Improving Business Environment and Low Cost
Model Helped Drive 6% Increase YOY in Revenue and Strong Overall
Results
Continued Progress on Previously Announced Spin
Transaction
Modified Plan for Separation to Include
Spin-off of Consumer Business as Opposed to Previously Announced
Spin-off of B2B Businesses
Positioned to Capture Demand During Upcoming
Back-to-School Season
Repurchased Shares Under Previously Announced
Stock Repurchase Authorization
The ODP Corporation (“ODP,” or the “Company”) (NASDAQ: ODP), a
leading provider of business services, products and digital
workplace technology solutions through an integrated B2B
distribution platform, today announced results for the second
quarter ended June 26, 2021.
Consolidated (in millions, except
per share amounts)
2Q21
2Q20
YTD21
YTD20
Sales
$2,286
$2,158
$4,652
$4,883
Sales change from prior year period
6%
(5)%
Operating loss
$(78)
$(456)
$(22)
$(376)
Adjusted operating income (1)
$44
$10
$135
$119
Net loss
$(88)
$(439)
$(35)
$(394)
Diluted loss per share
$(1.62)
$(8.19)
$(0.65)
$(7.31)
Adjusted net income (loss) (1)
$28
$(4)
$96
$62
Adjusted earnings (loss) per share (most
dilutive) (1)
$0.51
$(0.07)
$1.71
$1.15
Adjusted EBITDA (1)
$93
$59
$231
$216
Operating Cash Flow
$(11)
$(8)
$75
$180
Free Cash Flow (2)
$(27)
$(23)
$46
$140
Adjusted Free Cash Flow (3)
$(13)
$(7)
$66
$166
Second Quarter 2021
Summary(1)(3)
- Total reported sales of $2.3 billion, up 6% versus last
year
- GAAP operating loss includes charges of $122 million, including
$114 million of non-cash asset impairment charges related to
goodwill and intangibles at CompuCom, largely related to the
continued effects of the COVID-19 pandemic on current business
conditions, which led to a GAAP operating loss of $78 million and a
net loss of $88 million, or $(1.62) per share, compared to an
operating loss of $456 million and a net loss of $439 million, or
$(8.19) per share, in the prior year.
- Adjusted operating income of $44 million, up from $10 million
in the second quarter of 2020; and adjusted EBITDA of $93 million,
up from $59 million in the second quarter of 2020
- Adjusted net income of $28 million, or adjusted diluted
earnings per share of $0.51, versus adjusted net loss of $4 million
or $(0.07), respectively in the prior year
- Operating cash flow of $(11) million and adjusted free cash
flow of $(13) million, versus $(8) million and $(7) million,
respectively in the prior year
- $1.7 billion of total available liquidity including $691
million in cash and cash equivalents
“Our success in delivering improved results this quarter
reflects the meaningful progress we’ve made on all of our
initiatives to unlock shareholder value,” said Gerry Smith, chief
executive officer of The ODP Corporation. “Simultaneously, demand
for our core products and services grew in the quarter as customers
and more businesses and schools returned to work and to in-class
learning.”
“These factors helped drive continued strong results in our
Retail Division, which serves as the `home office and school supply
headquarters' choice for customers, and improving performance in
our Business Solutions Division (BSD). Combined with our low cost
model approach, we delivered a 6% increase in revenue and more than
tripled our adjusted operating income compared to last year,
putting us in a position of strength as we enter the second half of
2021.”
“We also continued to advance our digital platform business,
adding key new team members and making progress on our technology
platform development. We have attracted industry-leading talent and
are building out the capabilities of our new platform, placing us
in an excellent position to drive future value in the large and
growing business commerce market.”
“Finally, we’re also moving forward with our plans to separate
ODP into two, highly-focused, pure-play companies. The improving
market dynamics continue to reflect the growth opportunities for
both businesses, and we remain excited about their future
prospects. We have modified our plan for the separation, and we
remain on-track with our initiatives to complete this
transformation in the first half of 2022.”
“This is an exciting time for all of our stakeholders as we
strengthen our foundation to create greater value in the future.
Our entire team is confident, energized, and committed to capturing
the numerous opportunities ahead,” he added.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the second quarter of 2021 were $2.3
billion, an increase of 6% compared to the second quarter of 2020.
The year-over-year increase in revenue was partially driven by
stronger business activity as the public sector returned to work
and schools began to return to in-class learning. Product sales in
the second quarter were up 6% relative to the prior year period,
driven by stronger demand for core supply product categories,
workspaces and technology. Service revenue in the first quarter was
up 8%, largely related to stronger demand for managed print and
fulfillment, as well as copy and print services in both BSD and
Retail Divisions.
Sales Breakdown (in millions)
2Q21
2Q20
YTD21
YTD20
Product sales
$1,961
$1,857
$4,012
$4,194
Product sales change from prior year
6%
(4)%
Service revenues
$325
$301
$640
$689
Service revenues change from prior
year
8%
(7)%
Total sales
$2,286
$2,158
$4,652
$4,883
The Company reported operating loss of $78 million in the second
quarter of 2021, compared to operating loss of $456 million in the
prior year period. GAAP operating results in the second quarter
included $122 million of charges including $115 million of non-cash
asset impairment charges, and $7 million in net merger,
restructuring and other operating costs. Asset impairment charges
of $115 million in the second quarter of 2021 included $114 million
related to impairment of goodwill and other intangible assets at
CompuCom, largely related to the macroeconomic effects of COVID-19
on current business conditions. Net merger, restructuring and other
operating costs of $7 million were primarily associated with the
planned separation of B2B operations. Net loss was $88 million, or
$(1.62) per diluted share in the second quarter of 2021, compared
to net loss of $439 million, or $(8.19) per diluted share in the
second quarter of 2020.
Adjusted (non-GAAP) Results
(1)(2)
Adjusted results for the second quarter of 2021 exclude charges
and credits totaling $122 million as described above and the tax
impacts associated with the above items.
- Second quarter of 2021 adjusted EBITDA was $93 million compared
to $59 million in the prior year period. This included adjusted
depreciation and amortization(4) of $43 million and $47 million in
the second quarters of 2021 and 2020, respectively
- Second quarter 2021 adjusted operating income was $44 million
compared to $10 million in the second quarter of 2020
- Second quarter 2021 adjusted net income was $28 million, or
$0.51 per diluted share, compared to adjusted net loss of $4
million, or $(0.07) per diluted share, in the second quarter of
2020
Second Quarter Division Results
Business Solutions Division
(BSD)
- Reported sales were $1.1 billion in the second quarter of 2021,
up 12% compared to the same period last year. Stronger demand from
B2B customers, including those in the public and education sector,
positively impacted sales results as these customers continue to
recover from conditions related to the pandemic
- Revenue performance was driven by an increase in sales through
the Company’s B2B contract channel, partially offset by lower sales
in its eCommerce channel
- BSD generated stronger year-over-year demand for core supply
products and services; adjacency categories remained at 44% of BSD
sales, flat to the first quarter of 2021
- Operating income was $31 million in the second quarter of 2021
compared to $13 million in the prior year period
Retail Division
- Reported sales were $914 million in the second quarter of 2021,
flat with the prior year period despite 169 fewer retail outlets at
the end of the second quarter, as compared to the prior year, due
to planned closures of underperforming stores. The Company closed
55 stores in the quarter and had 1,091 stores at quarter end
- Retail drove strong year-over-year demand in core supply
categories, workspaces and technology products. Increased store
traffic, sales per shopper, and conversion rates all contributed to
strong sales in the quarter
- Operating income was $44 million in the second quarter of 2021,
up 144% over the same period last year, representing a 290 basis
point margin improvement
CompuCom Division
- Reported sales were $222 million in the second quarter of 2021,
up 4% compared to the prior year period. Stronger product sales
contributed to the year-over-year revenue performance
- CompuCom reported $3 million operating income in the second
quarter of 2021, compared to $4 million operating income in the
prior year period
Digital Transformation Progress
As a primary component of its strategy to drive growth in higher
value industry segments, the Company continued to make progress on
its digital transformation initiatives during the quarter. These
accomplishments included adding key personnel, continuing to
integrate and bring the capabilities of its leading P2P software
platform, BuyerQuest, to customers, and making progress on its
technology development with collaboration partners. The Company is
also advancing its collaboration with Microsoft and remains
on-track to bring BuyerQuest’s value proposition to Microsoft’s
Business Central customers in the future.
