Fourth Quarter Revenue of $2.0 Billion with
GAAP EPS of $0.61; Adjusted EPS of $0.71
Commitment to Low Cost Model Helped Drive GAAP
Operating Income of $31 Million and Adjusted Operating Income of
$47 Million in the Fourth Quarter of 2021
GAAP Operating Income of $234 Million and
Adjusted Operating Income of $305 Million for Full Year 2021
Strategic Initiatives Successes Included
Progress on Operational Separation of the Business, Sale of
CompuCom, and Further Advancement of Varis Platform and Digital
Business Commerce Capabilities
Over $300 Million Committed to Shareholders in
2021 Through Stock Repurchases
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 fourth
quarter and full year ended December 25, 2021.
Consolidated (in millions, except
per share amounts) (1)
4Q21
4Q20
FY21
FY20
Sales
$2,042
$2,085
$8,465
$8,872
Sales change from prior year period
(2)%
(5)%
Operating income
$31
$20
$234
$6
Adjusted operating income (2)
$47
$40
$305
$290
Net income (loss) from continuing
operations
$32
$31
$187
$(63)
Diluted earnings (loss) per share from
continuing operations
$0.61
$0.57
$3.42
$(1.20)
Adjusted net income from continuing
operations (2)
$37
$23
$234
$184
Adjusted earnings per share from
continuing operations (most dilutive) (2)
$0.71
$0.43
$4.28
$3.40
Adjusted EBITDA (2)
$87
$78
$465
$449
Operating Cash Flow from continuing
operations
$88
$15
$344
$425
Free Cash Flow (3)
$62
$6
$271
$367
Adjusted Free Cash Flow (4)
$80
$20
$328
$422
Fourth Quarter 2021
Summary(1)(2)(4)
- Total reported sales of $2.0 billion, down 2% versus prior
year, largely driven by 116 fewer retail locations in service
compared to the prior year as a result of planned store
closures
- GAAP operating income of $31 million and net income from
continuing operations of $32 million, or $0.61 per diluted share,
versus $20 million and $31 million, or $0.57 per diluted share,
respectively in the prior year
- Adjusted operating income of $47 million, compared to $40
million in the fourth quarter of 2020; adjusted EBITDA of $87
million, compared to $78 million in the fourth quarter of 2020
- Adjusted net income from continuing operations of $37 million,
or adjusted diluted earnings per share from continuing operations
of $0.71, versus $23 million or $0.43, respectively in the prior
year
- Operating cash flow from continuing operations of $88 million
and adjusted free cash flow of $80 million, versus $15 million and
$20 million, respectively in the prior year
- $1.4 billion of total available liquidity including $514
million in cash and cash equivalents
Full Year 2021 Summary
- Total reported sales of $8.5 billion, down 5% versus the prior
year
- GAAP operating income of $234 million and net income from
continuing operations of $187 million, or $3.42 per diluted share,
versus $6 million and net loss from continuing operations of $63
million, or $(1.20) per diluted share, respectively in the prior
year
- Adjusted operating income of $305 million, compared to $290
million in 2020; adjusted EBITDA of $465 million, compared to $449
million in 2020
- Adjusted net income from continuing operations of $234 million,
or adjusted diluted earnings per share from continuing operations
of $4.28, versus $184 million or $3.40, respectively in the prior
year
- Operating cash flow from continuing operations of $344 million
and adjusted free cash flow of $328 million, versus $425 million
and $422 million, respectively in the prior year
“I’m extremely proud of our team for delivering strong results
throughout the year while making significant progress on all of our
initiatives to unlock shareholder value,” said Gerry Smith, chief
executive officer of The ODP Corporation. “We delivered solid
operating performance in 2021 against a macroeconomic backdrop
challenged by supply chain constraints, inflation, and a slower
pace of back-to-office trends, as we leveraged our pricing
flexibility and the strength of our distribution network to help
offset some of these market dynamics. Our commitment to our low
cost model approach and the flexibility of our supply chain and
distribution assets helped us deliver over $300 million in adjusted
operating income and generate strong free cash flow results.”
