UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report February 13, 2002
Commission file number 1-10948
OFFICE DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
(Address of principal executive offices) (Zip Code)
(561) 438-4800
(Registrant's telephone number, including area code)
Former name or former address, if changed since last report: N/A
ITEM 5. OTHER EVENTS
1. On February 13, 2002, Office Depot, Inc. issued a press release, with
earnings information for its fiscal year ended December 29, 2002 and an
update of its outlook for the first quarter of 2002 and for the full fiscal
year 2002. A copy of the press release is attached hereto as Exhibit 99.1.1
and incorporated by reference herein.
2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99.1.1 Press release dated February 13, 2002, announcing financial results
for the Company's fiscal year ended December 29, 2002 and its outlook
for the first quarter 2002 and the full year 2002.
3
SIGNATURE
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.
OFFICE DEPOT, INC.
Date: February 13, 2002 By: /S/ DAVID C. FANNIN
David C. Fannin
Executive Vice President and
General Counsel
4
OFFICE
DEPOT
NEWS RELEASE
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CONTACT: Eileen H. Dunn
Vice President, Investor Relations/Public Relations
561/438-4930
edunn@officedepot.com
---------------------
OFFICE DEPOT ANNOUNCES SIGNIFICANT IMPROVEMENT IN 2001 RESULTS;
SETS INCREASED EXPECTATIONS FOR 2002
o 4Q Operating Income Improved $266.2 Million, from $190.7 Million
Loss in 2000, to $75.5 Million of Income in 2001
o 4Q EPS $0.19 (Before Charges) Compared to $0.06 in 4Q 2000
o FY 2001 Free Cash Flow Totaled $540 Million
o All Business Units Generated Strong Operating Improvements, On
Improved Margins, Despite Sales Softness
o E-commerce Sales Reached $1.6 Billion; Expected to Top $2 Billion
in 2002
o Company Reports Improved Outlook for 2002, Increases EPS Growth
Targets to $0.97- $1.03, an Approximate 25% Increase over 2001
(DELRAY BEACH, FL) FEBRUARY 13, 2002 -- OFFICE DEPOT, INC. (NYSE: ODP), the
world's largest seller of office products, today announced fourth quarter and
year-end results for the fiscal periods ended December 29, 2001.
Office Depot reported fourth quarter net income of $40.3 million or $0.13
diluted EPS (GAAP basis), including after tax charges of $17.8 million related
to an increase in estimated net lease obligations for a number of the 70
non-performing stores closed in the first quarter of 2001, closure costs for 8
additional non-performing stores and the write-down of certain investments in
Internet companies. Net income before these charges was $58.1 million, or $0.19
diluted EPS.
FOURTH QUARTER 2001 PERFORMANCE
Total sales for the fourth quarter of 2001 decreased 8% to $2.8 billion compared
to the fourth quarter last year, which included an additional week in December
2000, in accordance with the Company's 52-53 week accounting convention.
Comparable worldwide sales in the 849 stores and 39 delivery centers that have
been open for more than one year declined 3% in the fourth quarter reflecting a
continued weak economy. The following table more fully describes the Company's
sales performance:
FOURTH QUARTER SALES
- --------------------------------------------------------------------------------
2001 2000 53 Wk. Basis 52 Wk. Comp.
Basis Basis
- --------------------------------------------------------------------------------
Fourth Quarter $2.8 Billion $3.0 Billion (8%) (1%) (3%)
- --------------------------------------------------------------------------------
Operating profit for the fourth quarter improved to $75.5 million compared to an
operating loss of $190.7 million for the fourth quarter in the prior year.
Included in fourth quarter 2001 reported operating profit are the store related
charges discussed above. The following table describes the charges and credits
included in operating profit:
FOURTH QUARTER OPERATING PROFIT
- ------------------------------------------------------------------
(In millions of dollars) 2001 2000
- ------------------------------------------------------------------
As reported (GAAP) $75.5 $(190.7)
Charges and credits:
Facility-related 20.7 174.7
Merger-related 0.5 (8.0)
Other 2000 business review costs - 61.5
As adjusted $96.7 $37.5
- ------------------------------------------------------------------
Net income for the fourth quarter 2001 rose to $40.3 million as compared to a
loss of $168.3 million in the fourth quarter of 2000. Reported earnings per
share increased to $0.13 per share (GAAP basis) as compared to a loss of $0.57
for the same period last year. The table below highlights the reported net
income (loss) and diluted earnings (loss) per share for the fourth quarters of
2001 and 2000:
FOURTH QUARTER NET INCOME (LOSS) DILUTED EPS
- --------------------------------------------------------------------------------
(Net income (loss) dollars in millions) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
As reported (GAAP) $40.3 $(168.3) $0.13 $(0.57)
Charges and credits (after-tax):
After-tax operating profit 13.8 146.6 0.05 0.49
Internet investments and other 4.0 40.7 0.01 0.14
As adjusted $58.1 $19.0 $0.19 $0.06
- --------------------------------------------------------------------------------
In reviewing the Company's fourth quarter results, Bruce Nelson, Office Depot's
Chairman & CEO, commented, " These results reflect the tremendous improvement we
have seen across all channels of our business throughout the year both in
customer service and operating performance. North American Retail had its fourth
sequential quarter of comparable store sales improvement, despite continued
weakness in technology. Strong gross margin performance coupled with continued
control on expenses resulted in this segment exceeding its operating plan for
the quarter. In our Business Services Group, even with fourth quarter negative
sales growth, operating profit reached 8.1% of sales compared to 0.6% in the
fourth quarter of 2000. This was due to the continued improvement in efficiency,
productivity and quality in our North American warehouses. Our International
business grew 2% in local currencies, reflecting some softness in our larger
European countries, but maintained its strong operating margins despite the
additional costs associated with the launch of BSD in Europe, and early costs in
our newest country, Switzerland."
FISCAL YEAR 2001 PERFORMANCE
For fiscal 2001, total sales decreased 4% to $11.2 billion compared to fiscal
2000 which included an additional week in December 2000, in accordance with the
Company's 52-53 week
2
accounting convention. Comparable worldwide sales in the 849 stores and 39
delivery centers declined 2% for the full fiscal year. The following table more
fully describes the Company's sales performance:
FISCAL YEAR SALES
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2001 2000 53 Wk. Basis 52 Wk. Comp.
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Basis Basis
Fiscal Year $11.2 Billion $11.6 Billion (4%) (2%) (2%)
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Operating profit for fiscal 2001 improved to $354.4 million compared to
operating income of $110.2 million for the full year of 2000. The following
table describes the charges and credits included in operating profit:
FISCAL YEAR OPERATING PROFIT
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(In millions of dollars) 2001 2000
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As reported (GAAP) $354.4 $110.2
Charges and credits:
Facility-related 43.6 174.7
Gain on London warehouse (10.2) -
Legal, merger and other 15.9 25.7
Other 2000 business review costs - 61.5
As adjusted $403.7 $372.1
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Net income for fiscal 2001 improved to $201.0 million as compared to $49.3
million in 2000. Reported earnings per share in 2001 increased to $0.66 per
share (GAAP basis) as compared to $0.16 for 2000. The table below highlights the
reported net income and diluted earnings per share for the fiscal years 2001 and
2000:
FISCAL YEAR NET INCOME DILUTED EPS
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(Net income dollars in millions) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
As reported (GAAP) $201.0 $49.3 $0.66 $0.16
Charges and credits (after-tax):
After-tax operating profit 32.0 168.8 0.10 0.54
Internet investments and other 9.0 4.1 0.03 0.02
As adjusted $242.0 $222.2 $0.79 $0.70*
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* EPS adjusted for dilutive effect of convertible securities
The company reached several important milestones in 2001:
o Transformed our culture into a more compelling place to work.
Management and hourly retention increased substantially, and we made
significant progress on our corporate wide diversity initiatives.
o Substantially improved our balance sheet, reduced debt and ended 2001
with $563.4 million of cash.
3
o Successfully completed the acquisition of 4Sure.com, an online
technology retailer targeting tech-savvy buyers and Sands & McDougall,
the leading contract stationer in Western Australia.
o Launched the Office Depot Business Services Division in three new
countries - Ireland, The Netherlands and France. This channel targets
medium to large size businesses and offers better service through a
specialized sales force, individualized pricing and overnight order
fulfillment, utilizing our existing European logistics infrastructure.
o Grew our industry leading e-commerce results. Worldwide e-commerce
sales were $432.8 million in the fourth quarter, an increase of 36%
over the prior year, and reached $1.6 billion for the full year, an
increase of 58% over 2000.
o Finalized plans for the start-up of operations in Switzerland, with a
new call center and logistics center which opened in January, and we
laid the ground work to open in Spain in early 2002.
o Consolidated 24 Office Depot call centers into 7, resulting in
dramatically improved customer service and reduced costs.
o Re-established credibility and trust with the capital markets by
consistent execution against our operating and financial objectives
and providing the most detailed financial reporting to the financial
community in our sector.
CHAIRMAN AND CEO'S COMMENTS:
- ----------------------------
In reviewing the Company's results for the year ended December 29, 2001, Bruce
Nelson, Office Depot's Chairman & CEO, commented, "2001 was a year of
transformation and change for Office Depot. In addition to successfully
executing the strategic plans from our 2000 business review, we also made
several important changes and additions to our senior management team including
the addition of Charles Brown as Chief Financial Officer, Jerry Colley as
President of North American Stores, Jay Crosson as EVP of Human Resources, Rick
Lepley as President of Office Depot Japan, Patti Morrison as Chief Information
Officer, and most recently we have announced the addition of Jocelyn
Carter-Miller to the newly created position of Chief Marketing Officer. We have
seen an enormously positive change in our company culture by focusing our over
48,000 employees on three key values: Respect for the Individual, Fanatical
Customer Service, and Excellence in Execution. It is this change in our culture
that has driven our improved results in 2001 and will lead to an even better
2002.
"While our performance in our North American Retail segment struggled
throughout the year as a result of the economic environment, we have shown
continued sequential improvement in comp sales trends over the past four
quarters. Our retail gross margins improved 350 basis points in the second half,
compared to the same period last year. We think those levels are sustainable
except for product mix changes. Our ability to leverage fixed expenses suffered
from negative comp sales growth, but we implemented changes to our cost
structure that helped our results and at the same time virtually every customer
service metric.
"One of the many key highlights of 2001 was the dramatic improvement in
operating performance in our Business Services Group. Our North American
warehouse operations achieved the highest service levels in Office Depot's
history, and at the same time we reduced operating and selling costs by 131
basis points. Coupled with a steady and sustainable improvement in gross
margins, this segment reported a 7.7% operating profit for the full year,
compared to a 5.0% operating profit in 2000. This is in spite of a weakening
economy that resulted in negative comp sales growth in this segment of 4% during
the fourth quarter of 2001.
4
"Our highly successful and profitable International business segment had another
outstanding year. Reported sales (in U.S. dollars) were negatively impacted by
approximately $80 million as a result of foreign currency exchange rates.
International now accounts for 14% of consolidated worldwide revenues and is 27%
of consolidated segment operating income, with the most positive outlook for
future growth of all our business segments. We achieved this excellent
performance despite the initial operating losses associated with the launch of
the Office Depot Business Service Division in three new countries, the early
start-up costs of launching a new country, Switzerland, and somewhat higher
Japanese operating losses compared to plan and last year, reflecting the
continuing weak Japanese economy. This business segment continues to be our
highest return on sales and investment business and we are looking forward to
early successes in both Switzerland and Spain in 2002.
"During 2001 we successfully demonstrated our ability to execute against our
operating plans, deliver consistent and predictable results, plan for the
future, and establish a cost and quality platform that is sustainable, and can
be leveraged. I am extremely proud of our company's achievements in 2001, but I
am even more proud of the energy, commitment, dedication and loyalty that our
48,000 worldwide employees delivered this year."
OUTLOOK FOR 2002:
- -----------------
Mr. Nelson continued, "Based on our very early view of the overall economic
outlook for 2002, which is critical to our success, we now believe we can grow
EPS in 2002 to a range of $0.97-$1.03, a more than 23% increase over our 2001
performance. We face much easier comparisons in the first half of the year
versus the second half. Our performance in the first six months of 2002 will
primarily be driven by gross margin improvement over last year and continued
emphasis on efficiency and cost controls, and we believe we can achieve
continued success in these areas.
"We also are planning for improvement in North American Retail comps every
quarter on a year-over-year basis, and expect to comp in the positive low single
digit range for the full year, with the second half of 2002 somewhat stronger
than the first half. We are planning for continued softness in the first six
months of 2002 for our BSG as a direct result of the current recession. For the
full year we believe BSG will grow in the mid single digit range, which is more
modest than its historical rates of growth. Our International business is
expected to continue to be our fastest growing business and will grow (in U.S.
dollars) in the mid teens range. Reported International results will continue to
be highly dependent upon exchange rates and the relative strength of foreign
currencies (especially the Euro and the British Pound) against the U.S. dollar.
"Gross margins across all business units are planned at current levels (except
for product mix) and we plan to keep adequate controls over our cost structure.
As a result, we expect operating income as a percent of sales to grow in 2002.
Other key assumptions for 2002 include the following:
o 25-30 new North American Retail Stores
o 10-15 new Retail Stores in France & Japan
o Two new countries for European Business Service Division startup
o New country entry into Spain
5
o CAPEX in the $275-$300 million range (which includes two new
distribution facilities in Atlanta and Baltimore)
o Free Cash Flow of $300-$350 million
6
FIRST QUARTER 2002 MID QUARTER UPDATE
- -------------------------------------
"Based on trends through the first full week of February, we now expect first
quarter fully diluted EPS to be in the $0.30-$0.32 range, a more than 60%
increase over last year's first quarter performance.
"North American Retail comps to date are trending better than the fourth
quarter, but still are in the low single digit negative range. BSG comp trends
are somewhat better than the fourth quarter, and we anticipate a negative low
single digit comp performance in the first quarter. International sales, in
local currencies are stronger than the fourth quarter, but will again be
negatively impacted by foreign currency exchange rates. Gross margins are strong
across all business segments, more than offsetting the continued softness in
sales. Operating expenses are in line with our expectations and as a result we
are expecting a very strong first quarter EPS performance.
"Given the timing of our 2001 year-end earnings release, and this inclusion of
updating information on the first quarter of 2002, we will not provide our usual
mid quarter taped message this quarter, absent any need to update the financial
community for material changes in our outlook."
SUMMARY COMMENTS OF CHAIRMAN AND CEO:
Chairman Nelson continued: "As we enter 2002, we are building on the tremendous
progress we made in 2001 in our ability to successfully execute our business
plans, meet or exceed expectations, and leverage costs in our North America
warehouses and our G&A costs. We are relentlessly focused on increasing RONA to
exceed our cost of capital and increasing shareholder value. We are seeking new
ways to drive sales by (1) Differentiation, (2) Targeting our immense knowledge
of our customers and (3) Integrating our multi-channel strategy to provide a
flawless and seamless customer experience across all of our Brands and Channels.
We have undertaken a major re-branding and advertising initiative for the Office
Depot brand that will clearly define the differences between Office Depot and
our competitors. We expect these actions and others to accelerate growth across
all our business segments. We will continue to search for opportunistic
acquisitions that will position us for incremental growth in new channels and
segments. Most importantly, we are driven to make Office Depot the most
compelling place to work for our over 48,000 worldwide employees.
"In the short term, we still face the uncertainty of the domestic U.S. economy,
continued impact of corporate downsizing and its impact on unemployment, and the
lingering effects of the U.S. recession. Internationally, we face economic
difficulties in several countries in Europe, the continued business malaise in
Japan and the impact of a continued strong U.S. dollar against foreign
currencies. Our belief is that the overall economic outlook for the second half
of 2002 will be somewhat better than the first half. We feel confident that
there has never been a better time to invest in our future. Our foundation and
the opportunities to grow our global industry leadership position are stronger
than ever before."
7
Segment Results
- ---------------
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The following discussion includes the reclassification of certain
segment-related expenses previously recorded in total Company general and
administrative expenses. These reclassifications have been applied to both
fourth quarter and fiscal year 2001 and 2000 results.
- --------------------------------------------------------------------------------
North American Retail (See note above)
Fourth Quarter Fiscal Year
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(In millions of dollars) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Sales $1,477.7 $1,688.7 $5,842.6 $6,487.5
COGS and Occupancy Costs 1,119.1 1,335.6 4,479.1 5,065.0
------- ------- ------- -------
Gross Profit 358.6 353.1 1,363.5 1,422.5
Operating and Selling Expenses 266.0 353.0 1,046.7 1,101.7
----- ----- ------- -------
Segment Operating Profit $92.6 $0.1 $316.8 $320.8
- --------------------------------------------------------------------------------
Fourth quarter sales in the North American Retail Division continue to be the
hardest hit by the weak U.S. economy. Comparable store sales in the 816 stores
throughout the U.S. and Canada that have been open for more than one year
mirrored the trends experienced all year of weaker sales trends on the weekends
compared to sales during the week, when most of our core small to medium
business customers shop. Technology and furniture related categories during the
quarter continued to under perform while our core office supplies business
remained steady. The following table summarizes sales performance for the fourth
quarter and fiscal year 2001:
NORTH AMERICAN RETAIL SALES PERFORMANCE
- --------------------------------------------------------------------------------
2001 2000 53 Wk. Basis 52 Wk. Comp.
Basis Basis
- --------------------------------------------------------------------------------
Fourth Quarter $1.5 Billion $1.7 Billion (12%) (5%) (6%)
Fiscal Year $5.8 Billion $6.5 Billion (10%) (8%) (8%)
- --------------------------------------------------------------------------------
Gross margins, excluding business review charges taken in fiscal 2000, improved
152 basis points during the fourth quarter and 93 basis points for fiscal year
2001. The improvement in gross margins was due to the continued mix shift away
from technology and our successful re-merchandising initiatives offset by lower
vendor rebates from weaker sales during the quarter.
Expressed as a percent of sales, operating costs excluding non-recurring
charges, improved by 31 basis points during the fourth quarter, while increasing
by 132 basis points for the fiscal year. This increase in costs was primarily
due to the loss of leverage from the negative retail comparable sales and
increased expenses during the first three quarters from the various initiatives
implemented throughout this timeframe. We continue to keep tight control over
expenses, while at the same time improving virtually all of our customer service
measurements.
8
Included in North American Retail segment operating profit for fiscal 2001 are
write-downs totaling $9.1 million for the fourth quarter and $35.2 million for
the year. The fourth quarter charges related to an increase in three retail
store closures in the fourth quarter and eight store closures planned for early
2002. Additional charges were taken for the estimated net lease obligations for
several of the 70 non-performing store closures totaling $11.6 million for the
fourth quarter and $8.4 million for the year. For fiscal 2000, segment-operating
profit included charges totaling $97.4 million. These charges, and $103.7
million of facility closure costs presented outside of segment operating profit,
were taken as a result of the Company's comprehensive business reviewed
conducted in the latter half of 2000.
Office Depot continued to expand its store base during the fourth quarter by
opening 16 new stores, relocating one store and closing three under-performing
stores, for a total of 13 net new stores. For the year, a total of 44 new stores
were opened in North America, most of them in existing markets, where we
continue to find excellent real estate sites that enhance our current market
positions, build density and target new opportunities for growth. Five stores
were relocated and 73 under-performing stores were closed. At the end of fiscal
2001, Office Depot operated a total of 859 office product superstores throughout
the United States and Canada.
BUSINESS SERVICES GROUP (See note above)
Fourth Quarter Fiscal Year
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(In millions of dollars) 2001 2000 2001 2000
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Sales $921.1 $964.9 $3,763.0 $3,618.8
COGS and Occupancy Costs 622.9 703.1 2,573.9 2,526.6
----- ----- ------- -------
Gross Profit 298.2 261.8 1,189.1 1,092.2
Operating and Selling Expenses 223.7 256.4 897.9 910.8
----- ----- ----- -----
Segment Operating Profit 74.5 5.4 291.2 181.4
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Sales in the Business Services Group has continued to experience the impact of
many of our large contract customers' accelerated layoffs, in particular, in our
Western division. The following summarizes sales performance during the fourth
quarter and fiscal year 2001:
BUSINESS SERVICE GROUP PERFORMANCE
- ---------------------------------------------------------------------
2001 2000 53 Wk. 52 Wk.
Basis Basis
- ---------------------------------------------------------------------
Fourth Quarter $921 Million $965 Million (5%) 2%
Fiscal Year $3.8 Billion $3.6 Billion 4% 6%
Gross margins, excluding business review charges taken in fiscal 2000, improved
468 basis points during the fourth quarter and 128 basis points during fiscal
2001. This improvement reflects the continued disciplined contract management in
our business services business and more diligent management of our wholesaler
activity and pricing.
