First Quarter Revenue of $2.2 Billion with GAAP
EPS of $1.09; Adjusted EPS of $1.27
Commitment to Low-Cost Model Helped Drive GAAP
Operating Income of $76 Million and Adjusted Operating Income of
$88 Million in the First Quarter of 2022
Improved Back-to-Office Trends Drove Growth in
Business Solutions Division
Continued to Make Progress on Strategic
Initiatives Including Unlocking the Value of the Consumer Business
and the Operational Alignment Supporting Future Operations
Further Advancement of Varis Platform and
Digital Business Commerce Capabilities
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 first
quarter ended March 26, 2022.
Consolidated (in millions, except
per share amounts) (1)
1Q22
1Q21
Sales
$2,178
$2,174
Sales change from prior year period
0%
Operating income
$76
$69
Adjusted operating income (2)
$88
$93
Net income from continuing operations
$55
$63
Diluted earnings per share from continuing
operations
$1.09
$1.12
Adjusted net income from continuing
operations (2)
$64
$68
Adjusted earnings per share from
continuing operations
(most dilutive) (2)
$1.27
$1.22
Adjusted EBITDA (2)
$125
$133
Operating Cash Flow from continuing
operations
$30
$103
Free Cash Flow (3)
$9
$91
Adjusted Free Cash Flow (4)
$16
$96
First Quarter 2022
Summary(1)(2)(4)
- Total reported sales of $2.2 billion, flat versus last year;
higher sales in our BSD division, partially offset by lower sales
in our Retail division driven by 114 fewer retail locations in
service compared to the prior year as a result of planned store
closures
- GAAP operating income of $76 million and net income from
continuing operations of $55 million, or $1.09 per diluted share,
versus $69 million and $63 million, or $1.12 per diluted share,
respectively in the prior year
- Adjusted operating income of $88 million, compared to $93
million in the first quarter of 2021; adjusted EBITDA of $125
million, compared to $133 million in the first quarter of 2021
- Adjusted net income from continuing operations of $64 million,
or adjusted diluted earnings per share from continuing operations
of $1.27, versus $68 million or $1.22, respectively in the prior
year
- Operating cash flow from continuing operations of $30 million
and adjusted free cash flow of $16 million, versus $103 million and
$96 million, respectively in the prior year
- $1.4 billion of total available liquidity including $557
million in cash and cash equivalents
“Our team’s continued commitment to the core tenets that drive
our business helped us deliver strong results while making progress
on all of our initiatives to unlock shareholder value,” said Gerry
Smith, chief executive officer of The ODP Corporation. “We again
delivered solid operating performance against a macroeconomic
backdrop that continues to be challenged by supply chain
constraints, higher fuel prices, and inflation, as we utilized the
strength of our distribution network and pricing flexibility to
help offset some of these market dynamics. We’re encouraged by the
improving back-to-the-office trends that are helping us drive
stronger operating performance in our contract channel, while our
consumer business continues to execute well against its strategy,
leveraging its highly focused store and digital presence to deliver
solid results in the quarter. Overall, our strong execution across
the business, combined with our commitment to our low-cost model
approach, enabled us to deliver $88 million in adjusted operating
income.
“We’ve also continued to make progress on all of our strategic
initiatives, including our commitment to maximize the value of our
consumer business, and our efforts to align our assets with the
go-to-market strategies in our B2C, B2B, distribution, and digital
platform businesses. We’re advancing our new digital platform
business, Varis, receiving positive feedback from key build
partners as we move closer to a broader launch of the platform
later this year. We’re also excited about the progress we are
making on our supply chain and purchasing services provider, Veyer,
and the future value we expect to create in support of our B2B and
B2C businesses and as we offer logistics services to other third
parties in the future,” he added.
“As we move closer to concluding the strategic initiatives we
previously outlined, we remain committed to maximizing the value of
our consumer business and driving growth on our B2B platform. We
also continue to expect our results this year to be generally in a
range consistent with the prior year on a comparable basis,” Smith
concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the first quarter of 2022 were $2.2
billion, flat compared to the first quarter of 2021, despite fewer
retail stores in service and greater market-wide challenges related
to the sourcing and supply chain environment relative to last year.
BSD Division sales were higher compared to the prior year, which
was offset by lower sales in our Retail Division primarily due to
114 planned store closures. The Company drove stronger
business-to-business (B2B) sales through its contract channel as
more businesses began to return to the office, which was partially
offset by lower sales through its eCommerce channel compared to a
year ago. The Company drove strong sales across most major product
categories in its BSD Division and strong omni channel sales in its
Retail Division.
The Company reported operating income of $76 million in the
first quarter of 2022, up compared to operating income of $69
million in the prior year period. GAAP operating results in the
first quarter of 2022 included $12 million of charges consisting
primarily of $10 million in merger, restructuring and other
operating costs largely associated with activities related to the
Company’s planned separation. The remaining $2 million is
associated with non-cash asset impairment charges primarily related
to the impairment of operating lease right-of-use (ROU) assets
associated with the Company’s retail store locations. Net income
from continuing operations was $55 million, or $1.09 per diluted
share in the first quarter of 2022, down from $63 million, or $1.12
per diluted share in the first quarter of 2021.
Adjusted (non-GAAP) Results
(1)(2)
Adjusted results for the first quarter of 2022 exclude charges
and credits totaling $12 million as described above and the tax
impacts associated with the above items.
- First quarter of 2022 adjusted EBITDA was $125 million compared
to $133 million in the prior year period. This included adjusted
depreciation and amortization(5) of $34 million and $36 million in
the first quarters of 2022 and 2021, respectively
- First quarter 2022 adjusted operating income was $88 million
compared to $93 million in the first quarter of 2021
- First quarter 2022 adjusted net income from continuing
operations was $64 million, or $1.27 per diluted share, compared to
$68 million, or $1.22 per diluted share, in the first quarter of
2021
First Quarter Division Results
Business Solutions Division
(BSD)
- Reported sales were $1.2 billion in the first quarter of 2022,
up 9% compared to the same period last year
- Sales generated through BSD’s enterprise contract channel
increased year-over-year as more business and education customers
began to return to the workplace and classroom
- Partially offsetting this increase was lower sales through the
Company’s eCommerce channel compared to the same period last year
related to lower sales of pandemic related products that were in
strong demand last year
- Stronger sales across the majority of offerings including core
supply categories, workspaces, copy and print services, and
cleaning and breakroom, were partially offset by lower
year-over-year sales in technology products, as well as the ongoing
challenges related to supply chain and sourcing impacting certain
product categories
- Adjacency category sales including cleaning and breakroom,
furniture, technology, and copy and print, increased to 46% of
total BSD sales
- Operating income was $33 million in the first quarter of 2022,
up 94% over the same period last year, or 120 basis points as a
percentage of sales, driven by higher volume and lower SG&A
expenses helping to offset increased supply chain costs
Retail Division
- Reported sales were $943 million in the first quarter of 2022,
down 9% compared to the prior year period primarily due to 114
fewer retail outlets at the end of the first quarter compared to
the prior year, associated with planned store closures. The Company
closed 6 retail stores in the quarter and had 1,032 stores at
quarter end
- Lower traffic trends in the quarter were offset by stronger
sales-per-shopper, as well as strong omni-channel sales in the
quarter 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 $89 million in the first quarter of 2022,
down 11% over the same period last year; as a percentage of sales,
operating income was 9% of sales, slightly lower year over
year
Progress on Strategic initiatives
The Company continued to make significant progress on all of its
strategic initiatives to unlock shareholder value, including
progress on its separation activities, potential sale of its
Consumer business, and advancing its digital platform business.
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 business and
align its operating assets to support its B2C, B2B, distribution,
and digital platform businesses. The Company made significant
progress in all areas of the separation including organizational
structure, operating and supply chain mechanics, IT support, and
market-based commercial agreements, all supporting the near-term
and future state of the business.
During the first quarter, 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 continues to carefully review the 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 made
significant progress in concluding this review, there can be no
assurance that a sale of the consumer business will take place nor
the terms of any such sale.
Capital Allocation
As previously announced on November 16, 2021, the Company
entered into an accelerated share repurchase agreement (“ASR”) to
repurchase shares of the Company’s common stock in exchange for an
up-front payment of $150 million. The ASR program is ongoing, and
the Company expects it to be completed in June 2022. As of March
26, 2022, $342 million remains available for additional repurchases
under the current 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 over the past 12 months.
“The Board of Directors continues to evaluate its future capital
allocation plans and the eventual outcome of that process. 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 continues to make strong progress on its
digital platform business, Varis. Varis is 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 continues to accelerate its technology
development. Accomplishments in the quarter included initiating a
private preview launch on the Microsoft Dynamics 365 Business
Central platform and incorporating positive feedback from Varis’
build partners and customers. Other achievements include attracting
new customers to its platform, both buyers and suppliers,
innovating on their behalf, and continuing to make progress on the
launch of its technology platform with expanded capabilities that
position the Company for future growth.
Commentary and 2022 Expectations
“We continue to make strong progress across our strategic
initiatives while driving impressive results in the quarter,” said
Smith. “Our team remains committed to unlocking value by concluding
our review to maximize the value of our consumer business,
launching our digital platform business, and building upon our B2B
platform for the benefit of all of our stakeholders. While we
expect that the conditions related to both the supply chain and
inflationary environment will persist in the quarters ahead, we are
in an excellent position as we continue leveraging our assets to
meet our customers’ needs. We’ll also continue to use a balanced
approach to capital deployment, working with our Board on potential
future share repurchases and investing to capture the large market
opportunity through our digital platform business, supply chain
operations, and B2B presence,” Smith added.
The Company continues to anticipate generating annual revenue,
operating and cash flow results in a range consistent with the
prior year on a comparable basis, 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 March 26, 2022, ODP had total available liquidity of
approximately $1.4 billion, consisting of $557 million in cash and
cash equivalents and $874 million of available credit under the
Third Amended Credit Agreement. Total debt was $199 million.
For the first quarter of 2022, cash provided by operating
activities from continuing operations was $30 million, which
included $7 million in restructuring and other costs, compared to
cash provided by operating activities of continuing operations of
$103 million in the first quarter of the prior year, which included
less than $1 million in acquisition and integration-related costs
and $5 million in restructuring costs.
Capital expenditures in the first quarter of 2022 were $21
million versus $12 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 $5 million, respectively.
Accordingly, Adjusted Free Cash Flow(4) was $16 million in the
first quarter of 2022.
As part of the ongoing commitment and support of its strategic
initiatives, the Company retired approximately $43 million of FILO
Term Loan Facility loans under the Third Amended Credit Agreement
during the quarter.
(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)
(Unaudited)
13 Weeks Ended
March 26,
March 27,
2022
2021
Sales
$
2,178
$
2,174
Cost of goods sold and occupancy costs
1,694
1,679
Gross profit
484
495
Selling, general and administrative
expenses
396
401
Asset impairments
2
12
Merger, restructuring and other operating
expenses, net
10
13
Operating income
76
69
Other income (expense):
Interest income
1
—
Interest expense
(5
)
(7
)
Other income, net
2
11
Income from continuing operations before
income taxes
74
73
Income tax expense
19
10
Net income from continuing operations
55
63
Discontinued operations, net of tax
—
(10
)
Net income
$
55
$
53
Basic earnings (loss) per share
Continuing operations
$
1.14
$
1.17
Discontinued operations
—
(0.18
)
Net basic earnings (loss) per share
$
1.14
$
0.99
Diluted earnings (loss) per share
Continuing operations
$
1.09
$
1.12
Discontinued operations
—
(0.17
)
Net diluted earnings (loss) per share
$
1.09
$
0.95
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
March 26,
December 25,
2022
2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
557
$
514
Receivables, net
572
495
Inventories
866
859
Prepaid expenses and other current
assets
58
52
Current assets held for sale
—
469
Total current assets
2,053
2,389
Property and equipment, net
466
477
Operating lease right-of-use assets
899
936
Goodwill
464
464
Other intangible assets, net
52
54
Deferred income taxes
209
219
Other assets
386
326
Total assets
$
4,529
$
4,865
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
975
$
950
Accrued expenses and other current
liabilities
959
994
Income taxes payable
14
11
Short-term borrowings and current
maturities of long-term debt
18
20
Current liabilities held for sale
—
290
Total current liabilities
1,966
2,265
Deferred income taxes and other long-term
liabilities
155
159
Pension and postretirement obligations,
net
21
22
Long-term debt, net of current
maturities
181
228
Operating lease liabilities
714
753
Total liabilities
3,037
3,427
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued
shares — 65,357,585 at March 26, 2022 and
64,704,979 at
December 25, 2021; outstanding shares —
49,092,644 at March 26, 2022
and 48,455,951 at December 25, 2021
1
1
Additional paid-in capital
2,687
2,692
Accumulated other comprehensive loss
(1
)
(6
)
Accumulated deficit
(562
)
(617
)
Treasury stock, at cost — 16,264,941
shares at March 26, 2022 and
16,249,028 shares at December 25, 2021
(633
)
(632
)
Total stockholders’ equity
1,492
1,438
Total liabilities and stockholders’
equity
$
4,529
$
4,865
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
13 Weeks Ended
March 26,
March 27,
2022
2021
Cash flows from operating
activities:
Net income
$
55
$
53
Loss from discontinued operations, net of
tax
—
(10
)
Net income from continuing operations
55
63
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization
34
38
Charges for losses on receivables and
inventories
6
7
Asset impairments
2
12
Gain on disposition of assets, net
(3
)
—
Compensation expense for share-based
payments
9
10
Deferred income taxes and deferred tax
asset valuation allowances
10
6
Changes in working capital and other
operating activities
(83
)
(33
)
Net cash provided by operating activities
of continuing operations
30
103
Net cash used in operating activities of
discontinued operations
—
(17
)
Net cash provided by operating
activities
30
86
Cash flows from investing
activities:
Capital expenditures
(21
)
(12
)
Businesses acquired, net of cash
acquired
—
(28
)
Proceeds from disposition of assets
6
1
Settlement of company-owned life insurance
policies
1
7
Net cash used in investing activities of
continuing operations
(14
)
(32
)
Net cash provided by (used in) investing
activities of discontinued operations
67
(1
)
Net cash provided by (used in) investing
activities
53
(33
)
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(6
)
(6
)
Debt retirement
(43
)
—
Share purchases for taxes, net of proceeds
from employee share-based
Transactions
(14
)
(23
)
Other financing activities
(1
)
(1
)
Net cash used in financing activities of
continuing operations
(64
)
(30
)
Effect of exchange rate changes on cash
and cash equivalents
1
1
Net increase in cash and cash
equivalents
20
24
Cash and cash equivalents at beginning of
period
537
729
Cash and cash equivalents at end of period
– continuing operations
$
557
$
753
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
35
$
10
Business acquired in exchange for common
stock issuance
—
35
Other current receivable obtained from
disposition of discontinued operations
30
—
Promissory note receivable obtained from
disposition of discontinued operations
55
—
Earn-out receivable obtained from
disposition of discontinued operations
9
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
Business Solutions Division (in
millions)
1Q22
1Q21
Sales
$1,231
$1,127
Sales change from prior year
9%
Division operating income
$33
$17
Division operating income margin
2.7%
1.5%
Retail Division (in millions)
1Q22
1Q21
Sales
$943
$1,039
Sales change from prior year
(9)%
Division operating income
$89
$100
Division operating income margin
9.4%
9.6%
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)
Q1 2022
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
$
10
0.5
%
$
10
$
—
—
%
Operating income
$
76
3.5
%
$
(12
)
$
88
(6)
4.0
%
Income tax expense
$
19
0.9
%
$
(3
)
$
22
(8)
1.0
%
Net income from continuing operations
$
55
2.5
%
$
(9
)
$
64
(9)
2.9
%
Earnings per share from continuing
operations (most dilutive)
$
1.09
$
(0.18
)
$
1.27
(9)
Depreciation and amortization
$
34
1.6
%
$
—
$
34
(10)
1.6
%
Q1 2021
Reported
(GAAP)
% of
Sales
Less:
Charges &
Credits
Adjusted
(Non-GAAP)
% of
Sales
Assets impairments
$
12
0.6
%
$
12
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
13
0.6
%
$
13
$
—
—
%
Operating income
$
69
3.2
%
$
(25
)
$
93
(6)
4.3
%
Other income, net
$
11
0.5
%
$
7
$
4
(7)
0.2
%
Income tax expense
$
10
0.5
%
$
(12
)
$
22
(8)
1.0
%
Net income from continuing operations
$
63
2.9
%
$
(6
)
$
68
(9)
3.1
%
Earnings per share from continuing
operations (most dilutive)
$
1.12
$
(0.10
)
$
1.22
(9)
Depreciation and amortization
$
38
1.7
%
$
2
$
36
(10)
1.7
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
March 26,
March 27,
Adjusted
EBITDA:
2022
2021
Net income
$
55
$
53
Discontinued operations, net of tax
—
(10
)
Net income from continuing operations
55
63
Income tax expense
19
10
Income from continuing operations before
income taxes
74
73
Add (subtract)
Interest income
(1
)
—
Interest expense
5
7
Adjusted depreciation and amortization
(10)
34
36
Charges and credits, pretax (11)
12
18
Adjusted EBITDA
$
125
$
133
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 for the first
quarter of 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), 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), and European
Business liabilities release (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
March 26,
March 27,
Free cash
flow
2022
2021
Net cash provided by operating activities
from continuing operations
$
30
$
103
Capital expenditures
(21
)
(12
)
Free cash flow
9
91
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
2
4
Business Acceleration Program
—
1
Planned separation of consumer
business
5
—
Adjusted free cash flow
$
16
$
96
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)
Q1
Q1
2022
2021
Retail Division:
Stores opened
—
—
Stores closed
6
8
Total retail stores (U.S.)
1,032
1,146
Total square footage (in millions)
22.7
25.3
Average square footage per store (in
thousands)
22.0
22.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504005274/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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