Investing to Create an Omni-Channel Business
Services Platform as part of Multi-Year Strategic
Transformation
Q4 2017 Reported Sales of $2.6 Billion versus
$2.7 Billion in Q4 2016
Q4 2017 GAAP Operating Income of $59 Million
versus $57 Million in Q4 2016
Cash Flow from Continuing Operations of $467
Million and Free Cash Flow of $326 Million in 2017
CompuCom Once Again Named a Leader in Gartner
Magic Quadrant for Managed Workplace Services, N.A.
Provides Outlook for Fiscal 2018
Office Depot, Inc. (“Office Depot,” or the “Company”) (NASDAQ:
ODP), a leading omni-channel provider of business services and
supplies, products and technology solutions, today announced
results for the fourth quarter and full year ended December 30,
2017.
Consolidated (in millions,
except per share amounts)
4Q17 4Q16
FY17 FY16 Selected GAAP measures:
Sales
$2,581 $2,725 $10,240
$11,021 Sales decline from prior year period
(5)% (7)%
Operating income
$59 $57
$341 $531 Operating income margin
2.3% 2.1% 3.3%
4.8% Net income (loss) from continuing operations
$(48) $55 $146
$679 Earnings (loss) per share continuing operations
$(0.09) $0.10 $0.27
$1.24 Selected Non-GAAP measures: (1)
Adjusted sales decline from
prior year period (2)
(4)%
(5)% Adjusted operating income (3)
$95 $96 $446 $456
Adjusted operating income margin (3)
3.7%
3.7% 4.4% 4.2% Adjusted net
income from continuing operations
$45
$59 $241 $251 Adjusted net
earnings per share continuing operations (most dilutive)
$0.08 $0.11 $0.45
$0.46 Free Cash Flow from continuing operations (4)
$10 $6 $326 $381
(1) Adjusted results represent
non-GAAP measures and exclude charges or credits not indicative of
core operations and the tax effect of these items, which may
include but not be limited to merger integration, restructuring,
acquisition costs, asset impairments and executive transition
costs. Reconciliations from GAAP to non-GAAP financial measures can
be found in this release as well as on the Investor Relations
website at investor.officedepot.com.
(2) Adjusted sales change
excludes impact from U.S. retail store closures, foreign currency
translation, the CompuCom acquisition and additional 53rd week in
fiscal 2016.
(3) Fourth quarter and full year
2016 adjusted operating income and adjusted operating income margin
amounts exclude the benefit of $143 million in sales and $15
million in operating income from the additional 53rd week
(4) As used throughout this
release, Free Cash Flow is defined as cash flows from operating
activities of continuing operations less capital expenditures
“I’m pleased that we delivered strong fourth quarter results and
achieved full year 2017 adjusted operating income that exceeded our
most recent outlook, despite significant revenue pressure
throughout the year,” said Gerry Smith, chief executive officer of
Office Depot. “Fourth quarter sales trends in the Business
Solutions Division continued to improve sequentially and we also
saw relative improvement in store traffic recently as a result of
strategic shifts in our offer and marketing mix. We are encouraged
to see our initiatives to transform the Company beginning to gain
traction, including our ability to generate Free Cash Flow to fund
these future growth engines.”
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2017 were $2.6
billion compared to $2.7 billion in the fourth quarter of 2016, a
decrease of 5%. Sales for the full year 2017 were $10.2 billion, a
decline of 7% compared to the prior year. Fourth quarter and full
year 2016 results benefited from an additional 53rd week sales of
approximately $143 million and have been removed from our adjusted
sales change below.
In the fourth quarter of 2017, Office Depot reported operating
income of $59 million. The Company recognized a net loss from
continuing operations in the fourth quarter of 2017 of $48 million,
or $0.09 per diluted share, resulting from a net tax expense of
approximately $68 million associated with changes to the Company’s
U.S. deferred tax assets and tax valuation allowance due to recent
tax law reform. The impact of this change has been removed from our
adjusted comparisons below.
