Approves $600 Million Share Repurchase
Authorization, Including Cash Tender Offer for up to $300 Million
of Shares
The ODP Corporation (NASDAQ:ODP) (“ODP” or the “Company”), a
leading provider of business services, products and digital
workplace technology solutions through an integrated B2B
distribution platform, today announced preliminary unaudited
results for the second quarter of 2022 and announced that its Board
of Directors has unanimously approved a $600 million share
repurchase authorization including the launch of a $300 million
modified “Dutch auction” cash tender offer.
The Company expects to report its second quarter 2022 financial
results in August. Based on its preliminary assessment, the Company
expects to report unaudited results for the second quarter of 2022
as follows:
Preliminary Second Quarter 2022
Summary(1)(2)
- Total reported sales of approximately $2.0 billion
- GAAP operating income in the range of $27 to $29 million and
net income from continuing operations in the range of $19 to $21
million, or $0.38 to $0.40 per diluted share
- Adjusted operating income in the range of $53 to $55 million;
adjusted EBITDA in the range of $89 to $91 million
- Adjusted net income from continuing operations in the range of
$38 to $40 million, or adjusted diluted earnings per share from
continuing operations in the range of $0.78 to $0.80
- Operating cash flow from continuing operations in the range of
$(113 million) to $(115 million) and adjusted free cash flow in the
range of $(120 million) to $(122 million), driven largely by
investments in inventory ahead of the back-to-school season in the
coming quarter
Share Repurchase Authorization and Tender Offer
The Company’s Board of Directors has unanimously approved a new
$600 million share repurchase authorization, available through June
30, 2024. As a part of this new authorization, the Company also
announced that it is launching a $300 million modified “Dutch
auction” cash tender offer to be funded through its cash on hand
and its asset-based lending facility. After the completion of the
tender offer, the Company may repurchase additional shares at the
Company’s discretion, subject to applicable regulatory and other
legal requirements. The number of shares to be repurchased and the
timing of such transactions will depend on a variety of factors,
including market conditions, regulatory requirements, other
corporate considerations, and could be suspended or discontinued at
any time as determined by management.
“We continue to execute well against a challenging environment,
delivering solid operating and financial results,” said Gerry
Smith, chief executive officer of The ODP Corporation. “The work
that we have done to operationally separate the company into four
distinct businesses has positioned us with greater flexibility,
creating distinct routes-to-market, allowing us to better serve
customers and pursue growth. Our ability to reinvest in the
business while repurchasing shares is a true testament to our
team’s commitment to creating shareholder value and to the strength
of our balance sheet. We’re excited about ODP’s strong position as
we deploy capital to pursue profitable growth and generate strong
returns for our shareholders.”
2022 Guidance (3)(4)
The Company’s guidance for full year 2022 is as follows:
FY 2022 Guidance
Sales
$8.45 - $8.60 billion
Adjusted EBITDA
$430 - $460 million
Adjusted Operating Income
$285 - $315 million
Adjusted Earnings per Share(4)
$4.10 - $4.50
Adjusted Free Cash Flow (2)
$200 - $225 million
“Our entire team is enthusiastic about the opportunities ahead
to pursue long-term profitable growth, while enhancing shareholder
returns,” said Anthony Scaglione, executive vice president and
chief financial officer of The ODP Corporation. “Our strong balance
sheet, diversified routes-to-market, and long-term free cash flow
conversion profile provide us the ability to launch our tender
offer and continue to invest in our business, while remaining in a
position to enhance shareholder returns over time. Our outlook for
2022 assumes a reasonably stable macroeconomic environment for the
second half of the year, and recognizes that our fiscal year-end
occurs on December 31, 2022, which may affect the timing of certain
income statement and working capital items. Our entire leadership
team looks forward to hosting an investor day meeting later this
year where we will highlight our business units, their respective
strategies, and key long-term outlook and metrics,” he added.
The Company’s estimated results for the second quarter of 2022
reflect ODP’s preliminary unaudited estimates and views on market
trends observed year to date for 2022 and are based on information
available as of the date hereof. Actual results and estimates may
differ materially from the estimates and trends described above due
to developments or other information that may arise between now and
the time the financial results for the second quarter or fiscal
year end are finalized. These preliminary results should not be
viewed as a substitute for our second quarter interim unaudited
consolidated financial statements prepared in accordance with
GAAP.
(1)
As presented throughout this release,
adjusted results represent non-GAAP financial measures and exclude
charges or credits not indicative of core operations and the tax
effect of these items, which may include but not be limited to
merger integration, restructuring, acquisition costs, and asset
impairments. Reconciliations from GAAP to non-GAAP financial
measures can be found in this release as well as on the Company’s
Investor Relations website at investor.theodpcorp.com.
(2)
As used in this release, Adjusted Free
Cash Flow is defined as free cash flow, which we define as cash
flows from operating activities less capital expenditures,
excluding cash charges associated with the Company’s Maximize B2B
Restructuring program. Adjusted Free Cash Flow is a non-GAAP
financial measure. 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)
The Company’s outlook for 2022 included in
this release includes non-GAAP measures, such as adjusted EBITDA,
adjusted operating income, adjusted earnings per share, and
adjusted free cash flow. These measures exclude charges or credits
not indicative of core operations, which may include but not be
limited to merger integration expenses, restructuring charges,
acquisition-related costs, executive transition costs, asset
impairments and other significant items that currently cannot be
predicted without unreasonable efforts. The exact amount of these
charges or credits are not currently determinable but may be
significant. Accordingly, the Company is unable to provide
equivalent GAAP measures or reconciliations from GAAP to non-GAAP
for these financial measures.
(4)
The Company’s outlook for 2022 Adjusted
Earnings per Share does not include potential impact from the
planned tender offer.
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 contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
including statements regarding our preliminary second quarter
unaudited results and our expected full year guidance. 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, 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.
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. Also,
we believe that adjusted 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.
For purposes of reconciling GAAP to Non-GAAP metrics for
preliminary Q2 2022 results:
- Adjusted operating income adjusts GAAP operating income for
assets impairments and merger, restructuring and other operating
expenses, net
- Adjusted net income from continuing operations and adjusted
earnings per share from continuing operations (most dilutive)
adjust GAAP net income and GAAP diluted earnings per share for
assets impairments, merger, restructuring and other operating
expenses, net and their related tax effect
- Adjusted free cash flow adjusts operating cash flow from
continuing operations for capital expenditures and certain cash
charges related to Maximize B2B Restructuring Plan and our
previously planned separation of consumer business
Q2 2022
Assets impairments
$3 million
Merger, restructuring and other operating
expenses, net
$23 million
Income tax effect
$(7 million)
Capital expenditures
$22 million
Certain cash charges:
Maximize B2B Restructuring Plan
$1 million
Previously planned separation of consumer
business
$13 million
Additional Information and Where to Find It
This news release is for informational purposes only, is not a
recommendation to buy or sell any securities of the Company, and
does not constitute an offer to buy or the solicitation to sell any
securities of the Company.
The tender offer described above has not yet commenced, and
there can be no assurances that the Company will commence the
tender offer on the terms described in this new release or at all.
On the commencement date of the tender offer, the Company will file
a tender offer statement on Schedule TO, including an offer to
purchase, letter of transmittal and related materials, with the
SEC. The tender offer will be made only pursuant to the offer to
purchase, the related letter of transmittal and other related
materials filed as part of the Schedule TO with the SEC upon
commencement of the tender offer. When available, shareholders
should read carefully the offer to purchase, letter of transmittal
and related materials because they will contain important
information, including the various terms of, and conditions to, the
tender offer. Once the tender offer is commenced, shareholders will
be able to obtain a free copy of the tender offer statement on
Schedule TO, the offer to purchase, letter of transmittal and other
documents that the Company will be filing with the SEC at the SEC’s
website at www.sec.gov or from the Company’s information agent in
connection with the tender offer.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220718005276/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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