9
Expressed as a percent of sales, operating and selling expenses excluding
non-recurring items, improved by 174 basis points for the fourth quarter and 116
basis points for the year. Fourth quarter improvement reflects lower warehouse
operating costs as the Company's North American warehouse operations continue to
report an increase in productivity and cost management despite the pressure on
expense leverage from softer sales. In addition, we are seeing lower selling
costs as a result of further benefits from the call center consolidation
implemented in 2001, more diligent accounts receivable collections and better
management of our usage of third party delivery companies.
Included in segment operating profit for the fourth quarter and fiscal 2000 are
non-recurring charges and credits of $10.9 million. These charges and credits
are a direct result of the comprehensive business review conducted by the
Company throughout the last half of last year. There were no charges similar to
these taken during fiscal 2001 in the Business Services Group.
INTERNATIONAL DIVISION (See note above)
Fourth Quarter Fiscal Year
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(In millions of dollars) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Sales $402.7 $395.7 $1,552.0 $1,467.4
COGS and Occupancy Costs 242.2 244.0 932.3 890.0
----- ----- ----- -----
Gross Profit 160.5 151.7 619.7 577.4
Operating and Selling Expenses 113.4 110.8 400.3 398.5
----- ----- ----- -----
Segment Operating Profit 47.1 40.9 219.4 178.9
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Sales in the International Division experienced softness in Company operations
in larger European countries related to softer economic conditions generally
throughout Europe, particularly in the United Kingdom and France. While Japan
sales also reflected the deterioration in economic conditions being felt
throughout the U.S. and Europe, the operating loss was similar to the loss we
reported last year. Comparable sales, excluding the foreign currency effect,
grew 8% for the fourth quarter and 12% for the year. The following summarizes
sales performance during the fourth quarter and fiscal year 2001:
INTERNATIONAL SALES PERFORMANCE
- --------------------------------------------------------------------------------
Excl FX Excl FX
Effect Effect
53 Wk. 53Wk 52 Wk. 52 Wk
2001 2000 Basis Basis Basis Basis
- --------------------------------------------------------------------------------
Fourth Quarter $402 Million $396 Million 2% 2% 9% 8%
- --------------------------------------------------------------------------------
Fiscal Year $1.6 Billion $1.5 Billion 6% 11% 8% 12%
- --------------------------------------------------------------------------------
Gross margins, excluding non-recurring items, improved 151 basis points for the
fourth quarter and 58 basis points for fiscal 2001. Segment operating profit,
excluding non-recurring items,
11
improved 2% for the fourth quarter (declined 1% excluding the foreign currency
effect) and 14% for the year (19% excluding the foreign currency effect) despite
the slower economic conditions in Europe and Japan and the start-up costs
associated with opening Switzerland in the beginning of 2002.
Exchange rates increased reported sales by approximately $0.6 million for the
quarter and decreased reported sales by approximately $80.4 million for fiscal
2001.Segment operating profit was positively affected by $1.4 million for the
fourth quarter and was negatively affected by $9.0 million for the year.
Included in the International Division segment-operating profit for fiscal 2001
is a gain of $10.2 million related to the sale of the Company's London
warehouse.
Office Depot has retail stores, through a combination of wholly owned
operations, joint ventures and international licensing agreements, in the
following countries:
OFFICE DEPOT INTERNATIONAL RETAIL ACTIVITY
Fourth Quarter Activity Open at Year End
- --------------------------------------------------------------------------------
Number of Stores Opened Closed 2001 2000
- --------------------------------------------------------------------------------
Mexico 4 - 61 54
France * 2 - 30 28
Israel - - 23 22
Poland - 1 15 16
Japan * 2 - 9 7
Hungary - - 3 3
Thailand - - 2 2
---------- ------------- ------------ -----------
Total 8 1 143 132
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* Office Depot wholly-owned stores
Along with its retail stores, the Company also sells products and services
through its delivery and catalog operations in 16 countries outside of the
United States and Canada.
- --------------------------------------------------------------------------------
CONFERENCE CALL INFORMATION
Office Depot will hold a conference call for investors and analysts at 8:00 a.m.
(Eastern Time) on today's date. The conference call will be available to all
investors via Webcast at www.officedepot.com under Company Info/Investor
Relations. Interested parties may contact Investor Relations at 561-438-1680 for
further information on the conference call.
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ABOUT OFFICE DEPOT
No one sells more office products to more customers in more countries through
more channels than Office Depot. As the largest seller of office products around
the world, the Company operates under the Office Depot(R), Viking Office
Products(R), Viking Direct(R) and 4Sure.com(R) brand names. As of December 29,
2001, Office Depot operated 859 office supply superstores in the United States
and Canada, in addition to a national business-to-business delivery network
supported by 24 delivery centers, more than 60 local sales offices and 12
regional call centers. Furthermore, the Company sells products and services in
16 countries outside of the United States and Canada, including 30 office supply
stores in France and nine in Japan that are owned and operated by the Company;
and 104 additional office supply stores under joint
12
venture and licensing agreements operating under the Office Depot(R) name in
five foreign countries.
The Company also operates an award-winning U.S. Office Depot brand Web site at
www.officedepot.com where customers can access Office Depot's low competitive
prices seven days a week, twenty-four hours a day. The Company also operates 13
other Web sites, under the Office Depot and Viking Office Products names, in the
U.S. and eight international countries including: Austria, Australia, France,
Japan, Germany, Italy, The Netherlands and the United Kingdom.
Office Depot's common stock is traded on the New York Stock Exchange under the
symbol ODP and is included in the S&P 500 Index.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: Except for historical
information, the matters discussed in this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, as amended. Forward-looking statements, including without limitation all
of the projections and anticipated levels of future performance, involve risks
and uncertainties which may cause actual results to differ materially from those
discussed herein. These risks and uncertainties are detailed from time to time
by Office Depot in its filings with the United States Securities and Exchange
Commission ("SEC"), including without limitation its most recent filing on Form
10-K, filed in March 22, 2001 and subsequent 10-Q filings, including our most
recent 10-Q, filed on October 31, 2001 and in our 8-K filings made from time to
time. You are strongly urged to review all such filings for a more detailed
discussion of such risks and uncertainties. The Company's SEC filings are
readily obtainable at no charge at www.sec.gov and at www.freeEDGAR.com, as well
as on a number of other commercial Web sites. In addition to these prior
cautionary statements, you are cautioned that future performance may be impacted
by a number of additional matters referred to in Office Depot's Press Release
dated January 3, 2001, which has been filed with the SEC. We will be filing our
Report on Form 10-K next month, along with our Annual Report for 2001 and our
Proxy Statement, and we will hold our Annual Meeting on April 25, 2002.
13
OFFICE DEPOT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
13 Weeks 14 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended
December 29, December 30, December 29, December 30,
2001 2000 2001 2000
------------------- ------------------ ------------------ -------------------
Sales $ 2,800,171 $ 3,048,198 $ 11,154,081 $ 11,569,696
Cost of goods sold and occupancy costs 1,983,975 2,282,215 7,983,973 8,479,437
------------------- ------------------ ------------------ -------------------
Gross profit 816,196 765,983 3,170,108 3,090,259
Store and warehouse operating
and selling expenses 602,454 719,610 2,343,394 2,409,478
General and administrative expenses 122,599 130,171 451,722 453,784
Facility closure costs 11,600 110,038 8,436 110,038
Other operating expenses 4,068 (3,099) 12,125 6,733
------------------- ------------------ ------------------ -------------------
740,721 956,720 2,815,677 2,980,033
Operating profit 75,475 (190,737) 354,431 110,226
Other income (expense):
Interest income 5,079 1,952 13,058 11,502
Interest expense (13,353) (10,317) (44,302) (33,901)
Miscellaneous income (expense), net (5,196) (55,267) (9,057) 4,632
------------------- ------------------ ------------------ -------------------
Earnings before income taxes 62,005 (254,369) 314,130 92,459
Income taxes 21,725 (86,106) 113,087 43,127
------------------- ------------------ ------------------ -------------------
Net earnings $ 40,280 $ (168,263) $ 201,043 $ 49,332
=================== ================== ================== ===================
Earnings per common share:
Basic $ 0.13 $ (0.57) $ 0.67 $ 0.16
Diluted 0.13 (0.57) 0.66 0.16
Weighted average number of common
shares outstanding:
Basic 300,661 296,756 298,054 309,301
Diluted 322,081 296,756 316,423 311,231
14
OFFICE DEPOT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
As of As of
December 29, December 30,
2001 2000
---------------------- -------------------
Assets
Current assets:
Cash and cash equivalents $ 563,410 $ 151,482
Receivables, net 781,476 896,333
Merchandise inventories, net 1,259,522 1,420,825
Deferred income taxes 148,490 157,779
Prepaid expenses 53,292 72,670
---------------------- -------------------
Total current assets 2,806,190 2,699,089
Property and equipment, net 1,110,011 1,119,306
Goodwill, net 249,560 219,971
Other assets 165,882 157,968
---------------------- -------------------
$ 4,331,643 $ 4,196,334
====================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,060,968 $ 1,136,994
Accrued expenses and other liabilities 612,999 580,966
Income taxes payable 109,026 37,118
Current maturities of long-term debt 318,521 153,259
---------------------- -------------------
Total current liabilities 2,101,514 1,908,337
Deferred income taxes and other credits 64,139 88,247
Long-term debt, net of current maturities 315,331 374,061
Zero coupon, convertible subordinated notes 2,221 224,438
Commitments and Contingencies
Stockholders' Equity
Common stock - authorized 800,000,000 shares
of $.01 par value; issued 385,538,340 in
2001 and 378,688,359 in 2000 3,855 3,787
Additional paid-in capital 1,007,088 939,214
Unamortized value of long-term incentive stock grant (2,578) (2,793)
Accumulated other comprehensive income (71,273) (53,490)
Retained earnings 1,717,734 1,516,691
Treasury stock, at cost - 82,443,170 shares in 2001
and 82,190,548 in 2000 (806,388) (802,158)
---------------------- -------------------
1,848,438 1,601,251
---------------------- -------------------
$ 4,331,643 $ 4,196,334
====================== ===================
15
OFFICE DEPOT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
52 Weeks 53 Weeks
Ended Ended
December 29, December 30,
2001 2000
------------------ -------------------
Cash flows from operating activities:
Net earnings $ 201,043 $ 49,332
Adjustments to reconcile net earnings to net cash provided
By operating activities:
Depreciation and amortization 196,408 205,710
Provision for losses on inventories and receivables 109,560 121,226
Accreted interest on zero coupon, convertible
subordinated notes 11,308 19,203
Employee stock benefit plans 5,001 6,469
Deferred income tax benefit (10,610) (81,814)
Loss (gain) on investment securities 14,100 (12,414)
Net (earnings) on equity method investments (10,892) (9,436)
(Gain) Loss on disposal of property and equipment (5,275) 10,585
Write-down of impaired assets 42,690 114,343
Changes in assets and liabilities:
Decrease (increase) in receivables 93,849 (85,327)
Decrease (increase) in merchandise inventories 81,651 (66,348)
Net decrease (increase) in prepaid expenses
and other assets 13,156 (21,561)
Net decrease (increase) in accounts payable, accrued
expenses and deferred credits (15,397) 66,514
------------------ -------------------
Net cash provided by operating activities 726,592 316,482
------------------ -------------------
Cash flows from investing activities:
Purchases of investment securities - (30,112)
Proceeds from maturities or sales of investment securities - 54,006
Acquisitions, net (45,604) -
Capital expenditures (186,713) (267,728)
Proceeds from sale of property and equipment 20,947 4,469
------------------ -------------------
Net cash used in investing activities (211,370) (239,365)
------------------ -------------------
Cash flows from financing activities:
Proceeds from exercise of stock options and sale of stock
under stock purchase plans 52,962 12,388
Acquisition of treasury stock (4,193) (300,797)
Proceeds from issuance of long-term debt 266,286 430,522
Payments on long- and short-term borrowings (400,458) (27,015)
Repurchase of zero coupon, convertible subordinated notes - (249,191)
------------------ -------------------
Net cash used in financing activities (85,403) (134,093)
------------------ -------------------
Effect of exchange rate changes on cash and cash equivalents (17,891) (10,326)
------------------ -------------------
Net increase (decrease) in cash and cash equivalents 411,928 (67,302)
Cash and cash equivalents at beginning of period 151,482 218,784
------------------ -------------------
Cash and cash equivalents at end of period $ 563,410 $ 151,482
================== ===================
16