Update on Spin-Off Progress and Modified Plan for
Separation
The Company continues to execute upon its plans to separate ODP
into two, independent, publicly-traded companies, and made solid
progress in all areas of the separation including operating
mechanics, supply chain dynamics, IT support, and on the
anticipated market-based commercial agreements between the
companies.
Recognizing the flexibility provided by the Company’s
reorganization into a holding company structure in 2020, the
Company has modified its plan for the separation to be structured
as a tax-free spin-off of the Company’s consumer business, with the
Company retaining its B2B related operations, as further described
below. The Company believes that this modified approach will be
more efficient considering that it is expected that the majority of
the Company’s current management team and Directors will remain
with the B2B business, which will continue to operate under the
name “The ODP Corporation.” Each company is expected to have a
unique and highly focused strategy and investment profile, as
follows:
- ODP – a leading B2B solutions provider serving small,
medium and enterprise level companies, mainly consisting of the
contract sales channel of the Business Solutions Division, which
includes operations in Canada and the independent regional office
supply distribution businesses within the U.S. that the Company has
been acquiring since 2017. ODP will also own the newly formed B2B
digital platform technology business, including BuyerQuest, as well
as the Company’s global sourcing office, and its other sourcing,
supply chain and logistics assets; and
- Office Depot (“NewCo”) – an Office Depot branded leading
provider of retail consumer and small business products and
services distributed via approximately 1,100 Office Depot and
OfficeMax retail locations and an eCommerce presence,
officedepot.com.
The separation is expected to allow ODP and Office Depot to
pursue unique market opportunities and growth strategies, improving
the value for shareholders and stakeholders. While ODP and Office
Depot will be separate, independent companies, it is anticipated
that they will share commercial agreements to allow them to
continue to leverage scale benefits in such areas as product
sourcing and supply chain. The expected timing remains the same as
previously announced, with completion by the first half of
2022.
Balance Sheet and Cash Flow
As of June 26, 2021, ODP had total available liquidity of
approximately $1.7 billion, consisting of $691 million in cash and
cash equivalents and $997 million of available credit under the
Third Amended Credit Agreement. Total debt was $359 million.
For the second quarter of 2021, cash used in operating
activities was $11 million, which included $14 million in
restructuring costs, compared to cash used in operating activities
of $8 million in the second quarter of the prior year, which
included $4 million in acquisition and integration-related costs
and $16 million in restructuring costs.
Capital expenditures in the quarter were $16 million versus $15
million in the prior year period, reflecting continuing growth
investments in the Company’s digital transformation, distribution
network, and eCommerce capabilities. The cash charges associated
with the Company’s Maximize B2B Restructuring Plan and its Business
Acceleration Program in the quarter were $11 million and $3
million, respectively. Accordingly, Adjusted Free Cash Flow was
$(13) million in the second quarter of 2021(3).
As part of the ongoing commitment and support of its strategic
initiatives, the Company repurchased $46 million in stock of the
Company, retiring over 1 million shares of its stock during the
quarter, and through July 2021, repurchased 1.5 million shares for
an average cost of $45.38 per share.
(1)
As presented throughout this release,
adjusted results represent non-GAAP financial 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, and asset
impairments. Reconciliations from GAAP to non-GAAP financial
measures can be found in this release as well as on the Company’s
Investor Relations website at investor.theodpcorp.com.
(2)
As used in this release, Free Cash Flow is
defined as cash flows from operating activities less capital
expenditures. Free Cash Flow is a non-GAAP financial measure and
reconciliations from GAAP financial measures can be found in this
release as well as on the Company’s Investor Relations website at
investor.theodpcorp.com.
(3)
As used in this release, Adjusted Free
Cash Flow is defined as Free Cash Flow excluding cash charges
associated with the Company’s Maximize B2B Restructuring Plan and
its Business Acceleration Program. Adjusted Free Cash Flow is a
non-GAAP financial measure and reconciliations from GAAP financial
measures can be found in this release as well as on the Company’s
Investor Relations website at investor.theodpcorp.com.
(4)
Adjusted depreciation and amortization
each represents a non-GAAP financial measure and excludes
accelerated depreciation caused by updating the salvage value and
shortening the useful life of depreciable fixed assets to coincide
with planned store closures under an approved restructuring plan,
but only if impairment is not present. Accelerated depreciation
charges are restructuring expenses. Reconciliations from GAAP to
non-GAAP financial measures can be found in this release as well as
on the Company’s Investor Relations website at
investor.theodpcorp.com.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of
business services and supplies, products and digital workplace
technology solutions to small, medium and enterprise businesses,
through an integrated business-to-business (B2B) distribution
platform, which includes world-class supply chain and distribution
operations, dedicated sales professionals and technicians, online
presence, and approximately 1,100 stores. Through its banner brands
Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as
others, 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.theodpcorp.com and investor.theodpcorp.com.
The ODP Corporation and Office Depot are trademarks 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. ©2021 Office Depot, LLC. 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, the potential impacts
on our business due to the unknown severity and duration of the
COVID-19 pandemic, or state other information relating to, among
other things, the Company, 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 the Company’s
control. There can be no assurances that the Company will realize
these expectations or that these beliefs will prove correct, and
therefore investors and stakeholders 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, highly competitive office products market and failure to
differentiate the Company from other office supply resellers or
respond to decline in general office supplies sales or to shifting
consumer demands; competitive pressures on the Company’s sales and
pricing; the adverse effects of an unsolicited tender offer on our
business, operating results or financial condition; the risk that
the Company is unable to transform the business into a
service-driven, B2B platform that such a strategy will not result
in the benefits anticipated; the risk that the Company will not be
able to achieve its strategic plans, including the proposed
separation of its consumer business and the planned sale of
CompuCom, and the high costs in connection with these transactions
may not be recouped if these transactions are not consummated; the
risk that the Company may not be able to realize the anticipated
benefits of acquisitions 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; the
risk that the Company is unable to successfully maintain a relevant
omni-channel experience for its customers; the risk that the
Company is unable to execute the Maximize B2B Restructuring Plan
successfully or that such plan will not result in the benefits
anticipated; failure to effectively manage the Company’s real
estate portfolio; loss of business with government entities,
purchasing consortiums, and sole- or limited- source distribution
arrangements; failure to attract and retain qualified personnel,
including employees in stores, service centers, distribution
