The ODP Corporation Announces Second Quarter 2021 Results
Improving Business Environment and
Continued Progress on Previously Announced Spin Transaction
Modified Plan for Separation to Include Spin-off of Consumer Business as Opposed to Previously Announced Spin-off of B2B Businesses
Positioned to Capture Demand During Upcoming Back-to-School Season
Repurchased Shares Under Previously Announced Stock Repurchase Authorization
|
Consolidated (in millions, except per share amounts) |
2Q21 |
2Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year period |
6% |
|
(5)% |
|
|
Operating loss |
|
|
|
|
|
Adjusted operating income (1) |
|
|
|
|
|
Net loss |
|
|
|
|
|
Diluted loss per share |
|
|
|
|
|
Adjusted net income (loss) (1) |
|
|
|
|
|
Adjusted earnings (loss) per share (most dilutive) (1) |
|
|
|
|
|
Adjusted EBITDA (1) |
|
|
|
|
|
Operating Cash Flow |
|
|
|
|
|
Free Cash Flow (2) |
|
|
|
|
|
Adjusted Free Cash Flow (3) |
|
|
|
|
Second Quarter 2021 Summary(1)(3)
-
Total reported sales of
$2.3 billion , up 6% versus last year -
GAAP operating loss includes charges of
$122 million , including$114 million of non-cash asset impairment charges related to goodwill and intangibles at CompuCom, largely related to the continued effects of the COVID-19 pandemic on current business conditions, which led to a GAAP operating loss of$78 million and a net loss of$88 million , or$(1.62) per share, compared to an operating loss of$456 million and a net loss of$439 million , or$(8.19) per share, in the prior year. -
Adjusted operating income of
$44 million , up from$10 million in the second quarter of 2020; and adjusted EBITDA of$93 million , up from$59 million in the second quarter of 2020 -
Adjusted net income of
$28 million , or adjusted diluted earnings per share of$0.51 , versus adjusted net loss of$4 million or$(0.07) , respectively in the prior year -
Operating cash flow of
$(11) million and adjusted free cash flow of$(13) million , versus$(8) million and$(7) million , respectively in the prior year -
$1.7 billion of total available liquidity including$691 million in cash and cash equivalents
“Our success in delivering improved results this quarter reflects the meaningful progress we’ve made on all of our initiatives to unlock shareholder value,” said
“These factors helped drive continued strong results in our Retail Division, which serves as the `home office and school supply headquarters' choice for customers, and improving performance in our Business Solutions Division (BSD). Combined with our low cost model approach, we delivered a 6% increase in revenue and more than tripled our adjusted operating income compared to last year, putting us in a position of strength as we enter the second half of 2021.”
“We also continued to advance our digital platform business, adding key new team members and making progress on our technology platform development. We have attracted industry-leading talent and are building out the capabilities of our new platform, placing us in an excellent position to drive future value in the large and growing business commerce market.”
“Finally, we’re also moving forward with our plans to separate ODP into two, highly-focused, pure-play companies. The improving market dynamics continue to reflect the growth opportunities for both businesses, and we remain excited about their future prospects. We have modified our plan for the separation, and we remain on-track with our initiatives to complete this transformation in the first half of 2022.”
“This is an exciting time for all of our stakeholders as we strengthen our foundation to create greater value in the future. Our entire team is confident, energized, and committed to capturing the numerous opportunities ahead,” he added.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the second quarter of 2021 were
|
Sales Breakdown (in millions) |
2Q21 |
2Q20 |
YTD21 |
YTD20 |
|
Product sales |
|
|
|
|
|
Product sales change from prior year |
6% |
|
(4)% |
|
|
Service revenues |
|
|
|
|
|
Service revenues change from prior year |
8% |
|
(7)% |
|
|
Total sales |
|
|
|
|
The Company reported operating loss of
Adjusted (non-GAAP) Results (1)(2)
Adjusted results for the second quarter of 2021 exclude charges and credits totaling
-
Second quarter of 2021 adjusted EBITDA was
$93 million compared to$59 million in the prior year period. This included adjusted depreciation and amortization(4) of$43 million and$47 million in the second quarters of 2021 and 2020, respectively
-
Second quarter 2021 adjusted operating income was
$44 million compared to$10 million in the second quarter of 2020
-
Second quarter 2021 adjusted net income was
$28 million , or$0.51 per diluted share, compared to adjusted net loss of$4 million , or$(0.07) per diluted share, in the second quarter of 2020
Second Quarter Division Results
Business Solutions Division (BSD)
-
Reported sales were
$1.1 billion in the second quarter of 2021, up 12% compared to the same period last year. Stronger demand from B2B customers, including those in the public and education sector, positively impacted sales results as these customers continue to recover from conditions related to the pandemic - Revenue performance was driven by an increase in sales through the Company’s B2B contract channel, partially offset by lower sales in its eCommerce channel
- BSD generated stronger year-over-year demand for core supply products and services; adjacency categories remained at 44% of BSD sales, flat to the first quarter of 2021
-
Operating income was
$31 million in the second quarter of 2021 compared to$13 million in the prior year period
Retail Division
-
Reported sales were
$914 million in the second quarter of 2021, flat with the prior year period despite 169 fewer retail outlets at the end of the second quarter, as compared to the prior year, due to planned closures of underperforming stores. The Company closed 55 stores in the quarter and had 1,091 stores at quarter end - Retail drove strong year-over-year demand in core supply categories, workspaces and technology products. Increased store traffic, sales per shopper, and conversion rates all contributed to strong sales in the quarter
-
Operating income was
$44 million in the second quarter of 2021, up 144% over the same period last year, representing a 290 basis point margin improvement
CompuCom Division
-
Reported sales were
$222 million in the second quarter of 2021, up 4% compared to the prior year period. Stronger product sales contributed to the year-over-year revenue performance -
CompuCom reported
$3 million operating income in the second quarter of 2021, compared to$4 million operating income in the prior year period
Digital Transformation Progress
As a primary component of its strategy to drive growth in higher value industry segments, the Company continued to make progress on its digital transformation initiatives during the quarter. These accomplishments included adding key personnel, continuing to integrate and bring the capabilities of its leading P2P software platform, BuyerQuest, to customers, and making progress on its technology development with collaboration partners. The Company is also advancing its collaboration with Microsoft and remains on-track to bring BuyerQuest’s value proposition to Microsoft’s Business Central customers in the future.
Update on Spin-Off Progress and Modified Plan for Separation
The Company continues to execute upon its plans to separate ODP into two, independent, publicly-traded companies, and made solid progress in all areas of the separation including operating mechanics, supply chain dynamics, IT support, and on the anticipated market-based commercial agreements between the companies.
Recognizing the flexibility provided by the Company’s reorganization into a holding company structure in 2020, the Company has modified its plan for the separation to be structured as a tax-free spin-off of the Company’s consumer business, with the Company retaining its B2B related operations, as further described below. The Company believes that this modified approach will be more efficient considering that it is expected that the majority of the Company’s current management team and Directors will remain with the B2B business, which will continue to operate under the name “The ODP Corporation.” Each company is expected to have a unique and highly focused strategy and investment profile, as follows:
-
ODP – a leading B2B solutions provider serving small, medium and enterprise level companies, mainly consisting of the contract sales channel of the Business Solutions Division, which includes operations in
Canada and the independent regional office supply distribution businesses within theU.S. that the Company has been acquiring since 2017. ODP will also own the newly formed B2B digital platform technology business, including BuyerQuest, as well as the Company’s global sourcing office, and its other sourcing, supply chain and logistics assets; and -
Office Depot (“NewCo”) – anOffice Depot branded leading provider of retail consumer and small business products and services distributed via approximately 1,100Office Depot and OfficeMax retail locations and an eCommerce presence, officedepot.com.
