Delivered Full-Year 2022 Results Consistent
with Previously Issued Guidance Range
Fourth Quarter Revenue of $2.1 Billion with
GAAP EPS of $0.76; Adjusted EPS of $0.85; GAAP Operating Income of
$55 Million; Net Income of $36 Million; Adjusted EBITDA of $89
Million in the Fourth Quarter of 2022
Repurchased $197 Million of Shares in the
Fourth Quarter of 2022; Over $266 Million in Share Repurchases for
Full-Year 2022
Provides 2023 Guidance
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 fourth quarter and full year ended
December 31, 2022.
Consolidated (in millions, except
per share amounts)
4Q22
4Q21
FY22
FY21
Selected GAAP and Non-GAAP
measures:
Sales
$2,106
$2,042
$8,491
$8,465
Sales change from prior year period
3%
0%
Operating income
$55
$31
$243
$234
Adjusted operating income (1)
$58
$47
$296
$305
Net income from continuing operations
$36
$32
$178
$187
Diluted earnings per share from continuing
operations
$0.76
$0.61
$3.61
$3.42
Adjusted net income from continuing
operations (1)
$40
$37
$216
$234
Adjusted earnings per share from
continuing operations (most dilutive) (1)
$0.85
$0.71
$4.40
$4.28
Adjusted EBITDA (1)
$89
$87
$437
$465
Operating Cash Flow from continuing
operations
$158
$88
$237
$344
Free Cash Flow (2)
$127
$62
$138
$271
Adjusted Free Cash Flow (3)
$147
$80
$201
$328
Fourth Quarter 2022
Summary(1)(3)
- Total reported sales of $2.1 billion, up 3% versus the prior
year, primarily as a result of higher sales in our B2B distribution
division, ODP Business Solutions, offsetting lower sales in our
consumer division, Office Depot. Office Depot sales were lower
partially driven by 58 fewer retail locations in service compared
to the prior year as a result of planned store closures and lower
traffic. Consolidated sales results include the favorable impact
related to the 53rd week in fourth quarter of 2022 of $128
million
- GAAP operating income of $55 million and net income from
continuing operations of $36 million, or $0.76 per diluted share,
versus $31 million and $32 million, or $0.61 per diluted share,
respectively in the prior year. Operating income results include
the favorable impact related to the 53rd week in fourth quarter of
2022 of $20 million
- Adjusted operating income of $58 million, compared to $47
million in the fourth quarter of 2021; adjusted EBITDA of $89
million, compared to $87 million in the fourth quarter of 2021
- Adjusted net income from continuing operations of $40 million,
or adjusted diluted earnings per share from continuing operations
of $0.85, versus $37 million or $0.71, respectively in the prior
year
- Operating cash flow from continuing operations of $158 million
and adjusted free cash flow of $147 million, versus $88 million and
$80 million, respectively in the prior year
- $1.3 billion of total available liquidity including $403
million in cash and cash equivalents at quarter end
Full Year 2022 Summary
- Total reported sales of $8.5 billion, flat versus the prior
year. Consolidated sales results include the favorable impact
related to the 53rd week in 2022 of $128 million
- GAAP operating income of $243 million and net income from
continuing operations of $178 million, or $3.61 per diluted share,
versus $234 million and net income from continuing operations of
$187 million, or $3.42 per diluted share, respectively in the prior
year. Operating income results include the favorable impact related
to the 53rd week in 2022 of $20 million
- Adjusted operating income of $296 million, compared to $305
million in 2021; adjusted EBITDA of $437 million, compared to $465
million in 2021
- Adjusted net income from continuing operations of $216 million,
or adjusted diluted earnings per share from continuing operations
of $4.40, versus $234 million or $4.28, respectively in the prior
year
- Operating cash flow from continuing operations of $237 million
and adjusted free cash flow of $201 million, versus $344 million
and $328 million, respectively in the prior year
“Our performance in the quarter reflected our continued
disciplined financial and operational focus during a challenging
macroeconomic environment, which is a testament to the commitment
of our team across each of our businesses. I couldn't be more proud
of our team members, who go out every day and show what makes The
ODP Corporation so remarkable," said Gerry Smith, chief executive
officer for The ODP Corporation. “We navigated a very complicated
year, delivering solid performance with full year results
consistent with our guidance, despite the ongoing macroeconomic
environment burdened by high inflation and slower GDP growth. We’ve
remained true to our low-cost business model and we’re executing
along the path we set during our investor day meeting. We’ve also
remained committed to enhancing shareholder value, announcing our
$1 billion share repurchase program through 2025 and repurchasing
over $266 million of our stock in 2022. Included in the yearly
total, we repurchased $197 million during the fourth quarter, most
of which was bought back post our investor day meeting and under
our new share repurchase program.”
“We remain excited about our re-aligned four business unit
structure, unlocking the potential of our business and providing
greater transparency and more opportunities for long-term growth.
We’re encouraged about the progress we are making at Veyer, our
supply chain and logistics division, as it begins to build its
pipeline of new business, and at Varis, as it continues to refine
its capabilities and adds new customers and suppliers to its
recently launched B2B digital platform,” Smith continued.
“Moving forward in 2023, we remain cautiously optimistic about
the year ahead as we continue to navigate the increasingly
challenging macroeconomic environment and its effect across all
industries. That said, we remain in a position of strength, with a
strong balance sheet, diverse routes to market, and continued
low-cost business model mindset. As we move through the year, we
will prudently allocate capital and drive our four-business unit
model, remaining focused on delivering strong shareholder returns,”
Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2022 were $2.1
billion, an increase of 3% compared with the fourth 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 58 planned store closures and lower omni-channel
traffic. 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 the ODP Business Solutions and Office Depot
Divisions, 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. Fourth
quarter and full-year sales benefited from the impact of a 53rd
week in 2022 of approximately $128 million.
The Company reported operating income of $55 million in the
fourth quarter of 2022, up compared to operating income of $31
million in the prior year period. Fourth quarter operating income
results include the favorable impact related to the 53rd week in
2022 of $20 million. Operating results in the fourth quarter of
2022 included $3 million of charges consisting of $6 million
associated with non-cash asset impairment charges primarily related
to the operating lease right-of-use (ROU) assets associated with
the Company’s retail store locations, $8 million of other operating
costs associated with re-alignment activities and restructuring
costs, offset by credits of $11 million related to restructuring
activities. Net income from continuing operations was $36 million,
or $0.76 per diluted share in the fourth quarter of 2022, up from
$32 million, or $0.61 per diluted share in the fourth quarter of
2021.
Adjusted (non-GAAP) Results(1)
Adjusted results for the fourth quarter of 2022 exclude charges
and credits totaling $3 million as described above and the tax
impacts associated with the above items.
- Fourth quarter of 2022 adjusted EBITDA was $89 million compared
to $87 million in the prior year period. This included adjusted
depreciation and amortization(4) of $31 million and $35 million in
the fourth quarters of 2022 and 2021, respectively
- Fourth quarter 2022 adjusted operating income was $58 million
compared to $47 million in the fourth quarter of 2021
- Fourth quarter 2022 adjusted net income from continuing
operations was $40 million, or $0.85 per diluted share, compared to
$37 million, or $0.71 per diluted share, in the fourth quarter of
2021
Division Results
ODP Business Solutions Division
- Reported sales were $1.0 billion in the fourth quarter of 2022,
up 10% compared to the same period last year, as more business
customers continued to return to the workplace, helping to drive
strong sales in core and adjacency products. Sales results included
the favorable impact of $58 million, or 1%, related to the 53rd
week in 2022
- Stronger sales across core supply categories, cleaning and
breakroom, furniture, and copy and print
- Adjacency category sales including cleaning and breakroom,
furniture, technology, and copy and print were 44% of total ODP
Business Solutions’ sales, flat year-over-year
- Operating income was $37 million in the fourth quarter of 2022,
up 109% over the same period last year, or up approximately 180
basis points as a percentage of sales. Operating income results
included the favorable impact of $5 million related to the 53rd
week in 2022
Office Depot Division
- Reported sales were $1.1 billion in the fourth quarter of 2022,
down 3% compared to the prior year period partially due to 58 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 29 retail stores in
the quarter and had 980 stores at quarter end. Sales results
included the favorable impact of $70 million related to the 53rd
week in 2022
- Store traffic and demand relative to last year was negatively
impacted by the recovery from the pandemic as a greater percentage
of customers returned to the office. This was partially offset by
increases in sales through its buy online, pick-up in store (BOPIS)
offering on a same store basis
- Operating income was $57 million in the fourth quarter of 2022,
down 3% over the same period last year. As a percentage of sales,
operating income was 5%, flat 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. Operating income results included the favorable impact
of $15 million related to the 53rd week in 2022
Veyer Division
- Veyer is a supply chain, distribution, procurement and global
sourcing operation. Veyer procures and distributes products for
both Office Depot, LLC and ODP Business Solutions, LLC, as well as
third-party customers
- 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 $4 million in the fourth quarter of 2022,
down from $7 million in the prior year period due to lower product
volume from internal customers and lower product flow through
rate
Varis Division
- Varis is a 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
- Varis generated revenues in the quarter of $2 million and an
operating loss of $18 million as the business continues to add new
capabilities, customers, and relationships, and incurred costs
related to launching the platform during the fourth quarter
Share Repurchases
During the fourth quarter of 2022, the Company announced 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, and other corporate
considerations. The new authorization could be suspended or
discontinued at any time as determined by management.
For full year 2022, the Company repurchased 6.4 million shares
for $266 million, which included the repurchase of over 4.5 million
shares for approximately $197 million in the fourth quarter, most
of which was executed since its investor day meeting under its new
share repurchase program.
Balance Sheet and Cash Flow
As of December 31, 2022, ODP had total available liquidity of
approximately $1.3 billion, consisting of $403 million in cash and
cash equivalents and $856 million of available credit under the
Third Amended Credit Agreement. Total debt was $188 million.
For the fourth quarter of 2022, cash provided by operating
activities from continuing operations was $158 million, which
included $20 million in restructuring and other spend, compared to
cash provided by operating activities of continuing operations of
$88 million in the fourth quarter of the prior year, which included
$18 million in restructuring and other spend. The year-over-year
change in operating cash flow largely related to changes in working
capital.
Capital expenditures in the fourth quarter of 2022 were $31
million versus $26 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 re-alignment in the quarter were $3 million
and $17 million, respectively. Accordingly, operating cash flow
from continuing operations was $158 million in the fourth quarter
of 2022, an increase compared to $88 million in the prior year
period, and Adjusted Free Cash Flow(3) was $147 million in the
fourth quarter of 2022, a significant increase compared to $80
million in the prior year period.
“We delivered $147 million in adjusted free cash flow in the
fourth quarter and over $300 million in the second half of 2022, a
significant improvement over the first half of the year, where
adjusted free cash flow was a usage of over $100 million as we
addressed higher supply chain costs and overall inflation,” said
Anthony Scaglione, executive vice president and chief financial
officer of The ODP Corporation. “As we navigated the second half of
the year, the strategies we implemented to manage inventory levels,
balance price and promotions, and drive cash conversion led to our
strong performance across all key metrics,” he added.
2023 Expectations
“We’re enthusiastic about the numerous opportunities to pursue
long-term profitable growth and we remain focused on prudently
deploying capital to maximize shareholder value,” said Smith. “When
combining this focus with our long-term strategy, we’re creating a
compelling value proposition for all of our stakeholders. As we
head into 2023, we remain cautiously optimistic regarding the
evolving macroeconomic conditions, and we will remain laser focused
on executing upon our four business unit strategy and continuing
our commitment to our low-cost model approach.”
“While we saw some consumer weakness during the fourth quarter
and continue to see near-term challenges ahead, we ended the year
generally in-line with targeted inventory levels, and with our
low-cost model, we are issuing in the following guidance range for
fiscal 2023,” said Scaglione.
The Company’s full year guidance for 2023 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.
The Company’s full year guidance for 2023 is as follows:
FY 2023 Guidance
Sales
$8.0 - $8.4 billion
Adjusted EBITDA(1)
$400 - $430 million
Adjusted Operating Income(1)
$270 - $300 million
Adjusted Earnings per Share(1)(*)
$4.50 - $5.10 per share
Adjusted Free Cash Flow (3)
$200 - $230 million
Capital Expenditures
$100 - $120 million
*Adjusted Earnings per Share (EPS)
guidance for 2023 excludes potential discrete (tax) items that may
affect quarter to quarter fluctuations and includes expected impact
from share repurchases
“While our guidance assumes incremental improvement in overall
economic trends throughout 2023, we continue to remain cautious on
the state of the overall economy and macroeconomic conditions that
could further impact consumers and small businesses,” Scaglione
added.
The ODP Corporation will webcast a call with financial analysts
and investors on March 1, 2023, at 9:00 am Eastern Time, which will
be accessible to the media and the general public. To listen to the
conference call via webcast, please visit The ODP Corporation’s
Investor Relations website at investor.theodpcorp.com. A replay of
the webcast will be available approximately two hours following the
event.
Additionally, the Company will be hosting a demonstration of the
Varis platform at Nasdaq in New York City on Thursday, March 2,
2023, at 1:00 pm ET. The event will include a demonstration of the
platform and a brief presentation by the Varis team, led by Prentis
Wilson. A live webcast of the event will be available on the
Company’s Investor Relations website at
investor.theodpcorp.com.
(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 omni-channel presence, which
includes world-class supply chain and distribution operations,
dedicated sales professionals, 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. 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)
14 Weeks Ended
13 Weeks Ended
53 Weeks Ended
52 Weeks Ended
December 31,
December 25,
December 31,
December 25,
2022
2021
2022
2021
Sales
$
2,106
$
2,042
$
8,491
$
8,465
Cost of goods sold and occupancy costs
1,660
1,610
6,643
6,602
Gross profit
446
432
1,848
1,863
Selling, general and administrative
expenses
388
385
1,552
1,558
Asset impairments
6
2
14
20
Merger, restructuring and other operating
expenses, net
(3
)
14
39
51
Operating income
55
31
243
234
Other income (expense):
Interest income
2
—
5
1
Interest expense
(5
)
(7
)
(16
)
(28
)
Other income, net
—
5
10
24
Income from continuing operations before
income taxes
52
29
242
231
Income tax expense (benefit)
16
(3
)
64
44
Net income from continuing operations
36
32
178
187
Discontinued operations, net of tax
(19
)
(306
)
(12
)
(395
)
Net income (loss)
$
17
$
(274
)
$
166
$
(208
)
Basic earnings (loss) per share
Continuing operations
$
0.79
$
0.63
$
3.73
$
3.54
Discontinued operations
(0.41
)
(6.07
)
(0.25
)
(7.47
)
Net basic earnings (loss) per share
$
0.38
$
(5.44
)
$
3.48
$
(3.93
)
Diluted earnings (loss) per share
Continuing operations
$
0.76
$
0.61
$
3.61
$
3.42
Discontinued operations
(0.40
)
(5.87
)
(0.24
)
(7.21
)
Net diluted earnings (loss) per share
$
0.36
$
(5.26
)
$
3.37
$
(3.79
)
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
December 31,
December 25,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
403
$
514
Receivables, net
536
495
Inventories
828
859
Prepaid expenses and other current
assets
36
52
Current assets held for sale
107
469
Total current assets
1,910
2,389
Property and equipment, net
352
477
Operating lease right-of-use assets
874
936
Goodwill
464
464
Other intangible assets, net
46
54
Deferred income taxes
182
219
Other assets
321
326
Noncurrent assets held for sale
—
—
Total assets
$
4,149
$
4,865
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
821
$
950
Accrued expenses and other current
liabilities
1,005
994
Income taxes payable
17
11
Short-term borrowings and current
maturities of long-term debt
16
20
Current liabilities held for sale
—
290
Total current liabilities
1,859
2,265
Deferred income taxes and other long-term
liabilities
122
159
Pension and postretirement obligations,
net
16
22
Long-term debt, net of current
maturities
172
228
Operating lease liabilities
693
753
Noncurrent liabilities held for sale
—
—
Total liabilities
2,862
3,427
Commitments and contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued
shares — 65,636,015 at December 31, 2022
and 64,704,979 at
December 25, 2021; outstanding shares —
42,213,046 at December 31, 2022
and 48,455,951 at December 25, 2021
1
1
Additional paid-in capital
2,742
2,692
Accumulated other comprehensive loss
(77
)
(6
)
Accumulated deficit
(451
)
(617
)
Treasury stock, at cost — 23,422,969
shares at December 31, 2022 and
16,249,028 shares at December 25, 2021
(928
)
(632
)
Total stockholders’ equity
1,287
1,438
Total liabilities and stockholders’
equity
$
4,149
$
4,865
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
53 Weeks Ended
52 Weeks Ended
December 31,
December 25,
2022
2021
Cash flows from operating
activities:
Net income (loss)
$
166
$
(208
)
Loss from discontinued operations, net of
tax
(12
)
(395
)
Net income from continuing operations
178
187
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
131
146
Amortization of debt discount and issuance
costs
2
2
Charges for losses on receivables and
inventories
19
22
Asset impairments
14
20
Gain on disposition of assets, net
(4
)
(5
)
Compensation expense for share-based
payments
40
38
Deferred income taxes and deferred tax
asset valuation allowances
40
(6
)
Changes in assets and liabilities:
—
—
Increase in receivables
(42
)
(61
)
Decrease in inventories
13
35
Net decrease in prepaid expenses,
operating lease right-of-use assets, and other assets
282
281
Net increase in trade accounts payable,
accrued expenses, operating lease liabilities, and other current
and other long-term liabilities
(436
)
(312
)
Other operating activities
—
(3
)
Total Adjustments
59
157
Net cash provided by operating activities
of continuing operations
237
344
Net cash provided by operating activities
of discontinued operations
—
2
Net cash provided by operating
activities
237
346
Cash flows from investing
activities:
Capital expenditures
(99
)
(73
)
Businesses acquired, net of cash
acquired
—
(29
)
Proceeds from disposition of assets
8
5
Settlement of company-owned life insurance
policies
5
22
Net cash used in investing activities of
continuing operations
(86
)
(75
)
Net cash provided by (used in) investing
activities of discontinued operations
76
(4
)
Net cash used in investing activities
(10
)
(79
)
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(21
)
(25
)
Debt retirement
(43
)
(100
)
Share purchases for taxes, net of proceeds
from employee share-based transactions
(20
)
(26
)
Repurchase of common stock for treasury
and advance payment for accelerated share repurchase
(266
)
(307
)
Other financing activities
(5
)
(1
)
Net cash used in financing activities of
continuing operations
(355
)
(459
)
Net cash provided by (used in) financing
activities of discontinued operations
—
—
Net cash used in financing activities
(355
)
(459
)
Effect of exchange rate changes on cash
and cash equivalents
(5
)
—
Net decrease in cash, cash equivalents and
restricted cash
(133
)
(192
)
Cash, cash equivalents and restricted cash
at beginning of period
537
729
Cash, cash equivalents and restricted cash
at end of period
404
537
Less: cash and cash equivalents of
discontinued operations
—
(23
)
Cash, cash equivalents and restricted cash
at end of period – continuing operations
$
404
$
514
Supplemental information on operating,
investing, and financing activities
Right-of-use assets obtained in exchange
for new finance lease liabilities
4
3
Right-of-use assets obtained in exchange
for new operating lease liabilities
228
127
Cash taxes paid, net
17
43
Cash interest paid, net of amounts
capitalized and Timber notes/Non-recourse debt
16
25
Other current and noncurrent receivables
obtained from disposition of discontinued operations
9
—
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
—
Business acquired in exchange for common
stock issuance
—
35
THE ODP CORPORATION
BUSINESS UNIT
PERFORMANCE
(In millions)
(Unaudited)
ODP Business Solutions Division
4Q22
4Q21
FY22
FY21
Sales (external)
$1,001
$905
$4,005
$3,602
Sales (internal)
$4
$5
$19
$24
% change of total sales
10%
11%
Division operating income
$37
$18
$140
$72
% of total sales
4%
2%
3%
2%
Office Depot Division
4Q22
4Q21
FY22
FY21
Sales (external)
$1,093
$1,131
$4,451
$4,830
Sales (internal)
$11
$8
$36
$34
% change of total sales
(3)%
(8)%
Division operating income
$57
$59
$285
$326
% of total sales
5%
5%
6%
7%
Veyer Division
4Q22
4Q21
FY22
FY21
Sales (external)
$10
$4
$28
$28
Sales (internal)
$1,440
$1,470
$5,855
$5,963
% change of total sales
(2)%
(2)%
Division operating income
$4
$7
$28
$30
% of total sales
0%
0%
0%
1%
Varis Division
4Q22
4Q21
FY22
FY21
Sales (external)
$2
$2
$7
$5
Sales (internal)
$0
$0
$0
$0
% change of total sales
0%
40%
Division operating income
$(18)
$(13)
$(66)
$(34)
% of total sales
(900)%
(650)%
(943)%
(680)%
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
re-alignment.
(In millions, except per share
amounts)
Q4 2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non
GAAP)
% of Sales
Asset impairments
$
6
0.3
%
$
6
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
(3
)
(0.1
)%
$
(3
)
$
—
—
%
Operating income
$
55
2.6
%
$
(3
)
$
58
(5)
2.8
%
Income tax expense
$
16
0.8
%
$
1
$
15
(7)
0.7
%
Net income from continuing operations
$
36
1.7
%
$
(4
)
$
40
(8)
1.9
%
Earnings per share from continuing
operations (most dilutive)
$
0.76
$
(0.09
)
$
0.85
(8)
Depreciation and amortization
$
31
1.5
%
$
—
$
31
(9)
1.5
%
Q4 2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-
GAAP)
% of Sales
Asset impairments
$
2
0.1
%
$
2
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
14
0.7
%
$
14
$
—
—
%
Operating income
$
31
1.5
%
$
(16
)
$
47
(5)
2.3
%
Income tax expense (benefit)
$
(3
)
(0.1
)%
$
(11
)
$
8
(7)
0.4
%
Net income from continuing operations
$
32
1.6
%
$
(5
)
$
37
(8)
1.8
%
Earnings per share from continuing
operations (most dilutive)
$
0.61
$
(0.10
)
$
0.71
(8)
Depreciation and amortization
$
36
1.8
%
$
1
$
35
(9)
1.7
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
2022
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-
GAAP)
% of Sales
Asset impairments
$
14
0.2
%
$
14
$
—
—
%
Merger, restructuring and other
operating expenses, net
$
39
0.5
%
$
39
$
—
—
%
Operating income
$
243
2.9
%
$
(53
)
$
296
(5)
3.5
%
Income tax expense
$
64
0.8
%
$
(15
)
$
79
(7)
0.9
%
Net income from continuing
operations
$
178
2.1
%
$
(38
)
$
216
(8)
2.5
%
Earnings per share from
continuing operations (most dilutive)
$
3.61
$
(0.79
)
$
4.40
(8)
Depreciation and amortization
$
131
1.5
%
$
—
$
131
(9)
1.5
%
2021
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-
GAAP)
% of Sales
Asset impairments
$
20
0.2
%
$
20
$
—
—
%
Merger, restructuring and other
operating expenses, net
$
51
0.6
%
$
51
$
—
—
%
Operating income
$
234
2.8
%
$
(71
)
$
305
(5)
3.6
%
Other income, net
$
24
0.3
%
$
7
$
17
(6)
0.2
%
Income tax expense
$
44
0.5
%
$
(17
)
$
61
(7)
0.7
%
Net income from continuing
operations
$
187
2.2
%
$
(47
)
$
234
(8)
2.8
%
Earnings per share from
continuing operations (most dilutive)
$
3.42
$
(0.86
)
$
4.28
(8)
Depreciation and amortization
$
146
1.7
%
$
3
$
143
(9)
1.7
%
14 Weeks Ended
13 Weeks Ended
53 Weeks Ended
52 Weeks Ended
December 31,
December 25,
December 31,
December 25,
Adjusted EBITDA:
2022
2021
2022
2021
Net income (loss)
$
17
$
(274
)
$
166
$
(208
)
Discontinued operations, net of tax
(19
)
(306
)
(12
)
(395
)
Net income from continuing operations
36
32
178
187
Income tax expense (benefit)
16
(3
)
64
44
Income from continuing operations before
income taxes
52
29
242
231
Add (subtract)
Interest income
(2
)
—
(5
)
(1
)
Interest expense
5
7
16
28
Adjusted depreciation and amortization
(9)
31
35
131
143
Charges and credits, pretax (10)
3
16
53
64
Adjusted EBITDA
$
89
$
87
$
437
$
465
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)
14 Weeks Ended
13 Weeks Ended
53 Weeks Ended
52 Weeks Ended
December 31,
December 25,
December 31,
December 25,
Free cash flow
2022
2021
2022
2021
Net cash provided by operating activities
of continuing operations
$
158
$
88
$
237
$
344
Capital expenditures
(31
)
(26
)
(99
)
(73
)
Free cash flow
127
62
138
271
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
3
7
8
24
Business Acceleration Program
—
—
—
3
Previously planned separation of consumer
business and re-alignment
17
11
55
30
Adjusted free cash flow
$
147
$
80
$
201
$
328
Amounts may not foot due to rounding. The
sum of the quarterly amounts may not equal the reported amounts for
the year due to rounding.
THE ODP CORPORATION
Store Statistics
(Unaudited)
Q4
Full Year
Q4
2022
2022
2021
Office Depot Division:
Stores opened
—
—
—
Stores closed
29
58
46
Total retail stores (U.S.)
980
—
1,038
Total square footage (in millions)
21.6
—
22.9
Average square footage per store (in
thousands)
22.1
—
22.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230301005341/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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