centers, field and corporate offices and executive management, and
the inability to keep supply of skills and resources in balance
with customer demand; failure to execute effective advertising
efforts and maintain the Company’s reputation and brand at a high
level; disruptions in computer systems, including delivery of
technology services; breach of information technology systems
affecting reputation, business partner and customer relationships
and operations and resulting in high costs and lost revenue;
unanticipated downturns in business relationships with customers or
terms with the suppliers, third-party vendors and business
partners; disruption of global sourcing activities, evolving
foreign trade policy (including tariffs imposed on certain foreign
made goods); exclusive Office Depot branded products are subject to
additional product, supply chain and legal risks; product safety
and quality concerns of manufacturers’ branded products and
services and Office Depot private branded products; covenants in
the credit facility; general disruption in the credit markets;
incurrence of significant impairment charges; retained
responsibility for liabilities of acquired companies; fluctuation
in quarterly operating results due to seasonality of the Company’s
business; changes in tax laws in jurisdictions where the Company
operates; increases in wage and benefit costs and changes in labor
regulations; changes in the regulatory environment, legal
compliance risks and violations of the U.S. Foreign Corrupt
Practices Act and other worldwide anti-bribery laws; volatility in
the Company’s common stock price; changes in or the elimination of
the payment of cash dividends on Company common stock;
macroeconomic conditions such as future declines in business or
consumer spending; increases in fuel and other commodity prices and
the cost of material, energy and other production costs, or
unexpected costs that cannot be recouped in product pricing;
unexpected claims, charges, litigation, dispute resolutions or
settlement expenses; catastrophic events, including the impact of
weather events on the Company’s business; the discouragement of
lawsuits by shareholders against the Company and its directors and
officers as a result of the exclusive forum selection of the Court
of Chancery, the federal district court for the District of
Delaware or other Delaware state courts by the Company as the sole
and exclusive forum for such lawsuits; and the impact of the
COVID-19 pandemic on the Company’s business, including on the
demand for its and our customers’ products and services, on trade
and transport restrictions and generally on our ability to
effectively manage the impacts of the COVID-19 pandemic on our
business operations. The foregoing list of factors is not
exhaustive. Investors and shareholders should carefully consider
the foregoing factors and the other risks and uncertainties
described in the Company’s Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K filed with
the U.S. Securities and Exchange Commission. The Company does not
assume any obligation to update or revise any forward-looking
statements.
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 Weeks Ended
26 Weeks Ended
June 26,
June 27,
June 26,
June 27,
2021
2020
2021
2020
Sales:
Products
$
1,961
$
1,857
$
4,012
$
4,194
Services
325
301
640
689
Total sales
2,286
2,158
4,652
4,883
Cost of goods sold and occupancy
costs:
Products
1,590
1,531
3,199
3,358
Services
224
211
447
479
Total cost of goods sold and occupancy
costs
1,814
1,742
3,646
3,837
Gross profit
472
416
1,006
1,046
Selling, general and administrative
expenses
428
406
880
928
Asset impairments
115
401
127
413
Merger, restructuring and other operating
expenses, net
7
65
21
81
Operating loss
(78
)
(456
)
(22
)
(376
)
Other income (expense):
Interest income
—
—
—
3
Interest expense
(6
)
(11
)
(14
)
(29
)
Loss on extinguishment and modification of
debt
—
(12
)
—
(12
)
Other income, net
5
4
16
5
Loss before income taxes
(79
)
(475
)
(20
)
(409
)
Income tax expense (benefit)
9
(36
)
15
(15
)
Net loss
$
(88
)
$
(439
)
$
(35
)
$
(394
)
Loss per share
Basic
$
(1.62
)
$
(8.34
)
$
(0.65
)
$
(7.46
)
Diluted
$
(1.62
)
$
(8.19
)
$
(0.65
)
$
(7.31
)
THE ODP CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
June 26,
December 26,
2021
2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
691
$
729
Receivables, net
681
631
Inventories
957
930
Prepaid expenses and other current
assets
82
65
Total current assets
2,411
2,355
Property and equipment, net
533
576
Operating lease right-of-use assets
1,053
1,170
Goodwill
575
609
Other intangible assets, net
341
357
Deferred income taxes
151
162
Other assets
314
329
Total assets
$
5,378
$
5,558
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
979
$
919
Accrued expenses and other current
liabilities
1,089
1,138
Income taxes payable
10
12
Short-term borrowings and current
maturities of long-term debt
22
24
Total current liabilities
2,100
2,093
Deferred income taxes and other long-term
liabilities
193
197
Pension and postretirement obligations,
net
38
43
Long-term debt, net of current
maturities
337
354
Operating lease liabilities
869
991
Total liabilities
3,537
3,678
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 64,623,396 at June 26,
2021 and 62,551,255 at December 26, 2020; outstanding shares —
53,747,179 at June 26, 2021 and 52,694,062 at December 26, 2020
1
1
Additional paid-in capital
2,707
2,675
Accumulated other comprehensive loss
(22
)
(32
)
Accumulated deficit
(444
)
(409
)
Treasury stock, at cost — 10,876,217
shares at June 26, 2021 and 9,857,193 shares at December 26,
2020
(401
)
(355
)
Total stockholders’ equity
1,841
1,880
Total liabilities and stockholders’
equity
$
5,378
$
5,558
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
26 Weeks Ended
June 26,
June 27,
2021
2020
Cash flows from operating
activities:
Net loss
$
(35
)
$
(394
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
89
97
Charges for losses on receivables and
inventories
10
16
Asset impairments
127
413
(Gain) loss on disposition of assets,
net
(3
)
5
Loss on extinguishment and modification of
debt
—
12
Compensation expense for share-based
payments
20
16
Deferred income taxes and deferred tax
asset valuation allowances
6
(3
)
Changes in working capital and other
operating activities
(139
)
18
Net cash provided by operating
activities
75
180
Cash flows from investing
activities:
Capital expenditures
(29
)
(40
)
Businesses acquired, net of cash
acquired
(28
)
(18
)
Proceeds from collection of notes
receivable
—
818
Proceeds from disposition of assets
3
1
Settlement of company-owned life insurance
policies
21
1
Net cash provided by (used in) investing
activities
(33
)
762
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(13
)
(30
)
Debt retirement
—
(1,187
)
Debt issuance
—
400
Cash dividends on common stock
—
(13
)
Share purchases for taxes, net of proceeds
from employee share-based transactions
(23
)
(5
)
Repurchase of common stock for
treasury
(46
)
(30
)
Other financing activities
(1
)
(7
)
Net cash used in financing activities
(83
)
(872
)
Effect of exchange rate changes on cash
and cash equivalents
3
(6
)
Net increase (decrease) in cash and cash
equivalents
(38
)
64
Cash, cash equivalents and restricted cash
at beginning of period
729
700
Cash, cash equivalents and restricted cash
at end of period
$
691
$
764
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new finance lease liabilities
$
2
$
3
Right-of-use assets obtained in exchange
for new operating lease liabilities
39
63
Business acquired in exchange for common
stock issuance
35
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
Business Solutions Division (in
millions)
2Q21
2Q20
YTD21
YTD20
Sales
$1,146
$1,024
$2,274
$2,358
Sales change from prior year
12%
(4)%
Division operating income
$31
$13
$48
$53
Division operating income margin
2.7%
1.3%
2.1%
2.2%
Retail Division (in millions)
2Q21
2Q20
YTD21
YTD20
Sales
$914
$912
$1,953
$2,069
Sales change from prior year
0%
(6)%
Division operating income
$44
$18
$145
$106
Division operating income margin
4.8%
2.0%
7.4%
5.1%
CompuCom Division (in millions)
2Q21
2Q20
YTD21
YTD20
Sales
$222
$214
$418
$450
Sales change from prior year
4%
(7)%
Division operating income
$3
$4
$2
$7
Division operating income margin
1.4%
1.9%
0.5%
1.6%
THE ODP CORPORATION GAAP to Non-GAAP
Reconciliations (Unaudited)
We report our results in accordance with accounting principles
generally accepted in the United States (“GAAP”). We also review
certain financial measures excluding impacts of transactions that
are not related to our core operations (“non-GAAP”). Management
believes that the presentation of these non-GAAP financial measures
enhances the ability of its investors to analyze trends in its
business and provides a means to compare periods that may be
affected by various items that might obscure trends or developments
in its 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.
Our 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. We have
included reconciliations of this information to the most comparable
GAAP measures in the tables included within this material.
Free cash flow is a non-GAAP measure, which we define as cash
flows from operating activities less capital expenditures. We
believe that free cash flow is an important indicator that provides
additional perspective on our ability to generate cash to fund our
strategy and expand our distribution network. Adjusted free cash
flow is also a non-GAAP measure, which we define as free cash flow
excluding cash charges associated with the Company’s Maximize B2B
Restructuring Plan and its Business Acceleration Program.
(In millions, except per share amounts)
Q2 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Assets impairments
$
115
5.0
%
$
115
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
7
0.3
%
$
7
$
—
—
%
Operating income (loss)
$
(78
)
(3.4
)%
$
(122
)
$
44
(6)
1.9
%
Income tax expense
$
9
0.4
%
$
(5
)
$
14
(8)
0.6
%
Net income (loss)
$
(88
)
(3.8
)%
$
(117
)
$
28
(9)
1.2
%
Earnings (loss) per share (most
dilutive)
$
(1.62
)
$
(2.13
)
$
0.51
(9)
Depreciation and amortization
$
43
1.9
%
$
—
$
43
(10)
1.9
%
Q2 2020
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Assets impairments
$
401
18.6
%
$
401
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
65
3.0
%
$
65
$
—
—
%
Operating income (loss)
$
(456
)
(21.1
)%
$
(466
)
$
10
(6)
0.5
%
Loss on extinguishment and modification of
debt
$
(12
)
(0.6
)%
$
(12
)
$
—
—
%
Other income, net
$
4
0.2
%
$
2
$
2
(7)
0.1
%
Income tax expense (benefit)
$
(36
)
(1.7
)%
$
(41
)
$
5
(8)
0.2
%
Net loss
$
(439
)
(20.3
)%
$
(435
)
$
(4
)
(9)
(0.2
)%
Loss per share (most dilutive)
$
(8.19
)
$
(8.12
)
$
(0.07
)
(9)
Depreciation and amortization
$
48
2.2
%
$
1
$
47
(10)
2.2
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
YTD 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Selling, general and administrative
expenses
$
880
18.9
%
$
10
$
870
(5)
18.7
%
Assets impairments
$
127
2.7
%
$
127
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
21
0.5
%
$
21
$
—
—
%
Operating income (loss)
$
(22
)
(0.5
)%
$
(158
)
$
135
(6)
2.9
%
Other income, net
$
16
0.3
%
$
7
$
9
(7)
0.2
%
Income tax expense
$
15
0.3
%
$
(19
)
$
34
(8)
0.7
%
Net income (loss)
$
(35
)
(0.8
)%
$
(132
)
$
96
(9)
2.1
%
Earnings (loss) per share (most
dilutive)
$
(0.65
)
$
(2.36
)
$
1.71
(9)
Depreciation and amortization
$
89
1.9
%
$
2
$
87
(10)
1.9
%
YTD 2020
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Assets impairments
$
413
8.5
%
$
413
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
81
1.7
%
$
81
$
—
—
%
Operating income (loss)
$
(376
)
(7.7
)%
$
(494
)
$
119
(6)
2.4
%
Loss on extinguishment and modification of
debt
$
(12
)
(0.2
)%
$
(12
)
$
—
—
%
Other income, net
$
5
0.1
%
$
2
$
3
(7)
0.1
%
Income tax expense (benefit)
$
(15
)
(0.3
)%
$
(48
)
$
33
(8)
0.7
%
Net income (loss)
$
(394
)
(8.1
)%
$
(456
)
$
62
(9)
1.3
%
Earnings (loss) per share (most
dilutive)
$
(7.31
)
$
(8.46
)
$
1.15
(9)
Depreciation and amortization
$
97
2.0
%
$
2
$
95
(10)
1.9
%
13 Weeks Ended
26 Weeks Ended
June 26,
June 27,
June 26,
June 27,
Adjusted EBITDA:
2021
2020
2021
2020
Net loss
$
(88
)
$
(439
)
$
(35
)
$
(394
)
Income tax expense (benefit)
9
(36
)
15
(15
)
Loss before income taxes
(79
)
(475
)
(20
)
(409
)
Add (subtract)
Interest income
—
—
—
(3
)
Interest expense
6
11
14
29
Adjusted depreciation and amortization
(10)
43
47
87
95
Charges and credits, pretax (11)
122
476
151
504
Adjusted EBITDA
$
93
$
59
$
231
$
216
Amounts may not foot due to rounding. The sum of the quarterly
amounts may not equal the reported amounts for the year due to
rounding.