The separation is expected to allow ODP and
Balance Sheet and Cash Flow
As of
For the second quarter of 2021, cash used in operating activities was
Capital expenditures in the quarter were
As part of the ongoing commitment and support of its strategic initiatives, the Company repurchased
|
(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 Plan and its Business Acceleration Program. 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
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,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “propose” or other similar words, phrases or expressions, or other variations of such words. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of the Company’s control. There can be no assurances that the Company will realize these expectations or that these beliefs will prove correct, and therefore investors and stakeholders should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, highly competitive office products market and failure to differentiate the Company from other office supply resellers or respond to decline in general office supplies sales or to shifting consumer demands; competitive pressures on the Company’s sales and pricing; the adverse effects of an unsolicited tender offer on our business, operating results or financial condition; the risk that the Company is unable to transform the business into a service-driven, B2B platform that such a strategy will not result in the benefits anticipated; the risk that the Company will not be able to achieve its strategic plans, including the proposed separation of its consumer business and the planned sale of CompuCom, and the high costs in connection with these transactions may not be recouped if these transactions are not consummated; the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute the Maximize B2B Restructuring Plan successfully or that such plan will not result in the benefits anticipated; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited- source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs and lost revenue; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive
|
CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) (Unaudited) |
||||||||||||||||
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,961 |
|
|
$ |
1,857 |
|
|
$ |
4,012 |
|
|
$ |
4,194 |
|
|
Services |
|
|
325 |
|
|
|
301 |
|
|
|
640 |
|
|
|
689 |
|
|
Total sales |
|
|
2,286 |
|
|
|
2,158 |
|
|
|
4,652 |
|
|
|
4,883 |
|
|
Cost of goods sold and occupancy costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,590 |
|
|
|
1,531 |
|
|
|
3,199 |
|
|
|
3,358 |
|
|
Services |
|
|
224 |
|
|
|
211 |
|
|
|
447 |
|
|
|
479 |
|
|
Total cost of goods sold and occupancy costs |
|
|
1,814 |
|
|
|
1,742 |
|
|
|
3,646 |
|
|
|
3,837 |
|
|
Gross profit |
|
|
472 |
|
|
|
416 |
|
|
|
1,006 |
|
|
|
1,046 |
|
|
Selling, general and administrative expenses |
|
|
428 |
|
|
|
406 |
|
|
|
880 |
|
|
|
928 |
|
|
Asset impairments |
|
|
115 |
|
|
|
401 |
|
|
|
127 |
|
|
|
413 |
|
|
Merger, restructuring and other operating expenses, net |
|
|
7 |
|
|
|
65 |
|
|
|
21 |
|
|
|
81 |
|
|
Operating loss |
|
|
(78 |
) |
|
|
(456 |
) |
|
|
(22 |
) |
|
|
(376 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
Interest expense |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(14 |
) |
|
|
(29 |
) |
|
Loss on extinguishment and modification of debt |
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
|
Other income, net |
|
|
5 |
|
|
|
4 |
|
|
|
16 |
|
|
|
5 |
|
|
Loss before income taxes |
|
|
(79 |
) |
|
|
(475 |
) |
|
|
(20 |
) |
|
|
(409 |
) |
|
Income tax expense (benefit) |
|
|
9 |
|
|
|
(36 |
) |
|
|
15 |
|
|
|
(15 |
) |
|
Net loss |
|
$ |
(88 |
) |
|
$ |
(439 |
) |
|
$ |
(35 |
) |
|
$ |
(394 |
) |
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.62 |
) |
|
$ |
(8.34 |
) |
|
$ |
(0.65 |
) |
|
$ |
(7.46 |
) |
|
Diluted |
|
$ |
(1.62 |
) |
|
$ |
(8.19 |
) |
|
$ |
(0.65 |
) |
|
$ |
(7.31 |
) |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except shares and par value) |
||||||||
|
|
|
|
|
|
|
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
691 |
|
|
$ |
729 |
|
|
Receivables, net |
|
|
681 |
|
|
|
631 |
|
|
Inventories |
|
|
957 |
|
|
|
930 |
|
|
Prepaid expenses and other current assets |
|
|
82 |
|
|
|
65 |
|
|
Total current assets |
|
|
2,411 |
|
|
|
2,355 |
|
|
Property and equipment, net |
|
|
533 |
|
|
|
576 |
|
|
Operating lease right-of-use assets |
|
|
1,053 |
|
|
|
1,170 |
|
|
|
|
|
575 |
|
|
|
609 |
|
|
Other intangible assets, net |
|
|
341 |
|
|
|
357 |
|
|
Deferred income taxes |
|
|
151 |
|
|
|
162 |
|
|
Other assets |
|
|
314 |
|
|
|
329 |
|
|
Total assets |
|
$ |
5,378 |
|
|
$ |
5,558 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
979 |
|
|
$ |
919 |
|
|
Accrued expenses and other current liabilities |
|
|
1,089 |
|
|
|
1,138 |
|
|
Income taxes payable |
|
|
10 |
|
|
|
12 |
|
|
Short-term borrowings and current maturities of long-term debt |
|
|
22 |
|
|
|
24 |
|
|
Total current liabilities |
|
|
2,100 |
|
|
|
2,093 |
|
|
Deferred income taxes and other long-term liabilities |
|
|
193 |
|
|
|
197 |
|
|
Pension and postretirement obligations, net |
|
|
38 |
|
|
|
43 |
|
|
Long-term debt, net of current maturities |
|
|
337 |
|
|
|
354 |
|
|
Operating lease liabilities |
|
|
869 |
|
|
|
991 |
|
|
Total liabilities |
|
|
3,537 |
|
|
|
3,678 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock — authorized 80,000,000 shares of |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
|
2,707 |
|
|
|
2,675 |
|
|
Accumulated other comprehensive loss |
|
|
(22 |
) |
|
|
(32 |
) |
|
Accumulated deficit |
|
|
(444 |
) |
|
|
(409 |
) |
|
|
|
|
(401 |
) |
|
|
(355 |
) |
|
Total stockholders’ equity |
|
|
1,841 |
|
|
|
1,880 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
5,378 |
|
|
$ |
5,558 |
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) |
||||||||
|
|
|
26 Weeks Ended |
|
|||||
|
|
|
|
|
|
|
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(35 |
) |
|
$ |
(394 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
89 |
|
|
|
97 |
|
|
Charges for losses on receivables and inventories |
|
|
10 |
|
|
|
16 |
|
|
Asset impairments |
|
|
127 |
|
|
|
413 |
|
|
(Gain) loss on disposition of assets, net |
|
|
(3 |
) |
|
|
5 |
|
|
Loss on extinguishment and modification of debt |
|
|
— |
|
|
|
12 |
|
|
Compensation expense for share-based payments |
|
|
20 |
|
|
|
16 |
|
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
6 |
|
|
|
(3 |
) |
|
Changes in working capital and other operating activities |
|
|
(139 |
) |
|
|
18 |
|
|
Net cash provided by operating activities |
|
|
75 |
|
|
|
180 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(29 |
) |
|
|
(40 |
) |
|
Businesses acquired, net of cash acquired |
|
|
(28 |
) |
|
|
(18 |
) |
|
Proceeds from collection of notes receivable |
|
|
— |
|
|
|
818 |
|
|
