Low-Cost Business Model and Disciplined Capital
Allocation Drive Solid Operating Performance and Strong Adjusted
EPS Growth in 2023
Repurchased 6 Million Shares for $298 Million
in Full Year 2023
Announces “Project Core”: Enterprise-Wide
Program Focused on Streamlining Operations and Enhancing Focus on
Core Business
Approves New $1 Billion Share Repurchase
Authorization
Provides 2024 Guidance
The ODP Corporation (“ODP,” or the “Company”) (NASDAQ:ODP), a
leading provider of products, services, and technology solutions to
businesses and consumers, today announced results for the fourth
quarter and full year ended December 30, 2023.
Consolidated (in millions, except
per share amounts)
4Q23
4Q22
FY23
FY22
Selected GAAP and Non-GAAP
measures:
Sales
$1,806
$2,106
$7,831
$8,491
Sales change from prior year period
(14)%
(8)%
Operating income (loss)
$(31)
$55
$201
$243
Adjusted operating income (1)
$43
$58
$290
$296
Net income (loss) from continuing
operations
$(37)
$36
$139
$178
Diluted earnings (loss) per share from
continuing operations
$(0.99)
$0.76
$3.50
$3.61
Adjusted net income from continuing
operations (1)
$35
$40
$223
$216
Adjusted earnings per share from
continuing operations (fully diluted) (1)
$0.92
$0.85
$5.60
$4.40
Adjusted EBITDA (1)
$73
$89
$417
$437
Operating Cash Flow from continuing
operations
$70
$158
$331
$237
Free Cash Flow (2)
$41
$127
$224
$138
Adjusted Free Cash Flow (3)
$43
$147
$235
$201
Fourth Quarter 2023
Summary(1)(2)(3)
- Total reported sales of $1.8 billion, down 14% versus the prior
year on a reported basis, or down 9% when eliminating the $128
million favorable impact related to the 53rd week included in the
fourth quarter of 2022. The decrease in reported sales is largely
related to lower sales in its Office Depot consumer division,
primarily due to 64 fewer retail locations in service compared to
the previous year, as well as reduced retail and online consumer
traffic and transactions
- GAAP operating loss includes non-cash asset impairment charges
of $68 million related to goodwill at Varis, which led to a GAAP
operating loss of $31 million and net loss from continuing
operations of $37 million, or $(0.99) per diluted share. This
result compares to GAAP operating income of $55 million and net
income from continuing operations of $36 million, or $0.76 per
diluted share, in the prior year. GAAP operating income results in
the prior year period included the favorable impact related to the
53rd week of $20 million
- Adjusted operating income of $43 million, compared to $58
million in the fourth quarter of 2022; adjusted EBITDA of $73
million, compared to $89 million in the fourth quarter of 2022
- Adjusted net income from continuing operations of $35 million,
or adjusted diluted earnings per share from continuing operations
of $0.92, versus $40 million or $0.85, respectively, in the prior
year period
- Operating cash flow from continuing operations of $70 million
and adjusted free cash flow of $43 million, versus $158 million and
$147 million, respectively, in the prior year period
- Repurchased 672 thousand shares at a cost of $32 million in the
fourth quarter of 2023
- $1.1 billion of total available liquidity including $392
million in cash and cash equivalents at quarter end
Full Year 2023 Summary
- Total reported sales of $7.8 billion, versus $8.5 billion in
the prior year. Consolidated sales results in the prior year
included the favorable impact related to the 53rd week in 2022 of
$128 million
- GAAP operating income of $201 million and net income from
continuing operations of $139 million, or $3.50 per diluted share,
versus $243 million and net income from continuing operations of
$178 million, or $3.61 per diluted share, respectively, in the
prior year. Operating income results in the prior year include the
favorable impact related to the 53rd week in 2022 of $20
million
- Adjusted operating income of $290 million, compared to $296
million in 2022; adjusted EBITDA of $417 million, compared to $437
million in 2022
- Adjusted net income from continuing operations of $223 million,
or adjusted diluted earnings per share from continuing operations
of $5.60, versus $216 million or $4.40, respectively, in the prior
year
- Operating cash flow from continuing operations of $331 million
and adjusted free cash flow of $235 million, versus $237 million
and $201 million, respectively in the prior year
- Repurchased 6 million shares for $298 million in 2023
“In the first year of operating under our new structure, we
delivered strong adjusted EBITDA and adjusted earnings per share
results throughout an ongoing challenging macroeconomic
environment, underscoring our commitment to our low-cost business
model and capital allocation strategy,” said Gerry Smith, chief
executive officer of The ODP Corporation. “We expanded margins at
ODP Business Solutions, drove strong external EBITDA growth at
Veyer, expanded our product and service offerings at Office Depot,
and began our strategic review of Varis in late Q4. In addition,
our operational excellence helped drive free cash flow above our
forecasted guidance, supporting our return to shareholders of
nearly $300 million through our share repurchase program during
2023.”
“As we continue to evolve and consistent with our low-cost model
approach, we are announcing today “Project Core” -- a comprehensive
initiative aimed at streamlining operations, sharpening our focus
on our core business, and increasing shareholder returns through an
expanded new $1 billion share repurchase program,” Smith continued.
“We expect this broad-based plan to generate annualized savings in
the range of $50 million to $60 million when fully implemented,
achieved through cost efficiency measures across the entire
enterprise including all routes to market, including Varis, as well
as corporate support functions, leading to further optimization of
our organization and supporting future profitable growth. During
this effort, we are working to complete a strategic review of Varis
and we expect to provide a full update of that review by our first
quarter earnings call in early May 2024,” Smith added.
“We’re excited about the future and confident in our position of
strength, as we focus on continuing to drive our low-cost business
model, leveraging our multiple routes to market, and remaining
disciplined with our capital allocation plan,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2023 were $1.8
billion, a decrease of 14% compared with the same period last year,
or down 9% when eliminating the $128 million favorable impact
related to the 53rd week included in the fourth quarter of 2022.
This result was driven primarily by lower sales in its consumer
division, Office Depot, primarily due to 64 fewer stores in service
compared to last year related to planned store closures, as well as
lower retail and online consumer traffic and transactions. Sales at
ODP Business Solutions Division were down slightly compared to last
year when eliminating the favorable impact to sales from the 53rd
week included in the fourth quarter of last year, largely driven by
weaker economic activity and lower sales of personal protective
equipment (PPE) and technology products. Meanwhile, Veyer provided
strong logistics support for the ODP Business Solutions and Office
Depot Divisions and continued to capture additional sales for its
supply chain and procurement solutions among other third-party
customers.
The Company reported a GAAP operating loss of $31 million in the
fourth quarter of 2023, down compared to GAAP operating income of
$55 million in the prior year period. Operating results in the
fourth quarter of 2023 included $74 million of charges, primarily
related to a $68 million non-cash impairment of goodwill in its
Varis business unit. Net loss from continuing operations was $37
million, or $(0.99) per diluted share in the fourth quarter of
2023, down compared to net income from continuing operations of $36
million, or $0.76 per diluted share in the fourth quarter of
2022.
Adjusted (non-GAAP) Results(1)
Adjusted results for the fourth quarter of 2023 exclude charges
and credits totaling $74 million as described above and the
associated tax impacts.
- Fourth quarter of 2023 adjusted EBITDA was $73 million compared
to $89 million in the prior year period. This included depreciation
and amortization of $28 million and $31 million in the fourth
quarters of 2023 and 2022, respectively
- Fourth quarter of 2023 adjusted operating income was $43
million, down compared to $58 million in the fourth quarter of
2022
- Fourth quarter of 2023 adjusted net income from continuing
operations was $35 million, or $0.92 per diluted share, compared to
$40 million, or $0.85 per diluted share, in the fourth quarter of
2022, an increase of 8% on a per share basis
Division Results
ODP Business Solutions Division
Leading B2B distribution solutions provider serving small,
medium and enterprise level companies with an annual
trailing-twelve-month revenue of nearly $4 billion.
- Reported sales were $0.9 billion in the fourth quarter of 2023,
down 10% compared to the same period last year, or down 4% when
eliminating the $58 million favorable impact to sales related to
the 53rd week included in the fourth quarter of 2022. The decrease
in sales was related primarily to weaker macroeconomic conditions
and lower sales of PPE and technology products
- Total adjacency category sales, including cleaning and
breakroom, furniture, technology, and copy and print, were 44% of
total ODP Business Solutions’ sales
- Continued strong pipeline and net new business customer
additions
- Operating income was $34 million in the fourth quarter of 2023,
down 8% compared to the same period last year on a reported basis.
When eliminating the $5 million favorable impact to operating
income related to the 53rd week included in the fourth quarter of
2022, operating income was up approximately 6% over last year. As a
percentage of sales, operating income margin was 4%, flat compared
to last year
Office Depot Division
Leading provider of retail consumer and small business products
and services distributed via Office Depot and OfficeMax retail
locations and an award-winning eCommerce presence.
- Reported sales were $0.9 billion in the fourth quarter of 2023,
down 18% compared to the prior year on a reported basis, or down
13% when eliminating the favorable impact of $70 million in sales
related to the 53rd week included in same period last year. Lower
sales were partially driven by 64 fewer retail outlets in service
associated with planned store closures, as well as lower demand
relative to last year in certain product categories and lower
online sales. The Company closed 22 retail stores in the quarter
and had 916 stores at quarter end. Sales were down approximately 5%
on a comparable store basis when eliminating the favorable impact
of the 53rd week included in the prior year period
- Stronger sales of copy and print services were more than offset
by lower sales in supplies, technology, and other categories
- Store and online traffic were lower year over year due to a
greater percentage of customers having returned to the office post
pandemic, as well as weaker macroeconomic activity
- Operating income was $43 million in the fourth quarter of 2023,
compared to operating income of $57 million during the same period
last year, driven primarily by the flow through impact from lower
sales. Operating income results in the prior year period included a
$15 million favorable impact related to the 53rd week in in 2022.
As a percentage of sales, operating income was 5%, flat compared to
the same period last year
Veyer Division
Nationwide supply chain, distribution, procurement and global
sourcing operation supporting Office Depot and ODP Business
Solutions, as well as third-party customers. Veyer’s assets and
capabilities include 8 million square feet of infrastructure
through a network of distribution centers, cross-docks, and other
facilities throughout the United States; a global sourcing presence
in Asia; a large private fleet of vehicles; and next-day delivery
to 98.5% of US population.
- In the fourth quarter of 2023, Veyer provided strong support
for its internal customers, ODP Business Solutions and Office
Depot, as well as its third-party customers, generating sales of
$1.2 billion
- Operating income was $3 million in the fourth quarter of 2023,
compared to $4 million in the prior year period driven by the flow
through impact of lower sales to internal customers partially
offset by higher sales of services to external third-party
customers
- For the full year 2023, sales and EBITDA generated from third
party customers increased 25% and 120% respectively, resulting in
sales of $35 million and EBITDA of $11 million
Varis Division
Tech-enabled B2B indirect procurement marketplace launched in
the fourth quarter of 2022, which provides buyers and suppliers a
seamless way to transact through the platform’s consumer-like
buying experience and advanced spend management tools.
- Continued work with new customers, incorporating feedback and
adding new features and capabilities to the platform
- Generated revenues in the fourth quarter of 2023 of $2 million,
flat compared to the fourth quarter of 2022
- Operating loss was $15 million in the fourth quarter of 2023,
an improvement over the prior year
Share Repurchases in 2023
Throughout the year, the Company continued to execute under its
previously announced $1 billion share repurchase authorization
valid through year-end 2025. During the fourth quarter of 2023, the
Company repurchased 672 thousand shares at a cost of $32 million,
resulting in a total of 6 million shares for $298 million for the
full year 2023. Since the inception of the authorization beginning
in November 2022, the Company has repurchased 10 million shares for
approximately $451 million.
“We’re encouraged by the opportunities within our business to
generate value and enhance shareholder returns,” stated Anthony
Scaglione, executive vice president and chief financial officer of
The ODP Corporation. “Since the beginning of our previous
authorization, we have repurchased 10 million shares, retiring over
20% of our outstanding shares since November 2022. Moving forward,
we are thrilled to expand this initiative through Project Core,
establishing a new $1 billion share buyback authorization valid
over the next three years, creating additional value for
shareholders while enhancing our core focus and driving our
low-cost business model.”
Balance Sheet and Cash Flow
As of December 30, 2023, ODP had total available liquidity of
approximately $1.1 billion, consisting of $392 million in cash and
cash equivalents and $696 million of available credit under the
Third Amended Credit Agreement. Total debt was $174 million.
Subsequent to the end of the quarter, in January 2024, the Company
retired $53 million of outstanding FILO Term Loan Facility loans,
funded through available liquidity.
For the fourth quarter of 2023, cash generated by operating
activities of continuing operations was $70 million, which included
$2 million in restructuring and other spend, compared to cash
provided by operating activities of continuing operations of $158
million in the fourth quarter of the prior year, which included $20
million in restructuring and other spend. The year-over-year change
in operating cash flow is largely related to the timing of certain
working capital items.
Capital expenditures in the fourth quarter of 2023 were $29
million versus $31 million in the prior year period, reflecting
continued growth investments in the Company’s digital
transformation, distribution network, and eCommerce capabilities.
Adjusted Free Cash Flow(3) was $43 million in the fourth quarter of
2023, compared to $147 million in the prior year period.
“Our team’s strong commitment and dedication in managing
inventory and working capital has resulted in strong cash flow
generation,” said Scaglione. “As we move into the new year, we will
maintain our disciplined approach, focusing on managing costs,
maximizing cash flow, and executing our capital allocation plan,”
he added.
Project Core and New $1 Billion Share Repurchase
Authorization
Upon a year-end review across all of its business units and
consistent with its low-cost business model approach, the Company
announced “Project Core”, a plan designed to create further
efficiencies in its business, focused on driving enhanced operating
results and increasing shareholder returns through an expanded
share repurchase program. This broad-based plan includes cost
improvement actions across the entire enterprise, including all
routes to market, Varis, procurement, IT and shared services,
encompassing the entirety of ODP’s enterprise, optimizing its
organizational structure to support future growth of the business.
During this effort, the Company continues to review strategic
options for it’s Varis business unit and expects to conclude this
review and provide a full update by its first quarter earnings
announcement call in early May 2024.
In connection with Project Core, the Company expects to realize
annualized savings in the range of $50 million to $60 million when
fully implemented. Restructuring and related charges associated
with these actions are estimated to be in the range of $20 million
to $30 million and are expected to be substantially incurred
throughout 2024. The Company expects to begin reducing costs
exiting the first quarter of 2024, with most of these actions
expected to be completed over the following 12 months.
“Project Core aligns with our low-cost model mindset and builds
upon our continued focus of driving strong operating results while
enhancing value for shareholders through our new share repurchase
authorization,” said Smith. “We’re taking what we’ve learned during
our first year of operating under our new structure, and through
Project Core, we’re driving further operational efficiencies in our
business, enabling us to more effectively serve customers and
pursue new avenues of long-term growth.”
As a component of Project Core, the Company announced that its
Board of Directors has approved a new $1 billion, 3-year, share
repurchase authorization, replacing its prior authorization that
was valid through 2025, which had approximately $530 million
available at the end of February 2024, after the Company
repurchased approximately $470 million since November 2022.
“Our new $1 billion share repurchase authorization highlights
our management team and Board of Director’s continued focus on
enhancing value for shareholders. Our disciplined capital plan,
combined with our continued focus on driving operational excellence
enhanced through Project Core, create a compelling value
proposition for all of our stakeholders,” said Smith.
The number of shares to be repurchased under the authorization
in the future 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 the Board of Directors.
2024 Guidance
“We’re enthusiastic about the numerous opportunities in our
business to drive long term value and we remain focused on
prudently deploying capital to the benefit of shareholders,” said
Smith. “As we move forward into 2024, we remain cautiously
optimistic regarding the macroeconomic environment, and we will
remain focused on executing upon our three horizons strategy and
continuing our commitment to our low-cost model approach through
Project Core.”
“While macroeconomic conditions posed challenges throughout the
year and we expect these conditions to persist in the near term,
our team’s continued focus on driving our low-cost model, enhanced
by Project Core, have positioned us to issue the following guidance
for 2024,” Scaglione added.
The Company’s full year guidance for 2024 is as follows:
FY 2024 Guidance(1)
Sales
Decline of 2% - 5%
Adjusted EBITDA
$410 million - $430 million
Adjusted Operating Income(1)
$280 million - $300 million
Adjusted Earnings per Share(1)
$5.60 - $5.80 per share
Adjusted Free Cash Flow (3)(*)
Greater than $200 million
*Adjusted Free Cash Flow is defined as
cash flows from operating activities less capital expenditures
excluding cash charges associated with the Company’s Project Core
Restructuring and related expenses
The Company’s full year guidance for 2024 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 restructuring
charges, capital expenditures, 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.
“Our revenue guidance assumes continued store footprint
consolidation and improving trends in our eCommerce channel at
Office Depot, organic and inorganic growth at ODP Business
Solutions, continued expansion at Veyer and progress at Varis. Our
adjusted EPS outlook assumes higher interest expense associated
with projected intra-quarter ABL borrowings, and the impact from a
higher level of share buyback activity associated with Project
Core. While our guidance assumes incremental improvement in the
overall macroeconomic environment throughout 2024, we remain
cautious on the state of the overall US economy, primarily
workforce employment and the consumer, as well as international
trade policies and agreements that could further impact the level
of consumer and business activity,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts
and investors on February 28, 2024, 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.
(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 Project Core Restructuring, and
related expenses 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.
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of
products, services, and technology solutions through an integrated
business-to-business (B2B) distribution platform and omni-channel
presence, which includes 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 ODP Business Solutions,
LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc, 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,
LLC. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of
Veyer, LLC. Varis is a trademark of Varis, Inc. Grand&Toy is a
trademark of Grand & Toy, LLC in Canada. ©2023 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 the strategic review of Varis and
benefits related to Project Core; 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 higher interest rates and 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)
