegment revenues of $4 million for the first quarter of 2020 and $3 million for the first quarter of 2019.

The line items in our Condensed Consolidated Statements of Operations included as Corporate activities are Asset impairments and Merger and restructuring expenses, net. These activities are managed at the Corporate level and, accordingly, are not included in the determination of Division income for management reporting or external disclosures. In addition to these charges and credits, certain

selling, general and administrative expenses are not allocated to the Divisions and are managed at the Corporate level. Those expenses are addressed in the section “Unallocated Expenses” below.

We regularly review retail store assets for impairment indicators at the individual store level, as this represents the lowest level of identifiable cash flows. When indicators of impairment are present, a recoverability analysis is performed which considers the estimated undiscounted cash flows over the retail store’s remaining life and uses input from retail operations and accounting and finance personnel. These inputs include our best estimates of retail store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows, which, by their nature, include judgments about how current initiatives will impact future performance. If the undiscounted cash flows of a retail store cannot support the carrying amount of its assets, the assets are impaired and written down to estimated fair value. Our recoverability analysis in the first quarter of 2020 also included the impact of the COVID-19 pandemic on the operations of our retail stores as described in the “Retail Division” section, and used scenarios of varying retail store-level sales and operating cost assumptions. In the first quarter of 2020, we recognized asset impairment charges of $12 million. Of these asset impairment charges, $10 million was related to the impairment of operating lease ROU assets associated with our retail store locations, with the remainder primarily relating to impairment of fixed assets. In the first quarter of 2019, we recognized asset impairment charges of $29 million. Of these asset impairment charges, $25 million was related to the impairment of operating lease ROU assets associated with our retail store locations, with the remainder primarily relating to impairment of fixed assets.As discussed above, there is uncertainty regarding the impact of the COVID-19 pandemic on the results of our operations in the second quarter of 2020 and beyond, which could result in future impairments of store assets if deemed unrecoverable.

As of March 28, 2020, we believe, based on an evaluation of events and circumstances, that an interim impairment test has not been triggered and that our goodwill and indefinite-lived intangible assets continue to be recoverable for all reporting units. We are monitoring the performance of our Contract reporting unit, a component of the Business Solutions Division segment, and our CompuCom reporting unit, which both passed the quantitative assessments performed in 2019 with margins in excess of those determined our 2018 annual assessment. We have taken several actions to improve the future operating performance of CompuCom, including the use of automation and technology to further improve service efficiency, simplifying organizational structures to improve service velocity, and aligning sales efforts to better serve its customers and accelerate cross-selling opportunities. The anticipated impacts of these actions are reflected in key assumptions used in the 2019 quantitative assessment, and if not realized, could result in future impairment of goodwill and indefinite-lived intangible assets for the CompuCom reporting unit.

The CompuCom reporting unit has experienced a decline in project-based service revenue late in the first quarter of 2020 due to the impacts of COVID-19 on its customers. This decrease is primarily due to customer-imposed deferrals of projects into future periods and we do not expect it to result in a significant impact on its long-term forecast. However, its total operations could be impacted further depending on the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. Accordingly, we performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic, the possibility of declines in revenue beyond the deferral of project revenue and assumptions of the business returning to normal level of operations in future years. Based on the weighted evaluation of these different scenarios which included adjusted risk profiles, we believe that it is not more likely than not that the fair value of our CompuCom reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $442 million.

The Contract reporting unit, which is a key part of our integrated B2B platform, has been negatively impacted by the varying degrees of restrictions imposed late in the first quarter of 2020 by federal, state and local authorities, in response to the rapid spread of the novel coronavirus. The restrictions include the temporary closure of nonessential businesses, which constitute a significant portion of this reporting unit’s customers, along with the transition of many other business customers to a work-from-home environment and has resulted in decreased demand for the Contract reporting unit’s core product and service offerings. The extent to which the COVID-19 pandemic will impact the operating results of the Contract Reporting unit in the future will depend on numerous evolving factors and future developments, including the severity of the disease, the duration of the pandemic and actions that may be taken by governmental authorities. We performed a sensitivity analysis for this reporting unit using scenarios that factor in different durations of the pandemic and timing for its business-to-business customers returning back to levels of historical operations, as well as opportunities to increase sales in its cleaning and breakroom product category. Based on the weighted evaluation of these different scenarios which included adjusted risk profiles, we believe that it is not more likely than not that the fair value of our Contract reporting unit is less than its carrying amount as of March 28, 2020. Significant changes in these key assumptions due to future developments could result in future impairment of goodwill for this reporting unit up to its full value of $345 million.

customers. These expenses are not included in the determination of Division operating income. Merger and restructuring expenses, net were $16 million in the first quarter of 2020 compared to $14 million in the first quarter of 2019.

In May 2019, our Board of Directors approved a company-wide, multi-year, cost reduction and business improvement program to systematically drive down costs, improve operational efficiencies, and enable future growth investments. Under this program (the “Business Acceleration Program”), we have made and will continue to make organizational realignments stemming from process improvements, increased leverage of technology and accelerated use of automation. This has resulted and will continue to result in the elimination of certain positions and a flatter organization. In connection with the Business Acceleration Program, we also anticipate closing approximately 90 underperforming retail stores in 2020 and 2021, and 9 other facilities, consisting of distribution centers and sales offices. Twelve retail stores were closed in the first quarter of 2020, and 7 other facilities were closed as of the end of 2019. Total estimated costs to implement the Business Acceleration Program are expected to be approximately $109 million, comprised of:

(d) third-party costs to facilitate the execution of the Business Acceleration Program of approximately $48 million; and

Of the aggregate costs to implement the Business Acceleration Program, approximately $102 million are expected to be cash expenditures through 2021 funded primarily with cash on hand and cash from operations. We incurred $90 million in restructuring expenses to implement the Business Acceleration Program since its inception in 2019 through the end of the first quarter of 2020.

In the first quarter of 2020, we incurred $8 million in restructuring expenses associated with the Business Acceleration Program which consisted of $5 million in third-party professional fees, and $3 million of retail store and facility closure costs and other. We made cash expenditures of $10 million for the Business Acceleration Program in the first quarter of 2020.

We expect continued challenges in the market and economy that could materially impact consumer spending and employment, and in turn, negatively affect demand for the products and services we offer in our retail stores. These trends could be accelerated by COVID-19 and we may decide to commit to additional cost reduction strategies in the future.

Included in restructuring expenses in the first quarter of 2019 were costs incurred in connection with the Comprehensive Business Review, a program we announced in 2016 and concluded at the end of 2019. These costs include severance, facility closure costs, contract termination, accelerated depreciation, relocation and disposal gains and losses, as well as other costs associated with retail store closures.

Refer to Note 3. ~~Quantitative~~“Merger and ~~Qualitative Disclosures About Market Risk.~~Restructuring Activity” in Notes to Condensed Consolidated Financial Statements for an extensive analysis of these Corporate charges.

Unallocated expenses were $22 million in the first quarter of 2020 and $31 million in the first quarter of 2019. The decrease in the first quarter of 2020 compared to the prior year period was primarily due to lower deferred compensation expenses to our executive function and lower professional fees in the first quarter of 2020.

In November 2017, we entered into a $750 million Term Loan Credit Agreement, due 2022. The Term Loan Credit Agreement was amended in November 2018 to reduce the interest rate from LIBOR plus 7.00% to LIBOR plus 5.25%. We recorded $8 million of interest expense in the first quarter of 2020 and $11 million in the first quarter of 2019 related to the Term Loan Credit Agreement. In April 2020, we repaid the remaining balance under the Term Loan Credit Agreement in full and terminated it. Refer to Note 8. “Debt” in Notes to Condensed Consolidated Financial Statements for additional information.

Our effective rate of 32% for the first quarter of 2020 differs from the statutory rate of 21% primarily due to the impact of state taxes, excess tax deficiencies associated with stock-based compensation awards and certain nondeductible items, adjustments to certain tax benefits and the mix of income and losses across U.S. and non-U.S. jurisdictions. Our effective tax rates in prior periods have varied considerably as a result of several primary factors including the mix of income and losses across U.S. and non-U.S. jurisdictions, the impact of excess tax deficiencies associated with stock-based compensation awards and the derecognition of valuation allowances against deferred tax assets that were not more-likely-than-not realizable in the U.S. and certain non-U.S. jurisdictions. During 2020 and 2019, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing our effective tax rates due to the dispositions of the international businesses and improved operating results. As a result, our effective tax rates are 32% for the first quarter of 2020, and 11% for the first quarter of 2019. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters.

The Tax Cuts and Jobs Act repealed the corporate Alternative Minimum Tax (“AMT”) and allows unutilized AMT credits to be refunded. For tax years 2018 through 2020, taxpayers could receive 50% of their uncredited balances as a cash refund with any remaining amounts refunded in full in 2021. As of the year end 2019, we determined it is more-likely-than-not that $22 million of our AMT credits will be refunded and is expected to be received in the fourth quarter of 2020. During the first quarter of 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. The CARES Act allows for us to refund 100% of our remaining AMT credits in 2020. We anticipate filing for the remaining $22 million in the second quarter of 2020 for a total refund of $44 million. We continue to evaluate the other provisions of the CARES Act to determine if they would have any material impact.

During the first quarter of 2020, we net settled our Timber notes receivable and Non-recourse debt. We have previously recorded a deferred tax liability related to the taxes deferred from the original transaction. The deferred liability was realized in the first quarter of 2020. It is anticipated that certain capital loss carryforwards, available tax credits and net operating losses will offset the resulting gain and no material cash income taxes will be due in upon the realization.

We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal and state and local income tax examinations for years prior to 2017 and 2013, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal income tax examination, and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years prior to 2013. Our U.S. federal income tax return for 2017 is currently under review. Generally, we are subject to routine examination for years 2012 and forward in our international tax jurisdictions.

It is anticipated that $2 million of tax positions will be resolved within the next 12 months. Additionally, we anticipate that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

At March ~~30,~~28, 2020 and December 28, 2019, we had $842 million and $698 million in cash and cash equivalents, respectively, and $851 million and $920 million of available credit under the Amended Credit Agreement (as defined in Note 8. “Debt” in Notes to Condensed Consolidated Financial Statements), respectively, for a total liquidity of approximately $1.7 billion and $1.6 billion, respectively. Despite the weaker global economic conditions and the uncertainties related to the impacts of the COVID-19 pandemic, we currently believe that as a result of our strong financial position, including our cash and cash equivalents on hand, availability of funds under the Third Amended Credit Agreement, and full year cash flows generated from operations, we will be able to fund our working capital, capital expenditures, debt repayments, merger integration and restructuring expenses, and future acquisitions consistent with our strategic growth initiatives for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. As the impact of the COVID-19 pandemic on the global and national economies and our operations evolve, we will continue to assess our liquidity needs. To preserve liquidity and maximize financial flexibility in the current environment, our Board of Directors has determined to temporarily suspend the stock repurchase program and the quarterly dividend. We intend to continue to evaluate and implement additional cost-cutting measures as is necessary to mitigate the negative financial impact of COVID-19.

No amounts were drawn under the Amended Credit Agreement during the first quarter of 2020. There were letters of credit outstanding under the Amended Credit Agreement at the end of the first quarter of 2020 totaling $62 million, and we were in compliance with all applicable financial covenants at March 28, 2020.

As disclosed in Note 8. “Debt” in Notes to Condensed Consolidated Financial Statements, we received a net cash payment of $87.7 million upon maturity of the Installment Notes and the Bridge Loan on January 29, 2020, which were net settled as they were with the same third-party financial institution. This amount includes principal of $82.5 million and interest of $5.2 million. Also, as noted in the “Income Taxes” section above, we expect to receive a refund of unutilized AMT credits of $44 million no later than the fourth quarter of 2020.

Also as disclosed in Note 8. “Debt”, on April 17, 2020, we entered into the Third Amended and Restated Credit Agreement, which provides for a $1.2 billion asset-based revolving credit facility and a $100 million asset-based first-in, last-out term loan facility, for an aggregate principal amount of up to $1.3 billion (the “New Facilities”). The New Facilities mature in April 2025. The Third Amended and Restated Credit Agreement replaces our existing Amended Credit Agreement that was due to mature in May 2021. Upon the closing of the transaction, we made an initial borrowing in the amount of $400 million under the New Facilities. These proceeds, along with available cash on hand, were used to repay in full the remaining $388 million balance under the Term Loan Credit Agreement and terminate it and to repay approximately $66 million of other debt. We recognized $12 million of loss from extinguishment of debt related to this transaction in the second quarter of 2020, which primarily includes the amortization of the remaining discount and debt issuance costs of the Term Loan Credit Agreement as of the closing date of the transaction.

In addition to the acquisitions disclosed herein, we have evaluated, and expect to continue to evaluate, possible acquisitions and dispositions of businesses and assets as well the possible acceleration of potential restructuring plans in connection with our strategic transformation. Such transactions may be material and may involve cash, our securities or the incurrence of additional indebtedness (Refer to Note 2. “Acquisitions” in Notes to Condensed Consolidated Financial Statements for additional information).

We estimated capital expenditures in 2020 to be up to approximately $150 million, which includes investments to support our critical priorities. However, due to the factors described in the “Recent Development” section above, we are unable to estimate the magnitude by which capital expenditures will be affected in the future quarters of 2020. These expenditures will be funded through available cash on hand and operating cash flows.

In November 2018, our Board of Directors approved a stock repurchase program of up to $100 million of our common stock effective January 1, 2019, which extends until the end of 2020 and may be suspended or discontinued at any time. In November 2019, our Board of Directors approved an increase in the authorization of the existing stock repurchase program of up to $200 million and extended the program through the end of 2021. The current authorization includes the remaining authorized amount under the existing stock repurchase program. The stock repurchase authorization permits us to repurchase stock from time-to-time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions and/or other derivative transactions. The exact number and timing of stock repurchases will depend on market conditions and other factors, and will be funded through available cash balances. Our ability to repurchase our common stock was also subject to certain restrictions under the Term Loan Credit Agreement prior to its termination in the second quarter of 2020. The authorized amount under the stock repurchase program excludes fees, commissions or other expenses. In the first quarter of 2020, we purchased 13 million shares of our common stock at a cost of $30 million. As a result of the continued economic uncertainty due to COVID-19, our Board of Directors determined to temporarily suspend the stock repurchase program on May 5, 2020, however, the repurchase authorization remains effective and $131 million remains available for additional repurchases under the current stock repurchase program.

On February 4, 2020, our Board of Directors declared a quarterly cash dividend of $0.025 per share on our common stock, which was paid on March 13, 2020, for a total cash payment of $13 million to our shareholders of record at the close of business on March 2, 2020. Dividends have been recorded as a reduction to additional paid-in capital as we are in an accumulated deficit position. Our Amended Credit Agreement permits payment of dividends provided that we have the required minimum liquidity or fixed charge coverage ratio, but may be limited if we do not meet the necessary requirements. Additionally, the Term Loan Credit Agreement, prior to its termination in the second quarter of 2020, contained certain restrictions on our ability to declare or pay dividends. Refer to Note 8. “Debt” in Notes to Condensed Consolidated Financial Statements for additional information about the termination of the Term Loan Credit Agreement.

In order to preserve liquidity during the COVID-19 pandemic and in light of the uncertainties as to its duration and economic impact, on May 5, 2020, our Board of Directors determined to temporarily suspend the Company’s quarterly cash dividend beginning in the second

quarter of fiscal 2020. We will re-evaluate our capital return program when appropriate. Decisions regarding future dividends are within the discretion of our Board of Directors, and depend on a number of factors, including, general business and economic conditions, which includes the impact of COVID-19 on such conditions, and other factors which are discussed in “Risk Factors” within Other Key Information in our 2019 Form 10-K.

Cash provided by (used in) operating, investing and financing activities is summarized as follows:

During the first quarter of 2020, cash provided by operating activities was $188 million, compared to $60 million during the corresponding period in 2019. This increase in cash flows from operating activities was primarily driven by $80 million more cash inflows from working capital and $24 million more cash inflows due to the usage of deferred income tax assets against current tax obligations. Net income for the first quarter of 2020 was higher than the corresponding period in 2019 after adjusting for non-cash charges, which also contributed to the increase in cash provided by operating activities. In addition, the first quarter of 2019 included the impact of $11 million cash outflow for acquisition contingent consideration. Working capital is influenced by a number of factors, including period end sales, the flow of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. During the first quarter of 2020, the primary driver for working capital improvements was the depletion of our inventory through sales, which was not fully replenished at period-end.

For our accounting policy on cash management, refer to Note 1. “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements.

Cash from investing activities was $776 million in the first quarter of 2020, compared to cash used in investing activities of $52 million in the first quarter of 2019. The cash inflow in the first quarter of 2020 was driven by the cash proceeds from the collection of the Timber notes receivable of $818 million, which was partially offset by $18 million in business acquisitions, net of cash acquired, and $25 million in capital expenditures associated with improvements in our service platform, distribution network, and eCommerce capabilities. The cash outflow in the first quarter of 2019 was driven by $46 million in capital expenditures and $5 million in business acquisitions, net of cash acquired.

Cash used in financing activities was $808 million in the first quarter of 2020, compared to $64 million in the first quarter of 2019. The cash outflow in the first quarter of 2020 primarily consisted of $735 million in Non-recourse debt retirement, $25 million in repayments on long and short-term borrowings, $13 million in payment of cash dividends and $30 million in repurchases of common stock, including commissions. The cash outflow in the first quarter of 2019 primarily consisted of $24 million in repayments on long and short-term borrowings, $14 million in payment of cash dividends, $11 million in repurchases of common stock, and $12 million acquisition contingent consideration payment up to the amount of the acquisition-date liability.

For a description of new applicable accounting standards, refer to Note 1. “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2019 Form 10-K, in Note 1 of the Notes to the Consolidated Financial Statements and the Critical Accounting Policies and Estimates section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Except for our accounting policy updates described in Note 1 “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting policies since December 28, 2019.

At March 28, 2020, there had not been a material change in the interest rate, foreign exchange, and commodities risks information disclosed in the “Market Sensitive Risks and Positions” subsection of the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in ~~Item 7 of~~ our ~~2018~~2019 Form 10-K.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the possible controls and procedures. Each reporting period, we carry out an evaluation, with the participation of our ~~Chief Executive Officer (“CEO”)~~principal executive officer and ~~Chief Financial Officer (“CFO”),~~ principal financial officer, or persons performing similar functions,of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based on management’s evaluation, our principal executive and financial officer has concluded that, as of March ~~30, 2019, our CEO and CFO concluded that~~28, 2020, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the ~~CEO~~principal executive officer and ~~CFO~~ the principal financial officer, or persons performing similar functions, as appropriate,to allow timely decisions regarding required disclosures.

~~Changes in Internal Control over Financial Reporting~~CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the quarter ended March ~~30, 2019~~28, 2020 that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

We are in the process of integrating the companies we acquired during ~~2018 and 2019~~the last twelve months into our overall internal control over financial reporting processes. ~~In addition, during the first quarter of 2019, we implemented certain internal controls over financial reporting in connection with our adoption of the new lease accounting standard.~~

For a description of our legal proceedings, see Note ~~13.~~12. “Commitments and ~~Contingencies,”~~Contingencies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

~~There~~In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” within Other Key Information in our 2019 Form 10-K. In addition, we are supplementing such risk factors with the following disclosure:

Our business, results of operations and financial performance could be adversely affected by the recent COVID-19 pandemic and related social distancing and stay-at-home requirements implemented worldwide, which could materially affect our future results.

On March 11, 2020, the World Health Organization declared the current outbreak of a novel coronavirus disease (“COVID-19”) a global pandemic. In response to this declaration and with the rapid wide spread of COVID-19 globally and throughout the United States, federal, state and local authorities have declared states of emergency and imposed varying degrees of restrictions on social and commercial activities, including travel bans and curfews, in order to promote social distancing in an effort to prevent and slow the spread of the disease. The preventative measures taken by federal, state and local authorities to contain or mitigate the COVID-19 outbreak have caused, and are continuing to cause, business slowdown or shutdown in affected areas and significant disruption in the financial markets both globally and in the United States, which could lead to a decline in discretionary spending by consumers, and in turn impact, possibly materially, our business, sales, financial condition and results of operations. As a result of the COVID-19 pandemic, we have temporarily closed certain offices (including our corporate headquarters) and implemented certain travel restrictions, both of which have changed how we currently operate our business. Currently, some of our employees are working remotely, and an extended period of remote work arrangements has and could continue to strain our business continuity plans and introduce operational risk, including but not limited to cybersecurity risks. While we have not experienced a material cybersecurity incident in connection with our current remote work arrangements, we could in the future. We are monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our customers, employees, suppliers, vendors, business partners and distribution channels. The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which will adversely affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.

We are unable to predict the duration or severity of the COVID-19 pandemic. However, the longer it continues, we risk experiencing volatility in consumer and business demand and corresponding declining sales patterns. For example at the start of the second quarter 2020, the promotion of social distancing and the adoption of shelter-in-place orders are decreasing foot traffic in our stores. Additionally, we have experienced, and may continue to experience, reduced demand for our technology and IT workforce solutions from our enterprise business customers as a result of declining financial performance of such customers, lower demand, cancellations, reductions, revised payment terms, and requests to delay the start of service delivery. We expect that decreased foot traffic at our stores and declining financial performance of our business customers will adversely impact future sales.

In addition, we have incurred and will continue to incur additional costs to maintain the health of our customers and employees, which may be significant, as we continue to implement additional operational changes in response to the COVID-19 pandemic. COVID-19 has also caused disruption in our supply chain which has resulted in higher supply chain costs to replenish inventory in our retail stores and distribution centers, increased delivery costs as we shift from less commercial to more residential deliveries. The increased costs in our supply chain are likely to continue. Furthermore, we have experienced restricted product availability in certain categories, and while we have significantly increased our purchases across many categories, including new product categories, we may face delays or difficulty sourcing certain products and we may fail to adequately identify with certain regulatory requirements for new products which could negatively impact us.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including: the severity of the disease; the duration of the outbreak; the possibility of a resulting global or regional economic downturn or recession; governmental, business and other actions; the promotion of social distancing and the adoption of shelter-in-place orders affecting foot traffic in our stores; the impacts on our supply chain, including impacts to our distribution and logistics providers’ ability to operate or increases in their operating costs, which may have an adverse effect on our ability to meet customer demand and could result in an increase in our costs of production and distribution, including increased freight and logistics costs and other expenses; disruption to our third-party manufacturing partners and other vendors, including through effects of facility closures, reductions in operating hours and work force, and real time changes in operating procedures, including for additional cleaning and disinfection procedures; the impact of the pandemic on economic activity; customer reduction in workforce and furloughs; the extent and duration of the effect on consumer confidence and spending, customer demand and buying patterns including spending on discretionary categories; the effects of additional store closures or other changes to our operations; the health of and the effect on our workforce and our ability to meet staffing needs in our stores, distribution facilities, and other critical functions, particularly members of our work force who have been ~~no material~~quarantined as a result of exposure; any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions; and the potential effects on our internal

controls including those over financial reporting as a result of changes in working environments such as shelter-in-place and similar orders that are applicable to our ~~risk factors from those previously disclosed~~employees and business partners, among others. In addition, if the pandemic continues to create disruptions or turmoil in the ~~Company’s 2018~~credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.

In addition, we cannot predict the impact that COVID-19 will have on our customers, employees, suppliers, vendors, other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact us. The impact of COVID-19 may also exacerbate other risks discussed in “Risk Factors” within Other Key Information in our 2019 Form ~~10-K.~~10-K, any of which could have a material effect on us. The situation surrounding COVID-19 remains fluid and additional impacts may arise that we are not aware of currently.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In the first quarter of ~~2019,~~2020, we purchased ~~approximately 4~~13 million shares of our common stock ~~in connection with~~at a cost of $30 million. At March 28, 2020, $131 million remains available for additional repurchases under the ~~share~~current stock repurchase ~~program that was approved by the Board of Directors in November 2018.~~program.

Approximate Dollar

Total Number of

Value of Shares that

Total

Shares Purchased as

May Yet Be

Number

Average

Part of a Publicly

Purchased Under

of Shares

Price Paid

Announced Plan or

the Repurchase

Purchased

per Share

Program

Programs (b)

Period

(In thousands)

(a)

(In thousands)

(In millions)

December 30, 2018 — January 26, 2019

1,714

$
2.85

1,714

$
95

January 27, 2019 — February 23, 2019

1,512

$
3.06

1,512

$
91

February 24, 2019 — March 30, 2019

347

$
3.40

347

$
90

Total

3,573

$
2.99

3,573

							Approximate Dollar
					Total Number of		Value of Shares that
	Total				Shares Purchased as		May Yet Be
	Number		Average		Part of a Publicly		Purchased Under
	of Shares		Price Paid		Announced Plan or		the Repurchase
	Purchased		per Share		Program		Programs (b)
Period	(In millions)		(a)		(In millions)		(In millions)
December 29, 2019 — January 25, 2020		6	$	2.65		6	$	145
January 26, 2020 — February 22, 2020		1	$	2.43		1	$	142
February 23, 2020 — March 28, 2020		6	$	1.92		6	$	131
Total		13	$	2.30		13

In February ~~2019, the~~2020, our Board of Directors declared a quarterly cash dividend of $0.025 per share ofon our common stock, which was paid ~~in cash~~ on March ~~15, 2019~~13, 2020, for a total ~~distribution~~cash payment of ~~$14~~$13 million to ~~the Company’s~~our shareholders of record at the close of business on March ~~1, 2019.~~2, 2020. Dividends have been recorded as a reduction to additional paid-in capital as we are in an accumulated deficit position. ~~Additionally,~~Our Amended Credit Agreement permits payment of dividends ~~is permitted under our Amended Credit Agreement~~ provided that we have the required minimum liquidity or fixed charge coverage ratio, but may be limited if we do not meet the necessary requirements. Additionally, ~~under our~~the Term Loan Credit Agreement, ~~payment~~prior to its termination in the second quarter of ~~dividends is permitted subject~~2020, contained certain restrictions on our ability to ~~compliance with an annual limit.~~declare or pay dividends. Refer to Note 8. “Debt” in Notes to Condensed Consolidated Financial Statements for additional information about the termination of the Term Loan Credit Agreement.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Delaware	59-2663954
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)



6600 North Military Trail, Boca Raton, Florida	33496
(Address of Principal Executive Offices)	(Zip Code)

~~PART I. FINANCIAL INFORMATION~~
~~Item 1.~~ Financial Statements		Page
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~Condensed Consolidated Statements of Operations (Unaudited)		3
~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
~~CONDENSED CONSOLIDATED BALANCE SHEETS~~Condensed Consolidated Balance Sheets (Unaudited)		5
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~Condensed Consolidated Statements of Cash Flows (Unaudited)		6
~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		7
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements (Unaudited)		8
~~Item 2.~~ Management’s Discussion and Analysis ~~of Financial Condition and Results of Operations~~(MD&A)
Overview		2523
~~Item 3.~~ Operating Results by Division		26
Liquidity and Capital Resources		31
New Accounting Standards		33
Critical Accounting Policies		33
Other Information
Quantitative and Qualitative Disclosures About Market Risk		34
~~Item 4.~~ Controls and Procedures		34
~~PART II. OTHER INFORMATION~~Legal Proceedings		35
~~Item 1. Legal Proceedings~~Risk Factors		35
~~Item 1A. Risk Factors~~		35
~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds		35
~~Item 6. Exhibits~~		36
~~SIGNATURES~~Exhibits		37
Form 10-Q Cross-Reference Index		38
Signatures		39
EX ~~3.1~~10.1
EX 31.1
~~EX 31.2~~
EX 32
EX 101
EX 104

	March 30,
(In millions)	2019
Finance lease cost:
Amortization of right-of-use assets	$	4
Interest on lease liabilities		1
Operating lease cost		111
Short-term lease cost		3
Variable lease cost		33
Total lease cost	$	152

Level 1:		Quoted prices in active markets for identical assets or liabilities.

Level 2:		Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3:		Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows or option pricing models using the Company’s own estimates and assumptions or those expected to be used by market participants.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

	March 30,
(In millions, except lease term and discount rate)	2019
Property and equipment, net	$	41
Operating lease right-of-use assets		1,398
Accrued expenses and other current liabilities		370
Short-term borrowings and current maturities of long-term debt		16
Long-term debt, net of current maturities		53
Operating lease liabilities		1,208
Weighted-average remaining lease term – finance leases	5 years
Weighted-average remaining lease term – operating leases	5 years
Weighted-average discount rate – finance leases		6.9	%
Weighted-average discount rate – operating leases		7.0	%

	March 30, 2019
	Operating			Finance
(In millions)	Leases⁽¹⁾			Leases
2019 (excluding the first quarter of 2019)	$	546		$	16
2020		479			16
2021		338			14
2022		254			12
2023		178			11
Thereafter		132			15
		1,927			84
Less imputed interest		(349	)		(15	)
Total	$	1,578		$	69

Reported as of March 30, 2019
Accrued expenses and other current liabilities	$	370		$	—
Short-term borrowings and current maturities of long-term debt		—			16
Long-term debt, net of current maturities		—			53
Operating lease liabilities		1,208			—
Total	$	1,578		$	69

~~31.1~~10.1		~~Rule 13a-14(a)/15d-14(a) Certification of CEO~~General Release Agreement, dated March 18, 2020, between the Company and Jerri DeVard.*

~~31.2~~31.1		~~Rule 13a-14(a)/15d-14(a)~~ Certification of ~~CFO~~Principal Executive Officer and Principal Financial Officer required by Securities and Exchange Commission Rule 13a-14(a) or 15d-14(a)

32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, ~~Certification~~as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~(101.INS)~~101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~(101.SCH)~~101.SCH		Inline XBRL Taxonomy Extension Schema Document

~~(101.CAL)~~101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~(101.DEF)~~101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

~~(101.LAB)~~101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

~~(101.PRE)~~101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page from this Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101.

Item		Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)		3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
Condensed Consolidated Balance Sheets (Unaudited)		5
Condensed Consolidated Statements of Cash Flows (Unaudited)		6
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk		34
Item 4. Controls and Procedures		34
Part II - Other Information
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		Not Applicable
Item 4. Mine Safety Disclosures		Not Applicable
Item 5. Other Information		Not Applicable
Item 6. Exhibits		37
Signatures		39
EX 10.1
EX 31.1
EX 32
EX 101
EX 104

	OFFICE DEPOT, INC.
		(Registrant)

Date: May ~~8, 2019~~6, 2020	By:	/s/ ~~Gerry~~GERRY P. ~~Smith~~SMITH
		Gerry P. Smith
		Chief Executive Officer
		(Principal Executive ~~Officer)~~Officer and Principal Financial Officer)

Date: May ~~8, 2019~~6, 2020	By:	/s/ ~~Joseph T. Lower~~
	~~Joseph T. Lower~~
	~~Executive Vice President and~~
	~~Chief Financial Officer~~
	~~(Principal Financial Officer)~~RICHARD A. HAAS

~~Date: May 8, 2019~~	~~By:~~	~~/s/ Scott~~Richard A. ~~Kriss~~Haas
	~~Scott A. Kriss~~
	Senior Vice President and
		Chief Accounting Officer
		(Principal Accounting Officer)