Proceeds from disposition of assets |
|
|
3 |
|
|
|
1 |
|
|
Settlement of company-owned life insurance policies |
|
|
21 |
|
|
|
1 |
|
|
Net cash provided by (used in) investing activities |
|
|
(33 |
) |
|
|
762 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Net payments on long and short-term borrowings |
|
|
(13 |
) |
|
|
(30 |
) |
|
Debt retirement |
|
|
— |
|
|
|
(1,187 |
) |
|
Debt issuance |
|
|
— |
|
|
|
400 |
|
|
Cash dividends on common stock |
|
|
— |
|
|
|
(13 |
) |
|
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(23 |
) |
|
|
(5 |
) |
|
Repurchase of common stock for treasury |
|
|
(46 |
) |
|
|
(30 |
) |
|
Other financing activities |
|
|
(1 |
) |
|
|
(7 |
) |
|
Net cash used in financing activities |
|
|
(83 |
) |
|
|
(872 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
3 |
|
|
|
(6 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(38 |
) |
|
|
64 |
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
729 |
|
|
|
700 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
691 |
|
|
$ |
764 |
|
|
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 |
|
|
39 |
|
|
|
63 |
|
|
Business acquired in exchange for common stock issuance |
|
|
35 |
|
|
|
— |
|
|
BUSINESS UNIT PERFORMANCE (In millions) (Unaudited) |
||||
|
Business Solutions Division (in millions) |
2Q21 |
2Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year |
12% |
|
(4)% |
|
|
Division operating income |
|
|
|
|
|
Division operating income margin |
2.7% |
1.3% |
2.1% |
2.2% |
|
Retail Division (in millions) |
2Q21 |
2Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year |
0% |
|
(6)% |
|
|
Division operating income |
|
|
|
|
|
Division operating income margin |
4.8% |
2.0% |
7.4% |
5.1% |
|
CompuCom Division (in millions) |
2Q21 |
2Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year |
4% |
|
(7)% |
|
|
Division operating income |
|
|
|
|
|
Division operating income margin |
1.4% |
1.9% |
0.5% |
1.6% |
GAAP to Non-GAAP Reconciliations
(Unaudited)
We report our results in accordance with accounting principles generally accepted in
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 Plan and its Business Acceleration Program.
(In millions, except per share amounts)
|
Q2 2021 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Assets impairments |
|
$ |
115 |
|
|
|
5.0 |
% |
|
$ |
115 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
7 |
|
|
|
0.3 |
% |
|
$ |
7 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income (loss) |
|
$ |
(78 |
) |
|
|
(3.4 |
)% |
|
$ |
(122 |
) |
|
$ |
44 |
|
(6) |
|
1.9 |
% |
|
Income tax expense |
|
$ |
9 |
|
|
|
0.4 |
% |
|
$ |
(5 |
) |
|
$ |
14 |
|
(8) |
|
0.6 |
% |
|
Net income (loss) |
|
$ |
(88 |
) |
|
|
(3.8 |
)% |
|
$ |
(117 |
) |
|
$ |
28 |
|
(9) |
|
1.2 |
% |
|
Earnings (loss) per share (most dilutive) |
|
$ |
(1.62 |
) |
|
|
|
|
|
$ |
(2.13 |
) |
|
$ |
0.51 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
43 |
|
|
|
1.9 |
% |
|
$ |
— |
|
|
$ |
43 |
|
(10) |
|
1.9 |
% |
|
Q2 2020 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Assets impairments |
|
$ |
401 |
|
|
|
18.6 |
% |
|
$ |
401 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
65 |
|
|
|
3.0 |
% |
|
$ |
65 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income (loss) |
|
$ |
(456 |
) |
|
|
(21.1 |
)% |
|
$ |
(466 |
) |
|
$ |
10 |
|
(6) |
|
0.5 |
% |
|
Loss on extinguishment and modification of debt |
|
$ |
(12 |
) |
|
|
(0.6 |
)% |
|
$ |
(12 |
) |
|
$ |
— |
|
|