13 Weeks Ended
14 Weeks Ended
52 Weeks Ended
53 Weeks Ended
December 30,
December 31,
December 30,
December 31,
2023
2022
2023
2022
Sales
$
1,806
$
2,106
$
7,831
$
8,491
Cost of goods sold and occupancy costs
1,410
1,660
6,065
6,643
Gross profit
396
446
1,766
1,848
Selling, general and administrative
expenses
353
388
1,476
1,552
Asset impairments
72
6
85
14
Merger, restructuring and other operating
expenses, net
2
(3
)
4
39
Operating income (loss)
(31
)
55
201
243
Other income (expense):
Interest income
3
2
10
5
Interest expense
(5
)
(5
)
(20
)
(16
)
Other income, net
2
—
9
10
Income (loss) from continuing operations
before income taxes
(31
)
52
200
242
Income tax expense
6
16
61
64
Net income (loss) from continuing
operations
(37
)
36
139
178
Discontinued operations, net of tax
—
(19
)
—
(12
)
Net income (loss)
$
(37
)
$
17
$
139
$
166
Basic earnings (loss) per share
Continuing operations
$
(0.99
)
$
0.79
$
3.61
$
3.73
Discontinued operations
—
(0.41
)
—
(0.25
)
Net basic earnings (loss) per share
$
(0.99
)
$
0.38
$
3.61
$
3.48
Diluted earnings (loss) per share
Continuing operations
$
(0.99
)
$
0.76
$
3.50
$
3.61
Discontinued operations
—
(0.40
)
—
(0.24
)
Net diluted earnings (loss) per share
$
(0.99
)
$
0.36
$
3.50
$
3.37
THE ODP CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except shares
and par value)
December 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
392
$
403
Receivables, net
487
536
Inventories
765
828
Prepaid expenses and other current
assets
28
36
Current assets held for sale
6
107
Total current assets
1,678
1,910
Property and equipment, net
359
352
Operating lease right-of-use assets
983
874
Goodwill
403
464
Other intangible assets, net
45
46
Deferred income taxes
140
182
Other assets
278
321
Total assets
$
3,886
$
4,149
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable
$
755
$
821
Accrued expenses and other current
liabilities
923
1,005
Income taxes payable
6
17
Short-term borrowings and current
maturities of long-term debt
9
16
Total current liabilities
1,693
1,859
Deferred income taxes and other long-term
liabilities
123
122
Pension and postretirement obligations,
net
15
16
Long-term debt, net of current
maturities
165
172
Operating lease liabilities, net of
current portion
789
693
Total liabilities
2,785
2,862
Contingencies
Stockholders’ equity:
Common stock — authorized 80,000,000
shares of $0.01 par value; issued shares — 66,700,292 at December
30, 2023 and 65,636,015 at December 31, 2022; outstanding shares —
36,959,377 at December 30, 2023 and 42,213,046 at December 31,
2022
1
1
Additional paid-in capital
2,752
2,742
Accumulated other comprehensive loss
(114
)
(77
)
Accumulated deficit
(312
)
(451
)
Treasury stock, at cost — 29,740,915
shares at December 30, 2023 and 23,422,969 shares at December 31,
2022
(1,226
)
(928
)
Total stockholders’ equity
1,101
1,287
Total liabilities and stockholders’
equity
$
3,886
$
4,149
THE ODP CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
52 Weeks Ended
53 Weeks Ended
December 30,
December 31,
2023
2022
Cash flows from operating
activities:
Net income
$
139
$
166
Loss from discontinued operations, net of
tax
—
(12
)
Net income (loss) from continuing
operations
139
178
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
115
131
Amortization of debt discount and issuance
costs
2
2
Charges for losses on receivables and
inventories
28
19
Asset impairments
85
14
Gain on disposition of assets, net
(4
)
(4
)
Compensation expense for share-based
payments
36
40
Deferred income taxes and deferred tax
asset valuation allowances
40
40
Changes in assets and liabilities:
Decrease (Increase) in receivables
41
(42
)
Decrease in inventories
47
13
Net decrease in prepaid expenses,
operating lease right-of-use assets, and other assets
277
282
Net increase in trade accounts payable,
accrued expenses, operating lease liabilities, and other current
and other long-term liabilities
(474
)
(436
)
Other operating activities
(1
)
—
Total Adjustments
192
59
Net cash provided by operating activities
of continuing operations
331
237
Net cash provided by operating activities
of discontinued operations
—
—
Net cash provided by operating
activities
331
237
Cash flows from investing
activities:
Capital expenditures
(105
)
(99
)
Businesses acquired, net of cash
acquired
(16
)
—
Proceeds from disposition of assets
109
8
Settlement of company-owned life insurance
policies
5
5
Net cash used in investing activities of
continuing operations
(7
)
(86
)
Net cash provided by investing activities
of discontinued operations
5
76
Net cash used by investing activities
(2
)
(10
)
Cash flows from financing
activities:
Net payments on long and short-term
borrowings
(15
)
(21
)
Debt retirement
(204
)
(43
)
Debt issuance
200
—
Share purchases for taxes, net of proceeds
from employee share-based transactions
(26
)
(20
)
Repurchase of common stock for treasury
and advance payment for accelerated share repurchase
(295
)
(266
)
Other financing activities
—
(5
)
Net cash used in financing activities of
continuing operations
(340
)
(355
)
Net cash used in financing activities of
discontinued operations
—
—
Net cash used in financing activities
(340
)
(355
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
2
(5
)
Net decrease in cash, cash equivalents and
restricted cash
(9
)
(133
)
Cash, cash equivalents and restricted cash
at beginning of period
404
537
Cash, cash equivalents and restricted cash
at end of period
$
395
$
404
Supplemental information on non-cash
investing and financing activities
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
375
$
228
Promissory note receivable obtained from
disposition of discontinued operations
59
55
Cash taxes paid, net
35
17
Earn-out receivable obtained from
disposition of discontinued operations
9
9
Right-of-use assets obtained in exchange
for new finance lease liabilities
7
4
Cash interest paid, net of amounts
capitalized and non-recourse debt
16
16
Other current 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
4Q23
4Q22
FY23
FY22
Sales (external)
$902
$1,001
$3,904
$4,005
Sales (internal)
$3
$4
$13
$19
% change of total sales
(10)%
10%
(3)%
11%
Division operating income
$34
$37
$174
$140
% of total sales
4%
4%
4%
3%
Office Depot Division
4Q23
4Q22
FY23
FY22
Sales (external)
$893
$1,093
$3,884
$4,451
Sales (internal)
$7
$11
$34
$36
% change of total sales
(18)%
(3)%
(13)%
(8)%
Division operating income
$43
$57
$230
$285
% of total sales
5%
5%
6%
6%
Comparable store sales decrease
(6)%
N/A
(6)%
N/A
Veyer Division
4Q23
4Q22
FY23
FY22
Sales (external)
$8
$10
$35
$28
Sales (internal)
$1,207
$1,440
$5,253
$5,855
% change of total sales
(16)%
(2)%
(10)%
(2)%
Division operating income
$3
$4
$34
$28
% of total sales
0%
0%
1%
0%
Varis Division
4Q23
4Q22
FY23
FY22
Sales (external)
$2
$2
$8
$7
Sales (internal)
$0
$0
$0
$0
% change of total sales
0%
0%
14%
40%
Division operating loss
$(15)
$(18)
$(63)
$(66)
% of total sales
(750)%
(900)%
(788)%
(943)%
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 and
changes in restricted cash. 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, and the
previously planned separation of the consumer business and
re-alignment.
(In millions, except per share
amounts)
Q4 2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
72
4.0
%
$
72
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
2
0.1
%
$
2
$
—
—
%
Operating income (loss)
$
(31
)
(1.7
)%
$
(74
)
$
43
(4)
2.4
%
Income tax expense
$
6
0.3
%
$
(2
)
$
8
(5)
0.4
%
Net income (loss) from continuing
operations
$
(37
)
(2.0
)%
$
(72
)
$
35
(6)
1.9
%
Earnings (loss) per share from continuing
operations (fully diluted)
$
(0.99
)
$
(1.91
)
$
0.92
(6)
Depreciation and amortization
