Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2018shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2018 |
Document Fiscal Year Focus | 2,018 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | ODP |
Entity Registrant Name | OFFICE DEPOT INC |
Entity Central Index Key | 800,240 |
Current Fiscal Year End Date | --12-29 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 557,846,581 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Sales: | ||
Products | $ 2,423 | $ 2,460 |
Services | 407 | 216 |
Total Sales | 2,830 | 2,676 |
Cost of goods sold and occupancy costs: | ||
Products | 1,891 | 1,878 |
Services | 272 | 123 |
Total Cost of goods sold and occupancy costs | 2,163 | 2,001 |
Gross profit | 667 | 675 |
Selling, general and administrative expenses | 573 | 531 |
Merger and restructuring expenses, net | 17 | 20 |
Operating income | 77 | 124 |
Other income (expense): | ||
Interest income | 6 | 6 |
Interest expense | (29) | (13) |
Other income, net | 1 | 4 |
Income from continuing operations before income taxes | 55 | 121 |
Income tax expense | 22 | 47 |
Net income from continuing operations | 33 | 74 |
Discontinued operations, net of tax | 8 | 42 |
Net income | $ 41 | $ 116 |
Basic earnings per common share | ||
Continuing operations | $ 0.06 | $ 0.14 |
Discontinued operations | 0.01 | 0.08 |
Net basic earnings per common share | 0.07 | 0.22 |
Diluted earnings per common share | ||
Continuing operations | 0.06 | 0.14 |
Discontinued operations | 0.01 | 0.08 |
Net diluted earnings per common share | 0.07 | 0.22 |
Dividends per common share | $ 0.025 | $ 0.025 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Net income | $ 41 | $ 116 |
Other comprehensive income, net of tax, where applicable: | ||
Foreign currency translation adjustments | 6 | |
Reclassification of foreign currency translation adjustments realized upon disposal of business | 14 | |
Total other comprehensive income, net of tax, where applicable | 14 | 6 |
Comprehensive income | $ 55 | $ 122 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 737 | $ 622 |
Receivables, net | 942 | 931 |
Inventories | 1,033 | 1,093 |
Prepaid expenses and other current assets | 118 | 86 |
Current assets of discontinued operations | 98 | 139 |
Total current assets | 2,928 | 2,871 |
Property and equipment, net | 713 | 725 |
Goodwill | 882 | 851 |
Other intangible assets, net | 448 | 448 |
Timber notes receivable | 858 | 863 |
Deferred income taxes | 295 | 305 |
Other assets | 266 | 260 |
Total assets | 6,390 | 6,323 |
Current liabilities: | ||
Trade accounts payable | 969 | 892 |
Accrued expenses and other current liabilities | 1,011 | 986 |
Income taxes payable | 6 | 5 |
Short-term borrowings and current maturities of long-term debt | 93 | 96 |
Current liabilities of discontinued operations | 27 | 67 |
Total current liabilities | 2,106 | 2,046 |
Deferred income taxes and other long-term liabilities | 331 | 336 |
Pension and postretirement obligations, net | 90 | 91 |
Long-term debt, net of current maturities | 918 | 936 |
Non-recourse debt | 770 | 776 |
Total liabilities | 4,215 | 4,185 |
Commitments and contingencies | ||
Redeemable noncontrolling interest | 18 | 18 |
Stockholders' equity: | ||
Common stock - authorized 800,000,000 shares of $.01 par value; issued shares - 614,216,218 at March 31, 2018 and 610,353,994 at December 30, 2017 | 6 | 6 |
Additional paid-in capital | 2,697 | 2,711 |
Accumulated other comprehensive loss | (64) | (78) |
Accumulated deficit | (236) | (273) |
Treasury stock, at cost - 56,369,637 shares at March 31, 2018 and December 30, 2017 | (246) | (246) |
Total stockholders' equity | 2,157 | 2,120 |
Total liabilities, redeemable noncontrolling interest and stockholders' equity | $ 6,390 | $ 6,323 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 30, 2017 |
Common stock, authorized | 800,000,000 | 800,000,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, issued shares | 614,216,218 | 610,353,994 |
Treasury stock, shares | 56,369,637 | 56,369,637 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Cash flows from operating activities of continuing operations: | ||
Net income | $ 41 | $ 116 |
Income from discontinued operations, net of tax | 8 | 42 |
Net income from continuing operations | 33 | 74 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 51 | 40 |
Charges for losses on inventories and receivables | 14 | 18 |
Compensation expense for share-based payments | 4 | 11 |
Deferred income taxes and deferred tax asset valuation allowances | 19 | 35 |
Changes in working capital and other | 86 | (90) |
Net cash provided by operating activities of continuing operations | 207 | 88 |
Cash flows from investing activities of continuing operations: | ||
Capital expenditures | (37) | (30) |
Businesses acquired, net of cash acquired | (30) | |
Proceeds from disposition of assets and other | 1 | 8 |
Net cash used in investing activities of continuing operations | (66) | (22) |
Cash flows from financing activities of continuing operations: | ||
Net payments on long and short-term borrowings | (25) | (6) |
Debt related fees | (1) | |
Cash dividends on common stock | (14) | (13) |
Share purchases for taxes, net of proceeds from employee share-based transactions | (3) | (9) |
Repurchase of common stock for treasury | (10) | |
Other financing activities | 2 | |
Net cash used in financing activities of continuing operations | (41) | (38) |
Cash flows from discontinued operations: | ||
Operating activities of discontinued operations | 10 | 14 |
Investing activities of discontinued operations | 30 | (49) |
Net cash provided by (used in) discontinued operations | 40 | (35) |
Effect of exchange rate changes on cash and cash equivalents | (2) | 2 |
Net increase (decrease) in cash and cash equivalents | 138 | (5) |
Cash, cash equivalents and restricted cash at beginning of period | 639 | 807 |
Cash, cash equivalents and restricted cash at end of period-total | 777 | 802 |
Cash and cash equivalents of discontinued operations | (37) | (58) |
Cash, cash equivalents and restricted cash at end of the period-continuing operations | $ 740 | $ 744 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Office Depot, Inc., including consolidated subsidiaries (“Office Depot” or the “Company”), is a leading omni-channel provider of business services and supplies, product and technology solutions. On November 8, 2017, the Company acquired CompuCom Systems, Inc. (“CompuCom”) refer to Note 2 for additional discussion about this acquisition. The Company currently operates under several banners, including Office Depot ® ® ® In September 2016, the Company’s Board of Directors committed to a plan to sell substantially all of the Company’s International Division operations (the “International Operations”). Accordingly, the Company has presented the International Operations as discontinued operations beginning in the third quarter of 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 assets and liabilities of discontinued operations on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2018, and December 30, 2017. Cash flows from the Company’s discontinued operations are presented separately in the Condensed Consolidated Statements of Cash Flows for all periods. Certain portions of the International Division assets and operations primarily consisting of the Company’s global sourcing and trading operations in the Asia/Pacific region are being retained or did not meet the held for sale criteria and therefore remain in continuing operations, with prior periods adjusted, where appropriate. Additional information on the Company’s discontinued operations is provided in Note 4. The Condensed Consolidated Financial Statements as of March 31, 2018, and for the 13-week As a result of the Company’s purchase of CompuCom in November 2017, the Company’s level of service revenue in the first quarter of 2018 exceeded 10% of the Company’s total revenue and accordingly, revenues and cost of sales from services and products are separately disclosed on the Company’s statement of operations. Prior period amounts have been reclassified to conform to the current period presentation. Note 6 describes the components of the Company’s business included in the product and service categories. In addition, as discussed below, certain amounts have been reclassified due to the Company’s adoption of the new accounting guidance related to the presentation of defined benefit plan expense. These prior period reclassifications did not affect the Company’s net income or cash flows. 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 (“GAAP”), 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 2017 Form 10-K. Cash Management The cash management process generally utilizes zero balance accounts which provide for the settlement of the related disbursement and cash concentration accounts on a daily basis. Trade accounts payable and Accrued expenses and other current liabilities as of March 31, 2018 and December 30, 2017, included $54 million and $53 million, respectively, of amounts not yet presented for payment drawn in excess of disbursement account book balances, after considering offset provisions. At March 31, 2018, cash and cash equivalents from continuing operations held outside the United States amounted to $137 million. Additionally, $37 million of cash held outside the United States was included in current assets of discontinued operations. Restricted Cash Restricted cash consist primarily of short-term cash term deposits having original maturity dates of twelve months or less that serve as a collateral to certain of the Company’s letters of credit. Restricted cash is valued at cost, which approximates fair value. At March 31, 2018, restricted cash amounted to $3 million and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. New Accounting Standards Standards that are not yet adopted In February 2016, the Financial Accounting Standards Board (“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. The initial standard required a modified retrospective transition approach, with application, including disclosures, in all comparative periods presented. In March 2018, the FASB tentatively approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the date of initial application. The Company is currently evaluating the impact that the adoption of this new standard will have on its Condensed Consolidated Financial Statements but anticipates it will result in significant right of use assets and related liabilities associated with its operating leases being recorded on its balance sheet. Substantially all of the Company’s retail store locations, supply chain facilities, certain corporate facilities and copy print equipment are subject to operating lease arrangements. The Company will adopt the standard in the first quarter of 2019, and has begun implementing required upgrades to its existing lease systems. The Company is currently compiling an inventory of arrangements containing a lease and accumulating the lease data necessary to apply the amended guidance. In February 2018, the FASB issued an accounting standard update to address a specific consequence of the Tax Cuts and Jobs Act. This accounting update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Act. The standard eliminates the stranded tax effects that were created as a result of the reduction of historical U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The accounting update is effective January 1, 2019, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently assessing the impact of the new standard on the condensed consolidated financial statements. Standards that were adopted Revenue recognition In May 2014, the FASB issued a new standard that supersedes most current revenue recognition guidance and modifies the accounting for certain costs associated with revenue generation. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity is entitled to receive in exchange for those goods or services. The standard provides a number of steps to follow to achieve that principle and requires additional financial statement disclosures related to the nature, timing, amount and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new revenue standard on the first day of the first quarter of 2018, using the modified retrospective method, and applied the standard to contracts that were not complete as of the adoption date. As a result of applying this adoption method, the Company recognized a cumulative effect adjustment of $4 million, net of tax, to its accumulated deficit related to deferral of revenues for its loyalty program as of the first day of the first quarter of 2018. The most significant impact of the standard on the Company relates to revenues from sales of third-party software which were previously reported on a gross basis, but are reported on a net basis under the new standard, with no change in timing of recognition or impact to gross profit, earnings or cash flows. This impact resulted in a reduction in both sales from services and cost of services of $27 million during the first quarter of 2018. The adoption of the standard also resulted in minor changes related to the timing of revenue recognition associated with the Company’s loyalty program due to the impacts of the loyalty program being presented as a deferral of revenues under the new standard rather than as cost of sales accruals under the previous accounting rules. In addition, the Company’s balance sheet presentation of its sales return reserve has changed to present a separate return asset and liability, instead of the net presentation used in prior periods. The return asset and liability are included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, on the Condensed Consolidated Balance Sheet. Revenue recognition related to all other products and services remains substantially unchanged. The following tables summarize the impacts of adopting the new standard on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Statement of Operations for the first quarter of 2018. Adoption of the new standard had no impact to the cash from or used in operating, financing, or investing activities on the Company’s Condensed Consolidated Statements of Cash Flows. First Quarter of 2018 (In millions) As reported As if the previous accounting guidance was in effect Sales – Products $ 2,423 $ 2,427 Sales – Services 407 434 Total Sales 2,830 2,861 Cost of goods sold and occupancy costs – Products 1,891 1,895 Cost of goods sold and occupancy costs – Services 272 299 Total Cost of goods sold and occupancy costs 2,163 2,194 Gross profit 667 667 Net income 41 41 Diluted earnings per share 0.07 0.07 As of March 31, 2018 (In millions) As reported As if the previous guidance Receivables, net $ 942 $ 947 Prepaid expenses and other current assets 118 108 Deferred income taxes 295 293 Accrued expenses and other current liabilities 1,011 1,006 Stockholders’ equity 2,157 2,157 As part of its adoption of the new standard, the Company also implemented new internal controls and key system functionality to enable the preparation of financial information on adoption. Refer to Note 6 for additional disclosures required as a result of the adoption of this new standard. Defined benefit plan In March 2017, the FASB issued an accounting standards update which changed the income statement presentation of defined benefit plan expense by requiring that an employer report the service cost component of pension costs in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit pension cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of operating income. The Company adopted the new accounting standards update in the first quarter of 2018. The Company has presented the other components of net periodic benefit cost in Other income, net on the Condensed Consolidated Statements of Operations, while the service cost component of pension costs continues to be presented in Selling, general and administrative expenses. Adoption of this new accounting standards update required a retrospective reclassification of $3 million net pension benefit in the first quarter of 2017 from Selling, general and administrative expenses to Other income, net, and did not have an impact on the Company’s Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2018 | |
ACQUISITIONS | NOTE 2. ACQUISITIONS To further the Company’s strategic direction to transform into a more business services-driven platform and strengthen its core business operations, the Company acquired two businesses during the first quarter of 2018. In March 2018, the Company acquired a small independent regional office supply business which is expected to provide the Company with improved access to small and mid-market The aggregate total purchase consideration, including contingent consideration, for these two acquisitions was approximately $47 million, subject to certain customary post-closing adjustments. The aggregate purchase price was primarily funded with cash on hand, with the remainder consisting of contingent consideration to be paid in 2019. The acquisitions were treated as purchases in accordance with ASC 805, Business Combinations (“ASC 805”) which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction, and include certain amortizing intangible assets and goodwill. The Company has performed its preliminary purchase price allocations of the $47 million aggregate purchase price to the estimated fair values of assets and liabilities acquired in the transactions, including $8 million of customer relationship intangible assets and $33 million of goodwill. The remaining aggregate purchase price was primarily allocated to working capital accounts. These assets and liabilities are included in the balance sheet as of March 31, 2018. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value to allocate the purchase price. The operating results of the office supply business is combined with the Company’s operating results subsequent to its purchase date, and is included in the Business Solutions Division. The operating results of the technology business is combined with the Company’s operating results subsequent to its purchase date, and is included in the CompuCom Division. Certain disclosures set forth under ASC 805, including supplemental pro forma financial information, are not required because the operating results of the acquired businesses, in the aggregate, are not material to the Company. On November 8, 2017, the Company completed the acquisition of CompuCom by acquiring all of the capital stock of CompuCom for approximately $937 million, funded with a new $750 million 5-year term on-site 10-K Under the guidance on accounting for business combinations, merger and integration costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. Transaction-related expenses are included in the Merger and restructuring expense, net line in the Condensed Consolidated Statements of Operations. Refer to Note 3 for additional information about the expenses incurred during the first quarter of 2018. As part of the purchase of CompuCom, the Company acquired a redeemable noncontrolling equity interest in a consolidated subsidiary of CompuCom. In April 2018, subsequent to the end of the Company’s first quarter of 2018, the Company acquired the remaining ownership interest in the subsidiary of CompuCom for cash consideration of $18 million. |
MERGER AND RESTRUCTURING ACTIVI
MERGER AND RESTRUCTURING ACTIVITY | 3 Months Ended |
Mar. 31, 2018 | |
MERGER AND RESTRUCTURING ACTIVITY | NOTE 3. MERGER AND RESTRUCTURING ACTIVITY In recent years, the Company has taken actions to adapt to changing and competitive conditions. These actions include acquiring businesses, closing facilities, consolidating functional activities, eliminating redundant positions, disposing of businesses and assets, and taking actions to improve process efficiencies. The expenses and any income recognized directly associated with these actions are included in Merger and restructuring expenses, net on a separate line in the Condensed Consolidated Statements of Operations in order to identify these activities apart from the expenses incurred to sell to and service its customers. These expenses are not included in the determination of Division operating income. The table below summarizes the major components of Merger and restructuring expenses, net. First Quarter (In millions) 2018 2017 Merger and transaction related expenses, net Severance and retention $ 2 $ — Transaction and integration 7 6 Facility closure, contract termination, and other expenses, net 3 4 Total Merger and transaction related expenses, net 12 10 Restructuring expenses Severance — 9 Facility closure, contract termination, professional fees and other expenses, net 5 1 Total Restructuring expenses 5 10 Total Merger and restructuring expenses, net $ 17 $ 20 Merger and transaction related expenses, net Included in the 2018 Merger and transaction related expenses, net in the table above are expenses associated with the acquisitions in the first quarter of 2018 and fiscal 2017, including CompuCom. Transaction and integration expenses in 2018 primarily related to legal, accounting, and other third-party costs incurred by the Company associated with the acquisitions and integration of acquired companies. Such costs are being recognized as incurred. Severance and retention expenses include retention amounts incurred related to the integration of staff functions and are being expensed through the retention period as well as termination benefits related to certain supply chain integration activities. Also included in the Merger and transaction related expenses, net in the first quarter of 2018 in the table above are $3 million of integration expenses and $3 million of facility closure costs associated with the 2013 OfficeMax merger. 2017 Merger and transaction related expenses, net, are related to costs associated with the 2013 OfficeMax merger and include a gain of $1 million from the sale of a warehouse facility as part of a supply chain integration plan. Restructuring expenses During 2017, the Company announced a multi-year strategic transformation to pivot from a traditional office product retailer to a broader omni-channel business services, product and technology provider which included the acquisition of CompuCom. As part of the new strategy, the Company will expand its technology and business service offerings and accelerate the offering of new subscription-based services, including expanding its service offering to address the needs of small businesses. As part of this multi-year strategic shift, the Company anticipates incurring additional costs over the next few years including professional fees, severance and other related costs. Included in restructuring expenses in the first quarter of 2018 in the table above are professional fees of $4 million associated with this restructuring plan. Restructuring expense in 2017 and $1 million of restructuring costs in the first quarter of 2018 were associated with the Comprehensive Business Review strategy (the “Comprehensive Business Review”) announced in August 2016 which included the closure of approximately 300 retail stores in North America over a three-year period, and the reduction of operating and general and administrative expenses through efficiencies and organizational optimization. The Company incurred approximately $99 million in costs to implement the cost savings programs to date. Expenses associated with implementing the Comprehensive Business Review include severance, facility closure costs, contract termination, accelerated depreciation, professional fees, relocation and disposal gains and losses, as well as other costs associated with the store closures. The Company has completed 137 of the planned 300 retail store closures since announcing this initiative. The Company will continue to re-evaluate Merger and Restructuring Accruals The activity in the merger and restructuring accruals in the first quarter of 2018 is presented in the table below. Of the total $17 million of expense presented in Merger and restructuring expenses, net in the first quarter of 2018 Condensed Consolidated Statements of Operations, $6 million is related to Merger and restructuring liabilities and are included as Charges incurred in the table below. The remaining $11 million of expense is comprised of $3 million of Merger transaction and integration expenses and $8 million in property expenses, professional fees, non-cash (In millions) Balance as of Charges Incurred Cash Payments Balance as of Termination benefits: Merger-related accruals $ 1 $ 2 $ — $ 3 Comprehensive Business Review 4 — — 4 Lease and contract obligations, accruals for facilities closures and other costs: Merger-related accruals 16 1 (4 ) 13 Comprehensive Business Review 9 — (4 ) 5 Acquisition related accruals 2 3 (4 ) 1 Total $ 32 $ 6 $ (12 ) $ 26 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. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 3 Months Ended |
Mar. 31, 2018 | |
DISCONTINUED OPERATIONS | NOTE 4. DISCONTINUED OPERATIONS In the third quarter of 2016, the Company’s Board of Directors approved a plan to sell substantially all of the International Operations through four disposal groups (Europe, South Korea, Australia and New Zealand, and mainland China). Collectively, these dispositions represented a strategic shift that had a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations. The Company is presenting the operating results and cash flows of these disposal groups within discontinued operations through their respective dates of disposal, including all prior periods. The assets and liabilities of the disposal groups remaining at the end of each period are presented as current assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets. Certain portions of the former International Division assets and operations are being retained and, therefore, remain in continuing operations. The retained global sourcing operations are presented as Other in Note 13, Segment Information. As of the end of Fiscal 2017, the Company sold its European, South Korean and mainland China businesses. In April 2017, the Company entered into a definitive sale and purchase agreement to sell the Company’s Australian and New Zealand business operations, subject to regulatory approval. In November 2017, the Australian Competition and Consumer Commission announced that it would not oppose the sale, however, the Commerce Commission of New Zealand (the “Commerce Commission”) filed proceedings in the High Court at Auckland to enjoin the contemplated transaction. As a result of the delay in gaining regulatory approval in New Zealand, in February 2018, the Company and the purchaser amended the sale and purchase agreement to sell the Australian and New Zealand businesses in two separate transactions. The sale of the Company’s business in Australia was completed on February 5, 2018. The transaction was structured and accounted for as an equity sale. The Company agreed to provide certain transitional services to the purchaser until the sale of the New Zealand business was settled. Prior to the sale, the Company had recorded an aggregate reduction of $44 million in 2017 and 2016 to the carrying amount of its Australia Business based on its updated estimates of fair value less cost to sell. The disposition of the business in Australia resulted in a pre-tax The purchaser placed in escrow $7 million in connection with the amendment of the sale and purchase agreement. In addition, the purchaser had previously paid the Company $8 million in 2017 to extend the original purchase agreement which was to be applied to the purchase price when the transaction was completed or, if not successfully completed, be treated as a break fee. This amount is presented in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. Both the $7 million in escrow and the previous $8 million received by the Company will be applied to the purchase price of New Zealand when the transaction is completed. In April 2018, subsequent to the end of the Company’s first quarter of 2018, the Commerce Commission withdrew its objection to the sale of the Company’s New Zealand business to the purchaser, and on May 4, 2018, the Company completed the sale of its New Zealand business. Prior to its sale on May 4, 2018, the Company recorded an adjustment of $1 million in the first quarter of 2018 to its carrying amount of the New Zealand business that is held for sale based on its updated estimate of fair value less cost to sell. The adjustment resulted in an increase in the related valuation allowance and is included in the Net (increase) reduction of loss on discontinued operations held for sale in the table below. The adjusted carrying amount does not exceed the carrying amount at the time these operations were initially classified as held for sale. Until the closing date, the Company operated the New Zealand businesses in the ordinary course. Associated with the Company’s sale of its European business operations in 2016, the sale and purchase agreement (the “SPA”) contained customary warranties of the Company and the purchaser, with the Company’s warranties limited to an aggregate of EUR 10 million. The Company monitors its estimated exposure to liabilities under the warranties under the SPA, and as of March 31, 2018, the Company believes it has made adequate provisions for its potential exposures related to these warranties. The Company will continue to provide various transition and product sourcing services to the purchaser of the European business operations for a period of up to 24 months following the closing date of December 31, 2016, under a separate agreement. The proceeds and related costs from these services are not material and are presented in Other income, net as part of continuing operations in the Condensed Consolidated Statements of Operations. The Company also retains certain guarantees in place with respect to the liabilities or obligations of the European business and remains contingently liable for these obligations. However, the purchaser must indemnify and hold the Company harmless for any losses in connection with these guarantees. The Company currently does not believe it is probable it would be required to perform under any of these guarantees or any of the underlying obligations. The major components of Discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations are presented below. The results include the operations of the businesses sold up to the dates of sale. First Quarter (In millions) 2018 2017 Sales $ 94 $ 168 Cost of goods sold and occupancy costs 72 136 Operating expenses 17 27 Restructuring charges — 1 Other income (expense), net (2 ) 1 Net (increase) reduction of loss on discontinued operations held for sale (1 ) 38 Net loss on sale of discontinued operations 1 — Income tax expense (benefit) (7 ) 1 Discontinued operations, net of tax $ 8 $ 42 Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of March 31, 2018, and December 30, 2017 are included in the following table. The sale of the business in Australia was completed in February 2018, and therefore the assets and liabilities of this business are not included in the March 31, 2018 period presented below. (In millions) March 31, 2018 December 30, 2017 Assets Cash and cash equivalents $ 37 $ 14 Receivables, net 26 64 Inventories 31 78 Prepaid expenses and other current assets 1 4 Property and equipment, net 14 31 Other assets 2 3 Valuation allowance (13 ) (55 ) Current assets of discontinued operations $ 98 $ 139 Liabilities Trade accounts payable $ 15 $ 38 Accrued expenses and other current liabilities 10 24 Deferred income taxes and other long-term liabilities 2 5 Current liabilities of discontinued operations $ 27 $ 67 |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2018 | |
DEBT | NOTE 5. DEBT In May 2011, Office Depot entered into an amended and restated credit agreement, which was amended and restated in May 2016 for an additional five years, and was further amended in December 2016 and November 2017 (the Amended and Restated Credit Agreement including all amendments is referred to as the “Amended Credit Agreement”). The $1.2 billion facility will mature on May 13, 2021. At March 31, 2018, the Company had approximately $881 million of available credit under the Amended Credit Agreement, and had letters of credit outstanding under the Amended Credit Agreement of $76 million. There were no borrowings under the Amended Credit Agreement in the first quarter of 2018 and the Company was in compliance with all applicable financial covenants at March 31, 2018. In connection with the consummation of the acquisition of CompuCom, the Company entered into a credit agreement, dated as of November 8, 2017 (the “Term Loan Credit Agreement”), which provides for a $750 million term loan facility with a maturity date of November 8, 2022. The Amended Credit Agreement was further amended to permit, among other things, certain matters relating to the Term Loan Credit Agreement. The Company was in compliance with all applicable financial covenants with the Term Loan Credit Agreement at March 31, 2018. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 3 Months Ended |
Mar. 31, 2018 | |
REVENUE RECOGNITION | NOTE 6. REVENUE RECOGNITION Products and Services Revenue The following table provides information about disaggregated revenue by Division, and major product and service categories. First Quarter of 2018 ( In millions) Business Retail Division CompuCom Other Total Major products and services categories Products Supplies $ 735 $ 468 $ — $ 1 $ 1,204 Technology 354 539 46 — 939 Furniture and other 172 108 — — 280 Services Technology — 9 210 — 219 Other 67 120 1 — 188 Total $ 1,328 $ 1,244 $ 257 $ 1 $ 2,830 Products revenue Products revenue includes the sale of (1) supplies such as paper, writing instruments, office supplies, cleaning and breakroom items, (2) technology related products such as toner and ink, printers, computers, tablets and accessories, electronic storage, and (3) furniture and other products such as desks, seating, and luggage. The Company sells its supplies, furniture and other products through its Retail and Business Solutions Divisions, and its technology products through all three Divisions. Customers can purchase products through the Company’s retail stores, electronically through its internet sites, or through its call centers. Revenues from supplies, technology, and furniture and other product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. Furniture and other products also include arrangements where customers can make special furniture interior design and installation orders that are customized to their needs. The performance obligations related to these arrangements are satisfied over time. Services revenue Services revenue includes (1) technology service offerings provided through the Company’s CompuCom Division, such as end user computing, data center management, service desk, network infrastructure, IT workforce solutions, mobile device management and cloud services, as well as technology service offerings provided in its retail stores, such as installation and repair, and (2) other service offerings such as copy and print services, managed print and fulfillment services, product subscriptions, and sales of third party software, gift cards, and warranties, as well as rental income on operating lease arrangements where the Company conveys to its customers the right to use devices and other equipment for a stated period. The largest offering in the service technology category is end user computing, which provides on-site services Substantially all of the Company’s other service offerings are satisfied at a point in time and revenue is recognized as such. The largest other service offering is copy and print services, which includes printing, copying, and digital imaging. The majority of copy and print services are fulfilled through retail stores and the related performance obligations are satisfied within a short period of time (generally within the same day). Revenue Recognition and Significant Judgments Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company is entitled to receive in exchange for those products or services. For product sales, transfer of control occurs at a point in time, typically upon delivery to the customer. For service offerings, the transfer of control and satisfaction of the performance obligation is either over time or at a point in time. When performance obligations are satisfied over time, the Company evaluates the pattern of delivery and progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Revenue is recognized net of allowance for returns and net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs are considered fulfillment activities and are recognized within the Company’s cost of goods sold. Contracts with customers could include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Determining the standalone selling price also requires judgement. The Company did not have significant revenues generated from such contracts during the first quarter of 2018. Products are generally sold with a right of return and the Company may provide other incentives, such as rebates and coupons, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and incentives are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. The Company offers a customer loyalty program that provides customers with rewards that can be applied to future purchases or other incentives. Loyalty rewards are accounted for as a separate performance obligation and a deferred liability is recorded in the amount of the transaction price allocated to the rewards, inclusive of the impact of estimated breakage. The estimated breakage of loyalty rewards is based on historical redemption rates experienced under the loyalty program. Revenue is recognized when the loyalty rewards are redeemed or expire. As of March 31, 2018, the Company had $22 million of deferred liability related to loyalty programs, which is included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers. A receivable is recognized in the period the Company delivers goods or provide services, and is recorded at the invoiced amount, net of an allowance for doubtful accounts. A receivable is also recognized for unbilled services where the Company’s right to consideration is unconditional, and is recorded based on an estimate of time and materials. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 20 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services. The Company receives payments from customers based upon contractual billing schedules. Contract assets include amounts related to deferred contract acquisition costs (refer to the section “Costs to Obtain a Contract” below) and if applicable, the Company’s conditional right to consideration for completed performance under a contract. During the first quarter of 2018, the Company did not have any contract assets related to conditional rights. The short and long-term components of contract assets in the table below are included in Prepaid expenses and other current assets, and Other assets, respectively, in the Condensed Consolidated Balance Sheets. Contract liabilities include payments received in advance of performance under the contract, and are recognized as revenue when the performance obligation is completed under the contract, as well as accrued contract acquisition costs, liabilities related to the Company’s loyalty programs and gift cards. The short and long-term components of contract liabilities in the table below are included in Accrued expenses and other current liabilities, and Deferred income taxes and other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheets. The following table provides information about receivables, contract assets and contract liabilities from contracts with customers: In millions As of March 31, 2018 At Adoption Receivables, net $ 942 $ 931 Short-term contract assets 22 20 Long-term contract assets 17 11 Short-term contract liabilities 63 60 Long-term contract liabilities 1 — The Company recognized revenues of $25 million during the first quarter of 2018 which were included in short-term contract liability balance at the beginning of the period. There were no contract assets and liabilities that were recognized during the first quarter of 2018 as a result of business combinations. There were no significant adjustments to revenue from performance obligations satisfied in previous periods and there were no contract assets recognized at the beginning of the period that transferred to receivables during the first quarter of 2018. Substantially all of the purchase orders and statements of work related to contracts with customers require delivery of the product or service within one year or less. For certain service contracts that exceed one year, the Company recognizes revenue at the amount to which it has the right to invoice for services performed. Accordingly, the Company has applied the optional exemption provided by the new revenue recognition standard relating to unsatisfied performance obligations and does not disclose the value of unsatisfied performance obligations for its contracts. Costs to Obtain a Contract The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain rebate incentive programs meet the requirements to be capitalized. These costs are periodically reviewed for impairment, and are amortized on a straight-line basis over the expected period of benefit. As of March 31, 2018, capitalized acquisition cost amounted to $39 million, which is reflected in short-term contract assets and long-term contract assets in the table above. During the first quarter of 2018, amortization expense was $7 million, and there was no impairment loss in relation to costs capitalized. The Company had no asset impairment charges related to contract assets in the period. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
INCOME TAXES | NOTE 7. INCOME TAXES The Company’s effective rate for the first quarter of 2018 differs from the statutory rate of 21% enacted as part of the Tax Cuts and Jobs Act on December 22, 2017 in the United States due to the impact of excess tax deficiencies associated with stock-based compensation awards, the impact of state taxes and certain nondeductible items and the mix of income and losses across U.S. and non-U.S. jurisdictions. and non-U.S. jurisdictions, not more-likely-than-not realizable certain non-U.S. jurisdictions. During the third quarter of 2017, the Company concluded that it was more likely than not that a benefit from a significant 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 its U.S. federal and state valuation allowance should be reduced by approximately $40 million in 2017, with approximately $37 million in the third quarter of 2017 as a discrete non-cash income The Company continues to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods. The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years before 2016 and 2009, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal examination and with few exceptions, is no longer subject to U.S. state and local tax examinations for years before 2009. The Company’s U.S. federal income tax return for 2016 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 | 3 Months Ended |
Mar. 31, 2018 | |
STOCKHOLDERS' EQUITY | NOTE 8. STOCKHOLDERS’ EQUITY The following table reflects the changes in Stockholders’ equity. (In millions) Stockholders’ equity at December 30, 2017 $ 2,120 Net income 41 Dividends paid on common stock (14 ) Share purchase for taxes, net of proceeds on employee-related plans (3 ) Other comprehensive income 14 Adjustment for adoption of the new revenue accounting standard (4 ) Amortization of long-term incentive stock grants 3 Stockholders’ equity at March 31, 2018 $ 2,157 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 30, 2017 $ (43 ) $ (35 ) $ (78 ) Reclassification of foreign currency translation adjustments realized upon disposal of business 14 — 14 Balance at March 31, 2018 $ (29 ) $ (35 ) $ (64 ) 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 10b5-1 In the first quarter of 2018, the Company made no repurchases of common stock, under the stock repurchase program. As of March 31, 2018, $62 million remains available for repurchase under the current authorization. Dividends on Common Stock In the first quarter of 2018, the Company’s Board of Directors declared quarterly cash dividends of $0.025 per share on its common stock, resulting in total cash payments of $14 million. Dividends have been recorded as a reduction to additional paid-in |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | NOTE 9. EARNINGS PER SHARE The following table represents the calculation of net earnings per common share – basic and diluted: First Quarter (In millions, except per share amounts) 2018 2017 Basic Earnings Per Share Numerator: Net income from continuing operations $ 33 $ 74 Income from discontinued operations, net of tax 8 42 Net income $ 41 $ 116 Denominator: Weighted-average shares outstanding 555 515 Basic earnings per share: Continuing operations $ 0.06 $ 0.14 Discontinued operations 0.01 0.08 Net earnings per share $ 0.07 $ 0.22 Diluted Earnings Per Share Numerator: Net income from continuing operations $ 33 $ 74 Income from discontinued operations, net of tax 8 42 Net income $ 41 $ 116 Denominator: Weighted-average shares outstanding 555 515 Effect of dilutive securities: Stock options and restricted stock 8 17 Diluted weighted-average shares outstanding 563 532 Diluted earnings per share: Continuing operations $ 0.06 $ 0.14 Discontinued operations 0.01 0.08 Net diluted earnings per share $ 0.07 $ 0.22 Awards of stock options and nonvested shares representing approximately 8 million and 4 million additional shares of common stock were outstanding for the first quarters of 2018 and 2017, respectively, but were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 3 Months Ended |
Mar. 31, 2018 | |
EMPLOYEE BENEFIT PLANS | NOTE 10. EMPLOYEE BENEFIT PLANS Pension and Other Postretirement Benefit Plans – North America The components of net periodic pension benefit for the Company’s North America pension plans are as follows: First Quarter (In millions) 2018 2017 Service cost $ 1 $ 2 Interest cost 9 10 Expected return on plan assets (11 ) (12 ) Net periodic pension benefit $ (1 ) $ — In the first quarter of 2018, cash contributions to the North America pension plans were not significant. The Company expects to make additional cash contributions of approximately $2 million to the North America pension plans during the remainder of 2018. Pension Plan – United Kingdom As part of the European business sale, the Company retained the United Kingdom (“UK”) defined benefit pension plan. The components of net periodic pension benefit for the Company’s UK pension plan are as follows: First Quarter (In millions) 2018 2017 Service cost $ — $ — Interest cost 2 2 Expected return on plan assets (2 ) (3 ) Net periodic pension benefit $ — $ (1 ) The UK pension plan is in a net asset position. In the first quarter of 2018, cash contributions of $1 million were made to the UK pension plan. The Company is required to make an additional cash contribution of $1 million to the UK pension plan during the remainder of 2018. Net periodic pension benefits for the North America and UK pension and other postretirement benefit plans (the “Plans”) are recorded at the corporate level. The service cost for the Plans are reflected in Selling, general and administrative expenses, and the other components of net periodic pension benefits are reflected in Other income, net, in the Condensed Consolidated Statements of Operations. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2018 | |
FAIR VALUE MEASUREMENTS | NOTE 11. FAIR VALUE MEASUREMENTS 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. Recurring Fair Value Measurements In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company’s assets and liabilities that are adjusted to fair value on a recurring basis are money market funds that qualify as cash equivalents, and derivative financial instruments. As of March 31, 2018, and December 30, 2017, the Company did not have any money market funds that had floating net asset values that required measurement. As part of the purchase of CompuCom on November 8, 2017, the Company acquired a redeemable noncontrolling equity interest in a subsidiary of CompuCom. In accordance with GAAP, the redeemable noncontrolling interest is required to be adjusted to its maximum redemption amount as of each reporting period. The Company used level 2 and 3 inputs in measuring the fair value of redemption amount of $18 million as of March 31, 2018. 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 these derivative financial instruments are considered Level 1 measurements, but were not significant for the reported periods. At March 31, 2018, and December 30, 2017, Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets included less than $1 million related to derivative foreign currency and fuel contracts. Nonrecurring Fair Value Measurements In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges that are based on Level 3 measurements. The Company recognized no asset impairment charges associated with continuing operations in the first quarter of 2018. Other Fair Value Disclosures The fair values of cash and cash equivalents, receivables, trade accounts payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature. The following table presents information about financial instruments at the balance sheet dates indicated. March 31, 2018 December 30, 2017 (In millions) Carrying Value Fair Value Carrying Value Fair Value Timber notes receivable $ 858 $ 849 $ 863 $ 865 Company-owned life insurance 88 88 90 90 Financial liabilities: Recourse debt: Term Loan, due 2022 699 743 717 754 Revenue bonds, due in varying amounts periodically through 2029 186 185 186 185 American & Foreign Power Company, Inc. 5% debentures, due 2030 14 14 14 14 Non-recourse 770 764 776 777 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 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. 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 review by governmental authorities and regulatory agencies, with which the Company cooperates. Many of these lawsuits, investigations, audits and reviews are resolved without material impact to the Company. While claims in these matters may at times assert large demands, the Company does not believe that contingent liabilities related to these matters, either individually or in the aggregate, will materially affect its financial position, results of operations or cash flows. In addition to the foregoing, 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 March 31, 2018, 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. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
SEGMENT INFORMATION | NOTE 13. SEGMENT INFORMATION The Company had two reportable segments during 2017 until the acquisition of CompuCom on November 8, 2017, at which time a third reportable segment was formed for that business based on how the Company is managed. The Business Solutions Division sells office supply products and services across the United States, Puerto Rico, U.S. Virgin Islands, and Canada. Business Solutions Division customers are served through dedicated sales forces, catalogs, telesales, and electronically through its internet sites. The Retail Division includes retail stores in the United States, Puerto Rico and the U.S. Virgin Islands, which offer office supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom and facilities products, and office furniture as well as business services including copying, printing, mailing, shipping and technology support services. In addition, the print needs for retail and business customers are also facilitated through the Company’s regional print production centers. The CompuCom Division, which reflects the operations of CompuCom since its acquisition on November 8, 2017, sells information technology (IT) outsourcing services and products to North American enterprise organizations in the United States, Canada and Costa Rica, and offers a broad range of solutions that includes end user computing (tablets, smartphones, laptops and desktops), data center management, service desk, network infrastructure and IT workforce solutions. CompuCom Division customers are served through dedicated IT service and sales representatives, telesales, and electronically through the Company’s internet sites. The retained global sourcing operations previously included in the International Division are not significant and have been presented as Other. The Company’s three operating segments are the three reportable segments. The Business Solutions Division, Retail Division and CompuCom Division are managed separately as they represent separate channels in the way we serve our customers and are managed accordingly. The accounting policies for each segment are the same as those described in Note 1 in the Company’s 2017 Form 10-K. The following is a summary of sales and operating income (loss) by each of the Divisions and Other, reconciled to consolidated totals, after the elimination of the discontinued operations for all periods. Sales First Quarter (In millions) 2018 2017 Business Solutions Division $ 1,328 $ 1,315 Retail Division 1,244 1,358 CompuCom Division 257 — Other 1 3 Total $ 2,830 $ 2,676 Division Operating Income (loss) First Quarter (In millions) 2018 2017 Business Solutions Division $ 55 $ 58 Retail Division 72 112 CompuCom Division 5 — Other — (1 ) Total $ 132 $ 169 A reconciliation of the measure of Division operating income to Consolidated income from continuing operations before income taxes is as follows: First Quarter (In millions) 2018 2017 Total Divisions operating income $ 132 $ 169 Add/(subtract): Merger and restructuring expenses, net (17 ) (20 ) Unallocated expenses (38 ) (25 ) Interest income 6 6 Interest expense (29 ) (13 ) Other income, net 1 4 Income from continuing operations before income taxes $ 55 $ 121 The components of goodwill by segment are provided in the following table: (In millions) Business Division Retail Division CompuCom Division Total Balance as of December 30, 2017 $ 328 $ 78 $ 445 $ 851 Acquisitions 20 — 13 33 Foreign currency rate impact — — (3 ) (3 ) Purchase accounting adjustments — — 1 1 Balance as of March 31, 2018 $ 348 $ 78 $ 456 $ 882 Refer to Note 2 for additional information on the acquisitions during the first quarter of 2018. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Basis of Presentation | Basis of Presentation Office Depot, Inc., including consolidated subsidiaries (“Office Depot” or the “Company”), is a leading omni-channel provider of business services and supplies, product and technology solutions. On November 8, 2017, the Company acquired CompuCom Systems, Inc. (“CompuCom”) refer to Note 2 for additional discussion about this acquisition. The Company currently operates under several banners, including Office Depot ® ® ® In September 2016, the Company’s Board of Directors committed to a plan to sell substantially all of the Company’s International Division operations (the “International Operations”). Accordingly, the Company has presented the International Operations as discontinued operations beginning in the third quarter of 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 assets and liabilities of discontinued operations on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2018, and December 30, 2017. Cash flows from the Company’s discontinued operations are presented separately in the Condensed Consolidated Statements of Cash Flows for all periods. Certain portions of the International Division assets and operations primarily consisting of the Company’s global sourcing and trading operations in the Asia/Pacific region are being retained or did not meet the held for sale criteria and therefore remain in continuing operations, with prior periods adjusted, where appropriate. Additional information on the Company’s discontinued operations is provided in Note 4. The Condensed Consolidated Financial Statements as of March 31, 2018, and for the 13-week As a result of the Company’s purchase of CompuCom in November 2017, the Company’s level of service revenue in the first quarter of 2018 exceeded 10% of the Company’s total revenue and accordingly, revenues and cost of sales from services and products are separately disclosed on the Company’s statement of operations. Prior period amounts have been reclassified to conform to the current period presentation. Note 6 describes the components of the Company’s business included in the product and service categories. In addition, as discussed below, certain amounts have been reclassified due to the Company’s adoption of the new accounting guidance related to the presentation of defined benefit plan expense. These prior period reclassifications did not affect the Company’s net income or cash flows. 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 (“GAAP”), 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 2017 Form 10-K. |
Cash Management | Cash Management The cash management process generally utilizes zero balance accounts which provide for the settlement of the related disbursement and cash concentration accounts on a daily basis. Trade accounts payable and Accrued expenses and other current liabilities as of March 31, 2018 and December 30, 2017, included $54 million and $53 million, respectively, of amounts not yet presented for payment drawn in excess of disbursement account book balances, after considering offset provisions. At March 31, 2018, cash and cash equivalents from continuing operations held outside the United States amounted to $137 million. Additionally, $37 million of cash held outside the United States was included in current assets of discontinued operations. Restricted Cash Restricted cash consist primarily of short-term cash term deposits having original maturity dates of twelve months or less that serve as a collateral to certain of the Company’s letters of credit. Restricted cash is valued at cost, which approximates fair value. At March 31, 2018, restricted cash amounted to $3 million and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. |
New Accounting Standards | New Accounting Standards Standards that are not yet adopted In February 2016, the Financial Accounting Standards Board (“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. The initial standard required a modified retrospective transition approach, with application, including disclosures, in all comparative periods presented. In March 2018, the FASB tentatively approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the date of initial application. The Company is currently evaluating the impact that the adoption of this new standard will have on its Condensed Consolidated Financial Statements but anticipates it will result in significant right of use assets and related liabilities associated with its operating leases being recorded on its balance sheet. Substantially all of the Company’s retail store locations, supply chain facilities, certain corporate facilities and copy print equipment are subject to operating lease arrangements. The Company will adopt the standard in the first quarter of 2019, and has begun implementing required upgrades to its existing lease systems. The Company is currently compiling an inventory of arrangements containing a lease and accumulating the lease data necessary to apply the amended guidance. In February 2018, the FASB issued an accounting standard update to address a specific consequence of the Tax Cuts and Jobs Act. This accounting update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Act. The standard eliminates the stranded tax effects that were created as a result of the reduction of historical U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The accounting update is effective January 1, 2019, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently assessing the impact of the new standard on the condensed consolidated financial statements. Standards that were adopted Revenue recognition In May 2014, the FASB issued a new standard that supersedes most current revenue recognition guidance and modifies the accounting for certain costs associated with revenue generation. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity is entitled to receive in exchange for those goods or services. The standard provides a number of steps to follow to achieve that principle and requires additional financial statement disclosures related to the nature, timing, amount and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new revenue standard on the first day of the first quarter of 2018, using the modified retrospective method, and applied the standard to contracts that were not complete as of the adoption date. As a result of applying this adoption method, the Company recognized a cumulative effect adjustment of $4 million, net of tax, to its accumulated deficit related to deferral of revenues for its loyalty program as of the first day of the first quarter of 2018. The most significant impact of the standard on the Company relates to revenues from sales of third-party software which were previously reported on a gross basis, but are reported on a net basis under the new standard, with no change in timing of recognition or impact to gross profit, earnings or cash flows. This impact resulted in a reduction in both sales from services and cost of services of $27 million during the first quarter of 2018. The adoption of the standard also resulted in minor changes related to the timing of revenue recognition associated with the Company’s loyalty program due to the impacts of the loyalty program being presented as a deferral of revenues under the new standard rather than as cost of sales accruals under the previous accounting rules. In addition, the Company’s balance sheet presentation of its sales return reserve has changed to present a separate return asset and liability, instead of the net presentation used in prior periods. The return asset and liability are included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, on the Condensed Consolidated Balance Sheet. Revenue recognition related to all other products and services remains substantially unchanged. The following tables summarize the impacts of adopting the new standard on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Statement of Operations for the first quarter of 2018. Adoption of the new standard had no impact to the cash from or used in operating, financing, or investing activities on the Company’s Condensed Consolidated Statements of Cash Flows. First Quarter of 2018 (In millions) As reported As if the previous accounting guidance was in effect Sales – Products $ 2,423 $ 2,427 Sales – Services 407 434 Total Sales 2,830 2,861 Cost of goods sold and occupancy costs – Products 1,891 1,895 Cost of goods sold and occupancy costs – Services 272 299 Total Cost of goods sold and occupancy costs 2,163 2,194 Gross profit 667 667 Net income 41 41 Diluted earnings per share 0.07 0.07 As of March 31, 2018 (In millions) As reported As if the previous guidance Receivables, net $ 942 $ 947 Prepaid expenses and other current assets 118 108 Deferred income taxes 295 293 Accrued expenses and other current liabilities 1,011 1,006 Stockholders’ equity 2,157 2,157 As part of its adoption of the new standard, the Company also implemented new internal controls and key system functionality to enable the preparation of financial information on adoption. Refer to Note 6 for additional disclosures required as a result of the adoption of this new standard. Defined benefit plan In March 2017, the FASB issued an accounting standards update which changed the income statement presentation of defined benefit plan expense by requiring that an employer report the service cost component of pension costs in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit pension cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of operating income. The Company adopted the new accounting standards update in the first quarter of 2018. The Company has presented the other components of net periodic benefit cost in Other income, net on the Condensed Consolidated Statements of Operations, while the service cost component of pension costs continues to be presented in Selling, general and administrative expenses. Adoption of this new accounting standards update required a retrospective reclassification of $3 million net pension benefit in the first quarter of 2017 from Selling, general and administrative expenses to Other income, net, and did not have an impact on the Company’s Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows. |
Products and Services Revenue | Products and Services Revenue The following table provides information about disaggregated revenue by Division, and major product and service categories. First Quarter of 2018 ( In millions) Business Retail Division CompuCom Other Total Major products and services categories Products Supplies $ 735 $ 468 $ — $ 1 $ 1,204 Technology 354 539 46 — 939 Furniture and other 172 108 — — 280 Services Technology — 9 210 — 219 Other 67 120 1 — 188 Total $ 1,328 $ 1,244 $ 257 $ 1 $ 2,830 Products revenue Products revenue includes the sale of (1) supplies such as paper, writing instruments, office supplies, cleaning and breakroom items, (2) technology related products such as toner and ink, printers, computers, tablets and accessories, electronic storage, and (3) furniture and other products such as desks, seating, and luggage. The Company sells its supplies, furniture and other products through its Retail and Business Solutions Divisions, and its technology products through all three Divisions. Customers can purchase products through the Company’s retail stores, electronically through its internet sites, or through its call centers. Revenues from supplies, technology, and furniture and other product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. Furniture and other products also include arrangements where customers can make special furniture interior design and installation orders that are customized to their needs. The performance obligations related to these arrangements are satisfied over time. Services revenue Services revenue includes (1) technology service offerings provided through the Company’s CompuCom Division, such as end user computing, data center management, service desk, network infrastructure, IT workforce solutions, mobile device management and cloud services, as well as technology service offerings provided in its retail stores, such as installation and repair, and (2) other service offerings such as copy and print services, managed print and fulfillment services, product subscriptions, and sales of third party software, gift cards, and warranties, as well as rental income on operating lease arrangements where the Company conveys to its customers the right to use devices and other equipment for a stated period. The largest offering in the service technology category is end user computing, which provides on-site services Substantially all of the Company’s other service offerings are satisfied at a point in time and revenue is recognized as such. The largest other service offering is copy and print services, which includes printing, copying, and digital imaging. The majority of copy and print services are fulfilled through retail stores and the related performance obligations are satisfied within a short period of time (generally within the same day). |
Revenue Recognition and Significant Judgments | Revenue Recognition and Significant Judgments Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company is entitled to receive in exchange for those products or services. For product sales, transfer of control occurs at a point in time, typically upon delivery to the customer. For service offerings, the transfer of control and satisfaction of the performance obligation is either over time or at a point in time. When performance obligations are satisfied over time, the Company evaluates the pattern of delivery and progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Revenue is recognized net of allowance for returns and net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping and handling costs are considered fulfillment activities and are recognized within the Company’s cost of goods sold. Contracts with customers could include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Determining the standalone selling price also requires judgement. The Company did not have significant revenues generated from such contracts during the first quarter of 2018. Products are generally sold with a right of return and the Company may provide other incentives, such as rebates and coupons, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and incentives are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. The Company offers a customer loyalty program that provides customers with rewards that can be applied to future purchases or other incentives. Loyalty rewards are accounted for as a separate performance obligation and a deferred liability is recorded in the amount of the transaction price allocated to the rewards, inclusive of the impact of estimated breakage. The estimated breakage of loyalty rewards is based on historical redemption rates experienced under the loyalty program. Revenue is recognized when the loyalty rewards are redeemed or expire. As of March 31, 2018, the Company had $22 million of deferred liability related to loyalty programs, which is included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. |
Contract Balances | Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers. A receivable is recognized in the period the Company delivers goods or provide services, and is recorded at the invoiced amount, net of an allowance for doubtful accounts. A receivable is also recognized for unbilled services where the Company’s right to consideration is unconditional, and is recorded based on an estimate of time and materials. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 20 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services. The Company receives payments from customers based upon contractual billing schedules. Contract assets include amounts related to deferred contract acquisition costs (refer to the section “Costs to Obtain a Contract” below) and if applicable, the Company’s conditional right to consideration for completed performance under a contract. During the first quarter of 2018, the Company did not have any contract assets related to conditional rights. The short and long-term components of contract assets in the table below are included in Prepaid expenses and other current assets, and Other assets, respectively, in the Condensed Consolidated Balance Sheets. Contract liabilities include payments received in advance of performance under the contract, and are recognized as revenue when the performance obligation is completed under the contract, as well as accrued contract acquisition costs, liabilities related to the Company’s loyalty programs and gift cards. The short and long-term components of contract liabilities in the table below are included in Accrued expenses and other current liabilities, and Deferred income taxes and other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheets. The following table provides information about receivables, contract assets and contract liabilities from contracts with customers: In millions As of March 31, 2018 At Adoption Receivables, net $ 942 $ 931 Short-term contract assets 22 20 Long-term contract assets 17 11 Short-term contract liabilities 63 60 Long-term contract liabilities 1 — The Company recognized revenues of $25 million during the first quarter of 2018 which were included in short-term contract liability balance at the beginning of the period. There were no contract assets and liabilities that were recognized during the first quarter of 2018 as a result of business combinations. There were no significant adjustments to revenue from performance obligations satisfied in previous periods and there were no contract assets recognized at the beginning of the period that transferred to receivables during the first quarter of 2018. Substantially all of the purchase orders and statements of work related to contracts with customers require delivery of the product or service within one year or less. For certain service contracts that exceed one year, the Company recognizes revenue at the amount to which it has the right to invoice for services performed. Accordingly, the Company has applied the optional exemption provided by the new revenue recognition standard relating to unsatisfied performance obligations and does not disclose the value of unsatisfied performance obligations for its contracts. |
Costs to Obtain a Contract | Costs to Obtain a Contract The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain rebate incentive programs meet the requirements to be capitalized. These costs are periodically reviewed for impairment, and are amortized on a straight-line basis over the expected period of benefit. As of March 31, 2018, capitalized acquisition cost amounted to $39 million, which is reflected in short-term contract assets and long-term contract assets in the table above. During the first quarter of 2018, amortization expense was $7 million, and there was no impairment loss in relation to costs capitalized. The Company had no asset impairment charges related to contract assets in the period. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Standards Update 2014-09 | |
Impacts of Adoption of New Standard on Company's Balance Sheet and Statement of Operations | The following tables summarize the impacts of adopting the new standard on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Statement of Operations for the first quarter of 2018. Adoption of the new standard had no impact to the cash from or used in operating, financing, or investing activities on the Company’s Condensed Consolidated Statements of Cash Flows. First Quarter of 2018 (In millions) As reported As if the previous accounting guidance was in effect Sales – Products $ 2,423 $ 2,427 Sales – Services 407 434 Total Sales 2,830 2,861 Cost of goods sold and occupancy costs – Products 1,891 1,895 Cost of goods sold and occupancy costs – Services 272 299 Total Cost of goods sold and occupancy costs 2,163 2,194 Gross profit 667 667 Net income 41 41 Diluted earnings per share 0.07 0.07 As of March 31, 2018 (In millions) As reported As if the previous guidance Receivables, net $ 942 $ 947 Prepaid expenses and other current assets 118 108 Deferred income taxes 295 293 Accrued expenses and other current liabilities 1,011 1,006 Stockholders’ equity 2,157 2,157 |
MERGER AND RESTRUCTURING ACTI22
MERGER AND RESTRUCTURING ACTIVITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Major Components of Merger and Restructuring Expenses, Net | The table below summarizes the major components of Merger and restructuring expenses, net. First Quarter (In millions) 2018 2017 Merger and transaction related expenses, net Severance and retention $ 2 $ — Transaction and integration 7 6 Facility closure, contract termination, and other expenses, net 3 4 Total Merger and transaction related expenses, net 12 10 Restructuring expenses Severance — 9 Facility closure, contract termination, professional fees and other expenses, net 5 1 Total Restructuring expenses 5 10 Total Merger and restructuring expenses, net $ 17 $ 20 |
Facility Closure and Severance Costs | These charges are excluded from the table below because they are expensed as incurred, or otherwise not associated with the merger and restructuring balance sheet accounts. (In millions) Balance as of Charges Incurred Cash Payments Balance as of Termination benefits: Merger-related accruals $ 1 $ 2 $ — $ 3 Comprehensive Business Review 4 — — 4 Lease and contract obligations, accruals for facilities closures and other costs: Merger-related accruals 16 1 (4 ) 13 Comprehensive Business Review 9 — (4 ) 5 Acquisition related accruals 2 3 (4 ) 1 Total $ 32 $ 6 $ (12 ) $ 26 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Major Component of Discontinued Operations, Net of Tax | The major components of Discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations are presented below. The results include the operations of the businesses sold up to the dates of sale. First Quarter (In millions) 2018 2017 Sales $ 94 $ 168 Cost of goods sold and occupancy costs 72 136 Operating expenses 17 27 Restructuring charges — 1 Other income (expense), net (2 ) 1 Net (increase) reduction of loss on discontinued operations held for sale (1 ) 38 Net loss on sale of discontinued operations 1 — Income tax expense (benefit) (7 ) 1 Discontinued operations, net of tax $ 8 $ 42 Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of March 31, 2018, and December 30, 2017 are included in the following table. The sale of the business in Australia was completed in February 2018, and therefore the assets and liabilities of this business are not included in the March 31, 2018 period presented below. (In millions) March 31, 2018 December 30, 2017 Assets Cash and cash equivalents $ 37 $ 14 Receivables, net 26 64 Inventories 31 78 Prepaid expenses and other current assets 1 4 Property and equipment, net 14 31 Other assets 2 3 Valuation allowance (13 ) (55 ) Current assets of discontinued operations $ 98 $ 139 Liabilities Trade accounts payable $ 15 $ 38 Accrued expenses and other current liabilities 10 24 Deferred income taxes and other long-term liabilities 2 5 Current liabilities of discontinued operations $ 27 $ 67 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Disaggregated Revenue by Division, Major Product and Service Categories | The following table provides information about disaggregated revenue by Division, and major product and service categories. First Quarter of 2018 ( In millions) Business Retail Division CompuCom Other Total Major products and services categories Products Supplies $ 735 $ 468 $ — $ 1 $ 1,204 Technology 354 539 46 — 939 Furniture and other 172 108 — — 280 Services Technology — 9 210 — 219 Other 67 120 1 — 188 Total $ 1,328 $ 1,244 $ 257 $ 1 $ 2,830 |
Summary of Receivables, Contract Assets and Contract Liabilities from Contracts with Customers | The following table provides information about receivables, contract assets and contract liabilities from contracts with customers: In millions As of March 31, 2018 At Adoption Receivables, net $ 942 $ 931 Short-term contract assets 22 20 Long-term contract assets 17 11 Short-term contract liabilities 63 60 Long-term contract liabilities 1 — |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Stockholders' Equity | The following table reflects the changes in Stockholders’ equity. (In millions) Stockholders’ equity at December 30, 2017 $ 2,120 Net income 41 Dividends paid on common stock (14 ) Share purchase for taxes, net of proceeds on employee-related plans (3 ) Other comprehensive income 14 Adjustment for adoption of the new revenue accounting standard (4 ) Amortization of long-term incentive stock grants 3 Stockholders’ equity at March 31, 2018 $ 2,157 |
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 30, 2017 $ (43 ) $ (35 ) $ (78 ) Reclassification of foreign currency translation adjustments realized upon disposal of business 14 — 14 Balance at March 31, 2018 $ (29 ) $ (35 ) $ (64 ) |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Calculation of Net Earnings Per Common Share | The following table represents the calculation of net earnings per common share – basic and diluted: First Quarter (In millions, except per share amounts) 2018 2017 Basic Earnings Per Share Numerator: Net income from continuing operations $ 33 $ 74 Income from discontinued operations, net of tax 8 42 Net income $ 41 $ 116 Denominator: Weighted-average shares outstanding 555 515 Basic earnings per share: Continuing operations $ 0.06 $ 0.14 Discontinued operations 0.01 0.08 Net earnings per share $ 0.07 $ 0.22 Diluted Earnings Per Share Numerator: Net income from continuing operations $ 33 $ 74 Income from discontinued operations, net of tax 8 42 Net income $ 41 $ 116 Denominator: Weighted-average shares outstanding 555 515 Effect of dilutive securities: Stock options and restricted stock 8 17 Diluted weighted-average shares outstanding 563 532 Diluted earnings per share: Continuing operations $ 0.06 $ 0.14 Discontinued operations 0.01 0.08 Net diluted earnings per share $ 0.07 $ 0.22 |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
North America | |
Components of Net Periodic Pension Benefit | The components of net periodic pension benefit for the Company’s North America pension plans are as follows: First Quarter (In millions) 2018 2017 Service cost $ 1 $ 2 Interest cost 9 10 Expected return on plan assets (11 ) (12 ) Net periodic pension benefit $ (1 ) $ — |
United Kingdom | |
Components of Net Periodic Pension Benefit | The components of net periodic pension benefit for the Company’s UK pension plan are as follows: First Quarter (In millions) 2018 2017 Service cost $ — $ — Interest cost 2 2 Expected return on plan assets (2 ) (3 ) Net periodic pension benefit $ — $ (1 ) |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Fair Value of Assets and Liabilities | The following table presents information about financial instruments at the balance sheet dates indicated. March 31, 2018 December 30, 2017 (In millions) Carrying Value Fair Value Carrying Value Fair Value Timber notes receivable $ 858 $ 849 $ 863 $ 865 Company-owned life insurance 88 88 90 90 Financial liabilities: Recourse debt: Term Loan, due 2022 699 743 717 754 Revenue bonds, due in varying amounts periodically through 2029 186 185 186 185 American & Foreign Power Company, Inc. 5% debentures, due 2030 14 14 14 14 Non-recourse 770 764 776 777 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounts and Balances by Each Divisions and Other | The following is a summary of sales and operating income (loss) by each of the Divisions and Other, reconciled to consolidated totals, after the elimination of the discontinued operations for all periods. Sales First Quarter (In millions) 2018 2017 Business Solutions Division $ 1,328 $ 1,315 Retail Division 1,244 1,358 CompuCom Division 257 — Other 1 3 Total $ 2,830 $ 2,676 Division Operating Income (loss) First Quarter (In millions) 2018 2017 Business Solutions Division $ 55 $ 58 Retail Division 72 112 CompuCom Division 5 — Other — (1 ) Total $ 132 $ 169 |
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: First Quarter (In millions) 2018 2017 Total Divisions operating income $ 132 $ 169 Add/(subtract): Merger and restructuring expenses, net (17 ) (20 ) Unallocated expenses (38 ) (25 ) Interest income 6 6 Interest expense (29 ) (13 ) Other income, net 1 4 Income from continuing operations before income taxes $ 55 $ 121 |
Schedule of Goodwill by Segment | The components of goodwill by segment are provided in the following table: (In millions) Business Division Retail Division CompuCom Division Total Balance as of December 30, 2017 $ 328 $ 78 $ 445 $ 851 Acquisitions 20 — 13 33 Foreign currency rate impact — — (3 ) (3 ) Purchase accounting adjustments — — 1 1 Balance as of March 31, 2018 $ 348 $ 78 $ 456 $ 882 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018USD ($)Segment | Apr. 01, 2017USD ($) | Dec. 30, 2017USD ($) | |
Summary Of Significant Accounting Policies [Line Items] | |||
Number of reportable segments | Segment | 3 | ||
Accounts payable and accrued expenses and other current liabilities not yet presented for payment | $ 54 | $ 53 | |
Cash and cash equivalents | 737 | $ 622 | |
Cash and cash equivalents, discontinued operations | 37 | $ 58 | |
Cumulative effect on accumulated deficit, net of tax | (4) | ||
Reduction in sales from service | (27) | ||
Reduction in cost of service | (27) | ||
Selling, general and administrative expenses | 573 | 531 | |
Other income, net | $ 1 | 4 | |
CompuCom | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Percentage of revenue exceeding current revenue due to acquisition | 10.00% | ||
Accounting Standards Update 2014-09 | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Cumulative effect on accumulated deficit, net of tax | $ (4) | ||
Accounting Standards Update 2017-07 | Adjustment | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Selling, general and administrative expenses | (3) | ||
Other income, net | $ 3 | ||
Prepaid Expenses and Other Current Assets | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Restricted cash, included in Prepaid expenses and other current assets | 3 | ||
Non-US | |||
Summary Of Significant Accounting Policies [Line Items] | |||
Cash and cash equivalents | 137 | ||
Cash and cash equivalents, discontinued operations | $ 37 |
Impacts of Adoption of New Stan
Impacts of Adoption of New Standard on Company's Balance Sheet and Statement of Operations (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Apr. 01, 2017 | Dec. 30, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Sales - Products | $ 2,423 | $ 2,460 | |
Sales - Services | 407 | 216 | |
Total Sales | 2,830 | 2,676 | |
Cost of goods sold and occupancy costs - Products | 1,891 | 1,878 | |
Cost of goods sold and occupancy costs - Services | 272 | 123 | |
Total Cost of goods sold and occupancy costs | 2,163 | 2,001 | |
Gross profit | 667 | 675 | |
Net income | $ 41 | $ 116 | |
Diluted earnings per share | $ 0.07 | $ 0.22 | |
Receivables, net | $ 942 | $ 931 | |
Prepaid expenses and other current assets | 118 | 86 | |
Deferred income taxes | 295 | 305 | |
Accrued expenses and other current liabilities | 1,011 | 986 | |
Stockholders' equity | 2,157 | $ 2,120 | |
Pro Forma | Accounting Standards Update 2014-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Sales - Products | 2,427 | ||
Sales - Services | 434 | ||
Total Sales | 2,861 | ||
Cost of goods sold and occupancy costs - Products | 1,895 | ||
Cost of goods sold and occupancy costs - Services | 299 | ||
Total Cost of goods sold and occupancy costs | 2,194 | ||
Gross profit | 667 | ||
Net income | $ 41 | ||
Diluted earnings per share | $ 0.07 | ||
Receivables, net | $ 947 | ||
Prepaid expenses and other current assets | 108 | ||
Deferred income taxes | 293 | ||
Accrued expenses and other current liabilities | 1,006 | ||
Stockholders' equity | $ 2,157 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Detail) shares in Millions, $ in Millions | Nov. 08, 2017USD ($)shares | Apr. 30, 2018USD ($) | Mar. 31, 2018USD ($)Business | Dec. 30, 2017USD ($) |
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Number of business acquired | Business | 2 | |||
Goodwill | $ 882 | $ 851 | ||
Multiple Acquisition | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Business combination consideration transferred | 47 | |||
Goodwill | 33 | |||
Multiple Acquisition | Customer Relationships | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Intangible assets acquired | $ 8 | |||
CompuCom Systems, Inc | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Business combination consideration transferred | $ 937 | |||
Payment to acquire business | $ 52 | |||
CompuCom Systems, Inc | Subsequent Event | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Payment to acquire business | $ 18 | |||
CompuCom Systems, Inc | Common Stock | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Business combination consideration transferred common stock issued, shares | shares | 44 | |||
Business combination consideration transferred common stock issued, value | $ 135 | |||
CompuCom Systems, Inc | Term Loan Facility | ||||
Business Acquisition, Acquisition Related Costs [Line Items] | ||||
Business combination consideration transferred liabilities incurred | $ 750 | |||
Senior secured term loan, term | 5 years |
Summary of Major Components of
Summary of Major Components of Merger and Restructuring Expenses, Net (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Merger and transaction related expenses, net | ||
Severance and retention | $ 2 | |
Transaction and integration | 7 | $ 6 |
Facility closure, contract termination, and other expenses, net | 3 | 4 |
Total Merger and transaction related expenses, net | 12 | 10 |
Restructuring expenses | ||
Severance | 9 | |
Facility closure, contract termination, professional fees and other expenses, net | 5 | 1 |
Total Restructuring expenses | 5 | 10 |
Total Merger and restructuring expenses, net | $ 17 | $ 20 |
Merger and Restructuring Acti34
Merger and Restructuring Activity - Additional Information (Detail) $ in Millions | 1 Months Ended | 3 Months Ended | |
Aug. 31, 2016Store | Mar. 31, 2018USD ($)Store | Apr. 01, 2017USD ($) | |
Business Acquisition [Line Items] | |||
Transaction and integration | $ 7 | $ 6 | |
Facility closure, contract termination, and other expenses, net | 3 | 4 | |
Gain on sale of warehouse facilities classified as assets held for sale | 1 | ||
Charges Incurred | 6 | ||
Merger and restructuring expenses, net | 17 | 20 | |
Facility closure, contract termination, professional fees and other expenses, net | 5 | $ 1 | |
Comprehensive Business Review | |||
Business Acquisition [Line Items] | |||
Number of retail stores planned to be closed | Store | 300 | ||
Restructuring Cost incurred | 1 | ||
Retail stores closure period | 3 years | ||
Charges Incurred | $ 99 | ||
Number of retail stores planned to be closed | Store | 300 | ||
Number of Retail Stores closed | Store | 137 | ||
Restructuring Plan | |||
Business Acquisition [Line Items] | |||
Professional fees | $ 4 | ||
OfficeMax Merger | |||
Business Acquisition [Line Items] | |||
Transaction and integration | 3 | ||
Facility closure, contract termination, and other expenses, net | 3 | ||
Merger and restructuring expenses (income), net | |||
Business Acquisition [Line Items] | |||
Transaction and integration | 3 | ||
Charges Incurred | 11 | ||
Facility closure, contract termination, professional fees and other expenses, net | $ 8 |
Severance and Facility Closure
Severance and Facility Closure Costs (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | $ 32 |
Charges Incurred | 6 |
Cash Payments | (12) |
Ending Balance | 26 |
Comprehensive Business Review | |
Restructuring Cost and Reserve [Line Items] | |
Charges Incurred | 99 |
Termination benefits | Merger related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 1 |
Charges Incurred | 2 |
Ending Balance | 3 |
Termination benefits | Comprehensive Business Review | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 4 |
Ending Balance | 4 |
Lease and contract obligations, accruals for facilities closures and other costs | Merger related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 16 |
Charges Incurred | 1 |
Cash Payments | (4) |
Ending Balance | 13 |
Lease and contract obligations, accruals for facilities closures and other costs | Comprehensive Business Review | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 9 |
Cash Payments | (4) |
Ending Balance | 5 |
Lease and contract obligations, accruals for facilities closures and other costs | Acquisition related accruals | |
Restructuring Cost and Reserve [Line Items] | |
Beginning Balance | 2 |
Charges Incurred | 3 |
Cash Payments | (4) |
Ending Balance | $ 1 |
Discontinued Operations - Addit
Discontinued Operations - Additional Information (Detail) € in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | 24 Months Ended | |||
Mar. 31, 2018USD ($) | Sep. 24, 2016Group | Dec. 30, 2017USD ($) | Dec. 30, 2017USD ($) | Feb. 28, 2018Transactions | Dec. 31, 2016EUR (€) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Number of disposal groups | Group | 4 | |||||
Australia and New Zealand Businesses | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Number of separate transactions | Transactions | 2 | |||||
New Zealand | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Escrow deposit | $ 7 | $ 7 | ||||
Discontinued Operations | Australia | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Impairment of long-lived assets to be disposed of | $ 44 | |||||
Pre-tax gain (loss) on sale of discontinued operations | $ (1) | |||||
Cumulative gain (loss) on sale of discontinued operations | (45) | |||||
Discontinued Operations | New Zealand | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Proceeds for the extension of sale and purchase agreement | $ 8 | |||||
Adjustment of carrying amount of business that is held for sale | $ 1 | |||||
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 | European Business | Maximum | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Transition services period | 24 months |
Major Component of Discontinued
Major Component of Discontinued Operations, Net of Tax (Detail) - Discontinued Operations, Held-for-Sale - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Sales | $ 94 | $ 168 |
Cost of goods sold and occupancy costs | 72 | 136 |
Operating expenses | 17 | 27 |
Restructuring charges | 1 | |
Other income (expense), net | (2) | 1 |
Net (increase) reduction of loss on discontinued operations held for sale | (1) | 38 |
Net loss on sale of discontinued operations | 1 | |
Income tax expense (benefit) | (7) | 1 |
Discontinued operations, net of tax | $ 8 | $ 42 |
Assets and Liabilities of Disco
Assets and Liabilities of Discontinued Operations (Detail) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 30, 2017 | Apr. 01, 2017 |
Assets | |||
Cash and cash equivalents | $ 37 | $ 58 | |
Current assets of discontinued operations | 98 | $ 139 | |
Liabilities | |||
Current liabilities of discontinued operations | 27 | 67 | |
Discontinued Operations, Held-for-Sale | |||
Assets | |||
Cash and cash equivalents | 37 | 14 | |
Receivables, net | 26 | 64 | |
Inventories | 31 | 78 | |
Prepaid expenses and other current assets | 1 | 4 | |
Property and equipment, net | 14 | 31 | |
Other assets | 2 | 3 | |
Valuation allowance | (13) | (55) | |
Current assets of discontinued operations | 98 | 139 | |
Liabilities | |||
Trade accounts payable | 15 | 38 | |
Accrued expenses and other current liabilities | 10 | 24 | |
Deferred income taxes and other long-term liabilities | 2 | 5 | |
Current liabilities of discontinued operations | $ 27 | $ 67 |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) | Nov. 08, 2017 | May 31, 2011 | Mar. 31, 2018 |
Amended Credit Agreement | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity under the new Facility | $ 1,200,000,000 | ||
Maturity date of term loan Facility | May 13, 2021 | ||
Expiration period under the new Facility | 5 years | ||
Available credit under the Facility | $ 881,000,000 | ||
Amount outstanding under letters of credit | 76,000,000 | ||
Average borrowings under the Facility | $ 0 | ||
Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Maturity date of term loan Facility | Nov. 8, 2022 | ||
Senior secured term loan | $ 750,000,000 |
Summary of Disaggregated Revenu
Summary of Disaggregated Revenue by Division, Major Product and Service Categories (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Major product and service categories | ||
Sales Revenue Goods | $ 2,423 | $ 2,460 |
Total | 2,830 | 2,676 |
Sales Revenue Services | 407 | 216 |
Business Solutions Division | ||
Major product and service categories | ||
Total | 1,328 | 1,315 |
Retail Division | ||
Major product and service categories | ||
Total | 1,244 | 1,358 |
CompuCom Division | ||
Major product and service categories | ||
Total | 257 | |
Other | ||
Major product and service categories | ||
Total | 1 | $ 3 |
Sales | ||
Major product and service categories | ||
Total | 2,830 | |
Sales | Business Solutions Division | ||
Major product and service categories | ||
Total | 1,328 | |
Sales | Retail Division | ||
Major product and service categories | ||
Total | 1,244 | |
Sales | CompuCom Division | ||
Major product and service categories | ||
Total | 257 | |
Sales | Other | ||
Major product and service categories | ||
Total | 1 | |
Sales | Supplies | ||
Major product and service categories | ||
Sales Revenue Goods | 1,204 | |
Sales | Supplies | Business Solutions Division | ||
Major product and service categories | ||
Sales Revenue Goods | 735 | |
Sales | Supplies | Retail Division | ||
Major product and service categories | ||
Sales Revenue Goods | 468 | |
Sales | Supplies | Other | ||
Major product and service categories | ||
Sales Revenue Goods | 1 | |
Sales | Technology | ||
Major product and service categories | ||
Sales Revenue Goods | 939 | |
Sales Revenue Services | 219 | |
Sales | Technology | Business Solutions Division | ||
Major product and service categories | ||
Sales Revenue Goods | 354 | |
Sales | Technology | Retail Division | ||
Major product and service categories | ||
Sales Revenue Goods | 539 | |
Sales Revenue Services | 9 | |
Sales | Technology | CompuCom Division | ||
Major product and service categories | ||
Sales Revenue Goods | 46 | |
Sales Revenue Services | 210 | |
Sales | Furniture And Other | ||
Major product and service categories | ||
Sales Revenue Goods | 280 | |
Sales | Furniture And Other | Business Solutions Division | ||
Major product and service categories | ||
Sales Revenue Goods | 172 | |
Sales | Furniture And Other | Retail Division | ||
Major product and service categories | ||
Sales Revenue Goods | 108 | |
Sales | Other Services | ||
Major product and service categories | ||
Sales Revenue Services | 188 | |
Sales | Other Services | Business Solutions Division | ||
Major product and service categories | ||
Sales Revenue Services | 67 | |
Sales | Other Services | Retail Division | ||
Major product and service categories | ||
Sales Revenue Services | 120 | |
Sales | Other Services | CompuCom Division | ||
Major product and service categories | ||
Sales Revenue Services | $ 1 |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2018USD ($)Segment | |
Number of reportable segments | Segment | 3 |
Recognition of contract assets as a result of business combination | $ 0 |
Revenue recognition included in short-term contract liabilities | 25,000,000 |
Recognition of contract liabilities as a result of business combination | 0 |
Unsignificant adjustment to revenue from performance obligations | 0 |
Contract with customer, asset, reclassified to receivable | 0 |
Capitalized acquisition cost | 39,000,000 |
Capitalized contract cost, amortization | 7,000,000 |
Capitalized contract cost, impairment loss | 0 |
Impairment charges related to contract assets | 0 |
Accrued Expenses and Other Current Liabilities | |
Deferred liability related to loyalty programs | 22,000,000 |
Contract Assets | |
Impairment charges related to contract assets | $ 0 |
Summary of Receivables, Contrac
Summary of Receivables, Contract Assets and Contract Liabilities from Contracts with Customers (Detail) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 30, 2017 |
Receivables, net | $ 942 | $ 931 |
Short-term contract assets | 22 | 20 |
Long-term contract assets | 17 | 11 |
Short-term contract liabilities | 63 | $ 60 |
Long-term contract liabilities | $ 1 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Sep. 30, 2017 | Apr. 01, 2017 | Dec. 30, 2017 | |
Income Taxes [Line Items] | ||||
Effective income tax rate reconciliation, at federal statutory income tax rate, percent | 21.00% | |||
Effective tax rate | 40.00% | 39.00% | ||
U.S. Federal and State | ||||
Income Taxes [Line Items] | ||||
Estimated valuation allowance, determined to be reduced | $ 40 | |||
Non-cash income tax benefit | $ 37 |
Schedule of Stockholders' Equit
Schedule of Stockholders' Equity (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Stockholders Equity [Line Items] | ||
Beginning Balance | $ 2,120 | |
Net income | 41 | $ 116 |
Dividends paid on common stock | (14) | |
Share purchase for taxes, net of proceeds on employee-related plans | (3) | |
Other comprehensive income | 14 | $ 6 |
Adjustment for adoption of the new revenue accounting standard | (4) | |
Amortization of long-term incentive stock grants | 3 | |
Ending Balance | $ 2,157 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) Activity, Net of Tax (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | $ 2,120 |
Reclassification of foreign currency translation adjustments realized upon disposal of business | 14 |
Ending Balance | 2,157 |
Foreign Currency Translation Adjustments | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (43) |
Reclassification of foreign currency translation adjustments realized upon disposal of business | 14 |
Ending Balance | (29) |
Change in Deferred Pension and Other | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (35) |
Ending Balance | (35) |
Accumulated Other Comprehensive Income (Loss) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Beginning Balance | (78) |
Ending Balance | $ (64) |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Apr. 01, 2017 | Aug. 31, 2016 | May 31, 2016 | |
Shareholders Equity [Line Items] | ||||
Stock repurchase program, shares purchased | 0 | |||
Stock repurchase program, remaining authorized repurchase amount | $ 62,000,000 | |||
Dividend on common stock | $ 0.025 | $ 0.025 | ||
Payments of ordinary dividends, common stock | $ 14,000,000 | $ 13,000,000 | ||
Maximum | ||||
Shareholders Equity [Line Items] | ||||
Stock repurchase program, authorized amount | $ 250,000,000 | $ 100,000,000 |
Calculation of Net Earnings Per
Calculation of Net Earnings Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Earnings Per Share [Line Items] | ||
Net income from continuing operations | $ 33 | $ 74 |
Income from discontinued operations, net of tax | 8 | 42 |
Net income | $ 41 | $ 116 |
Weighted-average shares outstanding | 555 | 515 |
Basic earnings per share: | ||
Continuing operations | $ 0.06 | $ 0.14 |
Discontinued operations | 0.01 | 0.08 |
Net earnings per share | $ 0.07 | $ 0.22 |
Net income from continuing operations | $ 33 | $ 74 |
Income from discontinued operations, net of tax | 8 | 42 |
Net income | $ 41 | $ 116 |
Weighted-average shares outstanding | 555 | 515 |
Stock options and restricted stock | 8 | 17 |
Diluted weighted-average shares outstanding | 563 | 532 |
Diluted earnings per share: | ||
Continuing operations | $ 0.06 | $ 0.14 |
Discontinued operations | 0.01 | 0.08 |
Net diluted earnings per share | $ 0.07 | $ 0.22 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Nonvested Stock Options and Shares | ||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||
Shares excluded from computation of diluted earnings per share | 8 | 4 |
Components of Net Periodic Pens
Components of Net Periodic Pension Benefit (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
North America | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 1 | $ 2 |
Interest cost | 9 | 10 |
Expected return on plan assets | (11) | (12) |
Net periodic pension benefit | (1) | |
United Kingdom | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 0 | 0 |
Interest cost | 2 | 2 |
Expected return on plan assets | $ (2) | (3) |
Net periodic pension benefit | $ (1) |
Employee Benefit Plans - Additi
Employee Benefit Plans - Additional Information (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
North America | |
Defined Benefit Plan Disclosure [Line Items] | |
Pension and other postretirement contributions, remainder of fiscal year | $ 2 |
United Kingdom | |
Defined Benefit Plan Disclosure [Line Items] | |
Pension and other postretirement contributions, remainder of fiscal year | 1 |
Pension and other postretirement contributions, current period | $ 1 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 30, 2017 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Asset impairment charges | $ 0 | |
Derivative Foreign Currency and Fuel Contract | Maximum | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Accrued expenses and other current liabilities | 1,000,000 | $ 1,000,000 |
Fair Value Inputs Level2 and Level3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Redeemable noncontrolling interest, equity, fair value | $ 18,000,000 |
Schedule of Fair Value of Asset
Schedule of Fair Value of Assets and Liabilities (Detail) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 30, 2017 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Timber notes receivable | $ 849 | $ 865 |
Company-owned life insurance | 88 | 90 |
Recourse Debt | Term Loan, due 2022 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 743 | 754 |
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 | 185 | 185 |
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 |
Non-Recourse Debt | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 764 | 777 |
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Timber notes receivable | 858 | 863 |
Company-owned life insurance | 88 | 90 |
Carrying Value | Recourse Debt | Term Loan, due 2022 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 699 | 717 |
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 | $ 770 | $ 776 |
Schedule of Fair Value of Ass53
Schedule of Fair Value of Assets and Liabilities (Parenthetical) (Detail) - Recourse Debt | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 30, 2017 | |
Term Loan, due 2022 | Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, due date | 2,022 | 2,022 |
Term Loan, due 2022 | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, due date | 2,022 | 2,022 |
Revenue bonds, due in varying amounts periodically through 2029 | 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 | 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 | 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 | 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 | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Minimum | |
Commitments and Contingencies Disclosure [Line Items] | |
Losses for environmental liabilities | $ 10 |
Maximum | |
Commitments and Contingencies Disclosure [Line Items] | |
Losses for environmental liabilities | $ 25 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2018Segment | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 3 |
Reconciliation of Revenue from
Reconciliation of Revenue from Segments to Consolidated (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Segment Reporting Information [Line Items] | ||
Sales | $ 2,830 | $ 2,676 |
Business Solutions Division | ||
Segment Reporting Information [Line Items] | ||
Sales | 1,328 | 1,315 |
Retail Division | ||
Segment Reporting Information [Line Items] | ||
Sales | 1,244 | 1,358 |
CompuCom Division | ||
Segment Reporting Information [Line Items] | ||
Sales | 257 | |
Other | ||
Segment Reporting Information [Line Items] | ||
Sales | $ 1 | $ 3 |
Division Operating Income (Deta
Division Operating Income (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | $ 77 | $ 124 |
Operating Segments | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | 132 | 169 |
Operating Segments | Business Solutions Division | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | 55 | 58 |
Operating Segments | Retail Division | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | 72 | 112 |
Operating Segments | CompuCom Division | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | $ 5 | |
Operating Segments | Other | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Operating income (loss) | $ (1) |
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 | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Segment Reporting Information [Line Items] | ||
Total Divisions operating income | $ 77 | $ 124 |
Merger and restructuring expenses, net | (17) | (20) |
Unallocated expenses | (38) | (25) |
Interest income | 6 | 6 |
Interest expense | (29) | (13) |
Other income, net | 1 | 4 |
Income from continuing operations before income taxes | 55 | 121 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total Divisions operating income | $ 132 | $ 169 |
Schedule of Goodwill by Segment
Schedule of Goodwill by Segment (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Goodwill [Line Items] | |
Goodwill | $ 851 |
Acquisitions | 33 |
Foreign currency rate impact | (3) |
Purchase accounting adjustments | 1 |
Goodwill | 882 |
Operating Segments | Business Solutions Division | |
Goodwill [Line Items] | |
Goodwill | 328 |
Acquisitions | 20 |
Goodwill | 348 |
Operating Segments | Retail Division | |
Goodwill [Line Items] | |
Goodwill | 78 |
Goodwill | 78 |
Operating Segments | CompuCom Division | |
Goodwill [Line Items] | |
Goodwill | 445 |
Acquisitions | 13 |
Foreign currency rate impact | (3) |
Purchase accounting adjustments | 1 |
Goodwill | $ 456 |