|
— |
% |
|
Other income, net |
|
$ |
4 |
|
|
|
0.2 |
% |
|
$ |
2 |
|
|
$ |
2 |
|
(7) |
|
0.1 |
% |
|
Income tax expense (benefit) |
|
$ |
(36 |
) |
|
|
(1.7 |
)% |
|
$ |
(41 |
) |
|
$ |
5 |
|
(8) |
|
0.2 |
% |
|
Net loss |
|
$ |
(439 |
) |
|
|
(20.3 |
)% |
|
$ |
(435 |
) |
|
$ |
(4 |
) |
(9) |
|
(0.2 |
)% |
|
Loss per share (most dilutive) |
|
$ |
(8.19 |
) |
|
|
|
|
|
$ |
(8.12 |
) |
|
$ |
(0.07 |
) |
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
48 |
|
|
|
2.2 |
% |
|
$ |
1 |
|
|
$ |
47 |
|
(10) |
|
2.2 |
% |
|
GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||||||
|
YTD 2021 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Selling, general and administrative expenses |
|
$ |
880 |
|
|
|
18.9 |
% |
|
$ |
10 |
|
|
$ |
870 |
|
(5) |
|
18.7 |
% |
|
Assets impairments |
|
$ |
127 |
|
|
|
2.7 |
% |
|
$ |
127 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
21 |
|
|
|
0.5 |
% |
|
$ |
21 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income (loss) |
|
$ |
(22 |
) |
|
|
(0.5 |
)% |
|
$ |
(158 |
) |
|
$ |
135 |
|
(6) |
|
2.9 |
% |
|
Other income, net |
|
$ |
16 |
|
|
|
0.3 |
% |
|
$ |
7 |
|
|
$ |
9 |
|
(7) |
|
0.2 |
% |
|
Income tax expense |
|
$ |
15 |
|
|
|
0.3 |
% |
|
$ |
(19 |
) |
|
$ |
34 |
|
(8) |
|
0.7 |
% |
|
Net income (loss) |
|
$ |
(35 |
) |
|
|
(0.8 |
)% |
|
$ |
(132 |
) |
|
$ |
96 |
|
(9) |
|
2.1 |
% |
|
Earnings (loss) per share (most dilutive) |
|
$ |
(0.65 |
) |
|
|
|
|
|
$ |
(2.36 |
) |
|
$ |
1.71 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
89 |
|
|
|
1.9 |
% |
|
$ |
2 |
|
|
$ |
87 |
|
(10) |
|
1.9 |
% |
|
YTD 2020 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Assets impairments |
|
$ |
413 |
|
|
|
8.5 |
% |
|
$ |
413 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
81 |
|
|
|
1.7 |
% |
|
$ |
81 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income (loss) |
|
$ |
(376 |
) |
|
|
(7.7 |
)% |
|
$ |
(494 |
) |
|
$ |
119 |
|
(6) |
|
2.4 |
% |
|
Loss on extinguishment and modification of debt |
|
$ |
(12 |
) |
|
|
(0.2 |
)% |
|
$ |
(12 |
) |
|
$ |
— |
|
|
|
— |
% |
|
Other income, net |
|
$ |
5 |
|
|
|
0.1 |
% |
|
$ |
2 |
|
|
$ |
3 |
|
(7) |
|
0.1 |
% |
|
Income tax expense (benefit) |
|
$ |
(15 |
) |
|
|
(0.3 |
)% |
|
$ |
(48 |
) |
|
$ |
33 |
|
(8) |
|
0.7 |
% |
|
Net income (loss) |
|
$ |
(394 |
) |
|
|
(8.1 |
)% |
|
$ |
(456 |
) |
|
$ |
62 |
|
(9) |
|
1.3 |
% |
|
Earnings (loss) per share (most dilutive) |
|
$ |
(7.31 |
) |
|
|
|
|
|
$ |
(8.46 |
) |
|
$ |
1.15 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
97 |
|
|
|
2.0 |
% |
|
$ |
2 |
|
|
$ |
95 |
|
(10) |
|
1.9 |
% |
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted EBITDA: |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net loss |
|
$ |
(88 |
) |
|
$ |
(439 |
) |
|
$ |
(35 |
) |
|
$ |
(394 |
) |
|
Income tax expense (benefit) |
|
|
9 |
|
|
|
(36 |
) |
|
|
15 |
|
|
|
(15 |
) |
|
Loss before income taxes |
|
|
(79 |
) |
|
|
(475 |
) |
|
|
(20 |
) |
|
|
(409 |
) |
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
Interest expense |
|
|
6 |
|
|
|
11 |
|
|
|
14 |
|
|
|
29 |
|
|
Adjusted depreciation and amortization (10) |
|
|
43 |
|
|
|
47 |
|
|
|
87 |
|
|
|
95 |
|
|
Charges and credits, pretax (11) |
|
|
122 |
|
|
|
476 |
|
|
|
151 |
|
|
|
504 |
|
|
Adjusted EBITDA |
|
$ |
93 |
|
|
$ |
59 |
|
|
$ |
231 |
|
|
$ |
216 |
|
| 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 selling, general and administrative expenses for the first half of 2021 exclude charges for CompuCom’s malware incident related costs of |
