Division Information

9 Months Ended

Sep. 28, 2013

Division Information

Note I – Division Information

Office Depot operates in three Divisions: North American Retail Division, North American Business Solutions Division, and International Division. Each of these Divisions is managed separately primarily because it serves a different customer group. Division operating income (loss) is determined based on the measure of performance reported internally to manage the business and for resource allocation. This measure charges to the respective Divisions those General and administrative and other expenses considered directly or closely related to their operations and allocates corporate support costs. Other companies may charge more or less of these items to their segments and results may not be comparable to similarly titled measures used by other entities.

The following is a summary of significant accounts and balances by each of the Divisions, reconciled to consolidated totals.

	Sales
	Third Quarter				Year-to-Date
(In thousands)	2013		2012		2013		2012
North American Retail Division	$	1,127,755	$	1,173,653	$	3,211,063	$	3,387,087
North American Business Solutions Division		811,159		827,414		2,407,829		2,451,549
International Division		680,534		691,866		2,137,435		2,234,256
Total	$	2,619,448	$	2,692,933	$	7,756,327	$	8,072,892

	Division Operating Income (Loss)
	Third Quarter					Year-to-Date
(In thousands)	2013		2012			2013			2012
North American Retail Division	$	10,151	$	(52,040	)	$	(2,650	)	$	(84,359	)
North American Business Solutions Division		38,836		30,475			94,880			71,980
International Division		2,636		(14,576	)		(3,823	)		(25,754	)
Total	$	51,623	$	(36,141	)	$	88,407		$	(38,133	)

A reconciliation of the measure of Division operating income (loss) to consolidated earnings (loss) before income taxes is as follows:

	Third Quarter						Year-to-Date
(In thousands)	2013			2012			2013			2012
Total Division operating income (loss)	$	51,623		$	(36,141	)	$	88,407		$	(38,133	)
Add/(subtract):
Recovery of purchase price		—			—			—			68,314
Merger and certain shareholder-related expenses		(39,740	)		—			(71,564	)		—
Unallocated charges		—			(710	)		(137	)		(7,494	)
Unallocated operating expenses		(20,046	)		(18,249	)		(60,356	)		(58,744	)
Interest income		1,012			482			1,422			1,804
Interest expense		(15,359	)		(16,947	)		(48,471	)		(49,128	)
Loss on extinguishment of debt		—			—			—			(12,110	)
Goodwill impairment		(44,160	)		—			(44,160	)		—
Gain on disposition of joint venture		380,813			—			381,541			—
Miscellaneous income, net		1,318			13,073			14,192			26,019
Earnings (loss) before income taxes	$	315,461		$	(58,492	)	$	260,874		$	(69,472	)

The gross amount of goodwill and the amount of accumulated impairment losses as of September 28, 2013 are provided in the following table:

(In thousands)	North American Retail Division			North American Business Solutions Division			International Division			Total
Goodwill	$	1,842		$	367,790		$	908,015		$	1,277,647
Accumulated impairment losses		(1,842	)		(348,359	)		(863,134	)		(1,213,335	)
Balance as of December 29, 2012		—			19,431			44,881			64,312
2013 Changes:
Impairment charges								(44,160	)		(44,160	)
Foreign currency exchange rate changes		—			—			(721	)		(721	)
Balance as of September 28, 2013	$	—		$	19,431		$	—		$	19,431

Following the July 2013 sale of the Company’s interest in Office Depot de Mexico (refer to Note N) and return of cash proceeds to the U.S. parent company, the fair value of the reporting unit decreased below its carrying value and goodwill was fully impaired. The impairment charge of $44 million is included in Asset impairments in the Condensed Consolidated Statement of Operations for the third quarter and year-to-date 2013.