ODP Corp [ODP] Filings

10-Q 1 odp-20230930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

☐ Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from __ __ __ __to __ __ __ __

Commission File Number 1-10948

The ODP Corporation

(Exact Name of Registrant as Specified in its Charter)



Delaware	85-1457062
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)



6600 North Military Trail, Boca Raton, Florida	33496
(Address of Principal Executive Offices)	(Zip Code)

(561) 438-4800

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading
Symbol(s)

Name of Each Exchange on which Registered

Common Stock, par value $0.01 per share

ODP

The NASDAQ Stock Market
(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At November 1, 2023, there were 37,378,079 outstanding shares of The ODP Corporation Common Stock, $0.01 par value.

TABLE OF CONTENTS

The order and presentation of this Quarterly Report on Form 10-Q differ from that of the traditional U.S. Securities and Exchange Commission (“SEC”) Form 10-Q format. We believe that our format better presents the relevant sections of this document and enhances readability. See “Form 10-Q Cross-Reference Index” within Other Information for a cross-reference index to the traditional SEC Form 10-Q format.


Financial Statements		Page
Condensed Consolidated Statements of Operations (Unaudited)		3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
Condensed Consolidated Balance Sheets (Unaudited)		5
Condensed Consolidated Statements of Cash Flows (Unaudited)		6
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		9
Management’s Discussion and Analysis (MD&A)
Overview		21
Operating Results by Division		25
Liquidity and Capital Resources		30
New Accounting Standards		32
Critical Accounting Policies		32
Other Information
Quantitative and Qualitative Disclosures About Market Risk		33
Controls and Procedures		33
Legal Proceedings		33
Risk Factors		33
Unregistered Sales of Equity Securities and Use of Proceeds		34
Other Information		34
Exhibits		35
Form 10-Q Cross-Reference Index		36
Signatures		37

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)


	13 Weeks Ended						39 Weeks Ended
	September 30,			September 24,			September 30,			September 24,
	2023			2022			2023			2022
Sales	$	2,009		$	2,172		$	6,025		$	6,385
Cost of goods and occupancy costs		1,535			1,686			4,655			4,983
Gross profit		474			486			1,370			1,402
Selling, general and administrative expenses		379			391			1,123			1,164
Asset impairments		3			3			13			8
Merger, restructuring and other operating expenses, net		1			8			2			42
Operating income		91			84			232			188
Other income (expense):
Interest income		3			1			7			3
Interest expense		(5	)		(1	)		(15	)		(10	)
Other income, net		3			5			8			9
Income from continuing operations before income taxes		92			89			232			190
Income tax expense		22			22			56			48
Net income from continuing operations		70			67			176			142
Discontinued operations, net of tax		—			—			—			7
Net income	$	70		$	67		$	176		$	149
Basic earnings (loss) per share
Continuing operations	$	1.83		$	1.39		$	4.52		$	2.92
Discontinued operations		—			(0.01	)		—			0.14
Net basic earnings (loss) per share	$	1.83		$	1.38		$	4.52		$	3.06
Diluted earnings (loss) per share
Continuing operations	$	1.79		$	1.36		$	4.38		$	2.84
Discontinued operations		—			(0.01	)		—			0.13
Net diluted earnings (loss) per share	$	1.79		$	1.35		$	4.38		$	2.97

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in The ODP Corporation Annual Report on Form 10-K filed on March 1, 2023 (the “2022 Form 10-K”).

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	13 Weeks Ended						39 Weeks Ended
	September 30, 2023			September 24, 2022			September 30, 2023			September 24, 2022
Net income	$	70		$	67		$	176		$	149
Other comprehensive income, net of tax, where applicable:
Foreign currency translation adjustments		(7	)		(19	)		—			(31	)
Reclassification of foreign currency translation adjustments realized upon disposal of business		—			—			—			6
Pension valuation adjustments		(43	)		(3	)		(44	)		(5	)
Total other comprehensive income, net of tax, where applicable		(50	)		(22	)		(44	)		(30	)
Comprehensive income	$	20		$	45		$	132		$	119

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the 2022 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)


	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	384		$	403
Receivables, net		542			536
Inventories		782			828
Prepaid expenses and other current assets		37			36
Current assets held for sale		9			107
Total current assets		1,754			1,910
Property and equipment, net		352			352
Operating lease right-of-use assets		951			874
Goodwill		468			464
Other intangible assets, net		42			46
Deferred income taxes		141			182
Other assets		272			321
Total assets	$	3,980		$	4,149
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	818		$	821
Accrued expenses and other current liabilities		930			1,005
Income taxes payable		3			17
Short-term borrowings and current maturities of long-term debt		9			16
Total current liabilities		1,760			1,859
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
Operating lease liabilities		767			693
Total liabilities		2,825			2,862
Commitments and contingencies
Stockholders' equity:
Common stock — authorized 80,000,000 shares of $0.01 par value; issued shares — 66,695,068 at September 30, 2023 and 65,636,015 at December 31, 2022; outstanding shares — 37,626,086 at September 30, 2023 and 42,213,046 at December 31, 2022		1			1
Additional paid-in capital		2,744			2,742
Accumulated other comprehensive loss		(121	)		(77	)
Accumulated deficit		(275	)		(451	)
Treasury stock, at cost — 29,068,982 shares at September 30, 2023 and 23,422,969 shares at December 31, 2022		(1,194	)		(928	)
Total stockholders' equity		1,155			1,287
Total liabilities and stockholders’ equity	$	3,980		$	4,149

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the 2022 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	39 Weeks Ended
	September 30,			September 24,
	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:
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

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the 2022 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share amounts)

(Unaudited)


	39 Weeks Ended September 30, 2023
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 31, 2022		65,636,015	$	1	$	2,742		$	(77	)	$	(451	)	$	(928	)	$	1,287
Net income		—		—		—			—			72			—			72
Other comprehensive income		—		—		—			2			—			—			2
Exercise and release of incentive stock (including income tax benefits and withholding)		812,978		—		(19	)		—			—			—			(19	)
Amortization of long-term incentive stock grants		—		—		9			—			—			—			9
Repurchase of common stock															(202	)		(202	)
Other		—		—		—			—			—			(1	)		(1	)
Balance at April 1, 2023		66,448,993	$	1	$	2,732		$	(75	)	$	(379	)	$	(1,131	)	$	1,148
Net income		—		—		—			—			34			—			34
Other comprehensive income		—		—		—			4			—			—			4
Exercise and release of incentive stock (including income tax benefits and withholding)		148,113		—		(4	)		—			—			—			(4	)
Amortization of long-term incentive stock grants		—		—		9			—			—			—			9
Repurchase of common stock		—		—					—			—			(31	)		(31	)
Other		—		—		—			—			1			—			1
Balance at July 1, 2023		66,597,106	$	1	$	2,737		$	(71	)	$	(344	)	$	(1,162	)	$	1,161
Net income		—		—		—			—			70			—			70
Other comprehensive loss		—		—		—			(50	)		—			—			(50	)
Exercise and release of incentive stock (including income tax benefits and withholding)		97,962		—		(3	)		—			—			—			(3	)
Amortization of long-term incentive stock grants		—		—		10			—			—			—			10
Repurchase of common stock		—		—		—			—			—			(32