|
|
(6) |
Adjusted operating income (loss) for all periods presented herein exclude merger, restructuring and other operating expenses, net, asset impairments (if any) and CompuCom’s malware incident related costs (if any). |
|
|
(7) |
Adjusted other income, net for the first half of 2021 excludes credits for the release of certain liabilities of our former European Business of |
|
|
(8) |
Adjusted income tax expense (benefit) for all periods presented herein exclude the tax effect of the charges or credits not indicative of core operations as described in the preceding notes. |
|
|
(9) |
Adjusted net income (loss) and adjusted earnings (loss) per share (most dilutive) for all periods presented exclude merger, restructuring and other operating expenses, net, asset impairments (if any), CompuCom’s malware incident related costs (if any), European Business liabilities release (if any), loss on extinguishment and modification of debt (if any), indemnification asset adjustments (if any), and exclude the tax effect of the charges or credits not indicative of core operations. |
|
|
(10) |
Adjusted depreciation and amortization for all periods presented herein exclude accelerated depreciation caused by updating the salvage value and shortening the useful life of depreciable fixed assets to coincide with the planned store closures under an approved restructuring plan, but only if impairment is not present. Accelerated depreciation charges are restructuring expenses and included in the Charges and credits, pretax line item. |
|
|
(11) |
Charges and credits, pretax for all periods presented include merger, restructuring and other operating expenses, net, asset impairments (if any), CompuCom’s malware incident related costs (if any), European Business liabilities release (if any), loss on extinguishment and modification of debt (if any), and indemnification asset adjustments (if any). |
|
|
GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Free cash flow |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net cash provided by (used in) operating activities |
|
$ |
(11 |
) |
|
$ |
(8 |
) |
|
$ |
75 |
|
|
$ |
180 |
|
|
Capital expenditures |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
(29 |
) |
|
|
(40 |
) |
|
Free cash flow |
|
|
(27 |
) |
|
|
(23 |
) |
|
|
46 |
|
|
|
140 |
|
|
Adjustments for certain cash charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximize B2B Restructuring Plan |
|
|
11 |
|
|
|
3 |
|
|
|
16 |
|
|
|
3 |
|
|
Business Acceleration Program |
|
|
3 |
|
|
|
13 |
|
|
|
4 |
|
|
|
23 |
|
|
Adjusted free cash flow |
|
$ |
(13 |
) |
|
$ |
(7 |
) |
|
$ |
66 |
|
|
$ |
166 |
|
|
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. |
|
Store Statistics (Unaudited) |
||||||||||||
|
|
|
Q2 |
|
|
Q2 |
|
|
YTD |
|
|||
|
|
|
2020 |
|
|
2021 |
|
|
2021 |
|
|||
|
Retail Division: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stores closed |
|
|
35 |
|
|
|
55 |
|
|
|
63 |
|
|
Total retail stores ( |
|
|
1,260 |
|
|
|
1,091 |
|
|
|
— |
|
|
Total square footage (in millions) |
|
|
28.0 |
|
|
|
24.0 |
|
|
|
— |
|
|
Average square footage per store (in thousands) |
|
|
22.2 |
|
|
|
22.1 |
|
|
|
— |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210804005290/en/
Investor Relations
561-438-4629
Tim.Perrott@officedepot.com
Media Relations
561-438-1594
Danny.Jovic@officedepot.com
Source: