UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 30, 2008
Commission file number 1-10948
OFFICE DEPOT, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 59-2663954 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 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
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
Attached hereto as Exhibit 99.1.1 and incorporated by reference herein is Office Depot, Inc.’s news
release dated July 30, 2008, announcing its financial results for its fiscal second quarter 2008.
This release also contains forward-looking statements relating to Office Depot’s fiscal year 2008.
This information is furnished pursuant to Item 2.02 of Form 8-K. The information in this report
shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
The latest Investor Relations presentation that management of Office Depot, Inc. (the “Company”)
intends to cover in any meetings with shareholders during the quarter is attached to this Current
Report on Form 8-K as Exhibit 99.1.2. The presentation provides an overview of the Company,
perspective on the office supply market and the Company’s operating results for the quarter ended
July 30, 2008. In addition, the presentation provides information on strategy, action plans and
outlook. The Company will also post the attached materials on its web site
( www.OfficeDepot.com) located in the Investor Relations section of that site.
| ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
Exhibit 99.1.1 News release of Office Depot, Inc. issued on July 30, 2008.
Exhibit 99.1.2 Presentation Materials for Investor Relations Conferences for Office Depot, Inc.
2
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: July 30, 2008 | By: | /S/ ELISA D. GARCIA C. | ||
| Elisa D. Garcia C. | ||||
| Executive Vice President, General Counsel and Corporate Secretary | ||||
3
Exhibit 99.1.1
CONTACTS:
Brian Turcotte
Investor Relations
561-438-3657
brian.turcotte@officedepot.com
Investor Relations
561-438-3657
brian.turcotte@officedepot.com
Brian Levine
Public Relations
561-438-2895
brian.levine@officedepot.com
Public Relations
561-438-2895
brian.levine@officedepot.com
OFFICE DEPOT ANNOUNCES SECOND QUARTER RESULTS
Delray Beach, Fla., July 30, 2008 — Office Depot, Inc. (NYSE: ODP), a leading global provider of
office products and services, today announced results for the fiscal period ending June 28, 2008.
SECOND QUARTER RESULTS 1
Total Company sales for the second quarter decreased 1% to $3.6 billion. Total Company operating
expenses, adjusted for Charges, represented 26.9% of sales, an increase of 110 basis points over
the second quarter of 2007. EBIT, as adjusted, was $21 million in the second quarter of 2008 or
0.6% as a percentage of sales, compared to $170 million or 4.7% in the prior-year period.
The Company reported a net loss of $2 million in the second quarter of 2008, compared to earnings
of $106 million in the same period of 2007. The loss per share on a diluted basis was $0.01 for
the quarter, versus earnings per share of $0.38 in the second quarter of 2007. On an adjusted
basis, diluted earnings per share were $0.04 for the second quarter, versus $0.41 in the same
period one year ago.
SECOND QUARTER DIVISION RESULTS
North American Retail Division
Second quarter sales in the North American Retail Division were down 6% to $1.4 billion.
Comparable store sales in the 1,178 stores in the U.S. and Canada that have been open for more than
one year decreased 10% for the second quarter. Persistent weakness in Florida and California
continued to weigh heavily on results; however, the sales decline in these two states is consistent
with what has been reported over the past few quarters. Outside of those two states, a further
decline in demand has occurred as this economic slowdown has spread to most regions of the country.
The North American Retail Division had an operating loss of $4 million for the second quarter, a
decline from the operating profit of $99 million in the same period of the prior year. Operating
profit as a percentage of sales decreased 680 basis points to a negative 0.3% versus a positive
6.5% in the second quarter of 2007. Operating margin was negatively impacted by lower product
margins, inventory costs and shrink, and de-leveraging of fixed expenses. Partially offsetting
this margin decline was increased private brand penetration.
| 1 | Includes non-GAAP information. Second quarter results include impacts of previously announced programs (“Charges”). Additional information is provided in our Form 10-Q filing. Reconciliations from GAAP to non-GAAP financial measures can be found in this release, as well as on the corporate web site, www.officedepot.com , under the category Investor Relations. |
1
During the second quarter, Office Depot opened
six new stores, closed one, and relocated three
stores, bringing the total store count to 1,272. The Company also remodeled two stores in the
quarter.
