Authorizes a New $1 Billion Share Buy-Back Plan
Through 2025 and Reaffirms 2022 Guidance
Third Quarter Revenue of $2.2 Billion with GAAP
EPS of $1.36; Adjusted EPS of $1.48
Low-Cost Model Helps Deliver GAAP Operating
Income of $84 Million and Adjusted Operating Income of $95 Million
in the Third Quarter of 2022
Continued Strong Back-to-Office Trends Helps to
Drive Growth in ODP Business Solutions Division
The ODP Corporation (“ODP,” or the “Company”) (NASDAQ:ODP), a
leading provider of business services, products and digital
workplace technology solutions to businesses and consumers today
announced results for the third quarter ended September 24,
2022.
Consolidated (in millions, except
per share amounts)
3Q22
3Q21
YTD22
YTD21
Selected GAAP and Non-GAAP
measures:
Sales
$2,172
$2,179
$6,385
$6,423
Sales change from prior year period
0%
(1)%
Operating income
$84
$104
$188
$203
Adjusted operating income (1)
$95
$122
$238
$258
Net income from continuing operations
$67
$73
$142
$155
Diluted earnings per share from continuing
operations
$1.36
$1.33
$2.84
$2.79
Adjusted net income from continuing
operations (1)
$73
$96
$177
$197
Adjusted earnings per share from
continuing operations
(most dilutive) (1)
$1.48
$1.76
$3.54
$3.55
Adjusted EBITDA (1)
$131
$162
$347
$378
Operating Cash Flow from continuing
operations
$163
$121
$79
$256
Free Cash Flow (2)
$138
$102
$11
$209
Adjusted Free Cash Flow (3)
$160
$123
$54
$248
Third Quarter 2022
Summary(1)(3)
- Total reported sales of $2.2 billion, flat versus the prior
year, as sales grew in our B2B distribution division, ODP Business
Solutions, offset by lower sales in our consumer division. Office
Depot sales were lower partially driven by 75 fewer retail
locations in service compared to the prior year as a result of
planned store closures and lower traffic
- GAAP operating income of $84 million and net income from
continuing operations of $67 million, or $1.36 per diluted share,
versus $104 million and $73 million, or $1.33 per diluted share,
respectively in the prior year
- Adjusted operating income of $95 million, compared to $122
million in the third quarter of 2021; adjusted EBITDA of $131
million, compared to $162 million in the third quarter of 2021
- Adjusted net income from continuing operations of $73 million,
or adjusted diluted earnings per share from continuing operations
of $1.48, versus $96 million or $1.76, respectively in the prior
year
- Operating cash flow from continuing operations of $163 million
and adjusted free cash flow of $160 million, versus $121 million
and $123 million, respectively in the prior year
- $1.4 billion of total available liquidity including $473
million in cash and cash equivalents at quarter end
“Our realigned four business unit structure, provides greater
transparency for shareholders, unlocks the potential of our
business, and provides greater stability and opportunities for long
term growth,” said Gerry Smith, chief executive officer for The ODP
Corporation. “Our team continued to deliver against a challenging
macroeconomic environment, driving solid performance, as the
strength of our distribution platform and flexible pricing
strategies helped offset some of the market wide challenges related
to supply chain constraints, inflation, as well as a more
competitive back-to-school environment. Our B2B distribution
business, ODP Business Solutions, drove strong performance as
back-to-office trends continued to gain traction, helping to drive
strong revenue results and margins that are on a path to exceed
pre-pandemic levels in the future. In our consumer channel, Office
Depot, we maintained high customer satisfaction levels and drove
solid operating margin performance, despite lower traffic and a
competitive back-to-school selling season. Overall, our team
continued to focus on execution and remained committed to our
low-cost model approach, enabling us to deliver $95 million in
adjusted operating income and strong cash flow in the quarter.”
“We’re excited with the launch of Veyer, our supply chain and
logistics division, and the reporting of Varis, our B2B digital
platform business that creates a leading edge marketplace
experience for buyers and suppliers. These two divisions provide
attractive long-term growth opportunities for shareholders.”
“We remain focused on driving shareholder value and we announced
that our Board of Directors has approved a plan to return
approximately $1 billion to shareholders through 2025. We’re
looking forward to sharing more about our disciplined capital
allocation strategy during our upcoming investor day meeting to be
held later today. Overall, with our realigned four business unit
structure and disciplined capital allocation strategy, we are in a
strong position to unleash the full potential of ODP,” he
added.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the third quarter of 2022 were $2.2
billion, flat compared with the third quarter of 2021. The
Company’s ODP Business Solutions division drove strong top-line
revenue growth as more businesses returned to the office and as the
division continued to execute upon its growth strategy. This was
offset by lower sales at its Office Depot Division, largely due to
75 planned store closures, lower eCommerce sales, and lower store
traffic partially offset by higher sales per shopper. The Company
drove strong sales across most major product categories in its ODP
Business Solutions Division and continued strong omni channel sales
in its Office Depot Division. Additionally, Veyer, the Company’s
logistics division provided strong support for ODP Business
Solutions and Office Depot, as well as other third-party customers,
and worked to help mitigate the ongoing supply chain, sourcing and
cost challenges that remain persistent across most industries.
The Company reported operating income of $84 million in the
third quarter of 2022, down compared to operating income of $104
million in the prior year period. GAAP operating results in the
third quarter of 2022 included $11 million of charges consisting
primarily of $8 million in merger, restructuring and other
operating costs largely associated with activities related to the
Company’s previously planned separation. The remaining $3 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 $67 million, or $1.36 per
diluted share in the third quarter of 2022, down from $73 million,
or $1.33 per diluted share in the third quarter of 2021.
Adjusted (non-GAAP) Results (1)
Adjusted results for the third quarter of 2022 exclude charges
and credits totaling $11 million as described above and the tax
impacts associated with the above items.
- Third quarter of 2022 adjusted EBITDA was $131 million compared
to $162 million in the prior year period. This included adjusted
depreciation and amortization(4) of $32 million and $36 million in
the third quarters of 2022 and 2021, respectively
- Third quarter 2022 adjusted operating income was $95 million
compared to $122 million in the third quarter of 2021
- Third quarter 2022 adjusted net income from continuing
operations was $73 million, or $1.48 per diluted share, compared to
$96 million, or $1.76 per diluted share, in the third quarter of
2021
Realigned Four Business Unit Reporting Structure
The Company has transformed its operations under its holding
company structure and into its B2C business and three distinct B2B
businesses and digital segments focused on further enhancing value
for shareholders and pursuing growth:
- ODP Business Solutions, LLC – ODP’s leading B2B
solutions provider serving small, medium and enterprise level
companies (odpbusiness.com). This includes the contract sales
channel of ODP’s prior Office Depot Business Solutions Division;
Grand & Toy, serving customers in Canada (grandandtoy.com); and
the Company’s Federation Entities, which comprise more than a dozen
regional office supply distribution businesses acquired by ODP,
expanding its distribution network into previously underserved
geographic areas and which continue to operate under their own
brand names.
- Office Depot, LLC – a leading provider of retail
consumer and small business products and services distributed
through a fully integrated omnichannel platform of approximately
1,000 Office Depot and OfficeMax retail locations and an
award-winning eCommerce presence (officedepot.com).
- Veyer, LLC – a supply chain, distribution, procurement
and global sourcing operation (veyerlogistics.com). Veyer procures
and distributes products for both Office Depot, LLC and ODP
Business Solutions, LLC, as well as third-party customers.
- Varis, LLC – ODP’s tech-enabled B2B indirect procurement
marketplace, which provides a better way for buyers and suppliers
to transact through the platform’s consumer-like buying experience,
advanced spend management tools, network of suppliers, and
technology (govaris.com).
“Our four business unit model unlocks value for shareholders and
enables our dedicated teams to focus on meeting their customers’
needs and executing upon channel specific go-to-market strategies.
It will also enable us to provide greater visibility to our
stakeholders about the value of our operating businesses’
performance in the future,” said Smith. “We’re excited about the
value that our realigned four business unit structure creates for
all of our stakeholders.”
Division Results
ODP Business Solutions Division
- Reported sales were $1 billion in the third quarter of 2022, up
9% compared to the same period last year, as more business
customers continued to return to the workplace
- Stronger sales across core supply categories, cleaning and
breakroom, and technology products
- Adjacency category sales including cleaning and breakroom,
furniture, technology, and copy and print were 45% of total ODP
Business Solutions’ sales
- Operating income was $48 million in the third quarter of 2022,
up 41% over the same period last year, or up 100 basis points as a
percentage of sales
Office Depot Division
- Reported sales were $1.1 billion in the third quarter of 2022,
down 8% compared to the prior year period partially due to 75 fewer
retail outlets compared to the prior year associated with planned
store closures, as well as lower demand relative to last year in
certain product categories. The Company closed 11 retail stores in
the quarter and had 1009 stores at quarter end
- Store traffic and demand relative to last year was negatively
impacted due to the conditions related to the recovery from the
pandemic as a greater percentage of customers returned to the
office. This was partially offset by strong sales per shopper and
increases in sales though its buy online, pick-up in store (BOPIS)
offering on a same store basis
- Operating income was $83 million in the third quarter of 2022,
down 23% over the same period last year. As a percentage of sales,
operating income was 7%, a 2% decrease as a percentage of sales
compared to the same period last year. This result was primarily
driven by lower sales and higher supply chain costs and impacts
related to inflation
Veyer Division
- Veyer drove strong support for its internal customers, ODP
Business Solutions and Office Depot, as well as provided services
for third-party customers
- Veyer generated sales of $1.5 billion, predominately supporting
the purchasing and supply chain operations of ODP Business
Solutions and Office Depot
- Veyer’s Internal sales of product are made at a price that
includes a service fee to the cost of product we source from
third-party vendors. Internal sales of services represent supply
chain and logistics support services, which include warehousing,
shipping and handling, and returns
- Operating income was $9 million in the third quarter of 2022,
up from $7 million in the prior year period from growth in freight
collection activities and mix, including contribution from third
parties
Varis Division
- Varis is an early stage digital B2B platform technology
business that is focused on transforming digital commerce between
buying organizations and suppliers
- Varis generated revenues in the quarter of $2 million and an
operating loss of $17 million as the business continues to add new
capabilities, customers, and relationships, and prepares the
platform for a full launch in the coming months
Share Repurchase Authorization and Full Year Guidance
The Company announced today that its Board of Directors has
unanimously approved a new $1 billion share repurchase
authorization, available through year end 2025, replacing its prior
$600 million authorization. This new authorization is expected to
be completed by year-end 2025. 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 remain focused on providing value for shareholders and
excited about our plan to return $1 billion in capital to
shareholders over the next three years. Our disciplined capital
plan, combined with the growth objectives enabled through our
realigned four business unit structure, create a compelling value
proposition for all of our stakeholders,” said Smith.
“We’re enthusiastic about the numerous opportunities to pursue
long-term profitable growth, while enhancing shareholder returns,”
said Anthony Scaglione, executive vice president and chief
financial officer of The ODP Corporation. “During Q3 we repurchased
about 1.9 million shares for approximately $70 million. We are also
reconfirming our outlook for the balance of the fiscal year and
look forward to hosting our investor day meeting today highlighting
our business units, their respective strategies, and key long-term
outlook and metrics,” he added.
Balance Sheet and Cash Flow
As of September 24, 2022, ODP had total available liquidity of
approximately $1.4 billion, consisting of $473 million in cash and
cash equivalents and $934 million of available credit under the
Third Amended Credit Agreement. Total debt was $191 million.
For the third quarter of 2022, cash provided by operating
activities from continuing operations was $163 million, which
included $22 million in restructuring and other spend, compared to
cash provided by operating activities of continuing operations of
$121 million in the third quarter of the prior year, which included
$21 million in restructuring spend. The year-over-year change in
operating cash flow largely related to changes in working
capital.
Capital expenditures in the third quarter of 2022 were $25
million versus $19 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 previously planned separation of the
consumer business and realignment in the quarter were $2 million
and $20 million, respectively. Accordingly, Adjusted Free Cash
Flow(3) was a $160 million inflow in the third quarter of 2022.
Beginning at 9:00 am Eastern Time on November 2, 2022, The ODP
Corporation will webcast a call with the investment community
covering its financial results for the third quarter of 2022.
