Revenue of $2.2 Billion with GAAP EPS of $1.33;
Adjusted EPS of $1.76
Commitment to Low Cost Model Helped Drive GAAP
Operating Income of $104 Million and Adjusted Operating Income of
$122 Million
Continued Progress on Separation Including
Previously Announced CEO Appointments
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 third
quarter ended September 25, 2021.
Consolidated (in millions, except
per share amounts) (1)
3Q21
3Q20
YTD21
YTD20
Sales
$2,179
$2,347
$6,423
$6,787
Sales change from prior year period
(7)%
(5)%
Operating income (loss)
$104
$102
$203
$(14)
Adjusted operating income (2)
$122
$136
$258
$250
Net income (loss) from continuing
operations
$73
$34
$155
$(94)
Diluted earnings (loss) per share from
continuing operations
$1.33
$0.63
$2.79
$(1.78)
Adjusted net income from continuing
operations (2)
$96
$102
$197
$160
Adjusted earnings per share from
continuing operations
(most dilutive) (2)
$1.76
$1.88
$3.55
$2.97
Adjusted EBITDA (2)
$162
$175
$378
$371
Operating Cash Flow from continuing
operations
$121
$256
$256
$410
Free Cash Flow (3)
$102
$243
$209
$361
Adjusted Free Cash Flow (4)
$123
$259
$248
$402
Third Quarter 2021
Summary(1)(2)(4)
- Total reported sales of $2.2 billion, down 7% versus last year,
largely driven by 160 fewer retail locations in service compared to
last year and lower demand year-over-year in certain product
categories related to the COVID-19 pandemic
- GAAP operating income of $104 million and net income from
continuing operations of $73 million, or $1.33 per diluted share,
versus $102 million and $34 million, or $0.63 per diluted share,
respectively in the prior year
- Adjusted operating income of $122 million, compared to $136
million in the third quarter of 2020 and adjusted EBITDA of $162
million, compared to $175 million in the third quarter of 2020
- Adjusted net income from continuing operations of $96 million,
or adjusted diluted earnings per share from continuing operations
of $1.76, versus adjusted net income from continuing operations of
$102 million or $1.88, respectively in the prior year
- Operating cash flow from continuing operations of $121 million
and adjusted free cash flow of $123 million, versus $256 million
and $259 million, respectively in the prior year
- $1.7 billion of total available liquidity including $753
million in cash and cash equivalents
“We’re making meaningful progress on all of our initiatives to
unlock shareholder value while remaining true to our low-cost model
approach and providing value for our customers,” said Gerry Smith,
chief executive of The ODP Corporation. “I’m proud of our team for
delivering solid operating results against a more demanding
industry backdrop due to supply chain challenges and a slower pace
of back-to-office trends in the quarter. The investments we’ve made
in our private fleet, distribution assets, and diverse third party
carrier relationships are helping us mitigate some of the impacts
related to the recent industry-wide supply chain disruptions.
Additionally, our supplier diversification, combined with our
product assortment and flexible pricing strategies, adds to our
strength as we continue to navigate these challenges.”
“The pace of back-to-office trends was slower during the quarter
due to the well-publicized spread of the Delta variant. However,
we’re encouraged by the increase in demand for our core products
from companies who have returned to the office, highlighting
additional growth opportunities in the quarters ahead. We were also
pleased to see more students and teachers returning to the
classroom during the back-to-school season, driving year-over-year
demand in core school supplies and helping us partially offset
lower sales in certain product categories previously in stronger
demand last year during the earlier stages of the pandemic.”
“Moving forward, our entire team remains focused on unlocking
the power of our asset base and creating greater value for all
stakeholders in the future. We’re making progress on our plans for
separation, and we are advancing our digital transformation efforts
as Varis continues to make progress on its technology platform
development and rollout plans, placing us in an excellent position
to drive future value in the large and growing digital business
commerce market,” he added.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the third quarter of 2021 were $2.2
billion, a decrease of 7% compared to the third quarter of 2020.
The year-over-year decrease in revenue was largely driven by 160
fewer retail stores in service, as well as lower traffic in our
Retail and eCommerce channels in the quarter compared to last year.
Product sales in the third quarter of 2021 were down 8% relative to
the prior year period, driven by the lower store count and lower
demand for cleaning and PPE categories compared to last year, as
well as sourcing challenges for technology products and other
categories. Service revenue in the third quarter of 2021 was up 3%
relative to the prior year period, largely related to stronger
demand for copy and print services in both BSD and Retail
Divisions, as well as for managed print and fulfilment
services.
Sales Breakdown (in millions)
3Q21
3Q20
YTD21
YTD20
Product sales
$1,993
$2,166
$5,890
$6,238
Product sales change from prior year
(8)%
(6)%
Service revenues
$186
$181
$533
$549
Service revenues change from prior
year
3%
(3)%
Total sales
$2,179
$2,347
$6,423
$6,787
The Company reported operating income of $104 million in the
third quarter of 2021, compared to operating income of $102 million
in the prior year period. GAAP operating results in the third
quarter of 2021 included $18 million of charges including $5
million of non-cash asset impairment charges, and $13 million in
net merger, restructuring and other operating costs. Asset
impairment charges of $5 million in the third quarter of 2021
included $4 million related to impairment of operating lease
right-of-use assets associated with the Company’s retail store
locations, and the remainder was related to impairment of fixed
assets. Net merger, restructuring and other operating costs of $13
million were primarily associated with activities related to the
Company’s planned separation. Net income from continuing operations
was $73 million, or $1.33 per diluted share in the third quarter of
2021, up from $34 million, or $0.63 per diluted share in the third
quarter of 2020.
Adjusted (non-GAAP) Results
(1)(2)
Adjusted results for the third quarter of 2021 exclude charges
and credits totaling $18 million as described above and the tax
impacts associated with the above items.
- Third quarter of 2021 adjusted EBITDA was $162 million compared
to $175 million in the prior year period. This included adjusted
depreciation and amortization(5) of $36 million and $37 million in
the third quarters of 2021 and 2020, respectively
- Third quarter 2021 adjusted operating income was $122 million
compared to $136 million in the third quarter of 2020
- Third quarter 2021 adjusted net income from continuing
operations was $96 million, or $1.76 per diluted share, compared to
$102 million, or $1.88 per diluted share, in the third quarter of
2020
Third Quarter Division Results
Business Solutions Division
(BSD)
- Reported sales were $1.2 billion in the third quarter of 2021,
down 2% compared to the same period last year
- Sales generated through its enterprise contract channel
increased year-over-year as more business and education customers
slowly began to recover from the pandemic. This increase was more
than offset by lower sales through the Company’s eCommerce channel
compared to the same period last year
- Stronger sales in core categories were offset by lower
year-over-year demand for products previously in strong demand
during the height of the pandemic, as well as challenges related to
supply chain and sourcing impacting certain product categories
- Adjacency categories, including cleaning and breakroom,
furniture, technology, and copy and print, remained at 44% of BSD
sales, flat year-over-year
- Operating income was $41 million in the third quarter of 2021,
compared to $45 million in the prior year period
Retail Division
- Reported sales were $999 million in the third quarter of 2021,
down 13% compared to the prior year period primarily due to 160
fewer retail outlets at the end of the third quarter compared to
the prior year, associated with planned closures of underperforming
stores. The Company closed 7 retail stores in the quarter and had
1,084 stores at quarter end
- Back-to-school activity helped to drive an increase in core
school supplies year-over-year, which was offset by lower sales in
certain product categories that were in very strong demand last
year during the pandemic, including personal protective equipment
(PPE). Additionally, supply chain and sourcing challenges in
certain product categories, including technology and PC’s,
negatively impacted sales relative to last year
- Operating income was $107 million in the third quarter of 2021,
down 10% over the same period last year; As a percentage of sales,
this performance represented a 30 basis point margin improvement as
the Company continued to execute its low cost model approach
Spin-Off Progress and Plan for Separation
The Company continues to make progress on its plans to separate
ODP into two, independent, publicly-traded companies, making
advancements in all areas of the separation including
organizational structure, operating and supply chain mechanics, IT
support, and on the anticipated market-based commercial agreements
between the companies. During the quarter, the Company announced
the selection of the chief executive officers of both companies,
which would become effective upon completion of the spin-off, as
well as the company names for each of the two companies.