Inventory per store was $909 thousand at the end of the second quarter of 2008, down approximately
6% from the prior year. This decrease is a result of inventory management and the mitigation of
inventory risk through clearance activities.
North American Business Solutions Division
Second quarter sales in the North American Business Solutions Division were $1.1 billion, down 5%
compared to the same period last year. Low single digit sales growth with our large, national
account customers and the public sector was more than offset by a 10% sales decrease with our
small- to medium-sized customers in the second quarter of 2008. Sales were negatively impacted by
continued softness among small- to medium-sized business customers in
Florida and California, which
account for approximately 30% of the Division’s sales.
The North American Business Solutions Division operating profit was $49 million for the second
quarter of 2008 compared to $78 million for the same period of the prior year. Operating margin
declined by 240 basis points to 4.6% versus 7.0% in the second quarter 2007. The decrease in
operating margin reflects lower product margins, inventory shrink and de-leveraging of fixed costs.
Partially offsetting this margin decline was a reduction in operating expenses.
International Division
The
International Division reported a sales increase of 13% in the second
quarter of 2008 to $1.1 billion, compared
with the same period last year, while sales in local currency increased by 2%. While the U.K.
business has improved sequentially, continued weakness in the U.K. compared to last year, together
with a broadening decline in the macroeconomic environment across Europe, constrained sales growth
in the second quarter.
Division operating profit was $51 million in the second quarter of 2008 compared to $42 million in
the same period of the prior year. Operating profit margin was up slightly year-over-year at 4.6%
as a gain, resulting in lower employee-related costs, was largely offset by investments made to
support growth initiatives.
Other Matters
The Company has received recently an unsolicited non-binding proposal from its partner in its
Mexican joint venture in which its joint venture partner proposes to acquire the capital stock in
the joint venture owned by the Company for approximately $430 million. The Company has not yet
engaged in substantive discussions with its joint venture partner regarding this non-binding
proposal and there can be no assurance that any agreement on
financial or other terms satisfactory to the Company will result from
such proposal or that any transaction involving the Company will be
approved or completed.
During the first quarter of 2008, Office Depot amended its Revolving Credit Facility. Based on
current projected operating results, the Company anticipates remaining in compliance with all of
the restrictive covenants. However, given the uncertain economic environment, the Company is
seeking a new credit facility to replace its existing facility.
Office Depot has obtained commitments for a fully underwritten
facility in excess of $1 billion that will be in place by the
end of the third quarter 2008. The Amended Credit Agreement will be collateralized by the
Company’s accounts receivable and inventory in the U.S. and significant international subsidiaries.
2
Subsequent to second quarter end, the Company acquired a controlling interest in AGE Kontor & Data
AB, a contract and retail office supply company operating in Sweden.
Additional information on the Company’s results for the period can be found in the second quarter Form 10-Q filed with the Securities and Exchange
Commission.
Non-GAAP Reconciliation
A reconciliation of GAAP results to non-GAAP results excluding certain items is presented in this release and also may be accessed on the corporate website, www.officedepot.com , under the category Company Info.
A reconciliation of GAAP results to non-GAAP results excluding certain items is presented in this release and also may be accessed on the corporate website, www.officedepot.com , under the category Company Info.
Conference Call Information
Office Depot will hold a conference call for investors and analysts at 9 a.m. (Eastern Daylight Time) today. The conference call will be available to all investors via Web cast at http://investor.officedepot.com. Interested parties may contact Investor Relations at 561-438-7893 for further information.
Office Depot will hold a conference call for investors and analysts at 9 a.m. (Eastern Daylight Time) today. The conference call will be available to all investors via Web cast at http://investor.officedepot.com. Interested parties may contact Investor Relations at 561-438-7893 for further information.
About Office Depot
Every day, Office Depot is Taking Care of Business for millions of customers around the globe. For the local corner store as well as Fortune 500 companies, Office Depot provides products and services to its customers through 1,680 worldwide retail stores, a dedicated sales force, top-rated catalogs and a $5.0 billion e-commerce operation. Office Depot has annual sales of approximately $15.4 billion, and employs about 49,000 associates around the world. The Company provides more office products and services to more customers in more countries than any other company, and currently sells to customers directly or through affiliates in 44 countries.
