The ODP Corporation Announces Fourth Quarter and Full Year 2020 Results
The ODP Corporation (NASDAQ: ODP) reported a 4Q20 revenue of $2.3 billion, a 9% decline year-over-year, driven by the ongoing impacts of the COVID-19 pandemic. Operating income was $21 million, down from $74 million in 4Q19. For FY20, total sales dropped to $9.7 billion, with a net loss of $319 million compared to a net income of $99 million in FY19. Despite challenges, ODP reported a liquidity of $1.7 billion and continued to invest in its B2B pivot and digital transformation, partnering with Microsoft to enhance its offerings.
- Total liquidity of $1.7 billion, including $729 million in cash.
- Increased demand of 15% in eCommerce through the BSD channel.
- Successful pivot towards B2B and digital transformation initiatives.
- Acquisition of BuyerQuest to enhance eProcurement capabilities.
- Collaboration with Microsoft to improve digital procurement technology.
- 9% decrease in total reported sales year-over-year.
- GAAP operating loss of $252 million for FY20.
- Net loss of $319 million for FY20 compared to $99 million net income in FY19.
- Service revenue down 20% in 4Q20, impacting overall financial results.
The ODP Corporation (“ODP,” or the “Company”) (NASDAQ: ODP), a leading provider of business services, products and digital workplace technology solutions through an integrated B2B distribution platform, today announced results for the fourth quarter and full year ended December 26, 2020.
Consolidated (in millions, except per share amounts) |
4Q20 |
4Q19 |
FY20 |
FY19 |
Sales |
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|
|
|
Sales change from prior year period |
(9)% |
|
(9)% |
|
Operating income (loss) |
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|
|
Adjusted operating income (1) |
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|
|
Net income (loss) |
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Diluted earnings (loss) per share (2) |
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Adjusted net income (1) |
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Adjusted earnings per share (most dilutive) (2) |
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Adjusted EBITDA (1) |
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Operating Cash Flow |
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Free Cash Flow (3) |
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Adjusted Free Cash Flow (4) |
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Fourth Quarter 2020 Summary(1)
-
Total reported sales of
$2.3 billion , down9% versus last year -
GAAP operating income of
$21 million and net income of$18 million , or$0.34 per share, versus$74 million and$55 million , respectively in prior year -
Adjusted operating income of
$44 million , down from$92 million in fourth quarter of 2019; and adjusted EBITDA of$89 million , down from$156 million in the fourth quarter of 2019 -
Adjusted net income of
$30 million , or adjusted earnings per share of$0.55 , each down56% year-over-year -
Operating cash outflow of
$4 million and adjusted free cash outflow of$4 million , versus$152 million and$135 million , respectively in prior year -
$1.7 billion of total available liquidity including$729 million in cash and cash equivalents
Full Year 2020 Summary(1)
-
Total reported sales of
$9.7 billion , down9% versus last year -
GAAP operating loss of
$252 million and net loss of$319 million , or$(6.05) per share, driven primarily by non-cash asset impairment charges recognized in the second quarter of 2020 -
Adjusted operating income of
$300 million , compared to$367 million in 2019; and adjusted EBITDA of$491 million -
Adjusted net income of
$189 million , or adjusted earnings per share of$3.50 , down17% and15% , respectively year-over-year -
Operating cash flow of
$485 million and adjusted free cash flow of$474 million , versus$366 and$310 million , respectively in prior year
“I am extremely proud of our team for delivering solid results and advancing our B2B pivot and digital transformation despite the challenges posed by the pandemic. I want to thank all of our associates for their continued commitment and dedication, not only for driving these results, but also for maintaining their focus on measures to keep our customers and employees safe throughout the COVID-19 outbreak,” said Gerry Smith, chief executive officer of The ODP Corporation.
“The positive dynamics of our ecosystem and low cost model focus helped offset many of the challenges posed by the COVID-19 pandemic. We pivoted our value proposition, reaching customers through leveraging our diverse channels to market and broad product categories. We drove strong performance in cleaning, office technology and workspaces, and personal protective equipment (PPE) categories, partially offsetting challenges in core supply categories which were negatively impacted by business shutdowns and school closures related to the pandemic. Our omni-channel performance was outstanding, experiencing stronger demand during this unusual period, especially for our curb-side pick-up and buy on-line, pick-up in store (BOPIS) offerings. Our digital presence continued to expand, highlighted by a
“While we expect that conditions caused by the COVID-19 pandemic will persist for at least the first half of 2021, the actions and investments we have made during 2020 allow us to continue to work to meet our customers’ expanded needs through all channels. We are also maintaining our focus on driving our low-cost model, while working to evolve our B2B platform to expand into higher growth and higher value market categories. We’ve made significant progress on our B2B pivot and digital transformation, recently enhancing our senior team and accelerating our technology development by adding an industry-leading eProcurement software platform. This component of our digital transformation combined with our valuable physical asset base, has been recognized by one of the leading technology companies in the world, Microsoft, whom we are collaborating with to transform how businesses buy and sell in the over
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2020 were
Sales Breakdown (in millions) |
4Q20 |
4Q19 |
FY20 |
FY19 |
Product sales |
|
|
|
|
Product sales change from prior year |
(7)% |
|
(7)% |
|
Service revenues |
|
|
|
|
Service revenues change from prior year |
(20)% |
|
(17)% |
|
Total sales |
|
|
|
|
The Company reported operating income of
Total reported sales for the full year 2020 period were
Adjusted (non-GAAP) Results (1)
Adjusted results for the fourth quarter of 2020 exclude charges and credits totaling
-
Fourth quarter of 2020 adjusted EBITDA was
$89 million compared to$156 million in the prior year period. This included adjusted depreciation and amortization(5) of$45 million and$50 million in the fourth quarters of 2020 and 2019, respectively. -
Fourth quarter of 2020 adjusted operating income was
$44 million compared to$92 million in the fourth quarter of 2019, including the impacts related to the COVID-19 pandemic. -
Fourth quarter of 2020 adjusted net income was
$30 million , or$0.55 per diluted share, compared to$68 million , or$1.24 per diluted share, in the fourth quarter of 2019.
Full year 2020 adjusted operating income was
Fourth Quarter Division Results
Business Solutions Division (BSD)
-
Reported sales were
$1.1 billion in the fourth quarter of 2020, down10% compared to the same period last year. Sales performance was impacted by conditions caused by the COVID-19 outbreak, which impacted schools and business operations -
Demand in our eCommerce channel increased
15% with growth in certain adjacency product sales, which comprised45% of total BSD revenues in the quarter -
Operating income was
$18 million in the fourth quarter of 2020 compared to$69 million in the prior year period
Retail Division
-
Reported sales were
$951 million in the fourth quarter of 2020, down6% versus the prior year period. Planned closures of underperforming stores drove the reported decline with 153 fewer retail outlets at the end of the fourth quarter as compared to the prior year. The Company closed 90 stores in the quarter and had 1,154 stores at year end -
Partially offsetting these impacts were increased demand for cleaning and breakroom supplies as well as a
50% increase in our BOPIS offering -
Operating income was
$50 million in the fourth quarter of 2020, up47% over the same period last year. As a percentage of sales, this performance reflects an approximate 190 basis point margin improvement
CompuCom Division
-
Reported sales were
$207 million in the fourth quarter of 2020, down13% compared to the prior year period. The year-over-year decrease was due to lower product sales and services volumes related to the COVID-19 outbreak -
Operating income was
$4 million in the fourth quarter of 2020, down from$9 million in the prior year period. Business Acceleration Program (BAP) cost efficiency measures helped to partially offset disruptions caused by the COVID-19 outbreak - The Company’s Board of Directors recently announced that as a result of a business review of CompuCom, management has initiated a process to explore a value-maximizing sale of its CompuCom Division to maximize CompuCom’s full potential and drive forward its future value and success
B2B Pivot and Digital Transformation Progress
As a primary component of its strategy to drive growth in higher value industry segments, the Company has made significant foundational progress on its B2B pivot and digital transformation initiatives, including the development of an integrated digital source-to-settle business platform. Leveraging this initiative with its deep business relationships and supply chain capabilities, positions ODP to offer a fully integrated B2B platform that will positively impact the business sourcing and procurement industry and allow it to fully participate in the
B2B Industry Veteran Joins The ODP Corporation
The company announced that B2B industry veteran, Prentis Wilson, joined the company to lead the new digital technology business. Wilson has a strong track record of successfully building large scale, disruptive, B2B technology businesses. He spent almost eight years at Amazon, where he launched Amazon Business and grew it to over
Acquired Leading eProcurement Technology Software Platform
Significantly advancing its technology development, in the first quarter of 2021, the Company acquired BuyerQuest Holdings, Inc. (“BuyerQuest”), a business services software company, which has one of the leading technology digital platforms in the procure-to-pay software market. BuyerQuest’s advanced eProcurement platform serves an existing large blue-chip customer base and has been recognized as an industry leader by some of the top industry analyst firms in the world. The acquisition of BuyerQuest accelerates the Company’s technology development with an established and well recognized eProcurement platform.
Collaboration with Microsoft
The ODP Corporation announced that it is teaming up with Microsoft to transform how businesses buy and sell. As part of this collaboration, ODP is leveraging Microsoft Azure and is working to bring the power of ODP’s new digital procurement technology platform to Microsoft Dynamics 365 Business Central customers to help them realize immediate purchase savings and procurement automation. “This collaboration is further proof that ODP is evolving into a leading B2B company,” said Smith. “By combining ODP’s broad reach to B2B customers, advanced distribution capabilities, and new technology platform development, with Microsoft Azure capabilities and technology know-how, we are going to market with solutions to help customers grow.”
“We are excited about the future of our business and the initial progress we have made on our digital transformation,” Smith continued. “Leveraging the assets that we have put in place over the last several years, combined with our new digital platform, have us well positioned to pursue growth in much larger and higher value market segments, while providing better service for our existing customers. As B2B purchasing rapidly moves online, procurement organizations are embracing digital sourcing and purchasing, while suppliers require B2B-grade eCommerce technology and nimble supply chains to remain competitive. As a world-class B2B supply chain and emerging technology platform, ODP is perfectly positioned to drive value and help customers drive growth and efficiency. We have built a team that includes some of the most respected B2B and technology veterans in the industry, accelerated our technology stack development, and are collaborating with one of the most widely respected technology companies in the world, Microsoft. The progress we have made places us in an excellent position to execute our B2B pivot, creating value for shareholders.”
Balance Sheet and Cash Flow
As of December 26, 2020, ODP had total available liquidity of approximately
For the fourth quarter of 2020, cash used in operating activities was
Capital expenditures in the quarter were
2021 Commentary
“Despite the challenges caused by COVID, we drove solid results in 2020 and our team is committed to unlocking the value of our asset base by driving our digital transformation and building upon our B2B platform for the benefit of all of our stakeholders. While we expect that the conditions created by the COVID-19 pandemic will persist for the first half of the year, we expect to continue leveraging our diverse channels to market and expanded value proposition to meet our customers’ needs. We will continue to execute our Maximize B2B Restructuring Plan optimizing our retail footprint, invest in top-line revenue growth in BSD and leverage our omni-channel customer base. Additionally, we will continue to invest in our digital platform and B2B pivot, including in our technology development and supply chain capabilities,” said Smith.
Because of the continuing challenges posed by current market conditions and recent events, including the public proposal made by Sycamore Partners, the owner of Staples, to acquire The ODP Corporation, and the strategic review process exploring a value-maximizing sale of our CompuCom Division, the Company is not issuing guidance for 2021 at this time. The Company expects to make growth investments in the Company’s digital transformation initiatives in the range of
(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, asset impairments, loss on extinguishment and modification of debt, and executive transition costs. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Investor Relations website at investor.theodpcorp.com. |
|
(2) |
After obtaining approval of the Company’s shareholders on May 11, 2020, the Company’s Board of Directors determined to set a reverse stock split ratio of 1-for-10 for a reverse stock split of the Company’s outstanding shares of common stock, and a reduction in the number of authorized shares of the Company’s common stock by a corresponding ratio. The reverse stock split was effective on June 30, 2020. All share and per share amounts in this release have been retroactively adjusted for the prior periods presented to give effect to this reverse stock split. |
|
(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. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Investor Relations website at investor.theodpcorp.com. |
|
(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 Plan and its Business Acceleration Program and the Federal Trade Commission cash settlement. Adjusted Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Investor Relations website at investor.theodpcorp.com. |
|
(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. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Investor Relations website at investor.theodpcorp.com. |
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of business services and supplies, products and digital workplace technology solutions to small, medium and enterprise businesses, through an integrated business-to-business (B2B) distribution platform, which includes world-class supply chain and distribution operations, dedicated sales professionals and technicians, online presence, and approximately 1,100 stores. Through its banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, the Company offers its customers the tools and resources they need to focus on their passion of starting, growing and running their business. For more information, visit news.theodpcorp.com and investor.theodpcorp.com.
The ODP Corporation and Office Depot are trademarks of The Office Club, Inc. OfficeMax is a trademark of OMX, Inc. CompuCom is a trademark of CompuCom Systems, Inc. Grand&Toy is a trademark of Grand & Toy, LLC in Canada. ©2021 Office Depot, LLC. All rights reserved. Any other product or company names mentioned herein are the trademarks of their respective owners.
FORWARD LOOKING STATEMENTS
This communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements or disclosures may discuss goals, intentions and expectations as to future trends, plans, events, results of operations, cash flow or financial condition, the potential impacts on our business due to the unknown severity and duration of the COVID-19 outbreak, 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 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 both the Business Acceleration Program and the Maximize B2B Restructuring Plan successfully or that such program and plan will not result in the benefits anticipated; the risk that the Company will not be successful in maximizing the full potential of its CompuCom Division; 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; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive Office Depot branded products are subject to additional product, supply chain and legal risks; product safety and quality concerns of manufacturers’ branded products and services and Office Depot private branded products; covenants in the credit facility; general disruption in the credit markets; incurrence of significant impairment charges; retained responsibility for liabilities of acquired companies; fluctuation in quarterly operating results due to seasonality of the Company’s business; changes in tax laws in jurisdictions where the Company operates; increases in wage and benefit costs and changes in labor regulations; changes in the regulatory environment, legal compliance risks and violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws; volatility in the Company’s common stock price; changes in or the elimination of the payment of cash dividends on Company common stock; macroeconomic conditions such as future declines in business or consumer spending; increases in fuel and other commodity prices and the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing; unexpected claims, charges, litigation, dispute resolutions or settlement expenses; catastrophic events, including the impact of weather events on the Company’s business; the discouragement of lawsuits by shareholders against the Company and its directors and officers as a result of the exclusive forum selection of the Court of Chancery, the federal district court for the District of Delaware or other Delaware state courts by the Company as the sole and exclusive forum for such lawsuits; impacts of the Company’s adoption of a limited duration shareholder rights plan including potential deterrence of unsolicited offers to acquire the Company; and the impact of the COVID-19 pandemic on the Company’s business, including on the demand for its and our customers’ products and services, on trade and transport restrictions and generally on our ability to effectively manage the impacts of the COVID-19 pandemic on our business operations. The foregoing list of factors is not exhaustive. Investors and shareholders should carefully consider the foregoing factors and the other risks and uncertainties described in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update or revise any forward-looking statements.
THE ODP CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) |
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|
|
13 Weeks Ended |
|
|
52 Weeks Ended |
|
||||||||||
|
|
December 26, |
|
|
December 28, |
|
|
December 26, |
|
|
December 28, |
|
||||
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
1,971 |
|
|
$ |
2,113 |
|
|
$ |
8,374 |
|
|
$ |
9,034 |
|
Services |
|
|
317 |
|
|
|
395 |
|
|
|
1,336 |
|
|
|
1,613 |
|
Total sales |
|
|
2,288 |
|
|
|
2,508 |
|
|
|
9,710 |
|
|
|
10,647 |
|
Cost of goods sold and occupancy costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,569 |
|
|
|
1,676 |
|
|
|
6,655 |
|
|
|
7,088 |
|
Services |
|
|
222 |
|
|
|
261 |
|
|
|
923 |
|
|
|
1,095 |
|
Total cost of goods sold and occupancy costs |
|
|
1,791 |
|
|
|
1,937 |
|
|
|
7,578 |
|
|
|
8,183 |
|
Gross profit |
|
|
497 |
|
|
|
571 |
|
|
|
2,132 |
|
|
|
2,464 |
|
Selling, general and administrative expenses |
|
|
453 |
|
|
|
480 |
|
|
|
1,832 |
|
|
|
2,101 |
|
Asset impairments |
|
|
8 |
|
|
|
6 |
|
|
|
431 |
|
|
|
56 |
|
Merger and restructuring expenses, net |
|
|
15 |
|
|
|
11 |
|
|
|
121 |
|
|
|
116 |
|
Operating income (loss) |
|
|
21 |
|
|
|
74 |
|
|
|
(252 |
) |
|
|
191 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
6 |
|
|
|
4 |
|
|
|
23 |
|
Interest expense |
|
|
(7 |
) |
|
|
(21 |
) |
|
|
(42 |
) |
|
|
(89 |
) |
Loss on extinguishment and modification of debt |
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
Other income, net |
|
|
1 |
|
|
|
14 |
|
|
|
7 |
|
|
|
21 |
|
Income (loss) before income taxes |
|
|
15 |
|
|
|
73 |
|
|
|
(295 |
) |
|
|
146 |
|
Income tax expense (benefit) |
|
|
(3 |
) |
|
|
18 |
|
|
|
24 |
|
|
|
47 |
|
Net income (loss) |
|
$ |
18 |
|
|
$ |
55 |
|
|
$ |
(319 |
) |
|
$ |
99 |
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.35 |
|
|
$ |
1.01 |
|
|
$ |
(6.05 |
) |
|
$ |
1.82 |
|
Diluted |
|
$ |
0.34 |
|
|
$ |
1.00 |
|
|
$ |
(6.05 |
) |
|
$ |
1.80 |
|
THE ODP CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except shares and par value) |
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|
|
December 26, |
|
|
December 28, |
|
||
|
|
2020 |
|
|
2019 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
729 |
|
|
$ |
698 |
|
Receivables, net |
|
|
631 |
|
|
|
823 |
|
Inventories |
|
|
930 |
|
|
|
1,032 |
|
Prepaid expenses and other current assets |
|
|
65 |
|
|
|
75 |
|
Timber notes receivable |
|
|
— |
|
|
|
819 |
|
Total current assets |
|
|
2,355 |
|
|
|
3,447 |
|
Property and equipment, net |
|
|
576 |
|
|
|
679 |
|
Operating lease right-of-use assets |
|
|
1,170 |
|
|
|
1,413 |
|
Goodwill |
|
|
609 |
|
|
|
944 |
|
Other intangible assets, net |
|
|
357 |
|
|
|
388 |
|
Deferred income taxes |
|
|
162 |
|
|
|
183 |
|
Other assets |
|
|
329 |
|
|
|
257 |
|
Total assets |
|
$ |
5,558 |
|
|
$ |
7,311 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
919 |
|
|
$ |
1,026 |
|
Accrued expenses and other current liabilities |
|
|
1,138 |
|
|
|
1,219 |
|
Income taxes payable |
|
|
12 |
|
|
|
8 |
|
Short-term borrowings and current maturities of long-term debt |
|
|
24 |
|
|
|
106 |
|
Non-recourse debt |
|
|
— |
|
|
|
735 |
|
Total current liabilities |
|
|
2,093 |
|
|
|
3,094 |
|
Deferred income taxes and other long-term liabilities |
|
|
197 |
|
|
|
176 |
|
Pension and postretirement obligations, net |
|
|
43 |
|
|
|
85 |
|
Long-term debt, net of current maturities |
|
|
354 |
|
|
|
575 |
|
Operating lease liabilities |
|
|
991 |
|
|
|
1,208 |
|
Total liabilities |
|
|
3,678 |
|
|
|
5,138 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock — authorized 80,000,000 shares of shares — 62,551,255 at December 26, 2020 and 62,042,477 at December 28, 2019; outstanding shares — 52,694,062 at December 26, 2020 and 53,518,232 at December 28, 2019 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
2,675 |
|
|
|
2,652 |
|
Accumulated other comprehensive loss |
|
|
(32 |
) |
|
|
(66 |
) |
Accumulated deficit |
|
|
(409 |
) |
|
|
(89 |
) |
Treasury stock, at cost — 9,857,193 shares at December 26, 2020 and 8,524,245 shares at December 28, 2019 |
|
|
(355 |
) |
|
|
(325 |
) |
Total stockholders’ equity |
|
|
1,880 |
|
|
|
2,173 |
|
Total liabilities and stockholders’ equity |
|
$ |
5,558 |
|
|
$ |
7,311 |
|
THE ODP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) |
||||||||
|
|
2020 |
|
|
2019 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(319 |
) |
|
$ |
99 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
189 |
|
|
|
204 |
|
Amortization of debt discount and issuance costs |
|
|
3 |
|
|
|
8 |
|
Charges for losses on receivables and inventories |
|
|
36 |
|
|
|
26 |
|
Asset impairments |
|
|
431 |
|
|
|
56 |
|
(Gain) loss on disposition of assets, net |
|
|
5 |
|
|
|
(23 |
) |
Loss on extinguishment and modification of debt |
|
|
12 |
|
|
|
— |
|
Compensation expense for share-based payments |
|
|
41 |
|
|
|
33 |
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
9 |
|
|
|
100 |
|
Contingent consideration payments in excess of acquisition-date liability |
|
|
(2 |
) |
|
|
(11 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in receivables |
|
|
191 |
|
|
|
63 |
|
Decrease in inventories |
|
|
84 |
|
|
|
19 |
|
Net decrease in prepaid expenses, operating lease right-of-use assets, and other assets |
|
|
317 |
|
|
|
321 |
|
Net decrease in trade accounts payable, accrued expenses, operating lease liabilities, and other current and other long-term liabilities |
|
|
(513 |
) |
|
|
(532 |
) |
Other operating activities |
|
|
1 |
|
|
|
3 |
|
Total adjustments |
|
|
804 |
|
|
|
267 |
|
Net cash provided by operating activities |
|
|
485 |
|
|
|
366 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(68 |
) |
|
|
(150 |
) |
Businesses acquired, net of cash acquired |
|
|
(30 |
) |
|
|
(22 |
) |
Proceeds from collection of notes receivable |
|
|
818 |
|
|
|
— |
|
Proceeds from disposition of assets |
|
|
3 |
|
|
|
50 |
|
Other investing activities |
|
|
13 |
|
|
|
3 |
|
Net cash provided by (used in) investing activities |
|
|
736 |
|
|
|
(119 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net payments on long and short-term borrowings |
|
|
(341 |
) |
|
|
(98 |
) |
Debt retirement |
|
|
(1,196 |
) |
|
|
(735 |
) |
Debt issuance |
|
|
400 |
|
|
|
736 |
|
Cash dividends on common stock |
|
|
(13 |
) |
|
|
(55 |
) |
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(5 |
) |
|
|
(9 |
) |
Repurchase of common stock for treasury |
|
|
(30 |
) |
|
|
(40 |
) |
Contingent consideration payments up to amount of acquisition-date liability |
|
|
(1 |
) |
|
|
(12 |
) |
Other financing activities |
|
|
(7 |
) |
|
|
1 |
|
Net cash used in financing activities |
|
|
(1,193 |
) |
|
|
(212 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
1 |
|
|
|
5 |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
29 |
|
|
|
40 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
700 |
|
|
|
660 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
729 |
|
|
$ |
700 |
|
Supplemental information |
|
|
|
|
|
|
|
|
Cash interest paid, net of amounts capitalized and Timber notes/Non-recourse debt |
|
$ |
40 |
|
|
$ |
61 |
|
Cash taxes refunded, net |
|
|
(14 |
) |
|
|
(43 |
) |
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
|
29 |
|
|
|
27 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
126 |
|
|
|
338 |
|
THE ODP CORPORATION BUSINESS UNIT PERFORMANCE (In millions) |
||||
Business Solutions Division (in millions) |
4Q20 |
4Q19 |
FY20 |
FY19 |
Sales |
|
|
|
|
Sales change from prior year |
(10)% |
|
(11)% |
|
Division operating income |
|
|
|
|
Division operating income margin |
|
|
|
|
BSD year-over-year sales performance was impacted by conditions caused by the COVID-19 outbreak, negatively impacting sales primarily in the Company’s contract channel as the operations of many businesses were interrupted and schools remained closed. The Company utilized diverse channels and a broader product portfolio to meet customer needs. Demand through its eCommerce channel grew by
Retail Division (in millions) |
4Q20 |
4Q19 |
FY20 |
FY19 |
Sales |
|
|
|
|
Sales change from prior year |
(6)% |
|
(4)% |
|
Division operating income |
|
|
|
|
Division operating income margin |
|
|
|
|
The Retail Division reported sales were down
CompuCom Division (in millions) |
4Q20 |
4Q19 |
FY20 |
FY19 |
Sales |
|
|
|
|
Sales change from prior year |
(13)% |
|
(14)% |
|
Division operating income (loss) |
|
|
|
|
Division operating income (loss) margin |
|
|
|
(0.2)% |
The CompuCom Division reported sales decrease was due to lower product sales and services volumes, and customer imposed project delays related to the COVID-19 health crisis which impacted business operations of certain customers. The CompuCom Division operating income was
THE ODP CORPORATION |
GAAP to Non-GAAP Reconciliations |
(Unaudited) |
We report our results in accordance with accounting principles generally accepted in the United States (“GAAP”). We also review certain financial measures excluding impacts of transactions that are not related to our core operations (“non-GAAP”). Management believes that the presentation of these non-GAAP financial measures enhances the ability of its investors to analyze trends in its business and provides a means to compare periods that may be affected by various items that might obscure trends or developments in its business. Management uses both GAAP and non-GAAP measures to assist in making business decisions and assessing overall performance. Non-GAAP measures help to evaluate programs and activities that are intended to attract and satisfy customers, separate from expenses and credits directly associated with Merger, restructuring, and certain similar items. Certain non-GAAP measures are also used for short and long-term incentive programs.
Our measurement of these non-GAAP financial measures may be different from similarly titled financial measures used by others and therefore may not be comparable. These non-GAAP financial measures should not be considered superior to the GAAP measures, but only to clarify some information and assist the reader. We have included reconciliations of this information to the most comparable GAAP measures in the tables included within this material.
Free cash flow is a non-GAAP measure, which we define as cash flows from operating activities less capital expenditures. We believe that free cash flow is an important indicator that provides additional perspective on our ability to generate cash to fund our strategy and expand our distribution network. Adjusted free cash flow is also a non-GAAP measure, which we define as free cash flow excluding cash charges associated with the Company’s Maximize B2B Restructuring Plan and its Business Acceleration Program and the Federal Trade Commission cash settlement.
(In millions, except per share amounts)
Q4 2020 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
Assets impairments |
|
$ |
8 |
|
|
|
0.3 |
% |
|
$ |
8 |
|
|
$ |
— |
|
|
|
— |
% |
Merger and restructuring expenses, net |
|
$ |
15 |
|
|
|
0.7 |
% |
|
$ |
15 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
21 |
|
|
|
0.9 |
% |
|
$ |
(23 |
) |
|
$ |
44 |
|
(7) |
|
1.9 |
% |
Income tax expense |
|
$ |
(3 |
) |
|
|
(0.1 |
)% |
|
$ |
(11 |
) |
|
$ |
8 |
|
(9) |
|
0.3 |
% |
Net income |
|
$ |
18 |
|
|
|
0.8 |
% |
|
$ |
(12 |
) |
|
$ |
30 |
|
(10) |
|
1.3 |
% |
Earnings per share (most dilutive) |
|
$ |
0.34 |
|
|
|
|
|
|
$ |
(0.21 |
) |
|
$ |
0.55 |
|
(10) |
|
|
|
Depreciation and amortization |
|
$ |
46 |
|
|
|
2.0 |
% |
|
$ |
1 |
|
|
$ |
45 |
|
(11) |
|
2.0 |
% |
Q4 2019 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
Selling, general and administrative expenses |
|
$ |
480 |
|
|
|
19.1 |
% |
|
$ |
1 |
|
|
$ |
479 |
|
(6) |
|
19.1 |
% |
Assets impairments |
|
$ |
6 |
|
|
|
0.2 |
% |
|
$ |
6 |
|
|
$ |
— |
|
|
|
— |
% |
Merger and restructuring expenses, net |
|
$ |
11 |
|
|
|
0.4 |
% |
|
$ |
11 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
74 |
|
|
|
3.0 |
% |
|
$ |
(18 |
) |
|
$ |
92 |
|
(7) |
|
3.7 |
% |
Income tax expense |
|
$ |
18 |
|
|
|
0.7 |
% |
|
$ |
(4 |
) |
|
$ |
22 |
|
(9) |
|
0.9 |
% |
Net income |
|
$ |
55 |
|
|
|
2.2 |
% |
|
$ |
(14 |
) |
|
$ |
68 |
|
(10) |
|
2.7 |
% |
Earnings per share (most dilutive) |
|
$ |
1.00 |
|
|
|
|
|
|
$ |
(0.24 |
) |
|
$ |
1.24 |
|
(10) |
|
|
|
THE ODP CORPORATION GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||||||
2020 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
Assets impairments |
|
$ |
431 |
|
|
|
4.4 |
% |
|
$ |
431 |
|
|
$ |
— |
|
|
|
— |
% |
Merger and restructuring expenses, net |
|
$ |
121 |
|
|
|
1.2 |
% |
|
$ |
121 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income (loss) |
|
$ |
(252 |
) |
|
|
(2.6 |
)% |
|
$ |
(552 |
) |
|
$ |
300 |
|
(7) |
|
3.1 |
% |
Loss on extinguishment and modification of debt |
|
$ |
(12 |
) |
|
|
(0.1 |
)% |
|
$ |
(12 |
) |
|
$ |
— |
|
|
|
— |
% |
Other income, net |
|
$ |
7 |
|
|
|
0.1 |
% |
|
$ |
1 |
|
|
$ |
6 |
|
(8) |
|
0.1 |
% |
Income tax expense |
|
$ |
24 |
|
|
|
0.2 |
% |
|
$ |
(55 |
) |
|
$ |
79 |
|
(9) |
|
0.8 |
% |
Net income (loss) |
|
$ |
(319 |
) |
|
|
(3.3 |
)% |
|
$ |
(508 |
) |
|
$ |
189 |
|
(10) |
|
1.9 |
% |
Earnings (loss) per share (most dilutive) |
|
$ |
(6.05 |
) |
|
|
|
|
|
$ |
(9.55 |
) |
|
$ |
3.50 |
|
(10) |
|
|
|
Depreciation and amortization |
|
$ |
189 |
|
|
|
1.9 |
% |
|
$ |
4 |
|
|
$ |
185 |
|
(11) |
|
1.9 |
% |
2019 |
|
Reported (GAAP) |
|
|
% of Sales |
|
|
Less: Charges & Credits |
|
|
Adjusted (Non-GAAP) |
|
|
% of Sales |
|
|||||
Selling, general and administrative expenses |
|
$ |
2,101 |
|
|
|
19.7 |
% |
|
$ |
3 |
|
|
$ |
2,097 |
|
(6) |
|
19.7 |
% |
Assets impairments |
|
$ |
56 |
|
|
|
0.5 |
% |
|
$ |
56 |
|
|
$ |
— |
|
|
|
— |
% |
Merger and restructuring expenses, net |
|
$ |
116 |
|
|
|
1.1 |
% |
|
$ |
116 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
191 |
|
|
|
1.8 |
% |
|
$ |
(175 |
) |
|
$ |
367 |
|
(7) |
|
3.4 |
% |
Income tax expense |
|
$ |
47 |
|
|
|
0.4 |
% |
|
$ |
(46 |
) |
|
$ |
93 |
|
(9) |
|
0.9 |
% |
Net income |
|
$ |
99 |
|
|
|
0.9 |
% |
|
$ |
(129 |
) |
|
$ |
228 |
|
(10) |
|
2.1 |
% |
Earnings per share (most dilutive) |
|
$ |
1.80 |
|
|
|
|
|
|
$ |
(2.33 |
) |
|
$ |
4.13 |
|
(10) |
|
|
|
Depreciation and amortization |
|
$ |
204 |
|
|
|
1.9 |
% |
|
$ |
2 |
|
|
$ |
202 |
|
(11) |
|
1.9 |
% |
|
|
13 Weeks Ended |
|
|
52 Weeks Ended |
|
||||||||||
|
|
December 26, |
|
|
December 28, |
|
|
December 26, |
|
|
December 28, |
|
||||
Adjusted EBITDA: |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Net income (loss) |
|
$ |
18 |
|
|
$ |
55 |
|
|
$ |
(319 |
) |
|
$ |
99 |
|
Income tax expense (benefit) |
|
|
(3 |
) |
|
|
18 |
|
|
|
24 |
|
|
|
47 |
|
Income (loss) before income taxes |
|
|
15 |
|
|
|
73 |
|
|
|
(295 |
) |
|
|
146 |
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
— |
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(23 |
) |
Interest expense |
|
|
7 |
|
|
|
21 |
|
|
|
42 |
|
|
|
89 |
|
Adjusted depreciation and amortization (11) |
|
|
45 |
|
|
|
50 |
|
|
|
185 |
|
|
|
202 |
|
Charges and credits, pretax (12) |
|
|
23 |
|
|
|
18 |
|
|
|
563 |
|
|
|
175 |
|
Adjusted EBITDA |
|
$ |
89 |
|
|
$ |
156 |
|
|
$ |
491 |
|
|
$ |
590 |
|
| 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 selling, general and administrative expenses for the fourth quarter and year-to-date 2019 exclude charges for executive transition costs of |
|
(7) |
Adjusted operating income for all periods presented herein exclude merger and restructuring expenses, net, asset impairments (if any) and executive transition costs (if any). |
|
(8) |
Adjusted other income, net for year-to-date 2020 excludes credits for Indemnification asset adjustments of |
|
(9) |
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. |
|
(10) |
Adjusted net income and adjusted earnings per share (most dilutive) for all periods presented exclude merger and restructuring expenses, net, asset impairments (if any), executive transition costs (if any), loss on extinguishment and modification of debt (if any), indemnification asset adjustments (if any), and exclude the tax effect of the charges or credits not indicative of core operations. |
|
(11) |
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. |
|
(12) |
Charges and credits, pretax for all periods presented include merger and restructuring expenses, net, asset impairments (if any), executive transition costs (if any), loss on extinguishment and modification of debt (if any) and indemnification asset adjustments (if any). |
|
THE ODP CORPORATION GAAP to Non-GAAP Reconciliations (Unaudited) |
||||||||||||||||
|
|
13 Weeks Ended |
|
|
52 Weeks Ended |
|
||||||||||
|
|
December 26, |
|
|
December 28, |
|
|
December 26, |
|
|
December 28, |
|
||||
Free cash flow |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Net cash provided by (used in) operating activities |
|
$ |
(4 |
) |
|
$ |
152 |
|
|
$ |
485 |
|
|
$ |
366 |
|
Capital expenditures |
|
|
(14 |
) |
|
|
(27 |
) |
|
|
(68 |
) |
|
|
(150 |
) |
Free cash flow |
|
|
(18 |
) |
|
|
125 |
|
|
|
417 |
|
|
|
216 |
|
Adjustments for certain cash charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximize B2B Restructuring Plan |
|
|
12 |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
Business Acceleration Program |
|
|
2 |
|
|
|
10 |
|
|
|
29 |
|
|
|
69 |
|
Federal Trade Commission settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25 |
|
Adjusted free cash flow |
|
$ |
(4 |
) |
|
$ |
135 |
|
|
$ |
474 |
|
|
$ |
310 |
|
Amounts may not foot due to rounding. The sum of the quarterly amounts may not equal the reported amounts for the year due to rounding. |
THE ODP CORPORATION Store Statistics (Unaudited) |
||||||||||||
|
|
Q4 |
|
|
Q4 |
|
|
Full Year |
|
|||
|
|
2019 |
|
|
2020 |
|
|
2020 |
|
|||
Retail Division: |
|
|
|
|
|
|
|
|
|
|
|
|
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stores closed |
|
|
10 |
|
|
|
90 |
|
|
|
153 |
|
Total retail stores (U.S.) |
|
|
1,307 |
|
|
|
1,154 |
|
|
|
— |
|
Total square footage (in millions) |
|
|
29.1 |
|
|
|
25.5 |
|
|
|
— |
|
Average square footage per store (in thousands) |
|
|
22.3 |
|
|
|
22.1 |
|
|
|
— |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210224005316/en/
FAQ
What were ODP Corporation's financial results for the fourth quarter of 2020?
How did ODP's sales perform in fiscal year 2020?
What was ODP's net loss for 2020?
What strategic initiatives is ODP pursuing for growth?
What liquidity position does ODP Corporation have?
