false 2019 FY 0000800240 --12-28 Large Accelerated Filer true 0.005 P10D P3Y 0.005 P3Y 0000800240 2018-12-30 2019-12-28 xbrli:shares 0000800240 2020-02-19 iso4217:USD 0000800240 2019-06-28 0000800240 us-gaap:ProductMember 2018-12-30 2019-12-28 0000800240 us-gaap:ProductMember 2017-12-31 2018-12-29 0000800240 us-gaap:ProductMember 2017-01-01 2017-12-30 0000800240 us-gaap:ServiceMember 2018-12-30 2019-12-28 0000800240 us-gaap:ServiceMember 2017-12-31 2018-12-29 0000800240 us-gaap:ServiceMember 2017-01-01 2017-12-30 0000800240 2017-12-31 2018-12-29 0000800240 2017-01-01 2017-12-30 iso4217:USD xbrli:shares 0000800240 2019-12-28 0000800240 2018-12-29 0000800240 2017-12-30 0000800240 2016-12-31 0000800240 us-gaap:CommonStockMember 2016-12-31 0000800240 us-gaap:AdditionalPaidInCapitalMember 2016-12-31 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0000800240 us-gaap:RetainedEarningsMember 2016-12-31 0000800240 us-gaap:TreasuryStockMember 2016-12-31 0000800240 us-gaap:RetainedEarningsMember 2017-01-01 2017-12-30 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-30 0000800240 us-gaap:CommonStockMember 2017-01-01 2017-12-30 0000800240 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-30 0000800240 us-gaap:TreasuryStockMember 2017-01-01 2017-12-30 0000800240 us-gaap:CommonStockMember 2017-12-30 0000800240 us-gaap:AdditionalPaidInCapitalMember 2017-12-30 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-30 0000800240 us-gaap:RetainedEarningsMember 2017-12-30 0000800240 us-gaap:TreasuryStockMember 2017-12-30 0000800240 us-gaap:RetainedEarningsMember 2017-12-31 2018-12-29 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 2018-12-29 0000800240 us-gaap:CommonStockMember 2017-12-31 2018-12-29 0000800240 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 2018-12-29 0000800240 us-gaap:TreasuryStockMember 2017-12-31 2018-12-29 0000800240 us-gaap:CommonStockMember 2018-12-29 0000800240 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 0000800240 us-gaap:RetainedEarningsMember 2018-12-29 0000800240 us-gaap:TreasuryStockMember 2018-12-29 0000800240 us-gaap:RetainedEarningsMember 2018-12-30 2019-12-28 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-30 2019-12-28 0000800240 us-gaap:CommonStockMember 2018-12-30 2019-12-28 0000800240 us-gaap:AdditionalPaidInCapitalMember 2018-12-30 2019-12-28 0000800240 us-gaap:TreasuryStockMember 2018-12-30 2019-12-28 0000800240 us-gaap:CommonStockMember 2019-12-28 0000800240 us-gaap:AdditionalPaidInCapitalMember 2019-12-28 0000800240 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-28 0000800240 us-gaap:RetainedEarningsMember 2019-12-28 0000800240 us-gaap:TreasuryStockMember 2019-12-28 0000800240 odp:AssetsHeldUnderFinanceLeasesMember 2018-12-30 2019-12-28 odp:Store odp:Segment xbrli:pure 0000800240 us-gaap:NonUsMember 2019-12-28 0000800240 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2019-12-28 0000800240 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2018-12-29 odp:Customer 0000800240 odp:VendorArrangementsReceivablesMember 2019-12-28 0000800240 odp:VendorArrangementsReceivablesMember 2018-12-29 0000800240 us-gaap:BuildingMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:BuildingMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 odp:FurnitureFixtureAndEquipmentMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 odp:FurnitureFixtureAndEquipmentMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 odp:ComputerSoftwareForCommonOfficeApplicationsMember 2018-12-30 2019-12-28 0000800240 odp:ComputerSoftwareForLargerBusinessApplicationMember 2018-12-30 2019-12-28 0000800240 odp:ComputerSoftwareForEnterpriseWideSystemsMember 2018-12-30 2019-12-28 0000800240 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 odp:ComprehensiveBusinessReviewMember srt:MaximumMember 2016-06-25 2016-09-24 0000800240 odp:ComprehensiveBusinessReviewMember 2016-06-25 2016-09-24 0000800240 odp:ComprehensiveBusinessReviewMember 2016-09-25 2019-12-28 0000800240 odp:BusinessAccelerationProgramMember 2019-05-07 2019-05-08 odp:DistributionCenterandSalesOffice 0000800240 odp:BusinessAccelerationProgramMember 2019-12-28 0000800240 srt:MinimumMember 2019-12-28 0000800240 srt:MaximumMember 2019-12-28 0000800240 us-gaap:AccountingStandardsUpdate201602Member 2018-12-30 0000800240 us-gaap:AccountingStandardsUpdate201602Member 2018-12-30 2018-12-30 odp:Business 0000800240 country:US 2018-12-30 2019-12-28 0000800240 country:US 2018-12-30 2019-03-30 0000800240 country:US 2019-03-31 2019-06-29 0000800240 country:US 2019-09-29 2019-12-28 0000800240 odp:MultipleAcquisitionMember 2018-12-30 2019-12-28 0000800240 odp:MultipleAcquisitionMember 2019-12-28 0000800240 odp:MultipleAcquisitionMember us-gaap:CustomerRelationshipsMember 2019-12-28 0000800240 us-gaap:TradeNamesMember 2019-12-28 0000800240 2018-12-30 2019-03-30 0000800240 country:US us-gaap:SubsequentEventMember 2020-01-27 2020-02-26 0000800240 odp:BusinessAccelerationProgramMember us-gaap:EmployeeSeveranceMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember odp:EmployeeRecruitmentAndRelocationMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember us-gaap:FacilityClosingMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember odp:ThirdPartyCostsMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember us-gaap:OtherRestructuringMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember odp:CashExpenditureMember 2019-05-07 2019-05-08 0000800240 odp:BusinessAccelerationProgramMember 2018-12-30 2019-12-28 0000800240 odp:BusinessAccelerationProgramMember us-gaap:EmployeeSeveranceMember 2018-12-30 2019-12-28 0000800240 odp:BusinessAccelerationProgramMember odp:ThirdPartyProfessionalFeesMember 2018-12-30 2019-12-28 0000800240 odp:BusinessAccelerationProgramMember odp:FacilityClosingAndOtherMember 2018-12-30 2019-12-28 0000800240 odp:BusinessAccelerationProgramMember us-gaap:EmployeeSeveranceMember 2019-12-28 0000800240 odp:ComprehensiveBusinessReviewMember 2018-12-30 2019-12-28 0000800240 odp:ComprehensiveBusinessReviewMember 2017-12-31 2018-12-29 0000800240 odp:ComprehensiveBusinessReviewMember 2017-01-01 2017-12-30 0000800240 odp:StrategicPlanMember 2017-12-31 2018-12-29 0000800240 odp:StrategicPlanMember 2017-01-01 2017-12-30 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:MergerRelatedAccrualsMember 2018-12-29 0000800240 us-gaap:OtherRestructuringMember odp:MergerRelatedAccrualsMember 2018-12-29 0000800240 us-gaap:OtherRestructuringMember odp:ComprehensiveBusinessReviewMember 2018-12-29 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:MergerRelatedAccrualsMember 2018-12-30 2019-12-28 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:BusinessAccelerationProgramMember 2018-12-30 2019-12-28 0000800240 us-gaap:OtherRestructuringMember odp:ComprehensiveBusinessReviewMember 2018-12-30 2019-12-28 0000800240 us-gaap:OtherRestructuringMember odp:BusinessAccelerationProgramMember 2018-12-30 2019-12-28 0000800240 us-gaap:OtherRestructuringMember odp:MergerRelatedAccrualsMember 2018-12-30 2019-12-28 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:MergerRelatedAccrualsMember 2019-12-28 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:BusinessAccelerationProgramMember 2019-12-28 0000800240 us-gaap:OtherRestructuringMember odp:ComprehensiveBusinessReviewMember 2019-12-28 0000800240 us-gaap:OtherRestructuringMember odp:BusinessAccelerationProgramMember 2019-12-28 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:MergerRelatedAccrualsMember 2017-12-30 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:ComprehensiveBusinessReviewMember 2017-12-30 0000800240 us-gaap:OtherRestructuringMember odp:MergerRelatedAccrualsMember 2017-12-30 0000800240 us-gaap:OtherRestructuringMember odp:ComprehensiveBusinessReviewMember 2017-12-30 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:MergerRelatedAccrualsMember 2017-12-31 2018-12-29 0000800240 us-gaap:OtherRestructuringMember odp:MergerRelatedAccrualsMember 2017-12-31 2018-12-29 0000800240 us-gaap:OtherRestructuringMember odp:ComprehensiveBusinessReviewMember 2017-12-31 2018-12-29 0000800240 us-gaap:OneTimeTerminationBenefitsMember odp:ComprehensiveBusinessReviewMember 2017-12-31 2018-12-29 0000800240 odp:ProductsSuppliesMember odp:BusinessSolutionsDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsSuppliesMember odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsSuppliesMember us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:ProductsSuppliesMember 2018-12-30 2019-12-28 0000800240 odp:ProductsTechnologyMember odp:BusinessSolutionsDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsTechnologyMember odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsTechnologyMember odp:CompucomMember 2018-12-30 2019-12-28 0000800240 odp:ProductsTechnologyMember us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:ProductsTechnologyMember 2018-12-30 2019-12-28 0000800240 odp:ProductsFurnitureAndOtherMember odp:BusinessSolutionsDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsFurnitureAndOtherMember odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 odp:ProductsFurnitureAndOtherMember us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:ProductsFurnitureAndOtherMember 2018-12-30 2019-12-28 0000800240 us-gaap:TechnologyServiceMember odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 us-gaap:TechnologyServiceMember odp:CompucomMember 2018-12-30 2019-12-28 0000800240 us-gaap:TechnologyServiceMember us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 us-gaap:TechnologyServiceMember 2018-12-30 2019-12-28 0000800240 odp:CopyPrintAndOtherMember odp:BusinessSolutionsDivisionMember 2018-12-30 2019-12-28 0000800240 odp:CopyPrintAndOtherMember odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 odp:CopyPrintAndOtherMember odp:CompucomMember 2018-12-30 2019-12-28 0000800240 odp:CopyPrintAndOtherMember us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:CopyPrintAndOtherMember 2018-12-30 2019-12-28 0000800240 odp:BusinessSolutionsDivisionMember 2018-12-30 2019-12-28 0000800240 odp:RetailDivisionMember 2018-12-30 2019-12-28 0000800240 odp:CompucomMember 2018-12-30 2019-12-28 0000800240 us-gaap:AllOtherSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:ProductsSuppliesMember odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsSuppliesMember odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsSuppliesMember us-gaap:AllOtherSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:ProductsSuppliesMember 2017-12-31 2018-12-29 0000800240 odp:ProductsTechnologyMember odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsTechnologyMember odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsTechnologyMember odp:CompucomMember 2017-12-31 2018-12-29 0000800240 odp:ProductsTechnologyMember us-gaap:AllOtherSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:ProductsTechnologyMember 2017-12-31 2018-12-29 0000800240 odp:ProductsFurnitureAndOtherMember odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsFurnitureAndOtherMember odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 odp:ProductsFurnitureAndOtherMember us-gaap:AllOtherSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:ProductsFurnitureAndOtherMember 2017-12-31 2018-12-29 0000800240 us-gaap:TechnologyServiceMember odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 us-gaap:TechnologyServiceMember odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 us-gaap:TechnologyServiceMember odp:CompucomMember 2017-12-31 2018-12-29 0000800240 us-gaap:TechnologyServiceMember us-gaap:AllOtherSegmentsMember 2017-12-31 2018-12-29 0000800240 us-gaap:TechnologyServiceMember 2017-12-31 2018-12-29 0000800240 odp:CopyPrintAndOtherMember odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 odp:CopyPrintAndOtherMember odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 odp:CopyPrintAndOtherMember odp:CompucomMember 2017-12-31 2018-12-29 0000800240 odp:CopyPrintAndOtherMember 2017-12-31 2018-12-29 0000800240 odp:BusinessSolutionsDivisionMember 2017-12-31 2018-12-29 0000800240 odp:RetailDivisionMember 2017-12-31 2018-12-29 0000800240 odp:CompucomMember 2017-12-31 2018-12-29 0000800240 us-gaap:AllOtherSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:ProductsSuppliesMember odp:BusinessSolutionsDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsSuppliesMember odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsSuppliesMember us-gaap:AllOtherSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:ProductsSuppliesMember 2017-01-01 2017-12-30 0000800240 odp:ProductsTechnologyMember odp:BusinessSolutionsDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsTechnologyMember odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsTechnologyMember odp:CompucomMember 2017-01-01 2017-12-30 0000800240 odp:ProductsTechnologyMember us-gaap:AllOtherSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:ProductsTechnologyMember 2017-01-01 2017-12-30 0000800240 odp:ProductsFurnitureAndOtherMember odp:BusinessSolutionsDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsFurnitureAndOtherMember odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 odp:ProductsFurnitureAndOtherMember us-gaap:AllOtherSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:ProductsFurnitureAndOtherMember 2017-01-01 2017-12-30 0000800240 us-gaap:TechnologyServiceMember odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 us-gaap:TechnologyServiceMember odp:CompucomMember 2017-01-01 2017-12-30 0000800240 us-gaap:TechnologyServiceMember 2017-01-01 2017-12-30 0000800240 odp:CopyPrintAndOtherMember odp:BusinessSolutionsDivisionMember 2017-01-01 2017-12-30 0000800240 odp:CopyPrintAndOtherMember odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 odp:CopyPrintAndOtherMember odp:CompucomMember 2017-01-01 2017-12-30 0000800240 odp:CopyPrintAndOtherMember 2017-01-01 2017-12-30 0000800240 odp:BusinessSolutionsDivisionMember 2017-01-01 2017-12-30 0000800240 odp:RetailDivisionMember 2017-01-01 2017-12-30 0000800240 odp:CompucomMember 2017-01-01 2017-12-30 0000800240 us-gaap:AllOtherSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:AccruedExpensesAndOtherCurrentLiabilitiesMember 2019-12-28 0000800240 odp:AccruedExpensesAndOtherCurrentLiabilitiesMember 2018-12-29 0000800240 odp:ContractAssetsMember 2018-12-30 2019-12-28 0000800240 odp:ContractAssetsMember 2017-12-31 2018-12-29 0000800240 us-gaap:IntersegmentEliminationMember 2018-12-30 2019-12-28 0000800240 us-gaap:IntersegmentEliminationMember 2017-12-31 2018-12-29 0000800240 us-gaap:IntersegmentEliminationMember 2017-01-01 2017-12-30 0000800240 odp:BusinessSolutionsDivisionMember us-gaap:OperatingSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:RetailDivisionMember us-gaap:OperatingSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:CompucomDivisionMember us-gaap:OperatingSegmentsMember 2018-12-30 2019-12-28 0000800240 us-gaap:AllOtherSegmentsMember us-gaap:OperatingSegmentsMember 2018-12-30 2019-12-28 0000800240 odp:BusinessSolutionsDivisionMember us-gaap:OperatingSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:RetailDivisionMember us-gaap:OperatingSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:CompucomDivisionMember us-gaap:OperatingSegmentsMember 2017-12-31 2018-12-29 0000800240 us-gaap:AllOtherSegmentsMember us-gaap:OperatingSegmentsMember 2017-12-31 2018-12-29 0000800240 odp:BusinessSolutionsDivisionMember us-gaap:OperatingSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:RetailDivisionMember us-gaap:OperatingSegmentsMember 2017-01-01 2017-12-30 0000800240 odp:CompucomDivisionMember us-gaap:OperatingSegmentsMember 2017-01-01 2017-12-30 0000800240 us-gaap:AllOtherSegmentsMember us-gaap:OperatingSegmentsMember 2017-01-01 2017-12-30 0000800240 us-gaap:CorporateNonSegmentMember us-gaap:SegmentDiscontinuedOperationsMember 2018-12-30 2019-12-28 0000800240 us-gaap:CorporateNonSegmentMember us-gaap:SegmentDiscontinuedOperationsMember 2017-12-31 2018-12-29 0000800240 us-gaap:CorporateNonSegmentMember us-gaap:SegmentDiscontinuedOperationsMember 2017-01-01 2017-12-30 0000800240 odp:BusinessSolutionsDivisionMember us-gaap:OperatingSegmentsMember 2019-12-28 0000800240 odp:RetailDivisionMember us-gaap:OperatingSegmentsMember 2019-12-28 0000800240 odp:CompucomDivisionMember us-gaap:OperatingSegmentsMember 2019-12-28 0000800240 us-gaap:AllOtherSegmentsMember us-gaap:OperatingSegmentsMember 2019-12-28 0000800240 us-gaap:CorporateNonSegmentMember us-gaap:SegmentDiscontinuedOperationsMember 2019-12-28 0000800240 odp:BusinessSolutionsDivisionMember us-gaap:OperatingSegmentsMember 2018-12-29 0000800240 odp:RetailDivisionMember us-gaap:OperatingSegmentsMember 2018-12-29 0000800240 odp:CompucomDivisionMember us-gaap:OperatingSegmentsMember 2018-12-29 0000800240 us-gaap:AllOtherSegmentsMember us-gaap:OperatingSegmentsMember 2018-12-29 0000800240 us-gaap:CorporateNonSegmentMember us-gaap:SegmentDiscontinuedOperationsMember 2018-12-29 0000800240 us-gaap:OperatingSegmentsMember 2018-12-30 2019-12-28 0000800240 us-gaap:OperatingSegmentsMember 2017-12-31 2018-12-29 0000800240 us-gaap:OperatingSegmentsMember 2017-01-01 2017-12-30 0000800240 srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:DomesticCountryMember 2017-01-01 2017-12-30 0000800240 odp:DeferredIncomeTaxesAndOtherLongTermLiabilitiesMember 2019-12-28 0000800240 odp:DeferredIncomeTaxesAndOtherLongTermLiabilitiesMember 2018-12-29 0000800240 us-gaap:DomesticCountryMember 2019-12-28 0000800240 us-gaap:ForeignCountryMember 2019-12-28 0000800240 us-gaap:StateAndLocalJurisdictionMember 2019-12-28 0000800240 us-gaap:DomesticCountryMember odp:ExpireInTwoThousandAndNineteenMember 2019-12-28 0000800240 us-gaap:DomesticCountryMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:DomesticCountryMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 us-gaap:ForeignCountryMember odp:ExpireInTwoThousandAndTwentyMember 2019-12-28 0000800240 us-gaap:ForeignCountryMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:ForeignCountryMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 us-gaap:StateAndLocalJurisdictionMember odp:ExpireInTwoThousandAndTwentyMember 2019-12-28 0000800240 us-gaap:StateAndLocalJurisdictionMember srt:MinimumMember 2018-12-30 2019-12-28 0000800240 us-gaap:StateAndLocalJurisdictionMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 us-gaap:DomesticCountryMember us-gaap:CapitalLossCarryforwardMember 2019-12-28 0000800240 us-gaap:DomesticCountryMember srt:MinimumMember us-gaap:CapitalLossCarryforwardMember 2018-12-30 2019-12-28 0000800240 us-gaap:DomesticCountryMember srt:MaximumMember us-gaap:CapitalLossCarryforwardMember 2018-12-30 2019-12-28 0000800240 us-gaap:DomesticCountryMember us-gaap:CapitalLossCarryforwardMember 2018-12-30 2019-12-28 0000800240 us-gaap:StateAndLocalJurisdictionMember 2018-12-30 2019-12-28 0000800240 odp:FederalAndForeignCountryJurisdictionMember 2019-12-28 0000800240 odp:FederalAndForeignCountryJurisdictionMember us-gaap:EarliestTaxYearMember 2018-12-30 2019-12-28 0000800240 odp:FederalAndForeignCountryJurisdictionMember us-gaap:LatestTaxYearMember 2018-12-30 2019-12-28 0000800240 odp:FederalStateAndForeignTaxMember 2019-12-28 0000800240 odp:FederalStateAndForeignTaxMember odp:IndefiniteCarryforwardMember 2019-12-28 0000800240 odp:FederalStateAndForeignTaxMember us-gaap:EarliestTaxYearMember 2018-12-30 2019-12-28 0000800240 odp:FederalStateAndForeignTaxMember us-gaap:LatestTaxYearMember 2018-12-30 2019-12-28 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-12-29 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-12-30 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2016-12-31 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2018-12-30 2019-12-28 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-01-01 2017-12-30 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2017-12-31 2018-12-29 0000800240 us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember 2019-12-28 0000800240 odp:CompuComSystemsIncMember 2017-01-01 2017-12-30 0000800240 odp:CompuComSystemsIncMember 2019-12-28 0000800240 odp:NonvestedOptionsAndSharesMember 2018-12-30 2019-12-28 0000800240 odp:NonvestedOptionsAndSharesMember 2017-12-31 2018-12-29 0000800240 odp:NonvestedOptionsAndSharesMember 2017-01-01 2017-12-30 0000800240 us-gaap:LandMember 2019-12-28 0000800240 us-gaap:LandMember 2018-12-29 0000800240 us-gaap:BuildingMember 2019-12-28 0000800240 us-gaap:BuildingMember 2018-12-29 0000800240 us-gaap:ComputerEquipmentMember 2019-12-28 0000800240 us-gaap:ComputerEquipmentMember 2018-12-29 0000800240 us-gaap:LeaseholdImprovementsMember 2019-12-28 0000800240 us-gaap:LeaseholdImprovementsMember 2018-12-29 0000800240 odp:FurnitureFixtureAndEquipmentMember 2019-12-28 0000800240 odp:FurnitureFixtureAndEquipmentMember 2018-12-29 0000800240 us-gaap:ConstructionInProgressMember 2019-12-28 0000800240 us-gaap:ConstructionInProgressMember 2018-12-29 0000800240 us-gaap:BuildingMember odp:AssetsHeldUnderFinanceLeasesMember 2019-12-28 0000800240 us-gaap:BuildingMember odp:AssetsHeldUnderFinanceLeasesMember 2018-12-29 0000800240 odp:FurnitureFixtureAndEquipmentMember odp:AssetsHeldUnderFinanceLeasesMember 2019-12-28 0000800240 odp:FurnitureFixtureAndEquipmentMember odp:AssetsHeldUnderFinanceLeasesMember 2018-12-29 0000800240 odp:AssetsHeldUnderFinanceLeasesMember 2019-12-28 0000800240 odp:AssetsHeldUnderFinanceLeasesMember 2018-12-29 0000800240 odp:CapitalizedSoftwareMember 2019-12-28 0000800240 odp:CapitalizedSoftwareMember 2018-12-30 2019-12-28 0000800240 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-12-30 2019-12-28 0000800240 odp:MergerAndRestructuringExpensesNetMember 2018-12-30 2019-12-28 0000800240 us-gaap:CustomerRelationshipsMember 2019-12-28 0000800240 odp:TechnologyMember 2019-12-28 0000800240 us-gaap:CustomerRelationshipsMember 2018-12-29 0000800240 odp:TechnologyMember 2018-12-29 0000800240 us-gaap:OffMarketFavorableLeaseMember 2018-12-29 0000800240 us-gaap:CustomerRelationshipsMember 2018-12-30 2019-12-28 0000800240 odp:TechnologyMember 2018-12-30 2019-12-28 0000800240 2013-11-05 0000800240 odp:NonRecourseDebtMember 2013-11-05 0000800240 odp:NonRecourseDebtMember 2018-12-30 2019-12-28 0000800240 odp:NonRecourseDebtMember odp:TermLoanAgreementMember 2019-10-31 0000800240 odp:NonRecourseDebtMember odp:TermLoanAgreementMember 2019-10-30 2019-10-31 0000800240 odp:NonRecourseDebtMember odp:TermLoanAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-10-30 2019-10-31 0000800240 odp:TermLoanAgreementMember 2019-12-28 0000800240 odp:TermLoanAgreementMember 2018-12-29 0000800240 us-gaap:SubsequentEventMember 2020-01-28 2020-01-29 0000800240 odp:RecourseDebtMember 2019-12-28 0000800240 odp:RecourseDebtMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:TermLoanDueTwoThousandTwentyTwoMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:TermLoanDueTwoThousandTwentyTwoMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember 2018-12-29 0000800240 odp:NonRecourseDebtMember odp:TermLoanDueTwoThousandTwentyMember 2019-12-28 0000800240 odp:NonRecourseDebtMember 2018-12-29 0000800240 odp:NonRecourseDebtMember 2019-12-28 0000800240 odp:NonRecourseDebtMember 2017-12-31 2018-12-29 0000800240 odp:NonRecourseDebtMember odp:TermLoanDueTwoThousandTwentyMember 2018-12-30 2019-12-28 0000800240 odp:RecourseDebtMember odp:TermLoanDueTwoThousandTwentyTwoMember 2018-12-30 2019-12-28 0000800240 odp:RecourseDebtMember odp:TermLoanDueTwoThousandTwentyTwoMember 2017-12-31 2018-12-29 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember 2018-12-30 2019-12-28 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember 2017-12-31 2018-12-29 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember 2018-12-30 2019-12-28 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember 2017-12-31 2018-12-29 0000800240 odp:AmendedCreditAgreementMember 2011-05-25 0000800240 odp:LineOfCreditSubFacilityMember 2011-05-25 0000800240 odp:LetterOfCreditSubFacilityMember 2011-05-25 0000800240 odp:SwingLineLoanFacilityMember 2011-05-25 0000800240 odp:AmendedCreditAgreementMember 2011-05-24 2011-05-25 0000800240 odp:FederalFundsRatePlusMember odp:AmendedCreditAgreementMember 2018-12-30 2019-12-28 0000800240 us-gaap:LondonInterbankOfferedRateLIBORMember odp:AmendedCreditAgreementMember 2018-12-30 2019-12-28 0000800240 odp:GlobalAvailabilityMember 2018-12-30 2019-12-28 0000800240 odp:AmendedCreditAgreementMember 2018-12-30 2019-12-28 0000800240 odp:AmendedCreditAgreementMember 2019-12-28 0000800240 odp:TermLoanFacilityMember 2017-11-08 0000800240 odp:TermLoanFacilityMember 2017-11-08 2017-11-08 0000800240 odp:TermLoanFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2017-11-08 2017-11-08 0000800240 odp:TermLoanFacilityMember us-gaap:BaseRateMember 2017-11-08 2017-11-08 0000800240 us-gaap:LondonInterbankOfferedRateLIBORMember odp:FirstAmendmentMember odp:TermLoanFacilityMember 2018-11-21 2018-11-21 0000800240 us-gaap:LondonInterbankOfferedRateLIBORMember odp:FirstAmendmentMember odp:TermLoanFacilityMember 2017-11-08 2017-11-08 0000800240 odp:TermLoanFacilityMember 2018-11-21 2018-11-21 0000800240 odp:AmendedCreditAgreementMember srt:MinimumMember 2017-11-08 0000800240 odp:AmendedCreditAgreementMember srt:MinimumMember 2019-12-28 0000800240 us-gaap:PropertyPlantAndEquipmentMember 2019-12-28 0000800240 odp:ShortTermBorrowingsAndCurrentMaturitiesOfLongTermDebtMember 2019-12-28 0000800240 odp:LongTermDebtNetOfCurrentMaturitiesMember 2019-12-28 0000800240 us-gaap:EmployeeStockOptionMember 2018-12-30 2019-12-28 0000800240 odp:LegallyBindingLeasePaymentsMember 2018-12-30 2019-12-28 odp:Lease 0000800240 us-gaap:PreferredStockMember 2019-12-28 0000800240 us-gaap:PreferredStockMember 2018-12-29 0000800240 srt:MaximumMember 2019-11-06 0000800240 srt:MaximumMember 2018-11-30 0000800240 2019-09-29 2019-12-28 0000800240 2019-06-30 2019-09-28 0000800240 2019-03-31 2019-06-29 0000800240 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-29 0000800240 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-29 0000800240 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-30 2019-12-28 0000800240 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-30 2019-12-28 0000800240 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-28 0000800240 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-28 0000800240 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-30 0000800240 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-30 0000800240 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 2018-12-29 0000800240 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 2018-12-29 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2018-12-30 2019-12-28 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember srt:DirectorMember 2018-12-30 2019-12-28 0000800240 us-gaap:RestrictedStockMember 2018-12-30 2019-12-28 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2018-12-29 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2017-12-30 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2016-12-31 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2017-12-31 2018-12-29 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2017-01-01 2017-12-30 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember 2019-12-28 0000800240 us-gaap:RestrictedStockMember 2019-12-28 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember srt:DirectorMember 2019-12-28 0000800240 odp:RestrictedStockAndRestrictedStockUnitsMember odp:EmployeesMember 2019-12-28 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2018-12-30 2019-12-28 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2018-12-29 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2017-12-30 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2016-12-31 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2017-12-31 2018-12-29 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2017-01-01 2017-12-30 0000800240 odp:PerformanceBasedStockIncentiveProgramMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2017-12-30 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2018-12-30 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2017-12-31 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2017-12-31 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2018-12-30 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2017-01-01 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2017-01-01 2017-12-30 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember 2016-12-31 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember srt:NorthAmericaMember 2016-12-31 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2019-12-28 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2019-12-28 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2017-12-30 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2018-12-30 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2017-12-31 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember 2017-01-01 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2018-12-30 2019-12-28 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2017-12-31 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:US 2017-01-01 2017-12-30 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2018-12-30 2019-12-28 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2017-12-31 2018-12-29 0000800240 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember country:CA 2017-01-01 2017-12-30 0000800240 srt:NorthAmericaMember 2018-12-30 2019-12-28 0000800240 srt:NorthAmericaMember 2019-12-28 0000800240 srt:NorthAmericaMember 2018-12-29 0000800240 srt:NorthAmericaMember 2017-12-30 0000800240 srt:NorthAmericaMember 2017-12-31 2018-12-29 0000800240 srt:NorthAmericaMember 2017-01-01 2017-12-30 0000800240 srt:MaximumMember srt:NorthAmericaMember 2018-12-30 2019-12-28 0000800240 odp:ChangeInMortalityTableMember 2018-12-30 2019-12-28 0000800240 odp:ChangeInMortalityTableMember 2017-12-31 2018-12-29 0000800240 odp:ChangeInMortalityTableMember srt:MaximumMember 2018-12-30 2019-12-28 0000800240 odp:ChangeInMortalityTableMember srt:MaximumMember 2017-12-31 2018-12-29 0000800240 us-gaap:DefinedBenefitPlanCashMember 2019-12-28 0000800240 us-gaap:DefinedBenefitPlanCashMember 2018-12-29 0000800240 us-gaap:DefinedBenefitPlanCommonCollectiveTrustMember 2019-12-28 0000800240 us-gaap:DefinedBenefitPlanCommonCollectiveTrustMember 2018-12-29 0000800240 us-gaap:DefinedBenefitPlanEquitySecuritiesMember srt:MinimumMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:DefinedBenefitPlanEquitySecuritiesMember srt:MaximumMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:FixedIncomeSecuritiesMember srt:MinimumMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:FixedIncomeSecuritiesMember srt:MaximumMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember odp:DefinedBenefitPlanEquitySecuritiesUSSmallAndMidCapMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanEquitySecuritiesUsLargeCapMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:CorporateDebtSecuritiesMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:USTreasuryAndGovernmentMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:OtherDebtSecuritiesMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCommonCollectiveTrustMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember us-gaap:FairValueInputsLevel1Member 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember srt:NorthAmericaMember 2019-12-28 0000800240 us-gaap:PensionPlansDefinedBenefitMember odp:DefinedBenefitPlanEquitySecuritiesUSSmallAndMidCapMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanEquitySecuritiesUsLargeCapMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:CorporateDebtSecuritiesMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:USTreasuryAndGovernmentMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:OtherDebtSecuritiesMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCommonCollectiveTrustMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember srt:NorthAmericaMember us-gaap:FairValueInputsLevel1Member 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember srt:NorthAmericaMember us-gaap:FairValueInputsLevel1Member 2018-12-29 0000800240 us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember srt:NorthAmericaMember 2018-12-29 0000800240 country:GB 2018-12-29 0000800240 country:GB 2017-12-30 0000800240 country:GB 2018-12-30 2019-12-28 0000800240 country:GB 2017-12-31 2018-12-29 0000800240 country:GB 2019-12-28 0000800240 country:GB 2017-01-01 2017-12-30 0000800240 odp:UnitedKingdomGovernmentSecuritiesMember country:GB 2018-12-30 2019-12-28 0000800240 us-gaap:DefinedBenefitPlanEquitySecuritiesMember country:GB 2019-12-28 0000800240 us-gaap:DefinedBenefitPlanEquitySecuritiesMember country:GB 2018-12-29 0000800240 us-gaap:FixedIncomeSecuritiesMember country:GB 2019-12-28 0000800240 us-gaap:FixedIncomeSecuritiesMember country:GB 2018-12-29 0000800240 country:GB us-gaap:DefinedBenefitPlanCashMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel1Member country:GB us-gaap:DefinedBenefitPlanCashMember 2019-12-28 0000800240 country:GB odp:DevelopedMarketsEquityFundMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel1Member country:GB odp:DevelopedMarketsEquityFundMember 2019-12-28 0000800240 country:GB odp:EmergingMarketsEquityFundMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel1Member country:GB odp:EmergingMarketsEquityFundMember 2019-12-28 0000800240 country:GB odp:MutualFundsRealEstateMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel3Member country:GB odp:MutualFundsRealEstateMember 2019-12-28 0000800240 country:GB odp:MutualFundsMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:MutualFundsMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel1Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel3Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2019-12-28 0000800240 country:GB odp:ForeignDebtSecuritiesMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:ForeignDebtSecuritiesMember 2019-12-28 0000800240 country:GB odp:LiabilityTermMatchingDebtFundMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:LiabilityTermMatchingDebtFundMember 2019-12-28 0000800240 country:GB odp:EmergingMarketsDebtFundMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:EmergingMarketsDebtFundMember 2019-12-28 0000800240 country:GB odp:HighYieldDebtMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:HighYieldDebtMember 2019-12-28 0000800240 country:GB us-gaap:DefinedBenefitPlanDebtSecurityMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB us-gaap:DefinedBenefitPlanDebtSecurityMember 2019-12-28 0000800240 us-gaap:FairValueInputsLevel1Member country:GB 2019-12-28 0000800240 us-gaap:FairValueInputsLevel2Member country:GB 2019-12-28 0000800240 us-gaap:FairValueInputsLevel3Member country:GB 2019-12-28 0000800240 country:GB us-gaap:DefinedBenefitPlanCashMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel1Member country:GB us-gaap:DefinedBenefitPlanCashMember 2018-12-29 0000800240 country:GB odp:DevelopedMarketsEquityFundMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel1Member country:GB odp:DevelopedMarketsEquityFundMember 2018-12-29 0000800240 country:GB odp:EmergingMarketsEquityFundMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel1Member country:GB odp:EmergingMarketsEquityFundMember 2018-12-29 0000800240 country:GB odp:MutualFundsRealEstateMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel3Member country:GB odp:MutualFundsRealEstateMember 2018-12-29 0000800240 country:GB odp:MutualFundsMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:MutualFundsMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel1Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel3Member country:GB us-gaap:DefinedBenefitPlanEquitySecuritiesMember 2018-12-29 0000800240 country:GB odp:ForeignDebtSecuritiesMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:ForeignDebtSecuritiesMember 2018-12-29 0000800240 country:GB odp:LiabilityTermMatchingDebtFundMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:LiabilityTermMatchingDebtFundMember 2018-12-29 0000800240 country:GB odp:EmergingMarketsDebtFundMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:EmergingMarketsDebtFundMember 2018-12-29 0000800240 country:GB odp:HighYieldDebtMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB odp:HighYieldDebtMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB us-gaap:FixedIncomeSecuritiesMember 2018-12-29 0000800240 us-gaap:FairValueInputsLevel1Member country:GB 2018-12-29 0000800240 us-gaap:FairValueInputsLevel2Member country:GB 2018-12-29 0000800240 us-gaap:FairValueInputsLevel3Member country:GB 2018-12-29 0000800240 us-gaap:FairValueInputsLevel3Member country:GB 2018-12-30 2019-12-28 0000800240 odp:RetirementSavingsPlansMember 2018-12-30 2019-12-28 0000800240 odp:RetirementSavingsPlansMember 2017-12-31 2018-12-29 0000800240 odp:RetirementSavingsPlansMember 2017-01-01 2017-12-30 0000800240 odp:RetailStoresMember us-gaap:FairValueInputsLevel3Member 2018-12-30 2019-12-28 0000800240 odp:RetailStoresMember odp:ScenarioOneMember us-gaap:FairValueInputsLevel3Member 2018-12-30 2019-12-28 0000800240 srt:MaximumMember odp:RetailStoresMember odp:ScenarioOneMember odp:AdditionalImpairmentChargesMember us-gaap:FairValueInputsLevel3Member 2019-09-29 2019-12-28 0000800240 odp:RetailStoresMember odp:ScenarioTwoMember us-gaap:FairValueInputsLevel3Member 2019-09-29 2019-12-28 0000800240 srt:MaximumMember odp:RetailStoresMember odp:ScenarioTwoMember odp:AdditionalImpairmentChargesMember us-gaap:FairValueInputsLevel3Member 2019-09-29 2019-12-28 0000800240 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-28 0000800240 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:TermLoansMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:TermLoansMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:TermLoansMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:TermLoansMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:RevenueBondsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-29 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-28 0000800240 odp:RecourseDebtMember odp:FivePointZeroPercentDebenturesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-29 0000800240 odp:NonRecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-28 0000800240 odp:NonRecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-29 0000800240 odp:TermLoansMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:TermLoansMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:TermLoansMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 odp:TermLoansMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 odp:RevenueBondsMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:RevenueBondsMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:RevenueBondsMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 odp:RevenueBondsMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-28 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-29 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-30 2019-12-28 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 odp:FivePointZeroPercentDebenturesMember odp:RecourseDebtMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 2018-12-29 0000800240 srt:MaximumMember 2018-12-30 2019-12-28 odp:Group 0000800240 2016-06-25 2016-09-24 iso4217:EUR 0000800240 us-gaap:SegmentDiscontinuedOperationsMember odp:EuropeanBusinessMember 2019-12-28 0000800240 us-gaap:DiscontinuedOperationsHeldforsaleMember 2017-12-31 2018-12-29 0000800240 us-gaap:DiscontinuedOperationsHeldforsaleMember 2017-01-01 2017-12-30 0000800240 2017-12-31 2018-03-31 0000800240 2018-04-01 2018-06-30 0000800240 2018-07-01 2018-09-29 0000800240 2018-09-30 2018-12-29 0000800240 odp:ClearpathHoldingsLimitedLiabilityCompanyMember 2018-09-30 2018-12-29

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 28, 2019

Or

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

Office Depot, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

59-2663954

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. 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)

 

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)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

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 Act). Yes No

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2019 (based on the closing market price of the common stock on the Composite Tape on June 28, 2019) was approximately $1,109,692,554 (determined by subtracting from the number of shares outstanding on that date the number of shares held by affiliates of the registrant).

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At February 19, 2020, there were 528,121,055 outstanding shares of Office Depot, Inc. Common Stock, $0.01 par value.

Documents Incorporated by Reference:

Certain information required for Part III of this Annual Report on Form 10-K is incorporated by reference to the Office Depot, Inc. definitive Proxy Statement for the registrant’s 2020 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after close of the registrant’s fiscal year.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

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

 

 

 

 

Fundamentals of Our Business

 

Page

The Company

 

3

How We Organize Our Business

 

4

Our Capital

 

5

Our Strategy

 

6

Who Manages Our Business

 

9

Other Key Information

 

 

Risk Factors

 

11

Properties

 

21

Legal Proceedings

 

22

Market for Our Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

23

Selected Financial Data

 

25

Management’s Discussion and Analysis (MD&A)

 

 

Overview

 

27

Operating Results by Division

 

30

Liquidity and Capital Resources

 

36

Critical Accounting Policies and Estimates

 

40

Significant Trends, Developments and Uncertainties

 

42

Market Sensitive Risks and Positions

 

42

Inflation and Seasonality

 

43

New Accounting Standards

 

44

Quantitative and Qualitative Disclosures About Market Risk

 

44

Controls and Procedures

 

 

Management’s Disclosures

 

44

Auditor's Report on Internal Control over Financial Reporting

 

45

Reference to the Proxy Statement

 

 

Directors, Executive Officers and Corporate Governance

 

46

Executive Compensation

 

46

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

46

Certain Relationships and Related Transactions, and Director Independence

 

46

Principal Accountant Fees and Services

 

46

Financial Statements and Supplemental Details

 

 

Exhibits and Financial Statement Schedules

 

47

Signatures

 

50

Auditor’s Report on the Financial Statements

 

52

Consolidated Statements of Operations

 

55

Consolidated Statements of Comprehensive Income (Loss)

 

56

Consolidated Balance Sheets

 

57

Consolidated Statements of Cash Flows

 

58

Consolidated Statements of Stockholders’ Equity

 

59

Notes to Consolidated Financial Statements

 

60

Form 10-K Cross-Reference Index

 

103

 

 

 

1


Table of Contents

 

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (“Annual Report”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”), that involve risks and uncertainties. These forward-looking statements include both historical information and other information that can be used to infer future performance. Examples of historical information include annual financial statements and the commentary on past performance contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). While certain information has specifically been identified as being forward-looking in the context of its presentation, we caution you that, with the exception of information that is historical, all the information contained in this Annual Report should be considered to be “forward-looking statements” as referred to in the Reform Act. Without limiting the generality of the preceding sentence, any time we use the words “estimate,” “project,” “intend,” “expect,” “believe,” “anticipate,” “continue” and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. Certain information in our MD&A is clearly forward-looking in nature, and without limiting the generality of the preceding cautionary statements, we specifically advise you to consider all of our MD&A in the light of the cautionary statements set forth herein.

Much of the information in this Annual Report that looks towards future performance of Office Depot, Inc. and its subsidiaries is based on various factors and important assumptions about future events that may or may not actually come true. As a result, our operations and financial results in the future could differ materially and substantially from those we have discussed in this Annual Report. Significant factors that could impact our future results are provided in “Risk Factors” within Other Key Information included in this Annual Report. Other risk factors are incorporated into the text of our MD&A, which should itself be considered a statement of future risks and uncertainties, as well as management’s view of our businesses. We assume no obligation (and specifically disclaim any such obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In this Annual Report, unless the context otherwise requires, the “Company,” “Office Depot,” “we,” “us,” and “our” refer to Office Depot, Inc. and its subsidiaries.


2


Table of Contents

 

THE COMPANY

We were incorporated in the state of Delaware in 1986 and opened our first retail store in Fort Lauderdale, Florida on October 9, 1986. Since then, we have become a leading provider of business services and supplies, products and technology solutions to small, medium and enterprise businesses, through our fully integrated business-to-business (“B2B”) distribution platform of 1,307 retail stores, online presence, and dedicated sales professionals and technicians, all supported by our world-class supply chain facilities and delivery operations. Through our banner brands Office Depot®, OfficeMax®, CompuCom® and Grand & Toy®, as well as others, we offer our customers the tools and resources they need to focus on starting, growing and running their businesses.

Our long-term strategy to deliver customer-focused value through our integrated B2B distribution platform is founded on three strategic pillars:

 

TRANSFORM

 

STRENGTHEN

 

DISRUPT

our business

 

our core

 

for our future

 

 

 

 

 

Grow CompuCom

 

Business services growth

 

Retail optimization

 

Grow B2B businesses

 

Low cost business model

 

Leverage distribution assets

 

Expand product and service offerings

 

Supply Chain as a service

 

Analytics Excellence / AI

 

Our common stock is traded on the NASDAQ Global Select Market under the ticker symbol ODP.

FISCAL YEAR

Our fiscal year results are based on a 52- or 53-week calendar ending on the last Saturday in December. Fiscal year 2019 had 52 weeks and ended on December 28, 2019. Fiscal year 2018 had 52 weeks and ended on December 29, 2018. Fiscal year 2017 had 52 weeks and ended on December 30, 2017. Certain subsidiaries, including CompuCom, operate on a calendar year basis; however, the reporting difference did not have a material impact on 2019 and the other periods presented.

AVAILABLE INFORMATION

We make available, free of charge, on the “Investor Relations” section of our website, www.officedepot.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file or furnish such materials to the United States Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, such as the Company, that file electronically with the SEC. The address of that website is http://www.sec.gov.

Additionally, our corporate governance materials, including our bylaws, corporate governance guidelines, charters of the Audit, Compensation, and Corporate Governance and Nominating Committees, and our code of ethical behavior may be found under the “Investor Relations” section of our website, www.officedepot.com.

3


Table of Contents

 

HOW WE ORGANIZE OUR BUSINESS

 

At December 28, 2019, our operations are organized into three reportable segments (or “Divisions”): Business Solutions Division, which we also refer to as BSD, Retail Division and CompuCom Division. The CompuCom Division was formed after the acquisition of CompuCom Systems, Inc. (“CompuCom”) on November 8, 2017. Additional information regarding our Divisions and operations in geographic areas is presented in MD&A and in Note 5. “Segment Information” in the Notes to Consolidated Financial Statements located in Financial Statements and Supplemental Details of this Annual Report.

BUSINESS SOLUTIONS DIVISION

The Business Solutions Division, or BSD, is the largest component of our integrated B2B platform and provides our customers with nationally branded as well as our private branded office supply products and services. Additionally, BSD provides adjacency products and services including cleaning and breakroom supplies, technology services, copy and print services, and office furniture products and services in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada through a dedicated sales force, catalogs, telesales, and electronically through our Internet websites. Adjacency products primarily include cleaning and breakroom supplies, technology and furniture and our service offerings are comprised of copy and print services, product subscriptions, and managed print and fulfillment services. BSD includes the distribution businesses we have acquired as part of our strategic transformation described within Our Strategy.

The Business Solutions Division is comprised of two main sales channels: contract and direct.

Our contract sales channel serves business customers including small, medium, and enterprise businesses as well as schools and local, state and national governmental agencies. We also enter into agreements with consortiums to sell to entities across many industries, including government and non-profit entities, in non-exclusive buying arrangements.

Our direct sales channel primarily serves small to medium-sized customers. Direct customers can order products through our eCommerce platform, from our catalogs, or by phone. Website functionality provides customers the convenience of using the loyalty program and offers suggestions by product ratings, pricing, and brand, among other features. Customer orders are fulfilled through our supply chain. See “Supply Chain” within Our Strategy for additional information on our supply chain network.

We have implemented several initiatives to strengthen the core of our Business Solutions Division, including the following:

 

improving our sales efficiency and value proposition;

 

expanding through strategic acquisitions that increase selling resources in the field, stretch our geographical reach, grow our small and medium-sized business customer base, and increase our sales in the aforementioned adjacency categories;

 

focus on demand-generation via a shift to digital marketing and investment in our eCommerce platform;

 

improve customer acquisition and retention trends by realigning our sales organization;

 

drive sales in our adjacency categories by adding dedicated selling and operational resources;

 

partnering with key vendors to add new products to our assortment of offerings;

 

capturing cross-selling opportunities with CompuCom; and

 

increasing our focus on services, including growing current offerings in technology and print, and identifying new services that complement our existing product and fulfillment capabilities.

RETAIL DIVISION

The Retail Division markets a broad assortment of merchandise through our chain of retail stores throughout the United States, Puerto Rico and the U.S. Virgin Islands. The retail stores operate under both the Office Depot and OfficeMax brands, though systems, processes and offerings have converged. We currently offer products in three categories: supplies, technology, and furniture and other. See “Merchandising and Services” within Our Strategy for additional information on our product categories. In addition, our Retail Division offers a range of business-related services targeted to small businesses, technology support services as well as printing, copying, mailing and shipping services. The print needs for retail and business customers are also facilitated through our regional print production centers.

 

4


Table of Contents

 

At the end of 2019, the Retail Division operated 1,307 retail stores which includes locations temporarily closed for remodeling. We have a broad representation across North America with the largest concentration of our retail stores in Texas, California, and Florida. Most of our retail stores are located in leased facilities that currently average over 20,000 square feet. To better serve our customers any way they choose to shop, we have a Buy Online-Pickup in Store (“BOPIS”) offering in all locations and offer same-day store delivery in selected markets. Sales under these programs are serviced by store employees and fulfilled with store inventory and therefore are reported in the Retail Division results.

 

In 2018, we introduced a variety of business services focused on “human touch” expertise to small and medium-sized businesses. The new offerings provide customers with enhanced tools and services as well as access to remote and in-person advisors and technical support, including tech services kiosks in more than 200 retail stores. Our services also include payroll support, bookkeeping, storage and shredding, shipping and printing, and workspace planning and assembly services. We offer these business services on our eCommerce platform, in store, and through a dedicated sales team. Since 2018, we have transformed nine of our retail locations to include integrated co-working spaces to help small business owners, entrepreneurs, freelancers, remote workers and startups achieve their goals in a flexible and modern environment.

Since we implemented our Comprehensive Business Review in 2016, we have closed a total of 208 retail stores and focused on reducing our operating and general and administrative expenses in order to optimize our asset base and drive operational efficiencies. In addition, we expect to close 90 stores in 2020 and 2021 as part of our Business Acceleration Program, which is a company-wide, multi- year, cost reduction and business improvement program.

COMPUCOM DIVISION

The CompuCom Division was formed after our acquisition of CompuCom Systems, Inc. on November 8, 2017. CompuCom is a technology service provider supporting the distributed technology needs of enterprise organizations in the United States and Canada. With a vision of connecting people, technology, and the edge with a seamless experience, CompuCom enables enterprise employees to be productive. CompuCom offers a broad range of solutions including technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions.

CompuCom’s unique capabilities allow us to enhance our service offerings and attract new customers. The minimal overlap between CompuCom’s customer base and the customer base of our Business Solutions and Retail Divisions allows us to capture cross-selling opportunities by offering a full suite of products and services. We are leveraging our more than 6,800 CompuCom technicians to serve our extensive small, medium-sized, and large enterprise business customers who require technical support.

OUR CAPITAL

INTELLECTUAL PROPERTY

We currently operate under the brand names Office Depot®, OfficeMax®, CompuCom®, Grand & Toy®, as well as others. We hold trademark registrations domestically and worldwide and have numerous other applications pending worldwide for the names “Office Depot,” “OfficeMax,” “TUL,” “Ativa,” “Foray,” “Realspace,” “WorkPro,” “Brenton Studio,” “Highmark” and others. As with all domestic trademarks, our trademark registrations in the United States are for a ten-year period and are renewable prior to their respective expirations, as long as the trademarks are used in the regular course of trade. We also hold issued patents and pending patent applications domestically for certain private brand products, such as shredders, office chairs and writing instruments.

EMPLOYEES

As of January 25, 2020, we had approximately 40,000 employees.

5


Table of Contents

 

OUR STRATEGY

 

STRATEGIC TRANSFORMATION

 

Since 2017, we have been undergoing a strategic business transformation to pivot Office Depot into an integrated B2B distribution platform, with the objective of expanding our product offerings to include value-added services for our customers and capture greater market share. As part of this transformation, we acquired CompuCom in 2017 and an enterprise IT solutions integrator and managed services provider in 2018.

 

We continue to expand our reach and distribution network through acquisitions of profitable regional office supply distribution businesses, serving small and mid-market customers. Many of these customers are in geographic areas that were previously underserved by our network. This has allowed for an effective and accretive means to expand our distribution reach, target new business customers and grow our offerings beyond traditional office supplies.

The operating results of the acquired office supply distribution businesses are combined with our operating results subsequent to their purchase dates and are included in the Business Solutions Division. The operating results of CompuCom and the enterprise IT solutions integrator and managed services provider are included in the CompuCom Division. Refer to Note 2. “Acquisitions” in the Notes to Consolidated Financial Statements for additional information.

SUPPLY CHAIN

We operate a network of distribution centers (“DCs”) and crossdock facilities across the United States, Puerto Rico, and Canada, including two DCs which support the operations of CompuCom. Our DCs fulfill customer orders, while crossdocks are smaller flow-through facilities where merchandise is sorted for distribution and shipped to fulfill the inventory needs of our retail locations. Our supply chain operations are also supported by a dedicated fleet of over 1,000 transportation vehicles. With our network of DCs, crossdocks, and vehicles, we are capable of providing next-day delivery services for approximately 98.5% of the population in the United States.

 

We continue to invest in our supply chain network, focusing on further enhancing our capabilities, increasing efficiency and lowering our costs. For example, we have grown our private fleet of transportation vehicles and introduced automated technology and robotics into our DCs and crossdock facilities. These investments position us to pursue opportunities beyond our traditional business, including utilizing our supply chain as a logistics service for third parties, including customers.

Excluding the two DCs supporting the CompuCom operations, DC and crossdock facilities’ costs, such as real estate, technology, labor, depreciation and inventory are allocated to the Retail and Business Solutions Divisions based on the relative services provided. For the two DCs supporting the CompuCom operations, these costs are included within the CompuCom Division.

We believe that inventory held in our DCs is at levels sufficient to meet current and anticipated customer needs. Certain purchases are sent directly from the manufacturer, industry wholesaler or other primary supplier to our customers or retail stores. Some supply chain facilities and some retail locations also house sales offices, showrooms, and administrative offices supporting our contract sales channel.

As of December 28, 2019, we operated a total of 67 DCs and crossdock facilities in the United States and Canada. Refer to “Properties” within Other Key Information for more details.

Out-bound delivery and inbound direct import operations are currently provided by third-party carriers along with our own vehicles.

MERCHANDISING AND SERVICES

Our merchandising and services strategy is to meet our customers’ needs by offering a broad selection of nationally branded office supply and adjacency products, as well as our own private branded products and services. The selection of our private branded products has increased in breadth and level of sophistication over time. We currently offer products under such labels, including Office Depot®, OfficeMax®, Foray®, Ativa®, TUL®, Realspace®, WorkPro®, Brenton Studio®, Highmark®, and Grand & Toy®.

 

We generally classify our product offerings into three categories: (1) supplies, (2) technology, and (3) furniture and other. The supplies category includes products such as paper, writing instruments, office supplies, and cleaning and breakroom supplies. The technology category includes products such as toner and ink, printers, computers, tablets and accessories, and electronic storage. The furniture and other category includes products such as desks, seating, and luggage.

 

6


Table of Contents

 

We classify our service offerings into two categories: (1) technology and (2) copy, print, and other. The technology category includes the technology service offerings provided through our CompuCom Division, such as technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions, as well as technology service offerings provided in our retail stores, such as equipment installation and repair. The copy, print, and other category includes offerings such as printing of business cards, banners, documents and promotional products, copying and photo services, managed print and fulfillment services, product and service subscriptions, and sales of third party software, gift cards, warranties, remote support as well as rental income on operating lease arrangements where the Company conveys to its customers the right to use devices and other equipment for a stated period.

Total Company sales by offering were as follows:

 

 

 

2019

 

 

2018

 

 

2017

 

Major products and services categories

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

 

 

 

 

 

 

 

 

 

 

Supplies

 

 

43.7

%

 

 

42.7

%

 

 

45.0

%

Technology**

 

 

30.2

%

 

 

31.5

%

 

 

34.7

%

Furniture and other

 

 

11.0

%

 

 

10.4

%

 

 

11.3

%

Services

 

 

 

 

 

 

 

 

 

 

 

 

Technology**

 

 

6.8

%

 

 

7.9

%

 

 

1.5

%

Copy, print, and other

 

 

8.3

%

 

 

7.5

%

 

 

7.5

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

** 2017 includes technology product and services sales of CompuCom subsequent to the acquisition date of November 8, 2017.

We buy substantially all of our merchandise directly from manufacturers, industry wholesalers, and other primary suppliers, and source our private branded products from domestic and offshore sources. We enter into arrangements with vendors that can lower our unit product costs if certain volume thresholds or other criteria are met. For additional discussion regarding these arrangements, refer to “Critical Accounting Policies” in MD&A.

We operate separate merchandising functions in the United States and Canada. Each function is responsible for selecting, purchasing, managing the product life cycle of our inventory, and managing pricing for all channels. Organizationally, they are aligned under the same Corporate leadership. In recent years, we have increasingly used global offerings across the regions to further reduce our product cost while maintaining product quality.

We operate a global sourcing office in Shenzhen, China, which allows us to better manage our product sourcing, logistics and quality assurance. This office consolidates our purchasing power with Asian factories and, in turn, helps us to increase the scope of our own branded offerings.

SALES AND MARKETING

We regularly assess consumer shopping behaviors in order to refine our strategy and curate the desired product assortment, shopping environment and purchasing methods. Identifying the most desirable and effective way to reach our customers and allowing them to shop through whichever channel they prefer will continue to be a priority. These efforts have impacted the extent, format and vehicles we use to advertise to and reach customers, our web page design, promotions and product offerings.

Our marketing programs are designed to attract and retain customers, drive frequency of customer visits, increase customer spend in our stores and websites, and build brand awareness. We have shifted a meaningful amount of our marketing efforts in recent periods to digital programs that enhance personalized offerings and promote customer satisfaction, and include the use of social media platforms. We also continue to advertise through traditional marketing vehicles such as national and local TV, radio, billboards, major newspapers in most of our North American markets and direct mail and catalogues.

Our customer loyalty and other incentive programs provide our customers with rewards that can be applied towards future purchases or other incentives. These programs enable us to effectively market to our customers and may change as customer preferences shift.

We perform periodic competitive pricing analyses to monitor each market, and prices are adjusted as necessary to further our competitive positioning. We generally target our pricing to be competitive with other resellers of office products and providers of business services and technology solutions.

Our customer acquisition efforts regularly shift to vehicles and formats found to be most productive for reaching the targeted customer. We acquire customers through e-mail and social media campaigns, online affiliate connections, on-premises sales calls,

7


Table of Contents

 

outbound sales calls, and catalogs, among others. No single customer accounted for more than 10% of total consolidated sales or receivables in 2019, 2018 or 2017. Additionally, we believe that none of our business segments is dependent upon a single customer or a few customers, the loss of which would have a material adverse effect in our consolidated results of operations.

SEASONALITY

Our business experiences a certain level of seasonality, with sales generally trending lower in the second quarter, following the “back-to-business” sales cycle in the first quarter and preceding the “back-to-school” sales cycle in the third quarter and the holiday sales cycle in the fourth quarter for our Business Solutions and Retail Divisions. The CompuCom Division generally does not experience notable seasonality. Certain working capital components may build and recede during the year reflecting established selling cycles. Business cycles can and have impacted our operations and financial position when compared to other periods.

INDUSTRY AND COMPETITION

We operate in a highly competitive environment. Our Business Solutions and Retail Divisions compete with office supply stores, wholesale clubs, discount stores, mass merchandisers, online retailers, food and drug stores, computer and electronics superstores and direct marketing companies. These companies compete with us in substantially all of our current markets. Increased competition in the office products markets, together with increased advertising, and Internet-based search tools, has heightened price awareness among end-users. Such heightened price awareness has led to sales and margin pressure on our office products categories and has impacted our results. In addition to price, we also compete based on customer service, the quality and extent of product selection and convenience. Other office supply retail companies market similarly to us in terms of store format, pricing strategy, product selection and product availability in the markets where we operate. Some of our competitors are larger than us and have greater financial resources, which provide them with greater purchasing power, increased financial flexibility and more capital resources for expansion and improvement, which may enable them to compete more effectively. We anticipate that in the future we will continue to face high levels of competition from these companies.

We believe our robust field sales forces, dedicated customer service associates and the efficiency and convenience for our customers from our combined contract and direct sales distribution channels position our Business Solutions Division well to compete with other business-to-business office products distributors.

We believe our Retail Division competes favorably against competitors based on convenience, location, the quality of our customer service, our store layouts, the range and depth of our merchandise offering and our pricing.

The CompuCom Division operates in an environment that is highly competitive, rapidly evolving and subject to shifting client needs and expectations. We compete with companies that provide IT services and outsourcing, as well as companies that sell IT related products. We believe that the principal competitive factors in our business include technical expertise, geographic reach, and the ability to provide compelling solutions to meet the needs of end users and distributed technology. We believe our CompuCom Division successfully competes based on the quality of our customer service, the geographic reach of our services, and the breadth of our offerings.

ENVIRONMENTAL MATTERS

As both a significant user and seller of paper products, we have developed environmental practices that are values-based and market-driven. Our environmental initiatives center on three guiding principles: (1) recycling and pollution reduction; (2) sustainable forest management; and (3) issue awareness and market development for environmentally preferable products. We offer thousands of different products containing recycled content and technology recycling services.

Office Depot continues to implement environmental programs in line with our stated environmental vision to “increasingly buy green, be green and sell green” — including environmental sensitivity in our packaging, operations and sales offerings. We have been commended for our leadership position for our facility design, recycling efforts, and ‘green’ product offerings. Additional information on our green product offerings can be found at www.officedepot.com/buygreen.

We are subject to a variety of environmental laws and regulations related to historical OfficeMax operations of paper and forest products businesses and timberland assets. We record environmental and asbestos liabilities, and accrue losses associated with these obligations, when probable and reasonably estimable. We record a separate insurance recovery receivable when considered probable. Refer to “Legal Proceedings” within Other Key Information for more details.

8


Table of Contents

 

WHO MANAGES OUR BUSINESS

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following information is provided regarding the executive officers of Office Depot.

Gerry P. Smith — Age: 56

Mr. Smith was appointed to serve as our Chief Executive Officer and a Director effective February 27, 2017. Prior to joining us, Mr. Smith was at Lenovo Group Limited (“Lenovo”) since 2006, most recently as Executive Vice President and Chief Operating Officer of Lenovo since 2016 where he was responsible for all operations across Lenovo’s global product portfolio. Prior to assuming this role, also in 2016, Mr. Smith was Executive Vice President and President, Data Center Group. From 2015 to 2016, he served as Chief Operating Officer of the Personal Computing Group and Enterprise Business Group, and from 2013 to 2015 he served as President of the Americas. In these roles, Mr. Smith oversaw Lenovo’s fast-growing enterprise business worldwide and Lenovo’s overall business in the America’s region. Prior to that, Mr. Smith was President, North America and Senior Vice President, Global Operations of Lenovo from 2012 to 2013, and Senior Vice President of Global Supply Chain of Lenovo from 2006 until 2012 where he was responsible for end-to-end supply chain management. Prior to Lenovo, Mr. Smith held a number of executive positions at Dell Inc. from 1994 until 2006, as the company became a global leader in personal computers.

N. David Bleisch — Age: 60

Mr. Bleisch was appointed to serve as our Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary in August 2018. Previously he served as Executive Vice President, Chief Legal Officer and Corporate Secretary from September 2017 to August 2018. Prior to joining us, Mr. Bleisch was Senior Vice President and Chief Legal Officer for The ADT Corporation (“ADT”) from September 2012 through May 2016, where he managed the legal, environmental, health and safety, government affairs and corporate governance matters. Prior to assuming this role, Mr. Bleisch served in several leadership roles at Tyco International before being appointed Vice President and General Counsel of Tyco Security Solutions. Before joining Tyco, Mr. Bleisch was Senior Vice President, General Counsel and Corporate Secretary of The LTV Corporation. Before LTV, Mr. Bleisch was a partner with Jackson Walker LLP. He currently serves on the Board of Directors for the Education Foundation of Palm Beach County.

Jerri L. DeVard — Age: 61

Ms. DeVard was appointed to serve as our Executive Vice President and Chief Customer Officer in January 2018. In this role, Ms. DeVard leads Customer Service, Marketing and Communications functions. Ms. DeVard joined us in September 2017 as Executive Vice President and Chief Marketing Officer. Prior to joining us, Ms. DeVard was Senior Vice President and Chief Marketing Officer for ADT from April 2014 to June 2016. Prior to ADT, Ms. DeVard held various marketing leadership positions for Nokia, Verizon and Citigroup. She currently serves on the Board of Directors for Under Armour, Inc. and Cars.com.

John W. Gannfors — Age: 54

Mr. Gannfors was appointed to serve as our Executive Vice President, Chief Merchandising and Supply Chain Officer in August 2018. Previously Mr. Gannfors served as Executive Vice President, Transformation, Strategic Sourcing and Supply Chain from July 2017 to August 2018, and as our Executive Vice President, Transformation and Strategic Sourcing when he joined the Company in April 2017. Prior to joining us, Mr. Gannfors served as Chief Procurement Officer at Lenovo Group Limited, where he spent nearly ten years. Prior to assuming this role, Mr. Gannfors served in various leadership roles at Dell. Mr. Gannfors began his career in Product Management at Lockheed Martin’s Calcomp division, as well as Definicon Systems.

Todd Hale — Age: 47

Mr. Hale was appointed to serve as our Executive Vice President and Chief Information Officer in August 2016. Previously, Mr. Hale served as our Senior Vice President, North American Chief Information Officer. Mr. Hale joined us in 2004 where he held several positions of increasing levels of responsibility such as Director, IT Supply Chain Systems; Senior Director, Merchandising, Marketing and Inventory Management Systems; and Vice President, North American Chief Information Officer and Vice President of Applications Development. Prior to joining us, Mr. Hale held various IT leadership positions with the Eckerd Corporation. He began his career in retail consulting for Proctor & Gamble and Walmart.

9


Table of Contents

 

Kevin Moffitt — Age: 46

Mr. Moffitt was appointed to serve as our Executive Vice President, Chief Retail Officer in November 2018. Previously, Mr. Moffitt served as our Senior Vice President, Chief Retail Officer from January 2018 to November 2018; Senior Vice President, Chief Digital Officer in 2017; Senior Vice President, eCommerce & Direct Business Unit Leader from 2016 to 2017; and as our Vice President, eCommerce Product Management and Customer Experience from 2012 to 2016. Prior to joining us, he held several leadership roles at Dillards and Crossview.

Stephen M. Mohan — Age: 43

Mr. Mohan was appointed to serve as our Executive Vice President, Business Solutions Division in May 2019. Prior to joining us, Mr. Mohan served as Senior Vice President of Sales and Marketing, North American Transportation at XPO Logistics, Inc., a transportation and logistics company, from October 2017 to May 3, 2019. Prior to joining XPO Logistics, Mr. Mohan served as Executive Vice President and Chief Sales Officer at Clean Harbors, an environmental, energy and industrial services company, from October 2016 to February 2017 and Senior Vice President, Field Sales for Republic Services, Inc., a waste collection and energy services company, from September 2009 to September 2016. His career began in 1999 at Reed Business Information, where he led acquisition and management of a large account portfolio for a leading provider of data and business information solutions.

John “Mick” Slattery — Age: 51

Mr. Slattery was appointed to serve as our President, CompuCom Division in June 2019. Mr. Slattery has nearly 30 years of experience in the technology-enabled business services space, and most recently served as the Chief Executive Officer of Conduent Transportation LLC, a division of Conduent, Inc., a technology-led business process services company. Prior to joining Conduent in 2018, Mr. Slattery was a founding executive team member of Avanade, Inc., a global professional services company providing IT consulting and services and was formed as a joint venture between Accenture plc and Microsoft Corporation. During his 17-year career with Avanade, Mr. Slattery served in a series of roles with increasing levels of responsibility, and ultimately served as President, North America. Prior to joining Avanade, Mr. Slattery served as Associate Partner, Communications & High Tech at Accenture plc.


10


Table of Contents

 

OTHER KEY INFORMATION

RISK FACTORS

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to us and our industry could materially impact our business, financial condition, results of operations, cash flows and future performance and results. You should carefully consider the risks described below in our subsequent periodic filings with the SEC. The following risk factors should be read in conjunction with the MD&A and Notes to Consolidated Financial Statements in the Annual Report.

Risks related to our business

Our business is highly competitive and failure to adequately differentiate ourselves or respond to the decline in general office supplies sales or to shifting consumer demands could continue to adversely impact our financial performance.

The office products market is highly competitive and we compete locally, domestically and internationally with office supply resellers, including Staples, Internet-based companies such as Amazon.com, mass merchandisers such as Wal-Mart and Target, wholesale clubs such as Costco, Sam’s Club and BJs, computer and electronics superstores such as Best Buy, food and drug stores, discount stores, and direct marketing companies. Some competitors may offer a broader assortment of products or have more extensive e-commerce channels, while others have substantially greater financial resources to devote to sourcing, marketing and selling their products. The ability of consumers to compare prices using smartphones and digital technology puts additional pressure on us to maintain competitive pricing. In addition, consumers are utilizing more technology and purchasing less paper, ink and toner, physical file storage and general office supplies. In order to achieve and maintain expected profitability levels, we must continue to grow by adding new customers and taking market share from competitors. If we are not able to compete effectively, it could negatively affect our business and results of operations.

The retail sector continues to focus on delivery services, with customers increasingly seeking faster, guaranteed delivery times and low-price or free shipping. Our ability to be competitive on delivery times and delivery costs depends on many factors, and our failure to successfully manage these factors and offer competitive delivery options could negatively impact the demand for our products and our profit margins. Because our business strategy is based on offering superior levels of customer service and a full range of services to complement the products we offer, our cost structure might be higher than some of our competitors, and this, in conjunction with price transparency, could put pressure on our margins.

In addition, the CompuCom Division operates in an environment that is highly competitive, rapidly evolving and subject to shifting client needs and expectations. We compete with companies that provide IT services and outsourcing, as well as companies that sell IT related products. If we are unable to: (i) provide technology solutions and services that meet consumer needs; (ii) continuously procure products that are up-to-date and among the latest trends in the rapidly changing technological environment; (iii) differentiate ourselves from other retailers who sell similar products; and (iv) effectively compete, our sales and financial performance could be negatively impacted.

Our focus on services as a strategic priority exposes us to certain risks that could have a material adverse impact on our revenue and profitability as well as our reputation.

Our transformation into a more business services-driven platform that delivers a full range of services complements our product offerings, including consultation, design, delivery, installation, set-up, protection plans, repair, and technical support. These services can differentiate us from many of our competitors and provide an opportunity to deliver superior customer service while generating additional revenue and profit. However, designing, marketing and executing these services successfully and consistently is subject to risks. These risks include, for example:

 

increased labor expense to fulfill our customer promises, which may be higher than the related revenue;

 

unpredictable warranty failure rates and related expenses;

 

employees in transit using company vehicles to deliver products or services to customers; these factors may increase our scope of liability related to our employees’ actions; and

 

employees having access to customer devices, including the information held on those devices, which may increase our responsibility for the security of those devices and the data they hold.

11


Table of Contents

 

As customers increasingly migrate to websites and mobile applications to initiate transactions, it is inherently more difficult to demonstrate and explain the features and benefits of our service offerings, which can lead to a lower revenue mix of these services. Our ability to compete successfully depends on our ability to ensure a continuing and timely introduction of innovative new products, services and technologies to the marketplace. If we are unable to pivot into a more business services-driven platform and sell innovative new products, our ability to gain a competitive advantage could be adversely affected.

These expanded risks increase the complexity of our business and places significant responsibility on our management, employees, operations, systems, technical expertise, financial resources, and internal financial and regulatory control and reporting functions. In addition, new initiatives we test through trials and pilots may not scale or grow effectively or as we expected, which could limit our growth and negatively affect our operating results. They may also involve significant laws or regulations that are beyond our current expertise.

Our business strategy includes making acquisitions and investments that complement our existing business. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.

Our ability to achieve the benefits we anticipate from acquisitions we make will depend in large part upon whether we are able to leverage the capabilities of the acquired companies to grow revenue across our combined organization, manage the acquired company’s business, execute our strategy in an efficient and effective manner and realize anticipated cost synergies. In addition, private companies recently acquired which were previously not subject to Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), may lack certain internal controls, which could ultimately affect our ability to ensure compliance with the requirements of SOX.

Because our business and the business of acquired companies may differ operationally, we may not be able to effectively manage or oversee the operations of the acquired company’s business smoothly or successfully and the process of achieving expected revenue growth and cost synergies may take longer than expected. If we are unable to successfully manage the operations of the acquired company’s business, we may be unable to realize the revenue growth, cost synergies and other anticipated benefits we expect to achieve as a result of the acquisition.

If we are unable to successfully maintain a relevant omni-channel experience for our customers, our results of operations could be adversely affected.

With the increasing use of computers, tablets, mobile phones and other devices to shop in our stores and online, we offer full and mobile versions of our website and applications for mobile phones and tablets. In addition, we use social media as a means of interacting with our customers and enhancing their shopping experiences. We rely on our omni-channel capabilities to provide a seamless shopping experience to our customers and to keep pace with new developments by our competitors. If we are unable to attract and retain team members or contract third parties with the specialized skills needed to support our omni-channel platforms or are unable to implement improvements to our customer-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected. In addition, if our website and our other customer-facing technology systems do not function as designed, the customer experience could be negatively affected, resulting in a loss of customer confidence and satisfaction, and lost sales, which could adversely affect our reputation and results of operations.

Our failure to effectively manage our real estate portfolio may negatively impact our operating results.

Effective management of our real estate portfolio is critical to our omni-channel strategy. Most of our properties are subject to long-term leases. As such, it is essential that we effectively evaluate a range of factors that may influence the success of our long-term real estate strategy. Such factors include but are not limited to:

 

changing patterns of customer consumption and behavior, particularly in light of an evolving omni-channel environment;

 

the appropriate number of stores in our portfolio;

 

the formats and sizes of our stores;

 

the locations of our stores;

 

the interior layouts of our stores;

 

the trade area demographics and economic data of each of our stores;

 

the local competitive positioning in and around our stores;

 

the primary term lease commitment for each store;

12


Table of Contents

 

 

the long-term lease option coverage for each store;

 

the occupancy cost of our stores relative to market rents;

 

our supply chain network strategy; and

 

our ongoing network of service locations.

The consequences for failure to effectively evaluate these factors or negotiate appropriate terms or anticipate changes could include:

 

having to close stores and abandon the related assets, while retaining the financial commitments of the leases;

 

incurring significant costs to remodel or transform our stores;

 

having stores, supply chain or service locations that no longer meet the needs of our business; and

 

bearing excessive lease expenses.

These consequences could have a materially adverse impact on our profitability, cash flows and liquidity.

For leased property, the financial impact of exiting a location varies greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property, our relationship with the landlord and the availability of potential sub-lease tenants. It is difficult for us to influence some of these factors, and the costs of exiting a property can be significant. In addition to rent, we are still responsible for the maintenance, taxes, insurance and common area maintenance charges for vacant properties until the lease commitment expires or is terminated. Similarly, when we enter into a contract with a tenant to sub-lease property, we usually retain our obligations as the master lessor. This leaves us at risk for any remaining liability in the event of default by the sub-lease tenant.

We do a significant amount of business with government entities, various purchasing consortiums, and through sole- or limited- source distribution arrangements, and loss of this business could negatively impact our results.

One of our largest customer groups consists of various governmental entities, government agencies and non-profit organizations, such as purchasing consortiums. Contracting with U.S. state and local governments is highly competitive, subject to federal and state procurement laws, requires more restrictive contract terms and can be expensive and time-consuming. Bidding such contracts often requires that we incur significant upfront time and expense without any assurance that we will win a contract. Our ability to compete successfully for and retain business with federal, state and local governments is highly dependent on cost-effective performance. Our business with governmental entities and agencies is also sensitive to changes in national and international priorities and their respective budgets, which in the current economy continue to decrease. We also service a substantial amount of business through agreements with purchasing consortiums and other sole- or limited-source distribution arrangements. If we are unsuccessful in retaining these customers, or if there is a significant reduction in sales under any of these arrangements, it could adversely impact our business and results of operations.

Failure to attract and retain qualified personnel could have an adverse impact on our business.

Our performance is highly dependent on attracting, retaining and engaging appropriately qualified employees in our stores, service centers, distribution centers, field and corporate offices. The market for qualified employees, with the right talent and competencies, is highly competitive. Factors that affect our ability to maintain sufficient numbers of qualified employees include employee morale, our reputation, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation packages. We operate in a competitive labor market and there is a risk that market increases in compensation could have a material adverse effect on our profitability. Failure to recruit or retain qualified employees, and the inability to keep our supply of skills and resources in balance with client demand, may impair our efficiency and effectiveness, our ability to pursue growth opportunities and adversely affect our results of operations. In addition, a significant amount of turnover of our executive team or other employees in key positions with specific knowledge relating to us, our operations and our industry, may negatively impact our operations.

We depend on our executive management team and other key personnel, and the inability to recruit and retain certain personnel could adversely affect our performance and result in the loss of management continuity and institutional knowledge.

Although certain members of our executive team have entered into agreements relating to their employment with us, most of our key personnel are not bound by employment agreements, and those with employment or retention agreements are bound only for a limited

13


Table of Contents

 

period of time. If we are unable to retain our key personnel, we may be unable to successfully develop and implement our business plans, which may have an adverse effect on our business and results of operations.

Failure to execute effective advertising efforts and maintain our reputation and brand at a high level, may adversely impact our financial performance.

Effective advertising and marketing efforts play a crucial role in maintaining high customer traffic. We focus on developing new marketing initiatives and maintaining effective promotional strategies that target further growth in our business. Failure to execute effective advertising efforts to attract new customers or retain existing customers, or misjudgment of consumer responses to our existing or future promotional activities, may adversely impact our financial performance.

Failure to detect, prevent, or mitigate issues that might give rise to reputational risk or failure to adequately address negative publicity or perceptions could adversely impact our reputation, business, results of operations, and financial condition. Issues that might pose a reputational risk include an inability to achieve our omni-channel goals, including providing an e-commerce and delivery experience that meets the expectations of consumers; failure of our cyber-security measures to protect against data breaches; product liability and product recalls; our social media activity; failure to comply with applicable laws and regulations; and any of the other risks enumerated in these risk factors. In addition, information concerning us, whether or not true, may be instantly and easily posted on social media platforms at any time, which information may be adverse to our reputation or brand. The harm may be immediate without affording us an opportunity for redress or correction. If our reputation or brand is damaged, our customers may refuse to continue shopping with us, potential employees may be unwilling to work for us, business partners may be discouraged from seeking future business dealings with us and, as a result, our operations and financial results may suffer.

Disruptions of our computer systems could adversely affect our operations.

We rely heavily on computer systems to process transactions, including delivery of technology services, manage our inventory and supply-chain and to summarize and analyze our global business. Our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber-attack or other security breaches, catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by our employees. If our computer systems are damaged or cease to function properly, or, if we do not replace or upgrade certain systems, we may incur substantial costs to repair or replace them and may experience an interruption of our normal business activities or loss of critical data. We are undertaking certain system enhancements and conversions to increase productivity and efficiency, that, if not done properly, could divert the attention of our workforce and constrain for some time our ability to provide the level of service our customers demand. Also, once implemented, the new systems and technology may not provide the intended efficiencies or anticipated benefits and could add costs and complications to our ongoing operations.

A breach of our information technology systems could adversely affect our reputation, business partner and customer relationships and operations and result in high costs.

Through our sales, marketing activities, and use of third-party information, we collect and store certain personally identifiable information that our customers provide to purchase products or services, enroll in promotional programs, register on our website, or otherwise communicate and interact with us. This may include, but is not limited to, names, addresses, phone numbers, driver license numbers, e-mail addresses, contact preferences, personally identifiable information stored on electronic devices, and payment account information, including credit and debit card information. We also gather and retain information about our employees in the normal course of business. We may share information about such persons with vendors that assist with certain aspects of our business. In addition, our online operations depend upon the secure transmission of confidential information over public networks, such as information permitting cashless payments.

We have instituted safeguards for the protection of such information and invested considerable resources, including insurance to cover cyber liabilities, in protecting our systems. These security measures may be compromised as a result of third-party security breaches, burglaries, cyber-attack, errors by employees or employees of third-party vendors, faulty password management, misappropriation of data by employees, vendors or unaffiliated third-parties, or other irregularity, and result in persons obtaining unauthorized access to our data or accounts. Despite instituted safeguards for the protection of such information, we cannot be certain that all of our systems and those of our vendors and unaffiliated third-parties are entirely free from vulnerability to attack or compromise given that the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently. During the normal course of our business, we have experienced and we expect to continue to experience attempts to breach our systems, none of which has been material to the Company to date, and we may be unable to protect sensitive data and the integrity of our systems or to prevent fraudulent purchases. We are also subject to data privacy and security laws and regulations, the number and complexity of which are increasing globally, and despite reasonable efforts to comply with all applicable laws and regulations, there can be no assurance that we will not be the subject of enforcement or other legal actions in the event of an incident. Moreover, an alleged or actual security breach that affects our systems or results in the unauthorized release of personally identifiable information could:

14


Table of Contents

 

 

materially damage our reputation and brand, negatively affect customer satisfaction and loyalty, expose us to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions, and infringe on proprietary information; and

 

cause us to incur substantial costs, including but not limited to costs associated with remediation for stolen assets or information, payments of customer incentives for the maintenance of business relationships after an attack, litigation costs, lost revenues resulting from unauthorized use of proprietary information or the failure to retain or attract customers following an attack, and increased cyber security protection costs. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses or all types of claims that may arise in the continually evolving area of cyber risk.

Our business may be adversely affected by the actions of and risks related to the activities of our third-party vendors.

We purchase products for resale under credit arrangements with our vendors and have been able to negotiate payment terms that are approximately equal in length to the time it takes to sell the vendor’s products. When the global economy is experiencing weakness as it has in the past, vendors may seek credit insurance to protect against non-payment of amounts due to them. If we experience declining operating performance and severe liquidity challenges, vendors may demand that we accelerate our payment for their products or require cash on delivery, which could have an adverse impact on our operating cash flow and result in severe stress on our liquidity. Borrowings under our existing credit facility could reach maximum levels under such circumstances, causing us to seek alternative liquidity measures, but we may not be able to meet our obligations as they become due until we secure such alternative measures.

We use and resell many manufacturers’ branded items and services. As a result, we are dependent on the availability and pricing of key products and services, including ink, toner, paper and technology products. As a reseller, we cannot control the supply, design, function, cost or vendor-required conditions of sale of many of the products we offer for sale. Disruptions in the availability of these products or the products and services we provide to our customers may adversely affect our sales and result in customer dissatisfaction. Further, we cannot control the cost of manufacturers’ products, and cost increases must either be passed along to our customers or will result in erosion of our earnings.

Failure to identify desirable products and make them available to our customers when desired and at attractive prices could have an adverse effect on our business and our results of operations. In addition, a material interruption in service by the carriers that ship goods within our supply chain may adversely affect our sales. Many of our vendors are small or medium sized businesses which are impacted by current macroeconomic conditions, both in the U.S., Asia and other locations. We may have no warning before a vendor fails, which may have an adverse effect on our business and results of operations.

We also engage key third-party business partners to support various functions of our business, including but not limited to, information technology, web hosting and cloud-based services, human resource operations, customer loyalty programs, gift cards, customer warranty, delivery and installation, technical support, transportation and insurance programs. Any material disruption in our relationship with key third-party business partners or any disruption in the services or systems provided or managed by third parties could impact our revenues and cost structure and hinder our operations, particularly if a disruption occurs during peak revenue periods.

Disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods) could negatively impact the cost and availability of our products.

Economic and civil unrest in areas of the world where we source products, as well as shipping and dockage issues, could adversely impact the availability or cost of our products, or both. Most of our goods imported to the U.S. arrive from Asia through ports located on the U.S. west coast and we are therefore subject to potential disruption due to labor unrest, security issues or natural disasters affecting any or all of these ports. In addition, we purchase and source products from a wide variety of suppliers, including from suppliers overseas, particularly in China. As a consequence, trade restrictions, including new or increased tariffs, quotas, embargoes, sanctions, safeguards, customs restrictions, epidemics/pandemics, like coronavirus, and mandatory government closures could increase our cost of goods sold or reduce the supply of the products available to us. There is no assurance that any such increased costs could be passed on to our customers, or that we could find alternative products from other sources at comparable prices. To the extent that we are subject to more challenging regulatory environments and enhanced legal and regulatory requirements, such exposure could have a material adverse effect on our business, including the added cost of increased compliance measures that we may determine to be necessary.

General trade tensions between the U.S. and China, which began escalating in 2018, could have a negative impact on our business. We have incurred incremental costs related to trade tariffs on inventory we purchase from China, but such costs have not had a material impact on our results of operations. We continue to monitor and evaluate the potential impact of the effective and proposed tariffs as

15


Table of Contents

 

well as other recent changes in foreign trade policy on our supply chain, costs, sales and profitability and have implemented strategies to mitigate such impact, including changes to our contracting model, alternative sourcing strategies and selective price increase pass-through efforts. If any of these events continue as described, they could disrupt the movement of products through our supply chain or increase their cost. In addition, while we may be able to shift our sourcing options, executing such a shift would be time consuming and would be difficult or impracticable for many products and may result in an increase in our manufacturing costs. Substantial regulatory uncertainty exists regarding foreign trade and trade policy, both in the United States and abroad. The adoption and expansion of trade restrictions, retaliatory tariffs, or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and/or the U.S. economy, which in turn could adversely impact our results of operations and business.

Our exclusive brands products are subject to several additional product, supply chain and legal risks that could affect our operating results.

In recent years, we have substantially increased the number and types of products that we sell under our own brands including Office Depot®, OfficeMax® and other proprietary brands. While we have focused on the quality of our proprietary branded products, we rely on third parties to manufacture these products. Such third-party manufacturers may prove to be unreliable, the quality of our globally sourced products may vary from our expectations and standards, such products may not meet applicable regulatory requirements which may require us to recall those products, or such products may infringe upon the intellectual property rights of third parties. Moreover, as we seek indemnities from the manufacturers of these products, the uncertainty of realization of any such indemnity and the lack of understanding of U.S. product liability laws in certain foreign jurisdictions make it more likely that we may have to respond to claims or complaints from our customers.

Product safety and quality concerns could have a material adverse impact on our revenue and profitability.

If the products we sell fail to meet applicable safety standards or our customers’ expectations regarding safety and quality, we could be exposed to increased legal risk and our reputation may be damaged. Failure to take appropriate actions in relation to product recalls could lead to breaches in laws and regulations and leave us susceptible to government enforcement actions or private litigation. Recalls of products, particularly when combined with lack of available alternatives or our difficulty in sourcing sufficient volumes of replacement products, could also have a material adverse impact on our revenue and profitability.

Covenants in our credit facility and term loan could adversely impact our operations.

Our asset-based credit facility contains a fixed charge coverage ratio covenant that is operative only when borrowing availability is below $125 million or prior to a restricted transaction, such as incurring additional indebtedness, acquisitions, dispositions, dividends, or share repurchases if we do not have the required liquidity. The agreement governing our credit facility (the “Amended Credit Agreement” as defined in Note 11, “Debt,” of the Consolidated Financial Statements) also contains representations, warranties, affirmative and negative covenants, and default provisions. A breach of any of these covenants could result in a default under our Amended Credit Agreement. Upon the occurrence of an event of default under our Amended Credit Agreement, the lenders could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If the lenders were to accelerate the repayment of borrowings, we may not have sufficient assets to repay our asset based credit facility and our other indebtedness. Also, should there be an event of default, or a need to obtain waivers following an event of default, we may be subject to higher borrowing costs and/or more restrictive covenants in future periods. Acceleration of our obligations under our credit facilities would permit the holders of our other material debt to accelerate their obligations.

In addition, the CompuCom acquisition was funded, in part, with a $750 million term loan facility. In November 2018, we executed the First Amendment to the Term Loan Credit Agreement to reduce the applicable interest rate from LIBOR plus 7.00% to LIBOR plus 5.25%. In connection with the applicable interest rate reduction, we made a voluntary repayment under the Term Loan Credit Agreement of $194 million. This Term Loan Credit Agreement (as defined in Note 11, “Debt,” of the Consolidated Financial Statements) contains representations and warranties, events of default, and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, repurchase common stock, create liens, incur additional indebtedness, make investments, dispose of assets, and merge or consolidate with any other person. In addition, a minimum liquidity maintenance covenant, requiring us and our restricted subsidiaries to retain unrestricted cash, cash equivalents, and availability under our Amended Credit Agreement in an aggregate amount of at least $400 million, will apply at any time that our senior secured leverage ratio under the agreement is greater than 1.50:1.00 as calculated quarterly. At December 28, 2019, our senior secured leverage ratio was 0.69:1.00 and the Company was in compliance with the agreement.

 

16


Table of Contents

 

A downgrade in our credit ratings or a general disruption in the credit markets could make it more difficult for us to access funds, refinance indebtedness, obtain new funding or issue securities.

While merger- and restructuring-related costs have been significant between 2013 and 2019, historically, we have generated positive cash flow from operating activities and have had access to broad financial markets that provide the liquidity we need to operate our business. Together, these sources have been used to fund operating and working capital needs, as well as invest in business expansion through capital improvements and acquisitions. Deterioration in our financial results or the impact of significant merger, integration and restructuring costs could negatively impact our credit ratings, our liquidity and our access to the capital markets. If we need to refinance all or a portion of that indebtedness, there is no assurance that we will be able to secure such refinancing at the same or more favorable terms than the terms of our existing indebtedness.

We have incurred significant impairment charges and we continue to incur impairment charges.

We regularly assess past performance and make estimates and projections of future performance at an individual store level. Reduced sales, our shift in strategy to be less price promotional, as well as competitive factors and changes in consumer spending habits resulted in a downward adjustment of anticipated future cash flows for the individual stores that resulted in the impairment. We foresee challenges in the market and economy that could adversely impact our operations. To the extent that forward-looking sales and operating assumptions are not achieved and are subsequently reduced, or if we commit to a more aggressive store downsizing strategy, including allocating capital to further modify store formats, additional impairment charges may result. We have also recognized impairment charges on retail store related assets, including operating lease right-of-use (“ROU”) assets, that were deemed unrecoverable based on the Comprehensive Business Review and the Business Acceleration Program. Additional asset impairments may be recognized based on future decisions and conditions.

Changes in the numerous variables associated with the judgments, assumptions and estimates we make, in assessing the appropriate valuation of our goodwill and other intangible assets of our reporting units, including changes resulting from macroeconomic, or disposition of components within reporting units, could in the future require a reduction of goodwill and recognition of related non-cash impairment charges. If we were required to further impair our store assets, our goodwill or intangible assets of our reporting units, it could have a material adverse effect on our business and results of operations.

In addition, we experienced a decline in the market valuation of our common shares during 2019, which was considered in our determination of the key valuation assumptions used in our impairment assessments. The decline in our market capitalization has not resulted in a trigger for impairment during the year, however, if the decline becomes sustained or future declines in macroeconomic factors or business conditions occur, we could incur impairment changes in future periods.

We have retained responsibility for liabilities of acquired companies that may adversely affect our financial results.

OfficeMax sponsors defined benefit pension plans covering certain terminated employees, vested employees, retirees, and some active employees (the “Pension Plans”). The Pension Plans are frozen and do not allow new entrants; however, they are under-funded and we may be required to make contributions in subsequent years in order to maintain required funding levels. Required future contributions could have an adverse impact on our cash flows and our financial results. Additional future contributions to the Pension Plans, financial market performance and Internal Revenue Service (“IRS”) funding requirements could materially change these expected payments.

As part of the sale of our business in Europe, we have retained responsibility for the defined benefit plan covering certain employees in the United Kingdom. While the plan was in a net asset position at the end of 2019, changes in assumptions and actual experience could result in that plan being considered underfunded in the future. Additionally, we have agreed to make contributions to the plan as required by the trustees. Financial performance of the plan and future valuation assumptions could materially change the expected payments. In addition, as part of the sale transaction, the purchaser shall indemnify and hold us harmless in connection with any guarantees in place as of September 23, 2016, and given by us in respect of the liabilities or obligations of the European business. Further, if the purchaser wishes to terminate any such guarantee or cease to comply with any underlying obligation which is subject to such a guarantee, the purchaser shall obtain an unconditional and irrevocable release of the guarantee. However, we are contingently liable in the event of a breach by the purchaser of any such obligation.

In connection with OfficeMax’s sale of its paper, forest products and timberland assets in 2004, OfficeMax agreed to assume responsibility for certain liabilities of the businesses sold. These obligations include liabilities related to environmental, asbestos, health and safety, tax, litigation and employee benefit matters. Some of these retained liabilities could turn out to be significant, which could have an adverse effect on our results of operations. Our exposure to these liabilities could harm our ability to compete with other office products distributors who would not typically be subject to similar liabilities.

 

17


Table of Contents

 

Our quarterly operating results are subject to fluctuation due to the seasonality of our business.

Our business, except for CompuCom, experiences a certain level of seasonality with sales generally trending lower in the second quarter, following the “back-to-business” sales cycle in the first quarter and preceding the “back-to-school” sales cycle in the third quarter and the holiday sales cycle in the fourth quarter. As a result, our operating results have fluctuated from quarter to quarter in the past, with sales and profitability being generally stronger in the second half of our fiscal year than the first half of our fiscal year. Factors that could also cause these quarterly fluctuations include: the pricing behavior of our competitors; the types and mix of products sold; the level of advertising and promotional expenses; severe weather; macroeconomic factors that affect consumer confidence and spending; and the other risk factors described in this section. Most of our operating expenses, such as occupancy costs and associate salaries, are not variable, and so short-term adjustments to reflect quarterly results are difficult. As a result, if sales in certain quarters are significantly below expectations, we may not be able to proportionately reduce operating expenses for that quarter, and therefore such a sales shortfall would have an adverse effect on our net income for the quarter.

Changes in tax laws in any of the jurisdictions in which we operate can cause fluctuations in our overall tax rate impacting our reported earnings.

Our tax rate is derived from a combination of applicable tax rates in the various domestic and international jurisdictions in which we operate. While we have disposed of the majority of our international businesses, we remain subject to international taxes as part of our existing operations. Depending upon the sources of our income, any agreements we may have with taxing authorities in various jurisdictions, and the tax filing positions we take in these jurisdictions, our overall tax rate may fluctuate significantly from other companies or even our own past tax rates. In addition, changes in applicable U.S. or foreign tax laws and regulations, including the Tax Cuts and Jobs Act of 2017, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense and profitability. At any given point in time, we base our estimate of an annual effective tax rate upon a calculated mix of the tax rates applicable to us and to estimates of the amount of income likely to be generated in any given geography. The loss of or modification to one or more agreements with taxing jurisdictions, whether as a result of a third party challenge, negotiation, or otherwise, a change in the mix of our business from year to year and from country to country, changes in rules related to accounting for income taxes, changes in tax laws in any of the multiple jurisdictions in which we operate, changes in valuation allowances, or adverse outcomes from the tax audits that regularly are in process in any of the jurisdictions in which we operate could result in substantial volatility, including an unfavorable change in our overall tax rate and/or our effective tax rate.

Increases in wage and benefit costs, changes in laws and other labor regulations could impact our financial results and cash flow.

Our expenses relating to employee labor, including employee health benefits, are significant. Our ability to control our employee and related labor costs is generally subject to numerous external factors, including prevailing wage rates, recent legislative and private sector initiatives regarding healthcare reform, and adoption of new or revised employment and labor laws and regulations. Recently, various legislative movements have sought to increase the federal minimum wage in the United States and the minimum wage in a number of individual states, some of which have been successful at the state level. As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well. Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer. Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations. We have a large employee base and while our management believes that our employee relations are good, we cannot be assured that we will not experience organization efforts from labor unions. The potential for unionization could increase if federal legislation is passed that would facilitate labor organization. Significant union representation would require us to negotiate wages, salaries, benefits and other terms with many of our employees collectively and could adversely affect our results of operations by significantly increasing our labor costs or otherwise restricting our ability to maximize the efficiency of our operations.

We also have employees in Canada, Mexico, India, Costa Rica and Asia and are required to comply with laws and regulations in those countries that may differ substantially from country to country, requiring significant management attention and cost.

Changes in the regulatory environment and violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws may negatively impact our business.

We are subject to regulations relating to our corporate conduct and the conduct of our business, including securities laws, consumer protection laws, trade regulations, advertising regulations, privacy and cybersecurity laws, and wage and hour regulations and anti-corruption legislation. Certain jurisdictions have taken a particularly aggressive stance with respect to such matters and have implemented new initiatives and reforms, including more stringent regulations, disclosure and compliance requirements.

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years

18


Table of Contents

 

have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with all anti-bribery laws. However, we operate in certain countries that are recognized as having governmental and commercial corruption. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on our business and results of operations.

Our common stock price has been and may continue to be subject to volatility, and shareholders could incur substantial losses of any investment in our common stock.

Our common stock price has experienced volatility over time and this volatility may continue, in part due to factors mentioned in this Item 1A. As a result of these and other factors, investors in our common stock may not be able to resell their shares at or above their original purchase price.

There can be no assurance that we will pay cash dividends.

Decisions regarding dividends are within the discretion of the Board of Directors, and depend on a number of factors, including general business and economic conditions, our financial condition, operating results and restrictions imposed by our debt agreements, the emergence of alternative investment or acquisition opportunities, changes in business strategy and other factors. Changes in, or the elimination of dividends could have an adverse effect on the price of our common stock.

Macroeconomic conditions have had and may continue to adversely affect our business and financial performance.

Our operating results and performance depend significantly on economic conditions and their impact on business and consumer spending. In the past, the decline in business and consumer spending has caused our comparable retail store sales to decline from prior periods. Our business and financial performance may continue to be adversely affected by current and future economic conditions, including, without limitation, the level of consumer debt, high levels of unemployment, higher interest rates and the ability of our customers to obtain credit, which may cause a continued or further decline in business and consumer spending.

Increases in fuel and other commodity prices could have an adverse impact on our earnings.

We operate a large network of retail stores, delivery centers, and delivery vehicles. As such, we purchase significant amounts of fuel needed to transport products to our stores and customers as well as shipping costs to import products from overseas. While we may hedge our anticipated fuel purchases, the underlying commodity costs associated with this transport activity is beyond our control and may be volatile. Disruptions in availability of fuel could cause our operating costs to rise significantly to the extent not covered by our hedges and could have a negative impact on our ability to operate our transportation networks. Additionally, other commodity prices, such as paper, may increase and we may not be able to pass along such costs to our customers. Fluctuations in the availability or cost of our energy and other commodity prices could have a material adverse effect on our profitability.

We are subject to legal proceedings and legal compliance risks.

We are involved in various legal proceedings, which from time to time may involve class action lawsuits, state and federal governmental inquiries, audits and investigations, environmental matters, employment, tort, state false claims act, consumer litigation and intellectual property litigation. At times, such matters may involve directors and/or executive officers. Certain of these legal proceedings, including government investigations, may be a significant distraction to management and could expose our Company to significant liability, including settlement expenses, damages, fines, penalties, attorneys’ fees and costs, and non-monetary sanctions, including suspensions and debarments from doing business with certain government agencies, any of which could have a material adverse effect on our business and results of operations. For a description of our legal proceedings, refer to Note 17, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements.

Catastrophic events could adversely affect our operating results.

The risk or actual occurrence of various catastrophic events could have a material adverse effect on our financial performance. Such events may be caused by, for example:

 

natural disasters or extreme weather events such as hurricanes, tornadoes, floods and earthquakes;

 

diseases, epidemics or pandemics that may affect our employees, customers or partners;

 

floods, fire or other catastrophes affecting our properties;

19


Table of Contents

 

 

terrorism, civil unrest or other conflicts; or

 

extended power outages.

Such events can adversely affect our work force and prevent employees and customers from reaching our stores and properties and can disrupt or disable portions of our supply chain and distribution network. They can also affect our information systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders. As a consequence of these or other catastrophic events, we may endure interruption to our operations or losses of property, equipment or inventory, which would adversely affect our revenue and profitability. For example, hurricanes can disrupt operations in the southeastern United States where a heavy concentration of our customers are located, and negatively impacted sales in both our Retail and Business Solutions Divisions.

Our amended and restated bylaws designate the Court of Chancery of the State of Delaware (the “Chancery Court”), or, if the Chancery Court does not have jurisdiction, the federal district court for the district of Delaware or other state courts located in the State of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.

Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Chancery Court (or, if the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the sole and exclusive forum for any shareholder (including a beneficial owner) to bring: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our shareholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our restated certificate of incorporation or amended and restated bylaws, or (4) any action asserting a claim governed by the internal affairs doctrine, except as to each of (1) through (4) above, for any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination). This forum selection provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction.

20


Table of Contents

 

PROPERTIES

As of December 28, 2019, our wholly-owned entities operated, as part of continuing operations, in the following locations:

STORES

Retail and CompuCom Divisions (United States)

 

State

 

#

 

State

 

#

 

Alabama

 

27

 

Montana

 

3

 

Alaska

 

5

 

Nebraska

 

9

 

Arizona

 

32

 

Nevada

 

20

 

Arkansas

 

12

 

New Jersey

 

2

 

California

 

129

 

New Mexico

 

11

 

Colorado

 

44

 

New York

 

15

 

District of Columbia

 

1

 

North Carolina

 

45

 

Florida

 

138

 

North Dakota

 

4

 

Georgia

 

58

 

Ohio

 

44

 

Hawaii

 

8

 

Oklahoma

 

16

 

Idaho

 

8

 

Oregon

 

19

 

Illinois

 

53

 

Pennsylvania

 

16

 

Indiana

 

23

 

Puerto Rico

 

11

 

Iowa

 

7

 

South Carolina

 

20

 

Kansas

 

10

 

South Dakota

 

3

 

Kentucky

 

15

 

Tennessee

 

31

 

Louisiana

 

37

 

Texas

 

166

 

Maine

 

1

 

Utah

 

12

 

Maryland

 

17

 

U.S. Virgin Islands

 

2

 

Massachusetts

 

4

 

Virginia

 

37

 

Michigan

 

33

 

Washington

 

36

 

Minnesota

 

34

 

West Virginia

 

5

 

Mississippi

 

18

 

Wisconsin

 

31

 

Missouri

 

33

 

Wyoming

 

2

 

 

 

 

 

TOTAL

 

 

1,307

 

The supply chain facilities which we operate in the continental United States and Puerto Rico support our Retail, Business Solutions and CompuCom Divisions and the facilities in Canada support our Business Solutions and CompuCom Divisions. The following table sets forth the locations of our principal supply chain facilities as of December 28, 2019.

DCs and Crossdock Facilities

 

State

 

#

 

State

 

#

Arizona

 

1

 

New Mexico

 

1

California

 

5

 

North Carolina

 

1

Colorado

 

1

 

North Dakota

 

3

Florida

 

5

 

Ohio

 

2

Georgia

 

3

 

Oklahoma

 

1

Hawaii

 

6

 

Pennsylvania

 

2

Idaho

 

1

 

Puerto Rico

 

1

Illinois

 

3

 

Tennessee

 

1

Kansas

 

1

 

Texas

 

3

Minnesota

 

2

 

Washington

 

3

Mississippi

 

1

 

Wisconsin

 

8

New Jersey

 

1

 

Total United States

 

56

 

 

 

 

Canada

 

11

 

 

 

 

TOTAL

 

67

 

21


Table of Contents

 

Our principal corporate headquarters in Boca Raton, FL consists of three interconnected buildings of approximately 625,000 square feet and our corporate office in Fort Mill, SC consists of approximately 152,000 square feet of office space. These facilities are considered to be in good condition, adequate for their purpose and suitably utilized according to the individual nature and requirements of the relevant operations. Although we currently own our corporate office in Boca Raton, FL, as well as a small number of our retail store locations, most of our facilities are leased or subleased. Additional information regarding our operating leases and leasing arrangements is available in Note 1, Summary of Significant Accounting Policies and Note 12, “Leases of the Notes to Consolidated Financial Statements.

For a description of our legal proceedings, refer to Note 17, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

 


22


Table of Contents

 

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market under the ticker symbol ODP.

 

Holders

As of the close of business on February 19, 2020, there were 7,650 holders of record of our common stock.

Cash Dividend

Prior to July 2016, we had never declared or paid cash dividends on our common stock. Beginning in the third quarter of fiscal 2016, our Board of Directors declared and paid cash dividends on our common stock.

The timing, declaration and payment of future dividends to holders of our common stock fall within the discretion of our Board of Directors and will depend on our operating results, earnings, financial condition, the capital requirements of our business and other factors. Payment of dividends is permitted under our existing term loan facility subject to certain restrictions and under our existing credit facilities subject to minimum liquidity or fixed charge ratio requirements.

For additional information about cash dividends declared and paid in 2019, refer to “Liquidity and Capital Resources” in MD&A and Note 13. “Stockholders’ Equity” in the Notes to Consolidated Financial Statements of this Annual Report.

Issuer Purchases of Equity Securities

In November 2018, our Board of Directors approved a stock repurchase program of up to $100 million of our common stock effective January 1, 2019, which extends until the end of 2020 and may be suspended or discontinued at any time. The stock repurchase authorization permits us to repurchase stock from time-to-time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions and/or other derivative transactions. The exact number and timing of stock repurchases will depend on market conditions and other factors, and will be funded through available cash balances. However, our ability to repurchase our common stock is subject to certain restrictions under the Term Loan Credit Agreement. The authorized amount under the stock repurchase program excludes fees, commissions or other expenses. In November 2019, the Board of Directors approved an increase in the authorization of the existing stock repurchase program of up to $200 million and extended the program through the end of 2021. The new authorization includes the remaining authorized amount under the existing stock repurchase program.

The following table summarizes our common stock repurchases during the fourth quarter of 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Approximate Dollar

 

 

 

 

 

 

 

 

 

 

 

Total Number of

 

 

Value of Shares that

 

 

 

Total

 

 

 

 

 

 

Shares Purchased as

 

 

May Yet Be

 

 

 

Number

 

 

Average

 

 

Part of a Publicly

 

 

Purchased Under

 

 

 

of Shares

 

 

Price Paid

 

 

Announced Plan or

 

 

the Repurchase

 

 

 

Purchased

 

 

per Share

 

 

Program

 

 

Programs

 

Period

 

(In millions)

 

 

(a)

 

 

(In millions)

 

 

(In millions)

 

September 29 — October 26, 2019

 

 

 

 

$

 

 

 

 

 

$

190

 

October 27 — November 23, 2019

 

 

 

 

$

 

 

 

 

 

$

190

 

November 24 — December 28, 2019

 

 

11

 

 

$

2.59

 

 

 

11

 

 

$

161

 

Total

 

 

11

 

 

$

2.59

 

 

 

11

 

 

 

 

 

 

(a)

The average price paid per share for our common stock repurchases includes a per share commission paid.

We purchased approximately 4 million and 11 million shares of our common stock during the first and fourth quarters of fiscal 2019, respectively, at a weighted average price of $2.68 per common share. We made no repurchases of common stock during the second and third quarters of fiscal 2019. For the year 2019, we purchased approximately 15 million common shares for total consideration of $40 million. At December 28, 2019, approximately $161 million remains available for additional purchases under the stock repurchase program.

23


Table of Contents

 

Office Depot Stock Comparative Performance Graph

The information contained in this Office Depot Comparative Performance Graph section shall not be deemed to be filed as part of this Annual Report and does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate the graph by reference.

The following graph compares the five-year cumulative total shareholder return on our common stock with the cumulative total returns of the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor’s Specialty Stores Index (“S&P Specialty Stores”) of which we are a component of each Index.

The graph assumes an investment of $100 at the close of trading on December 27, 2014, the last trading day of fiscal year 2014, in our common stock, the S&P 500 and the S&P Specialty Stores.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Office Depot, Inc., the S&P 500 Index

and the S&P Specialty Stores Index

 

 

 

*$100 invested on 12/27/14 in stock or 12/31/14 in index, including reinvestment of dividends. Indexes calculated on month-end basis.

Copyright© 2020 Standard & Poor’s, a division of S&P Global. All rights reserved.

 

 

 

12/27/14

 

 

12/26/15

 

 

12/31/16

 

 

12/30/17

 

 

12/29/18

 

 

12/28/19

 

Office Depot, Inc.

 

 

100.00

 

 

 

63.35

 

 

 

51.75

 

 

 

41.52

 

 

 

30.65

 

 

 

33.53

 

S&P 500

 

 

100.00

 

 

 

101.38

 

 

 

113.51

 

 

 

138.29

 

 

 

132.23

 

 

 

173.86

 

S&P Specialty Stores

 

 

100.00

 

 

 

84.07

 

 

 

84.53

 

 

 

84.73

 

 

 

82.69

 

 

 

102.64

 

 

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

24


Table of Contents

 

SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data at and for each of the five fiscal years in the period ended December 28, 2019. It should be read in conjunction with the Consolidated Financial Statements and Notes thereto in Financial Statements and Supplemental Details and MD&A of this Annual Report.

We have accounted for the disposition of substantially all of the business formerly presented as the International Division as discontinued operations in all periods. The disposition was complete as of the end of fiscal 2018, and there are no further discontinued operations in 2019. We have included the amounts associated with our acquired businesses from their dates of acquisition.

 

(In millions, except per share amounts and statistical data)

 

2019 (1)

 

 

2018 (2)

 

 

2017 (3)

 

 

2016 (4)

 

 

2015

 

Statements of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

10,647

 

 

$

11,015

 

 

$

10,240

 

 

$

11,021

 

 

$

11,727

 

Net income from continuing operations (1)(2)(3)(5)(6)

 

$

99

 

 

$

99

 

 

$

146

 

 

$

679

 

 

$

92

 

Discontinued operations, net of tax

 

$

 

 

$

5

 

 

$

35

 

 

$

(150

)

 

$

(84

)

Net income (1)(2)(3)(5)(6)

 

$

99

 

 

$

104

 

 

$

181

 

 

$

529

 

 

$

8

 

Net earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

0.18

 

 

$

0.18

 

 

$

0.28

 

 

$

1.26

 

 

$

0.17

 

Discontinued Operations

 

$

 

 

$

0.01

 

 

$

0.07

 

 

$

(0.28

)

 

$

(0.15

)

Net basic earnings per share

 

$

0.18

 

 

$

0.19

 

 

$

0.35

 

 

$

0.98

 

 

$

0.01

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$

0.18

 

 

$

0.18

 

 

$

0.27

 

 

$

1.24

 

 

$

0.16

 

Discontinued Operations

 

$

 

 

$

0.01

 

 

$

0.06

 

 

$

(0.27

)

 

$

(0.15

)

Net diluted earnings per share

 

$

0.18

 

 

$

0.19

 

 

$

0.34

 

 

$

0.96

 

 

$

0.01

 

Cash dividends declared per common share

 

$

0.10

 

 

$

0.10

 

 

$

0.10

 

 

$

0.05

 

 

$

 

Statistical Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Facilities open at end of period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail and technology stores

 

 

1,307

 

 

 

1,364

 

 

 

1,394

 

 

 

1,441

 

 

 

1,564

 

Distribution centers and crossdock facilities

 

 

56

 

 

 

45

 

 

 

40

 

 

 

28

 

 

 

33

 

Other (7):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution centers and crossdock facilities

 

 

11

 

 

 

11

 

 

 

11

 

 

 

10

 

 

 

12

 

Total square footage — Retail and CompuCom Divisions

   (in millions)

 

 

29.1

 

 

 

30.3

 

 

 

31.1

 

 

 

32.4

 

 

 

35.4

 

Percentage of sales by segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Solutions Division

 

 

49.6

%

 

 

48.0

%

 

 

49.9

%

 

 

49.0

%

 

 

48.7

%

Retail Division

 

 

41.0

%

 

 

42.1

%

 

 

48.5

%

 

 

50.8

%

 

 

51.2

%

CompuCom Division (3)

 

 

9.3

%

 

 

9.9

%

 

 

1.5

%

 

 

 

 

 

 

Other

 

 

0.1

%

 

 

0.1

%

 

 

0.1

%

 

 

0.2

%

 

 

0.1

%

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets (8)

 

$

7,311

 

 

$

6,166

 

 

$

6,323

 

 

$

5,540

 

 

$

6,442

 

Long-term debt, net of current maturities

 

 

575

 

 

 

690

 

 

 

936

 

 

 

358

 

 

 

628

 

 

(1)

During fiscal year 2019, we completed five business acquisitions that consist of small independent regional office supply distribution businesses in the United States. The operating results of the acquired office supply distribution businesses are combined with our operating results subsequent to their purchase dates, and are included in the Business Solutions Division. Sales in our Business Solutions Division in 2019 include $55 million from these acquisitions. Additionally, fiscal year 2019 Net income includes $56 million of asset impairment charges and $116 million of Merger and restructuring expenses, net. Refer to MD&A and Note 2. “Acquisitions,” of the Consolidated Financial Statements located in Financial Statements and Supplemental Details of this Annual Report for additional information.

(2)

During fiscal year 2018, we completed seven business acquisitions, six of which consist of small independent regional office supply distribution businesses in the United States, and one is an enterprise IT solutions integrator and managed services provider. The operating results of these companies are combined with our operating results subsequent to their purchase dates. Sales in our Business Solutions and CompuCom Divisions in 2018 include $80 million and $25 million, respectively, from these acquisitions. Additionally, fiscal year 2018 Net income includes $7 million of asset impairment charges, $72 million of Merger and restructuring expenses, net, $25 million of legal expense accrual, and $15 million of loss on modification of debt. Refer to MD&A and Note 2. “Acquisitions,” of the Consolidated Financial Statements located in Financial Statements and Supplemental Details of this Annual Report for additional information.

25


Table of Contents

 

(3)

In 2017, we acquired CompuCom and four small independent regional office supply distribution businesses in the United States. The operating results of these companies are combined with our operating results subsequent to their purchase dates. Sales in our Business Solutions and CompuCom Divisions in 2017 include $49 million and $156 million, respectively, from these acquisitions. Additionally, fiscal year 2017 Net income includes $4 million of asset impairment charges and $94 million of Merger and restructuring expenses, net. Refer to MD&A and Note 2. “Acquisitions,” of the Consolidated Financial Statements located in Financial Statements and Supplemental Details of this Annual Report for additional information.

(4)

Includes 53 weeks in accordance with our 52 — 53 week reporting convention. All other years presented in the table consisted of 52 weeks.

(5)

Fiscal year 2016 Net income includes $15 million of asset impairment charges, $80 million of Merger and restructuring income, net, including $250 million received from Staples as the Termination Fee, $15 million of loss on extinguishment of debt, and the reversal of $382 million of valuation allowances on deferred tax assets. Refer to MD&A for additional information.

(6)

Fiscal year 2015 Net income includes $13 million of asset impairment charges and $242 million of Merger and restructuring expenses, net.

(7)

Includes Canadian distribution centers and crossdock facilities.

(8)

Total assets for fiscal year 2019 reflect the adoption of the new lease accounting standard. Prior period amounts were not adjusted under the modified retrospective transition approach. Refer to Note 1. “Summary of Significant Accounting Policies,” of the Consolidated Financial Statements located in Financial Statements and Supplemental Details of this Annual Report for additional information.

26


Table of Contents

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist readers in better understanding and evaluating our financial condition and results of operations. We recommend reading this MD&A in conjunction with our Consolidated Financial Statements and Notes thereto included in this Form 10-K.

OVERVIEW

THE COMPANY

We are a leading provider of business services and supplies, products and technology solutions to small, medium and enterprise businesses, through our fully integrated business-to-business (“B2B”) distribution platform of 1,307 retail stores, online presence, and dedicated sales professionals and technicians. Through our banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, we offer our customers the tools and resources they need to focus on starting, growing and running their business.

At December 28, 2019, our operations are organized into three reportable segments (or “Divisions”): Business Solutions Division, Retail Division and CompuCom Division.

The Business Solutions Division, or BSD, is the largest component of our integrated B2B platform and provides our customers with nationally branded as well as our private branded office supply products and services. Additionally, BSD provides adjacency products and services including cleaning and breakroom supplies, technology services, copy and print services, and office furniture products and services in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada through a dedicated sales force, catalogs, telesales, and electronically through our Internet websites. BSD includes the distribution businesses we have acquired as part of our strategic transformation described in the section below.

The Retail Division includes our chain of retail stores in the United States, Puerto Rico and the U.S. Virgin Islands where we sell office supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom supplies and facilities products, and furniture. In addition, our Retail Division offers a range of business-related services targeted to small businesses, technology support services as well as printing, copying, mailing and shipping services.

The CompuCom Division was formed during the fourth quarter of 2017 as a result of our acquisition of CompuCom Systems, Inc. (“CompuCom”). The CompuCom Division is a technology services provider supporting the distributed technology needs of enterprise organizations in the United States and Canada. With a vision of connecting people, technology, and the edge with a seamless experience, CompuCom enables enterprise employees to be productive. CompuCom offers a broad range of solutions including technology lifecycle management, end user computing and collaboration, service desk, remote technology monitoring and management, and IT workforce solutions.

STRATEGIC TRANSFORMATION

 

Since 2017, we have been undergoing a strategic business transformation to pivot Office Depot into an integrated B2B distribution platform, with the objective of expanding our product offerings to include value-added services for our customers and capture greater market share. As part of this transformation, we acquired CompuCom in 2017 and an enterprise IT solutions integrator and managed services provider in 2018.

 

We continue to expand our reach and distribution network through acquisitions of profitable regional office supply distribution businesses, serving small and mid-market customers. Many of these customers are in geographic areas that were previously underserved by our network. During 2019, we acquired five small independent regional office supply distribution businesses which has allowed for an effective and accretive means to expand our distribution reach, target new business customers and grow our offerings beyond traditional office supplies.

The aggregate total purchase consideration, including contingent consideration, for the five acquisitions completed in 2019 was approximately $27 million, subject to certain customary post-closing adjustments. The aggregate purchase price was primarily funded with cash on hand, with the remainder consisting of contingent consideration estimated to be $2 million, the majority of which will be paid in the third quarter of 2020.

The operating results of the acquired office supply distribution businesses are combined with our operating results subsequent to their purchase dates, and are included in the Business Solutions Division, and the operating results of CompuCom and the enterprise IT solutions integrator and managed services provider are included in the CompuCom Division. Refer to Note 2. “Acquisitions” in the Notes to Consolidated Financial Statements for additional information.

27


Table of Contents

 

DISPOSITION OF THE INTERNATIONAL DIVISION — DISCONTINUED OPERATIONS

In September 2016, our Board of Directors approved a plan to sell substantially all of our international operations, formerly reported as the International Division through four disposal groups (Europe, South Korea, Australia and New Zealand (“Oceania”) and mainland China) (the “International Operations”). Collectively, these dispositions represented a strategic shift that had a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations. As of the end of fiscal 2018, the sale of the International Operations was complete, and there are no further discontinued operations in 2019. We retained the assets and obligations of a frozen defined benefit pension plan in the United Kingdom. Refer to “Pension Plan – UK” in Note 15. “Employee Benefit Plans” in the Notes to Consolidated Financial Statements for additional information. We retained the sourcing and trading operations of the former International Division, which are presented as Other in Note 5. “Segment Information” in the Notes to Consolidated Financial Statements.

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS AND LIQUIDITY

The following summarizes the significant factors impacting our operating results from continuing operations for the 52-week period ended December 28, 2019 (also referred to as “2019”) and the 52-week period ended December 29, 2018 (also referred to as “2018”) as well as our liquidity in 2019 and 2018. We have omitted discussion of 2017 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2018 Annual Report on Form 10-K.

Our consolidated sales were 3% lower in 2019 compared to 2018 mostly due to lower sales in our Retail Division, which decreased 6% in 2019 as a result of lower comparable store sales and store closures. Our CompuCom Division also experienced lower sales of 8% in 2019 compared to 2018, primarily due to a decline in sales of services as a result of reduced business volume. Our Business Solutions Division sales remained flat in 2019 compared to 2018.

 

(In millions)

 

2019

 

 

2018

 

 

Change

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Business Solutions Division

 

$

5,279

 

 

$

5,282

 

 

 

%

Retail Division

 

 

4,363

 

 

 

4,641

 

 

 

(6

)%

Change in comparable store sales

 

 

 

 

 

 

 

 

 

 

(4

)%

CompuCom Division

 

 

994

 

 

 

1,086

 

 

 

(8

)%

Other

 

 

11

 

 

 

6

 

 

 

83

%

Total

 

$

10,647

 

 

$

11,015

 

 

 

(3

)%

Product sales decreased 3% in 2019 compared to 2018 primarily driven by lower comparable store sales and store closures in the Retail Division. The decline in 2019 was partially offset by an increase in product sales in our CompuCom Division as a result of increased discipline in our selling process and improved relationships with our product manufacturer partners.

Sales of services decreased 5% primarily driven by a decline in sales of services in our CompuCom Division. The decline in 2019 was partially offset by the continued expansion of services we offer in our Retail Division, including a higher volume of subscriptions and increased sales of our copy and print services. We also experienced a continued increase in services in our Business Solutions Division as a result of acquisitions and increased sales of our managed print and fulfillment services. On a consolidated basis, services represented approximately 15% of our total sales in 2019, consistent with 2018.

 

(In millions)

 

2019

 

 

2018

 

 

Change

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

9,034

 

 

$

9,322

 

 

 

(3

)%

Services

 

 

1,613

 

 

 

1,693

 

 

 

(5

)%

Total

 

$

10,647

 

 

$

11,015

 

 

 

(3

)%

OTHER SIGNIFICANT FACTORS IMPACTING TOTAL COMPANY RESULTS AND LIQUIDITY

 

Total gross profit decreased by $87 million or 3% in 2019 compared to 2018 primarily due to the flow through impact of lower sales in our CompuCom and Retail Divisions, partially offset by the implementation of the Business Acceleration Program in May 2019 which generated savings from, among other things, the optimization of labor costs in our CompuCom Division. The overall decline in gross profit in 2019 was also partially offset by the impact of acquisitions in our Business Solutions Division.

 

Total gross margin for 2019 was consistent with 2018. While we incurred incremental costs related to trade tariffs on inventory we purchase from China, our recent actions, including changes to our contracting model, alternative sourcing

28


Table of Contents

 

 

strategies, and selective price increase pass-through efforts mitigated much of the impact of such trade tariffs to our results of operations.

 

Total selling, general and administrative expenses decreased by $92 million or 4% in 2019 compared to 2018. The decrease was the result of store closures in our Retail Division and certain strategic initiatives, including the Business Acceleration Program, aimed at reducing our spend on payroll and payroll-related costs and other discretionary expenses, as well as lower operating lease costs recognized as a result of store impairments. The decrease in total selling, general, and administrative expenses in 2019 was partially offset by increase in expenses associated with the expansion of our distribution network through acquisitions. As a percentage of sales, total selling, general and administrative expenses remained flat in 2019 when compared to 2018.

 

We recognized $25 million gain on disposition of assets held for sale during 2019, of which $19 million was included in Selling, general and administrative expenses and $6 million was included in Merger and restructuring expenses, net in the Consolidated Statement of Operations.

 

We recorded $56 million of asset impairment charges in 2019 which primarily related to impairment of operating lease right-of-use (“ROU”) assets associated with the Company’s retail store locations. Refer to Note 16. “Fair Value Measurements” in Notes to Consolidated Financial Statements for additional information.

 

We recorded $116 million of Merger and restructuring expenses, net in 2019 compared to $72 million in 2018. Merger and restructuring expense in 2019 includes $24 million of severance, retention, transaction and integration costs associated with business acquisitions and $92 million of severance, professional fees and other expenses associated with restructuring activities. Refer to Note 3. “Merger and Restructuring Activity” in the Notes to Consolidated Financial Statements for additional information.

 

We recorded $25 million of legal expense accrual in 2018 that was paid in 2019 in connection with certain settlement discussions we had undertaken with the Federal Trade Commission. We also incurred and paid an additional $900,000 legal expense in 2019 on a related legal matter. Refer to Note 17, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements for additional information.

 

Our effective tax rate of 32% in 2019 differs from the statutory rate of 21% primarily due to the impact of state taxes and certain nondeductible items, the recognition of valuation allowances, and our mix of income and losses across U.S. and non-U.S. jurisdictions. Our effective tax rate of 37% in 2018 reflects the same Federal marginal tax rate of 21% and the impact of a mix of income and losses across U.S. and non-U.S. jurisdictions. In addition, the 2018 rate was impacted by several discrete items, including the impact of a potentially nondeductible legal settlement, and excess tax deficiencies associated with stock-based compensation awards, state taxes, and certain other nondeductible items. We also completed several acquisitions and dispositions in 2018 and 2019, some of which resulted in the recognition of a gain or loss for tax purposes that differed from the amount recognized for GAAP purposes. Refer to Note 6. “Income Taxes” in Notes to Consolidated Financial Statements for additional information.

 

Diluted earnings per share from continuing operations was $0.18 in 2019, flat with $0.18 in 2018.

 

As disclosed in Note 18. “Discontinued Operations” to the Consolidated Financial Statements, we completed the sale of our former International Operations as of the end of fiscal 2018, and there are no further discontinued operations in 2019. Diluted earnings per share from discontinued operations was $0.01 in 2018.

 

Including diluted earnings per share from discontinued operations, net diluted earnings per share was $0.18 in 2019 compared to $0.19 in 2018.

 

At December 28, 2019, we had $698 million in cash and cash equivalents and $920 million available under the Amended Credit Agreement. Cash provided by operating activities of continuing operations was $366 million for 2019 compared to $616 million for 2018. Refer to the Liquidity and Capital Resources section of this MD&A for more information on cash flows.

 

In 2017, we entered into a $750 million Term Loan Credit Agreement in connection with our acquisition of CompuCom. In November 2018, we executed the First Amendment to the Term Loan Credit Agreement (the “First Amendment”) to reduce the applicable interest rate from LIBOR plus 7.00% to LIBOR plus 5.25%. In connection with the applicable interest rate reduction, we made a voluntary repayment under the Term Loan Credit Agreement of $194 million. As a result, in the fourth quarter of 2018 we recognized a $15 million loss on modification of debt, which is comprised of a 1% prepayment

29


Table of Contents

 

 

premium and the write-off of unamortized deferred financing costs and original issue discount in an amount proportional to the term loan repaid.

 

During 2019 and 2018, we paid quarterly cash dividends on our common stock of $0.025 per share for a total annual dividend distribution of $55 million in both years. In addition, we bought back approximately 15 million and 14 million shares of our common stock, respectively, in 2019 and 2018, returning another $40 million in 2019 and $39 million in 2018 to our shareholders.

 

OPERATING RESULTS BY DIVISION

Discussion of additional income and expense items, including material charges and credits and changes in interest and income taxes follows our review of segment results. Fiscal years 2019, 2018 and 2017 include 52 weeks.

BUSINESS SOLUTIONS DIVISION

 

(In millions)

 

2019

 

 

2018

 

 

2017

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

4,947

 

 

$

4,974

 

 

$

4,843

 

Services

 

 

332

 

 

 

308

 

 

 

265

 

Total

 

$

5,279

 

 

$

5,282

 

 

$

5,108

 

% change

 

 

%

 

 

3