Every day, Office Depot is Taking Care of Business for millions of customers around the globe. For the local corner store as well as Fortune 500 companies, Office Depot provides products and services to its customers through 1,680 worldwide retail stores, a dedicated sales force, top-rated catalogs and a $5.0 billion e-commerce operation. Office Depot has annual sales of approximately $15.4 billion, and employs about 49,000 associates around the world. The Company provides more office products and services to more customers in more countries than any other company, and currently sells to customers directly or through affiliates in 44 countries.
Office Depot’s common stock is listed on the New York Stock Exchange under the symbol ODP and is
included in the S&P 500 Index. Additional press information can be found at:
http://mediarelations.officedepot.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: The Private Securities Litigation Reform
Act of 1995, as amended (the “Act”) provides protection from liability in private lawsuits for
“forward-looking” statements made by public companies under certain circumstances, provided that
the public company discloses with specificity the risk factors that may impact its future results.
We want to take advantage of the “safe harbor” provisions of the Act. Certain statements made in
this press release are ‘forward-looking’ statements under the Act. Except for historical financial
and business performance information, statements made in this press release should be considered
‘forward-looking’ as referred to in the Act. Much of the information that looks towards future
performance of our company is based on various factors and important assumptions about future
events that may or may not actually come true. As a result, our operations and financial results in
the future could differ materially and substantially from those we have discussed in the
forward-looking statements made in this press release. Certain risks and uncertainties are detailed
from time to time in our filings with the United States Securities and Exchange Commission (“SEC”).
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.
3
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
| As of | As of | As of | ||||||||||
| June 28, | December 29, | June 30, | ||||||||||
| 2008 | 2007 | 2007 | ||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 156,607 | $ | 222,954 | $ | 122,695 | ||||||
Receivables, net |
1,471,710 | 1,511,681 | 1,466,714 | |||||||||
Inventories |
1,647,044 | 1,717,662 | 1,586,241 | |||||||||
Deferred income taxes |
99,398 | 120,162 | 64,474 | |||||||||
Prepaid expenses and other current assets |
166,247 | 143,255 | 148,295 | |||||||||
Total current assets |
3,541,006 | 3,715,714 | 3,388,419 | |||||||||
Property and equipment, net |
1,695,581 | 1,588,958 | 1,463,361 | |||||||||
Goodwill |
1,391,656 | 1,282,457 | 1,228,681 | |||||||||
Other intangible assets |
110,964 | 107,987 | 108,696 | |||||||||
Other assets |
579,175 | 561,424 | 439,579 | |||||||||
Total assets |
$ | 7,318,382 | $ | 7,256,540 | $ | 6,628,736 | ||||||
Liabilities and stockholders’ equity |
||||||||||||
Current liabilities: |
||||||||||||
Trade accounts payable |
$ | 1,398,321 | $ | 1,591,154 | $ | 1,582,487 | ||||||
Accrued expenses and other current liabilities |
1,148,041 | 1,170,775 | 1,095,197 | |||||||||
Income taxes payable |
13,063 | 3,491 | 2,167 | |||||||||
Short-term borrowings and current maturities
of long-term debt |
296,884 | 207,996 | 68,878 | |||||||||
Total current liabilities |
2,856,309 | 2,973,416 | 2,748,729 | |||||||||
Deferred income taxes and other long-term liabilities |
579,371 | 576,254 | 534,679 | |||||||||
Long-term debt, net of current maturities |
615,653 | 607,462 | 564,107 | |||||||||
Minority interest |
5,255 | 15,564 | 14,737 | |||||||||
Commitments and contingencies |
||||||||||||
Stockholders’ equity: |
||||||||||||
Common stock — authorized 800,000,000 shares
of $.01 par value; issued and outstanding shares —
280,962,284 in 2008, 428,777,625 in December
2007 and 428,553,951 in June 2007 |
2,810 | 4,288 | 4,286 | |||||||||
Additional paid-in capital |
1,177,644 | 1,784,184 | 1,757,070 | |||||||||
Accumulated other comprehensive income |
587,649 | 495,916 | 340,551 | |||||||||
Retained earnings |
1,551,979 | 3,783,805 | 3,647,543 | |||||||||
Treasury stock, at cost — 5,972,334 shares in
2008, 155,819,358 shares in December 2007
and 155,784,207 shares in June 2007 |
(58,288 | ) | (2,984,349 | ) | (2,982,966 | ) | ||||||
Total stockholders’ equity |
3,261,794 | 3,083,844 | 2,766,484 | |||||||||
Total liabilities and stockholders’ equity |
$ | 7,318,382 | $ | 7,256,540 | $ | 6,628,736 | ||||||
4
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 28, | June 30, | June 28, | June 30, | |||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
Sales |
$ | 3,605,073 | $ | 3,631,599 | $ | 7,567,090 | $ | 7,725,199 | ||||||||
Cost of goods sold and occupancy costs |
2,621,557 | 2,535,480 | 5,414,894 | 5,359,972 | ||||||||||||
Gross profit |
983,516 | 1,096,119 | 2,152,196 | 2,365,227 | ||||||||||||
Store and warehouse operating and selling
expenses |
811,694 | 799,494 | 1,678,500 | 1,685,186 | ||||||||||||
General and administrative expenses |
175,224 | 149,788 | 373,774 | 311,318 | ||||||||||||
Amortization of deferred gain on building sale |
(1,873 | ) | (1,873 | ) | (3,746 | ) | (3,746 | ) | ||||||||
Operating profit (loss) |
(1,529 | ) | 148,710 | 103,668 | 372,469 | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
5,604 | 1,241 | 6,509 | 2,101 | ||||||||||||
Interest expense |
(14,406 | ) | (18,031 | ) | (29,226 | ) | (30,671 | ) | ||||||||
Miscellaneous income, net |
6,502 | 9,874 | 14,943 | 19,695 | ||||||||||||
Earnings (loss) before income taxes |
(3,829 | ) | 141,794 | 95,894 | 363,594 | |||||||||||
Income taxes |
(1,827 | ) | 36,212 | 29,123 | 104,241 | |||||||||||
Net earnings (loss) |
$ | (2,002 | ) | $ | 105,582 | $ | 66,771 | $ | 259,353 | |||||||
Earnings (loss) per common share: |
||||||||||||||||
Basic |
$ | (0.01 | ) | $ | 0.39 | $ | 0.24 | $ | 0.95 | |||||||
Diluted |
(0.01 | ) | 0.38 | 0.24 | 0.93 | |||||||||||
Weighted average number of common shares
outstanding: |
||||||||||||||||
Basic |
272,845 | 271,879 | 272,620 | 273,690 | ||||||||||||
Diluted |
273,362 | 275,952 | 273,101 | 278,041 | ||||||||||||
5
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| 26 Weeks Ended | ||||||||
| June 28, | June 30, | |||||||
| 2008 | 2007 | |||||||
Cash flow from operating activities: |
||||||||
Net earnings |
$ | 66,771 | $ | 259,353 | ||||
Adjustments to reconcile net earnings to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
130,390 | 139,609 | ||||||
Charges for losses on inventories and receivables |
64,678 | 47,335 | ||||||
Changes in working capital and other |
(124,098 | ) | (153,134 | ) | ||||
Net cash provided by operating activities |
137,741 | 293,163 | ||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(206,840 | ) | (225,330 | ) | ||||
Acquisitions, net of cash acquired, and related payments |
(84,659 | ) | (47,591 | ) | ||||
Release of restricted cash |
18,100 | — | ||||||
Purchase of assets sold and held for sale |
(39,772 | ) | — | |||||
Proceeds from assets sold and other |
36,781 | 83,290 | ||||||
Net cash used in investing activities |
(276,390 | ) | (189,631 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from exercise of stock options and sale of
stock under employee stock purchase plans |
855 | 25,294 | ||||||
Tax benefits from employee share-based payments |
56 | 11,625 | ||||||
Acquisition of treasury stock under approved repurchase plans |
— | (199,592 | ) | |||||
Treasury stock additions from employee related plans |
(944 | ) | (9,801 | ) | ||||
Net proceeds on long- and short-term borrowings |
69,279 | 16,674 | ||||||
Net cash provided by (used in) financing activities |
69,246 | (155,800 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents |
3,056 | 1,411 | ||||||
Net decrease in cash and cash equivalents |
(66,347 | ) | (50,857 | ) | ||||
Cash and cash equivalents at beginning of period |
222,954 | 173,552 | ||||||
Cash and cash equivalents at end of period |
$ | 156,607 | $ | 122,695 | ||||
6
OFFICE DEPOT, INC.
Comparative Trailing Four Quarters Data and
GAAP to Non-GAAP Reconciliations
(Unaudited)
Comparative Trailing Four Quarters Data and
GAAP to Non-GAAP Reconciliations
(Unaudited)
| Trailing 4 Quarters | ||||||||
| Total Company | June 28, | June 30, | ||||||
| (Dollars in millions) | 2008 | 2007 | ||||||
Sales |
$ | 15,369.4 | $ | 15,425.4 | ||||
EBIT1 |
$ | 238.7 | $ | 752.9 | ||||
% of sales |
1.6% | 4.9% | ||||||
EBIT — as adjusted1 |
$ | 279.5 | $ | 814.1 | ||||
% of sales |
1.8% | 5.3% | ||||||
Net earnings |
$ | 203.0 | $ | 515.0 | ||||
Net earnings — as adjusted1 |
$ | 232.0 | $ | 557.1 | ||||
Diluted Earnings Per Share |
$ | 0.74 | $ | 1.84 | ||||
Diluted Earnings Per Share — as adjusted1 |
$ | 0.85 | $ | 1.99 | ||||
EBITDA — as adjusted1 |
$ | 536.8 | $ | 1,067.5 | ||||
% of sales |
3.5% | 6.9 | ||||||
Return on Invested Capital (ROIC) — as adjusted 1 |
8.1% | 15.2% | ||||||
Average shares |
273.5 | 280.3 | ||||||
| 1 | EBIT and EBITDA are non-GAAP financial measures; EBIT — as adjusted and EBITDA — as adjusted exclude the Charges. (bps = basis points) |
The Company is committed to measuring and reporting results in conformity with accounting
principles generally accepted in the United States of America (“GAAP”). However, management also
recognizes that some financial measures other than those prepared in accordance with GAAP
(“non-GAAP”) can provide meaningful and useful information about performance and allow for an
informed assessment of possible future performance. Certain non-GAAP performance measures (e.g.
EBIT and ROIC) are used to determine variable pay awards throughout our Company.
Non-GAAP measures in these tables exclude certain charges (“Charges”) that are important and
required under GAAP but that may not clearly convey the on-going results of operating the business
during the period. These measures also exclude a gain on sale of a building and a legal
settlement, both recognized in the fourth quarter of 2006.
7
OFFICE DEPOT, INC.
GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations
The non-GAAP numbers presented along with the most closely related GAAP numbers, and the
reconciliations are provided in the following tables. ($ in millions)
| Q2 2008 | GAAP | % of Sales | Charges | Non-GAAP | % of Sales | |||||||||||||||
Gross Profit |
$ | 983.5 | 27.3 | % | $ | — | $ | 983.5 | 27.3 | % | ||||||||||
Operating Expenses |
$ | 985.0 | 27.3 | % | $ | (15.5 | ) | $ | 969.5 | 26.9 | % | |||||||||
Operating Profit (Loss) |
$ | (1.5 | ) | 0.0 | % | $ | 15.5 | $ | 14.0 | 0.4 | % | |||||||||
Net Earnings (Loss) |
$ | (2.0 | ) | (0.1 | )% | $ | 11.8 | $ | 9.8 | 0.3 | % | |||||||||
Diluted Earnings (Loss) Per Share |
$ | (0.01 | ) | $ | 0.05 | $ | 0.04 | |||||||||||||
| Q2 2007 | GAAP | % of Sales | Charges | Non-GAAP | % of Sales | |||||||||||||||
Gross Profit |
$ | 1,096.1 | 30.2 | % | $ | 0.1 | $ | 1,096.2 | 30.2 | % | ||||||||||
Operating Expenses |
$ | 947.4 | 26.1 | % | $ | (11.8 | ) | $ | 935.6 | 25.8 | % | |||||||||
Operating Profit |
$ | 148.7 | 4.1 | % | $ | 11.9 | $ | 160.6 | 4.4 | % | ||||||||||
Net Earnings |
$ | 105.6 | 2.9 | % | $ | 8.7 | $ | 114.3 | 3.1 | % | ||||||||||
Diluted Earnings Per Share |
$ | 0.38 | $ | 0.03 | $ | 0.41 | ||||||||||||||
| YTD 2008 | GAAP | % of Sales | Charges | Non-GAAP | % of Sales | |||||||||||||||
Gross Profit |
$ | 2,152.2 | 28.4 | % | $ | — | $ | 2,152.2 | 28.4 | % | ||||||||||
Operating Expenses |
$ | 2,048.5 | 27.0 | % | $ | (26.3 | ) | $ | 2,022.2 | 26.7 | % | |||||||||
Operating Profit |
$ | 103.7 | 1.4 | % | $ | 26.3 | $ | 130.0 | 1.7 | % | ||||||||||
Net Earnings |
$ | 66.8 | 0.9 | % | $ | 21.1 | $ | 87.9 | 1.2 | % | ||||||||||
Diluted Earnings Per Share |
$ | 0.24 | $ | 0.08 | $ | 0.32 | ||||||||||||||
| YTD 2007 | GAAP | % of Sales | Charges | Non-GAAP | % of Sales | |||||||||||||||
Gross Profit |
$ | 2,365.2 | 30.6 | % | $ | 0.2 | $ | 2,365.4 | 30.6 | % | ||||||||||
Operating Expenses |
$ | 1,992.7 | 25.8 | % | $ | (23.7 | ) | $ | 1,969.0 | 25.5 | % | |||||||||
Operating Profit |
$ | 372.5 | 4.8 | % | $ | 23.9 | $ | 396.4 | 5.1 | % | ||||||||||
Net Earnings |
$ | 259.4 | 3.4 | % | $ | 20.4 | $ | 279.8 | 3.6 | % | ||||||||||
Diluted Earnings Per Share |
$ | 0.93 | $ | 0.08 | $ | 1.01 | ||||||||||||||
8
Office Depot, Inc.
DIVISION INFORMATION
(Unaudited)
DIVISION INFORMATION
(Unaudited)
North American Retail Division
| Second Quarter | First Half | |||||||||||||||
| (Dollars in millions) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Sales |
$ | 1,433.1 | $ | 1,525.3 | $ | 3,146.5 | $ | 3,373.9 | ||||||||
% change |
-6% | 1% | -7% | 2% | ||||||||||||
Division operating profit (loss) |
$ | (4.4) | $ | 99.2 | $ | 78.1 | $ | 251.6 | ||||||||
% of sales |
-0.3% | 6.5% | 2.5% | 7.5% | ||||||||||||
North American Business Solutions Division
| Second Quarter | First Half | |||||||||||||||
| (Dollars in millions) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Sales |
$ | 1,064.1 | $ | 1,123.2 | $ | 2,168.1 | $ | 2,285.6 | ||||||||
% change |
-5% | —% | -5% | 1% | ||||||||||||
Division operating profit |
$ | 49.3 | $ | 78.3 | $ | 108.9 | $ | 150.5 | ||||||||
% of sales |
4.6% | 7.0% | 5.0% | 6.6% | ||||||||||||
International Division
| Second Quarter | First Half | |||||||||||||||
| (Dollars in millions) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Sales |
$ | 1,107.9 | $ | 983.0 | $ | 2,252.5 | $ | 2,065.7 | ||||||||
% change |
13% | 14% | 9% | 18% | ||||||||||||
% change in local currency sales |
2% | 7% | -1% | 9% | ||||||||||||
Division operating profit |
$ | 51.2 | $ | 42.1 | $ | 111.3 | $ | 124.2 | ||||||||
% of sales |
4.6% | 4.3% | 4.9% | 6.0% | ||||||||||||
Division operating profit excludes Charges from the Division performance, as those Charges are
evaluated at a corporate level.
9
Office Depot, Inc.