It was announced that Gerry Smith will continue to serve as the
CEO of the ODP Corporation following the separation. As a leading
supplier of B2B solutions serving small, medium and enterprise
level companies, The ODP Corporation will consist of several
operating companies, including the contract sales channel of ODP’s
current Business Solutions Division, which will be renamed ODP
Business Solutions, and ODP’s newly formed B2B digital platform
technology business, which will be named Varis. ODP Business
Solutions and Varis will be owned by ODP, but operated as separate
businesses. ODP will also continue to own the global sourcing
operations and other sourcing, supply chain and logistics
assets.
As previously announced, Kevin Moffitt, currently EVP, Chief
Retail Officer of The ODP Corporation, will be appointed CEO of
Office Depot upon completion of the spin-off. After the successful
completion of the spin-off, the new company will be named Office
Depot, Inc., a leading provider of retail consumer and small
business products and services distributed via approximately 1,100
Office Depot and OfficeMax retail locations and an award-winning
eCommerce presence, officedepot.com.
The separation is expected to allow The ODP Corporation and
Office Depot, Inc., to pursue unique market opportunities and
growth strategies, improving value for all stakeholders. While the
companies 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 estimated completion in the
first half of 2022.
Digital Transformation Initiatives
Aligned with its strategy to drive growth in high value industry
segments, the Company continued to make progress on its digital
transformation initiatives during the quarter. Varis, a newly
formed technology company focused on filling the growing demand for
a modern, trusted, digital B2B platform that transforms how
businesses buy and sell, continued to advance its development.
These accomplishments included integrating and bringing the
capabilities of its leading P2P software platform, BuyerQuest, to
new customers, as well as continuing to make progress on its
technology development. The Company is also advancing its
collaboration with Microsoft and remains focused on bringing
BuyerQuest’s value proposition to Microsoft’s Business Central
customers in the future.
Balance Sheet and Cash Flow
As of September 25, 2021, ODP had total available liquidity of
approximately $1.7 billion, consisting of $753 million in cash and
cash equivalents and $953 million of available credit under the
Third Amended Credit Agreement. Total debt was $353 million.
For the third quarter of 2021, cash provided by operating
activities from continuing operations was $121 million, which
included $3 million in restructuring costs, compared to cash
provided by operating activities of continuing operations of $256
million in the third 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 third quarter of 2021 were $19
million versus $13 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 and the planned separation of the consumer business
in the quarter were $2 million and $19 million, respectively.
Accordingly, Adjusted Free Cash Flow(4) was $123 million in the
third quarter of 2021.
As part of the ongoing commitment and support of its strategic
initiatives, the Company repurchased $76 million in stock of the
Company, retiring 1.7 million shares of its stock during the
quarter. Additionally, in October 2021, the Company repurchased
approximately 600 thousand shares for a total cost of $24
million.
(1)
On June 29, 2021, the Company’s Board of
Directors provided their alignment with management’s commitment to
a plan to sell its CompuCom Division through a single disposal
group. Accordingly, that business is presented as discontinued
operations beginning in the third quarter of 2021. The Company has
reclassified the financial results of the CompuCom Division to
Discontinued operations, net of tax in the Condensed Consolidated
Statements of Operations for all periods presented. The Company
also reclassified the related assets and liabilities as assets and
liabilities held for sale on the accompanying Condensed
Consolidated Balance Sheets as of September 25, 2021, and December
26, 2020. Cash flows from the Company’s discontinued operations are
presented in the Condensed Consolidated Statements of Cash Flows
for all periods.
(2)
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.
(3)
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.
(4)
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, the
Business Acceleration Program, and the planned separation of the
consumer business. 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.
(5)
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
39 Weeks Ended
September 25,
September 26,
September 25,
September 26,
2021
2020
2021
2020
Sales:
Products
$
1,993
$
2,166
$
5,890
$
6,238
Services
186
181
533
549
Total sales
2,179
2,347
6,423
6,787
Cost of goods sold and occupancy
costs:
Products
1,560
1,688
4,660
4,935
Services
115
112
332
351
Total cost of goods sold and occupancy
costs
1,675
1,800
4,992
5,286
Gross profit
504
547
1,431
1,501
Selling, general and administrative
expenses
382
411
1,173
1,251
Asset impairments
5
10
18
175
Merger, restructuring and other operating
expenses, net
13
24
37
89
Operating income (loss)
104
102
203
(14
)
Other income (expense):
Interest income
—
—
—
3
Interest expense
(7
)
(6
)
(20
)
(34
)
Loss on extinguishment and modification of
debt
—
—
—
(12
)
Other income, net
3
2
19
5
Income (loss) from continuing operations
before income taxes
100
98
202
(52
)
Income tax expense
27
64
47
42
Net income (loss) from continuing
operations
73
34
155
(94
)
Discontinued operations, net of tax
28
23
(89
)
(243
)
Net income (loss)
$
101
$
57
$
66
$
(337
)
Basic earnings (loss) per share
Continuing operations
$
1.38
$
0.64
$
2.89
$
(1.78
)
Discontinued operations
0.54
0.43
(1.65
)
(4.62
)
Net basic earnings (loss) per share
$
1.92
$
1.07
$
1.24
$
(6.40
)
Diluted earnings (loss) per share
Continuing operations
$
1.33
$
0.63
$
2.79
$
(1.78
)
Discontinued operations
0.52
0.41
(1.60
)
(4.62
)
Net diluted earnings (loss) per share
$
1.85
$
1.04
$
1.19
$
(6.40
)
THE ODP CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
September 25,
December 26,
2021
2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
753
$
729
Receivables, net
482
442
Inventories
841
916
Prepaid expenses and other current
assets
56
49
Current assets held for sale
744
219
Total current assets
2,876
2,355
Property and equipment, net
492
542
Operating lease right-of-use assets
948
1,107
Goodwill
462
394
Other intangible assets, net
57
57
Deferred income taxes
213
218
Other assets
303
319
Noncurrent assets held for sale
—
622
Total assets
$
5,351
$
5,614
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
863
$
857
Accrued expenses and other current
liabilities
1,020
1,050
Income taxes payable
6
10
Short-term borrowings and current
maturities of long-term debt
20
24
Current liabilities held for sale
272
152
Total current liabilities
2,181
2,093
Deferred income taxes and other long-term
liabilities
169
172
Pension and postretirement obligations,
net
33
42
Long-term debt, net of current
maturities
333
354
Operating lease liabilities
773
935
Noncurrent liabilities held for sale
—
138
Total liabilities
3,489
3,734
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued
shares — 64,699,340 at September 25, 2021
and 62,551,255 at
December 26, 2020; outstanding shares —
52,134,592 at September 25, 2021
and 52,694,062 at December 26, 2020
1
1
Additional paid-in capital
2,711
2,675
Accumulated other comprehensive loss
(30
)
(32
)
Accumulated deficit
(343
)
(409
)
Treasury stock, at cost — 12,564,748 at
September 25, 2021 and 9,857,193
shares at December 26, 2020
(477
)
(355
)
Total stockholders’ equity
1,862
1,880
Total liabilities and stockholders’
equity
$
5,351
$
5,614
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
39 Weeks Ended
September 25,
September 26,
2021
2020
Cash flows from operating
activities:
Net income (loss)
$
66
$
(337
)
Loss from discontinued operations, net of
tax
(89
)
(243
)
Net income (loss) from continuing
operations
155
(94
)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization
110
119
Charges for losses on receivables and
inventories
17
26
Asset impairments
18
175
(Gain) loss on disposition of assets,
net
(3
)
5
Loss on extinguishment and modification of
debt
—
12
Compensation expense for share-based
payments
26
28
Deferred income taxes and deferred tax
asset valuation allowances
5
11
Changes in working capital and other
operating activities
(72
)
128
Net cash provided by operating activities
of continuing operations
256
410
Net cash provided by (used in) operating
activities of discontinued operations
(10
)
79
Net cash provided by operating
activities
246
489
Cash flows from investing
activities:
Capital expenditures
(47
)
(49
)
Businesses acquired, net of cash
acquired
(29
)
(28
)
Proceeds from collection of notes
receivable
—
818
Proceeds from disposition of assets
4
1
Settlement of company-owned life insurance
policies
21
9
Net cash provided by (used in) investing
activities of continuing operations
(51
)
751
Net cash used in investing activities of
discontinued operations
(3
)
(5
)
Net cash provided by (used in) investing
activities
(54
)
746
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(20
)
(337
)
Debt retirement
—
(1,196
)
Debt issuance
—
400
Cash dividends on common stock
—
(13
)
Share purchases for taxes, net of proceeds
from employee share-based
transactions
(25
)
(5
)
Repurchase of common stock for
treasury
(122
)
(30
)
Other financing activities
(1
)
(7
)
Net cash used in financing activities of
continuing operations
(168
)
(1,188
)
Net cash used in financing activities of
discontinued operations
—
—
Net cash used in financing activities
(168
)
(1,188
)
Effect of exchange rate changes on cash
and cash equivalents
—
(4
)
Net increase in cash and cash
equivalents
24
43
Cash, cash equivalents and restricted cash
at beginning of period
729
700
Cash and cash equivalents at end of period
– continuing operations
$
753
$
743
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new finance lease liabilities
$
3
$
22
Right-of-use assets obtained in exchange
for new operating lease liabilities
69
85
Business acquired in exchange for common
stock issuance
35
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
Business Solutions Division (in
millions)
3Q21
3Q20
YTD21
YTD20
Sales
$1,171
$1,197
$3,445
$3,554
Sales change from prior year
(2)%
(3)%
Division operating income
$41
$45
$89
$98
Division operating income margin
3.5%
3.8%
2.6%
2.8%
Retail Division (in millions)
3Q21
3Q20
YTD21
YTD20
Sales
$999
$1,147
$2,952
$3,216
Sales change from prior year
(13)%
(8)%
Division operating income
$107
$119
$252
$224
Division operating income margin
10.7%
10.4%
8.5%
7.0%
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, the Business Acceleration Program, and the planned
separation of the consumer business.
(In millions, except per share
amounts)
Q3 2021
Reported
(GAAP)
% of
Sales
Less:
Charges &
Credits
Adjusted
(Non-GAAP)
% of
Sales
Assets impairments
$
5
0.2
%
$
5
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
13
0.6
%
$
13
$
—
—
%
Operating income
$
104
4.8
%
$
(18
)
$
122
(6)
5.6
%
Income tax expense
$
27
1.2
%
$
4
$
23
(8)
1.1
%
Net income from continuing operations
$
73
3.4
%
$
(22
)
$
96
(9)
4.4
%
Earnings per share from continuing
operations (most dilutive)
$
1.33
$
(0.43
)
$
1.76
(9)
Depreciation and amortization
$
36
1.7
%
$
—
$
36
(10)
1.7
%
Q3 2020
Reported
(GAAP)
% of
Sales
Less:
Charges &
Credits
Adjusted
(Non-GAAP)
% of
Sales
Assets impairments
$
10
0.4
%
$
10
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
24
1.0
%
$
24
$
—
—
%
Operating income
$
102
4.3
%
$
(34
)
$
136
(6)
5.8
%
Income tax expense
$
64
2.7
%
$
34
$
30
(8)
1.3
%
Net income from continuing operations
$
34
1.4
%
$
(68
)
$
102
(9)
4.3
%
Earnings per share from continuing
operations (most dilutive)
$
0.63
$
(1.25
)
$
1.88
(9)
Depreciation and amortization
$
39
1.7
%
$
2
$
37
(10)
1.6
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
YTD 2021
Reported
(GAAP)
% of
Sales
Less:
Charges &
Credits
Adjusted
(Non-GAAP)
% of
Sales
Assets impairments
$
18
0.3
%
$
18
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
37
0.6
%
$
37
$
—
—
%
Operating income
$
203
3.2
%
$
(55
)
$
258
(6)
4.0
%
Other income, net
$
19
0.3
%
$
7
$
12
(7)
0.2
%
Income tax expense
$
47
0.7
%
$
(6
)
$
53
(8)
0.8
%
Net income from continuing operations
$
155
2.4
%
$
(42
)
$
197
(9)
3.1
%
Earnings per share from continuing
operations (most dilutive)
$
2.79
$
(0.76
)
$
3.55
(9)
Depreciation and amortization
$
110
1.7
%
$
2
$
108
(10)
1.7
%
YTD 2020
Reported
(GAAP)
% of
Sales
Less:
Charges &
Credits
Adjusted
(Non-GAAP)
% of
Sales
Assets impairments
$
175
2.6
%
$
175
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
89
1.3
%
$
89
$
—
—
%
Operating income (loss)
$
(14
)
(0.2
)%
$
(264
)
$
250
(6)
3.7
%
Loss on extinguishment and modification of
debt
$
(12
)
(0.2
)%
$
(12
)
$
—
—
%
Income tax expense
$
42
0.6
%
$
(22
)
$
64
(8)
0.9
%
Net income (loss) from continuing
operations
$
(94
)
(1.4
)%
$
(254
)
$
160
(9)
2.4
%
Earnings (loss) per share from continuing
operations (most dilutive)
$
(1.78
)
$
(4.75
)
$
2.97
(9)
Depreciation and amortization
$
119
1.8
%
$
4
$
115
(10)
1.7
%
13 Weeks Ended
39 Weeks Ended
September 25,
September 26,
September 25,
September 26,
Adjusted
EBITDA:
2021
2020
2021
2020
Net income (loss)
$
101
$
57
$
66
$
(337
)
Discontinued operations, net of tax
28
23
(89
)
(243
)
Net income (loss) from continuing
operations
73
34
155
(94
)
Income tax expense
27
64
47
42
Income (loss) from continuing operations
before income taxes
100
98
202
(52
)
Add (subtract)
Interest income
—
—
—
(3
)
Interest expense
7
6
20
34
Adjusted depreciation and amortization
(10)
36
37
108
115
Charges and credits, pretax (11)
18
34
48
276
Adjusted EBITDA
$
162
$
175
$
378
$
371
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.
(6)
Adjusted operating income (loss) for all
periods presented herein exclude merger, restructuring and other
operating expenses, net, and asset impairments (if any).
(7)
Adjusted other income, net year-to-date
2021 excludes credits for the release of certain liabilities of our
former European Business of $7 million.
(8)
Adjusted income tax expense 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 from continuing
operations and adjusted earnings per share from continuing
operations (most dilutive) for all periods presented exclude
merger, restructuring and other operating expenses, net, asset
impairments (if any), European Business liabilities release (if
any), loss on extinguishment and modification of debt (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), European Business
liabilities release (if any), and loss on extinguishment and
modification of debt (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
39 Weeks Ended
September 25,
September 26,
September 25,
September 26,
Free cash
flow
2021
2020
2021
2020
Net cash provided by operating activities
from continuing operations
$
121
$
256
$
256
$
410
Capital expenditures
(19
)
(13
)
(47
)
(49
)
Free cash flow
102
243
209
361
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
2
12
17
15
Business Acceleration Program
—
4
3
26
Planned separation of consumer
business
19
—
19
—
Adjusted free cash flow
$
123
$
259
$
248
$
402
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)
Q3
Q3
YTD
2020
2021
2021
Retail Division:
Stores opened
—
—
—
Stores closed
16
7
70
Total retail stores (U.S.)
1,244
1,084
—
Total square footage (in millions)
27.6
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/20211103005314/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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