odp-10q_20200627.htm

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

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

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

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.:

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 July 29, 2020, there were 52,664,952 outstanding shares of The ODP Corporation (the successor issuer pursuant to Rule 12g-3(a) under the Exchange Act as of June 30, 2020) (“ODP”) Common Stock, $0.01 par value.

The order and presentation of this Quarterly Report on Form 10-Q (“Form 10-Q”) differ from that of the traditional U.S. Securities and Exchange Commission (“SEC”) Form 10-Q format. We believe 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.

	13 Weeks Ended						26 Weeks Ended
	June 27,			June 29,			June 27,			June 29,
	2020			2019			2020			2019
Sales:
Products	$	1,857		$	2,183		$	4,194		$	4,543
Services		301			405			689			813
Total sales		2,158			2,588			4,883			5,356
Cost of goods and occupancy costs:
Products		1,531			1,731			3,358			3,570
Services		211			272			479			559
Total cost of goods and occupancy costs		1,742			2,003			3,837			4,129
Gross profit		416			585			1,046			1,227
Selling, general and administrative expenses		406			515			928			1,090
Asset impairments		401			16			413			45
Merger and restructuring expenses, net		65			69			81			83
Operating income (loss)		(456	)		(15	)		(376	)		9
Other income (expense):
Interest income		—			5			3			11
Interest expense		(11	)		(23	)		(29	)		(46	)
Loss on extinguishment and modification of debt		(12	)		—			(12	)		—
Other income, net		4			2			5			5
Loss before income taxes		(475	)		(31	)		(409	)		(21	)
Income tax benefit		(36	)		(7	)		(15	)		(5	)
Net loss	$	(439	)	$	(24	)	$	(394	)	$	(16	)
Loss per share
Basic	$	(8.34	)	$	(0.43	)	$	(7.46	)	$	(0.29	)
Diluted	$	(8.19	)	$	(0.43	)	$	(7.31	)	$	(0.28	)

On June 30, 2020, Office Depot, Inc., the predecessor of The ODP Corporation, implemented a holding company reorganization (the “Reorganization”), which resulted in The ODP Corporation becoming the parent company of, and the successor issuer to, Office Depot, Inc. For purposes of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (June 30, 2020) refer to those of Office Depot, Inc. as the predecessor company and its subsidiaries and thereafter to those of The ODP Corporation and its consolidated subsidiaries, except as otherwise specified or to the extent the context otherwise indicates.

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 Office Depot, Inc. Annual Report on Form 10-K filed on February 26, 2020 (the “2019 Form 10-K”).

	13 Weeks Ended						26 Weeks Ended
	June 27, 2020			June 29, 2019			June 27, 2020			June 29, 2019
Net loss	$	(439	)	$	(24	)	$	(394	)	$	(16	)
Other comprehensive income (loss), net of tax, where applicable:
Foreign currency translation adjustments		13			5			(28	)		15
Other		—			—			(1	)		1
Total other comprehensive income (loss), net of tax, where applicable		13			5			(29	)		16
Comprehensive loss	$	(426	)	$	(19	)	$	(423	)	$	—

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 2019 Form 10-K.

	June 27,			December 28,
	2020			2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	762		$	698
Receivables, net		679			823
Inventories		1,005			1,032
Prepaid expenses and other current assets		79			75
Timber notes receivable		—			819
Total current assets		2,525			3,447
Property and equipment, net		612			679
Operating lease right-of-use assets		1,272			1,413
Goodwill		593			944
Other intangible assets, net		363			388
Deferred income taxes		183			183
Other assets		317			257
Total assets	$	5,865		$	7,311
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	991		$	1,026
Accrued expenses and other current liabilities		1,104			1,219
Income taxes payable		10			8
Short-term borrowings and current maturities of long-term debt		30			106
Non-recourse debt		—			735
Total current liabilities		2,135			3,094
Deferred income taxes and other long-term liabilities		189			176
Pension and postretirement obligations, net		80			85
Long-term debt, net of current maturities		642			575
Operating lease liabilities		1,102			1,208
Total liabilities		4,148			5,138
Commitments and contingencies
Stockholders' equity:
Common stock — authorized 80,000,000 shares of $0.01 par value; issued shares — 62,514,546 at June 27, 2020 and 62,042,477 at December 28, 2019; outstanding shares — 52,657,353 at June 27, 2020 and 53,518,232 at December 28, 2019		1			1
Additional paid-in capital		2,650			2,652
Accumulated other comprehensive loss		(95	)		(66	)
Accumulated deficit		(484	)		(89	)
Treasury stock, at cost — 9,857,193 shares at June 27, 2020 and 8,524,245 shares at December 28, 2019		(355	)		(325	)
Total stockholders' equity		1,717			2,173
Total liabilities and stockholders’ equity	$	5,865		$	7,311

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 2019 Form 10-K.

	26 Weeks Ended
	June 27,			June 29,
	2020			2019
Cash flows from operating activities:
Net loss	$	(394	)	$	(16	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		97			102
Amortization of debt discount and issuance costs		2			4
Charges for losses on receivables and inventories		16			14
Asset impairments		413			45
Loss on disposition of assets, net		5			1
Loss on extinguishment and modification of debt		12			—
Compensation expense for share-based payments		16			17
Deferred income taxes and deferred tax asset valuation allowances		(3	)		(9	)
Contingent consideration payments in excess of acquisition-date liability		(2	)		(11	)
Changes in working capital and other operating activities		18			(145	)
Net cash provided by operating activities		180			2
Cash flows from investing activities:
Capital expenditures		(40	)		(91	)
Businesses acquired, net of cash acquired		(18	)		(22	)
Proceeds from collection of notes receivable		818			—
Other investing activities		2			—
Net cash provided by (used in) investing activities		762			(113	)
Cash flows from financing activities:
Net payments on long and short-term borrowings		(30	)		(48	)
Debt retirement		(1,187	)		—
Debt issuance		400			—
Cash dividends on common stock		(13	)		(27	)
Share purchases for taxes, net of proceeds from employee share-based transactions		(5	)		(9	)
Repurchase of common stock for treasury		(30	)		(11	)
Contingent consideration payments up to amount of acquisition-date liability		(1	)		(12	)
Other financing activities		(6	)		—
Net cash used in financing activities		(872	)		(107	)
Effect of exchange rate changes on cash and cash equivalents		(6	)		4
Net increase (decrease) in cash and cash equivalents		64			(214	)
Cash, cash equivalents and restricted cash at beginning of period		700			660
Cash, cash equivalents and restricted cash at end of period	$	764		$	446
Supplemental information
Right-of-use assets obtained in exchange for new finance lease liabilities	$	3		$	12
Right-of-use assets obtained in exchange for new operating lease liabilities		63			130

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 2019 Form 10-K.

	26 Weeks Ended June 27, 2020
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 28, 2019		62,042,477	$	1	$	2,652		$	(66	)	$	(89	)	$	(325	)	$	2,173
Net income		—		—		—			—			45			—			45
Other comprehensive loss		—		—		—			(42	)		—			—			(42	)
Exercise and release of incentive stock (including income tax benefits and withholding)		426,591		—		(4	)		—			—			—			(4	)
Amortization of long-term incentive stock grants		—		—		7			—			—			—			7
Dividends paid on common stock ($0.25 per share)		—		—		(13	)		—			—			—			(13	)
Repurchase of common stock		—		—		—			—			—			(30	)		(30	)
Adjustment for adoption of accounting standard		—		—		—			—			(1	)		—			(1	)
Balance at March 28, 2020		62,469,068	$	1	$	2,642		$	(108	)	$	(45	)	$	(355	)	$	2,135
Net loss		—		—		—			—			(439	)		—			(439	)
Other comprehensive income		—		—		—			13			—			—			13
Exercise and release of incentive stock (including income tax benefits and withholding)		45,478		—		(1	)		—			—			—			(1	)
Amortization of long-term incentive stock grants		—		—		9			—			—			—			9
Balance at June 27, 2020		62,514,546	$	1	$	2,650		$	(95	)	$	(484	)	$	(355	)	$	1,717

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 2019 Form 10-K.



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)

Financial Statements		Page
Condensed Consolidated Statements of Operations (Unaudited)		3
Condensed Consolidated Statements of Comprehensive Income (Loss) (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		26
Operating Results by Division		30
Liquidity and Capital Resources		36
New Accounting Standards		38
Critical Accounting Policies		38
Other Information
Quantitative and Qualitative Disclosures About Market Risk		39
Controls and Procedures		39
Legal Proceedings		40
Risk Factors		40
Unregistered Sales of Equity Securities and Use of Proceeds		41
Exhibits		43
Form 10-Q Cross-Reference Index		44
Signatures		45
EX 3.1
EX 4.1
EX 10.1
EX 10.2 EX 10.3
EX 31.1
EX 31.2 EX 32
EX 101
EX 104

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