Immediately following this webcast, Chief Executive Officer, Gerry
Smith, and members of his executive leadership team will host a
virtual investor day meeting and live Q&A session that will be
accessible to the media and to the general public. The investor day
meeting will provide the investment community further insight into
ODP’s realigned business, unit structure and respective growth
trajectories, its capital allocation plans, and its strategy to
drive shareholder value. To register for the investor day and view
the webcast, please visit The ODP Corporation’s Investor Relations
website at investor.theodpcorp.com. A replay of the investor day
and supporting materials will be available as soon as possible
following the event.
(1)
As presented throughout this release,
adjusted results represent non-GAAP financial measures and exclude
charges or credits not indicative of core operations and the tax
effect of these items, which may include but not be limited to
merger integration, restructuring, acquisition costs, and asset
impairments. Reconciliations from GAAP to non-GAAP financial
measures can be found in this release as well as on the Company’s
Investor Relations website at investor.theodpcorp.com.
(2)
As used in this release, Free Cash Flow is
defined as cash flows from operating activities less capital
expenditures. Free Cash Flow is a non-GAAP financial measure and
reconciliations from GAAP financial measures can be found in this
release as well as on the Company’s Investor Relations website at
investor.theodpcorp.com.
(3)
As used in this release, Adjusted Free
Cash Flow is defined as Free Cash Flow excluding cash charges
associated with the Company’s Maximize B2B Restructuring, the
Business Acceleration Program, and expenses incurred in connection
with our previously 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.
(4)
Adjusted depreciation and amortization
each represents a non-GAAP financial measure and excludes
accelerated depreciation caused by updating the salvage value and
shortening the useful life of depreciable fixed assets to coincide
with planned store closures under an approved restructuring plan,
but only if impairment is not present. Accelerated depreciation
charges are restructuring expenses. Reconciliations from GAAP to
non-GAAP financial measures can be found in this release as well as
on the Company’s Investor Relations website at
investor.theodpcorp.com.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of
products and services through an integrated business-to-business
(B2B) distribution platform and omnichannel presence, which
includes world-class supply chain and distribution operations,
dedicated sales professionals, a B2B digital procurement solution,
online presence and a network of Office Depot and OfficeMax retail
stores. Through its operating companies Office Depot, LLC; ODP
Business Solutions, LLC; Veyer, LLC; and Varis, LLC, The ODP
Corporation empowers every business, professional, and consumer to
achieve more every day. For more information, visit
theodpcorp.com.
ODP and ODP Business Solutions are trademarks of ODP Business
Solutions, LLC. Office Depot is a trademark of The Office Club,
Inc. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of
Veyer, LLC. 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 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 the expected benefits of its
strategic plans, including its strategic shift to maintain all of
its businesses under common ownership; the risk that the Company
may not be able to realize the anticipated benefits of acquisitions
due to unforeseen liabilities, future capital expenditures,
expenses, indebtedness and the unanticipated loss of key customers
or the inability to achieve expected revenues, synergies, cost
savings or financial performance; the risk that the Company is
unable to successfully maintain a relevant omni-channel experience
for its customers; the risk that the Company is unable to execute
the Maximize B2B Restructuring Plan successfully or that such plan
will not result in the benefits anticipated; failure to effectively
manage the Company’s real estate portfolio; loss of business with
government entities, purchasing consortiums, and sole- or limited-
source distribution arrangements; failure to attract and retain
qualified personnel, including employees in stores, service
centers, distribution centers, field and corporate offices and
executive management, and the inability to keep supply of skills
and resources in balance with customer demand; failure to execute
effective advertising efforts and maintain the Company’s reputation
