The ODP Corporation Announces Third Quarter 2021 Results
Revenue of
Commitment to Low Cost Model Helped Drive GAAP Operating Income of
Continued Progress on Separation Including Previously Announced CEO Appointments
Repurchased Shares Under Previously Announced Stock Repurchase Authorization
|
Consolidated (in millions, except per share amounts) (1) |
3Q21 |
3Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year period |
(7)% |
|
(5)% |
|
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Operating income (loss) |
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Adjusted operating income (2) |
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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 (2) |
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Adjusted earnings per share from continuing operations (most dilutive) (2) |
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Adjusted EBITDA (2) |
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Operating Cash Flow from continuing operations |
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Free Cash Flow (3) |
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Adjusted Free Cash Flow (4) |
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Third Quarter 2021 Summary(1)(2)(4)
-
Total reported sales of
$2.2 billion , down 7% versus last year, largely driven by 160 fewer retail locations in service compared to last year and lower demand year-over-year in certain product categories related to the COVID-19 pandemic -
GAAP operating income of
$104 million and net income from continuing operations of$73 million , or$1.33 per diluted share, versus$102 million and$34 million , or$0.63 per diluted share, respectively in the prior year -
Adjusted operating income of
$122 million , compared to$136 million in the third quarter of 2020 and adjusted EBITDA of$162 million , compared to$175 million in the third quarter of 2020 -
Adjusted net income from continuing operations of
$96 million , or adjusted diluted earnings per share from continuing operations of$1.76 , versus adjusted net income from continuing operations of$102 million or$1.88 , respectively in the prior year -
Operating cash flow from continuing operations of
$121 million and adjusted free cash flow of$123 million , versus$256 million and$259 million , respectively in the prior year -
$1.7 billion of total available liquidity including$753 million in cash and cash equivalents
“We’re making meaningful progress on all of our initiatives to unlock shareholder value while remaining true to our low-cost model approach and providing value for our customers,” said
“The pace of back-to-office trends was slower during the quarter due to the well-publicized spread of the Delta variant. However, we’re encouraged by the increase in demand for our core products from companies who have returned to the office, highlighting additional growth opportunities in the quarters ahead. We were also pleased to see more students and teachers returning to the classroom during the back-to-school season, driving year-over-year demand in core school supplies and helping us partially offset lower sales in certain product categories previously in stronger demand last year during the earlier stages of the pandemic.”
“Moving forward, our entire team remains focused on unlocking the power of our asset base and creating greater value for all stakeholders in the future. We’re making progress on our plans for separation, and we are advancing our digital transformation efforts as Varis continues to make progress on its technology platform development and rollout plans, placing us in an excellent position to drive future value in the large and growing digital business commerce market,” he added.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the third quarter of 2021 were
|
Sales Breakdown (in millions) |
3Q21 |
3Q20 |
YTD21 |
YTD20 |
|
Product sales |
|
|
|
|
|
Product sales change from prior year |
(8)% |
|
(6)% |
|
|
Service revenues |
|
|
|
|
|
Service revenues change from prior year |
3% |
|
(3)% |
|
|
Total sales |
|
|
|
|
The Company reported operating income of
Adjusted (non-GAAP) Results (1)(2)
Adjusted results for the third quarter of 2021 exclude charges and credits totaling
-
Third quarter of 2021 adjusted EBITDA was
$162 million compared to$175 million in the prior year period. This included adjusted depreciation and amortization(5) of$36 million and$37 million in the third quarters of 2021 and 2020, respectively
-
Third quarter 2021 adjusted operating income was
$122 million compared to$136 million in the third quarter of 2020
-
Third quarter 2021 adjusted net income from continuing operations was
$96 million , or$1.76 per diluted share, compared to$102 million , or$1.88 per diluted share, in the third quarter of 2020
Third Quarter Division Results
Business Solutions Division (BSD)
-
Reported sales were
$1.2 billion in the third quarter of 2021, down 2% compared to the same period last year - Sales generated through its enterprise contract channel increased year-over-year as more business and education customers slowly began to recover from the pandemic. This increase was more than offset by lower sales through the Company’s eCommerce channel compared to the same period last year
- Stronger sales in core categories were offset by lower year-over-year demand for products previously in strong demand during the height of the pandemic, as well as challenges related to supply chain and sourcing impacting certain product categories
- Adjacency categories, including cleaning and breakroom, furniture, technology, and copy and print, remained at 44% of BSD sales, flat year-over-year
-
Operating income was
$41 million in the third quarter of 2021, compared to$45 million in the prior year period
Retail Division
-
Reported sales were
$999 million in the third quarter of 2021, down 13% compared to the prior year period primarily due to 160 fewer retail outlets at the end of the third quarter compared to the prior year, associated with planned closures of underperforming stores. The Company closed 7 retail stores in the quarter and had 1,084 stores at quarter end - Back-to-school activity helped to drive an increase in core school supplies year-over-year, which was offset by lower sales in certain product categories that were in very strong demand last year during the pandemic, including personal protective equipment (PPE). Additionally, supply chain and sourcing challenges in certain product categories, including technology and PC’s, negatively impacted sales relative to last year
-
Operating income was
$107 million in the third quarter of 2021, down 10% over the same period last year; As a percentage of sales, this performance represented a 30 basis point margin improvement as the Company continued to execute its low cost model approach
Spin-Off Progress and Plan for Separation
The Company continues to make progress on its plans to separate ODP into two, independent, publicly-traded companies, making advancements in all areas of the separation including organizational structure, operating and supply chain mechanics, IT support, and on the anticipated market-based commercial agreements between the companies. During the quarter, the Company announced the selection of the chief executive officers of both companies, which would become effective upon completion of the spin-off, as well as the company names for each of the two companies.
It was announced that
As previously announced,
The separation is expected to allow
Digital Transformation Initiatives
Aligned with its strategy to drive growth in high value industry segments, the Company continued to make progress on its digital transformation initiatives during the quarter. Varis, a newly formed technology company focused on filling the growing demand for a modern, trusted, digital B2B platform that transforms how businesses buy and sell, continued to advance its development. These accomplishments included integrating and bringing the capabilities of its leading P2P software platform, BuyerQuest, to new customers, as well as continuing to make progress on its technology development. The Company is also advancing its collaboration with Microsoft and remains focused on bringing BuyerQuest’s value proposition to Microsoft’s Business Central customers in the future.
Balance Sheet and Cash Flow
As of
For the third quarter of 2021, cash provided by operating activities from continuing operations was
Capital expenditures in the third quarter of 2021 were
As part of the ongoing commitment and support of its strategic initiatives, the Company repurchased
|
(1) |
On |
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(2) |
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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(3) |
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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(4) |
As used in this release, Adjusted Free Cash Flow is defined as Free Cash Flow excluding cash charges associated with the Company’s Maximize B2B Restructuring, the Business Acceleration Program, and the planned separation of the consumer business. Adjusted Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com. |
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(5) |
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
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CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) (Unaudited) |
||||||||||||||||
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|
|
13 Weeks Ended |
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|
39 Weeks Ended |
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||||
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|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,993 |
|
|
$ |
2,166 |
|
|
$ |
5,890 |
|
|
$ |
6,238 |
|
|
Services |
|
|
186 |
|
|
|
181 |
|
|
|
533 |
|
|
|
549 |
|
|
Total sales |
|
|
2,179 |
|
|
|
2,347 |
|
|
|
6,423 |
|
|
|
6,787 |
|
|
Cost of goods sold and occupancy costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,560 |
|
|
|
1,688 |
|
|
|
4,660 |
|
|
|
4,935 |
|
|
Services |
|
|
115 |
|
|
|
112 |
|
|
|
332 |
|
|
|
351 |
|
|
Total cost of goods sold and occupancy costs |
|
|
1,675 |
|
|
|
1,800 |
|
|
|
4,992 |
|
|
|
5,286 |
|
|
Gross profit |
|
|
504 |
|
|
|
547 |
|
|
|
1,431 |
|
|
|
1,501 |
|
|
Selling, general and administrative expenses |
|
|
382 |
|
|
|
411 |
|
|
|
1,173 |
|
|
|
1,251 |
|
|
Asset impairments |
|
|
5 |
|
|
|
10 |
|
|
|
18 |
|
|
|
175 |
|
|
Merger, restructuring and other operating expenses, net |
|
|
13 |
|
|
|
24 |
|
|
|
37 |
|
|
|
89 |
|
|
Operating income (loss) |
|
|
104 |
|
|
|
102 |
|
|
|
203 |
|
|
|
(14 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
Interest expense |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
(20 |
) |
|
|
(34 |
) |
|
Loss on extinguishment and modification of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
Other income, net |
|
|
3 |
|
|
|
2 |
|
|
|
19 |
|
|
|
5 |
|
|
Income (loss) from continuing operations before income taxes |
|
|
100 |
|
|
|
98 |
|
|
|
202 |
|
|
|
(52 |
) |
|
Income tax expense |
|
|
27 |
|
|
|
64 |
|
|
|
47 |
|
|
|
42 |
|
|
Net income (loss) from continuing operations |
|
|
73 |
|
|
|
34 |
|
|
|
155 |
|
|
|
(94 |
) |
|
Discontinued operations, net of tax |
|
|
28 |
|
|
|
23 |
|
|
|
(89 |
) |
|
|
(243 |
) |
|
Net income (loss) |
|
$ |
101 |
|
|
$ |
57 |
|
|
$ |
66 |
|
|
$ |
(337 |
) |
|
Basic earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
1.38 |
|
|
$ |
0.64 |
|
|
$ |
2.89 |
|
|
$ |
(1.78 |
) |
|
Discontinued operations |
|
|
0.54 |
|
|
|
0.43 |
|
|
|
(1.65 |
) |
|
|
(4.62 |
) |
|
Net basic earnings (loss) per share |
|
$ |
1.92 |
|
|
$ |
1.07 |
|
|
$ |
1.24 |
|
|
$ |
(6.40 |
) |
|
Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
1.33 |
|
|
$ |
0.63 |
|
|
$ |
2.79 |
|
|
$ |
(1.78 |
) |
|
Discontinued operations |
|
|
0.52 |
|
|
|
0.41 |
|
|
|
(1.60 |
) |
|
|
(4.62 |
) |
|
Net diluted earnings (loss) per share |
|
$ |
1.85 |
|
|
$ |
1.04 |
|
|
$ |
1.19 |
|
|
$ |
(6.40 |
) |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except shares and par value) |
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|
|
|
|
|
|
|
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
753 |
|
|
$ |
729 |
|
|
Receivables, net |
|
|
482 |
|
|
|
442 |
|
|
Inventories |
|
|
841 |
|
|
|
916 |
|
|
Prepaid expenses and other current assets |
|
|
56 |
|
|
|
49 |
|
|
Current assets held for sale |
|
|
744 |
|
|
|
219 |
|
|
Total current assets |
|
|
2,876 |
|
|
|
2,355 |
|
|
Property and equipment, net |
|
|
492 |
|
|
|
542 |
|
|
Operating lease right-of-use assets |
|
|
948 |
|
|
|
1,107 |
|
|
|
|
|
462 |
|
|
|
394 |
|
|
Other intangible assets, net |
|
|
57 |
|
|
|
57 |
|
|
Deferred income taxes |
|
|
213 |
|
|
|
218 |
|
|
Other assets |
|
|
303 |
|
|
|
319 |
|
|
Noncurrent assets held for sale |
|
|
— |
|
|
|
622 |
|
|
Total assets |
|
$ |
5,351 |
|
|
$ |
5,614 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
863 |
|
|
$ |
857 |
|
|
Accrued expenses and other current liabilities |
|
|
1,020 |
|
|
|
1,050 |
|
|
Income taxes payable |
|
|
6 |
|
|
|
10 |
|
|
Short-term borrowings and current maturities of long-term debt |
|
|
20 |
|
|
|
24 |
|
|
Current liabilities held for sale |
|
|
272 |
|
|
|
152 |
|
|
Total current liabilities |
|
|
2,181 |
|
|
|
2,093 |
|
|
Deferred income taxes and other long-term liabilities |
|
|
169 |
|
|
|
172 |
|
|
Pension and postretirement obligations, net |
|
|
33 |
|
|
|
42 |
|
|
Long-term debt, net of current maturities |
|
|
333 |
|
|
|
354 |
|
|
Operating lease liabilities |
|
|
773 |
|
|
|
935 |
|
|
Noncurrent liabilities held for sale |
|
|
— |
|
|
|
138 |
|
|
Total liabilities |
|
|
3,489 |
|
|
|
3,734 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock — authorized 80,000,000 shares of
shares — 64,699,340 at
and 52,694,062 at |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
|
2,711 |
|
|
|
2,675 |
|
|
Accumulated other comprehensive loss |
|
|
(30 |
) |
|
|
(32 |
) |
|
Accumulated deficit |
|
|
(343 |
) |
|
|
(409 |
) |
|
shares at |
|
|
(477 |
) |
|
|
(355 |
) |
|
Total stockholders’ equity |
|
|
1,862 |
|
|
|
1,880 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
5,351 |
|
|
$ |
5,614 |
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) |
||||||||
|
|
|
39 Weeks Ended |
|
|||||
|
|
|
|
|
|
|
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
66 |
|
|
$ |
(337 |
) |
|
Loss from discontinued operations, net of tax |
|
|
(89 |
) |
|
|
(243 |
) |
|
Net income (loss) from continuing operations |
|
|
155 |
|
|
|
(94 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
110 |
|
|
|
119 |
|
|
Charges for losses on receivables and inventories |
|
|
17 |
|
|
|
26 |
|
|
Asset impairments |
|
|
18 |
|
|
|
175 |
|
|
(Gain) loss on disposition of assets, net |
|
|
(3 |
) |
|
|
5 |
|
|
Loss on extinguishment and modification of debt |
|
|
— |
|
|
|
12 |
|
|
Compensation expense for share-based payments |
|
|
26 |
|
|
|
28 |
|
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
5 |
|
|
|
11 |
|
|
Changes in working capital and other operating activities |
|
|
(72 |
) |
|
|
128 |
|
|
Net cash provided by operating activities of continuing operations |
|
|
256 |
|
|
|
410 |
|
|
Net cash provided by (used in) operating activities of discontinued operations |
|
|
(10 |
) |
|
|
79 |
|
|
Net cash provided by operating activities |
|
|
246 |
|
|
|
489 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(47 |
) |
|
|
(49 |
) |
|
Businesses acquired, net of cash acquired |
|
|
(29 |
) |
|
|
(28 |
) |
|
Proceeds from collection of notes receivable |
|
|
— |
|
|
|
818 |
|
|
Proceeds from disposition of assets |
|
|
4 |
|
|
|
1 |
|
|
Settlement of company-owned life insurance policies |
|
|
21 |
|
|
|
9 |
|
|
Net cash provided by (used in) investing activities of continuing operations |
|
|
(51 |
) |
|
|
751 |
|
|
Net cash used in investing activities of discontinued operations |
|
|
(3 |
) |
|
|
(5 |
) |
|
Net cash provided by (used in) investing activities |
|
|
(54 |
) |
|
|
746 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Net payments on long and short-term borrowings |
|
|
(20 |
) |
|
|
(337 |
) |
|
Debt retirement |
|
|
— |
|
|
|
(1,196 |
) |
|
Debt issuance |
|
|
— |
|
|
|
400 |
|
|
Cash dividends on common stock |
|
|
— |
|
|
|
(13 |
) |
|
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(25 |
) |
|
|
(5 |
) |
|
Repurchase of common stock for treasury |
|
|
(122 |
) |
|
|
(30 |
) |
|
Other financing activities |
|
|
(1 |
) |
|
|
(7 |
) |
|
Net cash used in financing activities of continuing operations |
|
|
(168 |
) |
|
|
(1,188 |
) |
|
Net cash used in financing activities of discontinued operations |
|
|
— |
|
|
|
— |
|
|
Net cash used in financing activities |
|
|
(168 |
) |
|
|
(1,188 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
— |
|
|
|
(4 |
) |
|
Net increase in cash and cash equivalents |
|
|
24 |
|
|
|
43 |
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
729 |
|
|
|
700 |
|
|
Cash and cash equivalents at end of period – continuing operations |
|
$ |
753 |
|
|
$ |
743 |
|
|
Supplemental information on non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
$ |
3 |
|
|
$ |
22 |
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
69 |
|
|
|
85 |
|
|
Business acquired in exchange for common stock issuance |
|
|
35 |
|
|
|
— |
|
|
BUSINESS UNIT PERFORMANCE (In millions) (Unaudited) |
||||
|
Business Solutions Division (in millions) |
3Q21 |
3Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year |
(2)% |
|
(3)% |
|
|
Division operating income |
|
|
|
|
|
Division operating income margin |
3.5% |
3.8% |
2.6% |
2.8% |
|
Retail Division (in millions) |
3Q21 |
3Q20 |
YTD21 |
YTD20 |
|
Sales |
|
|
|
|
|
Sales change from prior year |
(13)% |
|
(8)% |
|
|
Division operating income |
|
|
|
|
|
Division operating income margin |
10.7% |
10.4% |
8.5% |
7.0% |
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, the Business Acceleration Program, and the planned separation of the consumer business.
|
(In millions, except per share amounts) |
||||||||||||||||||||
|
Q3 2021 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
|
Assets impairments |
|
$ |
5 |
|
|
|
0.2 |
% |
|
$ |
5 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
13 |
|
|
|
0.6 |
% |
|
$ |
13 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
104 |
|
|
|
4.8 |
% |
|
$ |
(18 |
) |
|
$ |
122 |
|
(6) |
|
5.6 |
% |
|
Income tax expense |
|
$ |
27 |
|
|
|
1.2 |
% |
|
$ |
4 |
|
|
$ |
23 |
|
(8) |
|
1.1 |
% |
|
Net income from continuing operations |
|
$ |
73 |
|
|
|
3.4 |
% |
|
$ |
(22 |
) |
|
$ |
96 |
|
(9) |
|
4.4 |
% |
|
Earnings per share from continuing operations (most dilutive) |
|
$ |
1.33 |
|
|
|
|
|
|
$ |
(0.43 |
) |
|
$ |
1.76 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
36 |
|
|
|
1.7 |
% |
|
$ |
— |
|
|
$ |
36 |
|
(10) |
|
1.7 |
% |
|
Q3 2020 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
|
Assets impairments |
|
$ |
10 |
|
|
|
0.4 |
% |
|
$ |
10 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
24 |
|
|
|
1.0 |
% |
|
$ |
24 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
102 |
|
|
|
4.3 |
% |
|
$ |
(34 |
) |
|
$ |
136 |
|
(6) |
|
5.8 |
% |
|
Income tax expense |
|
$ |
64 |
|
|
|
2.7 |
% |
|
$ |
34 |
|
|
$ |
30 |
|
(8) |
|
1.3 |
% |
|
Net income from continuing operations |
|
$ |
34 |
|
|
|
1.4 |
% |
|
$ |
(68 |
) |
|
$ |
102 |
|
(9) |
|
4.3 |
% |
|
Earnings per share from continuing operations (most dilutive) |
|
$ |
0.63 |
|
|
|
|
|
|
$ |
(1.25 |
) |
|
$ |
1.88 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
39 |
|
|
|
1.7 |
% |
|
$ |
2 |
|
|
$ |
37 |
|
(10) |
|
1.6 |
% |
|
GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||||||
|
YTD 2021 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
|
Assets impairments |
|
$ |
18 |
|
|
|
0.3 |
% |
|
$ |
18 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
37 |
|
|
|
0.6 |
% |
|
$ |
37 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
203 |
|
|
|
3.2 |
% |
|
$ |
(55 |
) |
|
$ |
258 |
|
(6) |
|
4.0 |
% |
|
Other income, net |
|
$ |
19 |
|
|
|
0.3 |
% |
|
$ |
7 |
|
|
$ |
12 |
|
(7) |
|
0.2 |
% |
|
Income tax expense |
|
$ |
47 |
|
|
|
0.7 |
% |
|
$ |
(6 |
) |
|
$ |
53 |
|
(8) |
|
0.8 |
% |
|
Net income from continuing operations |
|
$ |
155 |
|
|
|
2.4 |
% |
|
$ |
(42 |
) |
|
$ |
197 |
|
(9) |
|
3.1 |
% |
|
Earnings per share from continuing operations (most dilutive) |
|
$ |
2.79 |
|
|
|
|
|
|
$ |
(0.76 |
) |
|
$ |
3.55 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
110 |
|
|
|
1.7 |
% |
|
$ |
2 |
|
|
$ |
108 |
|
(10) |
|
1.7 |
% |
|
YTD 2020 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
|
Assets impairments |
|
$ |
175 |
|
|
|
2.6 |
% |
|
$ |
175 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
89 |
|
|
|
1.3 |
% |
|
$ |
89 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income (loss) |
|
$ |
(14 |
) |
|
|
(0.2 |
)% |
|
$ |
(264 |
) |
|
$ |
250 |
|
(6) |
|
3.7 |
% |
|
Loss on extinguishment and modification of debt |
|
$ |
(12 |
) |
|
|
(0.2 |
)% |
|
$ |
(12 |
) |
|
$ |
— |
|
|
|
— |
% |
|
Income tax expense |
|
$ |
42 |
|
|
|
0.6 |
% |
|
$ |
(22 |
) |
|
$ |
64 |
|
(8) |
|
0.9 |
% |
|
Net income (loss) from continuing operations |
|
$ |
(94 |
) |
|
|
(1.4 |
)% |
|
$ |
(254 |
) |
|
$ |
160 |
|
(9) |
|
2.4 |
% |
|
Earnings (loss) per share from continuing operations (most dilutive) |
|
$ |
(1.78 |
) |
|
|
|
|
|
$ |
(4.75 |
) |
|
$ |
2.97 |
|
(9) |
|
|
|
|
Depreciation and amortization |
|
$ |
119 |
|
|
|
1.8 |
% |
|
$ |
4 |
|
|
$ |
115 |
|
(10) |
|
1.7 |
% |
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted EBITDA: |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net income (loss) |
|
$ |
101 |
|
|
$ |
57 |
|
|
$ |
66 |
|
|
$ |
(337 |
) |
|
Discontinued operations, net of tax |
|
|
28 |
|
|
|
23 |
|
|
|
(89 |
) |
|
|
(243 |
) |
|
Net income (loss) from continuing operations |
|
|
73 |
|
|
|
34 |
|
|
|
155 |
|
|
|
(94 |
) |
|
Income tax expense |
|
|
27 |
|
|
|
64 |
|
|
|
47 |
|
|
|
42 |
|
|
Income (loss) from continuing operations before income taxes |
|
|
100 |
|
|
|
98 |
|
|
|
202 |
|
|
|
(52 |
) |
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
Interest expense |
|
|
7 |
|
|
|
6 |
|
|
|
20 |
|
|
|
34 |
|
|
Adjusted depreciation and amortization (10) |
|
|
36 |
|
|
|
37 |
|
|
|
108 |
|
|
|
115 |
|
|
Charges and credits, pretax (11) |
|
|
18 |
|
|
|
34 |
|
|
|
48 |
|
|
|
276 |
|
|
Adjusted EBITDA |
|
$ |
162 |
|
|
$ |
175 |
|
|
$ |
378 |
|
|
$ |
371 |
|
|
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. |
||
|
(6) |
Adjusted operating income (loss) for all periods presented herein exclude merger, restructuring and other operating expenses, net, and asset impairments (if any). |
|
|
(7) |
Adjusted other income, net year-to-date 2021 excludes credits for the release of certain liabilities of our former European Business of |
|
|
(8) |
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. |
|
|
(9) |
Adjusted net income from continuing operations and adjusted earnings per share from continuing operations (most dilutive) for all periods presented exclude merger, restructuring and other operating expenses, net, asset impairments (if any), European Business liabilities release (if any), loss on extinguishment and modification of debt (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), European Business liabilities release (if any), and loss on extinguishment and modification of debt (if any). |
|
|
GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Free cash flow |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net cash provided by operating activities from continuing operations |
|
$ |
121 |
|
|
$ |
256 |
|
|
$ |
256 |
|
|
$ |
410 |
|
|
Capital expenditures |
|
|
(19 |
) |
|
|
(13 |
) |
|
|
(47 |
) |
|
|
(49 |
) |
|
Free cash flow |
|
|
102 |
|
|
|
243 |
|
|
|
209 |
|
|
|
361 |
|
|
Adjustments for certain cash charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximize B2B Restructuring Plan |
|
|
2 |
|
|
|
12 |
|
|
|
17 |
|
|
|
15 |
|
|
Business Acceleration Program |
|
|
— |
|
|
|
4 |
|
|
|
3 |
|
|
|
26 |
|
|
Planned separation of consumer business |
|
|
19 |
|
|
|
— |
|
|
|
19 |
|
|
|
— |
|
|
Adjusted free cash flow |
|
$ |
123 |
|
|
$ |
259 |
|
|
$ |
248 |
|
|
$ |
402 |
|
|
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) |
||||||||||||
|
|
|
Q3 |
|
|
Q3 |
|
|
YTD |
|
|||
|
|
|
2020 |
|
|
2021 |
|
|
2021 |
|
|||
|
Retail Division: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stores closed |
|
|
16 |
|
|
|
7 |
|
|
|
70 |
|
|
Total retail stores ( |
|
|
1,244 |
|
|
|
1,084 |
|
|
|
— |
|
|
Total square footage (in millions) |
|
|
27.6 |
|
|
|
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/20211103005314/en/
Investor Relations
561-438-4629
Tim.Perrott@officedepot.com
Media Relations
561-438-1594
Danny.Jovic@officedepot.com
Source: