ODP Corp [ODP] Filings

10-Q 1 odp-20240928.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 28, 2024

☐ 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 October 30, 2024, there were 30,118,194 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		22
Operating Results by Division		25
Liquidity and Capital Resources		30
New Accounting Standards		33
Critical Accounting Policies		33
Other Information
Quantitative and Qualitative Disclosures About Market Risk		34
Controls and Procedures		34
Legal Proceedings		34
Risk Factors		34
Unregistered Sales of Equity Securities and Use of Proceeds		35
Other Information		35
Exhibits		36
Form 10-Q Cross-Reference Index		37
Signatures		38

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)


	13 Weeks Ended						39 Weeks Ended
	September 28,			September 30,			September 28,			September 30,
	2024			2023			2024			2023
Sales	$	1,780		$	2,007		$	5,367		$	6,020
Cost of goods and occupancy costs		1,416			1,535			4,252			4,653
Gross profit		364			472			1,115			1,367
Selling, general and administrative expenses		323			360			974			1,073
Asset impairments		7			3			21			13
Merger and restructuring expenses, net		2			1			47			2
Legal matter monetization		(70	)		—			(70	)		—
Operating income		102			108			143			279
Other income (expense):
Interest income		2			3			7			7
Interest expense		(6	)		(5	)		(16	)		(15	)
Other income, net		(3	)		3			(4	)		8
Income from continuing operations before income taxes		95			109			130			279
Income tax expense		27			27			35			71
Net income from continuing operations		68			82			95			208
Discontinued operations, net of tax		(10	)		(12	)		(95	)		(32	)
Net income	$	58		$	70		$	—		$	176
Basic earnings (loss) per share
Continuing operations	$	2.06		$	2.14		$	2.72		$	5.34
Discontinued operations		(0.31	)		(0.31	)		(2.71	)		(0.82	)
Net basic earnings per share	$	1.75		$	1.83		$	0.01		$	4.52
Diluted earnings (loss) per share
Continuing operations	$	2.04		$	2.09		$	2.65		$	5.18
Discontinued operations		(0.31	)		(0.30	)		(2.64	)		(0.80	)
Net diluted earnings per share	$	1.73		$	1.79		$	0.01		$	4.38

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 February 28, 2024 (the “2023 Form 10-K”).

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	13 Weeks Ended						39 Weeks Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net income	$	58		$	70		$	—		$	176
Other comprehensive income (loss), net of tax, where applicable:
Foreign currency translation adjustments		7			(7	)		4			—
Pension valuation adjustments		(4	)		(43	)		(4	)		(44	)
Total other comprehensive income (loss), net of tax, where applicable		3			(50	)		—			(44	)
Comprehensive income	$	61		$	20		$	—		$	132

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 2023 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)


	September 28,			December 30,
	2024			2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	181		$	381
Receivables, net		550			485
Inventories		760			765
Prepaid expenses and other current assets		35			28
Current assets held for sale		12			80
Total current assets		1,538			1,739
Property and equipment, net		307			297
Operating lease right-of-use assets		980			983
Goodwill		412			403
Other intangible assets, net		49			45
Deferred income taxes		128			142
Other assets		277			278
Total assets	$	3,691		$	3,887
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	773		$	755
Accrued expenses and other current liabilities		874			915
Income taxes payable		4			6
Short-term borrowings and current maturities of long-term debt		10			9
Current liabilities held for sale		6			12
Total current liabilities		1,667			1,697
Deferred income taxes and other long-term liabilities		118			120
Pension and postretirement obligations, net		13			15
Long-term debt, net of current maturities		236			165
Operating lease liabilities, net of current portion		801			789
Total liabilities		2,835			2,786
Contingencies (Note 11)
Stockholders’ equity:
Common stock — authorized 80,000,000 shares of $0.01 par value; issued shares — 67,408,175 at September 28, 2024 and 66,700,292 at December 30, 2023; outstanding shares — 31,204,701 at September 28, 2024 and 36,959,377 at December 30, 2023		1			1
Additional paid-in capital		2,763			2,752
Accumulated other comprehensive loss		(114	)		(114	)
Accumulated deficit		(312	)		(312	)
Treasury stock, at cost — 36,203,474 shares at September 28, 2024 and 29,740,915 shares at December 30, 2023		(1,482	)		(1,226	)
Total stockholders’ equity		856			1,101
Total liabilities and stockholders’ equity	$	3,691		$	3,887

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 2023 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	39 Weeks Ended
	September 28,			September 30,
	2024			2023
Cash flows from operating activities:
Net income	$	—		$	176
Loss from discontinued operations, net of tax		(95	)		(32	)
Net income from continuing operations		95			208
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		73			75
Amortization of debt discount and issuance costs		1			1
Charges for losses on receivables and inventories		17			16
Asset impairments		21			13
Gain on disposition of assets, net		(1	)		(3	)
Compensation expense for share-based payments		23			22
Deferred income taxes and deferred tax asset valuation allowances		13			39
Changes in working capital and other operating activities		(117	)		(82	)
Net cash provided by operating activities of continuing operations		125			289
Net cash used in operating activities of discontinued operations		(23	)		(27	)
Net cash provided by operating activities		102			262
Cash flows from investing activities:
Capital expenditures		(72	)		(56	)
Businesses acquired, net of cash acquired		(11	)		(9	)
Proceeds from disposition of assets		1			105
Settlement of company-owned life insurance policies		4			3
Net cash provided by (used in) investing activities of continuing operations		(78	)		43
Net cash used in investing activities of discontinued operations		(7	)		(15	)
Net cash provided by (used in) investing activities		(85	)		28
Cash flows from financing activities:
Payments on credit facilities and debt retirement		(450	)		(204	)
Borrowings under credit facilities		520			200
Net payments on other long and short-term borrowings		(8	)		(12	)
Share purchases for taxes, net of proceeds from employee share-based transactions		(15	)		(26	)
Repurchase of common stock for treasury		(254	)		(264	)
Other financing activities		(7	)		—
Net cash used in financing activities of continuing operations		(214	)		(306	)
Net cash provided by (used in) financing activities of discontinued operations		—			—
Net cash used in financing activities		(214	)		(306	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1	)		—
Net decrease in cash, cash equivalents and restricted cash		(198	)		(16	)
Cash, cash equivalents and restricted cash at beginning of period		395			404
Cash, cash equivalents and restricted cash at end of period	$	197		$	388
Supplemental information on non-cash investing and financing activities
Right-of-use assets obtained in exchange for new operating lease liabilities	$	202		$	275
Right-of-use assets obtained in exchange for new finance lease liabilities		9			4
Cash interest paid, net of amounts capitalized and non-recourse debt		13			5
Cash taxes paid, net		14			27

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 2023 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share amounts)

(Unaudited)


	39 Weeks Ended September 28, 2024
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 30, 2023		66,700,292	$	1	$	2,752		$	(114	)	$	(312	)	$	(1,226	)	$	1,101
Net income		—		—		—			—			15			—			15
Other comprehensive loss		—		—		—			(3	)		—			—			(3	)
Exercise and release of incentive stock (including income tax benefits and withholding)		258,397		—		(6	)		—			—			—			(6	)
Amortization of long-term incentive stock grants		—		—		11			—			—			—			11
Repurchase of common stock		—		—		—			—			—			(50	)		(50	)
Other		—		—		1			—			—			—			1
Balance at March 30, 2024		66,958,689	$	1	$	2,758		$	(117	)	$	(297	)	$	(1,276	)	$	1,069
Net loss		—		—		—			—			(73	)		—			(73	)
Other comprehensive income		—		—		—			—			—			—			—
Exercise and release of incentive stock (including income tax benefits and withholding)		423,391		—		(9	)		—			—			—			(9	)
Amortization of long-term incentive stock grants		—		—		11			—			—			—			11
Repurchase of common stock		—		—		—			—			—			(104	)		(104	)
Other		—		—		(1	)		—			—			—			(1	)
Balance at June 29, 2024		67,382,080	$	1	$	2,759		$	(117	)	$	(370	)	$	(1,380	)	$	893
Net income		—		—		—			—			58			—			58
Other comprehensive income		—		—		—			3			—			—			3
Exercise and release of incentive stock (including income tax benefits and withholding)		26,095		—		—			—			—			—			—
Amortization of long-term incentive stock grants		—		—		4			—			—			—			4
Repurchase of common stock		—		—		—			—			—			(102	)		(102	)
Balance at September 28, 2024		67,408,175	$	1	$	2,763		$	(114	)	$	(312	)	$	(1,482	)	$	856

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 2023 Form 10-K.

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share amounts)

(Unaudited) - (Continued)


	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	)		(32	)
Other		—		—		—			—			(1	)		—			(1	)
Balance at September 30, 2023		66,695,068	$	1	$	2,744		$	(121	)	$	(275	)	$	(1,194	)	$	1,155

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 2023 Form 10-K.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The ODP Corporation (including its consolidated subsidiaries, “ODP” or the “Company”) 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, online presence, and a network of Office Depot and OfficeMax retail stores. Through its operating companies ODP Business Solutions, LLC; Office Depot, LLC; and Veyer, LLC, The ODP Corporation empowers every business, professional, and consumer to achieve more every day.

The Company has three reportable segments (or “Divisions”), which are ODP Business Solutions Division, Office Depot Division, and Veyer Division. Refer to Note 4 for additional information. On April 24, 2024, the Company’s Board of Directors provided their approval of management’s commitment to a plan to sell its Varis Division through a single disposal group. Accordingly, Varis Division is presented as discontinued operations beginning in the second quarter of 2024. The Company has reclassified the financial results of the Varis Division to discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented. The Company also reclassified the related assets and liabilities as assets and liabilities held for sale on the accompanying Condensed Consolidated Balance Sheets as of September 28, 2024, and December 30, 2023. Cash flows from the Company’s discontinued operations are presented as such in the Condensed Consolidated Statements of Cash Flows for all periods. The Varis Division was subsequently sold on October 18, 2024. Refer to Note 12 for additional information.

The Condensed Consolidated Financial Statements as of September 28, 2024, and for the 13-week and 39-week periods ended September 28, 2024 (also referred to as the “third quarter of 2024” and “year-to-date 2024,” respectively), and September 30, 2023 (also referred to as the “third quarter of 2023” and “year-to-date 2023,” respectively) are unaudited. However, in management’s opinion, these Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature necessary to provide a fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented.

The Company has prepared the Condensed Consolidated Financial Statements included herein pursuant to the rules and regulations of the SEC. Some information and note disclosures, which would normally be included in comprehensive annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), have been condensed or omitted pursuant to those SEC rules and regulations. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For a better understanding of the Company and its Condensed Consolidated Financial Statements, the Company recommends reading these Condensed Consolidated Financial Statements in conjunction with the audited financial statements, which are included in the Company’s 2023 Form 10-K. These interim results are not necessarily indicative of the results that should be expected for the full year.

CASH MANAGEMENT

The cash management process generally utilizes zero balance accounts which provide for the settlement of the related disbursement and cash concentration accounts on a daily basis. Amounts not yet presented for payment to zero balance disbursement accounts of $11 million and $13 million at September 28, 2024 and December 30, 2023, respectively, are presented in Trade accounts payable and Accrued expenses and other current liabilities.

At September 28, 2024 and December 30, 2023, cash and cash equivalents held outside the United States amounted to $58 million and $106 million, respectively. Year-to-date 2024, the Company repatriated $25 million cash that was held in Canada, for a cost of $1 million.

The Company has certain ongoing pension obligations related to its frozen defined benefit pension plan in the United Kingdom (“UK”). Restricted cash consists primarily of cash in bank committed to fund UK pension obligations based on the agreements that govern the UK pension plan. Restricted cash is valued at cost, which approximates fair value. Restricted cash was $5 million and $3 million at September 28, 2024 and December 30, 2023, respectively, and is presented in Other assets.

In addition, $11 million and $10 million of cash at September 28, 2024 and December 30, 2023, respectively, relates to the Varis Division and is presented in Current assets held for sale.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

REVENUE AND CONTRACT BALANCES

The Company generates substantially all of its revenue from contracts with customers for the sale of products and services. Refer to Note 4 for information on revenue by reportable segment and product category. Contract balances primarily consist of receivables, assets related to deferred contract acquisition costs, liabilities related to payments received in advance of performance under the contract, and liabilities related to unredeemed gift cards and loyalty programs.