and brand at a high level; disruptions in computer systems,
including delivery of technology services; breach of information
technology systems affecting reputation, business partner and
customer relationships and operations and resulting in high costs
and lost revenue; unanticipated downturns in business relationships
with customers or terms with the suppliers, third-party vendors and
business partners; disruption of global sourcing activities,
evolving foreign trade policy (including tariffs imposed on certain
foreign made goods); exclusive Office Depot branded products are
subject to additional product, supply chain and legal risks;
product safety and quality concerns of manufacturers’ branded
products and services and Office Depot private branded products;
covenants in the credit facility; general disruption in the credit
markets; incurrence of significant impairment charges; retained
responsibility for liabilities of acquired companies; fluctuation
in quarterly operating results due to seasonality of the Company’s
business; changes in tax laws in jurisdictions where the Company
operates; increases in wage and benefit costs and changes in labor
regulations; changes in the regulatory environment, legal
compliance risks and violations of the U.S. Foreign Corrupt
Practices Act and other worldwide anti-bribery laws; volatility in
the Company’s common stock price; changes in or the elimination of
the payment of cash dividends on Company common stock;
macroeconomic conditions such as future declines in business or
consumer spending; increases in fuel and other commodity prices and
the cost of material, energy and other production costs, or
unexpected costs that cannot be recouped in product pricing;
unexpected claims, charges, litigation, dispute resolutions or
settlement expenses; catastrophic events, including the impact of
weather events on the Company’s business; the discouragement of
lawsuits by shareholders against the Company and its directors and
officers as a result of the exclusive forum selection of the Court
of Chancery, the federal district court for the District of
Delaware or other Delaware state courts by the Company as the sole
and exclusive forum for such lawsuits; and the impact of the
COVID-19 pandemic on the Company’s business, including on the
demand for its and our customers’ products and services, on trade
and transport restrictions and generally on our ability to
effectively manage the impacts of the COVID-19 pandemic on our
business operations. The foregoing list of factors is not
exhaustive. Investors and shareholders should carefully consider
the foregoing factors and the other risks and uncertainties
described in the Company’s Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K filed with
the U.S. Securities and Exchange Commission. The Company does not
assume any obligation to update or revise any forward-looking
statements.
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
amounts)
(Unaudited)
13 Weeks Ended
39 Weeks Ended
September 24,
September 25,
September 24,
September 25,
2022
2021
2022
2021
Sales
$
2,172
$
2,179
$
6,385
$
6,423
Cost of goods sold and occupancy costs
1,686
1,675
4,983
4,992
Gross profit
486
504
1,402
1,431
Selling, general and administrative
expenses
391
382
1,164
1,173
Asset impairments
3
5
8
18
Merger, restructuring and other operating
expenses, net
8
13
42
37
Operating income
84
104
188
203
Other income (expense):
Interest income
1
—
3
—
Interest expense
(1
)
(7
)
(10
)
(20
)
Other income, net
5
3
9
19
Income from continuing operations before
income taxes
89
100
190
202
Income tax expense
22
27
48
47
Net income from continuing operations
67
73
142
155
Discontinued operations, net of tax
—
28
7
(89
)
Net income (loss)
$
67
$
101
$
149
$
66
Basic earnings (loss) per share
Continuing operations
$
1.39
$
1.38
$
2.92
$
2.89
Discontinued operations
(0.01
)
0.54
0.14
(1.65
)
Net basic earnings (loss) per share
$
1.38
$
1.92
$
3.06
$
1.24
Diluted earnings (loss) per share
Continuing operations
$
1.36
$
1.33
$
2.84
$
2.79
Discontinued operations
(0.01
)
0.52
0.13
(1.60
)
Net diluted earnings (loss) per share
$
1.35
$
1.85
$
2.97
$
1.19
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
September 24,
December 25,
2022
2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
473
$
514
Receivables, net
591
495
Inventories
890
859
Prepaid expenses and other current
assets
47
52
Current assets held for sale
107
469
Total current assets
2,108
2,389
Property and equipment, net
355
477
Operating lease right-of-use assets
889
936
Goodwill
464
464
