Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This document, including the following discussion and analysis, contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. Without limitation, when we use the words "believe," "estimate," "plan," "expect," "intend," "anticipate," "continue," "may," "project," "probably," "should," "could," "will" and similar expressions in this Quarterly Report on Form 10-Q, we are identifying forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company's financial condition or results of operations, the potential impact of the COVID-19 pandemic on our business, liquidity, suppliers, consumers, customers, and employees, disruptions or inefficiencies in our supply chain, our ability to mitigate or manage disruptions posed by COVID-19, changes in worldwide andU.S. economic conditions that materially impact consumer spending and employment and the demand for our products and services, and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth herein under "Risk Factors," found in Other Information which supplements our discussion of "Risk Factors" within Other Key Information in our Annual Report on Form 10-K filed onFebruary 26, 2020 (the "2019 Form 10-K") with theSEC , and Forward-Looking Statements, found in our 2019 Form 10-K. OnJune 30, 2020 ,Office Depot, Inc. , the predecessor of TheODP Corporation , implemented a holding company reorganization (the "Reorganization"), which resulted in TheODP Corporation becoming the parent company of, and the successor issuer to,Office Depot, Inc. For purposes of this report, references to "we," or the "Company" or its management or business at any period prior to the holding company reorganization (June 30, 2020 ) refer toOffice Depot, Inc. as the predecessor company and its consolidated subsidiaries and thereafter to those of TheODP Corporation and its consolidated subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist readers in better understanding and evaluating our financial condition and results of operations. We recommend reading this MD&A in conjunction with our Condensed Consolidated Financial Statements and the Notes to those statements included in the "Financial Statements" section of this Quarterly Report on Form 10-Q, as well as our 2019 Form 10-K. OVERVIEW THE COMPANY We are a leading provider of business services and supplies, products and technology solutions to small, medium and enterprise businesses, through our integrated business-to-business ("B2B") distribution platform of dedicated sales professionals and technicians, online presence, and 1244 retail stores. Through our banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, we offer our customers the tools and resources they need to focus on starting, growing and running their business.
As of
The Business Solutions Division, or BSD, is the largest component of our integrated B2B platform and provides our customers with nationally branded as well as our private branded office supply products and services. Additionally, BSD provides adjacency products and services including cleaning and breakroom supplies, technology services, copy and print services, and office furniture products and services inthe United States ,Puerto Rico , theU.S. Virgin Islands , andCanada through a dedicated sales force, catalogs, telesales, and electronically through our Internet websites. BSD includes the distribution businesses we have acquired as part of our strategic transformation described in the section below. The Retail Division includes our chain of retail stores inthe United States ,Puerto Rico and theU.S. Virgin Islands where we sell office supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom supplies and facilities products, and furniture. In addition, our Retail Division offers a range of business-related services targeted to small businesses, technology support services as well as printing, copying, mailing and shipping services. The CompuCom Division was formed during the fourth quarter of 2017 as a result of our acquisition ofCompuCom Systems, Inc. ("CompuCom"). The CompuCom Division is a technology services provider supporting the distributed technology needs of enterprise organizations inthe United States andCanada . With a vision of connecting people, technology, and the edge with a seamless experience, CompuCom enables enterprise employees to be productive. CompuCom offers a broad range of solutions including technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions. In 2020, a suite of technology services is being marketed through BSD and brings CompuCom's enterprise quality services to small and medium companies. 27 --------------------------------------------------------------------------------
STRATEGIC TRANSFORMATION
Since 2017, we have been undergoing a strategic business transformation to pivot the Company into an integrated B2B distribution platform, with the objective of expanding our product offerings to include value-added services for our customers and capture greater market share. As part of this transformation, we acquired CompuCom in 2017 and an enterprise IT solutions integrator and managed services provider in 2018. We continue to expand our reach and distribution network through acquisitions of profitable regional office supply distribution businesses, serving small and mid-market customers. Many of these customers are in geographic areas that were previously underserved by our network. Year-to-date 2020, we acquired four small independent regional office supply distribution businesses which has allowed for an effective and accretive means to expand our distribution reach, target new business customers and grow our offerings beyond traditional office supplies. The aggregate total purchase consideration, including contingent consideration, for the four acquisitions completed year-to-date 2020 was approximately$37 million , subject to certain customary post-closing adjustments. The aggregate purchase price was funded with cash on hand. The operating results of the acquired office supply distribution businesses are combined with our operating results subsequent to their purchase dates, and are included in the Business Solutions Division, and the operating results of CompuCom and the enterprise IT solutions integrator and managed services provider are included in the CompuCom Division. Refer to Note 2. "Acquisitions" in Notes to Condensed Consolidated Financial Statements for additional information.
STOCK SPLIT AND CORPORATE REORGANIZATION
After obtaining the approval of our shareholders onMay 11, 2020 , our Board of Directors determined to set a reverse stock split ratio of 1-for-10 for a reverse stock split of the Company's outstanding shares of common stock, and a reduction in the number of authorized shares of the Company's common stock by a corresponding ratio. The reverse stock split was effective onJune 30, 2020 . OnMarch 31, 2020 , our Board of Directors approved proceeding with the implementation of a Reorganization of the Company's corporate structure into a holding company structure. The Reorganization was completed onJune 30, 2020 , andOffice Depot, Inc. became a wholly-owned subsidiary of a new holding company, TheODP Corporation , and replacedOffice Depot, Inc. as the public company trading on theNASDAQ Stock Market under the ticker symbol "ODP". All outstanding shares ofOffice Depot, Inc. were automatically converted into shares of common stock in TheODP Corporation . The Reorganization begins to simplify the Company's legal entity and tax structure, more closely aligns our operating assets to their respective operating channels within the legal entity structure, and is intended to increase its operational flexibility. It has not resulted in a change in the directors, executive officers, management or business of the Company. In addition, the Reorganization is intended to be a tax-free transaction forU.S. federal income tax purposes for our shareholders.
RECENT DEVELOPMENTS
OnMarch 11, 2020 , theWorld Health Organization declared the current outbreak of a novel coronavirus disease ("COVID-19") as a global pandemic. In response to this declaration and with the rapid spread of COVID-19 globally and throughoutthe United States , federal, state and local authorities have declared states of emergency and imposed varying degrees of restrictions on social and commercial activities, including travel restrictions and curfews, in order to promote social distancing in an effort to prevent and slow the spread of the disease. These restrictive measures have had significant adverse impacts on the national and global economy year-to-date 2020. From the beginning of the COVID-19 pandemic, we have made supporting the health and wellness of our employees and customers a priority. Due to the nature of products sold in our retail locations and integrated business-to-business distribution platform, our business is considered to be essential retail commerce by most local jurisdictions and has remained open and operational. Based upon the guidance of theU.S. Centers for Disease Control ("CDC") and local health authorities, we have put appropriate measures in place to help reduce the spread of infection to our employees and customers, including the institution of social distancing protocols and increased frequency of cleaning and sanitizing in those facilities. SinceMarch 2020 , employeeswho are able to, have been working from home, with only essential employees in our retail stores, customer support and distribution centers working on site at our facilities, as well as technicians and field support on-site at customer locations, as necessary. We have also limited employee travel to only essential business needs. Overall demand has declined significantly as a result of the disruptions experienced by our business customers from restrictions on commercial activities and social distancing measures, and we expect these demand fluctuations to continue into the fourth quarter of 2020 and beyond. We also experienced lower than historical levels of sales of back-to-school supplies which typically peak over several weeks in the third quarter. The delayed start of the school year and the cancellation or delayed start of in-person school instruction across theU.S. as a result of the COVID-19 outbreak have negatively impacted our third quarter results. We expect the demand for back-to-school supplies to be spread over a longer timeframe in 2020 and extend into the fourth quarter of 2020 and beyond. We continued to experience higher than forecasted demand in our e-Commerce platform, as well as in our retail locations 28 -------------------------------------------------------------------------------- associated with certain product categories, such as furniture, technology products, cleaning and breakroom supplies and personal protective equipment that meet our customers' needs arising from the risks related to potential exposure to COVID-19. In response to the volatility resulting from the pandemic, we are taking measures to protect our financial position during this challenging time period. These measures include creating contingency plans for merchandise categories that may be in high demand, adjusting our inventory levels, reducing certain occupancy costs, reducing nonessential expenses, and reducing our capital spend, among others. InMay 2020 , we proactively adopted a more conservative approach to our capital return program to preserve liquidity and maximum financial flexibility by temporarily suspending our share repurchases and quarterly cash dividend. InNovember 2020 , our Board of Directors approved the resumption of the stock repurchase program beginning in the fourth quarter of 2020 which will run through the end of 2021. Our quarterly cash dividend remains temporarily suspended. Beginning towards the end of the second quarter of 2020, states and local jurisdictions started to phase out restrictions imposed on commercial activities at varying degrees, while certain states have extended or reinstated restrictions. We continue to assess our outlook on a daily basis, but we are unable to accurately predict the pace and shape of the recovery from COVID-19 due to numerous uncertainties, including the duration or any future recurrence of the outbreak, actions that may be taken by governmental authorities, additional disruption to the economy and consumers' willingness and ability to spend, temporary or permanent closures of our business customers, supply chain disruptions and other unforeseeable consequences. As a result, weaker global economic conditions and increased unemployment, including continued business disruption relating to the COVID-19 outbreak and resulting governmental actions may continue to negatively impact our business and results of operations in the fourth quarter of 2020 and beyond, as well as result in future impairments of our assets.
CONSOLIDATED RESULTS AND LIQUIDITY
The following summarizes the more significant factors impacting our operating results for the 13-week and 39-week periods endedSeptember 26, 2020 (also referred to as the "third quarter of 2020" and "year-to-date 2020," respectively) andSeptember 28, 2019 (also referred to as the "third quarter of 2019" and "year-to-date 2019," respectively). Our consolidated sales were 9% lower in both the third quarter and year-to-date 2020 compared to the same periods of the prior year. These period-over-period decreases were primarily driven by lower sales in our Business Solutions Division, which decreased 11% and 12% during the third quarter and year-to-date 2020, respectively, primarily due to temporary closures of certain enterprise customers and a transition to a work-from-home environment in response to the restrictions imposed by local authorities to prevent and reduce the spread of COVID-19. This decrease was partially offset by higher sales generated by our eCommerce platform, which is included in our Business Solutions Division. Sales in our Retail Division decreased 3% and 4% in the third quarter and year-to-date 2020, respectively, due to planned store closures, lower sales in existing locations due to reduced customer traffic, and decreased sales of back-to-school supplies due to the delayed start of the school year. Our CompuCom Division also experienced lower sales of 22% and 15% in the third quarter and year-to-date 2020, respectively, when compared to the prior year periods, primarily due to certain customer imposed delays and cancellations of previously scheduled projects and postponed new projects as a result of COVID-19 business disruption and lower product sales and service volume. Sales Third Quarter Year-to-Date (In millions) 2020 2019 Change 2020 2019 Change Business Solutions Division$ 1,197 $ 1,350 (11 )%$ 3,554 $ 4,022 (12 )% Retail Division 1,147 1,177 (3 )% 3,216 3,352 (4 )% CompuCom Division 197 252 (22 )% 646 758 (15 )% Other (2 ) 3 (167 )% 6 7 (14 )% Total$ 2,539 $ 2,782 (9 )%$ 7,422 $ 8,139 (9 )% Product sales in the third quarter and year-to-date 2020 both decreased 7% from the comparative prior year periods, primarily driven by lower sales in the Business Solutions Division as a result of temporary closures and transition to a work-from-home environment of certain enterprise customers due to COVID-19, as described above, and was partially offset by an increase in product sales generated by our eCommerce platform. Sales of services in the third quarter and year-to-date 2020 decreased 19% and 16%, respectively, primarily driven by a decline in sales of our copy and print services in our Retail Division due to reduced demand and in our CompuCom Division due to customer imposed delays and cancellations of previously scheduled and postponed new projects and reduced business volume, both as a result of the impacts of COVID-19 which included shelter-in-place orders, temporary closures of nonessential businesses, and schools transitioning to virtual learning. Sales of services were also impacted by the decline of our copy and print services in our Business Solutions Division due to the impacts of COVID-19, mainly as a result of the temporary closures of nonessential businesses. On a consolidated basis, services represented approximately 13% and 14% of our total sales in the third quarter and year-to-date 2020, respectively, as compared to 15% in both the third quarter and year-to-date 2019. 29 --------------------------------------------------------------------------------
Sales Third Quarter Year-to-Date (In millions) 2020 2019 Change 2020 2019 Change Products$ 2,209 $ 2,377 (7 )%$ 6,403 $ 6,921 (7 )% Services 330 405 (19 )% 1,019 1,218 (16 )% Total$ 2,539 $ 2,782 (9 )%$ 7,422 $ 8,139 (9 )%
OTHER SIGNIFICANT FACTORS IMPACTING TOTAL COMPANY RESULTS AND LIQUIDITY
• Total gross profit decreased by
in the third quarter and year-to-date 2020, respectively, when compared to
the same periods in 2019. The decrease in gross profit was largely driven by
the flow through impact of lower sales in our Business Solutions Division
and Retail Division, which consisted of
decrease in gross profit for the third quarter of 2020, respectively, and
period. The remaining decrease of
quarter and year-to-date 2020, respectively, was attributable to our
CompuCom Division. These reductions were partially offset by the savings
generated from the implementation of the Business Acceleration Program,
which among other things, optimized labor costs in our CompuCom Division,
and acquisitions within our Business Solutions Division.
• Total gross margin for the third quarter and year-to-date 2020 was 23% and
22%, respectively, which were lower than the comparative prior year period
gross margins of 24% and 23%, respectively. The lower gross margin in the
third quarter of 2020 is mainly driven by higher product costs as a result
of product mix. The year-to-date 2020 period is mainly driven by the factors
impacting the third quarter of 2020 as well as the deleveraging impact of
supply chain and occupancy costs as a result of lower sales in the second
quarter of 2020. While we incurred incremental costs related to trade
tariffs on inventory we purchase from suppliers in
including changes to our contracting model, alternative sourcing strategies,
and selective price increase pass-through efforts mitigated much of the impact of such trade tariffs to our results of operations.
• Total selling, general and administrative expenses decreased by
or 15%, and
respectively, when compared to the same periods in 2019. The decrease was
the result of store closures in our Retail Division and certain strategic
initiatives, including the Business Acceleration Program, aimed at reducing
our spend on payroll and payroll-related costs and other discretionary
expenses such as professional fees, contingent labor, travel and marketing.
The decreases in total selling, general, and administrative expenses in the
third quarter and year-to-date 2020 were partially offset by increases in
expenses associated with the expansion of our distribution network through
acquisitions within our Business Solutions Division.
• We recorded
expenses, net in the third quarter and year-to-date 2020, respectively,
compared to
year-to-date 2019, respectively. Merger and restructuring expenses in the
third quarter and year-to-date 2020 included
respectively, of severance, retention, transaction and integration costs
associated with business acquisitions and
respectively, of expenses associated with restructuring activities. Refer to
Note 3. "Merger and Restructuring Activity" in Notes to Condensed Consolidated Financial Statements for additional information.
• We recorded
third quarter and year-to-date 2020, respectively, which included
million related to goodwill in our Contract and CompuCom reporting units and
other intangible assets impairment year-to-date 2020, and
million in the third quarter and year-to-date 2020, respectively, related to
impairment of operating lease ROU assets associated with our retail store
locations, with the remainder primarily relating to impairment of fixed
assets and a cost method investment. We recorded
of asset impairment charges in the third quarter and year-to-date 2019,
respectively, which primarily related to impairment of operating lease ROU
assets associated with our retail store locations. Refer to Note 11. "Fair
Value Measurements" in Notes to Condensed Consolidated Financial Statements
for additional information.
• In
Agreement in full and terminated it. We recognized
the extinguishment and modification of debt related to this transaction,
which primarily consists of the write-off of the remaining unamortized
original issue discount and debt issuance costs of the Term Loan Credit
Agreement, and is included in our results for year-to-date 2020. Refer to
Note 8. "Debt" in Notes to Condensed Consolidated Financial Statements for
additional information. • Our effective tax rates of 42% and (9)% for the third quarter and
year-to-date 2020, respectively, differ from the statutory rate of 21% due
to the impact of state taxes, excess tax deficiencies associated with
stock-based compensation awards and certain nondeductible items, adjustments
to certain tax benefits and the mix of income and losses across
non-
effective tax rate and the statutory rate was also impacted by goodwill
impairment. Our effective tax rates of 35% and 39% for the third quarter and
year-to-date 2019, respectively, were primarily influenced by the impact of
state taxes and certain nondeductible items, adjustments to tax credit
benefits, and the 30
--------------------------------------------------------------------------------
mix of income and losses across
Note 6. "Income Taxes" in Notes to Condensed Consolidated Financial Statements for additional information.
• Diluted earnings per share was
to
year-to-date 2020 compared to diluted earnings per share of$0.79 year-to-date 2019.
• In order to preserve liquidity during the COVID-19 pandemic and in light of
the uncertainties as to its duration and economic impact, in
Board of Directors suspended our quarterly cash dividend and our stock
repurchase program. In
resumption of the stock repurchase program beginning in the fourth quarter
of 2020 which will run through the end of 2021. Our quarterly cash dividend
continues to be temporarily suspended. In the third quarter of 2020, we did
not pay a quarterly cash dividend on our common stock. In the third quarter
of 2019, we paid a quarterly cash dividend on our common stock in the amount
of
of year-to-date 2020 and 2019, we paid total cash dividends of
and
• At
for a total liquidity of approximately
operating activities was
million in the comparable prior year period. During the third quarter of
2020, we repaid
Amended Credit Agreement. Refer to the "Liquidity and Capital Resources"
section for further information on cash flows.
OPERATING RESULTS BY DIVISION
Discussion of additional income and expense items, including material charges and credits and changes in interest and income taxes follows our review of segment results.
BUSINESS SOLUTIONS DIVISION Third Quarter Year-to-Date (In millions) 2020 2019 2020 2019 Products$ 1,127 $ 1,264 $ 3,338 $ 3,781 Services 70 86 216 241 Total Sales$ 1,197 $ 1,350 $ 3,554 $ 4,022 % change (11 )% (1 )% (12 )% 1 % Division operating income$ 45 $ 71 $ 98 $ 203 % of sales 4 % 5 % 3 % 5 % Product sales in our Business Solutions Division decreased 11% and 12% in the third quarter and year-to-date 2020, respectively, compared to the corresponding periods in 2019. The third quarter and year-to-date 2020 were impacted by lower demand, especially in product categories such as toner, ink and office supplies due to a portion of our business-to-business customers having to temporarily transition into a work-from-home environment or pause operations as a result of restrictions imposed by federal, state and local authorities, which resulted in a decrease of$236 million and$705 million in product sales during the third quarter and year-to-date 2020, respectively. These restrictions, which started inMarch 2020 and aim to prevent and reduce the spread of COVID-19, have continued through the third quarter across a majority of the jurisdictions in which our customers operate. The lower demand from our business-to-business customers was partially offset by higher sales in other product categories which aggregated to$99 million and$262 million , respectively, and primarily related to cleaning products and personal protective equipment sales of$49 million and$148 million , respectively, in the third quarter and year-to-date 2020. Higher sales in our eCommerce platform, which experienced increased demand during this period as more customers preferred to order online and have their purchases delivered, and the impact of acquisitions, also contributed positively to our product revenues for the period, although they were not material drivers of our results for the third quarter and year-to-date 2020. Sales of services in our Business Solutions Division decreased 19% and 10% in the third quarter and year-to-date 2020, respectively, compared to prior periods. The decrease in both periods is primarily due to lower demand from our business-to-business customers for our managed print and fulfillment services and copy and print services as a result of the impact of restrictions due to COVID-19 on their operations during the third quarter of 2020. The impacts of the COVID-19 outbreak on the fourth quarter of 2020 and the magnitude by which sales of products and services of our Business Solutions Division will be affected will depend heavily on the duration of restrictions imposed by governmental authorities to prevent and reduce the spread of COVID-19 such as social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, as discussed above, the impact has been material to the results of the Business Solutions Division in the third quarter and year-to-date 2020 and could continue into the fourth quarter of 2020 and beyond. Our Business Solutions Division operating income was$45 million in the third quarter of 2020 compared to$71 million in the third quarter of 2019, a decrease of 37% period-over-period. The decrease in operating income in the third quarter of 2020 was related to 31
-------------------------------------------------------------------------------- the flow through impact of lower product sales volume coupled with a lower gross profit margin due to a combination of pricing pressures and higher product costs. This was partially offset by a reduction in selling, general and administrative expenses achieved through our Business Acceleration Program. Our Business Solutions Division operating income of$98 million year-to-date 2020 as compared to$203 million year-to-date 2019, decreased 52% period-over-period, and was driven by the impact of the factors described above for the third quarter of 2020. RETAIL DIVISION Third Quarter Year-to-Date (In millions) 2020 2019 2020 2019 Products$ 1,037 $ 1,036 $ 2,884 $ 2,916 Services 110 141 332 436 Total Sales$ 1,147 $ 1,177 $ 3,216 $ 3,352 % change (3 )% (6 )% (4 )% (6 )% Division operating income$ 119 $ 84 $ 224 $ 160 % of sales 10 % 7 % 7 % 5 % Comparable store sales decline N/A (4 )% N/A (4 )% Product sales in our Retail Division were flat in the third quarter of 2020 compared to the corresponding period in 2019, and decreased 1% year-to-date 2020 compared to the corresponding period in 2019. Product sales were negatively impacted by closing underperforming retail stores, fewer transactions in existing stores, and a decline in sales of back-to-school supplies which typically peak over several weeks in the third quarter. The delayed start of the school year and the cancellation or delayed start of in-person school instruction across theU.S. as a result of the COVID-19 outbreak have negatively impacted the third quarter of 2020 as compared to the corresponding period in the prior year. We expect the demand for back-to-school supplies to be spread over a longer timeframe in 2020 and extend into the fourth quarter of 2020. The decline in sales was fully offset for third quarter of 2020, and partially offset for year-to-date 2020, by the increased demand in essential products such as furniture, technology products, cleaning and breakroom supplies and other work-from-home and learn-from-home enabling products. The increase in these product categories were$145 million and$303 million in the third quarter of 2020 and year-to-date 2020, respectively, and was primarily driven by the needs of our customers to help address their challenges derived from the COVID-19 outbreak. Additionally, the increased demand was driven by needs of customerswho transitioned into remote work and virtual learning environments inMarch 2020 as a result of restrictions imposed by federal, state and local authorities in order to prevent and reduce the spread of COVID-19. The demand for these product categories could decrease in the near term related to numerous factors, among others, a weakerU.S. economy and higher unemployment that materially impact consumer spending, the demand for our products and services and the availability of supply. Specifically, we have begun to experience supply constraints in our product categories with high demand such as ink, cleaning and breakroom supplies, and technology products, and we may continue to face delays or difficulty sourcing these products. For the reasons described in the "Recent Developments" section, our business is considered to be essential retail commerce by most local jurisdictions, and as a result, the substantial majority of our retail locations remain open and operational with the appropriate safety measures in place during the COVID-19 outbreak, including a curbside pickup option. Since late in first quarter of 2020, we have temporarily reduced our retail location hours by two hours daily, which continues to be in effect at the majority of our retail locations. We believe sales in our Retail Division may be adversely impacted due to the COVID-19 outbreak in the fourth quarter of 2020 and beyond. As there is uncertainty of the extent and duration of the impacts of the outbreak, we are unable to estimate the full impact at this time. Product sales were also positively impacted during the quarter by the increase in the volume of transactions where our customers buy online for pick up in our stores ("BOPIS"). BOPIS transactions are included in our Retail Division results because they are fulfilled with retail store inventory and serviced by our retail store associates. Our BOPIS sales have increased 82% and 84% in the third quarter and year-to-date 2020, respectively, from the corresponding prior year periods, and we expect this trend to continue during the COVID-19 outbreak. Sales of services in our Retail Division decreased 22% and 24% in the third quarter and year-to-date 2020, respectively, compared to the corresponding periods in 2019. The positive momentum we experienced in early 2020 from the expansion of our copy and print services and subscription volume was negatively impacted by a reduction in demand due to temporary closures of nonessential businesses, as well as the transition of a significant portion of our customers to a remote work and virtual learning environment, due to COVID-19. We have historically reported our comparable store sales, which relate to stores that have been open for at least one year. Stores are removed from the comparable sales calculation one month prior to closing, as sales during that period are mostly related to clearance activity. Stores are also removed from the comparable sales calculation during periods of store remodeling, store closures due to 32 -------------------------------------------------------------------------------- hurricanes, natural disasters or epidemics/pandemics, or if significantly downsized. Our measure of comparable store sales has been applied consistently across periods, but may differ from measures used by other companies. Due to the reduction in our retail location hours due to COVID-19, and the variability in COVID-19 related restrictions imposed by state and local governments such as occupancy levels and business regulations that can affect demand for our in-store products and services, comparable store sales are not a meaningful metric for the third quarter and year-to-date 2020, and therefore is not provided. The Retail Division operating income increased 42% and 40% in the third quarter and year-to-date 2020, respectively, which, as a percentage of sales, reflects a period-over-period increase of approximately 320 basis points and 220 basis points, respectively. The comparative increase in operating income was mostly attributable to lower selling, general and administrative expenses resulting from continuous efforts to optimize costs and lower operating lease costs recognized as a result of store impairments. These improvements have more than offset the flow-through impact of lower sales. As ofSeptember 26, 2020 , the Retail Division operated 1,244 retail stores inthe United States ,Puerto Rico and theU.S. Virgin Islands compared to 1,317 stores at the end of the third quarter of 2019. Charges associated with store closures are reported as appropriate in Merger and restructuring expenses, net in the Condensed Consolidated Statements of Operations. In addition, as part of our periodic recoverability assessment of owned retail stores and distribution center assets, and operating lease ROU assets, we recognize impairment charges in the Asset impairments line item of our Condensed Consolidated Statements of Operations. These charges are reflected in Corporate reporting and are not included in the determination of Division operating income. Refer to the "Corporate" section below for additional information of expenses incurred to date. COMPUCOM DIVISION Third Quarter Year-to-Date (In millions) 2020 2019 2020 2019 Products$ 45 $ 71 $ 166 $ 209 Services 152 181 480 549 Total Sales$ 197 $ 252 $ 646 $ 758 % change (22 )% (6 )% (15 )% (6 )% Division operating income (loss)$ 3 $ 3 $ 10 $ (11 ) % of sales 2 % 1 % 2 % (1 )% Product sales in our CompuCom Division decreased 37% and 21% in the third quarter and year-to-date 2020, respectively, compared to the corresponding periods in 2019. We experienced strong enterprise demand for computer and computer-related products in the latter part of the first quarter of 2020 as many businesses temporarily shifted to a work-from-home environment amid the COVID-19 outbreak. This was followed by lower demand during the second and third quarters of 2020 as the immediate needs of business customers for such products diminished and a portion of our business customers continued to be temporarily closed due to restrictions put in place by local authorities that aim to prevent and reduce the spread of COVID-19. Sales of services in our CompuCom Division decreased 16% and 13% in the third quarter and year-to-date 2020, respectively, compared to the corresponding periods in 2019. This was primarily due to lower project-related revenue from existing customer accounts and lower overall business volume. The reduction in project-related revenue is due to our customers pausing discretionary project spending amidst the COVID-19 outbreak and the uncertainty of its impact on the economy. Although sales of services have been declining since the beginning of 2019, we are continuing our efforts to stabilize and grow revenue in this Division. In connection with these efforts, we are strategically focusing on our strengths and placing greater emphasis on our core digital workplace offerings. We continue to expand our value proposition and capitalize on our unique market position to serve remote workforces through our capabilities to provision hardware, provide virtual or call center support and dispatch our field technicians as needed. The CompuCom Division operating income was$3 million and$10 million in the third quarter and year-to-date 2020, respectively, compared to operating income of$3 million and an operating loss of$11 million in the third quarter and year-to-date 2019, respectively. Operating income has been increasing sequentially since the first quarter of 2019, which is mostly attributable to improved cost efficiencies as a result of our Business Acceleration Program. The increase in operating profitability despite the flow through impact of lower service sales volume was achieved through a reduction in associated labor-related expenses and ongoing expenditures to develop and market additional service offerings. We continue to take actions to improve future operating performance at our CompuCom Division, which include increasing the use of automation and technology to further improve service efficiency, simplifying organizational structures to improve service velocity, and aligning sales efforts to better serve our customers and accelerate cross-selling opportunities including 'powered by CompuCom,' a suite of technology services marketed through BSD which brings CompuCom's enterprise quality services to small and medium companies. 33 --------------------------------------------------------------------------------
OTHER
Certain operations previously included in the former International Division, including our global sourcing and trading operations in theAsia/Pacific region, which we have retained, are presented as Other. These operations primarily relate to the sale of products to former joint venture partners, and are not material in any period. Also included in Other is the elimination of intersegment revenues of$5 million and$12 million for the third quarter and year-to-date 2020, respectively, and$3 million and$9 million for the third quarter and year-to-date 2019, respectively.
CORPORATE
The line items in our Condensed Consolidated Statements of Operations included as Corporate activities are Asset impairments and Merger and restructuring expenses, net. These activities are managed at the Corporate level and, accordingly, are not included in the determination of Division income for management reporting or external disclosures. In addition to these charges and credits, certain selling, general and administrative expenses are not allocated to the Divisions and are managed at the Corporate level. Those expenses are addressed in the section "Unallocated Expenses" below.
Asset impairments
In the third quarter and year-to-date 2020, we recognized asset impairment charges of$10 million and$423 million , respectively. Of the asset impairment charges in the third quarter of 2020,$7 million was related to impairment of operating lease ROU assets associated with our retail store locations, and the remainder was related to impairment of fixed assets. Of the asset impairment charges year-to-date 2020,$363 million was related to impairment of goodwill in our CompuCom and Contract reporting units and other intangible assets,$42 million was related to impairment of operating lease ROU assets associated with our retail store locations, and the remainder was related to impairment of fixed assets and a cost method investment. In the third quarter and year-to-date 2019, respectively, we recognized asset impairment charges of$5 million and$50 million . Of these asset impairment charges,$2 million and$41 million , respectively, were related to the impairment of operating lease ROU assets associated with our retail store locations, with the remainder primarily related to impairment of fixed assets. We regularly review retail store assets for impairment indicators at the individual store level, as this represents the lowest level of identifiable cash flows. When indicators of impairment are present, a recoverability analysis is performed which considers the estimated undiscounted cash flows over the retail store's remaining life and uses inputs from retail operations and accounting and finance personnel. These inputs include our best estimates of retail store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows, which, by their nature, include judgments about how current initiatives will impact future performance. In the third quarter and year-to-date 2020, the assumptions used within the recoverability analysis for the retail stores were updated to consider current quarter retail store operational results and formal plans for future retail store closures as part of our restructuring programs, including the probability of closure at the retail store level. While it is generally expected that closures will approximate the store's lease termination date, it is possible that changes in store performance or other conditions could result in future changes in assumptions utilized. In addition, the assumptions used reflected declining sales over the forecast period, and gross margin and operating cost assumptions that are consistent with recent actual results and consider plans for future initiatives. If the undiscounted cash flows of a retail store cannot support the carrying amount of its assets, the assets are impaired and written down to estimated fair value. Our recoverability analysis in the third quarter of 2020 also included the impact of the COVID-19 pandemic on the operations of our retail stores as described in the "Retail Division" section. As discussed above, there is uncertainty regarding the impact of the COVID-19 pandemic on the results of our operations in the fourth quarter of 2020 and beyond, which could result in future impairments of store assets if deemed unrecoverable. During the second quarter of 2020, due to the macroeconomic impacts of COVID-19 on our current and projected future results of operations, we determined that an indicator of potential impairment existed requiring an interim quantitative goodwill impairment test for our CompuCom and Contract reporting units. The Contract reporting unit is a component of our Business Solutions Division. The quantitative goodwill impairment test indicated that the carrying value of the CompuCom and Contract reporting units exceeded their fair value, and impairment charges of$237 million and$115 million , respectively, were recorded for these reporting units. CompuCom's tradename, which is an indefinite-lived intangible asset, was also tested for impairment during this quantitative assessment and an impairment charge of$11 million was recorded to reduce its carrying amount in the second quarter of 2020. AtSeptember 26, 2020 , the CompuCom reporting unit and the Contract reporting unit have goodwill of$211 million and$241 million , respectively. These non-cash impairment charges are presented within the Asset impairments line in the accompanying Condensed Consolidated Statements of Operations year-to-date 2020. Refer to Note 5. "Segment Information" in Notes to Condensed Consolidated Financial Statements for additional information regarding the drivers of decline in the fair values of our CompuCom and Contract reporting units as well as the methodologies, key inputs and assumptions used in determining the fair value estimates. During the third quarter of 2020, our CompuCom and Contract reporting units continued to experience the negative impacts of COVID-19, which are consistent with the factors discussed in Note 5. "Segment Information" referred to above that gave rise to the decline in their fair values. The CompuCom and Contract reporting units' operating performance and future outlook are in line with the Company's revised forecasts used in determining the fair value estimates. Accordingly, there are no impairment indicators identified for these reporting units as ofSeptember 26, 2020 . We also did not identify indicators of impairment related to our other 34 -------------------------------------------------------------------------------- reporting units, which mainly serve consumers through our retail stores and eCommerce platform and have been performing in accordance with our forecasts. We will continue to evaluate the recoverability of goodwill at the reporting unit level on an annual basis and whenever events or changes in circumstances indicate there may be a potential impairment. If the operating results of our reporting units deteriorate in the future, it may cause the fair value of one or more of the reporting units to fall below their carrying value, resulting in additional goodwill impairment charges. Further, while we are currently in a strong liquidity and capital position, a significant deterioration may have a material impact on our liquidity and capital in future periods.
Merger and restructuring expenses, net
Since 2017, we have taken actions to optimize our asset base and drive operational efficiencies. These actions include acquiring profitable businesses, closing underperforming retail stores and non-strategic distribution facilities, consolidating functional activities, eliminating redundant positions and disposing of non-strategic businesses and assets. The expenses and any income recognized directly associated with these actions are included in Merger and restructuring expenses, net on a separate line in the Condensed Consolidated Statements of Operations in order to identify these activities apart from the expenses incurred to sell to and service customers. These expenses are not included in the determination of Division operating income. Merger and restructuring expenses, net was$26 million and$107 million in the third quarter and year-to-date 2020, respectively, compared to$22 million and$105 million in the third quarter and year-to-date 2019, respectively.
Maximize B2B Restructuring Plan
InMay 2020 , our Board of Directors approved a restructuring plan to realign our operational focus to support our "business-to-business" solutions and IT services business units and improve costs. Implementation of the Maximize B2B Restructuring Plan is expected to be substantially completed by the end of 2023. The Maximize B2B Restructuring Plan aims to generate savings through optimizing our retail footprint, removing costs that directly support our Retail business and additional measures to implement a company-wide low-cost business model, which will then be invested in accelerating the growth of our business-to-business platform. The plan is broader than restructuring programs we have implemented in the past and includes closing and/or consolidating retail stores and distribution facilities and the reduction of up to 13,100 employee positions by the end of 2023. We are evaluating the number of retail store and distribution facility closures and/or consolidations, as well as the timing of any such closures and/or consolidations, however we generally expect that closures will approximate the store's lease termination date. We closed six retail stores and two distribution facilities under the Maximize B2B Restructuring Plan during the third quarter and year-to-date 2020. We estimate that approximately 63 additional retail stores will be closed by the end of 2020. Such closures are in addition to the closures we anticipate in connection with the Business Acceleration Plan, as discussed below. Total estimated restructuring costs related to the Maximize B2B Restructuring Plan are expected to be up to$143 million , comprised of:
(a) severance costs of approximately
(b) facility closure costs of approximately
related to retail stores; and (c) other costs, including contract termination costs, to facilitate the
execution of the Maximize B2B Restructuring Plan of approximately$37 million . The total costs of up to$143 million above are expected to be cash expenditures through 2023 funded primarily with cash on hand and cash from operations. As part of the optimization of our Retail footprint, potential closure prior to lease terms were considered. However, it is generally expected that closures would approximate their lease termination dates. Changes in future economic conditions and events may influence the decisions made which would not be a part of this plan. If stores are determined to be closed before the end of their lease term and the fair values of their assets are not sufficient to cover their carrying amounts, we may also incur non-cash asset impairment charges related to the operating lease ROU assets and fixed assets at these locations. The timing and amount of these future impairments will be dependent upon the decisions that will be made and whether the closures or disposals occur prior to the lease maturity dates or useful lives of the assets involved. Impairment charges on these assets, if any, will be reflected on the Asset impairments line item of our Condensed Consolidated Statements of Operations. In the third quarter of 2020, we incurred$17 million in restructuring expenses associated with the Maximize B2B Restructuring Plan which consisted of$1 million in severance,$7 million in third-party professional fees, and$9 million of retail store and facility closure costs and other that were mainly related to closure accruals, gains and losses on asset dispositions, and accelerated depreciation. Of these amounts,$13 million were cash expenditures in the third quarter of 2020. Year-to-date 2020, we incurred$68 million in restructuring expenses associated with the Maximize B2B Restructuring Plan which consisted of$43 million in severance,$7 million in third-party professional fees, and$18 million of retail store and facility closure costs and other that were mainly related to facility closure accruals, gains and losses on asset dispositions, and accelerated depreciation. Of these amounts,$16 million were cash expenditures year-to-date 2020.
Business Acceleration Program
InMay 2019 , our Board of Directors approved the Business Acceleration Program, a company-wide, multi-year, cost reduction and business improvement program to systematically drive down costs, improve operational efficiencies, and enable future growth investments. In connection with the Business Acceleration Program, we anticipate closing approximately 85 underperforming retail 35 -------------------------------------------------------------------------------- stores and eight other facilities, consisting of distribution centers and sales offices, by the end of 2020. In the third quarter and year-to-date 2020, we closed 10 and 57 retail stores, respectively. We closed one other facility in 2020, and seven other facilities were closed as of the end of 2019. No other facilities were closed in the third quarter of 2020. Total estimated costs to implement the Business Acceleration Program are expected to be approximately$107 million , of which approximately$99 million are expected to be cash expenditures through 2020 funded primarily with cash on hand and cash from operations. We incurred$101 million in restructuring expenses to implement the Business Acceleration Program since its inception in 2019 through the end of the third quarter of 2020. The Business Acceleration Program is expected to be substantially completed by the end of 2020. In the third quarter of 2020, we incurred$5 million in restructuring expenses associated with the Business Acceleration Program which consisted of$2 million in third-party professional fees, and$3 million of retail store and facility closure costs and other. We made cash expenditures of$4 million for the Business Acceleration Program in the third quarter of 2020. Year-to-date 2020, we incurred$19 million in restructuring expenses associated with the Business Acceleration Program which consisted of$11 million in third-party professional fees and$8 million of retail store and facility closure costs and other. We made cash expenditures of$27 million for the Business Acceleration Program year-to-date 2020.
Other
Included in restructuring expenses in the third quarter and year-to-date 2019 were costs incurred in connection with the Comprehensive Business Review which concluded at the end of 2019. These costs included severance, facility closure costs, contract termination, accelerated depreciation, relocation and disposal gains and losses, as well as other costs associated with retail store closures. Included in restructuring expenses in the third quarter and year-to-date 2020 were third-party professional fees incurred in connection with the Reorganization.
Refer to Note 3. "Merger and Restructuring Activity" in Notes to Condensed Consolidated Financial Statements for an extensive analysis of these Corporate charges.
Unallocated Expenses We allocate to our Divisions functional support expenses that are considered to be directly or closely related to segment activity. These allocated expenses are included in the measurement of Division operating income. Other companies may charge more or less for functional support expenses to their segments, and our results, therefore, may not be comparable to similarly titled measures used by other companies. The unallocated expenses primarily consist of the buildings used for our corporate headquarters and personnel not directly supporting the Divisions, including certain executive, finance, legal, audit and similar functions. Unallocated expenses also include the pension credit related to the frozen OfficeMax pension and other benefit plans. Additionally, the pension plan in theUnited Kingdom that has been retained by us in connection with the sale of the European Business, as well as certain general and administrative costs previously allocated to the former International Division have been included in corporate unallocated expenses. Unallocated expenses were$29 million and$75 million in the third quarter and year-to-date 2020, respectively, and$23 million and$80 million in the third quarter and year-to-date 2019, respectively. The increase in the third quarter of 2020 compared to the prior year period was primarily due to higher legal expenses. The decrease year-to-date 2020 compared to the prior year period was primarily due to lower deferred compensation expenses in our executive function and lower professional fees in the first quarter of 2020, partially offset by higher legal expenses in the third quarter of 2020. Other Income and Expense Third Quarter Year-to-Date (In millions) 2020 2019 2020 2019 Interest income $ -$ 5 $ 3 $ 16 Interest expense (6 ) (22 ) (35 ) (68 ) Loss on extinguishment and modification of debt - - (12 ) - Other income, net 3 2 7 7 InApril 2020 , we entered into the Third Amended Credit Agreement which provides for an aggregate principal amount of up to$1.3 billion asset-based revolving credit facility and asset-based FILO Term Loan Facility, maturing inApril 2025 . We recorded$2 million and$5 million of interest expense in the third quarter and year-to-date 2020, respectively, related to the Third Amended Credit Agreement. We recorded$10 million of interest expense year-to-date 2020, and$10 million and$31 million in the third quarter and year-to-date 2019, respectively, related to the Term Loan Credit Agreement. InApril 2020 , we repaid the remaining balance under the Term Loan Credit Agreement in full and terminated it. We recognized$12 million of loss from the extinguishment and modification of debt related to this transaction year-to-date 2020, which primarily included the write-off of the remaining unamortized original issue discount and debt issuance costs of the Term Loan Credit Agreement. 36 --------------------------------------------------------------------------------
Refer to Note 8. "Debt" in Notes to Condensed Consolidated Financial Statements for additional information.
Income Taxes During 2020 and 2019, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing our effective tax rates due to the dispositions of the international businesses and improved operating results. As a result, our effective tax rates are 42% for the third quarter and (9)% for year-to-date 2020, and 35% for the third quarter and 39% for year-to-date 2019. Our effective tax rates for the third quarter and year-to-date 2020 differ from the statutory rate of 21% primarily due to the impact of state taxes, excess tax deficiencies associated with stock-based compensation awards and certain nondeductible items, adjustments to certain tax benefits and the mix of income and losses acrossU.S. and non-U.S. jurisdictions. The difference between our year-to-date 2020 effective tax rate and the statutory rate was also impacted by goodwill impairment. Our effective tax rates in prior periods have varied considerably as a result of several primary factors including the mix of income and losses acrossU.S. and non-U.S. jurisdictions, the impact of excess tax deficiencies associated with stock-based compensation awards and the derecognition of valuation allowances against deferred tax assets that were not more-likely-than-not realizable in theU.S. and certain non-U.S. jurisdictions. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters. The Tax Cuts and Jobs Act repealed the corporate Alternative Minimum Tax ("AMT") and allows unutilized AMT credits to be refunded. For tax years 2018 through 2020, taxpayers could receive 50% of their uncredited balances as a cash refund with any remaining amounts refunded in full in 2021. As of year-end 2019, we determined it was more-likely-than-not that$22 million of our AMT credits would be refunded and was expected to be received in the third quarter of 2020. During the first quarter of 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted. The CARES Act allows for us to refund 100% of our remaining AMT credits in 2020. We filed for the remaining$22 million in the second quarter of 2020 for a total refund of$44 million . We received the entire$44 million in the third quarter of 2020. We continue to evaluate the other provisions of the CARES Act to determine if they would have any material impact. During the first quarter of 2020, we net settled our Timber notes receivable and Non-recourse debt. We had previously recorded a deferred tax liability related to the taxes deferred from the original transaction. The deferred liability was realized in the first quarter of 2020. We anticipate that certain capital loss carryforwards, available tax credits and net operating losses will offset the resulting gain and no material cash income taxes will be due upon the realization. We continue to have aU.S. valuation allowance for certainU.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. We will continue to assess the realizability of our deferred tax assets in theU.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods. We file aU.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject toU.S. federal and state and local income tax examinations for years prior to 2017 and 2013, respectively. The acquired OfficeMaxU.S. consolidated group is no longer subject toU.S. federal income tax examination, and with few exceptions, is no longer subject toU.S. state and local income tax examinations for years prior to 2013. OurU.S. federal income tax return for 2017 is currently under review. Generally, we are subject to routine examination for years 2012 and forward in our international tax jurisdictions. It is anticipated that$1 million of tax positions will be resolved within the next 12 months. Additionally, we anticipate that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made at this time.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
AtSeptember 26, 2020 andDecember 28, 2019 , we had$743 million and$698 million in cash and cash equivalents, respectively, and$1.0 billion and$920 million of available credit under the Third Amended Credit Agreement (as defined in Note 8. "Debt" in Notes to Condensed Consolidated Financial Statements), respectively, for a total liquidity of approximately$1.7 billion and$1.6 billion , respectively. Despite the weaker global economic conditions and the uncertainties related to the impacts of the COVID-19 pandemic, we currently believe that as a result of our strong financial position, including our cash and cash equivalents on hand, availability of funds under the Third Amended Credit Agreement, and full year cash flows generated from operations, we will be able to fund our working capital, capital expenditures, debt repayments, merger integration and restructuring expenses, and future acquisitions consistent with our strategic growth initiatives for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. As the impact of the COVID-19 pandemic on the global and national economies and our operations evolve, we will continue to assess our liquidity needs. To preserve liquidity and maximize financial flexibility in the current environment, our Board of Directors has proactively adopted a more conservative approach and temporarily suspended the stock repurchase program and the quarterly cash dividend beginning with the second quarter of 2020. InNovember 2020 , our Board of Directors approved the resumption of the stock 37
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repurchase program beginning in the fourth quarter of 2020 which will run through the end of 2021. Our quarterly cash dividend remains temporarily suspended. We intend to continue to evaluate and implement additional cost-cutting measures as is necessary to mitigate the negative financial impact of COVID-19.
Financing As disclosed in Note 8. "Debt" in Notes to Condensed Consolidated Financial Statements, we received a net cash payment of$87.7 million upon maturity of the Installment Notes and the Bridge Loan onJanuary 29, 2020 , which were net settled as they were with the same third-party financial institution. This amount includes principal of$82.5 million and interest of$5.2 million . Also, as noted in the "Income Taxes" section above, we received a refund of unutilized AMT credits of$44 million in the third quarter of 2020. Also as disclosed in Note 8. "Debt", onApril 17, 2020 , we entered into the Third Amended and Restated Credit Agreement, which provides for a$1.2 billion asset-based revolving credit facility and a$100 million asset-based FILO Term Loan Facility, for an aggregate principal amount of up to$1.3 billion (the "New Facilities"). The New Facilities mature inApril 2025 . The Third Amended and Restated Credit Agreement replaces our then existing amended and restated credit agreement that was due to mature inMay 2021 . Upon the closing of the transaction, we made an initial borrowing in the amount of$400 million under the New Facilities. These proceeds, along with available cash on hand, were used to repay in full the remaining$388 million balance under the Term Loan Credit Agreement and terminate it and to repay approximately$66 million of other debt and related interest. We recognized$12 million of loss from the extinguishment and modification of debt related to this transaction in the second quarter of 2020, which primarily included the write-off of the remaining unamortized original issue discount and debt issuance costs of the Term Loan Credit Agreement as of the closing date of the transaction. During the third quarter of 2020, we repaid$300 million of revolving loans outstanding under the Third Amended Credit Agreement. There were no revolving loans outstanding,$100 million of outstanding FILO Term Loan Facility loans, and$55 million of outstanding standby letters of credit under the Third Amended Credit Agreement at the end of the third quarter of 2020, and we were in compliance with all applicable financial covenants atSeptember 26, 2020 .
Strategic Transformation
In addition to the acquisitions disclosed herein, we have evaluated, and expect to continue to evaluate, possible acquisitions and dispositions of businesses and assets as well the possible acceleration of potential restructuring plans in connection with our strategic transformation. Such transactions may be material and may involve cash, our securities or the incurrence of additional indebtedness (Refer to Note 2. "Acquisitions" and Note 3. "Merger and Restructuring Activity" in Notes to Condensed Consolidated Financial Statements for additional information). Capital Expenditures We estimated capital expenditures in 2020 to be up to approximately$150 million , which includes investments to support our business priorities. However, due to the factors described in the "Recent Developments" section above, we are unable to estimate the magnitude by which capital expenditures will be affected in the fourth quarter of 2020. These expenditures will be funded through available cash on hand and operating cash flows.
Capital Return Programs - Share Repurchases and Dividends
InNovember 2018 , our Board of Directors approved a stock repurchase program of up to$100 million of our common stock effectiveJanuary 1, 2019 , which extends until the end of 2020. InNovember 2019 , our Board of Directors approved an increase in the authorization of the existing stock repurchase program of up to$200 million and extended the program through the end of 2021. The current authorization includes the remaining authorized amount under the existing stock repurchase program. The stock repurchase authorization permits us to repurchase stock from time-to-time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions and/or other derivative transactions. The exact number and timing of share repurchases will depend on market conditions and other factors, and will be funded through available cash balances. Our Third Amended Credit Agreement includes certain covenants on restricted payments such as common stock repurchases, based on our fixed charge coverage ratio, liquidity and borrowing availability. The authorized amount under the stock repurchase program excludes fees, commissions or other expenses. As a result of the continued economic uncertainty due to COVID-19, our Board of Directors temporarily suspended the stock repurchase program inMay 2020 , however, the stock repurchase authorization remains effective. We did not purchase any shares of our common stock in the third quarter of 2020. InNovember 2020 , our Board of Directors approved the resumption of the stock repurchase program beginning in the fourth quarter of 2020. Under the stock repurchase program before its temporary suspension inMay 2020 , we purchased approximately 1 million shares of our common stock at a cost of$30 million year-to-date 2020. As ofSeptember 26, 2020 , approximately$130 million remains available for stock repurchases under the current stock repurchase program which will resume in the fourth quarter of 2020 and run through the end of 2021. 38 -------------------------------------------------------------------------------- In order to preserve liquidity during the COVID-19 pandemic and in light of the uncertainties as to its duration and economic impact, inMay 2020 , our Board of Directors temporarily suspended the Company's quarterly cash dividend beginning in the second quarter of fiscal 2020. There was no quarterly cash dividend declared and paid in the second or third quarters of 2020. Our quarterly cash dividend remains temporarily suspended. Prior to its temporary suspension, dividends have been recorded as a reduction to additional paid-in capital as we are in an accumulated deficit position. Our Third Amended Credit Agreement permits payment of dividends provided that we have the required minimum liquidity or fixed charge coverage ratio, but may be limited if we do not meet the necessary requirements. We will re-evaluate our capital return program when appropriate. Decisions regarding future share buybacks and dividends are within the discretion of our Board of Directors, and depend on a number of factors, including, general business and economic conditions, which includes the impact of COVID-19 on such conditions, and other factors which are discussed in this discussion and analysis and "Risk Factors" within Other Key Information in our 2019 Form 10-K, as supplemented by our discussion of "Risk Factors" within Other Information in this quarterly report. CASH FLOWS
Cash provided by (used in) operating, investing and financing activities is summarized as follows:
Year-to-Date (In millions) 2020 2019 Operating activities$ 489 $ 214 Investing activities 746 (142 ) Financing activities (1,188 ) (145 ) Operating Activities Year-to-date 2020, cash provided by operating activities was$489 million , compared to$214 million during the corresponding period in 2019. This increase in cash flows from operating activities was primarily driven by$278 million more cash inflows from working capital and$9 million less cash outflows for contingent consideration payment, partially offset by$12 million less usage of deferred tax assets against current obligations. Working capital is influenced by a number of factors, including period end sales, the flow of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. Year-to-date 2020, the primary driver for working capital improvements was the reduction in our receivables as a result of improved collections and lower sales on credit and less cash outflow on payables due to payment terms and timing of payments. After adjusting for non-cash charges, net income year-to-date 2020 was consistent with the corresponding period in 2019.
For our accounting policy on cash management, refer to Note 1. "Summary of Significant Accounting Policies" in Notes to Condensed Consolidated Financial Statements.
Investing Activities Cash from investing activities was$746 million year-to-date 2020, compared to cash used in investing activities of$142 million year-to-date 2019. The cash inflow year-to-date 2020 was driven by the cash proceeds from the collection of the Timber notes receivable of$818 million , which was partially offset by$28 million in business acquisitions, net of cash acquired, and$54 million in capital expenditures associated with improvements in our service platform, distribution network, and eCommerce capabilities. The cash outflow year-to-date 2019 was driven by$123 million in capital expenditures and$21 million in business acquisitions, net of cash acquired.
Financing Activities
Cash used in financing activities was$1,188 million year-to-date 2020, compared to$145 million year-to-date 2019. The cash outflow year-to-date 2020 primarily consisted of activity related to our debt, which included$735 million Non-recourse debt retirement,$388 million Term Loan Credit Agreement retirement,$64 million of borrowings associated with our company owned life insurance policies,$337 million of net payments on other short- and long-term borrowings,$9 million revenue bond maturity, and$6 million of debt related fees, offset by$400 million of debt proceeds under the Third Amended Credit Agreement. We also used$13 million in payment of cash dividends and$30 million in repurchases of common stock, including commissions year-to-date 2020. The cash outflow year-to-date 2019 primarily consisted of$74 million in repayments on long- and short-term borrowings,$41 million in payment of cash dividends,$11 million in repurchases of common stock, and$12 million acquisition contingent consideration payment up to the amount of the acquisition-date liability.
NEW ACCOUNTING STANDARDS
For a description of new applicable accounting standards, refer to Note 1. "Summary of Significant Accounting Policies" in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
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CRITICAL ACCOUNTING POLICIES
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted inthe United States of America . Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2019 Form 10-K, in Note 1 of the Notes to the Consolidated Financial Statements and the Critical Accounting Policies and Estimates section of the Management's Discussion and Analysis of Financial Condition and Results of Operations. Except for our accounting policy updates described in Note 1 "Summary of Significant Accounting Policies" in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting policies sinceDecember 28, 2019 . 40
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OTHER INFORMATION
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