Announces Debt Retirement, Initiation of Quarterly Dividend, Expanded
Share Repurchase Plan
Identifies Initiatives for Future Growth
Expands U.S. Retail Optimization and Store of the Future Plan
Launches $250 Million Cost Savings Program
BOCA RATON, Fla.--(BUSINESS WIRE)--Aug. 3, 2016--
Office Depot, Inc. (“Office Depot”, or the “company”) (NASDAQ: ODP), a
leading global provider of office products, services, and solutions,
today announced results for the second quarter ended June 25, 2016.
“We are making good progress rebuilding our sales pipeline and moving
our overall business forward, despite the disruption of the prolonged
Staples acquisition attempt,” said Roland Smith, chairman and chief
executive officer for Office Depot. “The initiatives we announced today
are a result of our comprehensive strategic business review which is now
substantially complete. In the near term, we remain focused on executing
our Critical Priorities, completing the OfficeMax merger integration,
implementing our new cost saving programs, and returning capital to
shareholders. Longer term, our business review has also identified
several attractive growth initiatives that we intend to aggressively
pursue.”
Consolidated Results
Reported (GAAP) Results
Total reported sales for the second quarter of 2016 were $3.2 billion
compared to $3.4 billion in the second quarter of 2015, a decrease of 6%.
In the second quarter of 2016, Office Depot reported operating income of
$253 million and net income of $210 million, or $0.38 per share. In the
second quarter of 2015, the company reported an operating loss of $51
million and a net loss of $58 million, or $0.11 loss per share.
Adjusted (non-GAAP) Results (1)
Total adjusted sales in the second quarter of 2016 declined 3% compared
to the prior year period, excluding the impact of U.S. retail store
closures and foreign currency translation.
Adjusted operating income for the second quarter of 2016 was $67 million
compared to an adjusted operating income of $73 million in the second
quarter of 2015. For the second quarter of 2016, adjusted operating
income excludes a net credit totaling $187 million, comprised of a $250
million fee paid by Staples in connection with the termination of the
merger agreement, partially offset by charges including $34 million in
Staples acquisition expenses, $25 million in expenses related to the
Office Depot/OfficeMax integration and $4 million in restructuring
activities.
Adjusted net income for the second quarter of 2016 was $19 million, or
$0.03 per share, compared to adjusted net income of $32 million, or
$0.06 per share, in the second quarter of 2015. Adjusted net income in
the second quarter of 2016 excludes the after-tax impact from the
special charges and credits and reflects the negative impact of a higher
tax rate due to losses in non-U.S. jurisdictions with valuation
allowances.
|
Consolidated (in millions, except per share amounts)
|
|
2Q16
|
|
2Q15
|
|
YTD16
|
|
YTD15
|
|
Selected GAAP measures:
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$3,218
|
|
$3,440
|
|
$6,762
|
|
$7,317
|
|
Sales decline from prior year period
|
|
(6)%
|
|
|
|
(8)%
|
|
|
|
Gross profit
|
|
$747
|
|
$814
|
|
$1,603
|
|
$1,751
|
|
Gross profit margin
|
|
23.2%
|
|
23.7%
|
|
23.7%
|
|
23.9%
|
|
Operating income (loss)
|
|
$253
|
|
$(51)
|
|
$325
|
|
$36
|
|
Net income (loss)
|
|
$210
|
|
$(58)
|
|
$256
|
|
$(13)
|
|
Net earnings (loss) per share (most dilutive)
|
|
$0.38
|
|
$(0.11)
|
|
$0.46
|
|
$(0.02)
|
|
Selected Non-GAAP measures:(1) |
|
|
|
|
|
|
|
|
|
Adjusted sales decline from prior year period excluding impact
from U.S. retail store closures and foreign currency translation
|
|
(3)%
|
|
|
|
(4)%
|
|
|
|
Adjusted operating income
|
|
$67
|
|
$73
|
|
$181
|
|
$208
|
|
Adjusted operating income margin
|
|
2.1%
|
|
2.1%
|
|
2.7%
|
|
2.8%
|
|
Adjusted net income (loss)
|
|
$19
|
|
$32
|
|
$76
|
|
$103
|
|
Adjusted net earnings (loss) per share
|
|
$0.03
|
|
$0.06
|
|
$0.14
|
|
$0.19
|
(1) Adjusted results include non-GAAP measures and exclude
charges or credits not indicative of our core operations and the tax
effect of these items, which may include but not be limited to merger
integration, restructuring, Staples acquisition and asset impairments.
Additionally, the adjusted year-over-year rate of sales decline for the
consolidated company excludes the impact from foreign currency
translation and sales attributable to U.S. retail store closures.
Reconciliations from GAAP to non-GAAP financial measures can be found in
this release as well as on our Investor Relations website at
investor.officedepot.com.
Divisional Results
North American Retail Division
Retail Division sales were $1.2 billion in the second quarter of 2016
compared to $1.3 billion in the prior year period. Second quarter sales
declined 7%, primarily due to the impact of planned store closures in
the twelve months through June 25, 2016. Same-store sales in the quarter
declined 1% primarily due to lower transaction counts, partially offset
by higher average order value. Same-store sales benefited from the
positive impact of transferred sales from closed stores.
|
North American Retail (in millions)
|
|
2Q16
|
|
2Q15
|
|
YTD16
|
|
YTD15
|
|
Sales
|
|
$1,249
|
|
$1,342
|
|
$2,755
|
|
$2,995
|
|
Same-store sales increase (decline) from prior year
|
|
(1)%
|
|
|
|
(1)%
|
|
|
|
Division operating income (loss)
|
|
$30
|
|
$42
|
|
$132
|
|
$128
|
|
Division operating income (loss) margin
|
|
2.4%
|
|
3.1%
|
|
4.8%
|
|
4.3%
|
Retail Division operating income was $30 million, or 2.4% of sales, in
the second quarter of 2016 compared to $42 million, or 3.1% of sales, in
the second quarter of 2015. The decline from the prior year quarter
primarily reflected $15 million in favorable legal settlements recorded
in the second quarter of 2015 and a lower gross margin rate, partially
offset by lower occupancy costs and selling, general and administrative
expenses including payroll.
Office Depot ended the second quarter of 2016 with a total of 1,513
retail stores in the North American Retail Division. During the quarter,
the company closed 42 stores, completing the previously announced 400
store closure plan.
North American Business Solutions Division
Business Solutions Division sales were $1.3 billion in the second
quarter of 2016, a decline of 7% compared to the prior year period as
reported and in constant currency. Sales were lower in both the contract
and direct channels. The contract channel sales decline was driven
primarily by customer attrition and fewer customer additions during the
period of business disruption related to the prolonged Staples’
acquisition attempt. In the direct channel, decommissioning of legacy
OfficeMax ecommerce sites and the ongoing reduction in catalog sales
also contributed to the decline in sales.
|
Business Solutions (in millions)
|
|
2Q16
|
|
2Q15
|
|
YTD16
|
|
YTD15
|
|
Sales
|
|
$1,330
|
|
$1,434
|
|
$2,698
|
|
$2,910
|
|
Sales decline in constant currency from prior year
|
|
(7)%
|
|
|
|
(7)%
|
|
|
|
Division operating income
|
|
$63
|
|
$63
|
|
$109
|
|
$120
|
|
Division operating income margin
|
|
4.7%
|
|
4.4%
|
|
4.0%
|
|
4.1%
|
Business Solutions Division operating income was $63 million, or 4.7% of
sales, in the second quarter of 2016 compared to $63 million, or 4.4% of
sales, in the second quarter of 2015. Although operating income was flat
compared to the prior year quarter, operating margin increased as the
flow-through impact from lower sales was offset by a higher gross margin
rate and lower selling, general and administrative expenses including
payroll and advertising.
International Division
International Division sales were $0.6 billion in the second quarter of
2016, a decline of 4% compared to the prior year period, reflecting the
negative impact of foreign currency translation. International sales
declined 2% in constant currency primarily due to the continued business
disruption from the prolonged Staples’ acquisition attempt and ongoing
European sale process, the exit of unprofitable business in Asia and
ongoing competitive market pressures.
|
International (in millions)
|
|
2Q16
|
|
2Q15
|
|
YTD16
|
|
YTD15
|
|
Sales
|
|
$639
|
|
$664
|
|
$1,309
|
|
$1,412
|
|
Sales decline in constant currency from prior year
|
|
(2)%
|
|
|
|
(4)%
|
|
|
|
Division operating income (loss)
|
|
$(10)
|
|
$2
|
|
$(19)
|
|
$15
|
|
Division operating income (loss) margin
|
|
(1.6)%
|
|
0.3%
|
|
(1.5)%
|
|
1.1%
|
The International Division operating loss was $10 million, or 1.6% of
sales, in the second quarter of 2016 compared to an operating income of
$2 million, or 0.3% of sales, in the second quarter of 2015. The decline
from the prior year quarter primarily reflected the negative
flow-through impact of lower sales and a lower gross margin rate,
resulting from the initial margin impact of new contract wins, partially
offset by lower selling, general and administrative expenses including
payroll and support costs.
At the end of the second quarter of 2016, there were a total of 289
retail stores in the International Division, including 149 company-owned
stores and 140 stores operated by franchisees and licensees.
Office Depot is exploring strategic alternatives regarding its European
business and has a process underway to determine if a sale of this
business could be executed on terms acceptable to the company.
Corporate Results
Corporate includes support staff services and certain other expenses
that are not allocated to the three divisions. Unallocated operating
costs were $17 million in the second quarter of 2016 compared to $34
million in the second quarter of 2015. This decrease was primarily
driven by synergies achieved at the corporate level as a result of the
OfficeMax merger.
Balance Sheet and Cash Flow
As of June 25, 2016, Office Depot had $1.1 billion in cash and cash
equivalents and approximately $1.1 billion available under the Amended
and Restated Credit Agreement, for total available liquidity of
approximately $2.2 billion. Total debt was $654 million, excluding $808
million of non-recourse debt related to the credit-enhanced timber
installment notes.
For the second quarter of 2016, cash provided by operating activities
was $287 million, including a $250 million fee paid by Staples in
connection with the termination of the merger agreement, partially
offset by $37 million in acquisition-related expenses, $31 million in
OfficeMax merger-related costs and $16 million in International and
other restructuring costs. Capital expenditures were $23 million in the
second quarter of 2016, $6 million of which were related to the merger
integration. The company repurchased a total of 7 million shares of its
outstanding common stock during the quarter for a total cost of $26
million.
Update on Comprehensive Business Review and Strategy
In conjunction with the announcement of the Staples merger termination
on May 16, 2016, Office Depot announced that it had engaged Bain &
Company to assist with finalizing a comprehensive strategic review of
its business. This review included a detailed analysis of the company’s
current operating model, growth opportunities and cost structure to
support the company’s overall Framework for Growth. The result is a
three-year strategic plan to grow profitability and provide shareholder
value that contains four key elements: accelerating opportunities in the
contract channel, optimizing and reinventing the North American Retail
model, implementing multi-year cost reductions across the company and
returning capital to shareholders. This review is substantially complete
and a number of initiatives are underway across the business.
Identifies Initiatives for Future Growth
Office Depot has identified a number of opportunities to grow sales in
the contract channel by improving penetration into adjacent categories
and increasing share of wallet with existing customers. One attractive
opportunity is in the facilities space where the company can leverage
its relationships with current customers by offering an expanded
assortment of products. The market for these products remains large and
fragmented, with attractive growth potential for Office Depot. The
company intends to aggressively compete in this space by adding
additional core products, leveraging its supply chain capabilities and
increasing selling efforts to drive penetration.
Expanding U.S. Retail Optimization and Store of
the Future Plan
During the second quarter of 2016, Office Depot completed the first
phase of the U.S. Retail Store Optimization that was launched in 2014.
This plan resulted in the closure of 400 stores, with sales transfer
rates in excess of the company’s 30% stated target, leading to over $100
million in ongoing benefits. Based on the success of this initiative,
Office Depot is expanding this plan to include approximately 300
additional store closures over the next three years.
The company intends to build on the early success of its store of the
future format by expanding the pilot program to a total of 24 stores by
the end of 2016 with 100 stores targeted for 2017. This format features
a smaller 15,000 sq. ft. footprint and is designed to provide customers
with an enhanced shopping experience including a curated assortment of
products and expanded services. Office Depot expects that many of these
elements will be incorporated across the retail portfolio in the coming
years which will create a more consistent and efficient retail operating
model with enhanced sales per square foot.
Launching Additional Cost Savings Program
As part of the comprehensive business review process, several
opportunities were identified to increase efficiencies and optimize the
organization. Accordingly, the company is launching a number of
initiatives across key business areas to capture these savings including
the implementation of a more effective customer coverage model, a
reduction in indirect procurement costs, lower overall general and
administrative costs as well as realizing the benefits from the expanded
U.S. retail store optimization program. In total, these initiatives are
expected to deliver over $250 million in annual benefits by the end of
2018.
These savings are in addition to the expected merger synergy benefits of
more than $750 million from the OfficeMax integration and will bring the
total of annual savings benefits realized since 2014 to more than $1
billion by the end of 2018.
Optimizing Capital Structure
In conjunction with the comprehensive business review, Office Depot also
completed an analysis of its capital structure during the second
quarter. The company recently announced the extension of its $1.2
billion asset-based credit facility for an additional five years to
provide for long term liquidity and had approximately $2.2 billion in
total liquidity at the end of the second quarter of 2016. Based on this
liquidity position, Office Depot announced today that it is calling its
outstanding 9.75% senior secured notes due 2019 for redemption on
September 15, 2016. The notes are currently callable at a price equal to
104.875% of the principal amount for a total consideration of
approximately $262 million. The company will realize annual cash
interest savings of approximately $24 million as a result of this debt
retirement.
Initiating a Quarterly Dividend
In recognition of the company’s strong liquidity position and confidence
in the ability to generate future cash flow, the Office Depot Board of
Directors has approved the initiation of a quarterly cash dividend. The
company has declared an initial dividend of $0.025 per share ($0.10 per
share on an annualized basis) on the common stock of the company payable
on September 15, 2016, to shareholders of record at the close of
business August 25, 2016.
Increasing Share Repurchase Authorization
On May 31, 2016, the company announced that its Board of Directors had
authorized a stock repurchase program of up to $100 million of its
outstanding common stock. As of July 29, 2016, the company has
repurchased approximately 16 million shares for an aggregate cost of $55
million. Office Depot remains committed to enhancing shareholder return
and the Board has approved an increase in the stock repurchase
authorization from the previously authorized $100 million to a total of
$250 million.
Outlook
Office Depot continues to expect total company sales in 2016 to be lower
than 2015, primarily due to the impact of store closures, the business
disruption from the protracted regulatory process related to the
Staples’ acquisition attempt and continued challenging market
conditions. The company expects this disruption to continue throughout
the year but at a decelerated rate as the company focuses on winning new
business.
As a result of the adverse impact on the company’s sales resulting from
the prolonged Staples’ acquisition attempt, Office Depot now expects to
generate between $450 million and $470 million in adjusted operating
income in fiscal 2016.
Office Depot closed 42 stores in the second quarter of 2016 as part of
its previously announced U.S. retail store optimization plan. The
company expects to close approximately 25 additional stores in 2016 as
part of the second phase of this plan.
Total capital expenditures in 2016 are now expected to be approximately
$175 million, a reduction of $75 million from the previous target. This
estimate includes approximately $50 million in capital spend related to
the merger integration. Depreciation and amortization is expected to be
approximately $215 million in 2016.
Office Depot continues to expect total annual run-rate merger synergy
benefits of more than $750 million from the OfficeMax integration and
expects the integration to be substantially complete by the end of 2017.
The company expects to incur approximately $70 million of merger
integration expenses in 2016 and the remaining $30 million in 2017.
Office Depot anticipates a non-GAAP effective tax rate of approximately
45% in fiscal 2016, dependent on the mix and timing of income across
jurisdictions, and an estimated cash tax rate of between 10% and 15% as
the company utilizes available tax operating loss carry forwards and
credits.
The company expects free cash flow to be in excess of $200 million in
2016 and more than $300 million in 2017 as one-time merger and
integration spending abates.
About Office Depot, Inc.
Office Depot, Inc. is a leading global provider of products, services,
and solutions for every workplace – whether your workplace is an office,
home, school or car.
Office Depot, Inc. is a resource and a catalyst to help customers work
better. We are a single source for everything customers need to be more
productive, including the latest technology, core office supplies, print
and document services, business services, facilities products,
furniture, and school essentials.
The company has annual sales of approximately $14 billion, employs
approximately 49,000 associates, and serves consumers and businesses in
59 countries with approximately 1,800 retail stores, award-winning
e-commerce sites and a dedicated business-to-business sales organization
– all delivered through a global network of wholly owned operations,
franchisees, licensees and alliance partners. The company operates under
several banner brands including Office Depot, OfficeMax, Grand & Toy,
and Viking. The company’s portfolio of exclusive product brands include
TUL, Foray, Brenton Studio, Ativa, WorkPro, Realspace and HighMark.
Office Depot, Inc.’s common stock is listed on the NASDAQ Global Select
Market under the symbol “ODP”. Additional press information can be found
at: http://news.officedepot.com.
All trademarks, service marks and trade names of Office Depot, Inc.
and OfficeMax Incorporated used herein are trademarks or registered
trademarks of Office Depot, Inc. and OfficeMax Incorporated,
respectively. Any other product or company names mentioned herein are
the trademarks of their respective owners.
FORWARD LOOKING STATEMENTS
This communication may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements or disclosures may discuss goals, intentions and expectations
as to future trends, plans, events, results of operations or financial
condition, or state other information relating to, among other things,
Office Depot, 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,” “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
Office Depot’s control. There can be no assurances that Office Depot
will realize these expectations or that these beliefs will prove
correct, and therefore investors and stockholders 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, risks
related to the termination of Office Depot’s pending acquisition by
Staples, disruption in key business activities or any impact on Office
Depot’s relationships with third parties as a result of the announcement
of the termination of the Staples Merger Agreement; unanticipated
changes in the markets for Office Depot’s business segments; the
inability to realize expected benefits from Office Depot’s European
restructuring plan; fluctuations in currency exchange rates,
unanticipated downturns in business relationships with customers;
competitive pressures on Office Depot’s sales and pricing; increases in
the cost of material, energy and other production costs, or unexpected
costs that cannot be recouped in product pricing; the introduction of
competing technology products and services; unexpected technical or
marketing difficulties; unexpected claims, charges, litigation, dispute
resolutions or settlement expenses; new laws and governmental
regulations. The foregoing list of factors is not exhaustive. Investors
and stockholders should carefully consider the foregoing factors and the
other risks and uncertainties described in Office Depot’s Annual Reports
on Form 10-K, as amended, and Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission. Office Depot does not assume any
obligation to update or revise any forward-looking statements.
|
OFFICE DEPOT, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
|
June 25,
|
|
|
June 27,
|
|
|
June 25,
|
|
|
June 27,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
Sales
|
|
$
|
3,218
|
|
|
$
|
3,440
|
|
|
$
|
6,762
|
|
|
$
|
7,317
|
|
|
Cost of goods sold and occupancy costs
|
|
|
2,471
|
|
|
|
2,626
|
|
|
|
5,159
|
|
|
|
5,566
|
|
|
Gross profit
|
|
|
747
|
|
|
|
814
|
|
|
|
1,603
|
|
|
|
1,751
|
|
|
Selling, general and administrative expenses
|
|
|
681
|
|
|
|
741
|
|
|
|
1,421
|
|
|
|
1,543
|
|
|
Asset impairments
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
9
|
|
|
Merger, restructuring, and other operating (income) expenses, net
|
|
|
(187
|
)
|
|
|
120
|
|
|
|
(143
|
)
|
|
|
163
|
|
|
Operating income (loss)
|
|
|
253
|
|
|
|
(51
|
)
|
|
|
325
|
|
|
|
36
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
6
|
|
|
|
6
|
|
|
|
12
|
|
|
|
12
|
|
|
Interest expense
|
|
|
(25
|
)
|
|
|
(23
|
)
|
|
|
(48
|
)
|
|
|
(48
|
)
|
|
Other income (expense), net
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
Income (loss) before income taxes
|
|
|
234
|
|
|
|
(67
|
)
|
|
|
289
|
|
|
|
2
|
|
|
Income tax expense (benefit)
|
|
|
24
|
|
|
|
(9
|
)
|
|
|
33
|
|
|
|
15
|
|
|
Net income (loss)
|
|
$
|
210
|
|
|
$
|
(58
|
)
|
|
$
|
256
|
|
|
$
|
(13
|
)
|
|
Net earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.47
|
|
|
$
|
(0.02
|
)
|
|
Diluted
|
|
$
|
0.38
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.46
|
|
|
$
|
(0.02
|
)
|
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. Form 10-K filed
February 23, 2016 (the “2015 Form 10-K”).
|
OFFICE DEPOT, INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(In millions, except share and per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 25,
|
|
|
December 26,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,118
|
|
|
$
|
1,069
|
|
|
Receivables, net
|
|
|
1,055
|
|
|
|
1,166
|
|
|
Inventories
|
|
|
1,560
|
|
|
|
1,698
|
|
|
Prepaid expenses and other current assets
|
|
|
112
|
|
|
|
127
|
|
|
Total current assets
|
|
|
3,845
|
|
|
|
4,060
|
|
|
Property and equipment, net
|
|
|
750
|
|
|
|
785
|
|
|
Goodwill
|
|
|
378
|
|
|
|
378
|
|
|
Other intangible assets, net
|
|
|
47
|
|
|
|
54
|
|
|
Timber notes receivable
|
|
|
895
|
|
|
|
905
|
|
|
Deferred income taxes
|
|
|
22
|
|
|
|
24
|
|
|
Other assets
|
|
|
236
|
|
|
|
236
|
|
|
Total assets
|
|
$
|
6,173
|
|
|
$
|
6,442
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,145
|
|
|
$
|
1,319
|
|
|
Accrued expenses and other current liabilities
|
|
|
1,100
|
|
|
|
1,355
|
|
|
Income taxes payable
|
|
|
7
|
|
|
|
13
|
|
|
Short-term borrowings and current maturities of long-term debt
|
|
|
37
|
|
|
|
56
|
|
|
Total current liabilities
|
|
|
2,289
|
|
|
|
2,743
|
|
|
Deferred income taxes and other long-term liabilities
|
|
|
417
|
|
|
|
459
|
|
|
Pension and postretirement obligations, net
|
|
|
182
|
|
|
|
184
|
|
|
Long-term debt, net of current maturities
|
|
|
617
|
|
|
|
634
|
|
|
Non-recourse debt
|
|
|
808
|
|
|
|
819
|
|
|
Total liabilities
|
|
|
4,313
|
|
|
|
4,839
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock—authorized 800,000,000 shares of $.01 par value; issued
shares – 557,203,768 in June 2016 and 554,835,306 in December 2015
|
|
|
6
|
|
|
|
6
|
|
|
Additional paid-in capital
|
|
|
2,624
|
|
|
|
2,607
|
|
|
Accumulated other comprehensive income
|
|
|
41
|
|
|
|
30
|
|
|
Accumulated deficit
|
|
|
(727
|
)
|
|
|
(982
|
)
|
|
Treasury stock, at cost – 13,274,064 shares in 2016 and 5,915,268
shares in 2015
|
|
|
(84
|
)
|
|
|
(58
|
)
|
|
Total equity
|
|
|
1,860
|
|
|
|
1,603
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
6,173
|
|
|
$
|
6,442
|
|
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 2015 Form 10-K.
|
OFFICE DEPOT, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In millions)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended
|
|
|
|
|
June 25,
|
|
|
June 27,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
256
|
|
|
$
|
(13
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
110
|
|
|
|
150
|
|
|
Charges for losses on inventories and receivables
|
|
|
36
|
|
|
|
30
|
|
|
Asset impairments
|
|
|
—
|
|
|
|
9
|
|
|
Changes in working capital and other
|
|
|
(254
|
)
|
|
|
(311
|
)
|
|
Net cash provided by (used in) operating activities
|
|
|
148
|
|
|
|
(135
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(49
|
)
|
|
|
(71
|
)
|
|
Acquisition, net of cash acquired
|
|
|
—
|
|
|
|
(10
|
)
|
|
Proceeds from disposition of assets and other
|
|
|
12
|
|
|
|
42
|
|
|
Net cash used in investing activities
|
|
|
(37
|
)
|
|
|
(39
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net proceeds on employee share-based transactions
|
|
|
1
|
|
|
|
4
|
|
|
Net payments on long and short-term borrowings
|
|
|
(32
|
)
|
|
|
(12
|
)
|
|
Debt related fees
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
Repurchase of common stock for treasury
|
|
|
(26
|
)
|
|
|
—
|
|
|
Net cash used in financing activities
|
|
|
(63
|
)
|
|
|
(9
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1
|
|
|
|
(21
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
49
|
|
|
|
(204
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,069
|
|
|
|
1,071
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
1,118
|
|
|
$
|
867
|
|
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 2015 Form 10-K.
OFFICE DEPOT, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited)
We report our results in accordance with accounting principles generally
accepted in the United States (“GAAP”). We also review certain financial
measures excluding impacts of transactions that are not related to our
core operations (“non-GAAP”). Management uses both GAAP and non-GAAP
measures to assist in making business decisions and assessing overall
performance. Non-GAAP measures help to evaluate programs and activities
that are intended to attract and satisfy customers, separate from
expenses and credits directly associated with Merger, restructuring, and
certain similar items. Certain non-GAAP measures are also used for
short- and long-term incentive programs.
Our measurement of these non-GAAP financial measures may be different
from similarly titled financial measures used by others and therefore
may not be comparable. These non-GAAP financial measures should not be
considered superior to the GAAP measures, but only to clarify some
information and assist the reader. We have included reconciliations of
this information to the most comparable GAAP measures in the tables
included within this material.
|
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
% of
|
|
|
|
Charges &
|
|
Adjusted
|
|
|
|
% of
|
|
|
Q2 2016
|
|
(GAAP)
|
|
|
|
Sales
|
|
|
|
Credits
|
|
(Non-GAAP)
|
|
|
|
Sales
|
|
|
Merger, restructuring, and other operating (income) expenses, net
|
|
$
|
(187)
|
|
|
|
|
5.8
|
%
|
|
|
$
|
(187)
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Operating income (loss)
|
|
$
|
253
|
|
|
|
|
7.9
|
%
|
|
|
$
|
187
|
|
$
|
67
|
|
|
|
|
2.1
|
%
|
|
Net income (loss)
|
|
$
|
210
|
|
|
|
|
7.0
|
%
|
|
|
$
|
191
|
|
$
|
19
|
|
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (most dilutive)
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
$
|
0.35
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
% of
|
|
|
|
Charges &
|
|
Adjusted
|
|
|
|
% of
|
|
|
Q2 2015
|
|
(GAAP)
|
|
|
|
Sales
|
|
|
|
Credits
|
|
(Non-GAAP)
|
|
|
|
Sales
|
|
|
Assets impairments
|
|
$
|
4
|
|
|
|
|
0.1
|
%
|
|
|
$
|
4
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Merger, restructuring, and other operating (income) expenses, net
|
|
$
|
120
|
|
|
|
|
3.5
|
%
|
|
|
$
|
120
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Operating income (loss)
|
|
$
|
(51)
|
|
|
|
|
(1.5)
|
%
|
|
|
$
|
(124)
|
|
$
|
73
|
|
|
|
|
2.1
|
%
|
|
Net income (loss)
|
|
$
|
(58)
|
|
|
|
|
(1.7)
|
%
|
|
|
$
|
(90)
|
|
$
|
32
|
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (most dilutive)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
$
|
(0.17)
|
|
$
|
0.06
|
|
|
|
|
|
|
|
OFFICE DEPOT, INC.
|
|
|
|
GAAP to Non-GAAP Reconciliations
|
|
|
|
(Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
% of
|
|
|
Charges &
|
|
|
Adjusted
|
|
|
% of
|
|
YTD Q2 2016
|
|
(GAAP)
|
|
|
Sales
|
|
|
Credits
|
|
|
(Non-GAAP)
|
|
|
Sales
|
|
Merger, restructuring, and other operating (income) expenses, net
|
|
$
|
(143)
|
|
|
|
2.1
|
%
|
|
$
|
(143)
|
|
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Operating income (loss)
|
|
$
|
325
|
|
|
|
4.8
|
%
|
|
$
|
143
|
|
|
|
$
|
181
|
|
|
|
|
2.7
|
%
|
|
Net income (loss)
|
|
$
|
256
|
|
|
|
3.8
|
%
|
|
$
|
179
|
|
|
|
$
|
76
|
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (most dilutive)
|
|
$
|
0.46
|
|
|
|
|
|
|
$
|
0.32
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
% of
|
|
|
Charges &
|
|
|
Adjusted
|
|
|
% of
|
|
YTD Q2 2015
|
|
(GAAP)
|
|
|
Sales
|
|
|
Credits
|
|
|
(Non-GAAP)
|
|
|
Sales
|
|
Assets impairments
|
|
$
|
9
|
|
|
|
0.1
|
%
|
|
$
|
9
|
|
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Merger, restructuring, and other operating (income) expenses, net
|
|
$
|
163
|
|
|
|
2.2
|
%
|
|
$
|
163
|
|
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
Operating income (loss)
|
|
$
|
36
|
|
|
|
0.5
|
%
|
|
$
|
(172
|
)
|
|
|
$
|
208
|
|
|
|
|
2.8
|
%
|
|
Net income (loss)
|
|
$
|
(13)
|
|
|
|
0.2
|
%
|
|
$
|
(116
|
)
|
|
|
$
|
103
|
|
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (most dilutive)
|
|
$
|
(0.02)
|
|
|
|
|
|
|
$
|
(0.21
|
)
|
|
|
$
|
0.19
|
|
|
|
|
|
|
Amounts may not foot due to rounding
Note: The company has deferred tax asset valuation allowances in
the US and certain foreign jurisdictions for GAAP purposes. The non-GAAP
tax calculation removes the US valuation allowances because of
cumulative income on a non-GAAP basis. The foreign valuation allowances
remain for the non-GAAP calculations. The effective tax rate for both
GAAP and non-GAAP continues to be affected by losses in jurisdictions
with valuation allowances. Additionally, the 2016 GAAP effective tax
rate reflects benefits from utilization of deferred tax assets because
of existing valuation allowances.
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
|
Sales Decline Reconciliation:
|
|
June 25, 2016
|
|
June 25, 2016
|
|
Reported (GAAP) sales decline
|
|
(6)%
|
|
(8)%
|
|
Exclusion of foreign currency translation impact
|
|
(0)%
|
|
(0)%
|
|
Exclusion of sales associated with U.S. store closure impacts
|
|
(3)%
|
|
(4)%
|
|
Adjusted Sales decline (excluding impact from foreign currency
translation and U.S. retail store closures)
|
|
(3)%
|
|
(4)%
|
Amounts may not foot due to rounding
|
OFFICE DEPOT, INC.
|
|
Store Statistics
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
YTD
|
|
|
|
Q2 2016
|
|
Q2 2016
|
|
|
|
|
|
|
|
North American Retail (NAR):
|
|
|
|
|
|
Stores opened
|
|
—
|
|
—
|
|
Stores closed
|
|
42
|
|
51
|
|
Total NAR (U.S.) stores
|
|
1,513
|
|
|
|
Total NAR square footage (in millions)
|
|
34.1
|
|
|
|
Average square footage per store (in thousands)
|
|
22.5
|
|
|
|
|
|
|
|
|
|
Total International Company-Owned
|
|
149
|
|
|
|
|
|
|
|
|
|
Total International Franchisees & Licensees
|
|
140
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160803005412/en/
Source: Office Depot, Inc.
Office Depot, Inc.
Investor Relations
Richard Leland,
561-438-3796
Richard.Leland@officedepot.com
or
Media
Relations
Karen Denning, 630-438-7445
Karen.Denning@officedepot.com