Other intangible assets, net
47
54
Deferred income taxes
185
219
Other assets
370
326
Total assets
$
4,418
$
4,865
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
853
$
950
Accrued expenses and other current
liabilities
1,015
994
Income taxes payable
9
11
Short-term borrowings and current
maturities of long-term debt
16
20
Current liabilities held for sale
—
290
Total current liabilities
1,893
2,265
Deferred income taxes and other long-term
liabilities
124
159
Pension and postretirement obligations,
net
20
22
Long-term debt, net of current
maturities
175
228
Operating lease liabilities
707
753
Total liabilities
2,919
3,427
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued
shares — 65,632,777 at September 24, 2022
and 64,704,979 at
December 25, 2021; outstanding shares —
46,736,821 at September 24, 2022
and 48,455,951 at December 25, 2021
1
1
Additional paid-in capital
2,733
2,692
Accumulated other comprehensive loss
(36
)
(6
)
Accumulated deficit
(468
)
(617
)
Treasury stock, at cost — 18,895,956
shares at September 24, 2022 and
16,249,028 shares at December 25, 2021
(731
)
(632
)
Total stockholders’ equity
1,499
1,438
Total liabilities and stockholders’
equity
$
4,418
$
4,865
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
39 Weeks Ended
September 24,
September 25,
2022
2021
Cash flows from operating
activities:
Net income (loss)
$
149
$
66
Income (loss) from discontinued
operations, net of tax
7
(89
)
Net income from continuing operations
142
155
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization
100
110
Charges for losses on receivables and
inventories
15
17
Asset impairments
8
18
Gain on disposition of assets, net
(4
)
(3
)
Compensation expense for share-based
payments
31
26
Deferred income taxes and deferred tax
asset valuation allowances
33
5
Changes in working capital and other
operating activities
(246
)
(72
)
Net cash provided by (used in) operating
activities of continuing operations
79
256
Net cash used in operating activities of
discontinued operations
—
(10
)
Net cash provided by (used in) operating
activities
79
246
Cash flows from investing
activities:
Capital expenditures
(68
)
(47
)
Businesses acquired, net of cash
acquired
—
(29
)
Proceeds from disposition of assets
6
4
Settlement of company-owned life insurance
policies
3
21
Net cash provided by (used in) investing
activities of continuing operations
(59
)
(51
)
Net cash provided by (used in) investing
activities of discontinued operations
74
(3
)
Net cash provided by (used in) investing
activities
15
(54
)
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(16
)
(20
)
Debt retirement
(43
)
—
Share purchases for taxes, net of proceeds
from employee share-based
transactions
(19
)
(25
)
Repurchase of common stock for treasury
and advance payment for accelerated
share repurchase
(69
)
(122
)
Other financing activities
(4
)
(1
)
Net cash used in financing activities of
continuing operations
(151
)
(168
)
Effect of exchange rate changes on cash
and cash equivalents
(6
)
—
Net increase in cash and cash
equivalents
(63
)
24
Cash and cash equivalents at beginning of
period
537
729
Cash and cash equivalents at end of period
– continuing operations
$
474
$
753
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new finance lease liabilities
$
2
$
3
Right-of-use assets obtained in exchange
for new operating lease liabilities
171
69
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
—
Transfer from additional paid-in capital
to treasury stock for final settlement of
the accelerated share repurchase
agreement
29
—
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
3Q22
3Q21
YTD22
YTD21
Sales (external)
$1,030
$940
$3,004
$2,697
Sales (internal)
$5
$7
$15
$19
% change of total sales
9%
11%
Division operating income
$48
$34
$103
$55
% of total sales
5%
4%
3%
2%
Office Depot Division
3Q22
3Q21
YTD22
YTD21
Sales (external)
$1,133
$1,229
$3,358
$3,699
Sales (internal)
$10
$10
$25
$26
% change of total sales
(8)%
(9)%
Division operating income
$83
$108
$228
$266
% of total sales
7%
9%
7%
7%
Veyer Division
3Q22
3Q21
YTD22
YTD21
Sales (external)
$7
$8
$18
$24
Sales (internal)
$1,477
$1,520
$4,415
$4,493
% change of total sales
(3)%
(2)%
Division operating income
$9
$7
$25
$22
% of total sales
1%
0%
1%
0%
Varis Division
3Q22
3Q21
YTD22
YTD21
Sales (external)
$2
$2
$5
$3
Sales (internal)
$0
$0
$0
$0
% change of total sales
0%
67%
Division operating income
$(17)
$(10)
$(48)
$(21)
% of total sales
(850)%
(500)%
(960)%
(700)%
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
previously planned separation of the consumer business and
realignment.
(In millions, except per share amounts)
Q3 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Asset impairments
$
3
0.1
%
$
3
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
8
0.4
%
$
8
$
—
—
%
Operating income
$
84
3.9
%
$
(11
)
$
95
(5)
4.4
%
Income tax expense
$
22
1.0
%
$
(5
)
$
27
(7)
1.2
%
Net income from continuing operations
$
67
3.1
%
$
(6
)
$
73
(8)
3.4
%
Earnings per share from continuing
operations (most dilutive)
$
1.36
$
(0.12
)
$
1.48
(8)
Depreciation and amortization
$
32
1.5
%
$
—
$
32
(9)
1.5
%
Q3 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Asset impairments
$
5
0.2
%
$
5
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
13
0.6
%
$
13
$
—
—
%
Operating income
$
104
4.8
%
$
(18
)
$
122
(5)
5.6
%
Income tax expense
$
27
1.2
%
$
4
$
23
(7)
1.1
%
Net income from continuing operations
$
73
3.4
%
$
(22
)
$
96
(8)
4.4
%
Earnings per share from continuing
operations (most dilutive)
$
1.33
$
(0.43
)
$
1.76
(8)
Depreciation and amortization
$
36
1.7
%
$
—
$
36
(9)
1.7
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
YTD 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Asset impairments
$
8
0.1
%
$
8
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
42
0.7
%
$
42
$
—
—
%
Operating income
$
188
2.9
%
$
(50
)
$
238
(5)
3.7
%
Income tax expense
$
48
0.8
%
$
(15
)
$
63
(7)
1.0
%
Net income from continuing operations
$
142
2.2
%
$
(35
)
$
177
(8)
2.8
%
Earnings per share from continuing
operations (most dilutive)
$
2.84
$
(0.70
)
$
3.54
(8)
Depreciation and amortization
$
100
1.6
%
$
—
$
100
(9)
1.6
%
YTD 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted
(Non-GAAP)
% of Sales
Asset impairments
$
18
0.3
%
$
18
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
37
0.6
%
$
37
$
—
—
%
Operating income
$
203
3.2
%
$
(55
)
$
258
(5)
4.0
%
Other income, net
$
19
0.3
%
$
7
$
12
(6)
0.2
%
Income tax expense
$
47
0.7
%
$
(6
)
$
53
(7)
0.8
%
Net income from continuing operations
$
155
2.4
%
$
(42
)
$
197
(8)
3.1
%
Earnings per share from continuing
operations (most dilutive)
$
2.79
$
(0.76
)
$
3.55
(8)
Depreciation and amortization
$
110
1.7
%
$
2
$
108
(9)
1.7
%
13 Weeks Ended
39 Weeks Ended
September 24,
September 25,
September 24,
September 25,
Adjusted
EBITDA:
2022
2021
2022
2021
Net income (loss)
$
67
$
101
$
149
$
66
Discontinued operations, net of tax
—
28
7
(89
)
Net income from continuing operations
67
73
142
155
Income tax expense
22
27
48
47
Income from continuing operations before
income taxes
89
100
190
202
Add (subtract)
Interest income
(1
)
—
(3
)
—
Interest expense
1
7
10
20
Adjusted depreciation and amortization
(9)
32
36
100
108
Charges and credits, pretax (10)
11
18
50
48
Adjusted EBITDA
$
131
$
162
$
347
$
378
Amounts may not foot due to rounding. The
sum of the quarterly amounts may not equal the reported amounts for
the year due to rounding.
(5)
Adjusted operating income for all periods
presented herein exclude merger, restructuring and other operating
expenses, net, and asset impairments (if any).
(6)
Adjusted other income, net for year to
date 2021 excludes credits for the release of certain liabilities
of our former European Business of $7 million.
(7)
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.
(8)
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.
(9)
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.
(10)
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
39 Weeks Ended
September 24,
September 25,
September 24,
September 25,
Free cash flow
2022
2021
2022
2021
Net cash provided by (used in) operating
activities of continuing operations
$
163
$
121
$
79
$
256
Capital expenditures
(25
)
(19
)
(68
)
(47
)
Free cash flow
138
102
11
209
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
2
2
5
17
Business Acceleration Program
—
—
—
3
Previously planned separation of consumer
business and realignment
20
19
38
19
Adjusted free cash flow
$
160
$
123
$
54
$
248
Amounts may not foot due to rounding. The
sum of the quarterly amounts may not equal the reported amounts for
the year due to rounding.
THE ODP CORPORATION
Store Statistics
(Unaudited)
Q3
YTD
Q3
2022
2022
2021
Office Depot Division:
Stores opened
—
—
—
Stores closed
11
29
7
Total retail stores (U.S.)
1,009
—
1,084
Total square footage (in millions)
22.2
—
24.0
Average square footage per store (in
thousands)
22.0
—
22.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221102005311/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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