The ODP Corporation Announces Third Quarter 2023 Results
Low-Cost Business Model and Disciplined Capital Allocation Drive Solid Operating Performance and Strong EPS Growth
Third Quarter Revenue of
GAAP Operating Income of
Repurchased
Updates Full-Year 2023 Guidance
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Consolidated (in millions, except per share amounts) |
3Q23 |
3Q22 |
YTD23 |
YTD22 |
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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 |
(8)% |
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(6)% |
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Operating income |
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Adjusted operating income (1) |
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Net income from continuing operations |
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Diluted earnings 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 (fully diluted) (1) |
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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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Third Quarter 2023 Summary(1)(2)(3)
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Total reported sales of
$2.0 billion , down 8% versus the prior year, primarily due to lower sales in itsOffice Depot consumer division, largely driven by 71 fewer retail locations in service compared to the prior year, as well as lower retail and online consumer traffic and transactions -
GAAP operating income of
$91 million and net income from continuing operations of$70 million , or$1.79 per diluted share, versus$84 million and$67 million , respectively, or$1.36 per diluted share, in the prior year -
Adjusted operating income of
$95 million , flat compared to the third quarter of 2022; adjusted EBITDA of$125 million , compared to$131 million in the third quarter of 2022 -
Adjusted net income from continuing operations of
$73 million , or adjusted diluted earnings per share from continuing operations of$1.88 , versus$73 million or$1.48 , respectively, in the prior year -
Operating cash flow from continuing operations of
$112 million and adjusted free cash flow of$89 million , versus$163 million and$160 million , respectively, in the prior year -
Repurchased 659 thousand shares at a cost of
$32 million in the third quarter of 2023 -
$1.2 billion of total available liquidity including$384 million in cash and cash equivalents at quarter end
“I am extremely impressed seeing the day-to-day commitment and exceptional execution from our team as I fulfill Chief Executive Officer
“We continue to make progress across our four business units as we execute our three horizons strategy. This included expanding margins at ODP Business Solutions, new product testing and category expansion at
“Our shareholder value creation formula, which integrates operational excellence with a shareholder-focused capital allocation plan, including the repurchase of approximately
“As we look ahead, we anticipate the macroeconomic environment to remain challenging throughout the remainder of the year. However, we are confident in our position of strength and will continue to focus on driving value for shareholders through our low-cost business model, leveraging our multiple routes to market, and continuing with our disciplined capital allocation,” Vassalluzzo concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the third quarter of 2023 were
The Company reported operating income of
Adjusted (non-GAAP) Results(1)
Adjusted results for the third quarter of 2023 exclude charges and credits totaling
-
Third quarter of 2023 adjusted EBITDA was
$125 million compared to$131 million in the prior year period. This included depreciation and amortization of$28 million and$32 million in the third quarters of 2023 and 2022, respectively -
Third quarter of 2023 adjusted operating income was
$95 million , flat compared to the third quarter of 2022 -
Third quarter of 2023 adjusted net income from continuing operations was
$73 million , or$1.88 per diluted share, compared to$73 million , or$1.48 per diluted share, in the third quarter of 2022, an increase of 27% 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 in excess of
-
Reported sales were
$1.0 billion in the third quarter of 2023, down approximately 3% compared to the same period last year primarily related to lower sales of technology products and weaker macroeconomic conditions - Stronger sales in cleaning and breakroom supplies were more than offset by lower sales of technology and core supplies
- Total adjacency category sales, including cleaning and breakroom, furniture, technology, and copy and print, were 44% of total ODP Business Solutions’ sales
- Continued strong pipeline and net new business customer additions
-
Operating income was
$56 million in the third quarter of 2023, up 17% over the same period last year, related primarily to higher gross margins. As a percentage of sales, operating income margin was 6%, up 90 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
-
Reported sales were
$1.0 billion in the third quarter of 2023, down 12% compared to the prior year period partially due to 71 fewer retail outlets in service associated with planned store closures, as well as lower demand relative to last year in certain product categories, softer back-to-school seasonal demand, and lower online sales. The Company closed 14 retail stores in the quarter and had 938 stores at quarter end. Sales were down approximately 6% on a comparable store basis - Stronger sales of copy and print services were more than offset by lower sales in supplies, technology, and other categories
- Store and online traffic were lower year over year due to a greater percentage of customers having returned to the office post pandemic, as well as weaker macroeconomic activity
-
Operating income was
$66 million in the third quarter of 2023, compared to operating income of$83 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 7%, flat compared to the same period last year.
Veyer Division
Veyer is a supply chain, distribution, procurement and global sourcing operation with over 35 years of experience and proven leadership, supporting
-
In the third quarter of 2023, Veyer provided strong support for its internal customers, ODP Business Solutions and
Office Depot , as well as for its third-party customers, generating sales of$1.3 billion -
Operating income was
$10 million in the third quarter of 2023, up from$9 million in the prior year period related to the favorable impacts of higher sales to external third parties and lower product costing -
In the quarter relative to last year, sales and EBITDA generated from third party customers was up 57% and 119% respectively, resulting in sales of approximately
$11 million and EBITDA of$3 million in the quarter
Varis Division
Varis is a tech-enabled B2B indirect procurement marketplace launched in the fourth quarter of 2022, which provides buyers and suppliers a seamless way to transact through the platform’s consumer-like buying experience and advanced spend management tools
- Successfully launched the platform in the fourth quarter of 2022; adding and on-boarding new customers, incorporating feedback, and adding new features and capabilities to the platform
-
Varis generated revenues in the third quarter of 2023 of
$2 million , flat compared to the third quarter of 2022 -
Operating loss was
$17 million , flat compared to the third quarter of 2022, as the division continued to enhance its platform and onboard new customers
Share Repurchases
The Company continued to execute under its previously announced
The number of shares to be repurchased 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 current 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 third quarter of 2023, cash generated by operating activities of continuing operations was
Capital expenditures in the third quarter of 2023 and 2022 were
“I would like to recognize our entire team for their commitment and dedication in managing inventory and working capital, which has resulted in another quarter of strong cash flow generation,” said
Updated 2023 Expectations
“Our team’s unwavering commitment to delivering value is evident in our compelling customer proposition, strong free cash flow generation, and strategic capital allocation for the benefit of our shareholders," highlighted Vassalluzzo. "While we acknowledge the influence of the challenging macroeconomic environment on consumer and business activity, we remain steadfast in our dedication to driving long-term value within our business through effective execution of our three horizons strategy.”
The Company’s full year guidance for 2023 included in this release includes non-GAAP measures, such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Earnings per Share and Adjusted Free Cash Flow. These measures exclude charges or credits not indicative of core operations, which may include but not be limited to merger integration expenses, restructuring charges, acquisition-related costs, executive transition costs, asset impairments and other significant items that currently cannot be predicted without unreasonable efforts. The exact amount of these charges or credits are not currently determinable but may be significant. Accordingly, the Company is unable to provide equivalent GAAP measures or reconciliations from GAAP to non-GAAP for these financial measures without unreasonable effort.
The Company is updating its full year guidance for 2023 as follows:
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Previous 2023 Guidance |
Updated 2023 Guidance |
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Sales |
Approximately |
Revised to |
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Adjusted EBITDA |
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Affirmed |
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Adjusted Operating Income |
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Revised to |
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Adjusted Earnings per Share(*) |
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Revised to |
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Adjusted Free Cash Flow(**) |
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Affirmed |
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Capital Expenditures |
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Affirmed |
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*Adjusted Earnings per Share (EPS) guidance for 2023 includes tax benefits related to R&D and employee-related tax credits and includes expected impact from share repurchases |
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**Adjusted Free Cash Flow is defined as cash flows from operating activities less capital expenditures excluding cash charges associated with the Company’s Maximize B2B Restructuring and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment |
“Our year-to-date performance speaks to the resilience of our team and the strength of our low-cost business model and capital allocation approach,” said Scaglione. “While the weaker macroeconomic conditions have impacted the level of consumer and business activity creating top-line headwinds, our continued focus on operational excellence has us well positioned to continue driving strong operating results as we close out the year. Our updated guidance assumes a consistent overall macroeconomic environment and reflects our year-to-date revenue trends, while increasing our outlook for adjusted operating income and adjusted EPS.
Our increased adjusted EPS outlook also assumes a lower full-year effective tax rate driven by the execution of certain tax credits, lower than anticipated interest expense associated with projected intra-quarter ABL borrowings, and the impact from our continued share buyback activity,” Scaglione added.
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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 Maximize B2B Restructuring, and expenses incurred in connection with our previously planned separation of the consumer business and re-alignment. 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, the potential impacts on our business due to the unknown severity and duration of the COVID-19 pandemic, or state other information relating to, among other things, the Company, based on current beliefs and assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “expectations”, “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “propose” or other similar words, phrases or expressions, or other variations of such words. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of the Company’s control. There can be no assurances that the Company will realize these expectations or that these beliefs will prove correct, and therefore investors and stakeholders should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, highly competitive office products market and failure to differentiate the Company from other office supply resellers or respond to decline in general office supplies sales or to shifting consumer demands; competitive pressures on the Company’s sales and pricing; the risk that the Company is unable to transform the business into a service-driven, B2B platform that such a strategy will not result in the benefits anticipated; the risk that the Company will not be able to achieve the expected benefits of its strategic plans, including its strategic shift to maintain all of its businesses under common ownership; the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute the Maximize B2B Restructuring Plan successfully or that such plan will not result in the benefits anticipated; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited-source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs and lost revenue; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive
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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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39 Weeks Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Sales |
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$ |
2,009 |
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$ |
2,172 |
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$ |
6,025 |
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$ |
6,385 |
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Cost of goods sold and occupancy costs |
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1,535 |
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|
1,686 |
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4,655 |
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4,983 |
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Gross profit |
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474 |
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486 |
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1,370 |
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|
1,402 |
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Selling, general and administrative expenses |
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379 |
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|
391 |
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1,123 |
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1,164 |
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Asset impairments |
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3 |
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3 |
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13 |
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8 |
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Merger, restructuring and other operating expenses, net |
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1 |
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8 |
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2 |
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42 |
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Operating income |
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91 |
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84 |
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232 |
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188 |
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Other income (expense): |
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Interest income |
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3 |
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1 |
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7 |
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3 |
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Interest expense |
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(5 |
) |
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(1 |
) |
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(15 |
) |
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(10 |
) |
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Other income, net |
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3 |
|
|
|
5 |
|
|
|
8 |
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|
9 |
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Income from continuing operations before income taxes |
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|
92 |
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|
89 |
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|
232 |
|
|
|
190 |
|
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Income tax expense |
|
|
22 |
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|
|
22 |
|
|
|
56 |
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|
48 |
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Net income from continuing operations |
|
|
70 |
|
|
|
67 |
|
|
|
176 |
|
|
|
142 |
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Discontinued operations, net of tax |
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|
— |
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|
|
— |
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|
|
— |
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|
|
7 |
|
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Net income |
|
$ |
70 |
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|
$ |
67 |
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|
$ |
176 |
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|
$ |
149 |
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Basic earnings (loss) per share |
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Continuing operations |
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$ |
1.83 |
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$ |
1.39 |
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$ |
4.52 |
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$ |
2.92 |
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Discontinued operations |
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— |
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(0.01 |
) |
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— |
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|
0.14 |
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Net basic earnings (loss) per share |
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$ |
1.83 |
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$ |
1.38 |
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$ |
4.52 |
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$ |
3.06 |
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Diluted earnings (loss) per share |
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Continuing operations |
|
$ |
1.79 |
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$ |
1.36 |
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|
$ |
4.38 |
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|
$ |
2.84 |
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Discontinued operations |
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— |
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(0.01 |
) |
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— |
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|
0.13 |
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Net diluted earnings (loss) per share |
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$ |
1.79 |
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$ |
1.35 |
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$ |
4.38 |
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$ |
2.97 |
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CONSOLIDATED BALANCE SHEETS |
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(In millions, except shares and par value) |
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2023 |
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2022 |
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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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$ |
384 |
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$ |
403 |
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Receivables, net |
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|
542 |
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|
536 |
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Inventories |
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|
782 |
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|
828 |
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Prepaid expenses and other current assets |
|
|
37 |
|
|
|
36 |
|
|
Current assets held for sale |
|
|
9 |
|
|
|
107 |
|
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Total current assets |
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1,754 |
|
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|
1,910 |
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Property and equipment, net |
|
|
352 |
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|
352 |
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Operating lease right-of-use assets |
|
|
951 |
|
|
|
874 |
|
|
|
|
|
468 |
|
|
|
464 |
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Other intangible assets, net |
|
|
42 |
|
|
|
46 |
|
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Deferred income taxes |
|
|
141 |
|
|
|
182 |
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Other assets |
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|
272 |
|
|
|
321 |
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Total assets |
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$ |
3,980 |
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$ |
4,149 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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||
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Trade accounts payable |
|
$ |
818 |
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$ |
821 |
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Accrued expenses and other current liabilities |
|
|
930 |
|
|
|
1,005 |
|
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Income taxes payable |
|
|
3 |
|
|
|
17 |
|
|
Short-term borrowings and current maturities of long-term debt |
|
|
9 |
|
|
|
16 |
|
|
Total current liabilities |
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|
1,760 |
|
|
|
1,859 |
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Deferred income taxes and other long-term liabilities |
|
|
118 |
|
|
|
122 |
|
|
Pension and postretirement obligations, net |
|
|
16 |
|
|
|
16 |
|
|
Long-term debt, net of current maturities |
|
|
164 |
|
|
|
172 |
|
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Operating lease liabilities |
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|
767 |
|
|
|
693 |
|
|
Total liabilities |
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|
2,825 |
|
|
|
2,862 |
|
|
Commitments and contingencies |
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Stockholders’ equity: |
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||
|
Common stock — authorized 80,000,000 shares of |
|
|
1 |
|
|
|
1 |
|
|
Additional paid-in capital |
|
|
2,744 |
|
|
|
2,742 |
|
|
Accumulated other comprehensive loss |
|
|
(121 |
) |
|
|
(77 |
) |
|
Accumulated deficit |
|
|
(275 |
) |
|
|
(451 |
) |
|
|
|
|
(1,194 |
) |
|
|
(928 |
) |
|
Total stockholders’ equity |
|
|
1,155 |
|
|
|
1,287 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
3,980 |
|
|
$ |
4,149 |
|
|
|
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In millions) |
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(Unaudited) |
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|
39 Weeks Ended |
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|
|
2023 |
|
|
2022 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
||
|
Net income |
|
$ |
176 |
|
|
$ |
149 |
|
|
Income from discontinued operations, net of tax |
|
|
— |
|
|
|
7 |
|
|
Net income from continuing operations |
|
|
176 |
|
|
|
142 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
|
Depreciation and amortization |
|
|
87 |
|
|
|
100 |
|
|
Amortization of debt discount and issuance costs |
|
|
1 |
|
|
|
— |
|
|
Charges for losses on receivables and inventories |
|
|
16 |
|
|
|
15 |
|
|
Asset impairments |
|
|
13 |
|
|
|
8 |
|
|
Gain on disposition of assets, net |
|
|
(3 |
) |
|
|
(4 |
) |
|
Compensation expense for share-based payments |
|
|
28 |
|
|
|
31 |
|
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
39 |
|
|
|
33 |
|
|
Changes in working capital and other operating activities |
|
|
(96 |
) |
|
|
(246 |
) |
|
Net cash provided by operating activities of continuing operations |
|
|
261 |
|
|
|
79 |
|
|
Net cash provided by (used in) operating activities of discontinued operations |
|
|
— |
|
|
|
— |
|
|
Net cash provided by operating activities |
|
|
261 |
|
|
|
79 |
|
|
Cash flows from investing activities: |
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|
|
|
|
|
||
|
Capital expenditures |
|
|
(76 |
) |
|
|
(68 |
) |
|
Businesses acquired, net of cash acquired |
|
|
(9 |
) |
|
|
— |
|
|
Proceeds from disposition of assets |
|
|
105 |
|
|
|
6 |
|
|
Settlement of company-owned life insurance policies |
|
|
3 |
|
|
|
3 |
|
|
Net cash provided by (used in) investing activities of continuing operations |
|
|
23 |
|
|
|
(59 |
) |
|
Net cash provided by investing activities of discontinued operations |
|
|
5 |
|
|
|
74 |
|
|
Net cash provided by investing activities |
|
|
28 |
|
|
|
15 |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
|
Net payments on long and short-term borrowings |
|
|
(12 |
) |
|
|
(16 |
) |
|
Debt retirement |
|
|
(204 |
) |
|
|
(43 |
) |
|
Debt issuance |
|
|
200 |
|
|
|
— |
|
|
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(26 |
) |
|
|
(19 |
) |
|
Repurchase of common stock for treasury |
|
|
(264 |
) |
|
|
(69 |
) |
|
Other financing activities |
|
|
— |
|
|
|
(4 |
) |
|
Net cash used in financing activities of continuing operations |
|
|
(306 |
) |
|
|
(151 |
) |
|
Net cash provided by (used in) financing activities of discontinued operations |
|
|
— |
|
|
|
— |
|
|
Net cash used in financing activities |
|
|
(306 |
) |
|
|
(151 |
) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
— |
|
|
|
(6 |
) |
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
(17 |
) |
|
|
(63 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
404 |
|
|
|
537 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
387 |
|
|
$ |
474 |
|
|
Supplemental information on non-cash investing and financing activities |
|
|
|
|
|
|
||
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
275 |
|
|
$ |
171 |
|
|
Promissory note receivable obtained from disposition of discontinued operations |
|
|
59 |
|
|
|
55 |
|
|
Cash taxes paid, net |
|
|
27 |
|
|
|
— |
|
|
Earn-out receivable obtained from disposition of discontinued operations |
|
|
9 |
|
|
|
9 |
|
|
Cash interest paid, net of amounts capitalized and non-recourse debt |
|
|
5 |
|
|
|
— |
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
|
4 |
|
|
|
2 |
|
|
Other current receivable obtained from disposition of discontinued operations |
|
|
— |
|
|
|
30 |
|
|
Transfer from additional paid-in capital to treasury stock for final settlement of the accelerated share repurchase agreement |
|
|
— |
|
|
|
29 |
|
|
|
||||
|
BUSINESS UNIT PERFORMANCE |
||||
|
(In millions) |
||||
|
(Unaudited) |
||||
|
ODP Business Solutions Division |
3Q23 |
3Q22 |
YTD23 |
YTD22 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(3)% |
9% |
(0)% |
11% |
|
Division operating income |
|
|
|
|
|
% of total sales |
6% |
5% |
5% |
3% |
|
Office Depot Division |
3Q23 |
3Q22 |
YTD23 |
YTD22 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(12)% |
(8)% |
(11)% |
(9)% |
|
Division operating income |
|
|
|
|
|
% of total sales |
7% |
7% |
6% |
7% |
|
Comparable store sales decrease |
(6)% |
N/A |
(5)% |
N/A |
|
Veyer Division |
3Q23 |
3Q22 |
YTD23 |
YTD22 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
(10)% |
(3)% |
(8)% |
(2)% |
|
Division operating income |
|
|
|
|
|
% of total sales |
1% |
1% |
1% |
1% |
|
Varis Division |
3Q23 |
3Q22 |
YTD23 |
YTD22 |
|
Sales (external) |
|
|
|
|
|
Sales (internal) |
|
|
|
|
|
% change of total sales |
0% |
0% |
0% |
67% |
|
Division operating loss |
|
|
|
|
|
% of total sales |
(850)% |
(850)% |
(960)% |
(960)% |
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 Restructuring, and the previously planned separation of the consumer business and re-alignment.
|
(In millions, except per share amounts) |
||||||||||||||||||||
|
Q3 2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
3 |
|
|
|
0.1 |
% |
|
$ |
3 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
1 |
|
|
|
0.0 |
% |
|
$ |
1 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
91 |
|
|
|
4.5 |
% |
|
$ |
(4 |
) |
|
$ |
95 |
|
(4) |
|
4.7 |
% |
|
Income tax expense |
|
$ |
22 |
|
|
|
1.1 |
% |
|
$ |
(1 |
) |
|
$ |
23 |
|
(5) |
|
1.1 |
% |
|
Net income from continuing operations |
|
$ |
70 |
|
|
|
3.5 |
% |
|
$ |
(3 |
) |
|
$ |
73 |
|
(6) |
|
3.6 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
1.79 |
|
|
|
|
|
$ |
(0.09 |
) |
|
$ |
1.88 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
28 |
|
|
|
1.4 |
% |
|
$ |
— |
|
|
$ |
28 |
|
|
|
1.4 |
% |
|
Q3 2022 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
3 |
|
|
|
0.1 |
% |
|
$ |
3 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
8 |
|
|
|
0.4 |
% |
|
$ |
8 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
84 |
|
|
|
3.9 |
% |
|
$ |
(11 |
) |
|
$ |
95 |
|
(4) |
|
4.4 |
% |
|
Income tax expense |
|
$ |
22 |
|
|
|
1.0 |
% |
|
$ |
(5 |
) |
|
$ |
27 |
|
(5) |
|
1.2 |
% |
|
Net income from continuing operations |
|
$ |
67 |
|
|
|
3.1 |
% |
|
$ |
(6 |
) |
|
$ |
73 |
|
(6) |
|
3.4 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
1.36 |
|
|
|
|
|
$ |
(0.12 |
) |
|
$ |
1.48 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
32 |
|
|
|
1.5 |
% |
|
$ |
— |
|
|
$ |
32 |
|
|
|
1.5 |
% |
|
|
||||||||||||||||||||
|
GAAP to Non-GAAP Reconciliations |
||||||||||||||||||||
|
(Unaudited) |
||||||||||||||||||||
|
YTD 2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
13 |
|
|
|
0.2 |
% |
|
$ |
13 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
2 |
|
|
|
0.0 |
% |
|
$ |
2 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
232 |
|
|
|
3.9 |
% |
|
$ |
(15 |
) |
|
$ |
247 |
|
(4) |
|
4.1 |
% |
|
Income tax expense |
|
$ |
56 |
|
|
|
0.9 |
% |
|
$ |
(4 |
) |
|
$ |
60 |
|
(5) |
|
1.0 |
% |
|
Net income from continuing operations |
|
$ |
176 |
|
|
|
2.9 |
% |
|
$ |
(11 |
) |
|
$ |
187 |
|
(6) |
|
3.1 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
4.38 |
|
|
|
|
|
$ |
(0.28 |
) |
|
$ |
4.66 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
87 |
|
|
|
1.4 |
% |
|
$ |
— |
|
|
$ |
87 |
|
|
|
1.4 |
% |
|
YTD 2022 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
|
Asset impairments |
|
$ |
8 |
|
|
|
0.1 |
% |
|
$ |
8 |
|
|
$ |
— |
|
|
|
— |
% |
|
Merger, restructuring and other operating expenses, net |
|
$ |
42 |
|
|
|
0.7 |
% |
|
$ |
42 |
|
|
$ |
— |
|
|
|
— |
% |
|
Operating income |
|
$ |
188 |
|
|
|
2.9 |
% |
|
$ |
(50 |
) |
|
$ |
238 |
|
(4) |
|
3.7 |
% |
|
Income tax expense |
|
$ |
48 |
|
|
|
0.8 |
% |
|
$ |
(15 |
) |
|
$ |
63 |
|
(5) |
|
1.0 |
% |
|
Net income from continuing operations |
|
$ |
142 |
|
|
|
2.2 |
% |
|
$ |
(35 |
) |
|
$ |
177 |
|
(6) |
|
2.8 |
% |
|
Earnings per share from continuing operations (fully diluted) |
|
$ |
2.84 |
|
|
|
|
|
$ |
(0.70 |
) |
|
$ |
3.54 |
|
(6) |
|
|
||
|
Depreciation and amortization |
|
$ |
100 |
|
|
|
1.6 |
% |
|
$ |
— |
|
|
$ |
100 |
|
|
|
1.6 |
% |
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted EBITDA: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Net income |
|
$ |
70 |
|
|
$ |
67 |
|
|
$ |
176 |
|
|
$ |
149 |
|
|
Discontinued operations, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
Net income from continuing operations |
|
|
70 |
|
|
|
67 |
|
|
|
176 |
|
|
|
142 |
|
|
Income tax expense |
|
|
22 |
|
|
|
22 |
|
|
|
56 |
|
|
|
48 |
|
|
Income from continuing operations before income taxes |
|
|
92 |
|
|
|
89 |
|
|
|
232 |
|
|
|
190 |
|
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(3 |
) |
|
Interest expense |
|
|
5 |
|
|
|
1 |
|
|
|
15 |
|
|
|
10 |
|
|
Depreciation and amortization |
|
|
28 |
|
|
|
32 |
|
|
|
87 |
|
|
|
100 |
|
|
Charges and credits, pretax (7) |
|
|
4 |
|
|
|
11 |
|
|
|
15 |
|
|
|
50 |
|
|
Adjusted EBITDA |
|
$ |
125 |
|
|
$ |
131 |
|
|
$ |
342 |
|
|
$ |
347 |
|
|
Amounts may not foot due to rounding. The sum of the quarterly amounts may not equal the reported amounts for the year due to rounding. |
||
|
(4) |
Adjusted operating income for all periods presented herein exclude merger, restructuring and other operating expenses, net, and asset impairments (if any). |
|
|
(5) |
Adjusted income tax expense for all periods presented herein exclude the tax effect of the charges or credits not indicative of core operations as described in the preceding notes. |
|
|
(6) |
Adjusted net income and adjusted earnings per share (fully diluted) for all periods presented exclude merger, restructuring and other operating expenses, net, asset impairments (if any), and exclude the tax effect of the charges or credits not indicative of core operations. |
|
|
(7) |
Charges and credits, pretax for all periods presented include merger, restructuring and other operating expenses, net, asset impairments (if any). |
|
|
|
||||||||||||||||
|
GAAP to Non-GAAP Reconciliations |
||||||||||||||||
|
(Unaudited) |
||||||||||||||||
|
|
|
13 Weeks Ended |
|
|
39 Weeks Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Free cash flow |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Net cash provided by operating activities of continuing operations |
|
$ |
112 |
|
|
$ |
163 |
|
|
$ |
261 |
|
|
$ |
79 |
|
|
Capital expenditures |
|
|
(25 |
) |
|
|
(25 |
) |
|
|
(76 |
) |
|
|
(68 |
) |
|
Change in restricted cash impacting working capital |
|
|
(1 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
Free cash flow |
|
|
86 |
|
|
|
138 |
|
|
|
183 |
|
|
|
11 |
|
|
Adjustments for certain cash charges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Maximize B2B Restructuring Plan |
|
|
3 |
|
|
|
2 |
|
|
|
7 |
|
|
|
5 |
|
|
Previously planned separation of consumer business and re-alignment |
|
|
— |
|
|
|
20 |
|
|
2 |
|
|
|
38 |
|
|
|
Adjusted free cash flow |
|
$ |
89 |
|
|
$ |
160 |
|
|
$ |
192 |
|
|
$ |
54 |
|
|
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 |
|
|
YTD |
|
|
Q3 |
|
|||
|
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|||
|
Office Depot Division: |
|
|
|
|
|
|
|
|
|
|||
|
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stores closed |
|
|
14 |
|
|
|
42 |
|
|
|
11 |
|
|
Total retail stores ( |
|
|
938 |
|
|
|
— |
|
|
|
1,009 |
|
|
Total square footage (in millions) |
|
|
20.8 |
|
|
|
— |
|
|
|
22.2 |
|
|
Average square footage per store (in thousands) |
|
|
22.2 |
|
|
|
— |
|
|
|
22.0 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20231108274081/en/
Investor Relations
561-438-4629
Tim.Perrott@theodpcorp.com
Source: