Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 24, 2016shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Sep. 24, 2016 |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | ODP |
Entity Registrant Name | OFFICE DEPOT INC |
Entity Central Index Key | 800,240 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 528,383,116 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Sales | $ 2,836 | $ 3,046 | $ 8,295 | $ 8,961 |
Cost of goods sold and occupancy costs | 2,110 | 2,259 | 6,241 | 6,754 |
Gross profit | 726 | 787 | 2,054 | 2,207 |
Selling, general and administrative expenses | 569 | 626 | 1,694 | 1,852 |
Asset impairments | 9 | 1 | 9 | 10 |
Merger, restructuring, and other operating (income) expenses, net | 31 | 79 | (122) | 204 |
Operating income | 117 | 81 | 473 | 141 |
Other income (expense): | ||||
Interest income | 6 | 5 | 17 | 16 |
Interest expense | (19) | (22) | (63) | (69) |
Loss on extinguishment of debt | (15) | (15) | ||
Other income (expense), net | 1 | (1) | 1 | |
Income from continuing operations before income taxes | 90 | 63 | 413 | 88 |
Income tax expense (benefit) | (240) | 21 | (211) | 28 |
Net income from continuing operations | 330 | 42 | 624 | 60 |
Discontinued operations, net of tax | (286) | (36) | (324) | (67) |
Net income (loss) | $ 44 | $ 6 | $ 300 | $ (7) |
Basic earnings (loss) per share | ||||
Continuing operations | $ 0.62 | $ 0.08 | $ 1.15 | $ 0.11 |
Discontinued operations | (0.54) | (0.07) | (0.60) | (0.12) |
Net earnings (loss) per share | 0.08 | 0.01 | 0.55 | (0.01) |
Diluted earnings (loss) per share | ||||
Continuing operations | 0.61 | 0.08 | 1.13 | 0.11 |
Discontinued operations | (0.54) | (0.07) | (0.60) | (0.12) |
Net earnings (loss) per share | 0.08 | $ 0.01 | 0.54 | $ (0.01) |
Dividends per common share | $ 0.025 | $ 0.025 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Net income (loss) | $ 44 | $ 6 | $ 300 | $ (7) |
Other comprehensive income (loss), net of tax where applicable: | ||||
Foreign currency translation adjustments | 2 | (22) | 14 | (73) |
Other | 1 | (1) | ||
Total other comprehensive income (loss), net of tax, where applicable | 3 | (22) | 13 | (73) |
Comprehensive income (loss) | $ 47 | $ (16) | $ 313 | $ (80) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 24, 2016 | Dec. 26, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 801 | $ 860 |
Receivables, net | 718 | 746 |
Inventories | 1,216 | 1,406 |
Prepaid expenses and other current assets | 85 | 92 |
Current assets of discontinued operations | 580 | 956 |
Total current assets | 3,400 | 4,060 |
Property and equipment, net | 601 | 665 |
Goodwill | 363 | 363 |
Other intangible assets, net | 38 | 53 |
Timber notes receivable | 890 | 905 |
Deferred income taxes | 377 | 11 |
Other assets | 212 | 212 |
Non-current assets of discontinued operations | 173 | |
Total assets | 5,881 | 6,442 |
Current liabilities: | ||
Trade accounts payable | 886 | 987 |
Accrued expenses and other current liabilities | 889 | 1,074 |
Income taxes payable | 9 | |
Short-term borrowings and current maturities of long-term debt | 28 | 51 |
Current liabilities of discontinued operations | 519 | 622 |
Total current liabilities | 2,322 | 2,743 |
Deferred income taxes and other long-term liabilities | 368 | 421 |
Pension and postretirement obligations, net | 179 | 182 |
Long-term debt, net of current maturities | 360 | 628 |
Non-recourse debt | 803 | 819 |
Non-current liabilities of discontinued operations | 46 | |
Total liabilities | 4,032 | 4,839 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock-authorized 800,000,000 shares of $.01 par value; issued shares - 557,523,542 in September 2016 and 554,835,306 in December 2015 | 6 | 6 |
Additional paid-in capital | 2,621 | 2,607 |
Accumulated other comprehensive income | 43 | 30 |
Accumulated deficit | (682) | (982) |
Treasury stock, at cost - 29,140,426 shares in 2016 and 5,915,268 shares in 2015 | (139) | (58) |
Total equity | 1,849 | 1,603 |
Total liabilities and stockholders' equity | $ 5,881 | $ 6,442 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 24, 2016 | Dec. 26, 2015 |
Common stock, authorized | 800,000,000 | 800,000,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, issued shares | 557,523,542 | 554,835,306 |
Treasury stock, shares | 29,140,426 | 5,915,268 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016USD ($) | Sep. 26, 2015USD ($) | Sep. 24, 2016USD ($) | Sep. 26, 2015USD ($) | |
Cash flows from operating activities of continuing operations: | ||||
Net income (loss) | $ 44 | $ 6 | $ 300 | $ (7) |
Loss from discontinued operations, net of tax | (286) | (36) | (324) | (67) |
Net income from continuing operations | 330 | 42 | 624 | 60 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 140 | 197 | ||
Charges for losses on inventories and receivables | 49 | 41 | ||
Deferred income taxes | (235) | |||
Loss on extinguishment of debt | 15 | 15 | ||
Asset impairments | 9 | 1 | 9 | 10 |
Changes in working capital and other | (155) | (247) | ||
Net cash provided by operating activities of continuing operations | 447 | 61 | ||
Cash flows from investing activities of continuing operations: | ||||
Capital expenditures | (71) | (109) | ||
Acquisition, net of cash acquired | (9) | |||
Proceeds from disposition of assets and other | 14 | 63 | ||
Net cash used in investing activities of continuing operations | (57) | (55) | ||
Cash flows from financing activities of continuing operations: | ||||
Net proceeds on employee share-based transactions | 7 | |||
Net payments on long and short-term borrowings | (42) | (24) | ||
Loss on extinguishment of debt | (12) | |||
Cash dividends on common stock | (13) | |||
Debt retirement | (250) | |||
Debt related fees | (6) | (1) | ||
Repurchase of common stock for treasury | (81) | |||
Net cash used in financing activities of continuing operations | (404) | (18) | ||
Cash flows from discontinued operations: | ||||
Operating activities of discontinued operations | (113) | (61) | ||
Investing activities of discontinued operations | (4) | (12) | ||
Financing activities of discontinued operations | 3 | 1 | ||
Net cash used in discontinued operations | (114) | (72) | ||
Effect of exchange rate changes on cash and cash equivalents | 2 | (29) | ||
Net decrease in cash and cash equivalents | (126) | (113) | ||
Cash and cash equivalents at beginning of period | 1,069 | 1,071 | ||
Cash and cash equivalents at end of period-total | 943 | 958 | 943 | 958 |
Cash and cash equivalents of discontinued operations | (142) | (141) | (142) | (141) |
Cash and cash equivalent at end of the period-continuing operations | $ 801 | $ 817 | $ 801 | $ 817 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 24, 2016 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: ® ® In September 2016, the Company’s Board of Directors committed to a plan to sell substantially all of the International Division operations (the “International Operations”). Accordingly, the Company has presented the International Operations as discontinued operations beginning in the third quarter 2016. The Company has reclassified the financial results of the International Operations to Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented. The Company also reclassified the related assets and liabilities as current and non-current assets and liabilities of discontinued operations on the accompanying Condensed Consolidated Balance Sheets as of September 24, 2016 and December 26, 2015. Cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for all periods. Certain portions of the International Division assets and operations are being retained or did not meet the held for sale criteria at September 24, 2016 and therefore remain in continuing operations, with prior periods adjusted, where appropriate. Additional information on the planned dispositions is provided in Note 3. Refer to Note 11 for additional Division information. The Condensed Consolidated Financial Statements as of September 24, 2016 and for the 13-week and 39-week periods ended September 24, 2016 (also referred to as “the third quarter of 2016” and “the year-to-date 2016”) and September 26, 2015 (also referred to as “the third quarter of 2015” and “the year-to-date 2015”) 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. The Company has prepared the Condensed Consolidated Financial Statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (the “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, have been condensed or omitted pursuant to those SEC rules and regulations. For a better understanding of the Company and its Condensed Consolidated Financial Statements, we recommend reading these Condensed Consolidated Financial Statements in conjunction with the audited financial statements which are included in the 2015 Form 10-K. These interim results are not necessarily indicative of the results that should be expected for the full year. Cash Management: At September 24, 2016, cash and cash equivalents from continuing operations but held outside the United States amounted to $50 million. Additionally, $142 million of cash held outside the United States was included in current assets of discontinued operations. New Accounting Standards: The Company continues to assess the impact this new standard will have on its Consolidated Financial Statements and has not yet decided on which adoption alternative to apply. However, based on this ongoing assessment, the Company expects that the new standard will require the impacts of its loyalty programs to be presented as a reduction of revenue, rather than as cost accruals as is permitted under existing accounting rules. Also, costs associated with catalogs will be expensed as incurred, rather than capitalized and amortized over the anticipated benefit period. Additionally, the timing of revenue recognition will be accelerated for items where the Company’s performance obligation is complete, such as certain commission arrangements, and delayed where performance obligations remain, such as certain coupons and incentives offered from time-to-time. The Company has not yet quantified these expected impacts. In February 2016, the FASB issued an accounting standards update which will require lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The accounting treatment for lessors will remain 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 guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Lessees and lessors are required to use a modified retrospective transition method for existing leases and accordingly, apply the new accounting model for the earliest year presented in the financial statements. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements but anticipates it will result in significant right of use assets and related liabilities associated with our operating leases. Substantially all of the Company’s retail store locations and supply chain facilities are subject to operating lease arrangements. The Company has not yet decided on the period of adoption. In March 2016, the FASB issued an accounting standards update as part of its simplification initiative. The new standard will modify several aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. Other provisions of the new standard relate to nonpublic entities and eliminate guidance that had not become effective. The new standard is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements. |
ACQUISITION, MERGER AND RESTRUC
ACQUISITION, MERGER AND RESTRUCTURING | 9 Months Ended |
Sep. 24, 2016 | |
ACQUISITION, MERGER AND RESTRUCTURING | NOTE 2. ACQUISITION, MERGER AND RESTRUCTURING Merger and Restructuring In recent years, the Company has taken actions to adapt to changing and competitive conditions. These actions include closing facilities, consolidating functional activities, eliminating redundant positions, disposing of businesses and assets, and taking actions to improve process efficiencies. In 2013, the OfficeMax merger (the “Merger”) was completed and integration activities similar to the actions described above began. The Company also assumed certain restructuring liabilities previously recorded by OfficeMax. In mid-2014, the Company’s real estate strategy (the “Real Estate Strategy”) identified 400 retail stores for closure and integration of the supply chain. During the second quarter of 2016, the Company completed the retail store closures under this program. The changes to the supply chain are anticipated to be complete in 2017. Staples Acquisition and Merger Agreement Termination On February 4, 2015, Staples, Inc. (“Staples”) and the Company announced that the companies entered into a definitive merger agreement (the “Staples Merger Agreement”), under which Staples would acquire all of the outstanding shares of Office Depot and the Company would become a wholly owned subsidiary of Staples (the “Staples Acquisition”). On December 7, 2015, the United States Federal Trade Commission (the “FTC”) informed Office Depot and Staples that it intended to block the Staples Acquisition. On the same date, Office Depot and Staples announced their intent to contest the FTC’s decision to challenge the transaction. On May 10, 2016, the U.S. District Court for the District of Columbia granted the FTC’s request for a preliminary injunction against the proposed acquisition, and as a result, the companies terminated the Staples Merger Agreement on May 16, 2016. Per the terms of the termination agreement, Staples paid Office Depot a fee of $250 million in cash on May 19, 2016 (“Termination Fee”), which is included in Merger, restructuring and other operating (income) expenses, net in the Condensed Consolidated Statements of Operations and in Net cash provided by operating activities of continuing operations in the Condensed Consolidated Statements of Cash Flows. Comprehensive Business Review During August 2016, the Company announced the results of a comprehensive business review and strategy (the “Comprehensive Business Review”), which, among other things, includes a plan to close approximately 300 additional retail stores in North America over the next three years, and to lower operating and general and administrative expenses through efficiencies and organizational optimization. The significant components of the cost saving programs activities are discussed below. Additionally, the Company indicated that as part of this process, it would continue exploration of strategic alternatives regarding the European business that had been initiated by Staples as part of their attempt to get European Union regulatory approval of the Staples Acquisition. Merger, restructuring, and other operating (income) expenses, net The Company presents Merger, restructuring and other operating (income) expenses, net on a separate line in the Condensed Consolidated Statements of Operations to identify these activities apart from the activities to sell to and service its customers. These expenses and income are not included in the determination of Division operating income. The table below and narrative that follows provides the major components of Merger, restructuring and other operating (income) expenses, net. Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Merger related expenses Severance, retention, and relocation $ — $ 4 $ — $ 15 Transaction and integration 8 16 30 69 Facility closure, contract termination, and other costs, net 4 18 21 32 Total Merger related expenses 12 38 51 116 Staples Acquisition (income) expenses Retention — 26 15 58 Transaction 4 15 43 30 Termination Fee — — (250 ) — Total Staples Acquisition (income) expenses 4 41 (192 ) 88 Comprehensive Business Review expenses Severance 9 — 13 — Other related expenses 6 — 6 — Total Comprehensive Business Review expenses 15 — 19 — Total Merger, restructuring and other operating (income) expenses, net $ 31 $ 79 $ (122 ) $ 204 Merger related expenses Severance, retention, and relocation reflect expenses incurred for the integration of staff functions and include termination benefits for certain retail and supply chain closures. Such benefits are being accrued through the anticipated facility closure date. Severance calculations consider factors such as the expected timing of store closures, terms of existing severance plans, expected employee turnover and attrition. Transaction and integration expenses include integration-related professional fees, incremental temporary contract labor, salary and benefits for employees dedicated to the Merger activity, travel costs, non-capitalizable software integration costs, and other direct costs to combine the companies. Such costs are being recognized as incurred. Facility closure, contract termination, and other costs, net primarily relate to facility closure accruals, contract termination cost, gains and losses on asset dispositions, and accelerated depreciation. Facility closure expenses include amounts incurred by the Company to close retail stores in the United States as part of the Real Estate Strategy, as well as supply chain facilities. During year-to-date 2016 the Company recognized gains of $1 million from the sale of warehouse facilities that had been classified as assets held for sale. During the third quarter and year-to-date 2015, the Company recognized gains of $6 million and $25 million, respectively, from the sale of warehouse facilities that had been classified as assets held for sale. The gains are included in Merger, restructuring and other operating (income) expenses, net, as the dispositions were part of the supply chain integration associated with the Merger. Staples Acquisition (income) expenses Expenses include retention accruals and transaction costs, including costs associated with regulatory filings and professional fees, offset by the Termination Fee income. Comprehensive Business Review expenses Expenses include severance, facility closure costs, contract termination and accelerated depreciation associated with the announced closure of approximately 300 retail store locations through 2018, as well as severance and reorganization costs associated with reductions in staff functions. Severance costs are being accrued through the anticipated facility closure or termination date and consider timing, terms of existing severance plans, expected employee turnover and attrition. Asset impairments related to the restructuring initiatives are not included in the table above. Refer to Note 9 for further information. Merger and Restructuring Accruals The activity in the merger and restructuring accruals is presented in the table below. The total $122 million income presented in Merger, restructuring and other operating (income) expenses, net in the year-to-date 2016 Condensed Consolidated Statement of Operations, includes the $250 million Termination Fee. Excluding the Termination Fee, expenses of $128 million were incurred in the year-to-date 2016, of which $41 million relate to Merger and restructuring liabilities and are included as Charges incurred in the table below. The remaining $87 million expense is comprised of $43 million Staples Acquisition transaction expenses, $30 million Merger transaction and integration expenses and $14 million in other expenses. These amounts are excluded from the table below because they are recorded as incurred or earned, non-cash, or otherwise not associated with Merger and restructuring balance sheet accounts. Year-to-Date 2016 (In millions) December 26, 2015 Charges Incurred Cash Payments Lease Accretion and Other Adjustments September Termination benefits Merger related accruals $ 16 $ — $ (6 ) $ (2 ) $ 8 Comprehensive Business Review — 13 (5 ) — 8 Lease and contract obligations, accruals for facilities closures and other costs Merger related accruals 77 16 (51 ) 3 45 Other restructuring accruals 14 (1 ) (7 ) 1 7 Acquired entity accruals 25 (2 ) (6 ) 3 20 Staples Acquisition related accruals 64 15 (79 ) — — Total $ 196 $ 41 $ (154 ) $ 5 $ 88 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, on the Condensed Consolidated Balance Sheets. Assets held for sale Certain facilities identified for closure through integration and other activities have been accounted for as assets held for sale. Assets held for sale primarily consist of supply chain facilities, and are presented in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. The assets held for sale activity in the year-to-date 2016 is presented in the table below. (In millions) Balance as of December 26, 2015 $ 30 Additions 6 Dispositions (7 ) Balance as of September 24, 2016 $ 29 Gains on dispositions associated with Merger or restructuring activities will be recognized at the Corporate level and included when realized in Merger, restructuring and other operating (income) expenses, net in the Condensed Consolidated Statements of Operations. Losses, if any, are recognized when classified as held for sale. Gains or losses associated with dispositions of properties not associated with Merger or restructuring activities will be presented as a component of operations when the related accounting criteria are met. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 24, 2016 | |
DISCONTINUED OPERATIONS | NOTE 3. DISCONTINUED OPERATIONS In the second quarter of 2016, following termination of the Staples Agreement, the Company disclosed its intention to explore strategic alternatives regarding its European business of the International Division. On September 23, 2016, the Company announced that it had received an irrevocable offer from Aurelius Rho Invest DS GmbH, a subsidiary of The AURELIUS Group (the “Purchaser”) to acquire the Company’s European business operations (the “European Business”). The transaction is structured as an equity sale, for nominal consideration, with the Purchaser acquiring the European Business with its operating assets and liabilities. The Purchaser offered to purchase the European Business on the terms and conditions set out in a form of sale and purchase agreement. Upon completion of the consultation with central works council in France, the Company will have an option to enter into a definitive sale and purchase agreement (the “SPA”). If the Company does not exercise the option within the prescribed time period, the Company will be required to pay a EUR 5 million fee to the Purchaser. The transaction is subject to receipt of antitrust clearance (or expiration of the relevant waiting period) of the European Commission and contains certain indemnities from the Company. The SPA contains certain warranties of the Company and the Purchaser, with the Company’s warranties limited to an aggregate of EUR 10 million. The Company is optimistic that the transaction can close by the end of 2016. The Company will retain responsibility for the European defined benefit pension plan which is frozen and covers a limited number of employees in the United Kingdom. The offer to purchase includes a required maintenance of working capital components up to the time of closing. Any deficiency at closing would result in an increase to the estimated loss on classification as discontinued operations that was recognized in the third quarter of 2016. The Company will provide various transition services to the Purchaser for six to 24 months under a separate agreement. In addition to approving the sale of the European Business in the third quarter of 2016, the Company’s Board of Directors approved a plan to sell substantially all of the remaining operations of the International Division. The Company is actively marketing for sale the businesses in South Korea, mainland China, Australia and New Zealand and expects to complete the dispositions within 12 months. As such, the assets and liabilities of the entities expected to be sold were classified as held for sale. Collectively, the International Division dispositions represent a strategic shift that has a major impact on the Company’s operations and financial results. Accordingly, the operations of the International Division businesses classified as held for sale also have been reported as discontinued operations, beginning in the third quarter 2016. The retained sourcing and trading operations of the former International Division are presented as Other in Note 11, Division Information. The contract price for the European business was below the entity’s carrying value, resulting in an incremental impairment charge to reduce the carrying value of European long-lived assets, with the remainder considered a valuation allowance against the remaining assets. The loss on classification as discontinued operations relating to the remaining entities was measured at the lower of carrying value or estimated fair value less costs to sell and is included in the valuation allowance in the balance sheet as shown below. Completion of the sale of the European Business and sales of the remaining international operations may be for amounts different from the third quarter 2016 estimates and will be evaluated each reporting period until the dispositions are complete. Additionally, cumulative translation adjustments currently presented in Accumulated other comprehensive income will be recognized as part of the loss as dispositions are finalized. Substantially all of the foreign currency translation adjustments reported in Note 6 relate to entities in the former International Division. In accordance with the Company’s annual goodwill impairment test as of the first day of the third quarter, the $15 million of goodwill in the Australia/New Zealand reporting unit was considered impaired based on a decrease in the long-term projected cash flows and related estimated terminal value of that business. Restructuring charges incurred by the International Division that previously have been presented as part of Corporate costs have been included in the measurement and presentation of discontinued operations. The major components of Discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations include the following. Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Sales $ 583 $ 644 $ 1,886 $ 2,046 Cost of goods sold and occupancy costs 462 495 1,489 1,565 Operating expenses 139 147 435 464 Asset impairments 90 — 90 — Restructuring charges — 31 10 70 Interest income — — — 2 Interest expense — — (4 ) (2 ) Other income (expense), net — (1 ) (1 ) 1 Loss on classification as discontinued operations (304 ) — (304 ) — Income tax expense (benefit) (126 ) 6 (123 ) 15 Discontinued operations, net of tax $ (286 ) $ (36 ) $ (324 ) $ (67 ) Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of September 24, 2016, and December 26, 2015 include the following. (In millions) September 24, 2016 December 26, 2015 Assets Cash and cash equivalents $ 142 $ 209 Receivables, net 375 420 Inventories 259 292 Prepaid expenses and other current assets 47 35 Property and equipment, net 33 — Other assets 21 — Valuation allowance (297 ) — Current assets of discontinued operations $ 580 $ 956 Property and equipment, net — 119 Goodwill — 15 Other assets — 39 Non-current assets of discontinued operations $ — $ 173 Liabilities Trade accounts payable $ 235 $ 331 Accrued expenses and other current liabilities 228 282 Income taxes payable 6 4 Short-term borrowings and current maturities of long-term debt 10 5 Deferred income taxes and other long-term liabilities 35 — Long-term debt, net of current maturities 5 — Current liabilities of discontinued operations $ 519 $ 622 Deferred income taxes and other long-term liabilities — 40 Long-term debt, net of current maturities — 6 Non-current liabilities of discontinued operations $ — $ 46 Cash flows from discontinued operations for the year-to-date periods ended September 24, 2016 and September 26, 2015 include the following. Year-to-Date (In millions) September 24, September 26, Depreciation and amortization $ 19 $ 23 Capital expenditures $ 6 $ 15 Factoring Agreement The sale of selected accounts receivables on a non-recourse basis to an unrelated financial institution under a factoring agreement in France remains in place. Amounts related to those sales are included in the components of discontinued operations. |
DEBT
DEBT | 9 Months Ended |
Sep. 24, 2016 | |
DEBT | NOTE 4. DEBT Amended Credit Agreement Based on the September borrowing base certificate, at September 24, 2016, the Company had approximately $1.1 billion of available credit under the Second Amended and Restated Credit Agreement. In May 2011, Office Depot entered into an amended and restated agreement, which was further amended and restated in May 2016 for an additional five years (the “Amended Credit Agreement”). The $1.2 billion facility will mature on May 13, 2021. The Amended Credit Agreement reduces the overall fees and applicable spread on borrowing and modifies certain covenants to provide additional flexibility for incremental indebtedness, acquisitions, asset sales and restricted payments. In connection with the May 2016 amendment, the Company recorded $6 million in debt acquisition costs, which are included in Other assets in the Condensed Consolidated Balance Sheet and will be amortized ratably through May 2021. Upon completion of the sale of the European Business, the European entities and associated collateral will be removed from the Amended Credit Agreement. As of September 24, 2016, letters of credit outstanding under the Amended Credit Agreement totaled $90 million. There were no borrowings under the Amended Credit Agreement in the third quarter of 2016. Senior Secured Notes On September 15, 2016, the Company redeemed its outstanding 9.75% Senior Secured Notes due 2019 (the “Senior Secured Notes”) which had an aggregate principal outstanding of $250 million. The Notes were redeemed for cash at the outstanding principal plus a $12 million premium calculated as 4.875% of the principal amount. The total payment amounted to $262 million, plus accrued interest. The premium and recognition of the remaining deferred debt issue costs totaled $15 million and are presented as Loss on extinguishment of debt in the Condensed Consolidated Statements of Operations for third quarter and year-to-date 2016. The cash amounts of the premium paid are reflected as financing activities in the Condensed Consolidated Statements of Cash Flows. Other The Company was in compliance with all applicable financial covenants at September 24, 2016. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 24, 2016 | |
INCOME TAXES | NOTE 5. INCOME TAXES The effective tax rates for the third quarter and year-to-date 2016 continued to be primarily impacted by the Company’s U.S. federal and state valuation allowance. Year-to-date, the Company has experienced a lower than expected effective rate due to the utilization of certain deferred tax assets during the year whose benefits were limited in prior periods due to the valuation allowance. In the third quarter, the Company recognized a discrete non-cash income tax benefit for the reversal of the majority of the remaining U.S. federal and state valuation allowance. The effective tax rate in the third quarter was also impacted by other nondeductible expenses and the deductibility of certain formerly non-deductible expenses. Due to the Company’s valuation allowances and related reversals, interim income tax reporting is likely to result in significant variability of the effective tax rate throughout the remainder of the year. Changes in pretax income projections and the mix of income across jurisdictions could also impact the effective tax rate each quarter. As of the third quarter of 2016, the Company concluded that it was more likely than not that a benefit from a substantial portion of its U.S. federal and state deferred tax assets would be realized. This conclusion was based on a detailed evaluation of all available positive and negative evidence and the weight of such evidence, the current financial position and results of operations for the current and preceding years, and the expectation of continued earnings. The Company determined that approximately $400 million of its U.S. federal and state valuation allowance should be reversed in 2016, with approximately $240 million in the third quarter as a discrete non-cash income tax benefit in the third quarter and the remainder as an adjustment to the estimated annual effective tax rate. After the 2016 reversal, the Company will have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes. The remaining valuation allowances 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. 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 before 2015 and 2009, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal and state and local income tax examinations for years before 2013 and 2006, respectively. The U.S. federal income tax return for 2015 is currently under review. Generally, the Company is subject to routine examination for years 2008 and forward in its international tax jurisdictions. It is not reasonably possible that certain 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 24, 2016 | |
STOCKHOLDERS' EQUITY | NOTE 6. STOCKHOLDERS’ EQUITY The following table reflects the changes in stockholders’ equity. (In millions) Stockholders’ equity at December 26, 2015 $ 1,603 Net income 300 Repurchase of common stock for treasury (81 ) Dividends paid on common stock (13 ) Other comprehensive income 13 Amortization of long-term incentive stock grants 27 Stockholders’ equity at September 24, 2016 $ 1,849 Accumulated other comprehensive income (loss) activity, net of tax, where applicable, is provided in the following table: (In millions) Foreign Currency Translation Adjustments Change in Deferred Pension and Other Total Balance at December 26, 2015 $ 108 $ (78 ) $ 30 Other comprehensive income (loss) activity before reclassifications 14 (1 ) 13 Net other comprehensive income (loss) 14 (1 ) 13 Balance at September 24, 2016 $ 122 $ (79 ) $ 43 Treasury Stock In May 2016, the Company’s Board of Directors authorized a stock repurchase program of up to $100 million of its outstanding common stock. In August 2016, the Board of Directors authorized increasing the share repurchase program to $250 million. The stock repurchase authorization permits the Company 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 authorization extends to the end of 2018 and may be suspended or discontinued at any time. The exact number and timing of share repurchases will depend on market conditions and other factors, and will be funded through existing liquidity. Under the stock repurchase program, in the third quarter 2016, the Company purchased approximately 16 million shares at a cost of $55 million. In year-to-date 2016, the Company purchased approximately 23 million shares at a cost of $81 million. As of September 24, 2016, $169 million remains available for repurchase under the current authorization. Refer to Item 2 Unregistered Sales of Equity Securities and Use of Proceeds for more information. Dividends on Common Stock In August 2016, the Board of Directors declared a cash dividend of $0.025 per share on its common stock. The total per share dividend of $0.025 was paid in September 2016 to shareholders of record at the close of business on August 25, 2016, resulting in a total cash payment of $13 million. Dividends have been recorded as a reduction to additional paid-in capital as the Company is in an accumulated deficit position. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 24, 2016 | |
EARNINGS PER SHARE | NOTE 7. EARNINGS PER SHARE The following table represents the calculation of net earnings (loss) per common share – basic and diluted: Third Quarter Year-to-Date (In millions, except per share amounts) 2016 2015 2016 2015 Basic Earnings Per Share Numerator: Net income from continuing operations $ 330 $ 42 $ 624 $ 60 Loss from discontinued operations, net of tax (286 ) (36 ) (324 ) (67 ) Net income (loss) $ 44 $ 6 $ 300 $ (7 ) Denominator: Weighted-average shares outstanding 535 548 545 546 Basic earnings (loss) per share: Continuing operations $ 0.62 $ 0.08 $ 1.15 $ 0.11 Discontinued operations (0.54 ) (0.07 ) (0.60 ) (0.12 ) Net earnings (loss) $ 0.08 $ 0.01 $ 0.55 $ (0.01 ) Diluted Earnings Per Share Numerator: Net income from continuing operations $ 330 $ 42 $ 624 $ 60 Loss from discontinued operations, net of tax (286 ) (36 ) (324 ) (67 ) Net income (loss) $ 44 $ 6 $ 300 $ (7 ) Denominator: Weighted-average shares outstanding 535 548 545 546 Effect of dilutive securities: Stock options and restricted stock 10 8 8 9 Diluted weighted-average shares outstanding 545 556 553 555 Diluted earnings (loss) per share Continuing operations $ 0.61 $ 0.08 $ 1.13 $ 0.11 Discontinued operations (0.54 ) (0.07 ) (0.60 ) (0.12 ) Net earnings (loss) $ 0.08 $ 0.01 $ 0.54 $ (0.01 ) Awards of stock options and nonvested shares representing approximately 6 million and 7 million additional shares of common stock were outstanding for the third quarter and year-to-date 2016, respectively, and 3 million and less than 1 million for the third quarter and year-to-date 2015, respectively, but were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive. Additionally, the Stock options and restricted stock amounts are not included in the Diluted Earnings Per Share amounts of the Loss from discontinued operations, net of tax and the year-to-date 2015 Net earnings (loss) as the impacts would have been antidilutive. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 9 Months Ended |
Sep. 24, 2016 | |
EMPLOYEE BENEFIT PLANS | NOTE 8. EMPLOYEE BENEFIT PLANS Pension and Other Postretirement Benefit Plans – North America The components of net periodic pension benefit for the Company’s North American pension plans are as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Service cost $ 2 $ 1 $ 5 $ 3 Interest cost 11 11 34 34 Expected return on plan assets (14 ) (14 ) (41 ) (42 ) Net periodic pension (benefit) expense $ (1 ) $ (2 ) $ (2 ) $ (5 ) In the year-to-date 2016, $2 million of cash contributions were made to the North American pension plans. The Company expects to make additional cash contributions of $1 million to the North American pension plans in the remainder of 2016. Pension Plan – Europe The components of net periodic pension benefit for the Company’s European pension plan are as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Service cost $ — $ — $ — $ — Interest cost 2 2 6 6 Expected return on plan assets (3 ) (3 ) (9 ) (10 ) Net periodic pension (benefit) expense $ (1 ) $ (1 ) $ (3 ) $ (4 ) As part of the agreement to sell the European Business, the Company retained the European defined benefit pension plan and agreed to contribute GBP 20 million to the plan prior to closing the transaction, which is expected before the end of 2016. Net periodic pension benefits for the North American and European pension and other postretirement benefit plans are recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. |
DERIVATIVE INSTRUMENTS AND FAIR
DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 24, 2016 | |
DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS | NOTE 9. DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS Derivative Instruments and Hedging Activities As a global supplier of office products and services the Company is exposed to risks associated with changes in foreign currency exchange rates, fuel and other commodity prices and interest rates. Depending on the exposure, settlement timeframe and other factors, the Company may enter into derivative transactions to mitigate those risks. Financial instruments authorized under the Company’s established risk management policy include spot trades, swaps, options, caps, collars, forwards and futures. Use of derivative financial instruments for speculative purposes is expressly prohibited by the Company’s policies. The Company may designate and account for such qualifying arrangements as hedges or reflect current mark-to-market impacts of non-qualifying economic hedge arrangements currently in earnings. As of September 24, 2016, the foreign exchange and fuel contracts extended through December 2016 and January 2017, respectively. The fair values of the Company’s foreign currency contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current interest rates, exchange rates and commodity prices. The values are based on market-based inputs or unobservable inputs that are corroborated by market data. Amounts associated with derivative financial instruments were not significant for the reported periods. The Company’s foreign currency risk will be substantially reduced upon completion of the sale of the discontinued operations. Financial Instruments 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: 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. 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. September 24, 2016 December 26, 2015 (In millions) Carrying Value Fair Value Carrying Value Fair Value Financial assets Timber notes receivable $ 890 $ 910 $ 905 $ 909 Company-owned life insurance 87 87 88 88 Financial liabilities Recourse debt 9.75% senior secured notes, due 2019 — — 250 265 7.35% debentures, due 2016 — — 18 18 Revenue bonds, due in varying amounts periodically through 2029 186 186 186 186 American & Foreign Power Company, Inc. 5% debentures, due 2030 14 11 14 13 Non-recourse debt 803 822 819 825 The following methods and assumptions were used to estimate the fair value of each class of financial instruments: • Timber notes receivable: • Company-owned life insurance: • Recourse debt: • Non-recourse debt: Fair Value Estimates Used in Impairment Analyses North American Retail Division The Company recognized $9 million of asset impairment charges associated with continuing operations in the third quarter and year-to-date 2016 and $1 million and $10 million in the third quarter and year-to-date 2015, respectively. The third quarter 2016 impairment charge includes $5 million related to impairment of favorable lease intangible assets and $4 million related to operating retail store assets. The impairment of store assets reflects the impact of shortening the anticipated use periods of certain retail store locations in accordance with the Comprehensive Business Review. The analysis of future cash flows included a projection of declining sales, constant gross margins and operating expenses consistent with recent performance. A 100 basis point decrease in anticipated sales for all periods in the forecast horizon would have increased the impairment charge $4 million. A 50 basis point decrease in anticipated gross margins for all periods would have increased the impairment charge $1 million. Additionally, the planned early closure of certain locations and assessment of likely termination of lease renewal options resulted in impairment of favorable lease intangible assets remaining from the Merger. The year-to-date 2015 charges include approximately $1 million impairment of favorable lease intangible asset values following the identification of closing locations where future intangible asset recovery was considered unlikely. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 24, 2016 | |
COMMITMENTS AND CONTINGENCIES | NOTE 10. COMMITMENTS AND CONTINGENCIES Legal Matters 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 reviews 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. OfficeMax is named 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 September 24, 2016, 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 environmental liabilities, our estimated range of reasonably possible losses was approximately $10 million to $25 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. |
DIVISION INFORMATION
DIVISION INFORMATION | 9 Months Ended |
Sep. 24, 2016 | |
DIVISION INFORMATION | NOTE 11. DIVISION INFORMATION Following the decision to sell the European Business and substantially all of the remaining operations that previously were presented as the International Division, and their presentation as discontinued operations, the Company has two operating segments which are also the reportable segments: North American Retail Division and North American Business Solutions Division. The North American Retail Division includes retail stores in the United States, including Puerto Rico and the U.S. Virgin Islands, which offer office supplies, technology products and solutions, business machines and related supplies, facilities products, and office furniture. Most stores also have a copy and print center offering printing, reproduction, mailing and shipping services. The North American Business Solutions Division sells office supply products and services in Canada and the United States, including Puerto Rico and the U.S. Virgin Islands. North American Business Solutions Division customers are served through dedicated sales forces, through catalogs, telesales, and electronically through its Internet sites. The retained operations previously included in the International Division are not significant at September 24, 2016 and have been presented as Other. The office supply products and services offered across the segments are similar. 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 Divisions including Asset impairments and Merger, restructuring and other operating (income) 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. The following is a summary of Sales and Division operating income by each of the Divisions, reconciled to consolidated totals, after the elimination of the discontinued operations for all periods. Sales Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 North American Retail Division $ 1,482 $ 1,604 $ 4,237 $ 4,599 North American Business Solutions Division 1,348 1,438 4,046 4,348 Other 6 4 12 14 Total $ 2,836 $ 3,046 $ 8,295 $ 8,961 Division Operating Income Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 North American Retail Division $ 105 $ 120 $ 237 $ 248 North American Business Solutions Division 81 66 190 186 Other — — 1 2 Total $ 186 $ 186 $ 428 $ 436 A reconciliation of the measure of Division operating income to Consolidated income from continuing operations before income taxes is as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Total Division operating income $ 186 $ 186 $ 428 $ 436 Add/(subtract): Asset impairments (9 ) (1 ) (9 ) (10 ) Merger, restructuring and other operating income (expenses), net (31 ) (79 ) 122 (204 ) Unallocated expenses (29 ) (25 ) (68 ) (81 ) Interest income 6 5 17 16 Interest expense (19 ) (22 ) (63 ) (69 ) Loss on extinguishment of debt (15 ) — (15 ) — Other income (expense), net 1 (1 ) 1 — Income from continuing operations before income taxes $ 90 $ 63 $ 413 $ 88 As of September 24, 2016, goodwill totaled $363 million, of which $78 million was recorded in the North American Retail Division and $285 million in the North American Business Solutions Division. As a result of the Company’s annual goodwill impairment analysis, $15 million of goodwill relating to the Australia/New Zealand reporting unit was considered impaired and included in Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 24, 2016 | |
Basis of Presentation | Basis of Presentation: ® ® In September 2016, the Company’s Board of Directors committed to a plan to sell substantially all of the International Division operations (the “International Operations”). Accordingly, the Company has presented the International Operations as discontinued operations beginning in the third quarter 2016. The Company has reclassified the financial results of the International Operations to Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented. The Company also reclassified the related assets and liabilities as current and non-current assets and liabilities of discontinued operations on the accompanying Condensed Consolidated Balance Sheets as of September 24, 2016 and December 26, 2015. Cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for all periods. Certain portions of the International Division assets and operations are being retained or did not meet the held for sale criteria at September 24, 2016 and therefore remain in continuing operations, with prior periods adjusted, where appropriate. Additional information on the planned dispositions is provided in Note 3. Refer to Note 11 for additional Division information. The Condensed Consolidated Financial Statements as of September 24, 2016 and for the 13-week and 39-week periods ended September 24, 2016 (also referred to as “the third quarter of 2016” and “the year-to-date 2016”) and September 26, 2015 (also referred to as “the third quarter of 2015” and “the year-to-date 2015”) 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. The Company has prepared the Condensed Consolidated Financial Statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (the “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, have been condensed or omitted pursuant to those SEC rules and regulations. For a better understanding of the Company and its Condensed Consolidated Financial Statements, we recommend reading these Condensed Consolidated Financial Statements in conjunction with the audited financial statements which are included in the 2015 Form 10-K. These interim results are not necessarily indicative of the results that should be expected for the full year. |
Cash Management | Cash Management: At September 24, 2016, cash and cash equivalents from continuing operations but held outside the United States amounted to $50 million. Additionally, $142 million of cash held outside the United States was included in current assets of discontinued operations. |
New Accounting Standards | New Accounting Standards: The Company continues to assess the impact this new standard will have on its Consolidated Financial Statements and has not yet decided on which adoption alternative to apply. However, based on this ongoing assessment, the Company expects that the new standard will require the impacts of its loyalty programs to be presented as a reduction of revenue, rather than as cost accruals as is permitted under existing accounting rules. Also, costs associated with catalogs will be expensed as incurred, rather than capitalized and amortized over the anticipated benefit period. Additionally, the timing of revenue recognition will be accelerated for items where the Company’s performance obligation is complete, such as certain commission arrangements, and delayed where performance obligations remain, such as certain coupons and incentives offered from time-to-time. The Company has not yet quantified these expected impacts. In February 2016, the FASB issued an accounting standards update which will require lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The accounting treatment for lessors will remain 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 guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Lessees and lessors are required to use a modified retrospective transition method for existing leases and accordingly, apply the new accounting model for the earliest year presented in the financial statements. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements but anticipates it will result in significant right of use assets and related liabilities associated with our operating leases. Substantially all of the Company’s retail store locations and supply chain facilities are subject to operating lease arrangements. The Company has not yet decided on the period of adoption. In March 2016, the FASB issued an accounting standards update as part of its simplification initiative. The new standard will modify several aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. Other provisions of the new standard relate to nonpublic entities and eliminate guidance that had not become effective. The new standard is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements. |
ACQUISITION, MERGER AND RESTR19
ACQUISITION, MERGER AND RESTRUCTURING (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Major Components of Merger, Restructuring and Other Operating Expenses, Net | The table below and narrative that follows provides the major components of Merger, restructuring and other operating (income) expenses, net. Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Merger related expenses Severance, retention, and relocation $ — $ 4 $ — $ 15 Transaction and integration 8 16 30 69 Facility closure, contract termination, and other costs, net 4 18 21 32 Total Merger related expenses 12 38 51 116 Staples Acquisition (income) expenses Retention — 26 15 58 Transaction 4 15 43 30 Termination Fee — — (250 ) — Total Staples Acquisition (income) expenses 4 41 (192 ) 88 Comprehensive Business Review expenses Severance 9 — 13 — Other related expenses 6 — 6 — Total Comprehensive Business Review expenses 15 — 19 — Total Merger, restructuring and other operating (income) expenses, net $ 31 $ 79 $ (122 ) $ 204 |
Facility Closure and Severance Costs | These amounts are excluded from the table below because they are recorded as incurred or earned, non-cash, or otherwise not associated with Merger and restructuring balance sheet accounts. Year-to-Date 2016 (In millions) December 26, 2015 Charges Incurred Cash Payments Lease Accretion and Other Adjustments September Termination benefits Merger related accruals $ 16 $ — $ (6 ) $ (2 ) $ 8 Comprehensive Business Review — 13 (5 ) — 8 Lease and contract obligations, accruals for facilities closures and other costs Merger related accruals 77 16 (51 ) 3 45 Other restructuring accruals 14 (1 ) (7 ) 1 7 Acquired entity accruals 25 (2 ) (6 ) 3 20 Staples Acquisition related accruals 64 15 (79 ) — — Total $ 196 $ 41 $ (154 ) $ 5 $ 88 |
Assets Held for Sale Activity | The assets held for sale activity in the year-to-date 2016 is presented in the table below. (In millions) Balance as of December 26, 2015 $ 30 Additions 6 Dispositions (7 ) Balance as of September 24, 2016 $ 29 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Major Component of Discontinued Operations-Net of Tax, Assets and Liabilities of Discontinued Operations and Cash Flows from Discontinued Operations | The major components of Discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations include the following. Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Sales $ 583 $ 644 $ 1,886 $ 2,046 Cost of goods sold and occupancy costs 462 495 1,489 1,565 Operating expenses 139 147 435 464 Asset impairments 90 — 90 — Restructuring charges — 31 10 70 Interest income — — — 2 Interest expense — — (4 ) (2 ) Other income (expense), net — (1 ) (1 ) 1 Loss on classification as discontinued operations (304 ) — (304 ) — Income tax expense (benefit) (126 ) 6 (123 ) 15 Discontinued operations, net of tax $ (286 ) $ (36 ) $ (324 ) $ (67 ) Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of September 24, 2016, and December 26, 2015 include the following. (In millions) September 24, 2016 December 26, 2015 Assets Cash and cash equivalents $ 142 $ 209 Receivables, net 375 420 Inventories 259 292 Prepaid expenses and other current assets 47 35 Property and equipment, net 33 — Other assets 21 — Valuation allowance (297 ) — Current assets of discontinued operations $ 580 $ 956 Property and equipment, net — 119 Goodwill — 15 Other assets — 39 Non-current assets of discontinued operations $ — $ 173 Liabilities Trade accounts payable $ 235 $ 331 Accrued expenses and other current liabilities 228 282 Income taxes payable 6 4 Short-term borrowings and current maturities of long-term debt 10 5 Deferred income taxes and other long-term liabilities 35 — Long-term debt, net of current maturities 5 — Current liabilities of discontinued operations $ 519 $ 622 Deferred income taxes and other long-term liabilities — 40 Long-term debt, net of current maturities — 6 Non-current liabilities of discontinued operations $ — $ 46 Cash flows from discontinued operations for the year-to-date periods ended September 24, 2016 and September 26, 2015 include the following. Year-to-Date (In millions) September 24, September 26, Depreciation and amortization $ 19 $ 23 Capital expenditures $ 6 $ 15 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Schedule of Stockholders' Equity | The following table reflects the changes in stockholders’ equity. (In millions) Stockholders’ equity at December 26, 2015 $ 1,603 Net income 300 Repurchase of common stock for treasury (81 ) Dividends paid on common stock (13 ) Other comprehensive income 13 Amortization of long-term incentive stock grants 27 Stockholders’ equity at September 24, 2016 $ 1,849 |
Accumulated Other Comprehensive Income (Loss) Activity, Net of Tax | Accumulated other comprehensive income (loss) activity, net of tax, where applicable, is provided in the following table: (In millions) Foreign Currency Translation Adjustments Change in Deferred Pension and Other Total Balance at December 26, 2015 $ 108 $ (78 ) $ 30 Other comprehensive income (loss) activity before reclassifications 14 (1 ) 13 Net other comprehensive income (loss) 14 (1 ) 13 Balance at September 24, 2016 $ 122 $ (79 ) $ 43 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Calculation of Net Earnings (Loss) Per Common Share | The following table represents the calculation of net earnings (loss) per common share – basic and diluted: Third Quarter Year-to-Date (In millions, except per share amounts) 2016 2015 2016 2015 Basic Earnings Per Share Numerator: Net income from continuing operations $ 330 $ 42 $ 624 $ 60 Loss from discontinued operations, net of tax (286 ) (36 ) (324 ) (67 ) Net income (loss) $ 44 $ 6 $ 300 $ (7 ) Denominator: Weighted-average shares outstanding 535 548 545 546 Basic earnings (loss) per share: Continuing operations $ 0.62 $ 0.08 $ 1.15 $ 0.11 Discontinued operations (0.54 ) (0.07 ) (0.60 ) (0.12 ) Net earnings (loss) $ 0.08 $ 0.01 $ 0.55 $ (0.01 ) Diluted Earnings Per Share Numerator: Net income from continuing operations $ 330 $ 42 $ 624 $ 60 Loss from discontinued operations, net of tax (286 ) (36 ) (324 ) (67 ) Net income (loss) $ 44 $ 6 $ 300 $ (7 ) Denominator: Weighted-average shares outstanding 535 548 545 546 Effect of dilutive securities: Stock options and restricted stock 10 8 8 9 Diluted weighted-average shares outstanding 545 556 553 555 Diluted earnings (loss) per share Continuing operations $ 0.61 $ 0.08 $ 1.13 $ 0.11 Discontinued operations (0.54 ) (0.07 ) (0.60 ) (0.12 ) Net earnings (loss) $ 0.08 $ 0.01 $ 0.54 $ (0.01 ) |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
North America | |
Components of Net Periodic Pension Benefit | The components of net periodic pension benefit for the Company’s North American pension plans are as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Service cost $ 2 $ 1 $ 5 $ 3 Interest cost 11 11 34 34 Expected return on plan assets (14 ) (14 ) (41 ) (42 ) Net periodic pension (benefit) expense $ (1 ) $ (2 ) $ (2 ) $ (5 ) |
Europe | |
Components of Net Periodic Pension Benefit | The components of net periodic pension benefit for the Company’s European pension plan are as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Service cost $ — $ — $ — $ — Interest cost 2 2 6 6 Expected return on plan assets (3 ) (3 ) (9 ) (10 ) Net periodic pension (benefit) expense $ (1 ) $ (1 ) $ (3 ) $ (4 ) |
DERIVATIVE INSTRUMENTS AND FA24
DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Schedule of Fair Value of Assets and Liabilities | The following table presents information about financial instruments at the balance sheet dates indicated. September 24, 2016 December 26, 2015 (In millions) Carrying Value Fair Value Carrying Value Fair Value Financial assets Timber notes receivable $ 890 $ 910 $ 905 $ 909 Company-owned life insurance 87 87 88 88 Financial liabilities Recourse debt 9.75% senior secured notes, due 2019 — — 250 265 7.35% debentures, due 2016 — — 18 18 Revenue bonds, due in varying amounts periodically through 2029 186 186 186 186 American & Foreign Power Company, Inc. 5% debentures, due 2030 14 11 14 13 Non-recourse debt 803 822 819 825 |
DIVISION INFORMATION (Tables)
DIVISION INFORMATION (Tables) | 9 Months Ended |
Sep. 24, 2016 | |
Summary of Significant Accounts and Balances by Each Divisions | The following is a summary of Sales and Division operating income by each of the Divisions, reconciled to consolidated totals, after the elimination of the discontinued operations for all periods. Sales Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 North American Retail Division $ 1,482 $ 1,604 $ 4,237 $ 4,599 North American Business Solutions Division 1,348 1,438 4,046 4,348 Other 6 4 12 14 Total $ 2,836 $ 3,046 $ 8,295 $ 8,961 Division Operating Income Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 North American Retail Division $ 105 $ 120 $ 237 $ 248 North American Business Solutions Division 81 66 190 186 Other — — 1 2 Total $ 186 $ 186 $ 428 $ 436 |
Reconciliation of Measure of Division Operating Income to Consolidated Income Before Income Taxes | A reconciliation of the measure of Division operating income to Consolidated income from continuing operations before income taxes is as follows: Third Quarter Year-to-Date (In millions) 2016 2015 2016 2015 Total Division operating income $ 186 $ 186 $ 428 $ 436 Add/(subtract): Asset impairments (9 ) (1 ) (9 ) (10 ) Merger, restructuring and other operating income (expenses), net (31 ) (79 ) 122 (204 ) Unallocated expenses (29 ) (25 ) (68 ) (81 ) Interest income 6 5 17 16 Interest expense (19 ) (22 ) (63 ) (69 ) Loss on extinguishment of debt (15 ) — (15 ) — Other income (expense), net 1 (1 ) 1 — Income from continuing operations before income taxes $ 90 $ 63 $ 413 $ 88 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions | 9 Months Ended | ||
Sep. 24, 2016USD ($)Segment | Dec. 26, 2015USD ($) | Sep. 26, 2015USD ($) | |
Summary Of Significant Accounting Policies [Line Items] | |||
Number of operating segments | Segment | 2 | ||
Accounts payable and accrued expenses and other current liabilities not yet presented for payment | $ 18 | $ 32 | |
Cash and cash equivalents | 801 | $ 860 | $ 817 |
Cash and cash equivalents, discontinued operations | 142 | $ 141 | |
Non-US | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Cash and cash equivalents | 50 | ||
Cash and cash equivalents, discontinued operations | $ 142 |
Acquisition, Merger and Restr27
Acquisition, Merger and Restructuring - Additional Information (Detail) $ in Millions | May 19, 2016USD ($) | Aug. 31, 2016Store | Sep. 24, 2016USD ($) | Sep. 26, 2015USD ($) | Sep. 24, 2016USD ($)Store | Sep. 26, 2015USD ($) |
Business Acquisition [Line Items] | ||||||
Number of retail stores closed under real estate strategy | Store | 400 | |||||
Supply chain closure anticipated completion year | 2,017 | |||||
Termination Fee | $ 250 | |||||
Merger, restructuring and other operating (income) expenses, net | $ (31) | $ (79) | 122 | $ (204) | ||
Merger restructuring and other expenses | 128 | |||||
Charges Incurred | 41 | |||||
Merger, restructuring and other operating (income) expenses other than liabilities | 87 | |||||
Transaction expenses | 4 | 15 | 43 | 30 | ||
Merger related expenses, Transaction and integration | $ 8 | 16 | 30 | 69 | ||
Other expenses | 14 | |||||
Merger, restructuring, and other operating (income) expenses, net | ||||||
Business Acquisition [Line Items] | ||||||
Gain on sale of warehouse facilities classified as assets held for sale | $ 6 | 1 | $ 25 | |||
Charges Incurred | 41 | |||||
Comprehensive Business Review | ||||||
Business Acquisition [Line Items] | ||||||
Number of retail stores planned to be closed | Store | 300 | |||||
Retail stores closure period | 3 years | |||||
Retail stores planned to be closed completion period | 2,018 | |||||
Staples, Inc. | ||||||
Business Acquisition [Line Items] | ||||||
Termination Fee | $ 250 | |||||
Transaction expenses | $ 43 |
Summary of Major Components of
Summary of Major Components of Merger, Restructuring and Other Operating (Income) Expenses, Net (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Merger related expenses | ||||
Severance, retention, and relocation | $ 4 | $ 15 | ||
Transaction and integration | $ 8 | 16 | $ 30 | 69 |
Facility closure, contract termination, and other costs, net | 4 | 18 | 21 | 32 |
Total Merger related expenses | 12 | 38 | 51 | 116 |
Staples Acquisition (income) expenses | ||||
Retention | 26 | 15 | 58 | |
Transaction | 4 | 15 | 43 | 30 |
Termination Fee | (250) | |||
Total Staples Acquisition (income) expenses | 4 | 41 | (192) | 88 |
Comprehensive Business Review expenses | ||||
Severance | 9 | 13 | ||
Other related expenses | 6 | 6 | ||
Total Comprehensive Business Review expenses | 15 | 19 | ||
Total Merger, restructuring and other operating (income) expenses, net | $ 31 | $ 79 | $ (122) | $ 204 |
Severance and Facility Closure
Severance and Facility Closure Costs (Detail) $ in Millions | 9 Months Ended |
Sep. 24, 2016USD ($) | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | $ 196 |
Charges Incurred | 41 |
Cash Payments | (154) |
Lease Accretion and Other Adjustments | 5 |
Ending Balance | 88 |
Termination benefits | Merger related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 16 |
Cash Payments | (6) |
Lease Accretion and Other Adjustments | (2) |
Ending Balance | 8 |
Termination benefits | Comprehensive Business Review | |
Restructuring Cost and Reserve [Line Items] | |
Charges Incurred | 13 |
Cash Payments | (5) |
Ending Balance | 8 |
Lease and contract obligations, accruals for facilities closures and other costs | Merger related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 77 |
Charges Incurred | 16 |
Cash Payments | (51) |
Lease Accretion and Other Adjustments | 3 |
Ending Balance | 45 |
Lease and contract obligations, accruals for facilities closures and other costs | Other restructuring accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 14 |
Charges Incurred | (1) |
Cash Payments | (7) |
Lease Accretion and Other Adjustments | 1 |
Ending Balance | 7 |
Lease and contract obligations, accruals for facilities closures and other costs | Acquired entity accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 25 |
Charges Incurred | (2) |
Cash Payments | (6) |
Lease Accretion and Other Adjustments | 3 |
Ending Balance | 20 |
Lease and contract obligations, accruals for facilities closures and other costs | Staples Acquisition related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 64 |
Charges Incurred | 15 |
Cash Payments | $ (79) |
Assets Held for Sale Activity (
Assets Held for Sale Activity (Detail) $ in Millions | 9 Months Ended |
Sep. 24, 2016USD ($) | |
Assets Held For Sale [Line Items] | |
Balance as of December 26, 2015 | $ 30 |
Additions | 6 |
Dispositions | (7) |
Balance as of September 24, 2016 | $ 29 |
Discontinued Operation - Additi
Discontinued Operation - Additional Information (Detail) € in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 24, 2016 | Sep. 24, 2016USD ($) | Sep. 23, 2016EUR (€) | |
International Division | Australia/New Zealand | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Goodwill, impairment loss | $ | $ 15 | ||
Discontinued Operations | European Business | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Warranties on sale and purchase agreement | € | € 10 | ||
Discontinued Operations | International Division | Australia/New Zealand | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Goodwill, impairment loss | $ | $ 15 | ||
Aurelius Rho Invest DS GmbH | Discontinued Operations | European Business | Minimum | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Transition services period | 6 months | ||
Aurelius Rho Invest DS GmbH | Discontinued Operations | European Business | Maximum | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Transition services period | 24 months | ||
Aurelius Rho Invest DS GmbH | Discontinued Operations | European Business | Subject to Not Exercising Option within Prescribed Time Period | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Contingent liability on sale and purchase agreement | € | € 5 |
Major Component of Discontinued
Major Component of Discontinued Operations, Net of Tax (Detail) - Discontinued Operations, Held-for-sale - European Business - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Sales | $ 583 | $ 644 | $ 1,886 | $ 2,046 |
Cost of goods sold and occupancy costs | 462 | 495 | 1,489 | 1,565 |
Operating expenses | 139 | 147 | 435 | 464 |
Asset impairments | 90 | 90 | ||
Restructuring charges | 31 | 10 | 70 | |
Interest income | 2 | |||
Interest expense | (4) | (2) | ||
Other income (expense), net | (1) | (1) | 1 | |
Loss on classification as discontinued operations | (304) | (304) | ||
Income tax expense (benefit) | (126) | 6 | (123) | 15 |
Discontinued operations, net of tax | $ (286) | $ (36) | $ (324) | $ (67) |
Assets and Liabilities of Disco
Assets and Liabilities of Discontinued Operations (Detail) - USD ($) $ in Millions | Sep. 24, 2016 | Dec. 26, 2015 | Sep. 26, 2015 |
Assets | |||
Cash and cash equivalents | $ 142 | $ 141 | |
Current assets of discontinued operations | 580 | $ 956 | |
Non-current assets of discontinued operations | 173 | ||
Liabilities | |||
Current liabilities of discontinued operations | 519 | 622 | |
Non-current liabilities of discontinued operations | 46 | ||
Discontinued Operations, Held-for-sale | European Business | |||
Assets | |||
Cash and cash equivalents | 142 | 209 | |
Receivables, net | 375 | 420 | |
Inventories | 259 | 292 | |
Prepaid expenses and other current assets | 47 | 35 | |
Property and equipment, net | 33 | ||
Other assets | 21 | ||
Valuation allowance | (297) | ||
Current assets of discontinued operations | 580 | 956 | |
Property and equipment, net | 119 | ||
Goodwill | 15 | ||
Other assets | 39 | ||
Non-current assets of discontinued operations | 173 | ||
Liabilities | |||
Trade accounts payable | 235 | 331 | |
Accrued expenses and other current liabilities | 228 | 282 | |
Income taxes payable | 6 | 4 | |
Short-term borrowings and current maturities of long-term debt | 10 | 5 | |
Deferred income taxes and other long-term liabilities | 35 | ||
Long-term debt, net of current maturities | 5 | ||
Current liabilities of discontinued operations | $ 519 | 622 | |
Deferred income taxes and other long-term liabilities | 40 | ||
Long-term debt, net of current maturities | 6 | ||
Non-current liabilities of discontinued operations | $ 46 |
Cash Flows from Discontinued Op
Cash Flows from Discontinued Operations (Detail) - Discontinued Operations, Held-for-sale - European Business - USD ($) $ in Millions | 9 Months Ended | |
Sep. 24, 2016 | Sep. 26, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Depreciation and amortization | $ 19 | $ 23 |
Capital expenditures | $ 6 | $ 15 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) | Sep. 15, 2016 | May 31, 2016 | Sep. 24, 2016 | Sep. 24, 2016 |
Debt Instrument [Line Items] | ||||
Loss on extinguishment of debt | $ (15,000,000) | $ (15,000,000) | ||
9.75% senior secured notes, due 2019 | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, interest rate | 9.75% | |||
Long-term debt, due date | 2,019 | |||
Long-term debt, redemption price percent | 4.875% | |||
Long-term debt, amount notes outstanding | $ 250,000,000 | |||
Long-term debt, amount notes redeemed | 262,000,000 | |||
Loss on extinguishment of debt | (15,000,000) | |||
Long-term debt, redemption premium amount | $ 12,000,000 | |||
Amended Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Available credit under the Facility | 1,100,000,000 | 1,100,000,000 | ||
Expiration period under the new Facility | 5 years | |||
Maximum borrowing capacity under the new Facility | $ 1,200,000,000 | |||
Maturity date of the new Facility | May 13, 2021 | |||
Amount outstanding under letters of credit | 90,000,000 | 90,000,000 | ||
Average borrowings under the Facility | 0 | |||
Amended Credit Agreement | Other Assets | ||||
Debt Instrument [Line Items] | ||||
Debt acquisition costs | $ 6,000,000 | $ 6,000,000 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 24, 2016 | Sep. 24, 2016 | Dec. 31, 2016 | |
Income Taxes [Line Items] | |||
Non-cash income tax benefit | $ (235) | ||
U.S. Federal and State | |||
Income Taxes [Line Items] | |||
Non-cash income tax benefit | $ 240 | ||
Scenario, Forecast | U.S. Federal and State | |||
Income Taxes [Line Items] | |||
Estimated valuation allowance, determined to be reversed in 2016 | $ 400 |
Schedule of Stockholders' Equit
Schedule of Stockholders' Equity (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Stockholders Equity [Line Items] | ||||
Beginning Balance | $ 1,603 | |||
Net income | $ 44 | $ 6 | 300 | $ (7) |
Repurchase of common stock for treasury | (55) | (81) | ||
Dividends paid on common stock | (13) | |||
Other comprehensive income | 3 | $ (22) | 13 | $ (73) |
Amortization of long-term incentive stock grants | 27 | |||
Ending Balance | $ 1,849 | $ 1,849 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) Activity, Net of Tax (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | $ 1,603 | |||
Total other comprehensive income (loss), net of tax, where applicable | $ 3 | $ (22) | 13 | $ (73) |
Ending Balance | 1,849 | 1,849 | ||
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | 108 | |||
Other comprehensive income (loss) activity before reclassifications | 14 | |||
Total other comprehensive income (loss), net of tax, where applicable | 14 | |||
Ending Balance | 122 | 122 | ||
Change in Deferred Pension and Other | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (78) | |||
Other comprehensive income (loss) activity before reclassifications | (1) | |||
Total other comprehensive income (loss), net of tax, where applicable | (1) | |||
Ending Balance | (79) | (79) | ||
Accumulated Other Comprehensive Income (Loss) | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | 30 | |||
Other comprehensive income (loss) activity before reclassifications | 13 | |||
Total other comprehensive income (loss), net of tax, where applicable | 13 | |||
Ending Balance | $ 43 | $ 43 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, shares in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Aug. 31, 2016 | Sep. 24, 2016 | Sep. 24, 2016 | May 31, 2016 | |
Equity, Class of Treasury Stock [Line Items] | |||||
Stock repurchase program, shares purchased | 16 | 23 | |||
Stock repurchase program, shares purchased at cost | $ 55,000,000 | $ 81,000,000 | |||
Stock repurchase program, remaining authorized repurchase amount | $ 169,000,000 | $ 169,000,000 | $ 169,000,000 | ||
Dividend on common stock | $ 0.025 | $ 0.025 | $ 0.025 | ||
Common stock dividends per share cash paid | $ 0.025 | ||||
Dividends payable date of record | Aug. 25, 2016 | ||||
Payments of ordinary dividends, common stock | $ 13,000,000 | $ 13,000,000 | |||
Maximum | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Stock repurchase program, authorized amount | $ 250,000,000 | $ 100,000,000 |
Calculation of Net Earnings Per
Calculation of Net Earnings Per (Loss) Common Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Earnings Per Share [Line Items] | ||||
Net income from continuing operations | $ 330 | $ 42 | $ 624 | $ 60 |
Loss from discontinued operations, net of tax | (286) | (36) | (324) | (67) |
Net income (loss) | $ 44 | $ 6 | $ 300 | $ (7) |
Weighted-average shares outstanding | 535 | 548 | 545 | 546 |
Basic earnings (loss) per share: | ||||
Continuing operations | $ 0.62 | $ 0.08 | $ 1.15 | $ 0.11 |
Discontinued operations | (0.54) | (0.07) | (0.60) | (0.12) |
Net earnings (loss) | $ 0.08 | $ 0.01 | $ 0.55 | $ (0.01) |
Net income from continuing operations | $ 330 | $ 42 | $ 624 | $ 60 |
Loss from discontinued operations, net of tax | (286) | (36) | (324) | (67) |
Net income (loss) | $ 44 | $ 6 | $ 300 | $ (7) |
Weighted-average shares outstanding | 535 | 548 | 545 | 546 |
Stock options and restricted stock | 10 | 8 | 8 | 9 |
Diluted weighted-average shares outstanding | 545 | 556 | 553 | 555 |
Diluted earnings (loss) per share | ||||
Continuing operations | $ 0.61 | $ 0.08 | $ 1.13 | $ 0.11 |
Discontinued operations | (0.54) | (0.07) | (0.60) | (0.12) |
Net earnings (loss) | $ 0.08 | $ 0.01 | $ 0.54 | $ (0.01) |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - Nonvested Stock Options and Shares - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||||
Shares excluded from computation of diluted earnings per share | 6 | 7 | ||
Maximum | ||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||||
Shares excluded from computation of diluted earnings per share | 3 | 1 |
Components of Net Periodic Pens
Components of Net Periodic Pension Benefit (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Europe | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Interest cost | $ 2 | $ 2 | $ 6 | $ 6 |
Expected return on plan assets | (3) | (3) | (9) | (10) |
Net periodic pension (benefit) expense | (1) | (1) | (3) | (4) |
North America | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 2 | 1 | 5 | 3 |
Interest cost | 11 | 11 | 34 | 34 |
Expected return on plan assets | (14) | (14) | (41) | (42) |
Net periodic pension (benefit) expense | $ (1) | $ (2) | $ (2) | $ (5) |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Detail) - 9 months ended Sep. 24, 2016 £ in Millions, $ in Millions | USD ($) | GBP (£) |
North America | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Defined benefit pension plan employer contribution | $ 2 | |
Pension and other postretirement contributions, remainder of fiscal year | $ 1 | |
Europe | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Defined benefit pension plan employer contribution | £ | £ 20 |
Derivative Instruments and Fa44
Derivative Instruments and Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Asset impairment charges | $ 9 | $ 1 | $ 9 | $ 10 |
Retail Stores | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Asset impairment charges | 4 | |||
Retail Stores | Favorable Leases | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Asset impairment charges | $ 5 | $ 1 | ||
Retail Stores | Significant Unobservable Inputs (Level 3) | A 100 basis point decrease in anticipated sales | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Asset impairment charges | 4 | |||
Retail Stores | Significant Unobservable Inputs (Level 3) | 50 basis point decrease in anticipated gross margins | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Asset impairment charges | $ 1 | |||
Foreign Exchange Contracts | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Contracts expiration date | 2016-12 | |||
Fuel Contracts | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Contracts expiration date | 2017-01 |
Schedule of Fair Value of Senio
Schedule of Fair Value of Senior Notes (Detail) - USD ($) $ in Millions | Sep. 24, 2016 | Dec. 26, 2015 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Timber notes receivable | $ 910 | $ 909 |
Company-owned life insurance | 87 | 88 |
Recourse Debt | 9.75% senior secured notes, due 2019 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 265 | |
Recourse Debt | 7.35% debentures, due 2016 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 18 | |
Recourse Debt | Revenue bonds, due in varying amounts periodically through 2029 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 186 | 186 |
Recourse Debt | American & Foreign Power Company, Inc. 5% debentures, due 2030 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 11 | 13 |
Non-Recourse Debt | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 822 | 825 |
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Timber notes receivable | 890 | 905 |
Company-owned life insurance | 87 | 88 |
Carrying Value | Recourse Debt | 9.75% senior secured notes, due 2019 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 250 | |
Carrying Value | Recourse Debt | 7.35% debentures, due 2016 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 18 | |
Carrying Value | Recourse Debt | Revenue bonds, due in varying amounts periodically through 2029 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 186 | 186 |
Carrying Value | Recourse Debt | American & Foreign Power Company, Inc. 5% debentures, due 2030 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 14 | 14 |
Carrying Value | Non-Recourse Debt | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | $ 803 | $ 819 |
Schedule of Fair Value of Sen46
Schedule of Fair Value of Senior Notes (Parenthetical) (Detail) | Sep. 15, 2016 | Sep. 24, 2016 | Dec. 26, 2015 |
9.75% senior secured notes, due 2019 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 9.75% | ||
Long-term debt, due date | 2,019 | ||
9.75% senior secured notes, due 2019 | Recourse Debt | Carrying Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 9.75% | 9.75% | |
Long-term debt, due date | 2,019 | 2,019 | |
9.75% senior secured notes, due 2019 | Recourse Debt | Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 9.75% | 9.75% | |
Long-term debt, due date | 2,019 | 2,019 | |
7.35% debentures, due 2016 | Recourse Debt | Carrying Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 7.35% | 7.35% | |
Long-term debt, due date | 2,016 | 2,016 | |
7.35% debentures, due 2016 | Recourse Debt | Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 7.35% | 7.35% | |
Long-term debt, due date | 2,016 | 2,016 | |
Revenue bonds, due in varying amounts periodically through 2029 | Recourse Debt | Carrying Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, due date | 2,029 | 2,029 | |
Revenue bonds, due in varying amounts periodically through 2029 | Recourse Debt | Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, due date | 2,029 | 2,029 | |
American & Foreign Power Company, Inc. 5% debentures, due 2030 | Recourse Debt | Carrying Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 5.00% | 5.00% | |
Long-term debt, due date | 2,030 | 2,030 | |
American & Foreign Power Company, Inc. 5% debentures, due 2030 | Recourse Debt | Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term debt, interest rate | 5.00% | 5.00% | |
Long-term debt, due date | 2,030 | 2,030 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) $ in Millions | 9 Months Ended |
Sep. 24, 2016USD ($) | |
Minimum | |
Commitments and Contingencies Disclosure [Line Items] | |
Losses for environmental liabilities | $ 10 |
Maximum | |
Commitments and Contingencies Disclosure [Line Items] | |
Losses for environmental liabilities | $ 25 |
Division Information - Addition
Division Information - Additional Information (Detail) $ in Millions | 9 Months Ended | |
Sep. 24, 2016USD ($)Segment | Dec. 26, 2015USD ($) | |
Segment Reporting Information [Line Items] | ||
Number of operating segments | Segment | 2 | |
Goodwill | $ 363 | $ 363 |
North American Retail Division | ||
Segment Reporting Information [Line Items] | ||
Goodwill | 78 | |
North American Business Solutions Division | ||
Segment Reporting Information [Line Items] | ||
Goodwill | 285 | |
International Division | Australia/New Zealand | ||
Segment Reporting Information [Line Items] | ||
Goodwill, impairment loss | $ 15 |
Reconciliation of Revenue from
Reconciliation of Revenue from Segments to Consolidated (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Segment Reporting Information [Line Items] | ||||
Sales | $ 2,836 | $ 3,046 | $ 8,295 | $ 8,961 |
North American Retail Division | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,482 | 1,604 | 4,237 | 4,599 |
North American Business Solutions Division | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 1,348 | 1,438 | 4,046 | 4,348 |
Other | ||||
Segment Reporting Information [Line Items] | ||||
Sales | $ 6 | $ 4 | $ 12 | $ 14 |
Division Operating Income (Deta
Division Operating Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) | $ 117 | $ 81 | $ 473 | $ 141 |
Operating Segments | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) | 186 | 186 | 428 | 436 |
Operating Segments | North American Retail Division | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) | 105 | 120 | 237 | 248 |
Operating Segments | North American Business Solutions Division | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) | $ 81 | $ 66 | 190 | 186 |
Operating Segments | Other | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Operating income (loss) | $ 1 | $ 2 |
Reconciliation of Measure of Di
Reconciliation of Measure of Division Operating Income to Consolidated Income Before Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2016 | Sep. 26, 2015 | Sep. 24, 2016 | Sep. 26, 2015 | |
Segment Reporting Information [Line Items] | ||||
Operating income | $ 117 | $ 81 | $ 473 | $ 141 |
Asset impairments | (9) | (1) | (9) | (10) |
Merger, restructuring and other operating income (expenses), net | (31) | (79) | 122 | (204) |
Unallocated expenses | (29) | (25) | (68) | (81) |
Interest income | 6 | 5 | 17 | 16 |
Interest expense | (19) | (22) | (63) | (69) |
Loss on extinguishment of debt | (15) | (15) | ||
Other income (expense), net | 1 | (1) | 1 | |
Income from continuing operations before income taxes | 90 | 63 | 413 | 88 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Operating income | $ 186 | $ 186 | $ 428 | $ 436 |