“We’ve executed well upon all of our strategic initiatives that
focus on generating greater shareholder value. Over the past year,
we have used the flexibility afforded by our holding company
structure to align our assets with the go-to-market strategies in
our B2C, B2B, distribution, and digital platform businesses. We
separated many of the operational components of our business and
enhanced our focus on our core capabilities, including through the
sale of CompuCom. Additionally, we advanced our new digital
platform business, Varis, and remain very encouraged about our
early progress. Also, as part of our overall capital structure and
in support of our efforts to enhance return for shareholders, we’ve
repaid approximately $100 million of near term maturity Industrial
Revenue Bonds and committed over $300 million in the form of share
buybacks,” he added.
“Moving forward, we’re committed to unlocking the value of our
consumer business and driving growth in our B2B distribution and
digital platform businesses. We remain focused on regaining
momentum in our enterprise channel as more companies return to the
office and as we work to mitigate the ongoing supply chain and
inflation challenges. We expect 2022 to be a transformative year in
the development of Varis, as we continue to invest in its
capabilities, grow customer and supplier relationships, and launch
the beta version of the platform with key partners, positioning us
to drive future value in the large and growing business commerce
market,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2021 were $2.0
billion, a decrease of 2% compared to the fourth quarter of 2020.
The year-over-year decrease in revenue was driven by lower sales in
our Retail Division due to 116 planned store closures, partially
offset by higher revenue in our BSD Division. Stronger sales in our
workspace categories and copy and print services were offset by
lower sales in technology, cleaning, and personal protective
equipment (PPE) categories relative to last year’s strong demand
for these product categories during the height of the pandemic.
The Company reported operating income of $31 million in the
fourth quarter of 2021, up compared to operating income of $20
million in the prior year period. GAAP operating results in the
fourth quarter of 2021 included $16 million of charges including $2
million of non-cash asset impairment charges, and $14 million in
net merger, restructuring and other operating costs. Asset
impairment charges of $2 million in the fourth quarter of 2021
included the impairment of operating lease right-of-use (ROU)
assets and fixed assets associated with the Company’s retail store
locations. Net merger, restructuring and other operating costs of
$14 million were primarily associated with activities related to
the Company’s planned separation. Net income from continuing
operations was $32 million, or $0.61 per diluted share in the
fourth quarter of 2021, up from $31 million, or $0.57 per diluted
share in the fourth quarter of 2020.
Total reported sales for the full year 2021 period were $8.5
billion, a decrease of 5% over the same period last year, primarily
driven by lower sales in our Retail Division as a result of 116
planned store closures and lower sales in certain product
categories including furniture, technology, cleaning and PPE
relative to the strong demand we experienced for these categories
during the height of the pandemic last year. ODP reported full year
2021 operating income of $234 million, compared to $6 million in
2020. Primary drivers of the year-over-year increase in operating
income are improved operating results, a $162 million decrease in
non-cash asset impairment charges, and a $51 million decrease in
net merger, restructuring and other operating costs. Net income
from continuing operations in 2021 was $187 million, or $3.42 per
diluted share, compared to net loss from continuing operations of
$63 million, or $(1.20) per diluted share, in 2020.
Adjusted (non-GAAP) Results
(1)(2)
Adjusted results for the fourth quarter of 2021 exclude charges
and credits totaling $16 million as described above and the tax
impacts associated with the above items.
- Fourth quarter of 2021 adjusted EBITDA was $87 million compared
to $78 million in the prior year period. This included adjusted
depreciation and amortization(5) of $35 million and $37 million in
the fourth quarters of 2021 and 2020, respectively
- Fourth quarter 2021 adjusted operating income was $47 million
compared to $40 million in the fourth quarter of 2020
- Fourth quarter 2021 adjusted net income from continuing
operations was $37 million, or $0.71 per diluted share, compared to
$23 million, or $0.43 per diluted share, in the fourth quarter of
2020
Full year 2021 adjusted operating income was $305 million
compared to $290 million in 2020. Full year adjusted EBITDA was
$465 million, up 4% versus 2020. Adjusted net income in 2021 was
$234 million, or $4.28 per diluted share, compared to $184 million,
or $3.40 per diluted share, in 2020.
Fourth Quarter Division Results
Business Solutions Division
(BSD)
- Reported sales were $1.2 billion in the fourth quarter of 2021,
up 2% compared to the same period last year
- Sales generated through the Company’s enterprise contract
channel increased year-over-year as more business and education
customers slowly began to return to the workplace and
classrooms
- This increase was partially offset by lower sales through the
Company’s eCommerce channel compared to the same period last
year
- Stronger sales in core categories, copy and print services, and
furniture were offset by lower year-over-year demand for technology
products, 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 $30 million in the fourth quarter of 2021,
up 67% over the same period last year, driven by higher volume and
lower SG&A partially offset by supply chain rate pressure
Retail Division
- Reported sales were $885 million in the fourth quarter of 2021,
down 7% compared to the prior year period primarily due to 116
fewer retail outlets at the end of the fourth quarter compared to
the prior year, associated with planned closures. The Company
closed 46 retail stores in the quarter and had 1,038 stores at
quarter end
- Lower traffic trends in the quarter were offset by a strong
increase in sales-per-shopper, as well as strong omni-channel sales
in the quarter and year supported by our 20-minute pick-up
guarantee
- Increase in demand for copy and print services were offset by
lower sales of cleaning and PPE products as well as technology and
PC products which were negatively impacted by supply chain and
sourcing challenges
- Operating income was $54 million in the fourth quarter of 2021,
up 7% over the same period last year; As a percentage of sales,
this performance represented an over 80 basis point margin
improvement as the Company continued to execute its low cost model
approach
Progress on Strategic initiatives
The Company continued to make significant progress against all
of its strategic initiatives to unlock shareholder value in the
future.
Separation Activities and Evaluation of
Potential Sale of Consumer Business
Afforded by the flexibility of its holding company structure,
the Company continued to execute upon its operational separation of
its consumer and B2B businesses. These activities supported the
Company’s previously announced plans to separate its businesses
into two, independent, publicly-traded companies, by means of a
tax-free spin-off, positioning each company to pursue unique market
opportunities and growth strategies to improve value for all
stakeholders. The Company made significant progress resulting in
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.
In addition to its planned separation activities, in November
2021, USR Parent, Inc., the parent company of Staples and a
portfolio company of Sycamore Partners, reaffirmed its non-binding
proposal to acquire the Company’s consumer business, including the
Office Depot and OfficeMax retail stores business, the Company's
direct channel business (officedepot.com), and the Office Depot and
OfficeMax intellectual property, including all brand names, for $1
billion in cash. The Company remains in conversation with Sycamore
as it further evaluates the potential value and regulatory risk of
Sycamore’s proposed transaction.
Subsequent to the quarter-end, on January 14, 2022, the Company
announced that its Board of Directors determined to delay the
previously announced public company separation to evaluate a
potential sale of the Company’s consumer business and that it had
received a non-binding proposal from another third party to acquire
the Company’s consumer business, the terms of which are
confidential.
The Company’s Board of Directors is carefully reviewing both
proposals with the assistance of its financial and legal advisors
to determine the course of action that it believes is in the best
interests of the Company and its shareholders. While the Company
has previously been focusing on completing the public company
separation during the first half of 2022, it has determined to
delay further work on the separation in order to avoid incurring
potentially unnecessary separation costs while it focuses on a
potential sale of the consumer business. There can be no assurance
that a sale of the consumer business will take place and, if it
were to take place, as to the terms of such a sale.
Sale of CompuCom Subsidiary
As announced on December 31, 2021, the Company completed the
sale of its CompuCom Systems subsidiary to Variant Equity, a
private equity firm based in California.
“This action represents an important step in continuing to align
our business model and resources towards our core strategy,” said
Anthony Scaglione, chief financial officer of The ODP Corporation.
“By enhancing our core focus and leveraging our B2B assets and
digital commerce platform, we are in an excellent position to
maximize returns for our shareholders.”
Enhancing Returns for
Shareholders
As part of its ongoing efforts to opportunistically enhance
shareholder returns, the Company’s Board of Directors authorized a
$200 million increase to its existing $450 million stock repurchase
plan to $650 million and the Company announced that it had entered
into an accelerated share repurchase plan (“ASR”) agreement to
repurchase an aggregate of $150 million of the Company’s stock, to
be executed under its existing stock repurchase program. When
combined with the Company’s previously completed share repurchases,
ODP will have committed to return more than $300 million of capital
to shareholders in 2021.
“The Board of Directors continues to evaluate its future capital
allocation plans and use of proceeds. The actions to date continue
to reflect the confidence the Board of Directors has in our
business solutions provider and platform transformation strategy
and our capability to deliver shareholder value through disciplined
capital allocation,” said Gerry Smith, chief executive officer of
The ODP Corporation.
Progress on Varis
Aligned with its strategy to drive growth in high value industry
segments, the Company made tremendous progress on its digital
platform business throughout the year. The Company established
Varis, a technology company focused on fulfilling the growing
demand for a modern, trusted, digital B2B platform that transforms
how businesses buy and sell. Led by Prentis Wilson, a B2B industry
veteran with a strong record of success in building large scale,
disruptive, technology businesses, Varis has established a
world-class team of industry professionals and accelerated its
technology development with the acquisition of BuyerQuest in early
2021, a leading cloud-based enterprise Procure-to-Pay (P2P)
platform. The Company also announced last year a collaboration with
Microsoft to bring Varis’ digital procurement platform to Microsoft
Dynamics 365 Business Central customers in the future. Throughout
the year, Varis added new customers to its platform, both buyers
and suppliers, and has been innovating on their behalf. Varis
continues to make progress on the development of its technology
platform with expanded capabilities that position the Company for
future growth.
2022 Commentary and Expectations
“We continue to execute across our strategic initiatives while
driving strong results in 2021,” said Smith. “Our team remains
committed to unlocking future value by driving our digital
transformation and building upon our B2B platform for the benefit
of all of our stakeholders. While we expect that the conditions
related to both the pandemic and supply chain and inflationary
environment to persist in the quarters ahead, we expect some
abatement as we continue leveraging our assets to meet our
customers’ needs. In 2022, we will continue to execute upon the
strategic path for our consumer business to maximize value for
shareholders, work to regain momentum in our enterprise channel as
more businesses return to the office, continue to optimize our
store footprint, and continue to develop and launch our digital
platform business, Varis. We’ll also continue to use a balanced
approach to capital deployment, investing to capture the large
market opportunity through our digital platform business, supply
chain operations, and B2B presence, as well as work with our Board
on future share repurchase opportunities,” Smith added.
The Company anticipates generating annual revenue, operating and
cash flow results in a range consistent with the prior year, and
expects to refine and update its outlook for 2022 as conditions
related to the pandemic and supply chain challenges dissipate, and
further progress is made on its previously disclosed strategic
initiatives.
Balance Sheet and Cash Flow
As of December 25, 2021, ODP had total available liquidity of
approximately $1.4 billion, consisting of $514 million in cash and
cash equivalents and $877 million of available credit under the
Third Amended Credit Agreement. Total debt was $248 million.
For the fourth quarter of 2021, cash provided by operating
activities from continuing operations was $88 million, which
included $7 million in restructuring costs, compared to cash
provided by operating activities of continuing operations of $15
million in the fourth quarter of the prior year, which included
less than $1 million in acquisition and integration-related costs
and $14 million in restructuring costs.
Capital expenditures in the fourth quarter of 2021 were $26
million versus $9 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 $7 million and $11 million, respectively.
Accordingly, Adjusted Free Cash Flow(4) was $80 million in the
fourth quarter of 2021.
As part of the ongoing commitment and support of its strategic
initiatives, the Company repurchased $277 million in stock of the
Company, retiring 6.4 million shares of its stock during the
quarter, including $120 million for 2.8 million shares of its stock
associated with the ASR agreement. The Company also made $30
million advance payment for accelerated repurchase of shares that
will be settled in the first half of 2022. Also in the quarter, the
Company retired approximately $100 million of near term Industrial
Revenue Bonds.
(1)
Reflects the reclassification of the
financial results of the CompuCom Division to Discontinued
operations, net of tax in the 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 Consolidated Balance Sheets. Cash flows
from the Company’s discontinued operations are presented in the
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 1,000 stores. Through its banner brands
Office Depot®, OfficeMax®, ODP Business Solutions™, Varis™ 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.
ODP, ODP Business Solutions and Office Depot are trademarks of
The Office Club, Inc. OfficeMax is a trademark of OMX, Inc. Varis
is a trademark of Varis, LLC. Grand&Toy is a trademark of Grand
& Toy, LLC in Canada. ©2022 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,” “expectations”, “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 or sale of its consumer business, 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)
13 Weeks Ended
52 Weeks Ended
December 25,
December 26,
December 25,
December 26,
2021
2020
2021
2020
(Unaudited)
Sales
$
2,042
$
2,085
$
8,465
$
8,872
Cost of goods sold and occupancy costs
1,610
1,634
6,602
6,921
Gross profit
432
451
1,863
1,951
Selling, general and administrative
expenses
385
410
1,558
1,661
Asset impairments
2
8
20
182
Merger, restructuring and other operating
expenses, net
14
13
51
102
Operating income
31
20
234
6
Other income (expense):
Interest income
—
—
1
4
Interest expense
(7
)
(7
)
(28
)
(42
)
Loss on extinguishment and modification of
debt
—
—
—
(12
)
Other income, net
5
1
24
6
Income (loss) from continuing operations
before income taxes
29
14
231
(38
)
Income tax expense (benefit)
(3
)
(17
)
44
25
Net income (loss) from continuing
operations
32
31
187
(63
)
Discontinued operations, net of tax
(306
)
(13
)
(395
)
(256
)
Net income (loss)
$
(274
)
$
18
$
(208
)
$
(319
)
Basic earnings (loss) per share
Continuing operations
$
0.63
$
0.59
$
3.54
$
(1.20
)
Discontinued operations
(6.07
)
(0.24
)
(7.47
)
(4.85
)
Net basic earnings (loss) per share
$
(5.44
)
$
0.35
$
(3.93
)
$
(6.05
)
Diluted earnings (loss) per share
Continuing operations
$
0.61
$
0.57
$
3.42
$
(1.20
)
Discontinued operations
(5.87
)
(0.23
)
(7.21
)
(4.85
)
Net diluted earnings (loss) per share
$
(5.26
)
$
0.34
$
(3.79
)
$
(6.05
)
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
December 25,
December 26,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
514
$
729
Receivables, net
495
442
Inventories
859
916
Prepaid expenses and other current
assets
52
49
Current assets held for sale
469
219
Total current assets
2,389
2,355
Property and equipment, net
477
542
Operating lease right-of-use assets
936
1,107
Goodwill
464
394
Other intangible assets, net
54
57
Deferred income taxes
219
218
Other assets
326
319
Noncurrent assets held for sale
—
622
Total assets
$
4,865
$
5,614
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
950
$
857
Accrued expenses and other current
liabilities
994
1,050
Income taxes payable
11
10
Short-term borrowings and current
maturities of long-term debt
20
24
Current liabilities held for sale
290
152
Total current liabilities
2,265
2,093
Deferred income taxes and other long-term
liabilities
159
172
Pension and postretirement obligations,
net
22
42
Long-term debt, net of current
maturities
228
354
Operating lease liabilities
753
935
Noncurrent liabilities held for sale
—
138
Total liabilities
3,427
3,734
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued
shares — 64,704,979 at December 25, 2021
and 62,551,255 at
December 26, 2020; outstanding shares —
48,455,951 at December 25, 2021
and 52,694,062 at December 26, 2020
1
1
Additional paid-in capital
2,692
2,675
Accumulated other comprehensive loss
(6
)
(32
)
Accumulated deficit
(617
)
(409
)
Treasury stock, at cost — 16,249,028 at
December 25, 2021 and 9,857,193
shares at December 26, 2020
(632
)
(355
)
Total stockholders’ equity
1,438
1,880
Total liabilities and stockholders’
equity
$
4,865
$
5,614
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
2021
2020
Cash flows from operating
activities:
Net Loss
$
(208
)
$
(319
)
Loss from discontinued operations, net of
tax
(395
)
(256
)
Net income (loss) from continuing
operations
187
(63
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
146
157
Amortization of debt discount and issuance
costs
2
3
Charges for losses on receivables and
inventories
22
33
Asset impairments
20
182
(Gain) loss on disposition of assets,
net
(5
)
4
Loss on extinguishment and modification of
debt
—
12
Compensation expense for share-based
payments
38
41
Deferred income taxes and deferred tax
asset valuation allowances
(6
)
11
Changes in assets and liabilities:
Decrease (increase) in receivables
(61
)
185
Decrease in inventories
35
76
Net decrease in prepaid expenses,
operating lease right-of-use assets, and other assets
281
304
Net decrease in trade accounts payable,
accrued expenses, operating lease liabilities, and other current
and other long-term liabilities
(312
)
(519
)
Other operating activities
(3
)
(1
)
Total adjustments
157
488
Net cash provided by operating activities
of continuing operations
344
425
Net cash provided by operating activities
of discontinued operations
2
60
Net cash provided by operating
activities
346
485
Cash flows from investing
activities:
Capital expenditures
(73
)
(58
)
Businesses acquired, net of cash
acquired
(29
)
(30
)
Proceeds from collection of notes
receivable
—
818
Proceeds from disposition of assets
5
3
Settlement of company-owned life insurance
policies
22
13
Net cash provided by (used in) investing
activities of continuing operations
(75
)
746
Net cash used in investing activities of
discontinued operations
(4
)
(10
)
Net cash provided by (used in) investing
activities
(79
)
736
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(25
)
(341
)
Debt retirement
(100
)
(1,196
)
Debt issuance
—
400
Cash dividends on common stock
—
(13
)
Share purchases for taxes, net of proceeds
from employee share-based transactions
(26
)
(5
)
Repurchase of common stock for treasury
and advance payment for accelerated share repurchase
(307
)
(30
)
Other financing activities
(1
)
(8
)
Net cash used in financing activities of
continuing operations
(459
)
(1,193
)
Net cash used in financing activities of
discontinued operations
—
—
Net cash used in financing activities
(459
)
(1,193
)
Effect of exchange rate changes on cash
and cash equivalents
—
1
Net increase (decrease) in cash and cash
equivalents
(192
)
29
Cash, cash equivalents and restricted cash
at beginning of period
729
700
Cash, cash equivalents and restricted cash
at end of period
537
729
Less: cash and cash equivalents of
discontinued operations
(23
)
—
Cash and cash equivalents at end of period
– continuing operations
$
514
$
729
Supplemental information on non-cash
investing and financing activities
Cash interest paid, net of amounts
capitalized and Timber notes/Non-recourse debt
$
25
$
40
Cash taxes paid (refunded), net
43
(14
)
Right-of-use assets obtained in exchange
for new finance lease liabilities
3
29
Right-of-use assets obtained in exchange
for new operating lease liabilities
127
117
Business acquired in exchange for common
stock issuance
35
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
Business Solutions Division (in
millions)
4Q21
4Q20
FY21
FY20
Sales
$1,152
$1,129
$4,597
$4,683
Sales change from prior year
2%
(2)%
Division operating income
$30
$18
$119
$116
Division operating income margin
2.6%
1.6%
2.6%
2.5%
Retail Division (in millions)
4Q21
4Q20
FY21
FY20
Sales
$885
$951
$3,837
$4,167
Sales change from prior year
(7)%
(8)%
Division operating income
$54
$50
$306
$275
Division operating income margin
6.1%
5.3%
8.0%
6.6%
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, the Business Acceleration Program, and the planned
separation of the consumer business.
(In millions, except per share amounts)
Q4 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Assets impairments
$
2
0.1
%
$
2
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
14
0.7
%
$
14
$
—
—
%
Operating income
$
31
1.5
%
$
(16
)
$
47
(6)
2.3
%
Income tax expense (benefit)
$
(3
)
(0.1
)%
$
(11
)
$
8
(8)
0.4
%
Net income from continuing operations
$
32
1.6
%
$
(5
)
$
37
(9)
1.8
%
Earnings per share from continuing
operations (most dilutive)
$
0.61
$
(0.10
)
$
0.71
(9)
Depreciation and amortization
$
36
1.8
%
$
1
$
35
(10)
1.7
%
Q4 2020
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Assets impairments
$
8
0.4
%
$
8
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
13
0.6
%
$
13
$
—
—
%
Operating income
$
20
1.0
%
$
(21
)
$
40
(6)
1.9
%
Income tax expense (benefit)
$
(17
)
(0.8
)%
$
(28
)
$
11
(8)
0.5
%
Net income from continuing operations
$
31
1.5
%
$
7
$
23
(9)
1.1
%
Earnings per share from continuing
operations (most dilutive)
$
0.57
$
0.14
$
0.43
(9)
Depreciation and amortization
$
38
1.8
%
$
1
$
37
(10)
1.8
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Assets impairments
$
20
0.2
%
$
20
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
51
0.6
%
$
51
$
—
—
%
Operating income
$
234
2.8
%
$
(71
)
$
305
(6)
3.6
%
Other income, net
$
24
0.3
%
$
7
$
17
(7)
0.2
%
Income tax expense
$
44
0.5
%
$
(17
)
$
61
(8)
0.7
%
Net income from continuing operations
$
187
2.2
%
$
(47
)
$
234
(9)
2.8
%
Earnings per share from continuing
operations (most dilutive)
$
3.42
$
(0.86
)
$
4.28
(9)
Depreciation and amortization
$
146
1.7
%
$
3
$
143
(10)
1.7
%
2020
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Assets impairments
$
182
2.1
%
$
182
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
102
1.1
%
$
102
$
—
—
%
Operating income
$
6
0.1
%
$
(284
)
$
290
(6)
3.3
%
Loss on extinguishment and modification of
debt
$
(12
)
(0.1
)%
$
(12
)
$
—
—
%
Income tax expense
$
25
0.3
%
$
(49
)
$
74
(8)
0.8
%
Net income (loss) from continuing
operations
$
(63
)
(0.7
)%
$
(247
)
$
184
(9)
2.1
%
Earnings (loss) per share from continuing
operations (most dilutive)
$
(1.20
)
$
(4.60
)
$
3.40
(9)
Depreciation and amortization
$
157
1.8
%
$
5
$
152
(10)
1.7
%
13 Weeks Ended
52 Weeks Ended
December 25,
December 26,
December 25,
December 26,
Adjusted EBITDA:
2021
2020
2021
2020
Net income (loss)
$
(274
)
$
18
$
(208
)
$
(319
)
Discontinued operations, net of tax
(306
)
(13
)
(395
)
(256
)
Net income (loss) from continuing
operations
32
31
187
(63
)
Income tax expense (benefit)
(3
)
(17
)
44
25
Income (loss) from continuing operations
before income taxes
29
14
231
(38
)
Add (subtract)
Interest income
—
—
(1
)
(4
)
Interest expense
7
7
28
42
Adjusted depreciation and amortization
(10)
35
37
143
152
Charges and credits, pretax (11)
16
21
64
296
Adjusted EBITDA
$
87
$
78
$
465
$
449
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 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
52 Weeks Ended
December 25,
December 26,
December 25,
December 26,
Free cash flow
2021
2020
2021
2020
Net cash provided by operating activities
from continuing operations
$
88
$
15
$
344
$
425
Capital expenditures
(26
)
(9
)
(73
)
(58
)
Free cash flow
62
6
271
367
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
7
12
24
27
Business Acceleration Program
—
2
3
28
Planned separation of consumer
business
11
—
30
—
Adjusted free cash flow
$
80
$
20
$
328
$
422
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)
Q4
Q4
Full Year
2020
2021
2021
Retail Division:
Stores opened
—
—
—
Stores closed
90
46
116
Total retail stores (U.S.)
1,154
1,038
—
Total square footage (in millions)
25.5
22.9
—
Average square footage per store (in
thousands)
22.1
22.0
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220223005398/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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