In the fourth quarter of 2016, the Company reported operating
income of $57 million, which included the benefit of approximately
$15 million from the additional 53rd week. Net income from
continuing operations in the fourth quarter of 2016 was $55
million, or $0.10 per diluted share.
For the full year 2017 period, Office Depot reported operating
income of $341 million compared to an operating income of $531
million in the prior year period. Net income from continuing
operations in 2017 was $146 million, or $0.27 per diluted share,
compared to net income from continuing operations of $679 million,
or $1.24 per diluted share in 2016. Full year 2016 results
benefited from $250 million of operating income related to the
Staples termination fee received in the second quarter of 2016 and
from a net tax credit of approximately $240 million associated with
the reduction of the U.S. tax valuation allowance in the third
quarter of 2016, in addition to the 53rd week benefit stated
above.
Adjusted (non-GAAP) Results (2)
Excluding the impact of retail store closures, foreign currency
translation, the CompuCom acquisition and the additional 53rd week
in fiscal 2016, the year-over-year adjusted sales change for the
fourth quarter of 2017, would have been a decline of 4%. The full
year 2017 decline excluding these items would have been 5%.
Adjusted results for the fourth quarter of 2017 exclude charges
and credits totaling $36 million, which were comprised of $16
million in acquisition-related expenses, $11 million in
restructuring charges, $6 million in OfficeMax merger-related
expenses and $3 million in non-cash asset impairment charges, as
well as the after-tax impact of these items. Accordingly,
- Fourth quarter 2017 adjusted operating
income was $95 million compared to an adjusted operating income of
$96 million in the fourth quarter of 2016, excluding the 53rd week
benefit in the prior year.
- Fourth quarter 2017 adjusted net income
from continuing operations was $45 million, or $0.08 per diluted
share, compared to adjusted net income from continuing operations
of $59 million, or $0.11 per diluted share, in the fourth quarter
of 2016.
- Full year 2017 adjusted operating
income was $446 million compared to an adjusted operating income of
$456 million in 2016, excluding the 53rd week benefit.
- Full year 2017 adjusted net income from
continuing operations was $241 million compared to $251 million in
the full year 2016, with adjusted net earnings per share from
continuing operations of $0.45 in 2017 compared to $0.46 in
2016.
Fourth Quarter Division Results
Retail Division
Retail Division reported sales were $1.2 billion in the fourth
quarter of 2017. Fourth quarter 2017 comparable sales declined 4%
versus the prior year primarily driven by fewer transactions and
lower average order values.
Retail Division
(in millions)
4Q17 4Q16
Adjusted4Q16 (5)
FY17 FY16
AdjustedFY16 (5)
Sales
$1,164 $1,366
$1,279 $4,962 $5,603
$5,516 Comparable store sales change from prior year
(4)% (5)%
Division operating income
$40
$62 $48 $254
$299 $285 Division operating income margin
3.4% 4.5% 3.8%
5.1% 5.3% 5.2%
(5) Fourth quarter and full year
2016 adjusted amounts exclude the benefit of $87 million in sales
and $14 million in operating income from the additional 53rd
week.
Retail Division operating income was $40 million, or 3.4% of
sales, in the fourth quarter of 2017, compared to $48 million, or
3.8% of sales, in the fourth quarter of 2016, excluding the 53rd
week operating income benefit in 2016. Operating income declined $8
million versus the prior year primarily due to the negative
flow-through impact from lower sales and a lower gross margin rate,
partially offset by lower selling, general and administrative
expenses realized from the Company’s store closure program and cost
reduction initiatives.
During the fourth quarter the Company closed 26 stores, ending
the year with a total of 1,378 stores in the Retail Division.
Business Solutions Division
Business Solutions Division reported sales were $1.3 billion in
the fourth quarter of 2017, a decline of 7% compared to the fourth
quarter of 2016. Excluding sales from the additional selling week
in the fourth quarter of 2016, sales in the fourth quarter of 2017
declined 3% in constant currency versus the prior year, a quarterly
sequential improvement of approximately 150 basis points. The sales
decline versus 2016 was primarily driven by lower average sales
volume, a shift in the holiday calendar and the impact of sales
from omni-channel programs that are recorded in the Retail
Division.
Business Solutions
Division (in millions)
4Q17 4Q16
Adjusted4Q16 (6)
FY17 FY16
AdjustedFY16 (6)
Sales
$1,257 $1,355
$1,298 $5,108 $5,400
$5,344 Sales change from adjusted prior year (in constant
currency)
(3)%
(4)% Division operating income
$68 $75 $71
$262 $265 $261 Division
operating income margin
5.4% 5.5%
5.5% 5.1% 4.9%
4.9%
(6) Fourth quarter and full year
2016 adjusted amounts exclude the benefit of $56 million in sales
and $4 million in operating income from the additional 53rd
week.
Business Solutions Division operating income was $68 million, or
5.4% of sales, in the fourth quarter of 2017 compared to $71
million, or 5.5% of sales, in the fourth quarter of 2016 excluding
the 53rd week operating income benefit in 2016. The slight decline
in operating income of $3 million versus the prior year was
primarily due to the flow-through impact from lower sales and a
lower gross margin rate, partially offset by cost savings and
efficiencies including lower selling, general and administrative
expenses.
CompuCom Division
As previously announced, the Company completed the acquisition
of CompuCom Systems, Inc. during the fourth quarter of 2017.
Results for this business are now reported separately and included
within the total Company results for the period beginning November
8, 2017.
CompuCom Division reported sales were $156 million in the fourth
quarter of 2017, with reported operating income of $8 million, or
4.8% of sales.
CompuCom was once again named as a Leader in Gartner Magic
Quadrant for Managed Workplace Services, North America. This is the
15th consecutive year that CompuCom has received formal industry
recognition. The Gartner Magic Quadrant is a graphical portrayal of
exceptional vendor performance and demonstrates CompuCom’s strong
ability to deliver remote and on-site managed workplace services to
mid-size and large enterprise clients.
Sale of International Businesses
Office Depot successfully closed on the sale of its business in
Australia on February 5, 2018. The Company’s sale of the remaining
discontinued operation in New Zealand remains subject to obtaining
necessary regulatory approvals.
Corporate and Other
Corporate includes support staff services and certain other
expenses that are not allocated to the Company’s operating
divisions. Unallocated expenses decreased to $20 million in the
fourth quarter of 2017 compared to $25 million in the fourth
quarter of 2016 primarily due to cost savings and the 53rd week
impact of approximately $3 million in the prior year.
The Company’s retained sourcing and trading operations in Asia,
reported as an “Other” segment, contributed $4 million in sales for
the fourth quarter of 2017 and an operating loss of $1 million.
Balance Sheet and Cash Flow
As of December 30, 2017, Office Depot had total available
liquidity of approximately $1.5 billion consisting of $0.6 billion
in cash and cash equivalents and approximately $0.9 billion
available under the Amended and Restated Credit Agreement. Total
debt was $1.0 billion, excluding $776 million of non-recourse debt
related to the credit-enhanced timber installment notes.
For the full year 2017, cash provided by operating activities of
continuing operations was $467 million. This is an increase over
the prior year, excluding the Staples termination fee and
associated costs in 2016, primarily due to a greater focus on
working capital improvements, including targeted inventory
reductions. The 2017 amount includes the impact of $53 million in
restructuring costs, $53 million in OfficeMax merger–related costs
and $15 million in acquisition costs. Capital expenditures were
$141 million in 2017, $19 million of which were related to the
OfficeMax merger integration. Accordingly, Free Cash Flow of
continuing operations was $326 million in 2017.
During the fourth quarter, the Company paid a quarterly cash
dividend of $0.025 per share on December 15, 2017 for approximately
$14 million. For the full year 2017, the Company paid approximately
$53 million in dividends to shareholders. In addition, Office Depot
repurchased approximately 6 million shares at a total cost of
approximately $22 million in the fourth quarter of 2017.
Strategy and Outlook(7)
“I’m very excited by the positive response we have received from
our customers and key business partners since announcing our new
strategic direction to transform and strengthen Office Depot,” said
Gerry Smith. “This was never more evident than in our BizBox
flagship store grand opening in Austin, Texas at the end of
January. The BizBox services platform provides small and
medium-sized businesses with the core services needed to start and
grow their businesses. By delivering an increasing number of
service offerings, we create broader and longer-lasting
relationships with our customers. We are accelerating a number of
initiatives to drive this transformation including expanding the
CompuCom technology services footprint, rolling out the BizBox
services platform and accelerating the offering of new
subscription-based services.”
Accordingly, Office Depot expects sales from the new growth
initiatives, including recent acquisitions, to help mitigate but
not completely offset negative impacts to 2018 from:
- Lower store volume
- Prior year store closures
- Adoption of new revenue recognition
standards estimated to reduce reported sales by approximately $60
million
At the end of 2017, the Company substantially completed the
integration with OfficeMax which provided significant synergy
benefits since the integration first began in 2014. In addition,
since retaining the retail footprint is a critical part of the
Company’s omni-channel strategy going forward, Office Depot has
decided to significantly slow the pace of future store closures. As
a result, the Company believes it is now significantly complete
with the prior cost savings programs and does not expect material
additional benefits from these programs to be realized in 2018.
Accordingly, adjusted operating income in 2018 is expected to be
affected by the flow-through impact of lower sales volume, as well
as additional factors including:
- Approximately $40 million of
incremental growth investments as the Company accelerates the
transition towards a services-driven model
- Normalized compensation-related expense
over the prior year of approximately $30 million resulting from
lower than expected payouts in 2017
- Adoption of new pension and defined
benefit plan expense reporting requirements with a year-over-year
impact of approximately $13 million
- Partially offset by a full-year of
incremental benefits from acquisitions and realization of
approximately $20 million in expected synergies from the CompuCom
acquisition
Despite these impacts, the Company expects to deliver strong
free cash flow performance in 2018 through a continued focus on
driving working capital efficiencies, building upon the
improvements initiated in 2017. Also, the Company’s cash tax rate
is anticipated to remain low as tax operating loss carry forwards
and credits continue to be utilized.
Taking these items into consideration, the Company provides the
following outlook for fiscal 2018:
Projected Outlook (7) FY 2018 Combined Company
full-year sales ~ $10.6 billion Adjusted operating income
~ $350 million Adjusted diluted earnings per share ~
$0.30 Free Cash Flow ~ $325 million
Other underlying
assumptions include:
Net interest expense ~ $100 million Non-GAAP
effective tax rate ~ 31% Full-year weighted-average diluted
share count ~ 570 million Depreciation and amortization
expense ~ $175 million Capital expenditures ~ $175
million Cash tax rate < 10%
“We remain intensely focused on profitably growing Office Depot
with a deliberate shift to a more services oriented revenue base
while continuing to generate strong free cash flow,” said Gerry
Smith. “We recognize that 2018 is a year of transition and that
investments are required to advance our Company’s multi-year
transformation. However, as we look to 2019 and beyond, I expect
that 2018 will be our pivot year as the actions we have already
taken, coupled with the additional initiatives and investments we
have planned this year, should allow us to grow year-over-year
profitability in 2019. I am confident that we have a compelling and
differentiated strategy to create a unique omni-channel business
services platform that will generate long-term sustainable growth
and greater value to our customers, partners and shareholders.”
The Company expects to provide additional details on the
long-term strategic direction and operating priorities, at an
Investor Day expected to be held on or about May 16, 2018 in New
York City. Further details on this event will be forthcoming.
(7) The Company’s outlook for
2018 included in this release is for continuing operations only and
includes non-GAAP measures, such as adjusted operating income and
adjusted diluted earnings per share, which excludes charges or
credits not indicative of core operations, which may include but
not be limited to merger integration expenses, restructuring
charges, acquisition-related costs, executive transition costs,
asset impairments and other significant items that currently cannot
be predicted. The exact amount of these charges or credits are not
currently determinable, but may be significant. Accordingly, the
Company is unable to provide equivalent reconciliations from GAAP
to non-GAAP for these financial measures.
About Office Depot, Inc.
Office Depot, Inc. (NASDAQ:ODP) is a leading provider of
business services and supplies, products and technology solutions
through its fully integrated omni-channel platform of approximately
1,400 stores, online presence, and dedicated sales professionals
and technicians to small, medium and enterprise businesses. Through
its banner brands Office Depot®, OfficeMax®, CompuCom® and
Grand&Toy®, the company offers its customers the tools and
resources they need to focus on their passion of starting, growing
and running their business. For more information, visit
news.officedepot.com and follow @officedepot on Facebook, Twitter
and Instagram.
Office Depot is a trademark of The Office Club, Inc. OfficeMax
is a trademark of OMX, Inc. CompuCom is a trademark of CompuCom
Systems, Inc. Grand&Toy is a trademark of Grand & Toy, LLC
in Canada. ©2018 Office Depot, Inc. All rights reserved. Any other
product or company names mentioned herein are the trademarks of
their respective owners.
FORWARD LOOKING STATEMENTS
This communication may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements or disclosures may discuss goals, intentions
and expectations as to future trends, plans, events, results of
operations, cash flow or financial condition, or state other
information relating to, among other things, Office Depot, based on
current beliefs and assumptions made by, and information currently
available to, management. Forward-looking statements generally will
be accompanied by words such as “anticipate,” “believe,” “plan,”
“could,” “estimate,” “expect,” “forecast,” “guidance,” “outlook,”
“intend,” “may,” “possible,” “potential,” “predict,” “project,”
“propose” or other similar words, phrases or expressions, or other
variations of such words. These forward-looking statements are
subject to various risks and uncertainties, many of which are
outside of Office Depot’s control. There can be no assurances that
Office Depot will realize these expectations or that these beliefs
will prove correct, and therefore investors and stockholders should
not place undue reliance on such statements.
Factors that could cause actual results to differ materially
from those in the forward-looking statements include, among other
things, the risk that Office Depot is unable to transform the
business into a service-driven company or that such a strategy will
result in the benefits anticipated; the risk that Office Depot may
not be able to realize the anticipated benefits of the CompuCom
transaction due to unforeseen liabilities, future capital
expenditures, expenses, indebtedness and the unanticipated loss of
key customers or the inability to achieve expected revenues,
synergies, cost savings or financial performance; uncertainty of
the expected financial performance of Office Depot following the
completion of the CompuCom transaction; impact of weather events on
Office Depot’s business; unanticipated changes in the markets for
Office Depot’s business segments; the inability to realize expected
benefits from the disposition of the European and other
international operations; fluctuations in currency exchange rates,
unanticipated downturns in business relationships with customers or
terms with the Company’s suppliers; competitive pressures on Office
Depot’s sales and pricing; increases in the cost of material,
energy and other production costs, or unexpected costs that cannot
be recouped in product pricing; the introduction of competing
technology products and services; unexpected technical or marketing
difficulties; unexpected claims, charges, litigation, dispute
resolutions or settlement expenses; new laws, tariffs and
governmental regulations. The foregoing list of factors is not
exhaustive. Investors and stockholders should carefully consider
the foregoing factors and the other risks and uncertainties
described in Office Depot’s Annual Report on Form 10-K, as amended,
and Quarterly Reports on Form 10-Q filed with the U.S. Securities
and Exchange Commission. Office Depot does not assume any
obligation to update or revise any forward-looking statements.