$
28
1.6
%
$
—
$
28
1.6
%
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
(4)
2.8
%
Income tax expense
$
16
0.8
%
$
1
$
15
(5)
0.7
%
Net income from continuing operations
$
36
1.7
%
$
(4
)
$
40
(6)
1.9
%
Earnings per share from continuing
operations (fully diluted)
$
0.76
$
(0.09
)
$
0.85
(6)
Depreciation and amortization
$
31
1.5
%
$
—
$
31
1.5
%
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
2023
Reported (GAAP)
% of Sales
Less: Charges &
Credits
Adjusted (Non-GAAP)
% of Sales
Asset impairments
$
85
1.1
%
$
85
$
—
—
%
Merger, restructuring and other operating
expenses, net
$
4
0.1
%
$
4
$
—
—
%
Operating income
$
201
2.6
%
$
(89
)
$
290
(4)
3.7
%
Income tax expense
$
61
0.8
%
$
(5
)
$
66
(5)
0.8
%
Net income from continuing operations
$
139
1.8
%
$
(84
)
$
223
(6)
2.8
%
Earnings per share from continuing
operations (fully diluted)
$
3.50
$
(2.10
)
$
5.60
(6)
Depreciation and amortization
$
115
1.5
%
$
—
$
115
1.5
%
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
(4)
3.5
%
Income tax expense
$
64
0.8
%
$
(15
)
$
79
(5)
0.9
%
Net income from continuing operations
$
178
2.1
%
$
(38
)
$
216
(6)
2.5
%
Earnings per share from continuing
operations (fully diluted)
$
3.61
$
(0.79
)
$
4.40
(6)
Depreciation and amortization
$
131
1.5
%
$
—
$
131
1.5
%
13 Weeks Ended
14 Weeks Ended
52 Weeks Ended
53 Weeks Ended
December 30,
December 31,
December 30,
December 31,
Adjusted EBITDA:
2023
2022
2023
2022
Net income (loss)
$
(37
)
$
17
$
139
$
166
Discontinued operations, net of tax
—
(19
)
—
(12
)
Net income (loss) from continuing
operations
(37
)
36
139
178
Income tax expense
6
16
61
64
Income (loss) from continuing operations
before income taxes
(31
)
52
200
242
Add (subtract)
Interest income
(3
)
(2
)
(10
)
(5
)
Interest expense
5
5
20
16
Depreciation and amortization
28
31
115
131
Charges and credits, pretax (7)
74
3
92
53
Adjusted EBITDA
$
73
$
89
$
417
$
437
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.
(4)
Adjusted operating income for all periods
presented herein exclude merger, restructuring and other operating
expenses, net, and asset impairments (if any).
(5)
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.
(6)
Adjusted net income and adjusted earnings
per share (fully diluted) for all periods presented exclude merger,
restructuring and other operating expenses, net, asset impairments
(if any), and exclude the tax effect of the charges or credits not
indicative of core operations.
(7)
Charges and credits, pretax for all periods presented include
merger, restructuring and other operating expenses, net, asset
impairments (if any).
THE ODP CORPORATION
GAAP to Non-GAAP
Reconciliations
(Unaudited)
13 Weeks Ended
14 Weeks Ended
52 Weeks Ended
53 Weeks Ended
December 30,
December 31,
December 30,
December 31,
Free cash flow
2023
2022
2023
2022
Net cash provided by operating activities
of continuing operations
$
70
$
158
$
331
$
237
Capital expenditures
(29
)
(31
)
(105
)
(99
)
Change in restricted cash impacting
working capital
—
—
(2
)
—
Free cash flow
41
127
224
138
Adjustments for certain cash charges:
Maximize B2B Restructuring Plan
2
3
9
8
Previously planned separation of consumer
business and re-alignment
—
17
2
55
Adjusted free cash flow
$
43
$
147
$
235
$
201
Amounts may not foot due to rounding. The
sum of the quarterly amounts may not equal the reported amounts for
the year due to rounding.
THE ODP CORPORATION
Store Statistics
(Unaudited)
Q4
Q4
Full Year
2022
2023
2023
Office Depot Division:
Stores opened
—
—
—
Stores closed
29
22
64
Total retail stores (U.S.)
980
916
—
Total square footage (in millions)
21.6
20.3
—
Average square footage per store (in
thousands)
22.1
22.2
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240228279722/en/
Tim Perrott Investor
Relations 561-438-4629 Tim.Perrott@theodpcorp.com
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