The ODP Corporation Announces Second Quarter 2024 Results
Second Quarter Revenue of
Progress on Project Core to Drive Future Cost Savings and Implementing Growth Initiatives
Company Repurchased
Company Provides Update on Varis Sale Process
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Consolidated (in millions, except per share amounts) |
2Q24 |
2Q23 |
YTD24 |
YTD23 |
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Selected GAAP and Non-GAAP measures: |
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Sales |
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Sales change from prior year period |
(10)% |
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(11)% |
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Operating income |
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Adjusted operating income (1) |
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Net income (loss) from continuing operations |
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Diluted earnings (loss) per share from continuing operations |
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Adjusted net income from continuing operations (1) |
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Adjusted earnings per share from continuing operations
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Adjusted EBITDA (1) |
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Operating Cash Flow from continuing operations |
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Free Cash Flow (2) |
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Adjusted Free Cash Flow (3) |
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Second Quarter 2024 Summary(1)(2)(3)
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Total reported sales of
$1.7 billion , down 10% versus the prior year on a reported basis. The decrease in reported sales is largely related to lower sales in its Office Depot Division, primarily due to 58 fewer retail locations in service compared to the previous year and reduced transactions, as well as lower sales in its ODP Business Solutions Division -
GAAP operating income of approximately
$400 thousand and net income (loss) from continuing operations of$(4) million , or$(0.12) per diluted share, versus$60 million and$43 million , respectively, or$1.09 per diluted share, in the prior year period -
Adjusted operating income of
$33 million , compared to$67 million in the second quarter of 2023; adjusted EBITDA of$57 million , compared to$95 million in the second quarter of 2023 -
Adjusted net income from continuing operations of
$20 million , or adjusted diluted earnings per share from continuing operations of$0.56 , versus$48 million or$1.22 , respectively, in the prior year period -
Operating cash flow from continuing operations of
$(1) million and adjusted free cash flow of$5 million , versus$(8) million and$(24) million , respectively, in the prior year period -
Repurchased nearly 2.4 million shares at a cost of
$104 million in the second quarter of 2024; Repurchased a total of approximately$141 million of shares when including purchases made in the second quarter and post quarter through the current date -
$831 million of total available liquidity including$190 million in cash and cash equivalents, of which$10 million is presented in Current assets held for sale related to the Varis Division, at quarter end
“We are executing Project Core while taking actions to improve top-line trends in both our B2B and B2C businesses,” said
“While we are pacing below our prior expectations for the year, we are not standing still. We’re taking actions to improve our top-line trajectory and we remain focused on capturing the long-term opportunities derived by our strong value proposition, solid balance sheet, and flexible foundation. In addition to our efforts under Project Core, which we expect will create over
“Although we are disappointed by our first half performance and outlook for the remainder of the year, we are committed to driving growth back into the business, remaining focused on converting the numerous opportunities in our pipeline, strengthening our position in the second half of the year and having impact in 2025 and beyond. We have several prospects at both ODP Business Solutions and Veyer that we expect to close in the second half that will boost revenue growth velocity as we exit this year. With these opportunities, coupled with our full realization of Project Core, we expect to exit 2024 with a stronger profile,” he continued.
“Despite the near term top-line challenges, we remain committed and encouraged about the future and confident in our operational excellence approach. Our team remains focused on executing the necessary steps to position us for long term growth and profitability,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the second quarter of 2024 were
The Company reported GAAP operating income of approximately
Adjusted (non-GAAP) Results(1)
Adjusted results for the second quarter of 2024 exclude charges and credits totaling
-
Second quarter 2024 adjusted EBITDA was
$57 million compared to$95 million in the prior year period. This included depreciation and amortization of$24 million and$25 million in the second quarter of 2024 and 2023, respectively -
Second quarter 2024 adjusted operating income was
$33 million , down compared to$67 million in the second quarter of 2023 -
Second quarter 2024 adjusted net income from continuing operations was
$20 million , or$0.56 per diluted share, compared to$48 million , or$1.22 per diluted share, in the second quarter of 2023, a decrease of 54% 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
-
Reported sales were
$917 million in the second quarter of 2024, down 8% compared to the same period last year. The decrease in sales was related primarily to weaker macroeconomic conditions, more cautious business spending, new customer onboarding challenges, and lower sales conversion - Total adjacency category sales, including cleaning and breakroom, furniture, technology, and copy and print, were 43% of total ODP Business Solutions’ sales
- Continued strong pipeline of potential new business and implementing several initiatives to regain top-line traction
-
Operating income was
$29 million in the second quarter of 2024, down 36% compared to the same period last year on a reported basis. As a percentage of sales, operating income margin was 3%, down 140 basis points compared to the same period last year
Office Depot Division
Leading provider of retail consumer and small business products and services distributed via
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Reported sales were
$799 million in the second quarter of 2024, down 12% compared to the prior year on a reported basis. Lower sales were partially driven by 58 fewer retail outlets in service associated with planned store closures, as well as lower demand relative to last year in major product categories and lower online sales. The Company closed 9 retail stores in the quarter and had 894 stores at quarter end. Sales were down 7% on a comparable store basis - Store and online traffic were lower year over year due to macroeconomic factors causing sluggish consumer activity
-
Operating income was
$17 million in the second quarter of 2024, compared to operating income of$35 million during the same period last year, driven primarily by the flow through impact from lower sales. As a percentage of sales, operating income was 2%, down 170 basis points compared to the same period last year
Veyer Division
Nationwide supply chain, distribution, procurement and global sourcing operation supporting
-
In the second quarter of 2024, Veyer provided 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
$5 million in the second quarter of 2024, compared to$6 million in the prior year period driven by the flow through impact of lower sales to internal customers partially offset by the contribution related to services to external third-party customers -
In the second quarter of 2024, sales generated from third-party customers were in-line with the same period last year and EBITDA generated from third-party customers increased by 17% year over year, resulting in sales of
$10 million and EBITDA of$4 million
Share Repurchases
The Company continued to execute under its previously announced
“Our capital allocation strategy balances investing in the future of our business while continuing to enhance value for shareholders through share repurchases under our buyback authorization,” stated
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 share repurchase authorization could be suspended or discontinued at any time as determined by the Board of Directors.
Balance Sheet and Cash Flow
As of
For the second quarter of 2024, cash used in operating activities of continuing operations was
Capital expenditures in the second quarter of 2024 were
Progress on Project Core
As the Company previously announced, Project Core is a plan designed to create further efficiencies throughout its business, focused on driving enhanced operating results and shareholder value. This broad-based plan includes cost improvement actions across the entire enterprise, optimizing its organizational structure to support future growth of the business. The Company continues to make significant progress under Project Core and is in position to realize in-year savings of approximately
Varis Division Update
The Company has entered into a non-binding term sheet agreement with a third-party for the sale of Varis. Under the proposed terms, the Company would retain an approximately 20% current stake in the entity. However, there can be no assurances regarding the ultimate timing of this proposed transaction or that such transaction will be completed.
“After a thorough process, we have arrived at a path forward for Varis that aligns with our stated objectives of finalizing our capital commitment to the business, while providing ODP with a continued invested interest in the opportunities ahead. We expect to announce further details of the proposed transaction upon close, which we expect to be completed in the third quarter,” added Smith.
2024 Guidance
“Our performance in the first half of the year was clearly below expectations, placing us behind our goals for the year,” said Smith. “The initiatives we are taking to improve our top-line trajectory, along with our low-cost model, high touch service approach, and strong value proposition, give us confidence in our ability to improve our performance and position us for greater stability and growth in the future. Considering our slow start to the first half of the year, as well as the uncertain macroeconomic environment and the potential variability of the timing of our initiatives, we are updating our 2024 guidance as follows”:
Updated full-year guidance for 2024
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Updated FY 2024 Guidance(1) |
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Sales |
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At least |
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Adjusted EBITDA(1) |
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Adjusted Operating Income(1) |
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Adjusted Earnings per Share (fully diluted)(*)(1) |
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Adjusted Free Cash Flow(1)(3) |
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Approximately |
*Adjusted Earnings per Share (fully diluted) (EPS) guidance for 2024 excludes potential discrete (tax) items that may affect quarter to quarter fluctuations and includes expected impact from share repurchases
The Company’s full year guidance for 2024 includes non-GAAP measures, such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Earnings per Share (fully diluted) 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.
“As a result of our first half performance, along with a continuing challenging macro environment and lower than anticipated sales pipeline conversion in ODP Business Solutions, we are lowering our full year outlook. While first half results were below our expectations, our team remains focused on executing upon opportunities in our business to grow our top line, leveraging our low-cost business model, strong balance sheet, and diverse routes to market,” said Scaglione.
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(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. |
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(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. |
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(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
ODP and ODP Business Solutions are trademarks of
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, 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 or 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 a potential sale of Varis on the terms proposed or at all 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
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(In millions, except per share amounts) |
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(Unaudited) |
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13 Weeks Ended |
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26 Weeks Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Sales |
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$ |
1,717 |
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$ |
1,907 |
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$ |
3,586 |
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$ |
4,013 |
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Cost of goods sold and occupancy costs |
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1,375 |
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1,493 |
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2,836 |
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3,118 |
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Gross profit |
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342 |
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414 |
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|
750 |
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|
895 |
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Selling, general and administrative expenses |
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309 |
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|
347 |
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|
650 |
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|
712 |
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Asset impairments |
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8 |
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6 |
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14 |
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10 |
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Merger and restructuring expenses, net |
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25 |
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1 |
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45 |
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1 |
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Operating income |
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— |
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|
60 |
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41 |
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|
172 |
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Other income (expense): |
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Interest income |
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2 |
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2 |
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5 |
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4 |
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Interest expense |
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(5 |
) |
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(5 |
) |
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(10 |
) |
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(10 |
) |
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Other income, net |
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(1 |
) |
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|
3 |
|
|
|
(1 |
) |
|
|
5 |
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Income (loss) from continuing operations before income taxes |
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(4 |
) |
|
|
60 |
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|
|
35 |
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|
|
171 |
|
|
Income tax expense |
|
|
— |
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|
|
17 |
|
|
|
8 |
|
|
|
44 |
|
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Net income (loss) from continuing operations |
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(4 |
) |
|
|
43 |
|
|
|
27 |
|
|
|
127 |
|
|
Discontinued operations, net of tax |
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(69 |
) |
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(9 |
) |
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|
(85 |
) |
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(20 |
) |
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Net income (loss) |
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$ |
(73 |
) |
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$ |
34 |
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|
$ |
(58 |
) |
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$ |
107 |
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Basic earnings (loss) per share |
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Continuing operations |
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$ |
(0.12 |
) |
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$ |
1.11 |
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$ |
0.75 |
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$ |
3.22 |
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Discontinued operations |
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(1.93 |
) |
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(0.22 |
) |
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(2.34 |
) |
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|
(0.52 |
) |
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Net basic earnings (loss) per share |
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$ |
(2.05 |
) |
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$ |
0.89 |
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|
$ |
(1.59 |
) |
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$ |
2.70 |
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Diluted earnings (loss) per share |
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Continuing operations |
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$ |
(0.12 |
) |
|
$ |
1.09 |
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|
$ |
0.73 |
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$ |
3.11 |
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Discontinued operations |
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(1.93 |
) |
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(0.22 |
) |
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(2.28 |
) |
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(0.50 |
) |
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Net diluted earnings (loss) per share |
|
$ |
(2.05 |
) |
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$ |
0.87 |
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$ |
(1.55 |
) |
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$ |
2.61 |
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CONSOLIDATED BALANCE SHEETS |
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(In millions, except shares and par value) |
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2024 |
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2023 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
180 |
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$ |
381 |
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Receivables, net |
|
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465 |
|
|
|
485 |
|
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Inventories |
|
|
778 |
|
|
|
765 |
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Prepaid expenses and other current assets |
|
|
38 |
|
|
|
28 |
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Current assets held for sale |
|
|
15 |
|
|
|
80 |
|
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Total current assets |
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|
1,476 |
|
|
|
1,739 |
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Property and equipment, net |
|
|
301 |
|
|
|
297 |
|
|
Operating lease right-of-use assets |
|
|
999 |
|
|
|
983 |
|
|
|
|
|
403 |
|
|
|
403 |
|
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Other intangible assets, net |
|
|
43 |
|
|
|
45 |
|
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Deferred income taxes |
|
|
158 |
|
|
|
142 |
|
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Other assets |
|
|
273 |
|
|
|
278 |
|
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Total assets |
|
$ |
3,653 |
|
|
$ |
3,887 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Trade accounts payable |
|
$ |
779 |
|
|
$ |
755 |
|
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Accrued expenses and other current liabilities |
|
|
840 |
|
|
|
915 |
|
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Income taxes payable |
|
|
5 |
|
|
|
6 |
|
|
Short-term borrowings and current maturities of long-term debt |
|
|
10 |
|
|
|
9 |
|
|
Current liabilities held for sale |
|
|
8 |
|
|
|
12 |
|
|
Total current liabilities |
|
|
1,642 |
|
|
|
1,697 |
|
|
Deferred income taxes and other long-term liabilities |
|
|
113 |
|
|
|
120 |
|
|
Pension and postretirement obligations, net |
|
|
13 |
|
|
|
15 |
|
|
Long-term debt, net of current maturities |
|
|
173 |
|
|
|
165 |
|
|
Operating lease liabilities, net of current portion |
|
|
819 |
|
|
|
789 |
|
|
Total liabilities |
|
|
2,760 |
|
|
|
2,786 |
|
|
Contingencies |
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|
|
|
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Stockholders’ equity: |
|
|
|
|
|
|
||
|
Common stock — authorized 80,000,000 shares of |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
|
2,759 |
|
|
|
2,752 |
|
|
Accumulated other comprehensive loss |
|
|
(117 |
) |
|
|
(114 |
) |
|
Accumulated deficit |
|
|
(370 |
) |
|
|
(312 |
) |
|
|
|
|
(1,380 |
) |
|
|
(1,226 |
) |
|
Total stockholders’ equity |
|
|
893 |
|
|
|
1,101 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
3,653 |
|
|
$ |
3,887 |
|
|
|
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In millions) |
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(Unaudited) |
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26 Weeks Ended |
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|
2024 |
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|
2023 |
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||
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Cash flows from operating activities: |
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|
|
|
|
|
||
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Net income (loss) |
|
$ |
(58 |
) |
|
$ |
107 |
|
|
Loss from discontinued operations, net of tax |
|
|
(85 |
) |
|
|
(20 |
) |
|
Net income from continuing operations |
|
|
27 |
|
|
|
127 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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|
|
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||
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Depreciation and amortization |
|
|
49 |
|
|
|
50 |
|
|
Amortization of debt discount and issuance costs |
|
|
1 |
|
|
|
1 |
|
|
Charges for losses on receivables and inventories |
|
|
12 |
|
|
|
10 |
|
|
Asset impairments |
|
|
14 |
|
|
|
10 |
|
|
Gain on disposition of assets, net |
|
|
(1 |
) |
|
|
(1 |
) |
|
Compensation expense for share-based payments |
|
|
20 |
|
|
|
14 |
|
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
(18 |
) |
|
|
23 |
|
|
Changes in working capital and other operating activities |
|
|
(61 |
) |
|
|
(65 |
) |
|
Net cash provided by operating activities of continuing operations |
|
|
43 |
|
|
|
169 |
|
|
Net cash used in operating activities of discontinued operations |
|
|
(16 |
) |
|
|
(20 |
) |
|
Net cash provided by operating activities |
|
|
27 |
|
|
|
149 |
|
|
Cash flows from investing activities: |
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|
|
|
|
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Capital expenditures |
|
|
(50 |
) |
|
|
(36 |
) |
|
Businesses acquired, net of cash acquired |
|
|
— |
|
|
|
(10 |
) |
|
Proceeds from disposition of assets |
|
|
1 |
|
|
|
101 |
|
|
Settlement of company-owned life insurance policies |
|
|
1 |
|
|
|
1 |
|
|
Net cash provided by (used in) investing activities of continuing operations |
|
|
(48 |
) |
|
|
56 |
|
|
Net cash used in investing activities of discontinued operations |
|
|
(5 |
) |
|
|
(10 |
) |
|
Net cash provided by (used in) investing activities |
|
|
(53 |
) |
|
|
46 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
|
Net payments on long and short-term borrowings |
|
|
(5 |
) |
|
|
(9 |
) |
|
Debt retirement |
|
|
(240 |
) |
|
|
(165 |
) |
|
Debt issuance |
|
|
246 |
|
|
|
165 |
|
|
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(15 |
) |
|
|
(23 |
) |
|
Repurchase of common stock for treasury |
|
|
(153 |
) |
|
|
(231 |
) |
|
Other financing activities |
|
|
(7 |
) |
|
|
— |
|
|
Net cash used in financing activities of continuing operations |
|
|
(174 |
) |
|
|
(263 |
) |
|
Net cash provided by (used in) financing activities of discontinued operations |
|
|
— |
|
|
|
— |
|
|
Net cash used in financing activities |
|
|
(174 |
) |
|
|
(263 |
) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(2 |
) |
|
|
1 |
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
(202 |
) |
|
|
(67 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
395 |
|
|
|
404 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
193 |
|
|
$ |
337 |
|
|
Supplemental information on non-cash investing and financing activities |
|
|
|
|
|
|
||
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
155 |
|
|
$ |
148 |
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
|
8 |
|
|
|
3 |
|
|
Cash interest paid, net of amounts capitalized and non-recourse debt |
|
|
8 |
|
|
|
10 |
|
|
Cash taxes paid, net |
|
|
11 |
|
|
|
19 |
|
|
|
||||
|
BUSINESS UNIT PERFORMANCE |
||||
|
(In millions) |
||||
|
(Unaudited) |
||||
|
ODP Business Solutions Division |
2Q24 |
2Q23 |
YTD24 |
YTD23 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(8)% |
0% |
(8)% |
1% |
|
Division operating income |
|
|
|
|
|
% of total sales |
3% |
4% |
3% |
4% |
|
Office Depot Division |
2Q24 |
2Q23 |
YTD24 |
YTD23 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(12)% |
(13)% |
(13)% |
(10)% |
|
Division operating income |
|
|
|
|
|
% of total sales |
2% |
4% |
4% |
6% |
|
Comparable store sales decrease |
(7)% |
(8)% |
(8)% |
(5)% |
|
Veyer Division |
2Q24 |
2Q23 |
YTD24 |
YTD23 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(11)% |
(7)% |
(12)% |
(7)% |
|
Division operating income |
|
|
|
|
|
% of total sales |
0% |
0% |
1% |
1% |
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 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 and Project Core Restructuring, and the previously planned separation of the consumer business and re-alignment.
(In millions, except per share amounts)
|
Q2 2024 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
8 |
|
|
|
0.5 |
% |
|
$ |
8 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger and restructuring expenses, net |
|
$ |
25 |
|
|
|
1.5 |
% |
|
$ |
25 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
— |
|
|
|
— |
% |
|
$ |
(33 |
) |
|
$ |
33 |
|
(4) |
|
1.9 |
% |
|
Income tax expense |
|
$ |
— |
|
|
|
— |
% |
|
$ |
(9 |
) |
|
$ |
9 |
|
(5) |
|
0.5 |
% |
|
Net income (loss) from continuing operations |
|
$ |
(4 |
) |
|
|
(0.2 |
)% |
|
$ |
(24 |
) |
|
$ |
20 |
|
(6) |
|
1.2 |
% |
|
Earnings (loss) per share from continuing operations (fully diluted) |
|
$ |
(0.12 |
) |
|
|
|
|
$ |
(0.68 |
) |
|
$ |
0.56 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
24 |
|
|
|
1.4 |
% |
|
$ |
— |
|
|
$ |
24 |
|
|
|
1.4 |
% |
|
Q2 2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
6 |
|
|
|
0.3 |
% |
|
$ |
6 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger and restructuring expenses, net |
|
$ |
1 |
|
|
|
0.1 |
% |
|
$ |
1 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
60 |
|
|
|
3.1 |
% |
|
$ |
(7 |
) |
|
$ |
67 |
|
(4) |
|
3.5 |
% |
|
Income tax expense |
|
$ |
17 |
|
|
|
0.9 |
% |
|
$ |
(2 |
) |
|
$ |
19 |
|
(5) |
|
1.0 |
% |
|
Net income from continuing operations |
|
$ |
43 |
|
|
|
2.3 |
% |
|
$ |
(5 |
) |
|
$ |
48 |
|
(6) |
|
2.5 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
1.09 |
|
|
|
|
|
$ |
(0.13 |
) |
|
$ |
1.22 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
25 |
|
|
|
1.3 |
% |
|
$ |
— |
|
|
$ |
25 |
|
|
|
1.3 |
% |
|
YTD 2024 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
14 |
|
|
|
0.4 |
% |
|
$ |
14 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger and restructuring expenses, net |
|
$ |
45 |
|
|
|
1.3 |
% |
|
$ |
45 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
41 |
|
|
|
1.1 |
% |
|
$ |
(59 |
) |
|
$ |
100 |
|
(4) |
|
2.8 |
% |
|
Income tax expense |
|
$ |
8 |
|
|
|
0.2 |
% |
|
$ |
(15 |
) |
|
$ |
23 |
|
(5) |
|
0.6 |
% |
|
Net income from continuing operations |
|
$ |
27 |
|
|
|
0.8 |
% |
|
$ |
(44 |
) |
|
$ |
70 |
|
(6) |
|
2.0 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
0.73 |
|
|
|
|
|
$ |
(1.16 |
) |
|
$ |
1.89 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
49 |
|
|
|
1.4 |
% |
|
$ |
— |
|
|
$ |
49 |
|
|
|
1.4 |
% |
|
YTD 2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
10 |
|
|
|
0.2 |
% |
|
$ |
10 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
1 |
|
|
|
0.0 |
% |
|
$ |
1 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
172 |
|
|
|
4.3 |
% |
|
$ |
(11 |
) |
|
$ |
183 |
|
(4) |
|
4.6 |
% |
|
Income tax expense |
|
$ |
44 |
|
|
|
1.1 |
% |
|
$ |
(3 |
) |
|
$ |
47 |
|
(5) |
|
1.2 |
% |
|
Net income from continuing operations |
|
$ |
127 |
|
|
|
3.2 |
% |
|
$ |
(8 |
) |
|
$ |
135 |
|
(6) |
|
3.4 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
3.11 |
|
|
|
|
|
$ |
(0.19 |
) |
|
$ |
3.30 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
50 |
|
|
|
1.2 |
% |
|
$ |
— |
|
|
$ |
50 |
|
|
|
1.2 |
% |
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted EBITDA: |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
Net income (loss) |
|
$ |
(73 |
) |
|
$ |
34 |
|
|
$ |
(58 |
) |
|
$ |
107 |
|
|
Discontinued operations, net of tax |
|
|
(69 |
) |
|
|
(9 |
) |
|
|
(85 |
) |
|
|
(20 |
) |
|
Net income (loss) from continuing operations |
|
|
(4 |
) |
|
|
43 |
|
|
|
27 |
|
|
|
127 |
|
|
Income tax expense |
|
|
— |
|
|
|
17 |
|
|
|
8 |
|
|
|
44 |
|
|
Income (loss) from continuing operations before income taxes |
|
|
(4 |
) |
|
|
60 |
|
|
|
35 |
|
|
|
171 |
|
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
Interest expense |
|
|
5 |
|
|
|
5 |
|
|
|
10 |
|
|
|
10 |
|
|
Depreciation and amortization |
|
|
24 |
|
|
|
25 |
|
|
|
49 |
|
|
|
50 |
|
|
Charges and credits, pretax (7) |
|
|
33 |
|
|
|
7 |
|
|
|
59 |
|
|
|
11 |
|
|
Adjusted EBITDA |
|
$ |
57 |
|
|
$ |
95 |
|
|
$ |
147 |
|
|
$ |
239 |
|
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 and restructuring 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 and restructuring 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 and restructuring expenses, net, asset impairments (if any). |
|
|
||||||||||||||||
|
GAAP to Non-GAAP Reconciliations |
||||||||||||||||
|
(Unaudited) |
||||||||||||||||
|
|
|
13 Weeks Ended |
|
|
26 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Free cash flow |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
Net cash provided by (used in) operating activities of continuing operations |
|
$ |
(1 |
) |
|
$ |
(8 |
) |
|
$ |
43 |
|
|
$ |
169 |
|
|
Capital expenditures |
|
|
(19 |
) |
|
|
(17 |
) |
|
|
(50 |
) |
|
|
(36 |
) |
|
Change in restricted cash impacting working capital |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
Free cash flow |
|
|
(20 |
) |
|
|
(25 |
) |
|
|
(7 |
) |
|
|
132 |
|
|
Adjustments for certain cash charges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Maximize B2B Restructuring Plan |
|
|
3 |
|
|
|
1 |
|
|
|
5 |
|
|
|
4 |
|
|
Previously planned separation of consumer business and re-alignment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
Project Core |
|
|
22 |
|
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
Adjusted free cash flow |
|
$ |
5 |
|
|
$ |
(24 |
) |
|
$ |
22 |
|
|
$ |
138 |
|
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 |
|
|||
|
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
Office Depot Division: |
|
|
|
|
|
|
|
|
|
|||
|
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stores closed |
|
|
7 |
|
|
|
9 |
|
|
|
22 |
|
|
Total retail stores ( |
|
|
952 |
|
|
|
894 |
|
|
|
— |
|
|
Total square footage (in millions) |
|
|
21.1 |
|
|
|
19.8 |
|
|
|
— |
|
|
Average square footage per store (in thousands) |
|
|
22.1 |
|
|
|
22.1 |
|
|
|
— |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240807246692/en/
CONTACT:
Investor Relations
561-438-4629
Tim.Perrott@theodpcorp.com
Source: