The ODP Corporation Announces Fourth Quarter and Full Year 2023 Results
- Solid operating performance and strong adjusted EPS growth in 2023.
- Repurchased 6 million shares for $298 million in 2023.
- Launched 'Project Core' to streamline operations and enhance focus on core business.
- Approved a new $1 billion share repurchase authorization.
- Provided 2024 guidance.
- Total reported sales of $1.8 billion in Q4 2023, down 14% from the prior year.
- Operating income decreased from $55 million to $(31) million in Q4 2023.
- Adjusted earnings per share from continuing operations were $0.92 in Q4 2023, compared to $0.85 in Q4 2022.
- Operating cash flow from continuing operations was $70 million in Q4 2023, down from $158 million in Q4 2022.
- Repurchased 672 thousand shares at a cost of $32 million in Q4 2023.
- Total reported sales of $7.8 billion in full year 2023, down from $8.5 billion in 2022.
- Adjusted net income from continuing operations was $223 million in 2023, compared to $216 million in 2022.
- Operating cash flow from continuing operations was $331 million in 2023, up from $237 million in 2022.
- Repurchased 6 million shares for $298 million in 2023.
- Sales were down in both Q4 2023 and full year 2023 compared to the previous year.
- Operating income decreased in Q4 2023 and full year 2023.
- Adjusted net income and earnings per share were lower in Q4 2023 compared to Q4 2022.
Insights
The ODP Corporation's full-year financial results indicate a mixed performance, with a notable decline in year-over-year sales but an improvement in adjusted net income and earnings per share. The repurchase of 6 million shares for $298 million reflects a significant return of capital to shareholders, potentially signaling confidence from management in the company's intrinsic value. However, the reported operating loss in Q4 due to asset impairment charges at Varis raises concerns about the health of that business unit. The share repurchase authorization of $1 billion is a bullish signal for investors, as it suggests that the company believes its stock is undervalued and that it's financially robust enough to return capital to shareholders.
Project Core, aimed at streamlining operations and cutting costs, could bolster the company's long-term profitability if executed effectively. The projected annualized savings of $50 million to $60 million would improve operating margins and could make the company more competitive. However, investors should monitor the implementation closely, as cost-cutting initiatives can sometimes lead to unintended consequences, such as reduced service quality or employee morale.
Investors should also consider the macroeconomic environment mentioned by the CEO. While the company has shown resilience, further macroeconomic headwinds could challenge the company's performance. The strategic review of Varis is another key area to watch, as its outcome could have significant implications for the company's strategy and financials moving forward.
The decrease in sales, particularly in the Office Depot consumer division, is reflective of broader trends in the retail sector, where consumer traffic and transactions are shifting online. The closure of 64 retail locations is indicative of the company's adjustment to these market shifts. The ODP Corporation's focus on a low-cost business model and disciplined capital allocation is a strategic response to these trends, aiming to maintain profitability in a challenging retail landscape.
Project Core's focus on core business operations and cost efficiency measures is a strategic move that aligns with industry best practices. By optimizing operations and reducing costs, ODP aims to enhance its competitive edge. The retail industry is notoriously competitive and companies that can effectively manage costs while maintaining or improving service levels are more likely to succeed.
However, the company's performance must be contextualized within the industry. Comparing ODP's financial metrics and strategic initiatives with those of its peers could provide a clearer picture of its market position and the effectiveness of its strategies.
The asset impairment charges related to goodwill at Varis are a significant financial consideration that investors must evaluate, as they reflect a reassessment of the value of the acquired business. This could indicate that Varis is not performing as expected, which might have implications for ODP's overall valuation and future earnings potential. The legal and regulatory implications of such impairments should be minimal, provided that they are properly disclosed and accounted for, but they do require careful scrutiny from a corporate governance perspective.
Furthermore, the strategic review of Varis, mentioned by the CEO, suggests potential changes to the company's portfolio, which could include divestitures, restructuring, or other strategic shifts. Any such changes would have legal implications, including contract renegotiations, potential severance costs and other transitional legal expenses. These factors should be considered when evaluating the company's future financial health and strategic direction.
Low-Cost Business Model and Disciplined Capital Allocation Drive Solid Operating Performance and Strong Adjusted EPS Growth in 2023
Repurchased 6 Million Shares for
Announces “Project Core”: Enterprise-Wide Program Focused on Streamlining Operations and Enhancing Focus on Core Business
Approves New
Provides 2024 Guidance
Consolidated (in millions, except per share amounts) |
4Q23 |
4Q22 |
FY23 |
FY22 |
Selected GAAP and Non-GAAP measures: |
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Sales |
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Sales change from prior year period |
(14)% |
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(8)% |
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Operating income (loss) |
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Adjusted operating income (1) |
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Net income (loss) from continuing operations |
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Diluted earnings (loss) per share from continuing operations |
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Adjusted net income from continuing operations (1) |
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Adjusted earnings per share from continuing operations
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Adjusted EBITDA (1) |
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Operating Cash Flow from continuing operations |
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Free Cash Flow (2) |
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Adjusted Free Cash Flow (3) |
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Fourth Quarter 2023 Summary(1)(2)(3)
-
Total reported sales of
$1.8 billion 14% versus the prior year on a reported basis, or down9% when eliminating the$128 million -
GAAP operating loss includes non-cash asset impairment charges of
$68 million $31 million $37 million $(0.99) $55 million $36 million $0.76 $20 million -
Adjusted operating income of
$43 million $58 million $73 million $89 million -
Adjusted net income from continuing operations of
$35 million $0.92 $40 million $0.85 -
Operating cash flow from continuing operations of
$70 million $43 million $158 million $147 million -
Repurchased 672 thousand shares at a cost of
$32 million -
$1.1 billion $392 million
Full Year 2023 Summary
-
Total reported sales of
$7.8 billion $8.5 billion $128 million -
GAAP operating income of
$201 million $139 million $3.50 $243 million $178 million $3.61 $20 million -
Adjusted operating income of
$290 million $296 million $417 million $437 million -
Adjusted net income from continuing operations of
$223 million $5.60 $216 million $4.40 -
Operating cash flow from continuing operations of
$331 million $235 million $237 million $201 million -
Repurchased 6 million shares for
$298 million
“In the first year of operating under our new structure, we delivered strong adjusted EBITDA and adjusted earnings per share results throughout an ongoing challenging macroeconomic environment, underscoring our commitment to our low-cost business model and capital allocation strategy,” said Gerry Smith, chief executive officer of The ODP Corporation. “We expanded margins at ODP Business Solutions, drove strong external EBITDA growth at Veyer, expanded our product and service offerings at Office Depot, and began our strategic review of Varis in late Q4. In addition, our operational excellence helped drive free cash flow above our forecasted guidance, supporting our return to shareholders of nearly
“As we continue to evolve and consistent with our low-cost model approach, we are announcing today “Project Core” -- a comprehensive initiative aimed at streamlining operations, sharpening our focus on our core business, and increasing shareholder returns through an expanded new
“We’re excited about the future and confident in our position of strength, as we focus on continuing to drive our low-cost business model, leveraging our multiple routes to market, and remaining disciplined with our capital allocation plan,” Smith concluded.
Consolidated Results
Reported (GAAP) Results
Total reported sales for the fourth quarter of 2023 were
The Company reported a GAAP operating loss of
Adjusted (non-GAAP) Results(1)
Adjusted results for the fourth quarter of 2023 exclude charges and credits totaling
-
Fourth quarter of 2023 adjusted EBITDA was
$73 million $89 million $28 million $31 million -
Fourth quarter of 2023 adjusted operating income was
$43 million $58 million -
Fourth quarter of 2023 adjusted net income from continuing operations was
$35 million $0.92 $40 million $0.85 8% on a per share basis
Division Results
ODP Business Solutions Division
Leading B2B distribution solutions provider serving small, medium and enterprise level companies with an annual trailing-twelve-month revenue of nearly
-
Reported sales were
$0.9 billion 10% compared to the same period last year, or down4% when eliminating the$58 million -
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
$34 million 8% compared to the same period last year on a reported basis. When eliminating the$5 million 6% over last year. As a percentage of sales, operating income margin was4% , flat compared to last year
Office Depot Division
Leading provider of retail consumer and small business products and services distributed via Office Depot and OfficeMax retail locations and an award-winning eCommerce presence.
-
Reported sales were
$0.9 billion 18% compared to the prior year on a reported basis, or down13% when eliminating the favorable impact of$70 million 5% on a comparable store basis when eliminating the favorable impact of the 53rd week included in the prior year period - 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
$43 million $57 million $15 million 5% , flat compared to the same period last year
Veyer Division
Nationwide supply chain, distribution, procurement and global sourcing operation supporting Office Depot and ODP Business Solutions, as well as third-party customers. Veyer’s assets and capabilities include 8 million square feet of infrastructure through a network of distribution centers, cross-docks, and other facilities throughout
-
In the fourth quarter of 2023, Veyer provided strong support for its internal customers, ODP Business Solutions and Office Depot, as well as its third-party customers, generating sales of
$1.2 billion -
Operating income was
$3 million $4 million -
For the full year 2023, sales and EBITDA generated from third party customers increased
25% and120% respectively, resulting in sales of$35 million $11 million
Varis Division
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.
- Continued work with new customers, incorporating feedback and adding new features and capabilities to the platform
-
Generated revenues in the fourth quarter of 2023 of
$2 million -
Operating loss was
$15 million
Share Repurchases in 2023
Throughout the year, the Company continued to execute under its previously announced
“We’re encouraged by the opportunities within our business to generate value and enhance shareholder returns,” stated Anthony Scaglione, executive vice president and chief financial officer of The ODP Corporation. “Since the beginning of our previous authorization, we have repurchased 10 million shares, retiring over
Balance Sheet and Cash Flow
As of December 30, 2023, ODP had total available liquidity of approximately
For the fourth quarter of 2023, cash generated by operating activities of continuing operations was
Capital expenditures in the fourth quarter of 2023 were
“Our team’s strong commitment and dedication in managing inventory and working capital has resulted in strong cash flow generation,” said Scaglione. “As we move into the new year, we will maintain our disciplined approach, focusing on managing costs, maximizing cash flow, and executing our capital allocation plan,” he added.
Project Core and New
Upon a year-end review across all of its business units and consistent with its low-cost business model approach, the Company announced “Project Core”, a plan designed to create further efficiencies in its business, focused on driving enhanced operating results and increasing shareholder returns through an expanded share repurchase program. This broad-based plan includes cost improvement actions across the entire enterprise, including all routes to market, Varis, procurement, IT and shared services, encompassing the entirety of ODP’s enterprise, optimizing its organizational structure to support future growth of the business. During this effort, the Company continues to review strategic options for it’s Varis business unit and expects to conclude this review and provide a full update by its first quarter earnings announcement call in early May 2024.
In connection with Project Core, the Company expects to realize annualized savings in the range of
“Project Core aligns with our low-cost model mindset and builds upon our continued focus of driving strong operating results while enhancing value for shareholders through our new share repurchase authorization,” said Smith. “We’re taking what we’ve learned during our first year of operating under our new structure, and through Project Core, we’re driving further operational efficiencies in our business, enabling us to more effectively serve customers and pursue new avenues of long-term growth.”
As a component of Project Core, the Company announced that its Board of Directors has approved a new
“Our new
The number of shares to be repurchased under the authorization in the future and the timing of such transactions will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations. The new authorization could be suspended or discontinued at any time as determined by the Board of Directors.
2024 Guidance
“We’re enthusiastic about the numerous opportunities in our business to drive long term value and we remain focused on prudently deploying capital to the benefit of shareholders,” said Smith. “As we move forward into 2024, we remain cautiously optimistic regarding the macroeconomic environment, and we will remain focused on executing upon our three horizons strategy and continuing our commitment to our low-cost model approach through Project Core.”
“While macroeconomic conditions posed challenges throughout the year and we expect these conditions to persist in the near term, our team’s continued focus on driving our low-cost model, enhanced by Project Core, have positioned us to issue the following guidance for 2024,” Scaglione added.
The Company’s full year guidance for 2024 is as follows:
|
FY 2024 Guidance(1) |
Sales |
Decline of |
Adjusted EBITDA |
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Adjusted Operating Income(1) |
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Adjusted Earnings per Share(1) |
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Adjusted Free Cash Flow (3)(*) |
Greater than |
*Adjusted Free Cash Flow is defined as cash flows from operating activities less capital expenditures excluding cash charges associated with the Company’s Project Core Restructuring and related expenses |
The Company’s full year guidance for 2024 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 restructuring charges, capital expenditures, acquisition-related costs, executive transition costs, asset impairments and other significant items that currently cannot be predicted without unreasonable efforts. The exact amount of these charges or credits are not currently determinable but may be significant. Accordingly, the Company is unable to provide equivalent GAAP measures or reconciliations from GAAP to non-GAAP for these financial measures.
“Our revenue guidance assumes continued store footprint consolidation and improving trends in our eCommerce channel at Office Depot, organic and inorganic growth at ODP Business Solutions, continued expansion at Veyer and progress at Varis. Our adjusted EPS outlook assumes higher interest expense associated with projected intra-quarter ABL borrowings, and the impact from a higher level of share buyback activity associated with Project Core. While our guidance assumes incremental improvement in the overall macroeconomic environment throughout 2024, we remain cautious on the state of the overall US economy, primarily workforce employment and the consumer, as well as international trade policies and agreements that could further impact the level of consumer and business activity,” Scaglione added.
The ODP Corporation will webcast a call with financial analysts and investors on February 28, 2024, at 9:00 am Eastern Time, which will be accessible to the media and the general public. To listen to the conference call via webcast, please visit The ODP Corporation’s Investor Relations website at investor.theodpcorp.com. A replay of the webcast will be available approximately two hours following the event.
| (1) | As presented throughout this release, adjusted results represent non-GAAP financial measures and exclude charges or credits not indicative of core operations and the tax effect of these items, which may include but not be limited to merger integration, restructuring, acquisition costs, and asset impairments. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com. |
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| (2) | As used in this release, Free Cash Flow is defined as cash flows from operating activities less capital expenditures. Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com. |
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| (3) | As used in this release, Adjusted Free Cash Flow is defined as Free Cash Flow excluding cash charges associated with the Company’s Project Core Restructuring, and related expenses Adjusted Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com. |
About The ODP Corporation
The ODP Corporation (NASDAQ:ODP) is a leading provider of products, services, and technology solutions through an integrated business-to-business (B2B) distribution platform and omni-channel presence, which includes supply chain and distribution operations, dedicated sales professionals, a B2B digital procurement solution, online presence, and a network of Office Depot and OfficeMax retail stores. Through its operating companies ODP Business Solutions, LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc, The ODP Corporation empowers every business, professional, and consumer to achieve more every day. For more information, visit theodpcorp.com.
ODP and ODP Business Solutions are trademarks of ODP Business Solutions, LLC. Office Depot is a trademark of The Office Club, LLC. OfficeMax is a trademark of OMX, Inc. Veyer is a trademark of Veyer, LLC. Varis is a trademark of Varis, Inc. Grand&Toy is a trademark of Grand & Toy, LLC in
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 the strategic review of Varis and benefits related to Project Core; the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute the Maximize B2B Restructuring Plan successfully or that such plan will not result in the benefits anticipated; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited- source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs and lost revenue; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive 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
THE ODP CORPORATION |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(In millions, except per share amounts) |
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13 Weeks Ended |
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14 Weeks Ended |
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52 Weeks Ended |
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53 Weeks Ended |
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December 30, |
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December 31, |
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December 30, |
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December 31, |
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2023 |
|
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2022 |
|
|
2023 |
|
|
2022 |
|
||||
Sales |
|
$ |
1,806 |
|
|
$ |
2,106 |
|
|
$ |
7,831 |
|
|
$ |
8,491 |
|
Cost of goods sold and occupancy costs |
|
|
1,410 |
|
|
|
1,660 |
|
|
|
6,065 |
|
|
|
6,643 |
|
Gross profit |
|
|
396 |
|
|
|
446 |
|
|
|
1,766 |
|
|
|
1,848 |
|
Selling, general and administrative expenses |
|
|
353 |
|
|
|
388 |
|
|
|
1,476 |
|
|
|
1,552 |
|
Asset impairments |
|
|
72 |
|
|
|
6 |
|
|
|
85 |
|
|
|
14 |
|
Merger, restructuring and other operating expenses, net |
|
|
2 |
|
|
|
(3 |
) |
|
|
4 |
|
|
|
39 |
|
Operating income (loss) |
|
|
(31 |
) |
|
|
55 |
|
|
|
201 |
|
|
|
243 |
|
Other income (expense): |
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|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
3 |
|
|
|
2 |
|
|
|
10 |
|
|
|
5 |
|
Interest expense |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(20 |
) |
|
|
(16 |
) |
Other income, net |
|
|
2 |
|
|
|
— |
|
|
|
9 |
|
|
|
10 |
|
Income (loss) from continuing operations before income taxes |
|
|
(31 |
) |
|
|
52 |
|
|
|
200 |
|
|
|
242 |
|
Income tax expense |
|
|
6 |
|
|
|
16 |
|
|
|
61 |
|
|
|
64 |
|
Net income (loss) from continuing operations |
|
|
(37 |
) |
|
|
36 |
|
|
|
139 |
|
|
|
178 |
|
Discontinued operations, net of tax |
|
|
— |
|
|
|
(19 |
) |
|
|
— |
|
|
|
(12 |
) |
Net income (loss) |
|
$ |
(37 |
) |
|
$ |
17 |
|
|
$ |
139 |
|
|
$ |
166 |
|
Basic earnings (loss) per share |
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|
|
|
|
|
|
|
|
|
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|
||||
Continuing operations |
|
$ |
(0.99 |
) |
|
$ |
0.79 |
|
|
$ |
3.61 |
|
|
$ |
3.73 |
|
Discontinued operations |
|
|
— |
|
|
|
(0.41 |
) |
|
|
— |
|
|
|
(0.25 |
) |
Net basic earnings (loss) per share |
|
$ |
(0.99 |
) |
|
$ |
0.38 |
|
|
$ |
3.61 |
|
|
$ |
3.48 |
|
Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations |
|
$ |
(0.99 |
) |
|
$ |
0.76 |
|
|
$ |
3.50 |
|
|
$ |
3.61 |
|
Discontinued operations |
|
|
— |
|
|
|
(0.40 |
) |
|
|
— |
|
|
|
(0.24 |
) |
Net diluted earnings (loss) per share |
|
$ |
(0.99 |
) |
|
$ |
0.36 |
|
|
$ |
3.50 |
|
|
$ |
3.37 |
|
THE ODP CORPORATION |
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CONSOLIDATED BALANCE SHEETS |
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(In millions, except shares and par value) |
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December 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
392 |
|
|
$ |
403 |
|
Receivables, net |
|
|
487 |
|
|
|
536 |
|
Inventories |
|
|
765 |
|
|
|
828 |
|
Prepaid expenses and other current assets |
|
|
28 |
|
|
|
36 |
|
Current assets held for sale |
|
|
6 |
|
|
|
107 |
|
Total current assets |
|
|
1,678 |
|
|
|
1,910 |
|
Property and equipment, net |
|
|
359 |
|
|
|
352 |
|
Operating lease right-of-use assets |
|
|
983 |
|
|
|
874 |
|
Goodwill |
|
|
403 |
|
|
|
464 |
|
Other intangible assets, net |
|
|
45 |
|
|
|
46 |
|
Deferred income taxes |
|
|
140 |
|
|
|
182 |
|
Other assets |
|
|
278 |
|
|
|
321 |
|
Total assets |
|
$ |
3,886 |
|
|
$ |
4,149 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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|
|
|
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|
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Current liabilities: |
|
|
|
|
|
|
||
Trade accounts payable |
|
$ |
755 |
|
|
$ |
821 |
|
Accrued expenses and other current liabilities |
|
|
923 |
|
|
|
1,005 |
|
Income taxes payable |
|
|
6 |
|
|
|
17 |
|
Short-term borrowings and current maturities of long-term debt |
|
|
9 |
|
|
|
16 |
|
Total current liabilities |
|
|
1,693 |
|
|
|
1,859 |
|
Deferred income taxes and other long-term liabilities |
|
|
123 |
|
|
|
122 |
|
Pension and postretirement obligations, net |
|
|
15 |
|
|
|
16 |
|
Long-term debt, net of current maturities |
|
|
165 |
|
|
|
172 |
|
Operating lease liabilities, net of current portion |
|
|
789 |
|
|
|
693 |
|
Total liabilities |
|
|
2,785 |
|
|
|
2,862 |
|
Contingencies |
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Common stock — authorized 80,000,000 shares of |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
2,752 |
|
|
|
2,742 |
|
Accumulated other comprehensive loss |
|
|
(114 |
) |
|
|
(77 |
) |
Accumulated deficit |
|
|
(312 |
) |
|
|
(451 |
) |
Treasury stock, at cost — 29,740,915 shares at December 30, 2023 and 23,422,969 shares at December 31, 2022 |
|
|
(1,226 |
) |
|
|
(928 |
) |
Total stockholders’ equity |
|
|
1,101 |
|
|
|
1,287 |
|
Total liabilities and stockholders’ equity |
|
$ |
3,886 |
|
|
$ |
4,149 |
|
THE ODP CORPORATION |
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(In millions) |
||||||||
|
|
52 Weeks Ended |
|
|
53 Weeks Ended |
|
||
|
|
December 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
139 |
|
|
$ |
166 |
|
Loss from discontinued operations, net of tax |
|
|
— |
|
|
|
(12 |
) |
Net income (loss) from continuing operations |
|
|
139 |
|
|
|
178 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
115 |
|
|
|
131 |
|
Amortization of debt discount and issuance costs |
|
|
2 |
|
|
|
2 |
|
Charges for losses on receivables and inventories |
|
|
28 |
|
|
|
19 |
|
Asset impairments |
|
|
85 |
|
|
|
14 |
|
Gain on disposition of assets, net |
|
|
(4 |
) |
|
|
(4 |
) |
Compensation expense for share-based payments |
|
|
36 |
|
|
|
40 |
|
Deferred income taxes and deferred tax asset valuation allowances |
|
|
40 |
|
|
|
40 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Decrease (Increase) in receivables |
|
|
41 |
|
|
|
(42 |
) |
Decrease in inventories |
|
|
47 |
|
|
|
13 |
|
Net decrease in prepaid expenses, operating lease right-of-use assets, and
|
|
|
277 |
|
|
|
282 |
|
Net increase in trade accounts payable, accrued expenses, operating lease
|
|
|
(474 |
) |
|
|
(436 |
) |
Other operating activities |
|
|
(1 |
) |
|
|
— |
|
Total Adjustments |
|
|
192 |
|
|
|
59 |
|
Net cash provided by operating activities of continuing operations |
|
|
331 |
|
|
|
237 |
|
Net cash provided by operating activities of discontinued operations |
|
|
— |
|
|
|
— |
|
Net cash provided by operating activities |
|
|
331 |
|
|
|
237 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(105 |
) |
|
|
(99 |
) |
Businesses acquired, net of cash acquired |
|
|
(16 |
) |
|
|
— |
|
Proceeds from disposition of assets |
|
|
109 |
|
|
|
8 |
|
Settlement of company-owned life insurance policies |
|
|
5 |
|
|
|
5 |
|
Net cash used in investing activities of continuing operations |
|
|
(7 |
) |
|
|
(86 |
) |
Net cash provided by investing activities of discontinued operations |
|
|
5 |
|
|
|
76 |
|
Net cash used by investing activities |
|
|
(2 |
) |
|
|
(10 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Net payments on long and short-term borrowings |
|
|
(15 |
) |
|
|
(21 |
) |
Debt retirement |
|
|
(204 |
) |
|
|
(43 |
) |
Debt issuance |
|
|
200 |
|
|
|
— |
|
Share purchases for taxes, net of proceeds from employee share-based transactions |
|
|
(26 |
) |
|
|
(20 |
) |
Repurchase of common stock for treasury and advance payment for accelerated
|
|
|
(295 |
) |
|
|
(266 |
) |
Other financing activities |
|
|
— |
|
|
|
(5 |
) |
Net cash used in financing activities of continuing operations |
|
|
(340 |
) |
|
|
(355 |
) |
Net cash used in financing activities of discontinued operations |
|
|
— |
|
|
|
— |
|
Net cash used in financing activities |
|
|
(340 |
) |
|
|
(355 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
2 |
|
|
|
(5 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
|
(9 |
) |
|
|
(133 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
404 |
|
|
|
537 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
395 |
|
|
$ |
404 |
|
Supplemental information on non-cash investing and financing activities |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
375 |
|
|
$ |
228 |
|
Promissory note receivable obtained from disposition of discontinued operations |
|
|
59 |
|
|
|
55 |
|
Cash taxes paid, net |
|
|
35 |
|
|
|
17 |
|
Earn-out receivable obtained from disposition of discontinued operations |
|
|
9 |
|
|
|
9 |
|
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
|
7 |
|
|
|
4 |
|
Cash interest paid, net of amounts capitalized and non-recourse debt |
|
|
16 |
|
|
|
16 |
|
Other current receivable obtained from disposition of discontinued operations |
|
|
— |
|
|
|
9 |
|
Transfer from additional paid-in capital to treasury stock for final settlement of
|
|
|
— |
|
|
|
29 |
|
THE ODP CORPORATION |
||||
BUSINESS UNIT PERFORMANCE |
||||
(In millions) |
||||
(Unaudited) |
||||
ODP Business Solutions Division |
4Q23 |
4Q22 |
FY23 |
FY22 |
Sales (external) |
|
|
|
|
Sales (internal) |
|
|
|
|
% change of total sales |
(10)% |
|
(3)% |
|
Division operating income |
|
|
|
|
% of total sales |
|
|
|
|
Office Depot Division |
4Q23 |
4Q22 |
FY23 |
FY22 |
Sales (external) |
|
|
|
|
Sales (internal) |
|
|
|
|
% change of total sales |
(18)% |
(3)% |
(13)% |
(8)% |
Division operating income |
|
|
|
|
% of total sales |
|
|
|
|
Comparable store sales decrease |
(6)% |
N/A |
(6)% |
N/A |
Veyer Division |
4Q23 |
4Q22 |
FY23 |
FY22 |
Sales (external) |
|
|
|
|
Sales (internal) |
|
|
|
|
% change of total sales |
(16)% |
(2)% |
(10)% |
(2)% |
Division operating income |
|
|
|
|
% of total sales |
|
|
|
|
Varis Division |
4Q23 |
4Q22 |
FY23 |
FY22 |
Sales (external) |
|
|
|
|
Sales (internal) |
|
|
|
|
% change of total sales |
|
|
|
|
Division operating loss |
|
|
|
|
% of total sales |
(750)% |
(900)% |
(788)% |
(943)% |
THE ODP CORPORATION |
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) |
||||||||||||||||||||
Q4 2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
Asset impairments |
|
$ |
72 |
|
|
|
4.0 |
% |
|
$ |
72 |
|
|
$ |
— |
|
|
|
— |
% |
Merger, restructuring and other operating expenses, net |
|
$ |
2 |
|
|
|
0.1 |
% |
|
$ |
2 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income (loss) |
|
$ |
(31 |
) |
|
|
(1.7 |
)% |
|
$ |
(74 |
) |
|
$ |
43 |
|
(4) |
|
2.4 |
% |
Income tax expense |
|
$ |
6 |
|
|
|
0.3 |
% |
|
$ |
(2 |
) |
|
$ |
8 |
|
(5) |
|
0.4 |
% |
Net income (loss) from continuing operations |
|
$ |
(37 |
) |
|
|
(2.0 |
)% |
|
$ |
(72 |
) |
|
$ |
35 |
|
(6) |
|
1.9 |
% |
Earnings (loss) per share from continuing operations (fully diluted) |
|
$ |
(0.99 |
) |
|
|
|
|
$ |
(1.91 |
) |
|
$ |
0.92 |
|
(6) |
|
|
||
Depreciation and amortization |
|
$ |
28 |
|
|
|
1.6 |
% |
|
$ |
— |
|
|
$ |
28 |
|
|
|
1.6 |
% |
Q4 2022 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
Asset impairments |
|
$ |
6 |
|
|
|
0.3 |
% |
|
$ |
6 |
|
|
$ |
— |
|
|
|
— |
% |
Merger, restructuring and other operating expenses, net |
|
$ |
(3 |
) |
|
|
(0.1 |
)% |
|
$ |
(3 |
) |
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
55 |
|
|
|
2.6 |
% |
|
$ |
(3 |
) |
|
$ |
58 |
|
(4) |
|
2.8 |
% |
Income tax expense |
|
$ |
16 |
|
|
|
0.8 |
% |
|
$ |
1 |
|
|
$ |
15 |
|
(5) |
|
0.7 |
% |
Net income from continuing operations |
|
$ |
36 |
|
|
|
1.7 |
% |
|
$ |
(4 |
) |
|
$ |
40 |
|
(6) |
|
1.9 |
% |
Earnings per share from continuing operations (fully diluted) |
|
$ |
0.76 |
|
|
|
|
|
$ |
(0.09 |
) |
|
$ |
0.85 |
|
(6) |
|
|
||
Depreciation and amortization |
|
$ |
31 |
|
|
|
1.5 |
% |
|
$ |
— |
|
|
$ |
31 |
|
|
|
1.5 |
% |
THE ODP CORPORATION |
||||||||||||||||||||
GAAP to Non-GAAP Reconciliations |
||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||
2023 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
Asset impairments |
|
$ |
85 |
|
|
|
1.1 |
% |
|
$ |
85 |
|
|
$ |
— |
|
|
|
— |
% |
Merger, restructuring and other operating expenses, net |
|
$ |
4 |
|
|
|
0.1 |
% |
|
$ |
4 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
201 |
|
|
|
2.6 |
% |
|
$ |
(89 |
) |
|
$ |
290 |
|
(4) |
|
3.7 |
% |
Income tax expense |
|
$ |
61 |
|
|
|
0.8 |
% |
|
$ |
(5 |
) |
|
$ |
66 |
|
(5) |
|
0.8 |
% |
Net income from continuing operations |
|
$ |
139 |
|
|
|
1.8 |
% |
|
$ |
(84 |
) |
|
$ |
223 |
|
(6) |
|
2.8 |
% |
Earnings per share from continuing operations (fully diluted) |
|
$ |
3.50 |
|
|
|
|
|
$ |
(2.10 |
) |
|
$ |
5.60 |
|
(6) |
|
|
||
Depreciation and amortization |
|
$ |
115 |
|
|
|
1.5 |
% |
|
$ |
— |
|
|
$ |
115 |
|
|
|
1.5 |
% |
2022 |
|
Reported
|
|
|
% of
|
|
|
Less:
|
|
|
Adjusted
|
|
|
% of
|
|
|||||
Asset impairments |
|
$ |
14 |
|
|
|
0.2 |
% |
|
$ |
14 |
|
|
$ |
— |
|
|
|
— |
% |
Merger, restructuring and other operating expenses, net |
|
$ |
39 |
|
|
|
0.5 |
% |
|
$ |
39 |
|
|
$ |
— |
|
|
|
— |
% |
Operating income |
|
$ |
243 |
|
|
|
2.9 |
% |
|
$ |
(53 |
) |
|
$ |
296 |
|
(4) |
|
3.5 |
% |
Income tax expense |
|
$ |
64 |
|
|
|
0.8 |
% |
|
$ |
(15 |
) |
|
$ |
79 |
|
(5) |
|
0.9 |
% |
Net income from continuing operations |
|
$ |
178 |
|
|
|
2.1 |
% |
|
$ |
(38 |
) |
|
$ |
216 |
|
(6) |
|
2.5 |
% |
Earnings per share from continuing operations (fully diluted) |
|
$ |
3.61 |
|
|
|
|
|
$ |
(0.79 |
) |
|
$ |
4.40 |
|
(6) |
|
|
||
Depreciation and amortization |
|
$ |
131 |
|
|
|
1.5 |
% |
|
$ |
— |
|
|
$ |
131 |
|
|
|
1.5 |
% |
|
|
13 Weeks Ended |
|
|
14 Weeks Ended |
|
|
52 Weeks Ended |
|
|
53 Weeks Ended |
|
||||
|
|
December 30, |
|
|
December 31, |
|
|
December 30, |
|
|
December 31, |
|
||||
Adjusted EBITDA: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
(37 |
) |
|
$ |
17 |
|
|
$ |
139 |
|
|
$ |
166 |
|
Discontinued operations, net of tax |
|
|
— |
|
|
|
(19 |
) |
|
|
— |
|
|
|
(12 |
) |
Net income (loss) from continuing operations |
|
|
(37 |
) |
|
|
36 |
|
|
|
139 |
|
|
|
178 |
|
Income tax expense |
|
|
6 |
|
|
|
16 |
|
|
|
61 |
|
|
|
64 |
|
Income (loss) from continuing operations before income taxes |
|
|
(31 |
) |
|
|
52 |
|
|
|
200 |
|
|
|
242 |
|
Add (subtract) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
(10 |
) |
|
|
(5 |
) |
Interest expense |
|
|
5 |
|
|
|
5 |
|
|
|
20 |
|
|
|
16 |
|
Depreciation and amortization |
|
|
28 |
|
|
|
31 |
|
|
|
115 |
|
|
|
131 |
|
Charges and credits, pretax (7) |
|
|
74 |
|
|
|
3 |
|
|
|
92 |
|
|
|
53 |
|
Adjusted EBITDA |
|
$ |
73 |
|
|
$ |
89 |
|
|
$ |
417 |
|
|
$ |
437 |
|
| 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). | |
THE ODP CORPORATION |
||||||||||||||||
GAAP to Non-GAAP Reconciliations |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
13 Weeks Ended |
|
|
14 Weeks Ended |
|
|
52 Weeks Ended |
|
|
53 Weeks Ended |
|
||||
|
|
December 30, |
|
|
December 31, |
|
|
December 30, |
|
|
December 31, |
|
||||
Free cash flow |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net cash provided by operating activities of continuing operations |
|
$ |
70 |
|
|
$ |
158 |
|
|
$ |
331 |
|
|
$ |
237 |
|
Capital expenditures |
|
|
(29 |
) |
|
|
(31 |
) |
|
|
(105 |
) |
|
|
(99 |
) |
Change in restricted cash impacting working capital |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
Free cash flow |
|
|
41 |
|
|
|
127 |
|
|
|
224 |
|
|
|
138 |
|
Adjustments for certain cash charges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maximize B2B Restructuring Plan |
|
|
2 |
|
|
|
3 |
|
|
|
9 |
|
|
|
8 |
|
Previously planned separation of consumer business and re-alignment |
|
|
— |
|
|
|
17 |
|
|
|
2 |
|
|
|
55 |
|
Adjusted free cash flow |
|
$ |
43 |
|
|
$ |
147 |
|
|
$ |
235 |
|
|
$ |
201 |
|
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 |
|
|||
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|||
Office Depot Division: |
|
|
|
|
|
|
|
|
|
|||
Stores opened |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stores closed |
|
|
29 |
|
|
|
22 |
|
|
|
64 |
|
Total retail stores ( |
|
|
980 |
|
|
|
916 |
|
|
|
— |
|
Total square footage (in millions) |
|
|
21.6 |
|
|
|
20.3 |
|
|
|
— |
|
Average square footage per store (in thousands) |
|
|
22.1 |
|
|
|
22.2 |
|
|
|
— |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240228279722/en/
Tim Perrott Investor Relations 561-438-4629 Tim.Perrott@theodpcorp.com
Source: The ODP Corporation
FAQ
What was the total reported sales in Q4 2023?
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