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 WeeksEnded
14 WeeksEnded
52 WeeksEnded
53 WeeksEnded
December 30, December 31, December 30,
December 31, 2017 2016 2017 2016
Sales $ 2,581 $ 2,725 $ 10,240 $ 11,021 Cost of goods sold and
occupancy costs 1,974 2,072 7,779 8,313
Gross profit 607 653 2,461 2,708 Selling, general and
administrative expenses 513 547 2,022 2,242 Asset impairments 3 6 4
15
Merger and restructuring expenses
(income), net
32 43 94 (80 ) Operating income 59 57
341 531 Other income (expense): Interest income 5 5 22 22 Interest
expense (23 ) (16 ) (62 ) (80 ) Loss on extinguishment of debt — —
— (15 ) Other income (expense), net — — (2 )
1 Income from continuing operations before income taxes 41
46 299 459 Income tax expense (benefit) 89 (9 )
153 (220 ) Net income (loss) from continuing
operations (48 ) 55 146 679 Discontinued operations, net of tax
(4 ) 25 35 (150 ) Net income (loss) $
(52 ) $ 80 $ 181 $ 529 Basic earnings (loss) per share Continuing
operations $ (0.09 ) $ 0.11 $ 0.28 $ 1.26 Discontinued operations
(0.01 ) 0.05 0.07 (0.28 ) Net earnings
per share $ (0.10 ) $ 0.15 $ 0.35 $ 0.98
Diluted earnings (loss) per share
Continuing operations $ (0.09 ) $ 0.10 $ 0.27 $ 1.24 Discontinued
operations (0.01 ) 0.05 0.06 (0.27 )
Net earnings per share $ (0.10 ) $ 0.15 $ 0.34 $ 0.96
Dividends per common share $ 0.025 $ 0.025 $ 0.10 $ 0.05
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions, except share and per
share amounts)
(Unaudited)
December 30,2017
December 31,2016
ASSETS Current assets: Cash and cash equivalents $
622 $ 763 Receivables, net 931 687 Inventories 1,093 1,279 Prepaid
expenses and other current assets 86 102 Current assets of
discontinued operations 139 142 Total current assets
2,871 2,973 Property and equipment, net 725 601 Goodwill 851 363
Other intangible assets, net 448 33 Timber notes receivable 863 885
Deferred income taxes 305 466 Other assets 260 219
Total assets $ 6,323 $ 5,540
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Trade accounts payable $ 892 $ 893
Accrued expenses and other current liabilities 986 1,002 Income
taxes payable 5 3 Short-term borrowings and current maturities of
long-term debt 96 29 Current liabilities of discontinued operations
67 104 Total current liabilities 2,046 2,031 Deferred
income taxes and other long-term liabilities 336 361 Pension and
postretirement obligations, net 91 140 Long-term debt, net of
current maturities 936 358 Non-recourse debt 776 798
Total liabilities 4,185 3,688 Commitments and contingencies
Redeemable noncontrolling interest 18 — Stockholders’ equity:
Common stock — authorized 800,000,000 shares of $.01 par value;
issued shares — 610,353,994 at December 30, 2017 and 557,892,568 at
December 31, 2016 6 6 Additional paid-in capital 2,711 2,618
Accumulated other comprehensive loss (78 ) (129 ) Accumulated
deficit (273 ) (453 ) Treasury stock, at cost — 56,369,637 shares
at December 30, 2017 and 42,802,998 shares at December 31, 2016
(246 ) (190 ) Total stockholders’ equity 2,120
1,852 Total liabilities, redeemable noncontrolling interest
and stockholders’ equity $ 6,323 $ 5,540
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
2017 2016 Cash flows from operating
activities of continuing operations: Net income $ 181 $ 529
Income (loss) from discontinued operations, net of tax 35 (150 )
Net income from continuing operations 146 679 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 159 181 Charges for losses on
inventories and receivables 70 78 Asset impairments 4 15
Compensation expense for share-based payments 28 40 Loss on
extinguishment of debt — 15 Deferred income taxes and deferred tax
asset valuation allowances 137 (231 ) Gain on disposition of assets
(4 ) (9 ) Other 2 3 Changes in assets and liabilities: Decrease in
receivables 15 55 Decrease (increase) in inventories 160 56 Net
decrease (increase) in prepaid expenses and other assets 2 (51 )
Net decrease in trade accounts payable, accrued expenses and other
current and other long-term liabilities (252 ) (339 ) Total
adjustments 321 (187 ) Net cash provided by operating activities of
continuing operations 467 492
Cash flows from investing
activities of continuing operations: Capital expenditures (141
) (111 ) Purchase of leased head office facility (42 ) — Businesses
acquired, net of cash acquired (875 ) — Proceeds from disposition
of assets and other 25 27 Net cash used in investing activities of
continuing operations (1,033 ) (84 )
Cash flows from financing
activities of continuing operations: Share purchase for taxes,
net of proceeds from employee share-based transactions (17 ) —
Payment to extinguish capital lease obligation (92 ) — Debt
retirement — (250 ) Debt related fees (12 ) (6 ) Cash used in
extinguishment of debt — (12 ) Cash dividends on common stock (53 )
(26 ) Debt issuance 728 — Proceeds from issuance of borrowings 4 —
Net payments on long and short-term borrowings (31 ) (49 )
Repurchase of common stock for treasury (56 ) (132 ) Other
financing activities 2 — Net cash provided by (used in) financing
activities of continuing operations 473 (475 )
Cash flows from
discontinued operations: Operating activities of discontinued
operations (9 ) (122 ) Investing activities of discontinued
operations (68 ) (70 ) Financing activities of discontinued
operations (8 ) 5 Net cash used in discontinued operations (85 )
(187 )
Effect of exchange rate changes on cash and cash
equivalents 7 (8 )
Net decrease in cash and cash
equivalents (171 ) (262 ) Cash and cash equivalents at
beginning of period 807 1,069 Cash and cash equivalents at end of
period 636 807 Cash and cash equivalents of discontinued operations
(14 ) (44 ) Cash and cash equivalents at the end of period –
continuing operations $ 622 $ 763
Supplemental
information on operating, investing, and financing activities
Cash interest paid, net of amounts capitalized and Timber
notes/Non-recourse debt $ 34 $ 63 Cash taxes paid $ 18 $ 48
Non-cash asset additions under capital leases $ 5 $ 9
OFFICE DEPOT, INC.GAAP to Non-GAAP
Reconciliations(Unaudited)
Office Depot reports results in accordance with accounting
principles generally accepted in the United States (“GAAP”). The
Company also reviews certain financial measures excluding impacts
of transactions that are not related to core operations
(“non-GAAP”). Management believes that the presentation of these
non-GAAP financial measures enhances the ability of investors to
analyze trends in the business and provides a means to compare
periods that may be affected by various items that might obscure
trends or developments in the business. Management uses both GAAP
and non-GAAP measures to assist in making business decisions and
assessing overall performance. Non-GAAP measures help to evaluate
programs and activities that are intended to attract and satisfy
customers, separate from expenses and credits directly associated
with Merger, restructuring, and certain similar items. Certain
non-GAAP measures are also used for short and long-term incentive
programs.
The Company’s measurement of these non-GAAP financial measures
may be different from similarly titled financial measures used by
others and therefore may not be comparable. These non-GAAP
financial measures should not be considered superior to the GAAP
measures, but only to clarify some information and assist the
reader. Reconciliations of this information to the most comparable
GAAP measures have been included in the tables within this
material.
The Company’s outlook for 2018 is for continuing operations only
and includes non-GAAP measures, such as adjusted operating income
and adjusted diluted earnings per share, which excludes charges or
credits not indicative of core operations, which may include but
not be limited to merger integration expenses, restructuring
charges, acquisition-related costs, executive transition costs,
asset impairments and other significant items that currently cannot
be predicted. The exact amount of these charges or credits are not
currently determinable, but may be significant. Accordingly, the
Company is unable to provide equivalent reconciliations from GAAP
to non-GAAP for these financial measures.
(In millions, except per share amounts)
Q4 2017
Reported(GAAP)
% ofSales
Less:Charges
&Credits
Adjusted(Non-GAAP)
% ofSales
Selling, general and administrative expenses $ 513 19.9 %
$ 1 $ 512 19.8 % Assets impairments $ 3 0.1 %
$ 3 $ — — %
Merger and restructuring expenses, net
$ 32 1.2 % $ 32 $ — — % Operating income (loss) $ 59 2.3 % $ (36 )
$ 95 3.7 % Income tax expense $ 89 3.4 % $ 56 $ 33 1.3 % Net income
(loss) from continuing operations $ (48 ) (1.9 ) % $ (92 ) $ 45 1.7
% Earnings (loss) per share continuing operations (most
dilutive) $ (0.09 ) $ (0.17 ) $ 0.08
Q4 2016
Reported(GAAP)
% ofSales
Less:Charges
&Credits
Adjusted(Non-GAAP)
% ofSales
Selling, general and administrative expenses $ 547 20.1 % $ 6 $ 541
19.9 % Assets impairments $ 6 0.2 % $ 6 $ — — %
Merger and restructuring expenses, net
$ 43 1.6 % $ 43 $ — — % Operating income (loss) $ 57 2.1 % $ (55 )
$ 111 4.1 % Income tax expense (benefit) $ (9 ) (0.3 ) % $ (50 ) $
41 1.5 % Net income (loss) from continuing operations $ 55 2.0 % $
(5 ) $ 59 2.2 % Earnings (loss) per share continuing
operations (most dilutive) $ 0.10 $ (0.01 ) $ 0.11
OFFICE DEPOT, INC.
GAAP to Non-GAAP
Reconciliations
(Unaudited) (continued)
2017
Reported(GAAP)
% ofSales
Less:Charges
&Credits
Adjusted(Non-GAAP)
% ofSales
Selling, general and administrative expenses $ 2,022 19.7 %
$ 8 $ 2,014 19.7 % Assets impairments $ 4 0.0
% $ 4 $ — — %
Merger and restructuring expenses, net
$ 94 0.9 % $ 94 $ — — % Operating income (loss) $ 341 3.3 % $ (106
) $ 446 4.4 % Income tax expense (benefit) $ 153 1.5 % $ (10 ) $
163 1.6 % Net income (loss) from continuing operations $ 146 1.4 %
$ (96 ) $ 241 2.4 % Earnings (loss) per share continuing
operations (most dilutive) $ 0.27 $ (0.18 ) $ 0.45
2016
Reported(GAAP)
% ofSales
Less:Charges
&Credits
Adjusted(Non-GAAP)
% ofSales
Selling, general and administrative expenses $ 2,242 20.3 % $ 6 $
2,236 20.3 % Assets impairments $ 15 0.1 % $ 15 $ — — %
Merger and restructuring expenses
(income), net
$ (80 ) (0.7 ) % $ (80 ) $ — — % Operating income $ 531 4.8 % $ 59
$ 471 4.3 % Income tax expense (benefit) $ (220 ) (2.0 ) % $ (383 )
$ 163 1.5 % Net income from continuing operations $ 679 6.2 % $ 427
$ 251 2.3 % Earnings per share continuing operations (most
dilutive) $ 1.24 $ 0.78 $ 0.46
Amounts may not foot due to rounding
Note: The Company has released a majority of
the deferred tax asset valuation allowances in the U.S. for GAAP
purposes. The non-GAAP tax calculation removed the U.S. valuation
allowances in the first quarter of 2015 because of the cumulative
income on a non-GAAP basis.
Sales
Decline Reconciliation:
13 Weeks EndedDecember
30,2017
52 Weeks EndedDecember
30,2017
Reported (GAAP) sales decline (5)% (7)% Add: Sales impact of
foreign currency translation 0% 0% Add: Sales impact associated
with U.S. store closures 2% 2%
Add: Sales benefit from 53rd week in prior
year
5% 1% Less: CompuCom acquisition
6%
1%
Adjusted sales decline (excluding impact from foreign currency
translation and U.S. retail store closures) (4)% (5)%
Amounts may not foot due to rounding
OFFICE DEPOT, INC.
Store Statistics
(Unaudited)
Q42017
Full Year2017
Retail Division: Stores opened — — Stores closed 26
63 Total retail stores (U.S.) 1,378 Total square footage (in
millions) 31.0 Average square footage per store (in thousands) 22.5
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180228005432/en/
Office Depot, Inc.Richard Leland, 561-438-3796Investor
RelationsRichard.Leland@officedepot.comorDanny Jovic,
561-438-1594Media RelationsDanny.Jovic@officedepot.com
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