The ODP (ODP) - 2023 Q2 - Quarterly Report

Financial Statements This section presents the company's unaudited condensed consolidated financial statements, covering key financial performance and position Condensed Consolidated Statements of Operations (Unaudited) Net income rose to $34 million for 13 weeks and $107 million for 26 weeks, significantly increasing diluted EPS from continuing operations Consolidated Statements of Operations Highlights (in millions, except per share amounts) | Metric | 13 Weeks Ended July 1, 2023 | 13 Weeks Ended June 25, 2022 | 26 Weeks Ended July 1, 2023 | 26 Weeks Ended June 25, 2022 | | :-------------------------------------- | :-------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | | Sales | $1,908 | $2,034 | $4,016 | $4,212 | | Gross profit | $415 | $431 | $897 | $916 | | Operating income | $46 | $28 | $141 | $104 | | Net income | $34 | $27 | $107 | $82 | | Basic earnings per share (Continuing) | $0.89 | $0.40 | $2.70 | $1.54 | | Diluted earnings per share (Continuing) | $0.87 | $0.39 | $2.61 | $1.49 | Condensed Consolidated Statements of Comprehensive Income (Unaudited) Comprehensive income increased to $38 million for 13 weeks and $113 million for 26 weeks, driven by net income and foreign currency adjustments Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric | 13 Weeks Ended July 1, 2023 | 13 Weeks Ended June 25, 2022 | 26 Weeks Ended July 1, 2023 | 26 Weeks Ended June 25, 2022 | | :------------------------------------------------------------------ | :-------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | | Net income | $34 | $27 | $107 | $82 | | Foreign currency translation adjustments | $5 | $(11) | $7 | $(12) | | Total other comprehensive income, net of tax | $4 | $(13) | $6 | $(8) | | Comprehensive income | $38 | $14 | $113 | $74 | Condensed Consolidated Balance Sheets (Unaudited) Total assets decreased to $3,961 million as of July 1, 2023, primarily due to reduced cash and current assets, leading to lower stockholders' equity Consolidated Balance Sheets Highlights (in millions) | Metric | July 1, 2023 | December 31, 2022 | | :------------------------------------ | :----------- | :---------------- | | Cash and cash equivalents | $335 | $403 | | Current assets held for sale | $13 | $107 | | Total current assets | $1,738 | $1,910 | | Total assets | $3,961 | $4,149 | | Trade accounts payable | $864 | $821 | | Accrued expenses and other current liabilities | $903 | $1,005 | | Total current liabilities | $1,782 | $1,859 | | Total liabilities | $2,800 | $2,862 | | Total stockholders' equity | $1,161 | $1,287 | Condensed Consolidated Statements of Cash Flows (Unaudited) Net cash provided by operating activities improved to $149 million for 26 weeks, with investing activities providing $46 million and financing activities using $263 million Consolidated Statements of Cash Flows Highlights (in millions) | Metric | 26 Weeks Ended July 1, 2023 | 26 Weeks Ended June 25, 2022 | | :---------------------------------------------------- | :-------------------------- | :--------------------------- | | Net cash provided by (used in) operating activities | $149 | $(84) | | Net cash provided by investing activities | $46 | $39 | | Net cash used in financing activities | $(263) | $(74) | | Net decrease in cash, cash equivalents and restricted cash | $(67) | $(120) | | Cash, cash equivalents and restricted cash at end of period | $337 | $417 | - Cash provided by operating activities of continuing operations increased to $149 million in the first half of 2023, compared to cash used of $84 million in the prior year, driven by improved working capital management, particularly in receivables and inventories[161] - Investing activities generated $41 million in the first half of 2023, primarily from $101 million in proceeds from asset dispositions, including the sale of the corporate headquarters, partially offset by $51 million in capital expenditures[163] - Financing activities used $263 million in the first half of 2023, mainly due to $231 million in common stock repurchases and $23 million in share purchases for taxes[165] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Total stockholders' equity decreased to $1,161 million due to $233 million in common stock repurchases, partially offset by $107 million in net income Changes in Stockholders' Equity (in millions, except share amounts) | Metric | Balance at Dec 31, 2022 | 26 Weeks Ended July 1, 2023 Activity | Balance at July 1, 2023 | | :------------------------------------------------------------------ | :---------------------- | :----------------------------------- | :---------------------- | | Common Stock Shares | 65,636,015 | 961,091 | 66,597,106 | | Common Stock Amount | $1 | $0 | $1 | | Additional Paid-in Capital | $2,742 | $(5) | $2,737 | | Accumulated Other Comprehensive Loss | $(77) | $6 | $(71) | | Accumulated Deficit | $(451) | $107 | $(344) | | Treasury Stock | $(928) | $(234) | $(1,162) | | Total Equity | $1,287 | $(126) | $1,161 | - The company repurchased 5 million shares of common stock at a cost of $234 million in the first half of 2023, with $615 million remaining available under the current stock repurchase program as of July 1, 2023[71] Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed disclosures on accounting policies, financial performance, and position, offering context to the condensed financial statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the company's significant accounting policies, including segment reporting, cash and cash equivalents, and discontinued operations - The ODP Corporation operates through four reportable segments: ODP Business Solutions Division, Office Depot Division, Veyer Division, and Varis Division, providing B2B distribution solutions and omni-channel retail presence[22] - The CompuCom Division was sold on December 31, 2021, and is presented as discontinued operations[23] - Cash and cash equivalents held outside the United States amounted to $97 million at July 1, 2023, with $25 million repatriated from Canada during Q2 2023[26] NOTE 2. ACQUISITIONS This note outlines the company's acquisition activities, including details on recent purchases and their financial impact - In the first half of 2023, the Company acquired a small independent regional office supply distribution business in the U.S., consistent with its strategy to expand its distribution network[32] - The acquisition was funded primarily with cash on hand and resulted in $3 million of goodwill, allocated to the ODP Business Solutions Division[33] NOTE 3. MERGER, RESTRUCTURING AND OTHER ACTIVITY This note provides details on merger, restructuring, and other operating activities, including expenses and strategic plans Merger, Restructuring and Other Operating Expenses, Net (in millions) | Expense Category | 13 Weeks Ended July 1, 2023 | 13 Weeks Ended June 25, 2022 | 26 Weeks Ended July 1, 2023 | 26 Weeks Ended June 25, 2022 | | :------------------------------------------------------ | :-------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | | Merger and transaction related expenses | $0 | $0 | $0 | $0 | | Restructuring expenses, net | $1 | $0 | $1 | $1 | | Other operating expenses | $0 | $23 | $0 | $33 | | Total Merger, restructuring and other operating expenses, net | $1 | $23 | $1 | $34 | - The Maximize B2B Restructuring Plan, extended through 2024, aims to optimize the retail footprint and generate savings. The Company closed 6 and 26 retail stores in Q2 and H1 2023, respectively[41] - Total estimated restructuring costs for the Maximize B2B Restructuring Plan are expected to be up to $95 million, with $82 million incurred through H1 2023[42] - Other operating expenses were $0 in Q2 and H1 2023, a significant decrease from $23 million and $33 million in the prior year periods, which were related to the previously planned separation of the consumer business[45] NOTE 4. SEGMENT INFORMATION This note presents detailed financial information for each operating segment, including sales, operating income, and goodwill allocation - The ODP Business Solutions Division serves B2B customers, including Federation entities, expanding reach and offerings beyond traditional office supplies[48] - The Office Depot Division operates 952 retail stores and an eCommerce platform, providing products and services to consumers and small businesses[49] - Veyer Division handles supply chain, distribution, procurement, and global sourcing for internal divisions and third-party customers[51] - Varis Division is a tech-enabled B2B indirect procurement marketplace, including BuyerQuest, focused on digital commerce for businesses[52] Sales and Operating Income by Division (in millions) | Division | Q2 2023 Sales | Q2 2023 Op. Income | H1 2023 Sales | H1 2023 Op. Income | Q2 2022 Sales | Q2 2022 Op. Income | H1 2022 Sales | H1 2022 Op. Income | | :---------------------------- | :------------ | :----------------- | :------------ | :----------------- | :------------ | :----------------- | :------------ | :----------------- | | ODP Business Solutions Division | $1,002 | $45 | $2,011 | $84 | $1,000 | $36 | $1,984 | $55 | | Office Depot Division | $905 | $35 | $2,008 | $120 | $1,039 | $49 | $2,240 | $145 | | Veyer Division | $1,322 | $6 | $2,742 | $21 | $1,416 | $8 | $2,947 | $16 | | Varis Division | $2 | $(14) | $4 | $(31) | $1 | $(16) | $4 | $(31) | | Total Consolidated Sales | $1,908 | | $4,016 | | $2,034 | | $4,212 | | | Total Divisions operating income | $72 | | $194 | | $77 | | $185 | | Disaggregated Sales by Major Categories (in millions) | Major Sales Categories | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--------------------- | :------ | :------ | :------ | :------ | | Supplies | $947 | $976 | $1,999 | $2,026 | | Technology | $527 | $601 | $1,143 | $1,273 | | Furniture and other | $271 | $301 | $549 | $612 | | Copy and print | $163 | $156 | $325 | $301 | | Total | $1,908 | $2,034 | $4,016 | $4,212 | Goodwill by Segment (in millions) | Segment | Balance as of Dec 31, 2022 | Acquisitions | Balance as of July 1, 2023 | | :---------------------------- | :------------------------- | :----------- | :------------------------- | | ODP Business Solutions Division | $142 | $3 | $145 | | Office Depot Division | $219 | $0 | $219 | | Veyer Division | $35 | $0 | $35 | | Varis Division | $68 | $0 | $68 | | Total | $464 | $3 | $467 | - The Varis reporting unit's fair value exceeded its carrying amount by 21% in the Q4 2022 annual impairment assessment, but changes in critical assumptions could lead to future impairment charges[59] NOTE 5. INCOME TAXES This note explains the company's income tax provisions, including effective tax rates and factors influencing tax expense Effective Tax Rates | Period | Q2 2023 | H1 2023 | Q2 2022 | H1 2022 | | :----- | :------ | :------ | :------ | :------ | | Rate | 28% | 24% | 29% | 26% | - Effective tax rates were primarily impacted by tax benefits from stock-based compensation awards, state taxes, and the mix of income/losses across jurisdictions[63] - The Company maintains a U.S. valuation allowance for certain federal credits and state tax attributes, which may be impacted by future pretax income projections[63] NOTE 6. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per share from continuing operations Earnings Per Share Calculation (in millions, except per share amounts) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :-------------------------------------- | :------ | :------ | :------ | :------ | | Net income from continuing operations | $34 | $20 | $107 | $75 | | Net income | $34 | $27 | $107 | $82 | | Weighted-average shares outstanding | 38 | 49 | 40 | 49 | | Basic EPS (Continuing operations) | $0.89 | $0.40 | $2.70 | $1.54 | | Diluted EPS (Continuing operations) | $0.87 | $0.39 | $2.61 | $1.49 | | Net diluted earnings per share | $0.87 | $0.54 | $2.61 | $1.63 | - Diluted EPS from continuing operations increased significantly in Q2 2023 ($0.87 vs $0.39) and H1 2023 ($2.61 vs $1.49) due to higher net income and lower weighted average shares outstanding[121] NOTE 7. DEBT This note describes the company's debt facilities, including credit agreements, outstanding loans, and compliance with covenants - The Third Amended Credit Agreement provides for up to $1.3 billion in asset-based revolving credit and FILO Term Loan facilities, maturing in April 2025[67] - In H1 2023, the Company drew down $165 million to fund common stock repurchases and working capital, which was repaid, resulting in no revolving loans outstanding at July 1, 2023[68] - As of July 1, 2023, the Company had $57 million in outstanding FILO Term Loan Facility loans, $39 million in standby letters of credit, and $811 million in available credit, remaining in compliance with all covenants[68] NOTE 8. STOCKHOLDERS' EQUITY This note provides information on changes in stockholders' equity, including stock repurchases and accumulated other comprehensive loss Accumulated Other Comprehensive Loss Activity (in millions) | Metric | Balance at Dec 31, 2022 | Other Comprehensive Income Activity | Balance at July 1, 2023 | | :----------------------------------- | :---------------------- | :---------------------------------- | :---------------------- | | Foreign Currency Translation Adjustments | $(39) | $7 | $(32) | | Pension | $(38) | $(1) | $(39) | | Total | $(77) | $6 | $(71) | - A new $1 billion stock repurchase program was approved in October 2022, available through December 31, 2025. The Company repurchased 724 thousand shares for $31 million in Q2 2023 and 5 million shares for $234 million in H1 2023[70][71] - As of July 1, 2023, $615 million remains available for stock repurchases. The Company does not anticipate declaring cash dividends in the foreseeable future[71][73] NOTE 9. EMPLOYEE BENEFIT PLANS This note outlines the company's employee benefit plans, including pension obligations and related financial impacts Net Periodic Pension Benefit (in millions) | Plan / Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :----------------------------- | :------ | :------ | :------ | :------ | | North America Pension Plans | $(2) | $(2) | $(4) | $(2) | | UK Pension Plan | $0 | $(1) | $0 | $(1) | - In July 2023, the UK pension plan Trustees entered an agreement for a bulk annuity purchase, covering 100% of members, with a full buyout anticipated as early as 2024, expected to be non-cash[81] NOTE 10. FAIR VALUE MEASUREMENTS This note details the fair value measurements of financial instruments and asset impairment charges - The Company recognized asset impairment charges of $6 million in Q2 2023 and $10 million in H1 2023, primarily related to operating lease ROU assets of retail store locations[86] - The corporate headquarters in Boca Raton was sold on April 6, 2023, for $104 million, with no gains or losses recorded from the transaction[89] Financial Instruments Fair Value (in millions) | Financial Instrument | July 1, 2023 Carrying Amount | July 1, 2023 Fair Value | Dec 31, 2022 Carrying Amount | Dec 31, 2022 Fair Value | | :------------------------------------------------------ | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | Company-owned life insurance | $136 | $136 | $138 | $138 | | New Facilities loans under Third Amended Credit Agreement | $57 | $57 | $57 | $57 | | Revenue bonds | $75 | $76 | $75 | $76 | | American & Foreign Power Company, Inc. 5% debentures | $16 | $13 | $15 | $14 | NOTE 11. COMMITMENTS AND CONTINGENCIES This note describes the company's commitments and contingent liabilities, including legal proceedings and environmental matters - The Company is involved in various legal proceedings and does not believe contingent liabilities will materially affect its financial position, results of operations, or cash flows[94][95] - The estimated range of reasonably possible losses for environmental liabilities is approximately $15 million to $25 million[96] NOTE 12. DISCONTINUED OPERATIONS This note provides information on the financial impact and status of discontinued operations, specifically the CompuCom Division - The CompuCom Division was sold on December 31, 2021, for a cash purchase price of $104 million, a $55 million promissory note (amended to $59 million in Feb 2023), and an earn-out provision of up to $125 million[97][98] - The Company had no financial results related to discontinued operations in Q2 and H1 2023, compared to $7 million in insurance proceeds received in Q2 and H1 2022[99] Management's Discussion and Analysis (MD&A) This section provides management's perspective on the company's financial condition and results of operations Overview Consolidated sales decreased by 6% in Q2 2023 and 5% in H1 2023, primarily due to lower demand and planned store closures - Consolidated sales decreased by $126 million (6%) in Q2 2023 and $196 million (5%) in H1 2023 compared to the prior year periods[113] - ODP Business Solutions Division sales increased by $4 million in Q2 2023 and $31 million (2%) in H1 2023, driven by paper, furniture, cleaning, breakroom supplies, and copy/print services, partially offset by declines in technology and PPE[113] - Office Depot Division sales decreased by $134 million (13%) in Q2 2023 and $234 million (11%) in H1 2023, mainly due to planned store closures and lower demand in retail stores and eCommerce, particularly in categories previously boosted by COVID-19[113] External Sales by Division (in millions) | Division | Q2 2023 | Q2 2022 | Change (%) | H1 2023 | H1 2022 | Change (%) | | :---------------------------- | :------ | :------ | :--------- | :------ | :------ | :--------- | | ODP Business Solutions Division | $999 | $995 | 0% | $2,004 | $1,973 | 2% | | Office Depot Division | $897 | $1,031 | (13)% | $1,991 | $2,225 | (11)% | | Veyer Division | $10 | $7 | 43% | $17 | $10 | 70% | | Varis Division | $2 | $1 | 100% | $4 | $4 | 0% | | Total | $1,908 | $2,034 | (6)% | $4,016 | $4,212 | (5)% | - Total gross profit decreased by $16 million (4%) in Q2 2023 and $19 million (2%) in H1 2023. ODP Business Solutions saw higher gross profit due to favorable product margin, offset by a decrease in Office Depot Division due to lower sales[115] - Total gross margin remained at 22% for both Q2 and H1 2023[116] - Selling, general and administrative expenses decreased by $15 million in Q2 2023 and $28 million in H1 2023, mainly driven by store closures and strategic initiatives in the Office Depot Division[118] - Diluted EPS from continuing operations increased to $0.87 in Q2 2023 (from $0.39) and $2.61 in H1 2023 (from $1.49) due to higher net income and lower weighted average shares[121] - The company repurchased 724 thousand shares ($31 million) in Q2 2023 and 5 million shares ($234 million) in H1 2023, with $615 million remaining under the current stock repurchase program[122] - Total liquidity at July 1, 2023, was approximately $1.1 billion, comprising $335 million in cash and $811 million in available credit[123] Operating Results by Division This section details the individual performance of ODP's four operating divisions, highlighting sales trends and operating income changes ODP Business Solutions Division This division reported increased sales and operating income in Q2 and H1 2023, driven by higher demand and favorable product margins ODP Business Solutions Division Performance (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :------------------------ | :------ | :------ | :------ | :------ | | Sales (external) | $999 | $995 | $2,004 | $1,973 | | % change of total sales | 0% | | 1% | | | Division operating income | $45 | $36 | $84 | $55 | | % of total sales | 4% | 4% | 4% | 3% | - Sales increased by $2 million in Q2 2023 and $27 million in H1 2023, driven by higher demand and inflationary price adjustments in paper, furniture, cleaning, breakroom supplies, and copy/print services, partially offset by declines in technology, ink, toner, office supplies, and PPE[126][127] - Operating income increased by 25% to $45 million in Q2 2023 and 53% to $84 million in H1 2023, mainly due to favorable product margin and higher gross profit[129][130] Office Depot Division This division experienced decreased sales and operating income in Q2 and H1 2023, primarily due to planned store closures and lower demand Office Depot Division Performance (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :------------------------ | :------ | :------ | :------ | :------ | | Sales (external) | $897 | $1,031 | $1,991 | $2,225 | | % change of total sales | (13)% | | (10)% | | | Division operating income | $35 | $49 | $120 | $145 | | % of total sales | 4% | 5% | 6% | 6% | | Comparable store sales decrease | (8)% | N/A | (5)% | N/A | - Sales decreased by 13% in Q2 2023 and 10% in H1 2023, primarily due to planned store closures, lower demand, and reduced average order values, despite increased copy and print services sales[132] - eCommerce platform sales represented 30% of total sales in Q2 2023 and 29% in H1 2023[133] - Operating income decreased by 29% to $35 million in Q2 2023 and 17% to $120 million in H1 2023, mainly due to lower sales, partially offset by improved product margin in Q2[134] - The division operated 952 retail stores as of July 1, 2023, down from 1,020 stores at the end of Q2 2022[134] Veyer Division This division saw decreased internal sales but increased external sales in Q2 and H1 2023, with mixed operating income results Veyer Division Performance (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :------------------------ | :------ | :------ | :------ | :------ | | Sales (external) | $10 | $7 | $17 | $10 | | Sales (internal) | $1,312 | $1,409 | $2,725 | $2,937 | | % change of total sales | (7)% | | (7)% | | | Division operating income | $6 | $8 | $21 | $16 | | % of total sales | 0% | 1% | 1% | 1% | - Internal sales decreased by 7% in both Q2 and H1 2023, primarily due to reduced demand from the Office Depot and ODP Business Solutions Divisions[136] - External sales increased by $3 million in Q2 2023 and $7 million in H1 2023, driven by supply chain services and product sales to third parties[136] - Operating income decreased to $6 million in Q2 2023 due to lower internal sales but increased to $21 million in H1 2023 due to higher favorable impact from product costing[136] Varis Division This division reported increased sales in Q2 2023 and a reduced operating loss, with continued investment in its technology platform Varis Division Performance (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :------------------------ | :------ | :------ | :------ | :------ | | Sales (external) | $2 | $1 | $4 | $4 |\ | % change of total sales | 100% | | 0% | | | Division operating loss | $(14) | $(16) | $(31) | $(31) | | % of total sales | (700)% | (1,600)%| (775)% | (775)% | - Sales increased by $1 million in Q2 2023 and were flat in H1 2023, predominantly from subscription services[137] - Operating loss decreased to $14 million in Q2 2023 due to lower employee-related costs, remaining flat at $31 million in H1 2023[137] - The Company expects to continue investing in growing the Varis Division, incurring costs related to internally developed software and technology platform expansion[137] Corporate This section details corporate-level financial impacts, including asset impairment charges, restructuring expenses, and unallocated overhead - Asset impairment charges were $6 million in Q2 2023 and $10 million in H1 2023, primarily for operating lease ROU assets of retail store locations[139] - Merger, restructuring and other operating expenses, net, decreased significantly to $1 million in both Q2 and H1 2023, from $23 million and $34 million in the prior year periods, respectively[142] - Unallocated expenses decreased to $19 million in Q2 2023 (from $23 million) due to lower legal fees and corporate incentive expense, remaining flat at $42 million in H1 2023[144] Other Income and Expense (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :---------------- | :------ | :------ | :------ | :------ | | Interest income | $2 | $1 | $4 | $2 | | Interest expense | $(5) | $(4) | $(10) | $(9) | | Other income, net | $4 | $3 | $6 | $5 | - The effective tax rate was 28% for Q2 2023 and 24% for H1 2023, primarily influenced by tax benefits from stock-based compensation and the mix of income across jurisdictions[147] Liquidity and Capital Resources Total liquidity was $1.1 billion at July 1, 2023, with improved operating cash flows and significant share repurchases - Total liquidity was approximately $1.1 billion at July 1, 2023, consisting of $335 million in cash and cash equivalents and $811 million of available credit[152] - The sale of the corporate headquarters in April 2023 for $104 million increased cash and liquidity, partially offset by an $83 million reduction in available credit[152] - The Company expects 2023 capital expenditures to be up to $100 million, funded by available cash and operating cash flows[155] - In H1 2023, the Company repurchased 5 million shares of common stock for $234 million under its $1 billion stock repurchase program, with $615 million remaining available[155] - Cash provided by operating activities of continuing operations was $149 million in H1 2023, a significant improvement from cash used of $84 million in H1 2022, driven by improved working capital[161] - Cash provided by investing activities of continuing operations was $41 million in H1 2023, primarily from $101 million in proceeds from asset dispositions[163] - Cash used in financing activities of continuing operations was $263 million in H1 2023, mainly due to common stock repurchases[165] New Accounting Standards This section refers to Note 1, 'Summary of Significant Accounting Policies,' for a description of new applicable 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[167] Critical Accounting Policies The Company's critical accounting policies remain consistent with the 2022 Form 10-K, with no significant changes other than updates in Note 1 - There have been no significant changes to critical accounting policies since December 31, 2022, except for updates described in Note 1 'Summary of Significant Accounting Policies'[168] Other Information This section covers additional disclosures including market risk, controls, legal proceedings, risk factors, equity sales, and exhibits Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the Company's interest rate, foreign exchange, and commodities risks compared to the 2022 Form 10-K - No material change in interest rate, foreign exchange, and commodities risks information disclosed in the 2022 Form 10-K as of July 1, 2023[170] Controls and Procedures The Company's disclosure controls and procedures were effective as of July 1, 2023, with no material changes in internal control over financial reporting - As of July 1, 2023, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed is timely reported[172] - There were no changes in internal control over financial reporting during the quarter ended July 1, 2023, that materially affected or are reasonably likely to materially affect it[173] Legal Proceedings For a description of the Company's legal proceedings, refer to Note 11, 'Commitments and Contingencies,' in the financial statements - For a description of legal proceedings, refer to Note 11. 'Commitments and Contingencies' in Notes to Condensed Consolidated Financial Statements[174] Risk Factors No material changes occurred to the risk factors disclosed in the 2022 Form 10-K and the Form 10-Q for the quarter ended April 1, 2023 - No material changes with respect to the risk factors disclosed in the 2022 Form 10-K and the Form 10-Q for the quarter ended April 01, 2023[174] Unregistered Sales of Equity Securities and Use of Proceeds The Company repurchased 724 thousand shares for $31 million in Q2 2023, with $615 million remaining under the stock repurchase program - The Company repurchased 724 thousand shares of common stock at a cost of $31 million in Q2 2023[176] - As of July 1, 2023, $615 million remained available for additional repurchases under the current stock repurchase program[176] Common Stock Repurchases (Q2 2023) | Period | Total Number of Shares Purchased (In thousands) | Average Price Paid Per Share | 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 Repurchase Program (In millions) (1) | | :--------------------------- | :-------------------------------------------- | :--------------------------- | :-------------------------------------------------------------------------------------------- | :-------------------------------------------------------------------------------------------------------- | | April 2, 2023 — April 29, 2023 | 216 | $44.35 | 216 | $637 | | April 30, 2023 — May 27, 2023 | 238 | $42.42 | 238 | $627 | | May 28, 2023 — July 1, 2023 | 270 | $43.08 | 270 | $615 | | Total | 724 | $43.24 | 724 | | - No cash dividends were declared in Q2 or H1 2023, and the Company does not anticipate declaring cash dividends in the foreseeable future[179] Other Information D. Anthony Scaglione, EVP and CFO, terminated his Rule 10b5-1 trading plan on June 14, 2023, without executing any sales transactions - D. Anthony Scaglione, EVP and CFO, terminated his Rule 10b5-1 trading plan on June 14, 2023, without executing any sales transactions[180] Exhibits This section lists the exhibits filed with the Form 10-Q, including equity incentive plan agreements, officer certifications, and Inline XBRL documents - Exhibits include Varis, Inc. Equity Incentive Plan Option Award Agreement, officer certifications (Rule 13a-14(a) or 15d-14(a), and 18 U.S.C. Section 1350), and Inline XBRL documents[182][183][184][185][186][187][188] Form 10-Q Cross-Reference Index This index provides a cross-reference to the traditional SEC Form 10-Q format, detailing where each required item can be found - The index provides a cross-reference to the traditional SEC Form 10-Q format, indicating the page numbers for each item[190] Signatures This section contains the official signatures certifying the accuracy and completeness of the report Signatures The report is signed by the CEO, EVP & CFO, and SVP & Chief Accounting Officer on August 9, 2023 - The report is signed by Gerry P. Smith (CEO), D. Anthony Scaglione (EVP & CFO), and Max W. Hood (SVP & Chief Accounting Officer) on August 9, 2023[192][193][194]