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
Other Selected Financial Information
| 26 Weeks Ended | 26 Weeks Ended | |||||||
| (In thousands, except operational data) | June 28, 2008 | June 30, 2007 | ||||||
Cumulative share repurchases under approved
repurchase plans ($): |
$ | — | $ | 199,592 | ||||
Cumulative share repurchases under approved
repurchase plans (shares): |
— | 5,702 | ||||||
Shares outstanding, end of quarter |
274,990 | 272,770 | ||||||
Amount
authorized for future share repurchases, end of quarter ($): |
$ | 500,000 | ||||||
Selected Operating Highlights
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 28, 2008 | June 30, 2007 | June 28, 2008 | June 30, 2007 | |||||||||||||
Store Statistics |
||||||||||||||||
United States and Canada: |
||||||||||||||||
Store count: |
||||||||||||||||
Stores opened |
6 | 15 | 51 | 31 | ||||||||||||
Stores closed |
1 | 3 | 1 | 3 | ||||||||||||
Stores relocated |
3 | — | 4 | — | ||||||||||||
Total U.S. and Canada stores |
1,272 | 1,186 | 1,272 | 1,186 | ||||||||||||
North American Retail Division
square footage: |
30,812,400 | 29,062,748 | ||||||||||||||
Average square footage per NAR
store |
24,224 | 24,505 | ||||||||||||||
Inventory per store (end of
period) |
$ | 909,000 | $ | 965,000 | ||||||||||||
International Division
company-owned: |
||||||||||||||||
Store count: |
||||||||||||||||
Stores opened |
1 | 2 | 2 | 13 | ||||||||||||
Stores closed |
— | 1 | 1 | 1 | ||||||||||||
Total International
company-owned stores |
149 | 137 | 149 | 137 | ||||||||||||
10
Exhibit 99.1.2
| Investor Presentation July 2008 |
| Office Depot Overview |
| Office Depot is a leading global provider of office products and services 2007 sales of over $15.5 billion and EBITDA1 of over $800 million Supplies: 63% of sales Technology: 26% of sales Furniture and Other: 11% of Sales Multi-channel - stores, catalog, Internet and contract serve business customers of any size, from small home office to Fortune 500 accounts 56% of 2007 Sales were not North American Retail One of the world's largest e-commerce retailers - $4.9 billion in sales in 2007 Office Depot - Business Overview 1 Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com Artistree N.A. Business Solutions (29% of 2007 Sales) Artistree International (27% of 2007 Sales) Artistree North American Retail (44% of 2007 Sales) Over 1,200 stores in U.S. and Canada Largest concentration of stores in California, Florida and Texas Catalog, contract and e- commerce Dedicated sales force works with medium sized to Fortune 100 customers Orders serviced through 21 distribution centers Catalog, contract, e-commerce and retail Sells to customer directly and through affiliates in 41 countries outside of North America 35+ websites and 397 stores |
| 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 East Office Depot Timeline Founded in Florida with the first store opening in Fort Lauderdale, FL Listed on the NASDAQ under the symbol "ODEP" Listed on the NYSE under the symbol "ODP" Acquired The Great Canadian Office Supplies warehouse chain Acquired six additional contract stationers in North America Opened licensed Office Depot stores in Colombia and Israel. Announced retail joint venture agreement in Mexico and licensing agreement in Poland Entered the contract stationer business via the acquisition of two industry leaders: Wilson Stationery & Printing Company and Eastman Office Products Corporation Staples / Office Depot merger fails Merged with Viking Office Products, the leading direct marketer of office products in Europe and Australia Office Depot added to S&P 500 Acquired Guilbert S.A., a leading European contract stationer, doubling the size of the Company's European business Acquired Allied Office Products, Best Office Co., Ltd., Papirius, and AsiaEC Acquired Axidata, a Canada-based office products delivery company Completed merger with Office Club Inc. Acquired eOfficePlanet India in joint venture with Reliance Retail Acquired controlling interest in AGE Kontor & Data AB in Sweden |
| Issues Facing The Company Entering 2005 Functionally-aligned organization with no divisional leadership Non-integrated acquisitions Duplicate overhead Cost and complexity of multiple systems Information technology systems impeding growth Duplicate supply chain Operating margin gap versus largest competitor and no plan to close gap Declining market share Inconsistency in shopping experience and service, and lack of differentiation Aging store portfolio with no proven new store format 700 different store sets and at least five different retail formats Asset impairments, exit costs and other operating decisions contributed to $412M in charges from inception in 2005 through the end of the second quarter 2008 |
