UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM10-Q

(Mark One)

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

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

For the quarterly period ended ~~September~~March 30, ~~2017~~2024

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

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

For the transition period fromto __ __ __ __to __ __ __ __

Commission ~~file number~~File Number 1-10948

~~Office Depot, Inc.~~The ODP Corporation

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)


~~Delaware~~		~~59-2663954~~
Delaware	85-1457062
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~ Incorporation or ~~organization)~~Organization)		(~~I.R.S.~~IRS Employer Identification No.)



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

~~(561)~~(561) 438-4800

(Registrant’s ~~telephone number, including area code)~~Telephone Number, Including Area Code)

(Former ~~name, former address~~Name, Former Address and ~~former fiscal year, if changed since last report)~~Former Fiscal Year, If Changed Since Last Report)

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

Title of Each Class

Trading

Symbol(s)

Name of Each Exchange on which Registered

Common Stock, par value $0.01 per share

ODP

The NASDAQ Stock Market

(NASDAQ Global Select Market)

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.:


Large accelerated filer	☒	☒Accelerated filer	☐	~~Accelerated~~Non-accelerated filer		☐
~~Non-accelerated filer~~		~~☐ (Do not check if a smaller reporting company)~~		Smaller reporting company	☐	Emerging growth 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 Rule12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At ~~September 30, 2017,~~May 1, 2024, there were ~~516,118,302~~35,894,892 outstanding shares of ~~Office Depot, Inc.~~The ODP Corporation Common Stock, $0.01 par value.

TABLE OF CONTENTS

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


~~PART I. FINANCIAL INFORMATION~~Financial Statements
~~Item 1. Financial Statements~~			Page
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~Condensed Consolidated Statements of Operations (Unaudited)		3
~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
~~CONDENSED CONSOLIDATED BALANCE SHEETS~~Condensed Consolidated Balance Sheets (Unaudited)		5
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~Condensed Consolidated Statements of Cash Flows (Unaudited)		6
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		7
~~Item 2.~~ Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Management’s Discussion and Analysis ~~of Financial Condition and Results of Operations~~(MD&A)		25
~~Item 3.~~ Overview	19
Operating Results by Division	22
Liquidity and Capital Resources	26
New Accounting Standards	28
Critical Accounting Policies	28
Other Information
Quantitative and Qualitative Disclosures About Market Risk		35	29
~~Item 4.~~ Controls and Procedures		35	29
~~PART II. OTHER INFORMATION~~Legal Proceedings		36	29
~~Item 1. Legal Proceedings~~Risk Factors		36	29
~~Item 1A. Risk Factors~~		36
~~Item 2.~~ Unregistered Sales of Equity Securities and Use of Proceeds		37	30
~~Item 5.~~ Other Information		38	30
~~Item 6.~~ Exhibits		39	31
~~SIGNATURES~~Form 10-Q Cross-Reference Index		40	32
~~EX 31.1~~Signatures
~~EX 31.2~~
~~EX 32~~33
~~EX 101~~

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)


	13 Weeks Ended
	March 30,			April 1,
	2024			2023
Sales	$	1,871		$	2,108
Cost of goods and occupancy costs		1,461			1,627
Gross profit		410			481
Selling, general and administrative expenses		359			382
Asset impairments		6			4
Merger and restructuring expenses, net		27			—
Operating income		18			95
Other income (expense):
Interest income		3			2
Interest expense		(4	)		(5	)
Other income, net		—			2
Income from continuing operations before income taxes		17			94
Income tax expense		2			22
Net income from continuing operations		15			72
Discontinued operations, net of tax		—			—
Net income	$	15		$	72
Basic earnings per share
Continuing operations	$	0.42		$	1.79
Discontinued operations		—			—
Net basic earnings per share	$	0.42		$	1.79
Diluted earnings per share
Continuing operations	$	0.40		$	1.71
Discontinued operations		—			—
Net diluted earnings per share	$	0.40		$	1.71

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in The ODP Corporation Annual Report on Form 10-K filed on February 28, 2024 (the “2023 Form 10-K”).

13 Weeks Ended 39 Weeks Ended
September 30, September 24, September 30, September 24,
2017 2016 2017 2016
Sales
$ 2,620 $ 2,836 $ 7,659 $ 8,295
Cost of goods sold and occupancy costs
1,987 2,110 5,805 6,241

Gross profit
633 726 1,854 2,054
Selling, general and administrative expenses
503 569 1,509 1,694
Asset impairments
— 9 1 9
Merger, restructuring, and other operating (income) expenses, net
22 31 62 (122 )

Operating income
108 117 282 473
Other income (expense):

Interest income
6 6 17 17
Interest expense
(13 ) (19 ) (39 ) (63 )
Loss on extinguishment of debt
— (15 ) — (15 )
Other income (expense), net
(1 ) 1 (2 ) 1

Income from continuing operations before income taxes
100 90 258 413
Income tax expense (benefit)
2 (240 ) 63 (211 )

Net income from continuing operations
98 330 195 624
Discontinued operations, net of tax
(6 ) (137 ) 38 (175 )

Net income
$ 92 $ 193 $ 233 $ 449

Basic earnings (loss) per share

Continuing operations
$ 0.19 $ 0.62 $ 0.38 $ 1.15
Discontinued operations
(0.01 ) (0.26 ) 0.07 (0.32 )

Net earnings per share
$ 0.18 $ 0.36 $ 0.45 $ 0.82

Diluted earnings (loss) per share

Continuing operations
$ 0.19 $ 0.61 $ 0.37 $ 1.13
Discontinued operations
(0.01 ) (0.25 ) 0.07 (0.32 )

Net earnings per share
$ 0.17 $ 0.35 $ 0.44 $ 0.81

Dividends per common share
$ 0.025 $ 0.025 $ 0.075 $ 0.025

THE ODP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

13 Weeks Ended

March 30,
2024

April 1,
2023

Net income

$
15

$
72

Other comprehensive income/(loss), net of tax, where applicable:

Foreign currency translation adjustments

(4
)

2

Change in deferred pension

1

—

Total other comprehensive income/(loss), net of tax, where
applicable

(3
)

2

Comprehensive income

$
12

$
74

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~Office Depot, Inc.~~2023 Form~~10-K~~ ~~filed March 1, 2017 (the “2016 Form10-K”).~~ 10-K.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

CONDENSED CONSOLIDATED ~~STATEMENTS OF COMPREHENSIVE INCOME~~BALANCE SHEETS

(In ~~millions)~~millions, except share and per share amounts)


	March 30,			December 30,
	2024			2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	282		$	392
Receivables, net		466			487
Inventories		733			765
Prepaid expenses and other current assets		36			28
Current assets held for sale		7			6
Total current assets		1,524			1,678
Property and equipment, net		360			359
Operating lease right-of-use assets		978			983
Goodwill		403			403
Other intangible assets, net		44			45
Deferred income taxes		147			140
Other assets		279			278
Total assets	$	3,735		$	3,886
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	755		$	755
Accrued expenses and other current liabilities		854			923
Income taxes payable		5			6
Short-term borrowings and current maturities of long-term debt		10			9
Total current liabilities		1,624			1,693
Deferred income taxes and other long-term liabilities		122			123
Pension and postretirement obligations, net		14			15
Long-term debt, net of current maturities		115			165
Operating lease liabilities, net of current portion		791			789
Total liabilities		2,666			2,785
Contingencies (Note 10)
Stockholders’ equity:
Common stock — authorized 80,000,000 shares of $0.01 par value; issued shares — 66,958,689 at March 30, 2024 and 66,700,292 at December 30, 2023; outstanding shares — 36,260,932 at March 30, 2024 and 36,959,377 at December 30, 2023		1			1
Additional paid-in capital		2,758			2,752
Accumulated other comprehensive loss		(117	)		(114	)
Accumulated deficit		(297	)		(312	)
Treasury stock, at cost — 30,697,757 shares at March 30, 2024 and 29,740,915 shares at December 30, 2023		(1,276	)		(1,226	)
Total stockholders’ equity		1,069			1,101
Total liabilities and stockholders’ equity	$	3,735		$	3,886

~~(Unaudited)~~

13 Weeks Ended 39 Weeks Ended
September 30, September 24, September 30, September 24,
2017 2016 2017 2016
Net income
$ 92 $ 193 $ 233 $ 449
Other comprehensive income (loss), net of tax where applicable:

Foreign currency translation adjustments
6 2 24 14
Reclassification of foreign currency translation adjustments realized upon disposal of business
(7 ) — (1 ) —
Other
— 1 (1 ) (1 )

Total other comprehensive income (loss), net of tax, where applicable
(1 ) 3 22 13

Comprehensive income
$ 91 $ 196 $ 255 $ 462

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2016~~2023 Form10-K.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF CASH FLOWS

(In ~~millions, except share and per share amounts)~~millions)

(Unaudited)


	13 Weeks Ended
	March 30,			April 1,
	2024			2023
Cash flows from operating activities:
Net income	$	15		$	72
Income (loss) from discontinued operations, net of tax		—			—
Net income from continuing operations		15			72
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29			30
Amortization of debt discount and issuance costs		—			1
Charges for losses on receivables and inventories		9			5
Asset impairments		6			4
Gain on disposition of assets, net		—			(1	)
Compensation expense for share-based payments		11			9
Deferred income taxes and deferred tax asset valuation allowances		(8	)		17
Changes in working capital and other operating activities		(24	)		20
Net cash provided by operating activities of continuing operations		38			157
Net cash provided by (used in) operating activities of discontinued operations		—			—
Net cash provided by operating activities		38			157
Cash flows from investing activities:
Capital expenditures		(35	)		(27	)
Businesses acquired, net of cash acquired		—			(10	)
Proceeds from disposition of assets		1			1
Net cash used in investing activities of continuing operations		(34	)		(36	)
Net cash provided by investing activities of discontinued operations		—			5
Net cash used in investing activities		(34	)		(31	)
Cash flows from financing activities:
Net payments on long and short-term borrowings		(3	)		(5	)
Debt retirement		(128	)		(60	)
Debt issuance		75			100
Share purchases for taxes, net of proceeds from employee share-based transactions		(6	)		(19	)
Repurchase of common stock for treasury		(50	)		(201	)
Other financing activities		(1	)		—
Net cash used in financing activities of continuing operations		(113	)		(185	)
Net cash provided by (used in) financing activities of discontinued operations		—			—
Net cash used in financing activities		(113	)		(185	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1	)		—
Net decrease in cash, cash equivalents and restricted cash		(110	)		(59	)
Cash, cash equivalents and restricted cash at beginning of period		395			404
Cash, cash equivalents and restricted cash at end of period	$	285		$	345
Supplemental information on non-cash investing and financing activities
Right-of-use assets obtained in exchange for new operating lease liabilities	$	63		$	70
Right-of-use assets obtained in exchange for new finance lease liabilities		6			—
Cash interest paid, net of amounts capitalized and non-recourse debt		3			4
Cash taxes paid, net		1			—

   September 30,
2017 December 31,
2016
ASSETS

Current assets:

Cash and cash equivalents
   $          788 $          763
Receivables, net
   693 687
Inventories
   1,110 1,279
Prepaid expenses and other current assets
   100 102
Current assets of discontinued operations
   141 142


Total current assets
   2,832 2,973
Property and equipment, net
   627 601
Goodwill
   379 363
Other intangible assets, net
   34 33
Timber notes receivable
   869 885
Deferred income taxes
   428 466
Other assets
   228 219


Total assets
   $ 5,397 $ 5,540


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Trade accounts payable
   $ 889 $ 893
Accrued expenses and other current liabilities
   883 1,002
Income taxes payable
   1 3
Short-term borrowings and current maturities of long-term debt
   17 29
Current liabilities of discontinued operations
   68 104


Total current liabilities
   1,858 2,031
Deferred income taxes and other long-term liabilities
   328 361
Pension and postretirement obligations, net
   123 140
Long-term debt, net of current maturities
   265 358
Non-recourse debt
   781 798


Total liabilities
   3,355 3,688


Commitments and contingencies

Stockholders’ equity:

Common stock—authorized 800,000,000 shares of $.01 par value; issued shares – 566,578,985 at September 30, 2017 and 557,892,568 at December 31, 2016
   6 6
Additionalpaid-in capital
   2,588 2,618
Accumulated other comprehensive loss
   (107 ) (129 )
Accumulated deficit
   (221 ) (453 )
Treasury stock, at cost – 50,460,683 shares at September 30, 2017 and 42,802,998 shares at December 31, 2016
   (224 ) (190 )


Total stockholders’ equity
   2,042 1,852


Total liabilities and stockholders’ equity
   $ 5,397 $ 5,540

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2016~~2023 Form10-K.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(In ~~millions)~~millions, except share amounts)

(Unaudited)


	13 Weeks Ended March 30, 2024
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 30, 2023		66,700,292	$	1	$	2,752		$	(114	)	$	(312	)	$	(1,226	)	$	1,101
Net income		—		—		—			—			15			—			15
Other comprehensive loss		—		—		—			(3	)		—			—			(3	)
Exercise and release of incentive stock (including income tax benefits and withholding)		258,397		—		(6	)		—			—			—			(6	)
Amortization of long-term incentive stock grants		—		—		11			—			—			—			11
Repurchase of common stock															(50	)		(50	)
Other		—		—		1			—			—			—			1
Balance at March 30, 2024		66,958,689	$	1	$	2,758		$	(117	)	$	(297	)	$	(1,276	)	$	1,069

   39 Weeks Ended
   September 30,
2017 September 24,
2016
Cash flows from operating activities of continuing operations:

Net income
   $ 233 $ 449
Discontinued operations, net of tax
   38 (175 )


Net income from continuing operations
   195 624
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   116 140
Charges for losses on inventories and receivables
   51 49
Deferred income taxes
   36 (235 )
Compensation expense for share-based payments
   24 25
Loss on extinguishment of debt
   — 15
Asset impairments
   1 9
Changes in working capital and other
   (15 ) (180 )


Net cash provided by operating activities of continuing operations
   408 447


Cash flows from investing activities of continuing operations:

Capital expenditures
   (92 ) (71 )
Purchase of leased head office facility
   (42 ) —
Proceeds from disposition of assets
   28 8
Other
   (20 ) 6


Net cash used in investing activities of continuing operations
   (126 ) (57 )


Cash flows from financing activities of continuing operations:

Net payments on long and short-term borrowings
   (17 ) (42 )
Payment to extinguish capital lease obligation
   (92 ) —
Debt retirement
   — (250 )
Debt related fees
   — (6 )
Cash used in extinguishment of debt
   — (12 )
Cash dividends on common stock
   (39 ) (13 )
Share purchase for taxes, net of proceeds on employee-related plans
   (17 ) —
Repurchase of common stock for treasury
   (34 ) (81 )


Net cash used in financing activities of continuing operations
   (199 ) (404 )


Cash flows from discontinued operations:

Operating activities of discontinued operations
   10 (113 )
Investing activities of discontinued operations
   (76 ) (4 )
Financing activities of discontinued operations
   (8 ) 3


Net cash used in discontinued operations
   (74 ) (114 )


Effect of exchange rate changes on cash and cash equivalents
   8 2
Net increase (decrease) in cash and cash equivalents
   17 (126 )
Cash and cash equivalents at beginning of period
   807 1,069


Cash and cash equivalents at end of period-total
   824 943
Cash and cash equivalents of discontinued operations
   (36 ) (142 )


Cash and cash equivalent at end of the period-continuing operations
   $ 788 $ 801


	13 Weeks Ended April 1, 2023
	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Total Equity
Balance at December 31, 2022		65,636,015	$	1	$	2,742		$	(77	)	$	(451	)	$	(928	)	$	1,287
Net income		—		—		—			—			72			—			72
Other comprehensive income		—		—		—			2			—			—			2
Exercise and release of incentive stock (including income tax benefits and withholding)		812,978		—		(19	)		—			—			—			(19	)
Amortization of long-term incentive stock grants		—		—		9			—			—			—			9
Repurchase of common stock		—		—		—			—			—			(202	)		(202	)
Other		—		—		—			—			—			(1	)		(1	)
Balance at April 1, 2023		66,448,993	$	1	$	2,732		$	(75	)	$	(379	)	$	(1,131	)	$	1,148

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements in the ~~2016~~2023 Form10-K.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

~~Basis of Presentation~~

~~Office Depot, Inc., including~~The ODP Corporation (including its consolidated subsidiaries, ~~(“Office Depot”~~“ODP” or the “Company”), is a leading provider of ~~office supplies, business~~ products, services and ~~services delivered~~technology solutions through an ~~omnichannel platform.~~ integrated business-to-business (“B2B”) distribution platform and omni-channel presence, which includes supply chain and distribution operations, dedicated sales professionals, a B2B digital procurement solution, online presence, and a network of Office Depot and OfficeMax retail stores. Through its operating companies ODP Business Solutions, LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc., The ODP Corporation empowers every business, professional, and consumer to achieve more every day.

The Company ~~currently operates under several banners, including Office Depot~~^® ~~and OfficeMax~~^® and utilizes proprietary company and product brand names. The Company’s common stock is traded on the NASDAQ Global Select Market under the ticker symbol “ODP.” As of September 30, 2017, the Company sold to customers through twohas four reportable segments (or “Divisions”)~~: Retail~~, which are ODP Business Solutions Division, Office Depot Division, Veyer Division, and ~~Business Solutions~~Varis Division.

~~In September 2016,~~ Refer to Note 3 for additional information. On April 24, 2024, the Company’s Board of Directors ~~committed~~provided their approval of management’s commitment to a plan to sell ~~substantially all of the Company’s International~~its Varis Division operations (the “International Operations”). Accordingly, the Company has presented the International Operations as discontinued operations beginning in the third quarter 2016. The Company has reclassified the financial results of the International Operationsthrough a single disposal group. Refer to ~~Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations~~Note 12 for all periods presented. The Company also reclassified the related assets and liabilities as current assets and liabilities of discontinued operations on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016. Cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for all periods. Certain portions of the International Division assets and operations primarily consisting of the Company’s global sourcing and trading operations in the Asia/Pacific region are being retained or did not meet the held for sale criteria and therefore remain in continuing operations, with prior periods adjusted, where appropriate. Additional information on the dispositions is provided in Note 4.additional information.

The Condensed Consolidated Financial Statements as of ~~September~~March 30, ~~2017,~~2024, and for the13-week ~~and39-week~~ ~~periods~~ period ended ~~September~~March 30, ~~2017~~2024 (also referred to as the ~~“third~~“first quarter of ~~2017”~~2024”), and~~“year-to-date~~ ~~2017,” respectively) and September 24, 2016~~ April 1, 2023 (also referred to as the ~~“third~~“first quarter of ~~2016” and“year-to-date~~ ~~2016,” respectively)~~2023”) are unaudited. However, in management’s opinion, these ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature necessary to provide a fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented.

The Company has prepared the Condensed Consolidated Financial Statements included herein pursuant to the rules and regulations of the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Some information and note disclosures, which would normally be included in comprehensive annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), have been condensed or omitted pursuant to those SEC rules and regulations. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For a better understanding of the Company and its Condensed Consolidated Financial Statements, ~~we recommend~~the Company recommends reading these Condensed Consolidated Financial Statements in conjunction with the audited financial statements, which are included in the ~~2016~~Company’s 2023 Form10-K. These interim results are not necessarily indicative of the results that should be expected for the full year.

CASH MANAGEMENT

~~Cash Management~~

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

At March 30, ~~2017~~2024 and December ~~31, 2016, included $44 million and $58 million, respectively, of amounts not yet presented for payment drawn in excess of disbursement account book balances, after considering offset provisions.~~

~~At September~~ 30, ~~2017,~~2023, cash and cash equivalents ~~from continuing operations but~~ held outside the United States amounted to ~~$141~~$87 million and $106 million, respectively. In the first quarter of 2024, the Company repatriated $25 million cash that was held in Canada, for a cost of $1 million. ~~Additionally, $36 million~~

The Company has certain ongoing pension obligations related to its frozen defined benefit pension plan in the United Kingdom. Restricted cash consists primarily of cash ~~held outside~~in bank committed to fund UK pension obligations based on the ~~United States~~agreements that govern the UK pension plan. Restricted cash is valued at cost, which approximates fair value. Restricted cash was ~~included in current assets of discontinued operations.~~$3 million at both March 30, 2024 and December 30, 2023.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

REVENUE AND CONTRACT BALANCES

The Company generates substantially all of its revenue from contracts with customers for the sale of products and services. Refer to Note 3 for information on revenue by reportable segment and product category. Contract balances primarily consist of receivables, assets related to deferred contract acquisition costs, liabilities related to payments received in advance of performance under the contract, and liabilities related to unredeemed gift cards and loyalty programs. The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:


	March 30,		December 30,
(In millions)	2024		2023
Trade receivables, net	$	370	$	369
Short-term contract assets		4		4
Long-term contract assets		1		1
Short-term contract liabilities		30		32

The Company recognized revenues of $10 million and $18 million in the first quarters of 2024 and 2023, respectively, which were included in the short-term contract liability balance at the beginning of each respective period.

NEW ACCOUNTING STANDARDS

~~New Accounting Standards~~

Standards that are not yet ~~adopted~~adopted:

Segment Reporting: In ~~May 2014,~~November 2023, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued an accounting ~~standards~~standard update that ~~supersedes most current revenue recognition guidance and modifies~~modified the ~~accounting~~disclosure requirements for certain costs associated with revenue generation. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a number of steps to apply to achieve that principle and requires additional disclosures. The standard was originally to be effective for the Company’s first quarter of 2017. In July 2015, the FASB approved a one year extension to the required implementation date but also permitted companies to adopt the standard at the original effective date of 2017. The new revenue recognition standard may be applied retrospectively to each prior period presented or modified retrospectively with the cumulative effect recognized as of the date of adoption.

The Company will adopt the standard in the first quarter of 2018, and believes the impact of adopting the new guidance will be immaterial to its annual and interim financial statements. The Company’s assessment, which is ongoing, included a detailed review of contracts for each of its disaggregated revenue streams and a comparison of its historical accounting policies and practices to the new standard. Based on these procedures, the Company has identified minor changes related to the timing of recognition of revenues associated with its loyalty program due to the impacts of the loyalty program being presented as a deferral of revenues under the new standard rather than as cost accruals as is permitted under the existing accounting rules. The Company has also identified changes to revenues from sales of third-party softwareall public entities that are ~~currently reported on a gross basis, which will be reported on a net basis under the new standard with no change in timing of recognition or impact~~required to ~~gross profit, earnings or cash flow. In addition, the Company’s balance sheet presentation of its sales return reserve~~report segment information. The update will change the reporting of segments by adding significant segment expenses, other segment items, title and position of chief operating decision maker and how they use the reported measures to ~~present a separate return asset and liability, instead of the net presentation used currently.~~make decisions. The ~~Company has also started its assessment to determine the revenue recognition impact of the Company’s recent acquisitions.~~

The Company expects to finalize its assessment in the fourth quarter of 2017, and adopt the standard using the modified retrospective method. Under this method, the new standard would apply to all new contracts initiated on or after January 1, 2018. For existing contracts that have remaining obligations as of January 1, 2018, the Company would recognize any difference between the recognition criteria in the new standard and the Company’s current revenue recognition practices, using a cumulative effect adjustment to the opening balance of retained earnings at the date of adoption. The Company has made modifications to its existing system that processes loyalty transactions, and will implement updates to its control processes and procedures, as necessary, based on changes resulting from the new standard. The Company does not expect any such updates to materially affect the Company’s internal controls over financial reporting. The adoption of the standard will also result in increased footnote disclosure requirements relating to certain balance sheet accounts and disaggregation of revenue, as well as~~pro-forma~~ ~~impact of the changes described above on revenue during the first year of adoption under the modified retrospective method.~~

In February 2016, the FASB issued an accounting standards update which will require lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The accounting treatment for lessors will remain relatively unchanged. The accounting standards update also requires ~~additional qualitative~~all annual disclosures about reportable segment’s profit or loss and ~~quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The guidance~~assets in interim periods. This accounting update is effective for fiscal years beginning after December 15, ~~2018,~~2023, and interim periods within ~~those~~ fiscal ~~years. Early~~years beginning after December 15, 2024, with early adoption is permitted. Lessees and lessors are required to use a modified retrospective transition method for existing leases and accordingly, apply the new accounting model for the earliest year presented in the financial statements. The Company is ~~currently~~ evaluating the impact ~~the adoption~~ of this new standard and believes that the adoption will result in additional disclosures, but will not have any other impact on its Consolidated Financial Statements but anticipates it will result in significant right of use assets and related liabilities associated with its operating leases being recorded on its balance sheet. Substantially all of the Company’s retail store locations, supply chain facilities and copy print equipment are subject to operating lease arrangements. The Company will adopt the standard in the first quarter of 2019, and has begun implementing required upgrades to its existing lease systems.Statements.

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

Income Taxes: In ~~March 2017,~~December 2023, the FASB issued an accounting ~~standards~~standard update ~~which~~that enhances the transparency and decision usefulness of income tax disclosures by adding effects from state and local taxes, foreign tax, changes ~~the income statement presentation of defined benefit plan expense by requiring that an employer report the service cost component of pension costs~~ in ~~the same line item~~tax laws or rates in current period, cross-border tax laws, tax credits, valuation allowances, nontaxable and nondeductible items, ~~as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit pension cost~~and unrecognized tax benefits. This update will be presented in the income statement separately from the service cost component and outside a subtotal of operating income. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement.~~The guidance~~also require separate disclosure for any reconciling items. This accounting update is effective for fiscal years beginning after December 15, ~~2017,~~2024, and interim periods within ~~those~~ fiscal years ~~and will be applied retrospectively. Early~~beginning after December 15, 2025, with early adoption is permitted. The Company ~~expects the adoption of this accounting standard update to reduce operating income by approximately $13 million on an annual basis, but have no impact on net income.~~

~~Standards that were adopted~~

During the first quarter of 2017, the Company adopted the new accounting standard which modifies several aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. Starting in the first quarter of 2017, stock-based compensation excess tax benefits or deficiencies are reflected in the Consolidated Statements of Operations as a component of the provision for income taxes, whereas they previously were recognized in equity. Additionally, the Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity, which was applied prospectively in accordance with the standard and therefore prior periods have not been adjusted. Finally, the Company has elected to account for forfeitures as they occur rather than estimate expected forfeitures, which was applied on a modified retrospective basis, resulting in a cumulative effect that increased accumulated deficit by approximately $1 million as of January 1, 2017.

~~NOTE 2. ACQUISITIONS~~

To further the Company’s strategic direction to transform into a more services-driven platform and strengthen its core business operations, the Company acquired five businesses during and subsequent to its third quarter of 2017, including CompuCom Systems, Inc. (“CompuCom”), a provider of information technology (“IT”) services, products and solutions to North American enterprise organizations. In August 2017, and subsequent to the end of the Company’s reporting period in October 2017, the Company acquired four small independent regional businesses in the United States. These acquisitions were not individually material and, in the aggregate, total cost for the transactions were approximately $100 million, subject to certain customary post-closing adjustments. The transactions were funded with cash~~on-hand.~~ ~~The acquisitions will provide the Company with improved access to small,mid-market~~ and large business customers in select geographic markets within the United States across a diverse assortment, including cleaning and breakroom, furniture and office supplies. The acquisitions were treated as purchases in accordance with ASC 805, Business Combinations (“ASC 805”) which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction, and include certain amortizing intangible assets and goodwill. For the acquisition completed in the third quarter of 2017, the Company has performed its preliminary purchase price allocation, and the fair value of assets acquired and liabilities assumed, including certain amortizing intangible assets and goodwill, are included in the balance sheet as of September 30, 2017. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value to allocate the purchase price. The operating results of these companies are combined with the Company’s operating results subsequent to their purchase dates, and are included in the Business Solutions Division segment. Certain disclosures required under ASC 805, including supplemental pro forma financial information, are not provided because the transactions, in the aggregate, are not material.

On November 8, 2017, subsequent to the end of the Company’s reporting period, the Company completed its acquisition of CompuCom. The Company acquired all of the capital stock of CompuCom for approximately $940 million (including refinanced or assumed indebtedness and other liabilities), funded with a new $750 million~~5-year~~ ~~term loan facility, approximately 44 million shares of Office Depot common stock with an approximate value of $135 million, and approximately $55 million of cash on hand.~~

~~CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers andon-site~~ IT professionals. The acquisition of CompuCom is expected to accelerate Office Depot’s ability to pursue topline growth as it provides the opportunity to offer IT support services to all of the Company’s customers, including enterprise, small and medium sized businesses.

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

The acquisition of CompuCom will be treated as a purchase in accordance with ASC 805 which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. Due to the timing of the acquisition being subsequent to the end of the third quarter of 2017 period, the initial accounting for the business combination is incomplete as of the filing date, and certain disclosures, including the preliminary allocation of purchase price and supplemental pro forma financial information, have been omitted from these Condensed Consolidated Financial Statements. The Company will include necessary disclosures in its 2017 Annual Report on Form~~10-K.~~ ~~The Company is currently~~ evaluating the impact of this ~~acquisition~~new standard and believes that the adoption will result in additional disclosures, but will not have any other impact on ~~the Company’s reportable segments. The operating results of CompuCom will be combined with the Company’s operating results subsequent to the purchase date of November 8, 2017.~~

~~Transaction costs associated with the acquisitions described above are expensed as incurred and are presented in the Condensed~~its Consolidated Statement of Operations within Merger, restructuring and other operating (income) expenses, net. The acquisition expenses include, legal, accounting, and other third-party costs associated with the transaction. The Company incurred approximately $13 million of expenses related to the CompuCom acquisition, which were recognized subsequent to the third quarter of 2017 when the transaction closed.Financial Statements.

NOTE 3.2. MERGER ~~ACQUISITION TERMINATION,~~ AND RESTRUCTURING ACTIVITY

~~In recent years, the~~The Company has taken actions to ~~adapt to changing~~optimize its asset base and ~~competitive market conditions.~~drive operational efficiencies. These actions include acquiring profitable businesses, closing underperforming retail stores and non-strategic distribution facilities, consolidating functional activities, eliminating redundant positions and disposing of non-strategic businesses and ~~assets,~~assets. The expenses and ~~taking actions to improve process efficiencies.~~

~~Merger and Restructuring~~

In 2013, the OfficeMax merger (the “Merger”) was completed and integration activities similar to the actions described above began. The Company also assumed certain restructuring liabilities previously recorded by OfficeMax. In~~mid-2014,~~ ~~the Company’s real estate strategy (the “Real Estate Strategy”) identified 400 retail stores for closure through 2016 along with planned changes~~any income recognized directly associated with the integration of the two companies’ supply chains. During the second quarter of 2016, the Company completed the retail store closures under this program. During the third quarter of 2017, the changes to the Company’s supply chain related to the Merger were also completed. The significant components of expenses incurred by the Company relating to the Merger activities are discussed below.

~~Staples Acquisition and Merger Agreement Termination~~

On February 4, 2015, Staples, Inc. (“Staples”) and the Company announced that the companies had entered into a definitive merger agreement (the “Staples Merger Agreement”), under which Staples would acquire all of the outstanding shares of Office Depot and the Company would become a wholly owned subsidiary of Staples (the “Staples Acquisition”).

On May 10, 2016, the U.S. District Court for the District of Columbia granted the United States Federal Trade Commission’s request for a preliminary injunction against the proposed acquisition, and as a result, the companies terminated the Staples Merger Agreement on May 16, 2016. Per the terms of the termination agreement, Staples paid Office Depot a fee of $250 million in cash (“Termination Fee”) on May 19, 2016, which, along with transactions and retention costs associated with the planned acquisition,these actions are included in Merger ~~restructuring~~ and ~~other operating (income) expenses, net in the Condensed Consolidated Statements of Operations for theyear-to-date~~ 2016 and in Net cash provided by operating activities of continuing operations in the Condensed Consolidated Statements of Cash Flows for 2016. The significant components of expenses incurred by the Company relating to the Staples acquisition and merger agreement termination activities are discussed below.

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

~~Comprehensive Business Review~~

During August 2016, the Company announced the results of a comprehensive business review (the “Comprehensive Business Review”), which, among other things, includes a plan to close approximately 300 additional retail stores in North America over a three-year period, and to lower operating and general and administrative expenses through efficiencies and organizational optimization. The Company estimates it will incur up to approximately $125 million in costs to implement the cost savings programs, of which $90 million has been incurred in 2016 and through~~year-to-date~~ 2017. The remaining costs are expected to be incurred through the end of 2017, excluding costs related to planned store closures, which will be recognized over the next two years. The significant components of expenses incurred by the Company relating to its cost saving programs activities are discussed below.

~~Merger,~~ restructuring ~~and other operating (income) expenses, net~~

~~The Company presents Merger, restructuring and other operating (income)~~ expenses, net on a separate line in the Condensed Consolidated Statements of Operations in order to identify these activities apart from the ~~activities~~expenses incurred to sell to and service ~~its~~ customers. These expenses are not ~~allocated to~~included in the ~~Company’s divisions for the purpose~~determination of ~~calculating their~~Division operating income. The table below ~~and narrative that follow provide~~summarizes the major components of Merger ~~restructuring~~ and ~~other operating (income)~~restructuring expenses, net.


	First Quarter
(In millions)	2024		2023
Merger and transaction related expenses
Transaction and integration	$	—	$	—
Total Merger and transaction related expenses		—		—
Restructuring expenses
Severance		18		—
Professional fees		6		—
Facility closure, contract termination, and other expenses, net		3		—
Total Restructuring expenses, net		27		—
Total Merger and restructuring expenses, net	$	27	$	—

THE ODP CORPORATION

   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Merger related expenses

Transaction and integration
   $ 4    $ 8    $ 15    $ 30
Facility closure, contract termination, and other expenses, net
   2    4    4    21








Total Merger related expenses
   6    12    19    51








Staples Acquisition (income) expenses

Retention
   —      —      —      15
Transaction
   —      4    —      43
Termination Fee
   —      —      —      (250 )








Total Staples Acquisition (income) expenses
   —      4    —      (192 )








Comprehensive Business Review and other restructuring expenses

Severance
   11    9    26    13
Facility closure, contract termination, professional fees and other expenses, net
   4    6    16    6








Total Comprehensive Business Review and other restructuring expenses
   15    15    42    19








Acquisition related expenses – Refer to Note 2
   1    —      1    —








Total Merger, restructuring and other operating (income) expenses, net
   $ 22    $ 31    $ 62    $ (122 )

~~Merger related expenses~~

Transaction and integration expenses include integration-related professional fees, incremental temporary contract labor, salary and benefits for employees dedicated to the Merger activity, travel costs,~~non-capitalizable~~ ~~software integration costs, and other direct costs to combine the companies. Such costs are being recognized as incurred.~~

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

MERGER AND TRANSACTION RELATED EXPENSES

~~Facility closure, contract termination,~~Transaction and integration expenses include legal, accounting, and other third-party expenses ~~net primarily relate to facility closure accruals, contract termination cost, gains and losses on asset dispositions, and accelerated depreciation. Facility closure expenses include amounts~~ incurred byin connection with acquisitions. In the first quarter of 2024, the Company did not have any transaction and integration expenses. In the first quarter of 2023, the Company recognized transaction and integration expenses of less than $1 million related to ~~close retail stores in~~ the ~~United States as part~~acquisition of the ~~Real Estate Strategy,~~small independent regional office supply distribution business.

RESTRUCTURING EXPENSES

Project Core

In March 2024, the Company’s Board of Directors approved a restructuring plan to redesign its company-wide low-cost business model approach and create further efficiencies in its business to lower costs (“Project Core”). This was driven by a need to significantly reduce costs due to macroeconomic and other factors impacting the Company’s sales, as well as ~~supply chain facilities. Duringyear-to-date~~ ~~2017~~insights gainedfollowing the first year of operations of realignment of its operating segments into four divisions. The scope of Project Core was approved in two phases, in March 2024 and ~~2016,~~April 2024, and includes cost improvement actions across the entire enterprise, including the Varis Division. It aims to optimize the Company’s organizational structure to support future growth of the business. Project Core is expected to be completed in 2025, with the majority of actions expected to be taken by the end of 2024. Total restructuring costs related to Project Core are estimated to be up to $57 million, of which $35 million are estimated to be termination benefits, which mainly consists of severance, and $22 million are estimated to be costs to facilitate the program, which consists of third-party professional fees, and other incremental employee-related costs to implement actions. All costs of Project Core are expected to be cash expenditures.

In the first quarter of 2024, the Company ~~recognized gains~~had $25 million of ~~$6 million and $1 million, respectively, from the sale of warehouse facilities that had been classified as assets held for sale. The gains are included in Merger,~~ restructuring ~~and other operating (income) expenses, net, as the dispositions were part of the supply chain integration associated with the Merger.~~

~~Staples Acquisition (income) expenses~~

~~Expenses incurred in 2016 include retention accruals and transaction costs, including~~ costs associated with ~~regulatory filings~~Project Core. Of these costs, $19 million was severance and $6 million was costs to facilitate the program, which mainly consisted of third-party professional ~~fees, offset by the Termination Fee payment.~~fees. The ~~Staples Merger Agreement was terminated on May 16, 2016, and no further expenses are expected.~~

~~Comprehensive Business Review and other restructuring expenses~~

~~Expenses~~Company made cash payments of $2 million associated with ~~implementing~~expenditures for Project Core in the ~~Comprehensive Business Review include severance, facility closure costs, contract termination, accelerated depreciation, professional fees, relocation~~first quarter of 2024.

Maximize B2B Restructuring Plan

Since the inception of the Maximize B2B Restructuring Plan in May 2020, the Company has closed a total of 297 retail stores and ~~disposal gains and losses, as well as other~~two distribution facilities through 2023, with an additional 12 retail stores closed in the first quarter of 2024 under this plan. In the first quarter of 2024, the Company had $2 million of restructuring costs associated with the ~~store closures. The~~Maximize B2B Restructuring Plan, and made cash payments of $2 million associated with these expenditures. In the first quarter of 2023, the Company ~~has completed 109~~incurred less than $1 million of the planned 300 retail store closures since announcing this initiative, with the remaining stores expected to be closed over the next two years. Severance costs related to planned store closures are being accrued through the anticipated facility closure or termination date and consider timing, terms of existing severance plans, expected employee turnover and attrition. Restructuring expenses also include severance and reorganizationrestructuring costs associated with ~~reductions in staff functions that continued into 2017.~~the Maximize B2B Restructuring Plan, and made cash payments of $3 million associated with expenditures for the Maximize B2B Restructuring Plan.

~~Merger and Restructuring Accruals~~MERGER AND RESTRUCTURING ACCRUALS

The activity in the merger and restructuring accruals the first quarter of 2024 is presented in the table below. ~~Of the total $62 million expense presented in Merger, restructuring and other operating (income) expenses, net incurred in theyear-to-date~~ ~~2017, $40 million relates to Merger~~Certain merger and restructuring liabilities and are included as charges incurred in the table below. The remaining $22 million of expense is comprised of $16 million in Merger transaction and integration expenses, $11 million in property expenses, professional~~fees, non-cash items and~~ other expenses, and $1 million in Acquisition related expenses, partially offset by a $6 million gain on the disposition of warehouse facilities which were part of the supply chain integration associated with the Merger. These charges are excluded from the table ~~below~~ because they are ~~expensed~~paid asincurred or non-cash, or ~~otherwise not associated with the merger~~such as accelerated depreciation and ~~restructuring balance sheet accounts.~~gains and losses on asset dispositions.


	Balance as of								Balance as of
	December 30,		Charges (credits)			Cash			March 30,
(In millions)	2023		Incurred			Payments			2024
Termination benefits:
Project Core	$	—	$	19		$	—		$	19
Maximize B2B Restructuring Plan		2		(1	)		—			1
Lease and contract obligations, accruals for facilities closures and other costs:
Project Core		—		6			(2	)		4
Maximize B2B Restructuring Plan		3		2			(1	)		4
Comprehensive Business Review		1		—			—			1
Total	$	6	$	26		$	(3	)	$	29

      Year-to-Date 2017
(In millions)    Balance
as of
December 31,
2016    Charges
Incurred    Cash
Payments    Balance
as of
September 30,
2017
Termination benefits

Merger related accruals
   $ 5    $ 1    $ (4 )    $ 2
Comprehensive Business Review
   8    26    (27 )    7
Lease and contract obligations, accruals for facilities closures and other costs:

Merger related accruals
   40    4    (24 )    20
Comprehensive Business Review
   13    9    (13 )    9








Total
   $ 66    $ 40    $ (68 )    $ 38

The short-term and long-term components of these liabilities are included in Accrued expenses and other current liabilities, and Deferred income taxes and other long-term liabilities, respectively, onin the Condensed Consolidated Balance Sheets.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

NOTE 3. SEGMENT INFORMATION

At March 30, 2024, the Company had four reportable segments:

~~Assets held~~ODP Business Solutions Division – The Company’s leading B2B distribution solutions provider serving small, medium, and enterprise level companies, including those in the public and education sectors. This segment operates in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada. The ODP Business Solutions Division sells nationally branded, as well as the Company’s private branded, office supply and adjacency products and services to customers, who are served through a dedicated sales force, catalogs, telesales, and electronically through the Company’s Internet websites. Adjacency products and services include cleaning, janitorial, and breakroom supplies, office furniture, technology products, and copy and print services. This segment also includes our Federation entities, which are over 20 regional office supply distribution businesses acquired by the Company as part of its transformation to expand its reach and distribution network into geographic areas that were previously underserved, and which continue to operate under their own brand names. The acquisition of these businesses has allowed for ~~sale~~an effective means to expand our distribution reach, target new business customers, and grow our offerings beyond traditional office supplies.

~~Certain~~Office Depot Division – The Company’s leading provider of retail consumer and small business products and services distributed through a fully integrated omni-channel platform of 903 Office Depot and OfficeMax retail locations in the United States, Puerto Rico, and the U.S. Virgin Islands, and an eCommerce presence (www.officedepot.com). The Office Depot Division sells office supplies, technology products and solutions, business machines and related supplies, cleaning, breakroom and facilities ~~identified~~products, personal protective equipment, and office furniture, as well as offering business services including copying, printing, digital imaging, mailing, shipping, and technology support services. In addition, the print needs for ~~closure~~retail and business customers are facilitated through ~~integration and other activities have been accounted for as assets held for sale. Assets held for sale primarily consisted of~~the Company’s regional print production centers.

Veyer Division – The Company’s supply chain, ~~facilities,~~distribution, procurement, and ~~were presented~~global sourcing operation, which specializes in ~~Prepaid expenses~~B2B and ~~other current assets~~consumer business service delivery, with core competencies in distribution, fulfillment, transportation, global sourcing, and purchasing. The Veyer Division’s customers include our Office Depot Division and ODP Business Solutions Division, as well as third-party customers. The Veyer Division also includes the Company’s global sourcing operations in Asia.

Varis Division – The Company’s tech-enabled B2B indirect procurement marketplace, which provides a seamless way for buyers and suppliers to transact through the platform’s consumer-like buying experience, advanced spend management tools, network of suppliers, and technology capabilities. In connection with the Company’s development efforts of this Division, it acquired BuyerQuest Holdings, Inc. (“BuyerQuest”) in 2021, a software as a service eProcurement platform company. BuyerQuest’s operating results are included in the ~~Condensed Consolidated Balance Sheet as~~Varis Division. The Varis Division currently serves enterprise businesses and provides its services to middle- and small-sized businesses. It is focused on filling the growing demand for a B2B centric digital commerce platform that is modern, trusted, and provides the procurement controls and visibility businesses require to operate.

On April 24, 2024, management obtained the Board of ~~December 31, 2016.~~Directors’ approval and committed to a plan to sell its Varis Division through a single disposal group. The ~~assets held for sale activity foryear-to-date~~ ~~2017 is presented in~~Varis Division disposal group has met the ~~table below.~~

(In millions)

Balance as of December 31, 2016
   $ 23
Disposition
   (23 )


Balance as of September 30, 2017
   $ —

Gains on dispositions associated with Merger or restructuring activities are recognized at the corporate level and included when realized in Merger, restructuring and other operating (income) expenses, net in the Condensed Consolidated Statements of Operations. Losses, if any, are recognized whenaccounting criteria to be classified as held for ~~sale. Gains or losses associated with dispositions~~sale as of ~~properties not associated with Merger or restructuring activities are~~April 2024 and will be presented ~~in Selling general and administrative expenses~~as such in the ~~Condensed Consolidated Statements of Operations when the related accounting criteria are met.~~

~~NOTE 4. DISCONTINUED OPERATIONS~~

~~In the third~~second quarter of ~~2016,~~2024. In addition, the ~~Company’s Board of Directors approved a plan~~Company expects to sell substantially all of the operations of the former International Division through four disposal groups (Europe, South Korea, Australia and New Zealand (“Oceania”) and mainland China). Collectively, these dispositions represent a strategic shift that has a major impact on the Company’s operations and financial results and have been accounted for as discontinued operations. The Company is presentingpresent the operating results and cash flows of ~~these disposal groups within~~its Varis Division as discontinued operations ~~through~~for all periods presented in future filings. Refer to Note 12 for additional information.

Division operating income is determined based on the measure of performance reported internally to manage the business and for resource allocation. This measure charges to the respective Divisions those expenses considered directly or closely related to their ~~respective dates~~operations and allocates support costs. Certain operating expenses and credits are not allocated to the Divisions, including asset impairments and merger and restructuring expenses, net, as well as expenses and credits retained at the Corporate level, including certain management costs and legacy pension and environmental matters. Other companies may charge more or less of ~~disposal, including all prior periods.~~ these items to their segments and results may not be comparable to similarly titled measures used by other entities.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

The ~~assets~~following is a summary of sales and ~~liabilities~~operating income (loss) by each of the ~~disposal groups remaining at the end of each period are presented as current assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets. Certain portions~~Divisions, reconciled to consolidated totals:


(In millions)	ODP Business Solutions Division		Office Depot Division		Veyer Division		Varis Division			Eliminations			Total
First Quarter of 2024
Sales (external)	$	923	$	937	$	9	$	2		$	—		$	1,871
Sales (internal)		3		7		1,235		—			(1,245	)		—
Total sales	$	926	$	944	$	1,244	$	2		$	(1,245	)	$	1,871
Division operating income (loss)	$	30	$	50	$	9	$	(14	)	$	—		$	75

First Quarter of 2023
Sales (external)	$	1,005	$	1,094	$	7	$	2		$	—		$	2,108
Sales (internal)		4		9		1,412		—			(1,425	)		—
Total sales	$	1,009	$	1,103	$	1,419	$	2		$	(1,425	)	$	2,108
Division operating income (loss)	$	39	$	85	$	15	$	(17	)	$	—		$	122

The reconciliation of the ~~former International~~measure of Division operating income to Consolidated income from continuing operations before income taxes is as follows:


	First Quarter
(In millions)	2024			2023
Total Divisions operating income	$	75		$	122
Add/(subtract):
Asset impairments		(6	)		(4	)
Merger and restructuring expenses, net		(27	)		—
Unallocated expenses		(24	)		(23	)
Interest income		3			2
Interest expense		(4	)		(5	)
Other income, net		—			2
Income from continuing operations before income taxes	$	17		$	94

The following table provides information about disaggregated sales by major categories:


	First Quarter
(In millions)	2024		2023
Major sales categories
Supplies	$	929	$	1,052
Technology		531		616
Furniture and other		253		278
Copy and print		158		162
Total	$	1,871	$	2,108

The components of goodwill by segment are as follows:


(In millions)	Balance as of December 30, 2023		Acquisitions		Balance as of March 30, 2024
ODP Business Solutions Division	$	149	$	—	$	149
Office Depot Division		219		—		219
Veyer Division		35		—		35
Total	$	403	$	—	$	403

Goodwill and indefinite-lived intangible assets ~~and operations~~ are ~~being retained and, therefore, remain in continuing operations. The retained operations are presented~~tested for impairment annually as ~~Other in Note 12, Segment Information.~~

~~Europe~~

On September 23, 2016, the Company announced that it had received an irrevocable offer from Aurelius Rho Invest DS GmbH, a subsidiary of The AURELIUS Group (the “Purchaser”) to acquire the Company’s European business operations (the “European Business”). The transaction was structured as an equity sale with the Purchaser acquiring the European Business with its operating assets and liabilities. On December 31, 2016, the Company closed the sale of the ~~European Business resulting~~first day of fiscal December or more frequently when events or changes in circumstances indicate that impairment may have occurred. Each reportable segment also represents a~~pre-tax~~ ~~loss on sale of $108 million. The Company recorded approximately $8 million of additional costs associated with the sale of the European Business duringyear-to-date~~ ~~2017, which are included~~ reporting unit. There were no events or changes in ~~Net gain on sale of discontinued operations in the table below.~~

~~Approximately $70 million was accrued at December 31, 2016, under a working capital adjustment provision of the sale and purchase agreement (the “SPA”), of which $35 million was paid~~circumstances that indicate an impairment may have occurred during the first quarter of ~~2017.~~2024. The ~~Purchaser subsequently disagreed with certain items related~~Company will continue to evaluate the ~~working capital adjustment schedule and, as provided for~~recoverability of goodwill at the reporting unit level. If the operating results of the Company’s reporting units deteriorate in the ~~SPA,~~future, it may cause the ~~parties engaged an independent accountant~~fair value of one or more of the reporting units to resolve the disagreements. In July 2017, the dispute was resolved favorably and the Company paid the remaining working capital adjustment of $37 million to the Purchaser, which included approximately $2 million related to a changefall below their carrying value, resulting in ~~the foreign currency rate and accrued interest on the unpaid portion.~~goodwill impairment charges.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

The SPA contains customary warranties of the Company and the Purchaser, with the Company’s warranties limited to an aggregate of EUR 10 million. The Company monitors its estimated exposure to liabilities under the warranties under the SPA, and as of September 30, 2017, the Company believes it has made adequate provisions for its potential exposures related to these warranties. The Company will continue to provide various transition and product sourcing services to the Purchaser for a period of up to 24 months following the closing date under a separate agreement. The proceeds and related costs from these services are not material and are presented in Other income (expense), net as part of continuing operations in the Condensed Consolidated Statements of Operations. Also, as part of the disposition, the Company retained responsibility for the frozen defined benefits pension plan in the United Kingdom, which is now included in continuing operations.

The Company retains certain guarantees in place with respect to the liabilities or obligations of the European Business and remains contingently liable for these obligations. However, the Purchaser must indemnify and hold the Company harmless for any losses in connection with these guarantees. The Company currently does not believe it is probable it would be required to perform under any of these guarantees or any of the underlying obligations.

~~South Korea~~

The sale of the Company’s business in South Korea was completed on April 26, 2017. The transaction was structured and accounted for as an equity sale. Disposition of the business in South Korea resulted in a~~pre-tax~~ ~~gain on sale of $12 million during the second quarter of 2017, which has been reflected in Net gain on sale of discontinued operations foryear-to-date~~ ~~2017 in the table below.~~

~~China~~

The sale of the Company’s business in mainland China was completed on July 28, 2017. The transaction was structured and accounted for as an equity sale. Prior to the sale, the Company recorded a reduction of $10 million in the first half of 2017 to the carrying amount of its China Business based on its updated estimates of fair value less cost to sell. The adjustment is included in Net (increase) reduction of loss on discontinued operations held for sale for~~year-to-date~~ 2017 in the table below. The disposition of the business in mainland China in the third quarter of 2017 resulted in a gain of $1 million, which is included in Net gain on sale of discontinued operations for~~quarter-to-date~~ ~~2017 in the table below, resulting in a cumulative loss of $9 million.~~

~~Oceania~~

On April 18, 2017, the Company entered into a definitive sale and purchase agreement to sell the Company’s Australian and New Zealand business operations. The transaction is structured and will be accounted for as an equity sale, and remains subject to the purchaser obtaining necessary regulatory approval. During the third quarter of 2017, the purchaser paid the Company $8 million in exchange for the extension of the sale and purchase agreement through December 2017. The $8 million, which is presented in Accrued expenses and current liabilities in the Condensed Consolidated Balance Sheet, will be applied to the purchase price when the transaction is completed or if not successfully completed will be treated as a break fee and recorded in Other income (expense), net, within discontinued operations. The Company recorded adjustments of $58 million during~~year-to-date~~ 2017, to its carrying amount of this disposal group that is held for sale based on its updated estimates of fair value less cost to sell. The adjustments resulted in a reduction in the related valuation allowance and are included in the Net (increase) reduction of loss on discontinued operations held for sale in the table below. The adjusted carrying amount does not exceed the carrying amount at the time these operations were initially classified as held for sale. There were no increase or reduction of loss related to this disposal group during the third quarter of 2017. Until the closing date, the Company has agreed to operate the Australian and New Zealand businesses in the ordinary course. The Company may provide certain transitional services to the purchaser for a limited period of time following the closing.

On November 2, 2017, the Commerce Commission of New Zealand (the “Commerce Commission”) filed proceedings in the High Court at Auckland seeking to enjoin the contemplated transaction. The Commerce Commission has applied to consolidate its proceedings with those initiated by Complete Office Supplies Pty Limited, an office supply competitor in New Zealand. The parties requested the High Court to vacate the interim injunction hearing and proceed to trial. The trial date is not yet scheduled. The

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

purchaser has expressed their intention to continue to challenge the actions of the Commerce Commission. The Company currently remains committed to completing the sale as soon as practicable, including reviewing the possibility of further extending the sale and purchase agreement.

Completion of the sale of the Company’s Australian and New Zealand business operations may be for amounts different from the current estimates and will be evaluated each reporting period until the dispositions are complete.

The major components of Discontinued operations, net of tax presented in the Condensed Consolidated Statements of Operations are presented below. The 2016 amounts include the results of the European Business, which was sold at the end of 2016.

   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Sales
   $ 111    $ 583    $ 398    $ 1,886
Cost of goods sold and occupancy costs
   89    462    322    1,489
Operating expenses
   25    139    79    435
Asset impairments
   —      90    —      90
Restructuring charges
   —      —      2    10
Interest income
   —      —      1    —
Interest expense
   —      —      —      (4 )
Other income (expense), net
   —      —      —      (1 )
Net (increase) reduction of loss on discontinued operations held for sale
   —      (155 )    45    (155 )
Net gain on sale of discontinued operations
   1    —      4    —
Income tax expense (benefit)
   4    (126 )    7    (123 )








Discontinued operations, net of tax
   $ (6 )    $ (137 )    $ 38    $ (175 )

~~As disclosed in the Company’s 2016 Form10-K,~~ in December 2016 while preparing for and performing the controls associated with the disposition of the Company’s European Business, the Company identified an error relating to the third quarter of 2016 that was not considered to be material. When the Company committed to a plan to sell substantially all of the business formerly reported as the International Operations, it provided reference to the cumulative translation adjustment (“CTA”) balance that existed at the end of the third quarter of 2016, but did not include CTA in its impairment analysis. As a result, the loss amount of Discontinued operations, net of tax was overstated in the third quarter of 2016. In the September 30, 2017 Condensed Consolidated Financial Statements, the prior quarter financial information has been revised due to the correction of the error. Additionally, this correcting adjustment is provided below and impacts the same captioned line items in various disclosures of the third quarter financial statements by the same amount.

   Third Quarter
2016 Year-to-Date
Third Quarter 2016
($ in Millions, except per share)    As
Reported Adjustment    As
Corrected As
Reported Adjustment    As
Corrected
Discontinued operations, net of tax
   $ (286 ) $ 149    $ (137 ) $ (324 ) $ 149    $ (175 )
Net income
   $ 44 $ 149    $ 193 $ 300 $ 149    $ 449
Basic earnings (loss) per share

Discontinued operations
   $ (0.54 ) $ 0.28    $ (0.26 ) $ (0.60 ) $ 0.28    $ (0.32 )






Net earnings
   $ 0.08 $ 0.28    $ 0.36 $ 0.55 $ 0.27    $ 0.82






Diluted earnings per share

Discontinued operations
   $ (0.54 ) $ 0.29    $ (0.25 ) $ (0.60 ) $ 0.28    $ (0.32 )






Net earnings
   $ 0.08 $ 0.27    $ 0.35 $ 0.54 $ 0.27    $ 0.81

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

Assets and liabilities of discontinued operations presented in the Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016, are included in the following table. As the sale of the European Business was completed before~~year-end~~ 2016, the assets and liabilities of that business are not included in either period presented below. Additionally, the sale of the South Korean and mainland China businesses were completed in April 2017 and July 2017, respectively, and therefore the assets and liabilities of those businesses are not included in the September 30, 2017 period presented below.

(In millions)    September 30,
2017    December 31,
2016
Assets

Cash and cash equivalents
   $ 36    $ 44
Receivables, net
   55    88
Inventories
   67    82
Prepaid expenses and other current assets
   5    4
Property and equipment, net
   31    31
Other assets
   2    6
Valuation allowance
   (55 )    (113 )




Current assets of discontinued operations
   $ 141    $ 142




Liabilities

Trade accounts payable
   $ 43    $ 60
Accrued expenses and other current liabilities
   20    27
Income taxes payable
   —      2
Short-term borrowings and current maturities of long-term debt
   —      9
Deferred income taxes and other long-term liabilities
   5    6




Current liabilities of discontinued operations
   $ 68    $ 104

NOTE ~~5. DEBT~~

~~Amended Credit Agreement~~

In May 2011, Office Depot entered into an amended and restated credit agreement, which was amended and restated in May 2016 for an additional five years, and was further amended in December 2016 (the “Amended Credit Agreement”). The $1.2 billion facility will mature on May 13, 2021. The Amended Credit Agreement reduces the overall fees and applicable spread on borrowing and modifies certain covenants to provide additional flexibility for incremental indebtedness, acquisitions, asset sales and restricted payments. In connection with the May 2016 amendment, the Company recorded $6 million in debt acquisition costs, which are included in Other assets in the Condensed Consolidated Balance Sheet and will be amortized ratably through May 2021.

At September 30, 2017, the Company had approximately $1.0 billion of available credit under the Amended Credit Agreement, and had letters of credit outstanding of $53 million. There were no borrowings under the Amended Credit Agreement in the third quarter of 2017 and the Company was in compliance with all applicable financial covenants at September 30, 2017.

In connection with the acquisition of CompuCom, the Amended Credit Agreement was further amended to permit, among other things, certain matters relating to the Term Loan Credit Agreement (as defined below).

~~Term Loan Credit Agreement~~

In connection with the consummation of the acquisition of CompuCom, the Company entered into a credit agreement, dated as of November 8, 2017 (the “Term Loan Credit Agreement”), which provides for a $750 million term loan facility with a maturity date of November 8, 2022.

The Term Loan Credit Agreement is fully and unconditionally guaranteed by substantially all of the Company’s direct and indirect U.S. subsidiaries, including CompuCom and substantially all of its U.S. subsidiaries, subject to certain exceptions (collectively, the

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

“Guarantors”). The obligations under the Term Loan Credit Agreement are secured by a security interest in substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. Pursuant to an intercreditor agreement, the lenders and other secured parties under the Term Loan Credit Agreement have a first priority lien on certain assets constituting term priority collateral, and a second priority lien on certain assets constituting priority collateral for the Amended Credit Agreement.

The loans under the Term Loan Credit Agreement were issued with an original issue discount, at an issue price of 97.00%, and the Company incurred approximately $12 million of debt issuance costs. The loans under the Term Loan Credit Agreement bear interest at a rate per annum equal to LIBOR plus 7.00% (or an alternative base rate plus 6.00%).

The loans under the Term Loan Credit Agreement amortize quarterly beginning March 15, 2018 at the rate of $18.8 million per quarter, with the balance payable at maturity. The Term Loan Credit Agreement also requires mandatory prepayments in connection with certain asset sales, subject to certain exceptions, as well as additional mandatory prepayments from specified percentages of the Company’s excess cash flow. Additionally, the Term Loan Credit Agreement requires the Company to pay a prepayment fee of (a) 2.00% or (b) 1.00% if the loans thereunder are voluntarily repaid (i) on or prior to the first anniversary of the closing date of the Term Loan Credit Agreement, or (ii) after such date but on or prior to the second anniversary of the closing date of the Term Loan Credit Agreement.

The Term Loan Credit Agreement 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 subject to compliance with an annual limit, 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 the Company and its restricted subsidiaries to retain unrestricted cash, cash equivalents, and availability under the Company’s Amended Credit Agreement in an aggregate amount of at least $400 million, will apply at any time that the Company’s senior secured leverage ratio is greater than 1.50:1.00 and be tested quarterly.

The net proceeds of the loans under the Term Loan Credit Agreement were used to refinance certain indebtedness of CompuCom and to pay fees and expenses in connection with the acquisition of CompuCom and the related transactions.

~~NOTE 6.~~4. INCOME TAXES

The Company’s effective tax ~~rates in prior periods have varied considerably as~~rate was 12% for the first quarter of 2024, and 23% for the first quarter of 2023. For the first quarter of 2024, the Company’s effective rate was primarily impacted by a ~~result~~tax benefit associated with stock-based compensation awards year-to-date and the settlement of ~~two primary~~an uncertain tax position for less than the reserve. For the first quarter of 2023, the Company’s effective rate was primarily impacted by the recognition of a tax benefit associated with stock-based compensation awards year-to-date. These factors, 1)along with the impact of state taxes and the mix of income and losses across U.S. andnon-U.S. jurisdictions, ~~and 2) the derecognition of valuation allowances against deferred tax assets that were notmore-likely-than-not~~ ~~realizable in the U.S. and certainnon-U.S.~~ ~~jurisdictions. During 2017 and 2016, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing~~caused the Company’s effective tax ~~rates due~~rate to differ from the ~~dispositions~~statutory rate of the international businesses and improved operating results. In addition, during 2017 and 2016 the majority of the Company’s deferred tax assets that previously were not realizable, became realizable, thereby, causing significant reductions in previously established valuation allowances. These factors have resulted in the Company’s effective tax rates being 2% and 24% for the third quarter and~~year-to-date~~ ~~2017, respectively, and negative effective tax rates of (267%) and (51%) for the third quarter andyear-to-date~~ ~~2016, respectively.~~21%. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax ~~rate~~rates in future quarters.

During the third quarter of 2017 and 2016, the Company concluded that it was more likely than not that a benefit from a significant portion of its U.S. federal and state deferred tax assets would be realized. This conclusion was based on a detailed evaluation of all available positive and negative evidence and the weight of such evidence, the current financial position and results of operations for the current and preceding years, and the expectation of continued earnings. The Company determined that its U.S. federal and state valuation allowance should be reduced by approximately $40 million in 2017, with approximately $37 million in the third quarter as a discrete~~non-cash~~ income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate. The Company determined that approximately $400 million of its U.S. federal and state valuation allowance should be reduced in 2016, with approximately $240 million in the third quarter as a discrete~~non-cash~~ ~~income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate.~~

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

The Company continues to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which ~~relate~~relates to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods.

The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years ~~before 2016~~prior to 2021 and ~~2009,~~2014, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal income tax examination, and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years ~~before 2013 and 2006, respectively. The Company’s U.S. federal income tax return for 2016 is currently under review.~~prior to 2013. Generally, the Company is subject to routine examination for years ~~2008~~2013 and forward in its international tax jurisdictions.

It is ~~not reasonably possible~~anticipated that ~~certain~~$3 million of tax positions will be resolved within the next 12 months. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

NOTE 5. EARNINGS PER SHARE

The following table represents the calculation of earnings per common share – basic and diluted:


	First Quarter
(In millions, except per share amounts)	2024		2023
Basic Earnings Per Share
Numerator:
Net income from continuing operations	$	15	$	72
Income from discontinued operations, net of tax		—		—
Net income	$	15	$	72
Denominator:
Weighted-average shares outstanding		37		40
Basic earnings per share
Continuing operations	$	0.42	$	1.79
Discontinued operations		—		—
Net basic earnings per share	$	0.42	$	1.79
Diluted Earnings Per Share
Numerator:
Net income from continuing operations	$	15	$	72
Income from discontinued operations, net of tax		—		—
Net income	$	15	$	72
Denominator:
Weighted-average shares outstanding		37		40
Effect of dilutive securities:
Stock options and restricted stock		1		2
Diluted weighted-average shares outstanding		38		42
Diluted earnings per share
Continuing operations	$	0.40	$	1.71
Discontinued operations		—		—
Net diluted earnings per share	$	0.40	$	1.71

Awards of stock options and nonvested shares representing additional shares of outstanding common stock were less than one million in both the first quarter of 2024 and the first quarter of 2023, but they were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

NOTE 6. DEBT

On April 17, 2020, the Company entered into the Third Amended and Restated Credit Agreement (the “Third Amended Credit Agreement”), which provided for a $1.2 billion asset-based revolving credit facility and a $100 million asset-based first-in, last-out term loan facility (the “FILO Term Loan Facility”), for an aggregate principal amount of up to $1.3 billion (the “New Facilities”). The New Facilities mature on April 17, 2025. The Third Amended Credit Agreement replaced the Company’s then existing amended and restated credit agreement that was due to mature in May 2021. In 2022, the Company reduced its asset-based revolving credit facility by $200 million to $1.0 billion and retired $43 million of outstanding FILO Term Loan Facility loans under the Third Amended Credit Agreement. During the first quarter of 2023, the Third Amended Credit Agreement was amended to replace the LIBOR-based Eurocurrency reference interest rate option with a reference interest rate option based upon SOFR. Other than the foregoing, the material terms of the Third Amended Credit Agreement remain unchanged.

As provided by the Third Amended Credit Agreement, available amounts that can be borrowed at any given time are based on percentages of certain outstanding accounts receivable, credit card receivables, inventory, cash value of company-owned life insurance policies, and certain specific real estate of the Company. During the first quarter of 2024, the Company elected to draw down $75 million under the Third Amended Credit Agreement for working capital management. This was repaid during the quarter, resulting in no revolving loans outstanding at March 30, 2024. During the first quarter of 2024, the Company retired $53 million of outstanding FILO Term Loan Facility loans under the Third Amended Credit Agreement, resulting in no FILO Term Loan Facility loans at March 30, 2024. This was funded through available liquidity. At March 30, 2024, the Company had $37 million of outstanding standby letters of credit and $689 million of available credit under the Third Amended Credit Agreement. The Company was in compliance with all applicable covenants at March 30, 2024.

NOTE 7. STOCKHOLDERS’ EQUITY

~~The following table reflects the changes in Stockholders’ equity.~~

(In millions)

Stockholders’ equity at December 31, 2016
   $ 1,852
Net income
   233
Repurchase of common stock for treasury
   (34 )
Dividends paid on common stock
   (39 )
Share purchase for taxes, net of proceeds on employee-related plans
   (17 )
Other comprehensive income
   22
Amortization of long-term incentive stock grants
   25


Stockholders’ equity at September 30, 2017
   $ 2,042

Accumulated other comprehensive ~~income (loss)~~loss activity, net of tax, where applicable, is provided in the following table:


	Foreign			Change in
	Currency			Deferred
	Translation			Pension and
(In millions)	Adjustments			Other			Total
Balance at December 30, 2023	$	(31	)	$	(83	)	$	(114	)
Other comprehensive income (loss) activity		(4	)		1			(3	)
Balance at March 30, 2024	$	(35	)	$	(82	)	$	(117	)

TREASURY STOCK

(In millions)
   Foreign
Currency
Translation
Adjustments    Change in
Deferred
Pension and
Other    Total
Balance at December 31, 2016
   $ (67 )    $ (62 )    $ (129 )
Other comprehensive income activity before reclassifications
   24    (1 )    23
Reclassification of foreign currency translation adjustments realized upon disposal of business
   (1 )    —      (1 )






Balance at September 30, 2017
   $ (44 )    $ (63 )    $ (107 )

~~Treasury Stock~~

In ~~May 2016,~~October 2022, the ~~Company’s~~ Board of Directors ~~authorized~~approved a stock repurchase program of up to ~~$100~~$1 billion, available through December 31, 2025 which replaced the then existing $600 million ~~of its outstanding common stock.~~stock repurchase program effective November 3, 2022. In ~~August 2016,~~February 2024, the Company’s Board of Directors ~~authorized increasing the share~~approved a new stock repurchase program of up to ~~$250 million. The~~$1 billion of its common stock, available through March 31, 2027, which replaced the then existing $1 billion stock repurchase ~~authorization permits the Company to repurchase stock fromtime-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.~~program. The new authorization ~~extends to the end of 2018 and~~ may be suspended or discontinued at any time. The exact ~~number and~~ timing of share repurchases will depend on market conditions and other factors, and will be funded through ~~existing liquidity.~~available cash balances.

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

~~In the third quarter andyear-to-date~~ ~~2017, the~~The Company ~~purchased approximately 4 million~~repurchased 957 thousand shares of its common stock at a cost of ~~$17~~$50 million in the first quarter of 2024. As of March 30, 2024, $972 million remains available for stock repurchases under the current stock repurchase program. Subsequent to the end of the first quarter of 2024 and ~~8 million~~through May 1, 2024, the Company repurchased 703 thousand shares of its common stock at a cost of ~~$34~~$36 million.

At March 30, 2024, there were 31 million ~~respectively, under the stock repurchase program. As~~shares of September 30, 2017, $84 million remains available for repurchase under the current authorization. Under the Company’s Term Loan Credit Agreement, the Company’s ability to continue to repurchase its common stock ~~is significantly restricted. Refer to Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for more information.~~

~~Dividends on Common Stock~~

~~In the third quarter andyear-to-date~~ ~~2017, the~~held in treasury. The Company’s Board of Directors declared quarterly cash dividends of $0.025 per share on its common stock, resulting in total cash payments of $13 million and $39 million, respectively. Dividends have been recorded as a reduction to additional~~paid-in~~ ~~capital as the Company is in an accumulated deficit position. Additionally, payment of dividends is permitted under the Company’s~~Third Amended Credit Agreement ~~provided that the Company has the required minimum liquidity or fixed charge ratio,~~permits restricted payments, such as common stock repurchases, but may be limited if the Company does not meet the ~~necessary~~required minimum liquidity or fixed charge coverage ratio requirements. ~~Additionally, under~~Refer to Note 6 for additional information about the Company’s ~~Term Loan~~compliance with covenants.

DIVIDENDS ON COMMON STOCK

The Company did not declare any cash dividends in the first quarter of 2024. The Company does not anticipate declaring cash dividends in the foreseeable future. The Company’s Third Amended Credit Agreement ~~payment of~~permits restricted payments, such as dividends, ~~is permitted subject~~but may be limited if the Company does not meet the required minimum liquidity or fixed charge coverage ratio requirements. Refer to Note 6 for additional information about the Company’s compliance with ~~an annual limit.~~covenants.

THE ODP CORPORATION

~~NOTE 8. EARNINGS PER SHARE~~

~~The following table represents the calculation of net earnings per common share – basic and diluted:~~

   Third Quarter    Year-to-Date
(In millions, except per share amounts)    2017    2016    2017    2016
Basic Earnings Per Share

Numerator:

Net income from continuing operations
   $ 98    $ 330    $ 195    $ 624
Income (loss) from discontinued operations, net of tax
   (6 )    (137 )    38    (175 )








Net income
   $ 92    $ 193    $ 233    $ 449








Denominator:

Weighted-average shares outstanding
   518    535    517    545
Basic earnings (loss) per share:

Continuing operations
   $ 0.19    $ 0.62    $ 0.38    $ 1.15
Discontinued operations
   (0.01 )    (0.26 )    0.07    (0.32 )








Net earnings per share
   $ 0.18    $ 0.36    $ 0.45    $ 0.82








Diluted Earnings Per Share

Numerator:

Net income from continuing operations
   $ 98    $ 330    $ 195    $ 624
Income (loss) from discontinued operations, net of tax
   (6 )    (137 )    38    (175 )








Net income
   $ 92    $ 193    $ 233    $ 449








Denominator:

Weighted-average shares outstanding
   518    535    517    545
Effect of dilutive securities:

Stock options and restricted stock
   13    10    15    8








Diluted weighted-average shares outstanding
   531    545    532    553
Diluted earnings (loss) per share

Continuing operations
   $ 0.19    $ 0.61    $ 0.37    $ 1.13
Discontinued operations
   (0.01 )    (0.25 )    0.07    (0.32 )








Net diluted earnings per share
   $ 0.17    $ 0.35    $ 0.44    $ 0.81

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

~~Awards of stock options and nonvested shares representing approximately 4 million additional shares of common stock were outstanding for the third quarter andyear-to-date~~ ~~2017, respectively, and approximately 6 million and 7 million for the third quarter andyear-to-date~~ ~~2016, respectively, but were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive.~~

NOTE 9.8. EMPLOYEE BENEFIT PLANS

~~Pension and Other Postretirement Benefit Plans –~~Net periodic pension benefits for the North America and UK pension plans and other postretirement benefit plans (the “Plans”) are recorded at the Corporate level. The service cost for the Plans are reflected in Selling, general and administrative expenses, and the other components of net periodic pension benefits are reflected in Other income, net, in the Condensed Consolidated Statements of Operations.

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS – NORTH AMERICA

The components of net periodic pension benefit for the Company’s North America pension plans are as follows:


	First Quarter
(In millions)	2024			2023
Interest cost	$	7		$	8
Expected return on plan assets		(7	)		(9	)
Amortization of gain		—			(1	)
Net periodic pension benefit	$	—		$	(2	)

   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Service cost
   $ 1    $ 2    $ 4    $ 5
Interest cost
   10    11    30    34
Expected return on plan assets
   (12 )    (14 )    (36 )    (41 )








Net periodic pension benefit
   $ (1 )    $ (1 )    $ (2 )    $ (2 )

~~Year-to-date~~ ~~2017, $15~~The North America qualified pension plan is in a net asset position and included in Other assets in the Condensed Consolidated Balance Sheets at March 30, 2024 and December 30, 2023. The North America nonqualified pension plan is in a net liability position and included in Pension and postretirement obligations, net in the Condensed Consolidated Balance Sheets at March 30, 2024 and December 30, 2023. In the first quarter of 2024, $1 million of cash contributions were made to the North America pension ~~plans, which included a $13 million voluntary accelerated contribution to one of the qualified plans to reduce the costs associated with the plan.~~plans. The Company expects to make additional cash contributions of approximately $1$1 million to the North America pension plans during the remainder of ~~2017.~~2024.

~~Pension Plan~~PENSION PLAN – ~~United Kingdom~~UNITED KINGDOM

~~As part of the European Business sale, the Company retained the United Kingdom (“UK”) defined benefit pension plan.~~ The components of net periodic pension benefit for the Company’s pension plan in the United Kingdom (“UK”) are as follows:


	First Quarter
(In millions)	2024			2023
Interest cost	$	2		$	2
Expected return on plan assets		(1	)		(2	)
Net periodic pension benefit	$	1		$	—

The Company has a frozen defined benefit pension plan in the United Kingdom. In July 2023, in accordance with applicable UK pension regulations, Trustees of the UK pension plan ~~are as follows:~~entered into an agreement with an insurer for the bulk annuity purchase of the plan, covering 100% of the plan’s members. This agreement, or buy-in, resulted in an exchange of plan assets for an annuity that covers the plan’s future projected benefit obligations. The Company anticipates the buyout of the plan and transfer of future benefit obligations of plan participants to be completed with existing plan funds in 2025. Accordingly, the Company does not expect the transaction to result in material cash inflows or outflows. At the completion of the buy-out, the Company will remove the assets and liabilities of the UK pension plan from its Consolidated Balance Sheet and a final non-cash plan settlement loss will be included in net periodic pension cost.

   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Service cost
   $ —      $ —      $ —      $ —
Interest cost
   2    2    5    6
Expected return on plan assets
   (3 )    (3 )    (9 )    (9 )








Net periodic pension benefit
   $ (1 )    $ (1 )    $ (4 )    $ (3 )

The UK pension plan is in a net asset ~~position.Year-to-date~~ ~~2017,~~position and included in Other assets in the Condensed Consolidated Balance Sheets at March 30, 2024. There was no net funded amount as of December 30, 2023. In the first quarter of 2024, cash contributions of $2 $1million were made to the UK pension plan.

~~Net periodic pension benefits for~~ The Company anticipates making further cash contributions of $1 million to the ~~North America and~~ UK pension ~~and other postretirement benefit plans are recorded in Selling, general and administrative expenses at~~plan during the ~~corporate level in the Condensed Consolidated Statements~~remainder of ~~Operations.~~2024.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

NOTE ~~10.~~9. FAIR VALUE MEASUREMENTS

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In developing its fair value estimates, the Company uses the following hierarchy:


Level 1:		Quoted prices in active markets for identical assets or liabilities.

Level 2:		Observable ~~market based~~market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:		Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows or option pricing models using the Company’s own estimates and assumptions or those expected to be used by market participants.

~~OFFICE DEPOT, INC.~~RECURRING FAIR VALUE MEASUREMENTS

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

~~Recurring Fair Value Measurements~~

In accordance with GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company’s assets and liabilities that are adjusted to fair value on a recurring basis are money market funds that qualify as cash equivalents, and derivative financial ~~instruments. As of September 30, 2017, the~~instruments, which may be entered into to mitigate risks associated with changes in foreign currency exchange rates, fuel and other commodity prices and interest rates. The Company did not have ~~any money market funds that had floating net asset values that required measurement.~~

   Level 1
(In millions)    September 30,
2017    December 31,
2016
Money market funds
   $ —      $ 135

The fair values of the Company’s foreign currency contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current interest rates, exchange rates and commodity prices. The values are based on market-based inputs or unobservable inputs that are corroborated by market data. Amounts associated with these derivative financial instruments ~~are considered Level 1 measurements, but were not significant for~~during the reported periods. At September 30, 2017, and December 31, 2016, Accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets included less than $1 million related to derivative foreign currency and fuel contracts.first quarter of 2024.

~~Nonrecurring Fair Value Measurements~~NONRECURRING FAIR VALUE MEASUREMENTS

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records certain assets and liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. ~~The~~In the first quarter of 2024, the Company recognized ~~$1 million of~~ asset impairment charges of $6 million. Of these asset impairment charges, $5 million related to the impairment of operating lease right-of-use (“ROU”) assets associated with ~~continuing~~the Company’s retail store locations, with the remainder relating to impairment of fixed assets. In the first quarter of 2023, the Company recognized asset impairment charges of $4 million. Of these asset impairment charges, $3 million related to the impairment of operating lease ROU assets associated with the Company’s retail store locations, with the remainder relating to impairment of fixed assets and other impairment. All impairment charges discussed in the sections below are presented in Asset impairments in the Condensed Consolidated Statements of Operations.

The Company regularly reviews retail store assets for impairment indicators at the individual store level, as this represents the lowest level of identifiable cash flows. When indicators of impairment are present, a recoverability analysis is performed which considers the estimated undiscounted cash flows over the retail store’s remaining life and uses input from retail operations and accounting and finance personnel. These inputs include management’s best estimates of retail store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows that can naturally include judgments about how current initiatives will impact future performance. The assumptions used within the recoverability analysis for the retail stores were updated to consider current quarter retail store operational results and formal plans for future retail store closures as part of the Company’s restructuring programs, including the probability of closure at the retail store level. While it is generally understood that closures will approximate the store’s lease termination date, it is possible that changes in store performance or other conditions could result in future changes in assumptions utilized. These assumptions reflected declining sales over the forecast period, and gross margin and operating cost assumptions that are consistent with recent actual results and consider plans for future initiatives.

If the undiscounted cash flows of a retail store cannot support the carrying amount of its assets, the assets are impaired if necessary and written down to estimated fair value. The fair value of retail store assets is determined using a discounted cash flow analysis which uses Level 2 unobservable inputs that are corroborated by market data such as independent real estate valuation opinions. Specifically, the analysis uses assumptions of potential rental rates for each retail store location which are based on market data for comparable locations. These estimated cash flows used in the~~year-to-date~~ ~~2017, compared~~ first quarter of 2024 impairment calculation were discounted at a weighted average discount rate of 8%.

The Company will continue to $9evaluate initiatives to improve performance and lower operating costs. There are uncertainties regarding the impact of supply chain and macroeconomic conditions on the future results of operations, including the forecast period used in the recoverability analysis. To the extent that forward-looking sales and operating assumptions are not achieved and are subsequently reduced, additional impairment charges may result. However, at the end of the first quarter of 2024, the impairment recognized reflects the Company’s best estimate of future performance.

In addition to its retail store assets, the Company also regularly evaluates whether there are impairment indicators associated with its other long-lived assets. The Company did not identify any impairment indicators for these long-lived assets as of March 30, 2024, and as a result, there were no associated impairment charges.

THE ODP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

The Company had assets held for sale of $7 million as of March 30, 2024, consisting of $6 million in ~~the third quarter~~land and~~year-to-date~~ ~~2016, which were based on Level 3 measurements.~~ $1 million in other property.

~~The preliminary purchase price allocation performed in connection with the acquisition during the third quarter of 2017 was primarily based on Level 3 inputs.~~OTHER FAIR VALUE DISCLOSURES

~~Other Fair Value Disclosures~~

The fair values of cash and cash equivalents, receivables, trade accounts payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

The following table presents information about financial instruments at the balance sheet dates indicated.


	March 30,				December 30,
	2024				2023
	Carrying		Fair		Carrying		Fair
(In millions)	Amount		Value		Amount		Value
Financial assets:
Company-owned life insurance	$	136	$	136	$	138	$	138
Financial liabilities:
Long-term debt:
New Facilities loans under the Third Amended Credit Agreement, due 2025		—		—		53		53
Revenue bonds, due in varying amounts periodically through 2029		75		76		75		76
American & Foreign Power Company, Inc. 5% debentures, due 2030		16		14		16		14

   September 30, 2017    December 31, 2016
(In millions)    Carrying
Value    Fair
Value    Carrying
Value    Fair
Value
Financial assets

Timber notes receivable
   $ 869    $ 875    $ 885    $ 884
Company-owned life insurance
   88    88    89    89
Financial liabilities

Recourse debt

Revenue bonds, due in varying amounts periodically through 2029
   186    186    186    181
American & Foreign Power Company, Inc. 5% debentures, due 2030
   14    14    14    12
Non-recourse debt
   781    788    798    800

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

~~Timber notes receivable:~~ ~~Fair value is determined as the present value of expected future cash flows discounted at the current interest rate for loans of similar terms with comparable credit risk (Level 2 measure).~~

•

Company-owned life ~~insurance:~~insurance: In connection with the ~~Merger,~~2013 OfficeMax merger, the Company acquired ~~company owned~~company-owned life insurance policies on certain former employees. The fair value of the company-owned life insurance policies is derived using determinable net cash surrender value, which is the cash surrender value less any outstanding loans (Level 2 measure). Death benefits received on company-owned life insurance policies, which are tax-free at payout, typically exceed their cash surrender values.

~~Recourse debt:~~ ~~Recourse~~•

Long-term debt: Long-term debt, for which there were no transactions on the measurement date, was valued based on quoted market prices near the measurement date when available or by discounting the future cash flows of each instrument using rates based on the most recently observable trade or using rates currently offered to the Company for similar debt instruments of comparable maturities (Level 2 measure).

~~Non-recourse~~ ~~debt:~~ ~~Fair value is estimated by discounting the future cash flows~~ The carrying amount of the ~~instrument at~~New Facilities loans under the Third Amended Credit Agreement approximates fair value because the interest rates ~~currently available~~vary with market interest rates. Refer to Note 6 for additional information about the ~~Company for similar instruments of comparable maturities (Level 2 measure).~~Third Amended Credit Agreement.

NOTE ~~11. COMMITMENTS AND~~10. CONTINGENCIES

~~Legal Matters~~LEGAL MATTERS

The Company is involved in litigation arising in the normal course of business. While, from time to time, claims are asserted that make demands for a large sum of money (including, from time to time, actions which are asserted to be maintainable as class action suits), the Company does not believe that contingent liabilities related to these matters (including the matters discussed below), either individually or in the aggregate, will materially affect the Company’s financial position, results of operations, or cash flows.

In ~~addition, in~~ the ordinary course of business, sales to and transactions with government customers may be subject to lawsuits, investigations, audits and review by governmental authorities and regulatory agencies, with which the Company cooperates. Many of these lawsuits, investigations, audits and reviews are resolved without material impact to the Company. While claims in these matters may at times assert large demands, the Company does not believe that contingent liabilities related to these matters, either individually or in the aggregate, will materially affect its financial position, results of operations, or cash flows.

In addition to the foregoing, OfficeMax is named as a defendant in a number of lawsuits, claims, and proceedings arising out of the operation of certain paper and forest products assets prior to those assets being sold in 2004, for which OfficeMax agreed to retain responsibility. Also, as part of that sale, OfficeMax agreed to retain responsibility for all pending, or threatened ~~proceedings~~ and future proceedings alleging asbestos-related injuries arising out of the operation of the paper and forest products assets prior to the closing of the sale. The Company has made provision for losses with respect to the pending proceedings. Additionally, as of ~~September~~March 30, ~~2017,~~2024, the Company has ~~provided~~made provision for environmental liabilities with respect to certain sites where hazardous substances or other contaminants are or may be located. For these ~~environmental and toxic tort~~combined liabilities, ~~our~~the Company’s estimated range of reasonably possible losses was approximately ~~$10~~$15 million to ~~$25~~$25 million. The Company regularly monitors its estimated exposure to these liabilities. As additional information becomes known, these estimates may change, however, the Company does not believe any of these OfficeMax retained proceedings are material to the Company’s financial position, results of operations, or cash flows.

THE ODP CORPORATION

~~OFFICE DEPOT, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) – (Continued)

NOTE 11. DISCONTINUED OPERATIONS

~~NOTE 12. SEGMENT INFORMATION~~

~~Following~~The Company sold its CompuCom Division on December 31, 2021, through a transaction that was structured and accounted for as an equity sale. The disposition represented a strategic shift that had a major impact on the ~~decision~~Company’s operations and financial statements, and as a result the operating results and cash flows related to ~~sell substantially all of~~ the ~~operations that previously were presented as the International~~CompuCom Division the Company has two operating segments which are also its reportable segments: the Retail Division and the Business Solutions Division. The Retail Division includes retail stores in the continental United States, Puerto Rico and the U.S. Virgin Islands. The Retail Division and the Business Solutions Division sell supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom and facilities products, and office furniture. Stores also have a copy and print center offering printing, reproduction, mailing and shipping services, and the print needs for retail and business customers are also facilitated through regional print production centers. The Business Solutions Division customers are served through dedicated sales forces, catalogs, telesales, and electronically through its internet sites across the continental United States, Puerto Rico, U.S. Virgin Islands, and Canada.

~~The retained operations previously included in the International Division are not significant and~~ have been presented as ~~Other.~~discontinued operations. The related Securities Purchase Agreement provided for consideration consisting of a cash purchase price, which was settled for $104 million in the fourth quarter of 2022, an interest-bearing promissory note in the amount of $55 million, and an earn-out provision providing for payments of up to $125 million in certain circumstances. The promissory note accrues interest at six percent per annum, payable on a quarterly basis in cash or in-kind, and is due in full on June 30, 2027. Under the earn-out provision, if the purchaser receives dividends or sale proceeds from the CompuCom business equal to (i) three times its initial capital investment in the CompuCom business plus (ii) 15% per annum on subsequent capital investments, the Company will be entitled to 50% of any subsequent dividends or sale proceeds up to and until the Company has received an aggregate of $125 million.

At the closing date of the transaction, on December 31, 2021, the Company had previously received $95 million from the purchaser. Of the additional $9 million to be received to settle the total cash purchase price, $5 million was received in the first quarter of 2023, and the promissory note was amended in February 2023 to include the remaining $4 million, bringing its principal balance to $59 million. The ~~office supply products~~earn-out provision was identified to be a derivative in accordance with ASC 815, and ~~services offered across~~its fair value was determined using Monte Carlo simulation as $9 million. The promissory note and the ~~segments~~earn-out are ~~similar. Division operating income is determined based on the measure~~non-current receivables as of ~~performance reported internally to manage the business and for resource allocation. This measure charges to the respective Divisions those expenses considered directly or closely~~March 30, 2024.

The Company did not have any financial results related to their operations and allocates support costs. Certain operating expenses and credits are not allocated to the Divisions including Merger, restructuring and other operating (income) expenses, net, and Asset impairments, as well as expenses and credits retained at the corporate level, including certain management costs and legacy pension and environmental matters. Other companies may charge more or less of these items to their segments and results may not be comparable to similarly titled measures used by other entities.

~~The following is a summary of sales and operating income (loss) by each of the Divisions and Other, reconciled to consolidated totals, after the elimination of the~~ discontinued operations ~~for all periods.~~

   Sales
   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Retail Division
   $ 1,329    $ 1,482    $ 3,799    $ 4,237
Business Solutions Division
   1,288    1,348    3,851    4,046
Other
   3    6    9    12








Total
   $ 2,620    $ 2,836    $ 7,659    $ 8,295








   Operating Income (Loss)
   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Retail Division
   $ 82    $ 105    $ 214    $ 237
Business Solutions Division
   71    81    193    190
Other
   (1 )    —      (2 )    1








Total
   $ 152    $ 186    $ 405    $ 428

~~OFFICE DEPOT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) – (Continued)~~

~~A reconciliation~~on its Condensed Consolidated Statements of ~~the measure of Division operating income to Consolidated income from continuing operations before income taxes is as follows:~~

   Third Quarter Year-to-Date
(In millions)    2017 2016 2017 2016
Total Division operating income
   $ 152 $ 186 $ 405 $ 428
Add/(subtract):

Asset impairments
   —   (9 ) (1 ) (9 )
Merger, restructuring and other operating income (expenses), net
   (22 ) (31 ) (62 ) 122
Unallocated expenses
   (22 ) (29 ) (60 ) (68 )
Interest income
   6 6 17 17
Interest expense
   (13 ) (19 ) (39 ) (63 )
Loss on extinguishment of debt
   —   (15 ) —   (15 )
Other income (expense), net
   (1 ) 1 (2 ) 1


Income from continuing operations before income taxes
   $ 100 $ 90 $ 258 $ 413

~~The components of goodwill by segment are provided~~Operations in the ~~following table:~~

(In millions)    Retail
Division    Business
Solutions
Division    Total
Balance as of December 31, 2016
   $ 78    $ 285    $ 363
Acquisition
   —      16    16






Balance as of September 30, 2017
   $ 78    $ 301    $ 379

~~Refer to Note 2 for additional information on the acquisition during the third~~first quarter of ~~2017.~~

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~When using this report,~~2024 or the ~~terms “Office Depot,” “Company,” “we,” “us” and “our” mean Office Depot, Inc. and all entities included in our Condensed Consolidated Financial Statements.~~

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 Condensed Consolidated Financial Statements and the Notes to those statements included in Item 1 of this Quarterly Report on Form~~10-Q,~~ ~~as well as our 2016 Form10-K.~~

~~RESULTS OF OPERATIONS~~

~~OVERVIEW~~

~~The Company~~

Office Depot together with its subsidiaries, is a provider of office supplies, business products and services delivered through an omnichannel platform. We currently operate under several banners, including Office Depot^® ~~and OfficeMax~~^® ~~and utilize proprietary company and product brand names. As of September 30, 2017, we sold to customers throughout North America and the Asia/Pacific region.~~

~~Acquisitions~~

~~To further our strategic direction to transform into a more services-driven platform and strengthen our core business operations, we acquired five businesses during and subsequent to the third~~first quarter of 2017, including CompuCom Systems, Inc. (“CompuCom”), a market leading provider of award winning information technology (“IT”) services, products, and solutions to North American enterprise organizations. In August 2017, and subsequent to2023.

NOTE 12. SUBSEQUENT EVENTS

On April24, 2024, the end of our reporting period in October 2017, we acquired four small independent regional businesses in the United States. These acquisitions were not individually material and, in the aggregate, total costs for the transactions were approximately $100 million, subject to certain customary post-closing adjustments. The transactions were funded with cash~~on-hand.~~ ~~The acquisitions will provide us with improved access to small,mid-market~~ and large business customers in select geographic markets within the United States across a diverse assortment, including cleaning and breakroom, furniture and office supplies. The operating results of these companies are combined with our operating results subsequent to their purchase dates, and are included in the Business Solutions Division segment.

On November 8, 2017, subsequent to the end of our reporting period, we completed the acquisition of CompuCom. We acquired all of the capital stock of CompuCom for approximately $940 million, funded with a new $750 million~~5-year~~ ~~term loan facility, approximately 44 million shares of Office Depot common stock with an approximate market value of $135 million, and approximately $55 million of cash on hand.~~

~~CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers andon-site~~ IT professionals. The acquisition of CompuCom is expected to accelerate our ability to pursue topline growth as it provides the opportunity to offer world class IT support services to all our customers, including enterprise, small and medium sized businesses.

We are currently evaluating the impact of this acquisition on our reportable segments. The operating results of CompuCom will be combined with our operating results subsequent to the purchase date of November 8, 2017.

~~Disposition of the International Division – Discontinued Operations~~

~~In September 2016, our~~Company’s Board of Directors ~~committed~~approved management’s commitment to a plan to sell ~~substantially all of our international operations, formerly reported as the International~~its Varis Division through ~~four~~a single disposal ~~groups (Europe, South Korea, Australia and New Zealand (“Oceania”) and mainland China).~~

On December 31, 2016, we completed the sale of our European Business to The AURELIUS Group (the “Purchaser”). We retained the assets and obligations of a frozen defined benefit pension plan in the United Kingdom. As part of the sales and purchase agreement (the “SPA”), approximately $70 million was accrued at December 31, 2016, under a working capital adjustment provision,

of which $35 million was paid during the first quarter of 2017 and an additional $37 million was paid to the purchaser during the third quarter of 2017, which included approximately $2 million related to a change in the foreign currency rate and accrued interest on the unpaid portion.

We completed the sale of our business in South Korea on April 26, 2017, and recognized a gain on the sale of $12 million. Additionally, we completed the sale of our business in mainland China on July 28, 2017, and recognized a cumulative loss of $9 million associated with the sale, of which $10 million was recognized in the first half of 2017 and was partially offset by a $1 million gain recognized at the time of sale. We retained the sourcing and trading operations of the former International Division, which are presented as Other in Note 12, “Segment Information,” of the Condensed Consolidated Financial Statements.

In April 2017, we announced that we had entered into a definitive sale and purchase agreement to sell our businesses in Australia and New Zealand. The Commerce Commission has recently filed proceedings in the High Court at Auckland seeking an injunction of the contemplated transaction. The trial date has not yet been set and the sale remains subject to regulatory approval.

~~Refer to Note 4 of the Condensed Consolidated Financial Statements for additional information about the discontinued operations.~~

~~Continuing Operations~~

We operate through two reportable segments (or “Divisions”): the Retail Division and the Business Solutions Division. The Retail Division includes our retail stores in the continental United States, Puerto Rico and the U.S. Virgin Islands. The Retail Division and the Business Solutions Division sell office supplies, technology products and solutions, business machines and related supplies, print, cleaning, breakroom and facilities products, and office furniture. Stores also have a copy and print center offering printing, reproduction, mailing and shipping services, and the print needs for the retail and business customers are also facilitated through regional print production centers. The Business Solutions Division customers are served through dedicated sales forces, catalogs, telesales, and electronically through our Internet sites across the continental United States, Puerto Rico, U.S. Virgin Islands, and Canada.

~~A summary of factors impacting operating results of the continuing operations for the13-week~~ ~~and39-week~~ ~~periods ended September 30, 2017 (also referred to as “the third quarter of 2017” and “theyear-to-date~~ ~~2017,” respectively) and September 24, 2016 (also referred to as “the third quarter of 2016” and “theyear-to-date~~ ~~2016,” respectively), is provided below. Additional discussion of the 2017 third quarter andyear-to-date~~ ~~results is provided in the narrative that follows this overview.~~

~~Sales reported in the third quarter andyear-to-date~~ 2017 compared to the same period of the prior year were significantly affected by planned retail store closures and declining comparable store sales in the Retail Division. Sales in our Business Solutions Division were negatively impacted by continuing competitive pressures and the continued impact of prior period customer losses.

During the third quarter of 2017, the south-central and southeast areas of the United States, as well as Puerto Rico and the U.S. Virgin Islands, were impacted by three powerful hurricanes that disrupted normal operations at approximately 220 of our retail stores and impacted sales in our Business Solutions Division. While most of these stores have resumed operations, many of these stores continue to be impacted by the hurricanes, either as a result of damage incurred, or they are experiencing declines in customer traffic driven by reduced hours and disrupted shopping patterns in those areas. We are in the process of assessing the damage to store assets and inventory. As of the date of this filing, we have not completed our assessment of the full economic impact of the hurricanes, including future impact of lost sales in the affected regions.

   Third Quarter Year-to-Date
(In millions)    2017    2016    Change 2017    2016    Change
Retail Division
   $ 1,329    $ 1,482    (10 )% $ 3,799    $ 4,237    (10 )%
Change in comparable store sales
         (5 )%       (5 )%
Business Solutions Division
   1,288    1,348    (4 )% 3,851    4,046    (5 )%
Other
   3    6    9    12









Total
   $ 2,620    $ 2,836    (8 )% $ 7,659    $ 8,295    (8 )%

Total Company gross profit decreased by $93 million in the third quarter of 2017 compared to the same period in the prior year. The decrease reflects lower sales and a 146 basis point decrease in gross profit as a percentage of sales (“gross margin”). The decrease in the gross margin reflects lower gross margins in both the Retail and Business Solutions Divisions, and is primarily due to certain promotion and integration activities in our Business Solutions Division as well as the rate of

~~decrease in sales for the quarter exceeding the rate of reduction in store and supply chain costs which are more fixed in nature. In theyear-to-date~~ 2017, total Company gross profit decreased by $200 million compared to the same period in the prior year, primarily due to lower sales and a 56 basis point decrease in gross margin. The decrease in gross margin relates to both the Business Solutions Division and the Retail Division.

~~Total Company selling, general and administrative expenses decreased in the third quarter and theyear-to-date~~ 2017 compared to the same period in 2016, reflecting the closure of stores, lower payroll and lower general and administrative expenses primarily related to actions taken as part of our Comprehensive Business Review and continued Merger synergies.

~~Merger, restructuring and other operating (income) expense, net in the third quarter and theyear-to-date~~ ~~2017, amounted to an expense of $22 million and $62 million, respectively, compared to an expense of $31 million and income of $122 million in the third quarter and theyear-to-date~~ 2016, respectively. In the third quarter of 2017, we incurred $6 million of expenses, net, related to merger activities and $15 million of expenses associated with the Comprehensive Business Review initiated in August 2016. The~~year-to-date~~ 2016 includes $250 million of income related to the Termination Fee payment received from Staples during the period. Additional integration and restructuring expenses are expected to be incurred in future periods.

~~Our effective tax rates of 2% and 24% for the third quarter and theyear-to-date~~ 2017, respectively, were primarily impacted by the reduction of certain valuation allowances and the effect of state taxes and nondeductible expenses. The negative effective tax rates of (267%) and (51%) for the third quarter and the~~year-to-date~~ 2016, respectively, were also primarily impacted by the reduction of certain valuation allowances on the U.S. deferred tax assets during the periods. The change in effective tax rates year over year primarily reflects the reversal of a substantial portion of our U.S. federal and state valuation allowance in the~~year-to-date~~ ~~2016 versus a smaller reduction in 2017.~~

Diluted earnings per share from continuing operations was $0.19 in the third quarter of 2017 compared to $0.61 in the third quarter of 2016. Diluted earnings per share from continuing operations was $0.37 in the~~year-to-date~~ ~~2017 compared to $1.13 in theyear-to-date~~ ~~2016.~~

Diluted loss per share from discontinued operations was $0.01 in the third quarter of 2017 compared to a loss of $0.25 per share in the third quarter of 2016. Diluted earnings per share from discontinued operations was $0.07~~year-to-date~~ ~~2017 compared to a loss of $0.32 per shareyear-to-date~~ 2016. The 2017 amounts reflect a $12 million gain on the sale of our business in South Korea, a $9 million loss associated with the sale of our mainland China business and other adjustments related to the agreement to sell our businesses in Australia and New Zealand at amounts higher than previous estimates.

~~Net diluted earnings per share was $0.17 in the third quarter of 2017 compared to earnings of $0.35 per share in the third quarter of 2016. Net diluted earnings per share was $0.44year-to-date~~ ~~2017 compared to earnings of $0.81 per shareyear-to-date~~ ~~2016.~~

~~We began paying quarterly dividends in the third quarter of 2016. In the third quarter and theyear-to-date~~ 2017, we paid quarterly cash dividends on our common stock of $0.025 per share and $0.075 per share, respectively, resulting in total cash payments of $13 million and $39 million, respectively. In the third quarter and~~year-to-date~~ ~~2016, we paid a quarterly cash dividend on our common stock of $0.025 per share, resulting in a total cash payment of $13 million.~~

~~OPERATING RESULTS~~

~~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.~~

~~RETAIL DIVISION~~

   Third Quarter Year-to-Date
(In millions)    2017 2016 2017 2016
Sales
   $ 1,329 $ 1,482 $ 3,799 $ 4,237
% change from prior year
   (10 )% (8 )% (10 )% (8 )%
Division operating income
   $ 82 $ 105 $ 214 $ 237
% of sales
   6 % 7 % 6 % 6 %
Comparable store sales decline
   (5 )% (2 )% (5 )% (2 )%

Sales in our Retail Division decreased 10% in the third quarter of 2017 compared to the same period in the prior year. The decrease resulted from planned store closures over the past twelve months and a 5% decline in comparable store sales in the quarter, partially offset by the positive impact of sales from omnichannel programs. The sales were also negatively impacted due to the sales disruption caused by the three hurricanes discussed above. In August 2016, we announced plans to close an additional 300 retail locations over a three-year period as part of the Comprehensive Business Review. We closed 72 stores under this program in 2016. During the third quarter and~~year-to-date~~ 2017, the Retail Division closed 4 and 37 stores, respectively, resulting in cumulative closures of 109 under this program. We ended the third quarter of 2017 with a store count of 1,404. We currently plan to close approximately 60 stores in total during 2017.

~~Comparable store sales in the third quarter and theyear-to-date~~ 2017 decreased 5%, respectively, reflecting lower store traffic, transaction counts and average order values during this year’s back to school period. Comparable store sales decreased across most of our primary product categories, including ink, toner, computers and technology related products, partially offset by increased sales in cleaning and break room products.

Our comparable store sales relate to stores that have been open for at least one year. Stores are removed from the comparable sales calculation one month prior to closing, as sales during that period are largely~~non-comparable~~ clearance activity. Stores are also removed from the comparable sales calculation during periods of store remodeling, store closures due to hurricanes or natural disasters, or if significantly downsized. Our measure of comparable store sales has been applied consistently across periods, but may differ from measures used by other companies.

The Retail Division reported operating income of $82 million in the third quarter of 2017, compared to $105 million in the third quarter of 2016. The decrease in the Division’s operating income in the third quarter of 2017 reflects the negative impact of lower sales, which were partially offset by lower occupancy costs and selling, general and administrative expenses, including payroll and other store expenses. The decrease in expenses is primarily a result of a smaller base of stores, operational efficiencies, and cost control initiatives.

~~Division operating income declinedyear-to-date~~ ~~2017 as compared toyear-to-date~~ ~~2016, although it was flat as a percentage of sales. The factors discussed above affecting the third quarter of 2017 are also reflective of those impacting theyear-to-date~~ ~~2017 compared to the same period of 2016. The year to date 2017 decrease in expenses was also impacted by favorable legal settlements.~~

Charges associated with the store closure programs are reported in Merger, restructuring and other operating (income) expenses, net in the Condensed Consolidated Statements of Operations. These charges are reflected in corporate reporting, and not included in the determination of the Retail Division’s operating income.

~~BUSINESS SOLUTIONS DIVISION~~

   Third Quarter Year-to-Date
(In millions)    2017 2016 2017 2016
Sales
   $ 1,288 $ 1,348 $ 3,851 $ 4,046
% change from prior year
   (4 )% (6 )% (5 )% (7 )%
Division operating income
   $ 71 $ 81 $ 193 $ 190
% of sales
   6 % 6 % 5 % 5 %

The decline in sales was primarily driven by continued competitive pressures, prior period customer losses in the contract channel, the ongoing reduction in catalog sales through our call centers, the impact of sales from omnichannel programs that are recorded in the Retail Division, as well as the negative impact of the three hurricanes discussed above. The acquisition in the third quarter of 2017group. Although management did not ~~have~~bring forth a material impact on sales. On a product category basis, sales increased in cleaning/breakroom, and furniture, remained flat in copy and print services, and decreased across the other primary product categories for the third quarter of 2017. For the~~year-to~~ ~~date 2017, sales increased in cleaning/breakroom, remained flat in copy and print services and decreased across the other primary product categories. Enhancements~~specific transaction to the sales model, future product offering expansions and strategic initiatives are anticipated to reduce the rate of sales decline. Additionally, new customers typically require an integration period before reaching their buying potential and having a positive impact on sales trends.

Division operating income was $71 million in the third quarter of 2017 as compared to $81 million in the third quarter of 2016. The decrease in the Division’s operating income in the third quarter of 2017 reflects the negative impact of lower sales, which were partially offset by lower selling, general and administrative expenses. Division operating income increased year-to-date 2017 compared to year-to-date 2016 despite the negative impact of lower sales, as lower selling, general and administrative expenses more than offset the lower sales.

~~OTHER~~

Certain operations previously included in the International Division, including our global sourcing and trading operations in the Asia/Pacific region, which we have retained, are presented as Other. The operations primarily relate to the sale of products to former joint venture partners, and are not material in any period.

~~CORPORATE~~

The line items in our Condensed Consolidated Statements of Operations included as corporate activities are Merger, restructuring and other operating (income) expenses, net and Asset impairments. These activities are managed at the corporate level and, accordingly, are not included in the determination of Division operating income for management reporting or external disclosures. In addition to these charges and credits, certain selling, general and administrative expenses are not allocated to the Divisions and are managed at the corporate level. Those expenses are addressed in the section “Unallocated Expenses” below.

~~There were no asset impairments in the third quarter of 2017. Asset impairmentsyear-to-date~~ ~~2017 was $1 million, compared to $9 million in the third quarter andyear-to-date~~ ~~2016. The table below summarizes the major components of Merger, restructuring and other operating (income) expenses, net, followed by a narrative discussion of the significant matters.~~

~~Merger related expenses~~

Facility closure, contract termination, and other expenses, net primarily relate to facility closure accruals, contract termination cost, gains and losses on asset dispositions, and accelerated depreciation. Facility closure expenses include amounts incurred by us to close retail stores in the United States as part of our real estate strategy, as well as supply chain facilities.~~Year-to-date~~ 2017 and 2016, we recognized gains of $6 million and $1 million, respectively, from the sale of warehouse facilities that had been classified as assets held for sale. The gains are included in Merger, restructuring and other operating (income) expenses, net, as the dispositions were part of the supply chain integration associated with the Merger.

~~Staples Acquisition (income) expenses~~

Expenses incurred in 2016 include retention accruals and transaction costs, including costs associated with regulatory filings and professional fees, offset by the Termination Fee payment. The Staples Merger Agreement was terminated on May 16, 2016, and no further expenses are expected.

~~Comprehensive Business Review and other restructuring expenses~~

Expenses include severance, facility closure costs, contract termination, accelerated depreciation, professional fees, relocation and disposal gains and losses, and other costs associated with the announced closure of approximately 300 retail store locations through 2019, as well as severance and reorganization costs associated with reductions in staff functions. Severance costs related to store closures are being accrued through the anticipated facility closure or termination date and consider timing, terms of existing severance plans, expected employee turnover and attrition.

~~Refer to Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional information.~~

~~Unallocated Expenses~~

We allocate to the Divisions functional support costs that are considered to be directly or closely related to segment activity. Those allocated costs are included in the measurement of Division operating income. Other companies may charge more or less of functional support costs to their segments, and our results therefore may not be comparable to similarly titled measures used by other companies. The unallocated costs primarily consist of the buildings used for our corporate headquarters and personnel not directly supporting the Divisions, including certain executive, finance, audit and similar functions. Unallocated costs also include the pension credit related to the frozen OfficeMax pension and other benefit plans. Additionally, the pension plan in the United Kingdom that has been retained by us in connection with the sale of the European Business, as well as certain general and administrative costs previously allocated to the International Division that have been excluded from the discontinued operations measurement have been included in corporate unallocated costs.

~~Unallocated costs were $22 million and $29 million in the third quarter of 2017 and 2016, respectively, and $60 million and $68 million in theyear-to-date~~ ~~2017 and 2016, respectively. The decrease in the third quarter andyear-to-date~~ 2017 compared to the same periods in 2016 primarily resulted from savings associated with our Comprehensive Business Review and lower incentive costs associated with our overall performance, partially offset by certain executive transition costs.

~~Other Income and Expense~~

   Third Quarter    Year-to-Date
(In millions)    2017    2016    2017    2016
Interest income
   $ 6    $ 6    $ 17    $ 17
Interest expense
   (13 )    (19 )    (39 )    (63 )
Loss on extinguishment of debt
   —      (15 )    —      (15 )
Other income (expense), net
   (1 )    1    (2 )    1

~~Interest expense in the third quarter andyear-to-date~~ ~~2016 includes $5 million and $17 million, respectively, associated with senior secured notes which were redeemed in the third quarter of 2016.~~

~~Discontinued Operations~~

~~Refer to Note 4 of the Notes to the Condensed Consolidated Financial Statements for information regarding the businesses accounted for as discontinued operations.~~

~~Income Taxes~~

~~Our effective tax rates in prior periods have varied considerably as a result of two primary factors, 1) the mix of income and losses across U.S. andnon-U.S.~~ ~~jurisdictions, and 2) the derecognition of valuation allowances against deferred tax assets that were notmore-likely-than-not~~ ~~realizable in the U.S. and certainnon-U.S.~~ jurisdictions. During 2017 and 2016, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing our effective tax rates due to the dispositions of our international businesses and our improved operating results. In addition, during 2017 and 2016 the majority of our deferred tax assets that previously were not realizable, became realizable, thereby, causing significant reductions in previously established valuation allowances. These factors have resulted in our effective tax rates being 2% and 24% for the third quarter and~~year-to-date~~ ~~2017, respectively, and negative effective tax rates of (267%) and (51%) for the third quarter andyear-to-date~~ ~~2016, respectively. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters.~~

During the third quarter of 2017 and 2016, we concluded that it was more likely than not that a benefit from a significant portion of its U.S. federal and state deferred tax assets would be realized. This conclusion was based on a detailed evaluation of all available positive and negative evidence and the weight of such evidence, the current financial position and results of operations for the current and preceding years, and the expectation of continued earnings. We determined that our U.S. federal and state valuation allowance should be reduced by approximately $40 million in 2017, with approximately $37 million in the third quarter as a discrete~~non-cash~~ income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate. We determined that approximately $400 million of its U.S. federal and state valuation allowance should be reduced in 2016, with approximately $240 million in the third quarter as a discrete~~non-cash~~ ~~income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate.~~

We continue to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. We will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods.

We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal and state and local income tax examinations for years before 2016 and 2009, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal and state and local income tax examinations for years before 2013 and 2006, respectively. Our U.S. federal income tax return for 2016 is currently under review. Generally, we are subject to routine examination for years 2008 and forward in our international tax jurisdictions.

It is not reasonably possible that certain tax positions will be resolved within the next 12 months. Additionally, we anticipate that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

~~NEW ACCOUNTING STANDARDS~~

For a description of new applicable accounting standards, refer to Note 1, Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form~~10-Q.~~

~~LIQUIDITY AND CAPITAL RESOURCES~~

At September 30, 2017, we had $788 million in cash and equivalents and another $1.0 billion available under the Amended Credit Agreement (as defined in Note 5 of the Condensed Consolidated Financial Statements) for a total liquidity of approximately $1.8 billion. We currently believe that our cash on hand, availability of funds under the Amended Credit Agreement, and full year cash flows generated from operations will be sufficient to fund our working capital, capital expenditure, debt repayment, common stock repurchases, cash dividends on common stock, and merger integration and restructuring expenses for at least the next twelve months, although it is possible that a portion of our liquidity may be allocated in the future towards acquisitions consistent with our strategic growth initiatives.

At September 30, 2017, no amounts were drawn under the Amended Credit Agreement. There were letters of credit outstanding under the Amended Credit Agreement at the end of the third quarter of 2017 totaling $53 million and we were in compliance with all applicable financial covenants at September 30, 2017.

We have incurred significant expenses related to the merger, integration and restructuring actions associated with the OfficeMax merger, and expect total expenses to be approximately $40 million in 2017, of which $25 million was incurred~~year-to-date~~ 2017. Also, in August 2016, we announced plans to lower operating costs under the Comprehensive Business Review. We expect to deliver over $250 million in annual benefits by the end of 2018, with about~~two-thirds~~ of the total benefits anticipated to be realized in 2017, and estimate we will incur approximately $125 million in costs to implement the cost savings programs. To date we have incurred approximately $90 million of implementation costs. The remaining costs are expected to be incurred through the end of 2017, excluding costs related to planned store closures, which will be recognized over the next two years.

For the full year 2017, we estimate capital expenditures will be approximately $125 million including investments to support our critical priorities and the Store of the Future test formats. In addition, in the third quarter of 2017, we purchased our corporate headquarters for a cash payment of approximately $132 million plus $2 million of closing costs. The purchase eliminated the liability and ongoing expenses related to the capital lease on the building.

To further our strategic direction to transform into a more services-driven platform and strengthen our core business operations, we acquired five businesses during and subsequent to the third quarter of 2017, including CompuCom. During the third quarter of 2017 and subsequent to the end of our reporting period, we acquired four small independent regional businesses in the United States. These acquisitions were not individually material and in the aggregate total costs for the transactions were approximately $100 million in cash, of which the amount paid during the third quarter of 2017 is reflected in cash flows from investing activities in the Other line item within the Condensed Consolidated Statement of Cash Flows. No additional debt obligations were acquired as part of these transactions.

In November 2017, we purchased CompuCom for approximately $940 million, which was funded with a new $750 million 5-year Term Loan Credit Agreement, approximately 44 million shares of our common stock with an approximate market value of $135 million, and approximately $55 million of cash on hand. The loans under the Term Loan Credit Agreement, which were issued with an original issue discount, at an issue price of 97.00%, bear interest at a rate per annum equal to LIBOR plus 7.00% (or an alternative base rate plus 6.00%).

The loans under the Term Loan Credit Agreement amortize quarterly beginning March 15, 2018 at the rate of $18.8 million per quarter, with the balance payable at maturity. The Term Loan Credit Agreement also requires mandatory prepayments in connection with certain asset sales, subject to certain exceptions, as well as additional mandatory prepayments from specified percentages of our excess cash flow. Additionally, the Term Loan Credit Agreement requires us to pay a prepayment fee of (a) 2.00% or (b) 1.00% if the loans thereunder are voluntarily repaid (i) on or prior to the first anniversary of the closing date of the Term Loan Credit Agreement, or (ii) after such date but on or prior to the second anniversary of the closing date of the Term Loan Credit Agreement.

The Term Loan Credit Agreement 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 our ability to declare or pay dividends subject to compliance with an annual limit, 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 is greater than 1.50:1.00 and be tested quarterly.

In addition to the acquisitions disclosed herein, we have evaluated, and expect to continue to evaluate, possible acquisitions and dispositions of certain businesses and assets. Such transactions may be material and may involve cash, our securities or the assumption of additional indebtedness (See Note 2 – Acquisitions to the accompanying Unaudited Consolidated Financial Statements).

~~In August 2016, our~~ Board of Directors, ~~authorized increasing~~management expects to complete the sale within one year. The Company is actively marketing its Varis Division for sale at a price that the Company believes is reasonable in relation to its current ~~common stock repurchase program from $100 million to $250 million. The stock repurchase authorization permits us to repurchase stock fromtime-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 program extends through~~fair value. However, there can be no assurances regarding the ~~end of 2018 and may be suspended or discontinued at any time. The exact number and~~ultimate timing of ~~share repurchases~~this planned disposition or that such disposition will ~~depend on market conditions and other factors,~~be completed. The Varis Division disposal group has met the accounting criteria to be classified as held for sale as of April2024 and will be ~~funded through existing liquidity. As~~presented as such in the second quarter of September 30, 2017, we have $84 million remaining under our common stock repurchase program for purchases in future periods. As discussed above, the Term Loan Credit Agreement significantly restricts our continued repurchase of our common stock.

~~In the third quarter andyear-to-date~~ ~~2017, we purchased approximately 4 million shares at a cost of $17 million and 8 million shares at a cost of $34 million, respectively, under the stock repurchase program.~~

~~Cash Flows~~

~~Cash provided by (used in) operating, investing and financing activities of continuing operations is summarized as follows:~~

   Year-to-Date
(In millions)    2017    2016
Operating activities of continuing operations
   $ 408    $ 447
Investing activities of continuing operations
   (126 )    (57 )
Financing activities of continuing operations
   (199 )    (404 )

~~Operating Activities of Continuing Operations~~

~~Year-to-date~~ 2017, cash provided by operating activities of continuing operations was $408 million, compared to $447 million during the same period last year. Operating activities reflect outflows related to Merger, restructuring, and integration in 2017 and 2016.2024. The ~~2016 operating activities also reflect the receipt~~planned disposition of the ~~$250 million Termination Fee~~Varis Division represents a strategic shift that will have a major impact on the Company’s operations and ~~outflows related~~financial results. Accordingly, the Company expects to ~~Staples Acquisition activities.~~

~~Changes in net working capital~~present the operating results and ~~other operating activitiesyear-to-date~~ ~~2017 resulted in a $15 million use of cash compared to a use of $180 million in the same period last year. Theyear-to-date~~ 2017 period reflects a lower decrease in inventory and receivables, as well as a lower decrease in accounts payable and other accrued liabilities compared to the same period of the prior year, partially offset by a greater increase in prepaid expenses and other assets. The 2016 period includes the payment of 2015 accrued incentives and payment of retention awards associated with the Staples Acquisition attempt. Working capital is influenced by a number of factors including period end sales, the flow of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. For our accounting policy on cash management, refer to Note 1 of the Condensed Consolidated Financial Statements.

~~Investing Activities of Continuing Operations~~

~~Cash used in investing activities of continuing operations was $126 millionyear-to-date~~ ~~2017, compared to $57 millionyear-to-date~~ ~~2016. The increase year over year reflects $42 million associated with the purchase of our leased corporate headquarters as discussed above. Capital expenditures were $92 millionyear-to-date~~ ~~2017, compared to $71 millionyear-to-date~~ ~~2016.Year-to-date~~ ~~2017 and 2016, we received proceeds from the disposition of assets of $28 million and $8 million, respectively.~~

~~Financing Activities of Continuing Operations~~

~~Cash used in financing activities of continuing operations was $199 millionyear-to-date~~ ~~2017, compared to $404 millionyear-to-date~~ 2016. The decrease from the prior year reflects $250 million retirement of debt in 2016, a smaller repurchase of common stock for treasury and smaller net repayments on long and short-term borrowings, partially offset by $92 million of cash used to extinguish our capital lease obligation associated with the purchase of our leased corporate headquarters in 2017, and larger cash payments for dividends~~year-to-date~~ ~~2017 compared to the same period in 2016.Year-to-date~~ ~~2017, we used $34 million to repurchase common stock for treasury compared to $81 million in 2016. Net payments on long and short-term borrowings were $17 millionyear-to-date~~ ~~2017 compared to net payments of $42 millionyear-to-date~~ ~~2016. Theyear-to-date~~ 2016 payments on long and short-term borrowings included the redemption at maturity of a 7.35% debentures totaling $18 million. We declared and paid cumulative cash dividends of $0.075 per share on our common stock for an aggregate payment of $39 million~~year-to-date~~ ~~2017, compared to $0.025 per share in the same period last year.~~

~~Discontinued Operations~~

~~Cash provided by (used in) operating, investing and financing activities of discontinued operations is summarized as follows:~~

   Year-to-Date
(In millions)    2017    2016
Operating activities of discontinued operations
   $ 10    $ (113 )
Investing activities of discontinued operations
   (76 )    (4 )
Financing activities of discontinued operations
   (8 )    3

~~The change in operating~~ cash flows of its Varis Division as discontinued operations for all periods presented in 2017 compared to 2016 reflects the impact of the sale of our European Business at the end of 2016. The change in investing cash flows primarily reflect the payments in 2017 associated with the working capital adjustments related to the sale of our European Business, partially offset by funds received in 2017 from the sale of our South Korean business.future filings.

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

~~CRITICAL ACCOUNTING POLICIES~~

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2016 Form~~10-K,~~ in Note 1 of the Notes to the Consolidated Financial Statements and the Critical Accounting Policies and Estimates section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Safe Harbor Statement Under the Private Securities Litigation Reform Act Ofof 1995

This document, including the following discussion and analysis, contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. Without limitation, when we use the words “believe,” “estimate,” “plan,” “expect,” “intend,” “anticipate,” “continue,” “may,” “project,” “probably,” “should,” “could,” “will” and similar expressions in this Quarterly Report on Form10-Q, we are identifying forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief, or current expectations of the Company, its directors, or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations, the Company’s ability to achieve its strategic plans, including the planned sale of Varis and benefits related to Project Core, liquidity, suppliers, consumers, customers, and employees, disruptions or inefficiencies in our supply chain, uncertainties arising from conflicts including the conflicts in Russia-Ukraine and in the Middle East, and macroeconomic drivers and their effect on the U.S. economy, changes in worldwide and U.S. economic conditions including higher interest rates that materially impact consumer spending and employment and the demand for our products and services, and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth herein under “Risk Factors,” found in Other Information which supplements our discussion of ~~Risk Factors, found~~“Risk Factors” within Other Key Information in ~~Item 1A of~~ our Annual Report on Form10-K ~~as amended,~~ filed on February 28, 2024 (the “2023 Form 10-K”) with the ~~U.S. Securities and Exchange Commission (the “SEC”) on March 1, 2017 (the “2016 Form10-K”),~~ ~~and~~SEC, Forward-Looking Statements, found in ~~Part I~~our 2023 Form 10-K.

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 Condensed Consolidated Financial Statements and the Notes to those statements included in the “Financial Statements” section of this Quarterly Report on Form 10-Q, as well as our 2023 Form 10-K.

OVERVIEW

THE COMPANY

We are a leading provider of products, services and technology solutions through an integrated business-to-business (“B2B”) distribution platform and omni-channel presence, which includes supply chain and distribution operations, dedicated sales professionals, a B2B digital procurement solution, online presence, and a network of Office Depot and OfficeMax retail stores. Through our operating companies ODP Business Solutions, LLC; Office Depot, LLC; Veyer, LLC; and Varis, Inc., we empower every business, professional, and consumer to achieve more every day.

As of March 30, 2024, our operations are organized into four reportable segments (or “Divisions”), as described below.

ODP Business Solutions Division – Our leading B2B distribution solutions provider serving small, medium, and enterprise level companies, including those in the public and education sectors. This segment operates in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada. The ODP Business Solutions Division sells nationally branded, as well as our private branded, office supply and adjacency products and services to customers, who are served through a dedicated sales force, catalogs, telesales, and electronically through our Internet websites. Adjacency products and services include cleaning, janitorial, and breakroom supplies, office furniture, technology products, and copy and print services. This segment also includes our Federation entities, which are over 20 regional office supply distribution businesses acquired by us as part of our ~~2016~~transformation to expand our reach and distribution network into geographic areas that were previously underserved, and which continue to operate under their own brand names. The acquisition of these businesses 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.

Office Depot Division – Our leading provider of retail consumer and small business products and services distributed through a fully integrated omni-channel platform of 903 Office Depot and OfficeMax retail locations in the United States, Puerto Rico and the U.S. Virgin Islands, and an eCommerce presence (www.officedepot.com). Our Office Depot Division sells office supplies, technology products and solutions, business machines and related supplies, cleaning, breakroom and facilities products, personal protective equipment, and office furniture as well as offering business services including copying, printing, digital imaging, mailing, shipping, and technology support services. In addition, the print needs for retail and business customers are facilitated through our regional print production centers.

Veyer Division – Our supply chain, distribution, procurement and global sourcing operation, which specializes in B2B and consumer business service delivery, with core competencies in distribution, fulfillment, transportation, global sourcing, and purchasing. The Veyer Division’s customers include our Office Depot Division and ODP Business Solutions Division, as well as third-party customers. The Veyer Division also includes the Company’s global sourcing operations in Asia.

Varis Division – Our tech-enabled B2B indirect procurement marketplace, which provides a seamless way for buyers and suppliers to transact through the platform’s consumer-like buying experience, advanced spend management tools, network of suppliers, and technology capabilities. In connection with our development efforts of this Division, we acquired BuyerQuest Holdings, Inc. (“BuyerQuest”) in 2021, a software as a service eProcurement platform company. BuyerQuest’s operating results are included in our Varis Division. The Varis Division currently serves enterprise businesses and provides its services to middle- and small-sized businesses. It is focused on filling the growing demand for a B2B centric digital commerce platform that is modern, trusted, and provides the procurement controls and visibility businesses require to operate. See Recent Developments below for the planned disposition of our Varis Division.

RECENT DEVELOPMENTS

Planned Disposition of our Varis Division

On April 24, 2024, our Board of Directors approved management’s commitment to a plan to sell our Varis Division through a single disposal group. Although management did not bring forth a specific transaction to the Board of Directors, management expects to complete the sale within one year. We are actively marketing the Varis Division for sale at a price that we believe is reasonable in relation to its current fair value. However, there can be no assurances regarding the ultimate timing of this planned disposition or that such disposition will be completed. The Varis Division disposal group has met the accounting criteria to be classified as held for sale as of April 2024 and will be presented as such in the second quarter of 2024. The planned disposition of our Varis Division represents a strategic shift that will have a major impact on our operations and financial results. Accordingly, we expect to present the operating results and cash flows of the Varis Division as discontinued operations for all periods presented in future filings.

RECENT GLOBAL EVENTS

We are closely monitoring the unfolding events due to the conflict in the Middle East, and its regional and global ramifications. We do not have operations in the Middle East, and our supply chain has not been impacted as of the date of this report. Other impacts due to this rapidly evolving situation are currently unknown and the broader economic impacts could potentially subject our business to materially adverse consequences should the situation escalate beyond its current scope.

CONSOLIDATED RESULTS OF CONTINUING OPERATIONS AND LIQUIDITY

The following summarizes the more significant factors impacting our operating results for the 13-week period ended March 30, 2024 (also referred to as the “first quarter of 2024”) and April 1, 2023 (also referred to as the “first quarter of 2023”).

Our consolidated sales were lower by $237 million, or 11%, in the first quarter of 2024 compared to the same period in the prior year. Sales in our ODP Business Solutions Division decreased $82 million, or 8%, as compared to the same period in the prior year. Our ODP Business Solutions Division experienced decreased sales across a majority of its product categories, primarily in technology and supplies. This was driven by lower demand from business-to-business customers, due to reduced spending, and fewer customers. Sales in our Office Depot Division decreased $157 million, or 14%, as compared to the same period in the prior year, mainly as a result of planned store closures, lower demand, and lower average order values at our retail stores and eCommerce platform. The sales decline was across the majority of Office Depot Division’s product categories. The contribution of our Veyer Division and Varis Division to consolidated sales was not material.


Sales (External)	First Quarter
(In millions)	2024		2023		Change
ODP Business Solutions Division	$	923	$	1,005		(8	)%
Office Depot Division		937		1,094		(14	)%
Veyer Division		9		7		29	%
Varis Division		2		2		0	%
Total	$	1,871	$	2,108		(11	)%

OTHER SIGNIFICANT FACTORS IMPACTING TOTAL COMPANY RESULTS AND LIQUIDITY

•

Total gross profit decreased $71 million, or 15% in the first quarter of 2024 when compared to the same period in 2023. Our Office Depot Division, ODP Business Solutions Division, and Veyer Division had $56 million, $12 million, and $3 million lower gross profit, respectively. The decreases in gross profit were mainly due to the flow through impact of lower sales and increases in occupancy costs, which were partially offset by improved product margin. Our Varis Division had $1 million higher gross profit during this period. Our supply chain and occupancy costs have increased in the first quarter of 2024, as a percentage of sales, including labor, facility and store rents, and utilities.

•

Total gross margin for the first quarter of 2024 was 22%. Total gross margin for the first quarter of 2023 was 23%. The decrease in gross margin is mainly the result of higher supply chain and occupancy costs as a percentage of sales.

•

Total selling, general, and administrative expenses decreased $23 million in the first quarter of 2024 when compared to the same period in 2023. This was mainly driven by a $21 million decrease in our Office Depot Division in the first quarter of 2024, as well as a $3 million decrease in our ODP Business Solutions Division, and a $2 million decrease in our Varis Division. The decrease in our Office Depot Division was driven by store closures and certain strategic initiatives, including the Maximize B2B Restructuring Plan, aimed to generate savings through optimizing our retail footprint and removing corresponding costs supporting our Office Depot Division as our retail footprint is reduced. These decreases were partially offset by increases in employee-related costs and professional fees in our Veyer Division. Selling, general, and administrative expenses as a percentage of total sales was 19% in the first quarter of 2024 as compared to 18% in the same prior year period, mainly due to the deleveraging from lower sales.

•

We recorded $6 million of asset impairment charges in the first quarter of 2024 primarily related to the impairment of operating lease ROU assets associated with our retail store locations, with the remainder relating to impairment of fixed assets. Refer to Note 9. “Fair Value Measurements” in Notes to Condensed Consolidated Financial Statements for additional information.

•

Our merger and restructuring expenses, net were $27 million in the first quarter of 2024. The expenses in the period related to restructuring activities, including $25 million of restructuring costs associated with Project Core. Refer to Note 2. “Merger and Restructuring Activity” in Notes to Condensed Consolidated Financial Statements for additional information.

•

For the first quarter of 2024, the Company’s effective tax rates were primarily impacted by a tax benefit associated with stock-based compensation awards year-to-date and settlement of an uncertain tax position for less than the reserve. For the first quarter of 2023, the Company’s effective rate was primarily impacted by the recognition of a tax benefit associated with stock-based compensation awards year-to-date. These factors, along with the impact of state taxes and the mix of income and losses across U.S. and non-U.S. jurisdictions, caused the Company’s effective tax rate of 12% for the first quarter of 2024 to differ from the statutory rate of 21%. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rates in future quarters. Refer to Note 4. “Income Taxes” in Notes to Condensed Consolidated Financial Statements for additional information.

•

Diluted earnings per share from continuing operations was $0.40 in the first quarter of 2024 compared to $1.71 in the first quarter of 2023. The decrease in diluted earnings per share from continuing operations in the first quarter of 2024 compared to the same prior year periods is due to lower net income, partially offset by the impact of lower weighted average shares. Refer to Note 5. “Earnings Per Share” in Notes to Condensed Consolidated Financial Statements for additional information.

•

We repurchased 957 thousand shares of our common stock in the first quarter of 2024 for total consideration of $50 million. As of March 30, 2024, $972 million remains available for stock repurchases under the current stock repurchase program. Subsequent to the end of first quarter of 2024 and through May 1, 2024, we bought back 703 thousand shares of our common stock at a cost of $36 million.

•

At March 30, 2024, we had $282 million in cash and cash equivalents and $689 million of available credit under the Third Amended Credit Agreement (as defined in Note 6. “Debt” in Notes to Condensed Consolidated Financial Statements), for a total liquidity of approximately $971 million. Cash provided by operating activities of continuing operations was $38 million in the first quarter of 2024 compared to cash provided by operating activities of continuing operations of $157 million in the comparable prior year period. Refer to the “Liquidity and Capital Resources” section for further information on cash flows.

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.

ODP BUSINESS SOLUTIONS DIVISION


	First Quarter
(In millions)	2024			2023
Sales (external)	$	923		$	1,005
Sales (internal)	$	3		$	4
% change of total sales		(8	)%		3	%
Division operating income	$	30		$	39
% of total sales		3	%		4	%

Sales in our ODP Business Solutions Division decreased $83 million in the first quarter of 2024 compared to the corresponding quarter in 2023. During the first quarter of 2024, our ODP Business Solutions Division experienced decreased sales across a majority of its product categories, primarily in technology and supplies, compared to the corresponding quarter in 2023. This was driven by lower demand from business-to-business customers, due to reduced spending and fewer customers. We expect sales in our ODP Business Solutions Division to continue to be adversely impacted in the near term due to macroeconomic factors that continue to weigh on the U.S. economy, which can materially impact spending by our business-to-business customers and the demand for our products and services. Sales include internal sales of $3 million and $4 million in the first quarter of 2024 and the first quarter of 2023, respectively, which relate to ODP Business Solutions Division customers’ transactions held at Office Depot Division retail store locations.

Our ODP Business Solutions Division sales could be adversely impacted in the near term related to numerous factors, among others, a weaker U.S. economy and higher unemployment and inflation that materially impact spending, the demand for our products and services and the availability of supply. The changes in work environments as a result of the general macroeconomic environment, including ongoing remote work trends, have been material to the results of the ODP Business Solutions Division in the first quarter of 2024. A prolonged or permanent shift to hybrid or continued remote work arrangements, as well as the substance and pace of macroeconomic recovery could continue to have a material impact to the future results of the ODP Business Solutions Division.

Our ODP Business Solutions Division operating income was $30 million in the first quarter of 2024 compared to $39 million in the first quarter of 2023, a decrease of 23%. Operating income as a percentage of sales decreased 60 basis points in the first quarter of 2024 compared to the corresponding period in 2023. The decreasein operating income was mainly driven by lower sales and higher occupancy costs, which resulted in $12 million lower gross profit. This decrease was partially offset by $3 million lower selling, general and administrative expenses, which as a percentage of sales, was 70 basis points higher compared to the corresponding period in the prior year, due to the deleveraging impact of lower sales.

OFFICE DEPOT DIVISION


	First Quarter
(In millions)	2024			2023
Sales (external)	$	937		$	1,094
Sales (internal)	$	7		$	9
% change of total sales		(14	)%		(8	)%
Division operating income	$	50		$	85
% of total sales		5	%		8	%
Comparable store sales decrease		(10	)%		(3	)%

Sales in our Office Depot Division decreased $159 million, or 14%, in the first quarter of 2024 compared to the corresponding period in 2023. The largest drivers of our product sales decline for the first quarter of 2024 were planned store closures, lower demand, and lower average order values in our stores as well as through our eCommerce platform. The sales decline in the first quarter of 2024 was across the majority of our product categories. The demand for these categories was mainly impacted by reduced spending of our customers due to macroeconomic factors affecting the U.S. economy. In addition, certain interruptions experienced due to inclement weather further impacted our store traffic during the competitive back-to-business season. We believe sales in our Office Depot Division may continue to be adversely impacted in the near term and potentially longer related to numerous factors, among others, a weaker U.S. economy and higher unemployment that materially impact consumer spending, and the demand for our products and services.

Sales include internal sales of $7 million and $9 million in the first quarter of 2024 and the first quarter of 2023, respectively, which relate to print services provided to the ODP Business Solutions Division as well as internal service fees for providing buy online, pick up in store (“BOPIS”) transactions to ODP Business Solutions Division customers.

Sales generated through our eCommerce platform include online sales fulfilled through warehouses, BOPIS transactions, online orders shipped from store, and same day delivery orders fulfilled with retail store inventory. These sales represented 32% of Office Depot Division’s total sales in the first quarter of 2024, as compared to 29% of total sales in the comparable prior period.

Comparable store sales decreased 10% in the first quarter of 2024 reflecting lower store traffic and average order value, partially offset by higher conversion rate. The average order value was impacted by lower sales in our workspace and technology product categories. Our comparable store sales relate to stores that have been open for at least one year. Stores are removed from the comparable sales calculation one month prior to closing, as sales during that period are mostly related to clearance activity. Stores are also removed from the comparable sales calculation during periods of store remodeling, store closures due to hurricanes or natural disasters, or if significantly downsized. Our measure of comparable store sales has been applied consistently across periods but may differ from measures used by other companies.

Our Office Depot Division operating income was $50 million in the first quarter of 2024, which decreased 41% as compared to $85 million in the first quarter of 2023. Operating income as a percentage of sales decreased 240 basis points in the first quarter of 2024 compared to the corresponding period in 2023. The reduction in operating income was mainly due to the flow through impact of lower sales, which resulted in $56 million lower gross profit. In addition, our gross margin was 130 basis points lower primarily due to the impact of higher occupancy and distribution costs, which more than offset the 100 basis points favorable product margin. The decrease in gross profit was partially offset by $21 million lower selling, general and administrative expenses, which was driven by store closures as part of the Maximize B2B Restructuring Plan, and other initiatives to reduce costs as our retail footprint is reduced. Selling, general and administrative expenses as a percentage of sales were 110 basis points higher due to deleveraging from lower sales.

As of March 30, 2024, our Office Depot Division operated 903 retail stores in the United States, Puerto Rico, and the U.S. Virgin Islands compared to 959 stores at the end of the first quarter of 2023. Charges associated with store closures as part of a restructuring plan are reported as appropriate in Asset impairments and Merger and restructuring expenses, net in the Condensed Consolidated Statements of Operations. In addition, as part of our periodic recoverability assessment of owned retail store and distribution center assets and operating lease ROU assets, we recognize impairment charges in the Asset impairments line item of our Condensed Consolidated Statements of Operations. These charges are reflected in Corporate reporting and are not included in the determination of Division operating income. Refer to the “Corporate” section below for additional information of expenses incurred to date.

VEYER DIVISION


	First Quarter
(In millions)	2024			2023
Sales (external)	$	9		$	7
Sales (internal)	$	1,235		$	1,412
% change of total sales		(12	)%		(7	)%
Division operating income	$	9		$	15
% of total sales		1	%		1	%

Internal sales represent sales of product and supply chain services provided to our Office Depot Division and ODP Business Solutions Division, which are then sold to third-party customers through those divisions. Internal sales of product are made at a price that includes a service fee to the cost of product we source from third-party vendors, net of the impact of vendor income, and certain other adjustments. Internal sales of services represent supply chain and logistics support services, which include warehousing, shipping and handling, returns and others. These internal sales of services are also provided to the Office Depot Division and the ODP Business Solutions Division, at a service fee over cost. Internal sales are eliminated upon consolidation.

Our Veyer Division aims to be the lowest cost provider to the Office Depot Division and the ODP Business Solutions Division, with the purpose of achieving the most favorable outcome for our consolidated results. As a result, Veyer Division’s internal sales and profitability related to these internal sales could be impacted by product cost fluctuations and activities that we may undertake to drive efficiencies in the Veyer Division, including rebates we may receive from third-party vendors, as well as decisions made independently by the Office Depot Division and ODP Business Solutions Division for alternative sourcing options to meet customer needs.

In the first quarter of 2024 and the first quarter of 2023, $586 million and $692 million of internal sales are to the Office Depot Division, and $649 million and $720 million are to the ODP Business Solutions Division, respectively. The decrease in internal sales to the Office Depot Division is related to the decline in customer demand at our retail stores and eCommerce platform, which is discussed further in the Office Depot Division section above. The decrease in internal sales to the ODP Business Solutions Division is related to reduced demand experienced by ODP Business Solutions Division during the first quarter of 2024, which is discussed further in the ODP Business Solutions Division section above.

External sales represent supply chain services provided to third parties, as well as product sales by our Asia sourcing operation to third parties. The $2 million increase in external sales in the first quarter of 2024 was driven by supply chain services and product sales to third parties.

Our Veyer Division operating income was $9 million in the first quarter of 2024 compared to $15 million in the first quarter of 2023. The decrease in the period related to the flow through impact of lower internal sales, which resulted in $4 million less gross profit, as well as a $3 million increase in selling, general and administrative expenses due to higher employee-related costs and professional fees. This was partially offset by a favorable impact of $1 million from higher sales to third parties. The gross margin was flat as compared to the corresponding period in the prior year. Future performance of our Veyer Division is dependent upon market conditions in the transportation and logistics industry, including fluctuations in labor and fuel costs, and its ability to pass any cost increases through to its customers.

VARIS DIVISION


	First Quarter
(In millions)	2024			2023
Sales (external)	$	2		$	2
Sales (internal)	$	—		$	—
% change of total sales		0	%		0	%
Division operating loss	$	(14	)	$	(17	)
% of total sales		(700	)%		(850	)%

Sales in our Varis Division in the first quarter of 2024 were flat compared to the corresponding period in the prior year. Sales predominantly related to subscription services.

Division operating loss was $14 million in the first quarter of 2024 compared to $17 million in the first quarter of 2023. Our Varis Division had lower employee-related costs in the first quarter of 2024 compared to the corresponding period in the prior year. This was partially offset by costs incurred related to the amortization of internally developed software, which represent investments in the resources required to expand and scale the technology platform.

CORPORATE

The line items in our Condensed Consolidated Statements of Operations included as Corporate activities are Asset impairments and Merger and restructuring expenses, net. These activities are managed at the Corporate level and, accordingly, are not included in the determination of Division income for management reporting or external disclosures. In addition to these charges and credits, certain selling, general and administrative expenses are not allocated to the Divisions and are managed at the Corporate level. Those expenses are addressed in the section “Unallocated Expenses” below.

Asset impairments

We recognized asset impairment charges of $6 million in the first quarter of 2024. Of these asset impairment charges, $5 million related to the impairment of operating lease ROU assets associated with our retail store locations, with the remainder relating to impairment of fixed assets. We recognized asset impairment charges of $4 million in the first quarter of 2023. Of these asset impairment charges, $3 million was related to impairment of operating lease ROU assets associated with our retail store locations.

We regularly review retail store assets for impairment indicators at the individual store level, as this represents the lowest level of identifiable cash flows. When indicators of impairment are present, a recoverability analysis is performed which considers the estimated undiscounted cash flows over the retail store’s remaining life and uses inputs from retail operations and accounting and finance personnel. These inputs include our best estimates of retail store-level sales, gross margins, direct expenses, exercise of future lease renewal options when reasonably certain to be exercised, and resulting cash flows, which, by their nature, include judgments about how current initiatives will impact future performance. In the first quarter of 2024, the assumptions used within the recoverability analysis for the retail stores were updated to consider current quarter retail store operational results and formal plans for future retail store closures as part of our restructuring programs, including the probability of closure at the retail store level. While it is generally expected that closures will approximate the store’s lease termination date, it is possible that changes in store performance or other conditions could result in future changes in assumptions utilized. In addition, the assumptions used reflected declining sales over the forecast period, and gross margin and operating cost assumptions that are consistent with recent actual results and consider plans for future initiatives. If the undiscounted cash flows of a retail store cannot support the carrying amount of its assets, the assets are impaired and written down to estimated fair value.

We test our goodwill and indefinite-lived intangible assets for impairment annually as of the first day of fiscal December or more frequently when events or changes in circumstances indicate that impairment may have occurred. There were no events or changes in circumstances that indicate an impairment may have occurred during the first quarter of 2024. We will continue to evaluate the recoverability of goodwill at the reporting unit level on an annual basis and whenever events or changes in circumstances indicate there may be a potential impairment. If the operating results of our reporting units deteriorate in the future, it may cause the fair value of one or more of the reporting units to fall below their carrying value, resulting in goodwill impairment charges. Further, while we are currently in a strong liquidity and capital position, a significant deterioration may have a material impact on our liquidity and capital in future periods.

Merger and restructuring expenses, net

We have taken actions to optimize our asset base and drive operational efficiencies. These actions include acquiring profitable businesses, closing underperforming retail stores and non-strategic distribution facilities, consolidating functional activities, eliminating redundant positions, and disposing of non-strategic businesses and assets. The expenses and any income recognized directly associated with these actions are included in Merger and restructuring expenses, net on a separate line in the Condensed Consolidated Statements of Operations in order to identify these activities apart from the expenses incurred to sell to and service customers. These expenses are not included in the determination of Division operating income.

In March 2024, our Board of Directors approved a restructuring plan to redesign our company-wide low-cost business model approach and create further efficiencies in our business to lower costs (“Project Core”). This was driven by a need to significantly reduce costs due to macroeconomic and other factors impacting our sales, as well as insights gainedfollowing the first year of operations of realignment of our operating segments into four divisions. The scope of Project Core was approved in two phases, in March 2024 and April 2024, and includes cost improvement actions across the entire enterprise, including our Varis Division. It aims to optimize our organizational structure to support future growth of the business. Project Core is expected to be completed in 2025, with the majority of actions expected to be taken by the end of 2024. Total estimated restructuring costs related to Project Core are estimated to be up to $57 million, of which $35 million are estimated to be termination benefits, which mainly consists of severance, and $22 million are estimated to be costs to facilitate the program, which mainly consists of third-party professional fees and other incremental employee-related costs to implement actions. All costs of Project Core are expected to be cash expenditures.

Merger and restructuring expenses, net were $27 million in the first quarter of 2024 compared to less than $1 million in the first quarter of 2023. Of the expenses in the first quarter of 2024, $25 million relate to Project Core, which consists of $19 million of severance and $6 million of third-party professional fees. Refer to Note 2. “Merger and Restructuring Activity” in Notes to Condensed Consolidated Financial Statements for an additional analysis of these Corporate charges.

Unallocated Expenses

We allocate to our Divisions functional support expenses that are considered to be directly or closely related to segment activity. These allocated expenses are included in the measurement of Division operating income. Other companies may charge more or less for functional support expenses to their segments, and our results, therefore, may not be comparable to similarly titled measures used by other companies. The unallocated expenses primarily consist of the buildings used for our corporate headquarters and personnel not directly supporting the Divisions, including certain executive, finance, legal, audit and similar functions. Unallocated expenses were $24 million in the first quarter of 2024 compared to $23 million in the first quarter of 2023. The increase in the first quarter of 2024 compared to the prior year period was primarily due to higher corporate payroll and incentive expenses, partially offset by lower third-party legal fees.

Other Income and Expense


	First Quarter
(In millions)	2024			2023
Interest income	$	3		$	2
Interest expense		(4	)		(5	)
Other income, net		—			2

In April 2020, we entered into the Third Amended Credit Agreement which provided for an aggregate principal amount of up to $1.3 billion asset-based revolving credit facility and asset-based FILO Term Loan Facility, maturing in April 2025. In 2022, we reduced our asset-based revolving credit facility by $200 million to $1.0 billion and retired $43 million of outstanding FILO Term Loan Facility loans under the Third Amended Credit Agreement. We recorded $1 million of interest expense in the first quarter of 2024 and $2 million of interest expense in the first quarter of 2023, related to the Third Amended Credit Agreement. We also recorded interest expense related to our finance lease obligations and revenue bonds in all periods presented.

Other income, net includes the pension credit related to the frozen OfficeMax pension and other benefit plans, as well as the pension credit related to the pension plan in the United Kingdom that has been retained by us in connection with the sale of the European Business.

Income Taxes

Our effective tax rate was 12% for the first quarter of 2024 and 23% for the first quarter of 2023. For the first quarter of 2024 the Company’s effective rate was primarily impacted by a tax benefit associated with stock-based compensation awards year-to-date and the settlement of an uncertain tax position for less than the reserve. For the first quarter of 2023, the Company’s effective rate was primarily impacted by the recognition of a tax benefit associated with stock-based compensation awards year-to-date. This along with the impact of state taxes and the mix of income and losses across U.S and non-U.S. jurisdictions, caused our effective tax rate to differ from the statutory rate of 21%. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rates in future quarters.

We continue to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relates to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. We will continue to assess the realizability of our deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods.

We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal and state and local income tax examinations for years prior to 2021 and 2014, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal income tax examination, and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years prior to 2013. Generally, we are subject to routine examination for years 2013 and forward in our international tax jurisdictions.

It is anticipated that $3 million of tax positions will be resolved within the next 12 months. Additionally, we anticipate that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made at this time.

The Organization for Economic Cooperation and Development reached agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals. We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. We do not expect these legislative changes to have an adverse impact on our effective tax rate, tax liabilities or cash tax.

Discontinued Operations

Refer to Note 11. “Discontinued Operations” in Notes to Condensed Consolidated Financial Statements for information regarding the CompuCom Division which is accounted for as discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

At March 30, 2024 and December 30, 2023, we had $282 million and $392 million in cash and cash equivalents, respectively, and $689 million and $696 million of available credit under the Third Amended Credit Agreement, respectively, for a total liquidity of approximately $971 million and $1.1 billion at the end of each respective period. Despite the weaker global economic conditions and the uncertainties related to the current macroeconomic environment, we currently believe that as a result of our strong financial position, including our cash and cash equivalents on hand, availability of funds under the Third Amended Credit Agreement, and future year cash flows generated from operations, we will be able to fund our working capital, capital expenditures, debt repayments, common stock repurchases, dividends (if any), merger integration and restructuring expenses, and future acquisitions consistent with our strategic growth initiatives for at least the next twelve months from the date of this Quarterly Report on Form 10-Q. From time to time, we may prepay outstanding debt and/or restructure or refinance debt obligations.

Financing

On April 17, 2020, as disclosed in Note 6. “Debt,” we entered into the Third Amended and Restated Credit Agreement, which provides for a $1.2 billion asset-based revolving credit facility and a $100 million asset-based FILO Term Loan Facility, for an aggregate principal amount of up to $1.3 billion (the “New Facilities”). The New Facilities mature in April 2025. The Third Amended and Restated Credit Agreement replaced our then existing amended and restated credit agreement that was due to mature in May 2021. In 2022, we reduced our asset-based revolving credit facility by $200 million to $1.0 billion and retired $43 million of outstanding FILO Term Loan Facility loans under the Third Amended Credit Agreement. Also, during the first quarter of 2023, the Third Amended Credit Agreement was amended to replace the LIBOR-based Eurocurrency reference interest rate option with a reference interest rate option based upon SOFR. Other than the foregoing, the material terms of the Third Amended Credit Agreement remain unchanged.

During the first quarter of 2024, we retired $53 million of outstanding FILO Term Loan Facility loans, resulting in no FILO Term Facility loans at March 30, 2024. This was funded through available liquidity. There were no revolving loans outstanding atMarch 30, 2024. At March 30, 2024, we had $37 million of outstanding standby letters of credit and $689 million of available credit under the Third Amended Credit Agreement. We were in compliance with all applicable covenants at March 30, 2024.

Acquisitions and dispositions

In addition to the business acquisition disclosed herein, we have evaluated, and expect to continue to evaluate, possible acquisitions and dispositions of businesses and assets in connection with our strategic transformation. Such transactions may be material and may involve cash, our securities or the incurrence of additional indebtedness.

Capital Expenditures

We estimate capital expenditures in 2024 to be up to approximately $105million, which includes investments to support our business priorities. These expenditures will be funded through available cash on hand and operating cash flows.

Capital Return Programs – Share Repurchases and Dividends

In October 2022, our Board of Directors approved a new stock repurchase program of up to $1 billion, available through December 31, 2025, to replace the then existing $600 million stock repurchase program effective November 3, 2022. In February 2024, our Board of Directors approved a new stock repurchase program of up to $1 billion of our common stock, available through March 31, 2027, which replaced the then existing $1 billion stock repurchase program. In the first quarter of 2024, we repurchased 957 million shares of our common stock for total consideration of $50 million. As of March 30, 2024, $972 million remains available for stock repurchases under the current stock repurchase program. Subsequent to the end of the first quarter of 2024 and through May 1, 2024, we repurchased 703 thousand shares of our common stock at a cost of $36 million.

The new authorization 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. Our Third Amended Credit Agreement permits restricted payments, such as common stock repurchases, but may be limited if we do not meet the required minimum liquidity or fixed charge coverage ratio requirements. The authorized amount under the stock repurchase program excludes fees, commissions, taxes or other expenses.

We did not declare any cash dividends in the first quarter of 2024. We do not anticipate declaring cash dividends in the foreseeable future. Our Third Amended Credit Agreement permits restricted payments, such as dividends, but may be limited if we do not meet the required minimum liquidity or fixed charge coverage ratio requirements.

We will continue to evaluate our capital return programs as appropriate. Decisions regarding future share repurchases and dividends are within the discretion of our Board of Directors, and depend on a number of factors, including, general business and economic conditions, which includes the impact of COVID-19 on such conditions, and other factors which are discussed in this discussion and analysis and “Risk Factors” within Other Key Information in our 2023 Form 10-K.

~~Item 3. Quantitative~~CASH FLOWS

Continuing Operations

Cash provided by (used in) operating, investing and ~~Qualitative Disclosures About Market Risk.~~financing activities of continuing operations is summarized as follows:


	First Quarter
(In millions)	2024			2023
Operating activities of continuing operations	$	38		$	157
Investing activities of continuing operations		(34	)		(36	)
Financing activities of continuing operations		(113	)		(185	)

Operating Activities

In the first quarter of 2024, cash provided by operating activities of continuing operations was $38 million, compared to $157 million during the corresponding period in 2023. This decrease in cash flows from operating activities was primarily driven by $50 million less net income after adjusting for non-cash charges, $25 million less usage of deferred tax assets, and $44 million less cash flows from working capital. Working capital is influenced by a number of factors, including period end sales, the flow of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. In the first quarter of 2024, the primary drivers for lower cash flows from working capital were $33 million less cash flows from our trade payables and other liabilities, and $8 million less cash flows from our inventories. The changes in our payables and other liabilities are reflective of the timing of payments. The change in inventories is mainly attributable to purchase volume.

For our accounting policy on cash management, refer to Note 1. “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements.

Investing Activities

Cash used in investing activities of continuing operations was $34 million in the first quarter of 2024, compared to cash used in investing activities of continuing operations of $36 million in the first quarter of 2023. The cash outflow in the first quarter of 2024 was driven by $35 million in capital expenditures associated with improvements in our service platform, distribution network, and eCommerce capabilities, partially offset by $1 million of proceeds from disposition of assets. The cash outflow in the first quarter of 2023 was driven by $27 million in capital expenditures associated with improvements in our service platform, distribution network, and eCommerce capabilities, as well as $10 million related to a business acquisition. These outflows were partially offset by proceeds from sale of assets of $1 million.

Financing Activities

Cash used in financing activities of continuing operations was $113 million in the first quarter of 2024, compared to $185 million in the first quarter of 2023. The cash outflow in the first quarter of 2024 primarily consisted of $50 million in repurchases of common stock, including commissions,$53 million related to the retirement of our FILO Term Loan Facility loans, $6 million share purchases for taxes, net of proceeds, for employee share-based transactions, and $3 million of net payments on long- and short-term borrowings activity related to our debt. The cash outflow in the first quarter of 2023 primarily consisted of $201 million in repurchases of common stock, including commissions, $40 million net borrowing on our asset-based revolving credit facility, $19 million share purchases for taxes, net of proceeds, for employee share-based transactions, and $5 million of net payments on long- and short-term borrowings activity related to our debt.

Discontinued Operations

There was no cash flow related to operating and financing activities of discontinued operations for the first quarter of 2024 or the first quarter of 2023.

There was no cash flow related to investing activities of discontinued operations in the first quarter of 2024 compared to cash provided by investing activities of discontinued operations of $5 million in the first quarter of 2023. The cash flows in the comparative period represent proceeds from the purchaser to settle the cash, debt and working capital adjustments related to sale of our CompuCom Division.

NEW ACCOUNTING STANDARDS

For a description of new applicable accounting standards, refer to Note 1. “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2023 Form 10-K, in Note 1 of the Notes to Consolidated Financial Statements and the Critical Accounting Policies and Estimates section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations. Except for our accounting policy updates described in Note 1 “Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting policies since December 30, 2023.

OTHER INFORMATION

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At ~~September~~March 30, ~~2017,~~2024, there had not been a material change in the interest rate, foreign exchange, and commodities risks information disclosed in the “Market Sensitive Risks and Positions” subsection of the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in ~~Item 7 of~~ our ~~2016~~2023 Form10-K. ~~However, the only remaining entity that represents the majority of the foreign currency risk is now being accounted for as discontinued operations.~~

~~Item 4. Controls and Procedures.~~CONTROLS AND PROCEDURES

~~Evaluation of~~DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and ~~procedures~~

~~We maintain controls and other~~ procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)~~ is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in ~~this report~~our reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the possible controls and procedures. Each reporting period, we carry out an evaluation, with the participation of our ~~Chief Executive Officer (“CEO”,)~~principal executive officer and ~~Chief Financial Officer (“CFO”,)~~principal financial officer, or persons performing similar functions, of the effectiveness of the design and operation of our disclosure controls and procedures as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act.

Based on management’s evaluation, our principal executive officer and principal financial officer have concluded that, as of ~~September~~March 30, ~~2017, our CEO and CFO concluded that~~2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the ~~CEO~~principal executive officer and ~~CFO,~~the principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures.

~~Changes in Internal Control over Financial Reporting~~CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There ~~has been~~were no ~~change~~changes in our internal control over financial reporting during the quarter ended March 30, 2024 that ~~occurred during our most recent fiscal quarter that has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

~~PART II. OTHER INFORMATION~~LEGAL PROCEEDINGS

~~Item 1. Legal Proceedings.~~

For a description of our legal proceedings, see Note ~~11, “Commitments and Contingencies,” of the~~10. “Contingencies” in Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form10-Q.

~~Item 1A. Risk Factors.~~RISK FACTORS

~~Except for the additional risk factors set forth below, there~~There have been no material changes with respect to the risk factors disclosed in our ~~risk factors from those previously disclosed in the Company’s 2016~~2023 Form10-K.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~The Acquisition of CompuCom Involves a Number of Risks, including, among others, Risks Associated with Failure to Realize Expected Benefits of the Acquisition~~

~~On November 8, 2017, we completed the acquisition of CompuCom.~~ We entered into this transaction with the expectation that it would result in various benefits, including, among other things, expected contributions to profit and cash flows from operations, synergies, cost savings and operating efficiencies. Our ability to achieve the benefits we anticipate from the acquisition will depend in large part upon whether we are able to achieve expected cost savings, manage CompuCom’s business and execute our strategy in an efficient and effective manner. Because our business and the business of CompuCom differ, we may not be able to manage CompuCom’s business smoothly or successfully and the process of achieving expected cost savings may take longer than expected. If we are unable to successfully manage the operations of CompuCom’s business, we may be unable to realize the cost savings and other anticipated benefits we expect to achieve as a result of the acquisition. In addition, the acquisition was funded, in part, with a new $750 million term loan facility. The loans under the term loan facility amortize quarterly beginning March 15, 2018 at a rate of $18.8 million per quarter, with the balance payable at maturity in 2022. The loans under the term loan facility bear interest at a rate per annum equal to LIBOR plus 7.00% (or an alternative base rate plus 6.00%). The increase in the amount of debt on our balance sheet will result in additional interest expense. If our financial performance after the acquisition does not meet management’s current expectations, our ability to reduce our level of indebtedness may be adversely impacted.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~In the third quarter of 2017, we~~ repurchased ~~approximately 3.9 million~~957 thousand shares of our common stock at a cost of $50 million in ~~connection with~~ the ~~share repurchase program that was approved by~~first quarter of 2024. As of March 30, 2024, $972 million remained available for additional repurchases under the current stock repurchase. Subsequent to the end of the first quarter of 2024 and through May 1, 2024, we repurchased 703 thousand shares of our common stock at a cost of $36 million.


							Approximate Dollar
					Total Number of		Value of Shares that
	Total				Shares Purchased as		May Yet Be
	Number				Part of a Publicly		Purchased Under
	of Shares		Average		Announced Plan or		the Repurchase
	Purchased		Price Paid		Program		Program
Period	(In thousands)		per Share		(In thousands)		(In millions) (1)
December 31, 2023 — January 27, 2024		170	$	52.89		170	$	543
January 28, 2024 — February 24, 2024		181	$	53.08		181	$	533
February 25, 2024 — March 30, 2024		606	$	52.31		606	$	972
Total		957	$	52.56		957

(1) In February 2024, our Board of Directors ~~in May 2016 and amended in August 2016.~~approved a new stock repurchase program of up to $1 billion, available through March 31, 2027, to replace the existing $1 billion stock repurchase program effective March 4, 2024.

Period
   Total
Number
of Shares
Purchased
(In thousands)    Average
Price Paid
per Share
(a)    Total Number of
Shares Purchased as
Part of a Publicly
Announced Plan or
Program
(In thousands)    Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Repurchase
Programs
(b)
(In millions)
July 2, 2017 – July 29, 2017
   —      $ —      —      $ 101
July 30, 2017 – August 26, 2017
   1,104    $ 4.29    1,104    $ 96
August 27, 2017 – September 30, 2017
   2,796    $ 4.30    2,796    $ 84



Total
   3,900

~~(a)~~

~~This amount represents the weighted average price paid per share and includes a per share commission paid.~~

~~(b)~~

~~In May 2016, our Board of Directors authorized a stock repurchase program of up to $100 million of our outstanding common stock. The stock repurchase authorization permits us to repurchase stock fromtime-to-time~~ ~~through a combination of open market repurchases, privately negotiated transactions,~~The new authorization 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. In August 2016, the Board of Directors authorized increasing the share repurchase program to $250 million. The authorization extends to the end of 2018 and may be suspended or discontinued at any time. Under our Term Loan Credit Agreement, our ability to continue to repurchase common stock is significantly restricted.

The exact number and timing of ~~share~~stock repurchases will depend on market conditions and other factors and will be funded through ~~existing liquidity.~~

~~In August 2017, the Board of Directors declared a quarterly dividend of $0.025 per share of our common stock. On September 15, 2017, a~~available cash dividend of $0.025 per share of common stock was paid to shareholders of record at the close of business on August 25, 2017, resulting in total cash payment of $13 million. Dividends have been recorded as a reduction to additional~~paid-in~~ ~~capital as we are in an accumulated deficit position. Additionally, payment of dividends is permitted under our~~balances. Our Third Amended Credit Agreement ~~provided that we have the required minimum liquidity or fixed charge ratio,~~permits restricted payments, such as common stock repurchases, but may be limited if we do not meet the ~~necessary~~required minimum liquidity or fixed charge coverage ratio requirements. ~~Additionally,~~The authorized amount under ~~our Term Loan~~the stock repurchase program excludes fees, commissions, taxes or other expenses.

We did not declare any cash dividends in first quarter of 2024 and do not anticipate declaring cash dividends in the foreseeable future. Our Third Amended Credit Agreement ~~payment~~permits restricted payments, such as dividends, but may be limited if we do not meet the required minimum liquidity or fixed charge coverage ratio requirements.

OTHER INFORMATION

RULE 10B5-1 TRADING PLANS

On March 5, 2024, John Gannfors, Executive Vice President and President of ~~dividends is permitted subject~~Veyer, entered into a trading plan designed to ~~compliance with an annual limit.~~

~~Item 5. Other Information.~~

satisfy the affirmative defense of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The ~~Company expects~~trading plan provides for sales of up to ~~hold the Company’s 2018 Annual Meeting~~24,955 shares of ~~Shareholders~~our common stock beginning on June 7, 2024 until December 31, 2024or ~~around May 4, 2018 (the “2018 Annual Meeting”), which is more than 30 days before the anniversary~~once all of the ~~2017 Annual Meeting~~shares have been sold. The trading plan is in accordance with our securities trading policy.

On March 6, 2024, Kevin Moffitt, Executive Vice President and President of ~~Shareholders. Any proposal submitted by~~Office Depot, entered into a ~~shareholder, including nominations~~trading plan designed to satisfy the affirmative defense of ~~persons~~Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The trading plan provides for ~~election~~sales of up to ~~the Office Depot Board~~23,898 shares of Directors, intended to be presented for consideration at the 2018 Annual Meeting must be received, according to the Company’s Amended and Restated Bylaws, by the Office Depot Corporate Secretary at Office Depot’s corporate offices, 6600 North Military Trail, Boca Raton, FL 33496, Attn: Officeour common stock beginning on June 10, 2024 until December 31, 2024 or once all of the ~~Chief Legal Officer, no earlier than January 4, 2018, and no later than 5:00p.m. (Eastern Time) on February 3, 2018.~~shares have been sold. The ~~notice~~trading plan is in ~~writing to be delivered to the Office Depot Corporate Secretary must comply~~accordance with the provisions of Office Depot’s Amended and Restated Bylaws. Any proposal submitted outside this timeframe will not be considered timely and such business will be excluded from consideration at the 2018 Annual Meeting. For shareholders who wish to submit a proposal for consideration of inclusion in the 2018 proxy statement and presentation at the 2018 Annual Meeting pursuant to Rule~~14a-8~~ under the Exchange Act, such proposal must be received by the Office Depot Corporate Secretary at Office Depot’s corporate offices no later than December 9, 2017, and otherwise must comply with the Securities and Exchange Commission requirements in Proxy Rule~~14a-8.~~our securities trading policy.

~~Item 6. Exhibits.~~

~~Exhibits~~

EXHIBITS



31.1
~~10.1~~		~~Office Depot, Inc. 2017 Long-Term Incentive Plan (Incorporated by reference from Exhibit 99.1~~Certification of ~~Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with the~~Principal Executive Officer required by Securities and Exchange Commission ~~on July 20, 2017).~~Rule 13a-14(a) or 15d-14(a)

~~10.2~~ 31.2		~~Form~~Certification of ~~Restricted Stock Agreement (Directors) (Incorporated~~Principal Financial Officer required by ~~reference from Exhibit 99.2 of Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with the~~ Securities and Exchange Commission ~~on July 20, 2017)~~Rule 13a-14(a) or 15d-14(a)

~~10.3~~ 32		~~Form~~Certification of ~~Restricted Stock Unit Agreement (Directors) (Incorporated by reference from Exhibit 99.3~~Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of ~~Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with~~ the ~~Securities and Exchange Commission on July 20, 2017).~~Sarbanes-Oxley Act of 2002

~~10.4~~ 10.1		~~Form of Restricted Stock Unit Agreement (Executives) (Incorporated by reference from Exhibit 99.4 of Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with the Securities and Exchange Commission on July 20, 2017).~~

~~10.5~~		~~Form of AOI~~Omnibus Amendment To 2021 FCF Performance Share Award ~~Agreement (Executives) (Incorporated by reference from Exhibit 99.5 of Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with the Securities and Exchange Commission on July 20, 2017).~~

~~10.6~~		~~Form of~~Agreements And 2021 TSR Performance Share Award ~~Agreement (Executives) (Incorporated by reference from Exhibit 99.6 of Office Depot, Inc.’s Registration Statement on FormS-8,~~ ~~filed with the Securities and Exchange Commission on July 20, 2017).~~Agreements

~~31.1~~ 10.2		~~Rule13a-14(a)/15d-14(a)~~ ~~Certification of CEO~~Omnibus Amendment To 2021 Restricted Stock Unit Award Agreements

~~31.2~~ 10.3		~~Rule13a-14(a)/15d-14(a)~~ ~~Certification of CFO~~Omnibus Amendment To 2022 TSR Performance Share Award Agreements

32 10.4		~~Section 1350 Certification~~Omnibus Amendment To 2022 Restricted Stock Unit Award Agreements

~~(101.INS)~~ 10.5		Omnibus Amendment To 2023 Restricted Stock Unit Award Agreements - Canada

10.6		Omnibus Amendment To 2023 Restricted Stock Unit Award Agreements

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~(101.SCH)~~ 101.SCH		Inline XBRL Taxonomy Extension Schema Document

~~(101.CAL)~~ 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~(101.DEF)~~ 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

~~(101.LAB)~~ 101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

~~(101.PRE)~~ 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page from this Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101.

FORM 10-Q CROSS-REFERENCE INDEX


Item		Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)		3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
Condensed Consolidated Balance Sheets (Unaudited)		5
Condensed Consolidated Statements of Cash Flows (Unaudited)		6
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
Part II - Other Information
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information		30
Item 6. Exhibits		31
Signatures		33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THE ODP CORPORATION
	~~OFFICE DEPOT, INC.~~	(Registrant)
	~~(Registrant)~~
Date: May 8, 2024	By:	/s/ GERRY P. SMITH
~~Date: November 9, 2017~~	~~By:~~	~~/s/~~			Gerry P. Smith
	~~Gerry P. Smith~~
	Chief Executive Officer
		(Principal Executive Officer)

~~Date: November 9, 2017~~	~~By:~~	~~/s/ Stephen E. Hare~~
	~~Stephen E. Hare~~
Date: May 8, 2024	By:	/s/ D. ANTHONY SCAGLIONE
		D. Anthony Scaglione
		Executive Vice President and
		Chief Financial Officer
				(Principal Financial Officer)

~~Date: November 9, 2017~~	~~By:~~	~~/s/ Michael Rabinovitch~~
Date: May 8, 2024	~~Michael Rabinovitch~~ By:	/s/ MAX W. HOOD
		Max W. Hood
		Senior Vice President and
		Chief Accounting Officer
				(Principal Accounting Officer)


	13 Weeks Ended						39 Weeks Ended
	September 30,			September 24,			September 30,			September 24,
	2017			2016			2017			2016
Sales	$	2,620		$	2,836		$	7,659		$	8,295
Cost of goods sold and occupancy costs		1,987			2,110			5,805			6,241

Gross profit		633			726			1,854			2,054
Selling, general and administrative expenses		503			569			1,509			1,694
Asset impairments		—			9			1			9
Merger, restructuring, and other operating (income) expenses, net		22			31			62			(122	)

Operating income		108			117			282			473
Other income (expense):
Interest income		6			6			17			17
Interest expense		(13	)		(19	)		(39	)		(63	)
Loss on extinguishment of debt		—			(15	)		—			(15	)
Other income (expense), net		(1	)		1			(2	)		1

Income from continuing operations before income taxes		100			90			258			413
Income tax expense (benefit)		2			(240	)		63			(211	)

Net income from continuing operations		98			330			195			624
Discontinued operations, net of tax		(6	)		(137	)		38			(175	)

Net income	$	92		$	193		$	233		$	449

Basic earnings (loss) per share
Continuing operations	$	0.19		$	0.62		$	0.38		$	1.15
Discontinued operations		(0.01	)		(0.26	)		0.07			(0.32	)

Net earnings per share	$	0.18		$	0.36		$	0.45		$	0.82

Diluted earnings (loss) per share
Continuing operations	$	0.19		$	0.61		$	0.37		$	1.13
Discontinued operations		(0.01	)		(0.25	)		0.07			(0.32	)

Net earnings per share	$	0.17		$	0.35		$	0.44		$	0.81

Dividends per common share	$	0.025		$	0.025		$	0.075		$	0.025


	13 Weeks Ended
	March 30, 2024			April 1, 2023
Net income	$	15		$	72
Other comprehensive income/(loss), net of tax, where applicable:
Foreign currency translation adjustments		(4	)		2
Change in deferred pension		1			—
Total other comprehensive income/(loss), net of tax, where applicable		(3	)		2
Comprehensive income	$	12		$	74


	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	788		$	763
Receivables, net		693			687
Inventories		1,110			1,279
Prepaid expenses and other current assets		100			102
Current assets of discontinued operations		141			142

Total current assets		2,832			2,973
Property and equipment, net		627			601
Goodwill		379			363
Other intangible assets, net		34			33
Timber notes receivable		869			885
Deferred income taxes		428			466
Other assets		228			219

Total assets	$	5,397		$	5,540

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	889		$	893
Accrued expenses and other current liabilities		883			1,002
Income taxes payable		1			3
Short-term borrowings and current maturities of long-term debt		17			29
Current liabilities of discontinued operations		68			104

Total current liabilities		1,858			2,031
Deferred income taxes and other long-term liabilities		328			361
Pension and postretirement obligations, net		123			140
Long-term debt, net of current maturities		265			358
Non-recourse debt		781			798

Total liabilities		3,355			3,688

Commitments and contingencies
Stockholders’ equity:
Common stock—authorized 800,000,000 shares of $.01 par value; issued shares – 566,578,985 at September 30, 2017 and 557,892,568 at December 31, 2016		6			6
Additionalpaid-in capital		2,588			2,618
Accumulated other comprehensive loss		(107	)		(129	)
Accumulated deficit		(221	)		(453	)
Treasury stock, at cost – 50,460,683 shares at September 30, 2017 and 42,802,998 shares at December 31, 2016		(224	)		(190	)

Total stockholders’ equity		2,042			1,852

Total liabilities and stockholders’ equity	$	5,397		$	5,540


	39 Weeks Ended
	September 30, 2017			September 24, 2016
Cash flows from operating activities of continuing operations:
Net income	$	233		$	449
Discontinued operations, net of tax		38			(175	)

Net income from continuing operations		195			624
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		116			140
Charges for losses on inventories and receivables		51			49
Deferred income taxes		36			(235	)
Compensation expense for share-based payments		24			25
Loss on extinguishment of debt		—			15
Asset impairments		1			9
Changes in working capital and other		(15	)		(180	)

Net cash provided by operating activities of continuing operations		408			447

Cash flows from investing activities of continuing operations:
Capital expenditures		(92	)		(71	)
Purchase of leased head office facility		(42	)		—
Proceeds from disposition of assets		28			8
Other		(20	)		6

Net cash used in investing activities of continuing operations		(126	)		(57	)

Cash flows from financing activities of continuing operations:
Net payments on long and short-term borrowings		(17	)		(42	)
Payment to extinguish capital lease obligation		(92	)		—
Debt retirement		—			(250	)
Debt related fees		—			(6	)
Cash used in extinguishment of debt		—			(12	)
Cash dividends on common stock		(39	)		(13	)
Share purchase for taxes, net of proceeds on employee-related plans		(17	)		—
Repurchase of common stock for treasury		(34	)		(81	)

Net cash used in financing activities of continuing operations		(199	)		(404	)

Cash flows from discontinued operations:
Operating activities of discontinued operations		10			(113	)
Investing activities of discontinued operations		(76	)		(4	)
Financing activities of discontinued operations		(8	)		3

Net cash used in discontinued operations		(74	)		(114	)

Effect of exchange rate changes on cash and cash equivalents		8			2
Net increase (decrease) in cash and cash equivalents		17			(126	)
Cash and cash equivalents at beginning of period		807			1,069

Cash and cash equivalents at end of period-total		824			943
Cash and cash equivalents of discontinued operations		(36	)		(142	)

Cash and cash equivalent at end of the period-continuing operations	$	788		$	801


	Third Quarter				Year-to-Date
(In millions)	2017		2016		2017		2016
Merger related expenses
Transaction and integration	$	4	$	8	$	15	$	30
Facility closure, contract termination, and other expenses, net		2		4		4		21

Total Merger related expenses		6		12		19		51

Staples Acquisition (income) expenses
Retention		—		—		—		15
Transaction		—		4		—		43
Termination Fee		—		—		—		(250	)

Total Staples Acquisition (income) expenses		—		4		—		(192	)

Comprehensive Business Review and other restructuring expenses
Severance		11		9		26		13
Facility closure, contract termination, professional fees and other expenses, net		4		6		16		6

Total Comprehensive Business Review and other restructuring expenses		15		15		42		19

Acquisition related expenses – Refer to Note 2		1		—		1		—

Total Merger, restructuring and other operating (income) expenses, net	$	22	$	31	$	62	$	(122	)


			Year-to-Date 2017
(In millions)	Balance as of December 31, 2016		Charges Incurred		Cash Payments			Balance as of September 30, 2017
Termination benefits
Merger related accruals	$	5	$	1	$	(4	)	$	2
Comprehensive Business Review		8		26		(27	)		7
Lease and contract obligations, accruals for facilities closures and other costs:
Merger related accruals		40		4		(24	)		20
Comprehensive Business Review		13		9		(13	)		9

Total	$	66	$	40	$	(68	)	$	38


(In millions)
Balance as of December 31, 2016	$	23
Disposition		(23	)

Balance as of September 30, 2017	$	—


	Third Quarter 2016								Year-to-Date Third Quarter 2016
($ in Millions, except per share)	As Reported			Adjustment		As Corrected			As Reported			Adjustment		As Corrected
Discontinued operations, net of tax	$	(286	)	$	149	$	(137	)	$	(324	)	$	149	$	(175	)
Net income	$	44		$	149	$	193		$	300		$	149	$	449
Basic earnings (loss) per share
Discontinued operations	$	(0.54	)	$	0.28	$	(0.26	)	$	(0.60	)	$	0.28	$	(0.32	)

Net earnings	$	0.08		$	0.28	$	0.36		$	0.55		$	0.27	$	0.82

Diluted earnings per share
Discontinued operations	$	(0.54	)	$	0.29	$	(0.25	)	$	(0.60	)	$	0.28	$	(0.32	)

Net earnings	$	0.08		$	0.27	$	0.35		$	0.54		$	0.27	$	0.81


(In millions)
Stockholders’ equity at December 31, 2016	$	1,852
Net income		233
Repurchase of common stock for treasury		(34	)
Dividends paid on common stock		(39	)
Share purchase for taxes, net of proceeds on employee-related plans		(17	)
Other comprehensive income		22
Amortization of long-term incentive stock grants		25

Stockholders’ equity at September 30, 2017	$	2,042


(In millions)	Foreign Currency Translation Adjustments			Change in Deferred Pension and Other			Total
Balance at December 31, 2016	$	(67	)	$	(62	)	$	(129	)
Other comprehensive income activity before reclassifications		24			(1	)		23
Reclassification of foreign currency translation adjustments realized upon disposal of business		(1	)		—			(1	)

Balance at September 30, 2017	$	(44	)	$	(63	)	$	(107	)


	Third Quarter						Year-to-Date
(In millions, except per share amounts)	2017			2016			2017		2016
Basic Earnings Per Share
Numerator:
Net income from continuing operations	$	98		$	330		$	195	$	624
Income (loss) from discontinued operations, net of tax		(6	)		(137	)		38		(175	)

Net income	$	92		$	193		$	233	$	449

Denominator:
Weighted-average shares outstanding		518			535			517		545
Basic earnings (loss) per share:
Continuing operations	$	0.19		$	0.62		$	0.38	$	1.15
Discontinued operations		(0.01	)		(0.26	)		0.07		(0.32	)

Net earnings per share	$	0.18		$	0.36		$	0.45	$	0.82

Diluted Earnings Per Share
Numerator:
Net income from continuing operations	$	98		$	330		$	195	$	624
Income (loss) from discontinued operations, net of tax		(6	)		(137	)		38		(175	)

Net income	$	92		$	193		$	233	$	449

Denominator:
Weighted-average shares outstanding		518			535			517		545
Effect of dilutive securities:
Stock options and restricted stock		13			10			15		8

Diluted weighted-average shares outstanding		531			545			532		553
Diluted earnings (loss) per share
Continuing operations	$	0.19		$	0.61		$	0.37	$	1.13
Discontinued operations		(0.01	)		(0.25	)		0.07		(0.32	)

Net diluted earnings per share	$	0.17		$	0.35		$	0.44	$	0.81


	Level 1
(In millions)	September 30, 2017		December 31, 2016
Money market funds	$	—	$	135


	September 30, 2017				December 31, 2016
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Timber notes receivable	$	869	$	875	$	885	$	884
Company-owned life insurance		88		88		89		89
Financial liabilities
Recourse debt
Revenue bonds, due in varying amounts periodically through 2029		186		186		186		181
American & Foreign Power Company, Inc. 5% debentures, due 2030		14		14		14		12
Non-recourse debt		781		788		798		800


(In millions)	Retail Division		Business Solutions Division		Total
Balance as of December 31, 2016	$	78	$	285	$	363
Acquisition		—		16		16

Balance as of September 30, 2017	$	78	$	301	$	379


Period	Total Number of Shares Purchased *(In thousands)*		Average Price Paid per Share (a)		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program *(In thousands)*		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Programs (b) *(In millions)*
July 2, 2017 – July 29, 2017		—	$	—		—	$	101
July 30, 2017 – August 26, 2017		1,104	$	4.29		1,104	$	96
August 27, 2017 – September 30, 2017		2,796	$	4.30		2,796	$	84

Total		3,900