(5)
Adjusted selling, general and
administrative expenses for the first half of 2021 exclude charges
for CompuCom’s malware incident related costs of $10 million.
(6)
Adjusted operating income (loss) for all
periods presented herein exclude merger, restructuring and other
operating expenses, net, asset impairments (if any) and CompuCom’s
malware incident related costs (if any).
(7)
Adjusted other income, net for the first
half of 2021 excludes credits for the release of certain
liabilities of our former European Business of $7 million. Adjusted
other income, net for the second quarter and first half of 2020
both exclude credits for Indemnification asset adjustments of $2
million.
(8)
Adjusted income tax expense (benefit) for
all periods presented herein exclude the tax effect of the charges
or credits not indicative of core operations as described in the
preceding notes.
(9)
Adjusted net income (loss) and adjusted
earnings (loss) per share (most dilutive) for all periods presented
exclude merger, restructuring and other operating expenses, net,
asset impairments (if any), CompuCom’s malware incident related
costs (if any), European Business liabilities release (if any),
loss on extinguishment and modification of debt (if any),
indemnification asset adjustments (if any), and exclude the tax
effect of the charges or credits not indicative of core
operations.
(10)
Adjusted depreciation and amortization for
all periods presented herein exclude accelerated depreciation
caused by updating the salvage value and shortening the useful life
of depreciable fixed assets to coincide with the planned store
closures under an approved restructuring plan, but only if
impairment is not present. Accelerated depreciation charges are
restructuring expenses and included in the Charges and credits,
pretax line item.
(11)
Charges and credits, pretax for all
periods presented include merger, restructuring and other operating
expenses, net, asset impairments (if any), CompuCom’s malware
incident related costs (if any), European Business liabilities
release (if any), loss on extinguishment and modification of debt
(if any), and indemnification asset adjustments (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
26 Weeks Ended
June 26,
June 27,
June 26,
June 27,
Free cash flow
2021
2020
2021
2020
Net cash provided by (used in) operating
activities
$
(11
)
$
(8
)
$
75
$
180
Capital expenditures
(16
)
(15
)
(29
)
(40
)
Free cash flow
(27
)
(23
)
46
140
Adjustments for certain cash charges
Maximize B2B Restructuring Plan
11
3
16
3
Business Acceleration Program
3
13
4
23
Adjusted free cash flow
$
(13
)
$
(7
)
$
66
$
166
Amounts may not foot due to rounding. The
sum of the quarterly amounts may not equal the reported amounts for
the year due to rounding.
THE ODP CORPORATION
Store Statistics
(Unaudited)
Q2
Q2
YTD
2020
2021
2021
Retail Division:
Stores opened
—
—
—
Stores closed
35
55
63
Total retail stores (U.S.)
1,260
1,091
—
Total square footage (in millions)
28.0
24.0
—
Average square footage per store (in
thousands)
22.2
22.1
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804005290/en/
Tim Perrott Investor Relations 561-438-4629
Tim.Perrott@officedepot.com
Danny Jovic Media Relations 561-438-1594
Danny.Jovic@officedepot.com
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