| Successful Turnaround Begins North American Retail North American Business Solutions International Improve profitability while continuing store build out program Finalize new format (M2) for the remodeled stores Improve service in stores Grow market share organically and through acquisitions Expand large contract sales, add sales force Complete integration of Viking acquisition Expand product / service portfolio Improve profitability by growing European contract business, tightening cost control Use telephone account managers to acquire new customers in Europe Integrate various operations around the globe Expand geographic reach into developing areas New Management talent was added across the organization |
| EBIT 04 SL05 EBIT 05 SL 06 Shortfall EBIT 06 SL 1 07 Volume 07 F3 07 Saule 1 576 654 802 802 551 Saule 2 576 654 802 551 Saule 3 50 488 366 0 110 380 Column 4 28 26 26 2004 Mix / Margin Investment 2006 2007 Initiatives Successful in Reducing Costs In excess of $600 million in costs eliminated between 2004 and 2007 Cost Savings / Volume 2005 Cost Savings / Volume Mix / Margin Investment Cost Savings / Volume EBIT Margin1 4.6% 5.3% 3.5% 4.2% 1 Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com |
| 2004 2005 2006 First Half 2007 Sales $ 13,565 $ 14,279 $ 15,011 $ 7,725 EBIT1 $ 576 $ 654 $ 802 $ 416 EPS1 $ 1.18 $ 1.41 $ 1.90 $ 1.00 EBIT Margin1 4.2% 4.6% 5.3% 5.4% EPS Growth1 19.2% 19.5% 34.8% 8.7% Positive Impact From Turnaround (Dollars in millions, except per share data) Stock Performance January 2004 - June 2007 $16.71 $30.30 +81% Company announces Steve Odland hired as new CEO 1 Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com Nine strong consecutive quarters under new Management team, with improving performance and increased shareholder value, including record sales and earnings in Q1 2007 Approximately $2 billion of capital returned to stockholders through share repurchases from 2005 through 2007 (represented approximately 20% of outstanding shares, 140% of adjusted after-tax earnings and 106% of operating cash flow) |
| 2007 2007 2007 First Half Second Half Full Year Sales $ 7,725 $ 7,802 $15,528 EBIT1 $ 416 $ 135 $ 551 EPS1 $ 1.00 $ 0.53 $ 1.54 EBIT Margin1 5.4% 1.7% 3.5% EPS Growth1 8.7% (45.9%) (18.9%) Macroeconomic And Business Conditions Shift (Dollars in millions, except per share data) Stock Performance July 2007 - December 2007 $30.30 $13.91 (54%) Weakening housing-related economic conditions and a heavy sales concentration in Florida and California (approximately 30% of North American sales in 2007) negatively impacted results in the second half of 2007 Heavier mix of both lower margin technology product sales in North American Retail and lower margin customers in North American Business Solutions contributed to margin declines Declining vendor program support due to industry slowdown also impacted margins Weaker U.K. performance negatively affected International results 1 Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com |
| Strategic Priorities |
| North American Retail North American Business Solutions International Addressing customers' need for value Growing loyalty programs Enhancing service offerings to complement product offerings Implementing customer contact strategy Redesigning the telephone account management (TAM) program New catalog / direct marketing team Executing plan to improve performance in the U.K. Sharp focus on improving productivity in existing businesses Leveraging global sourcing to increase direct import and private brand penetration in Europe and Asia Strategic Priorities - Taking Care of Business |
| North American Retail Conduct line reviews Reducing overall SKU count, lowering costs Micro-assort key technology departments Matching offering to the individual store sales volume and customer profile Stringent inventory controls Supporting more conservative sales forecast Reduce new store openings and remodels Less than 15 new store openings and eight remodels planned for balance of 2008 Cut costs Reduce headcount in North American Retail corporate office N. A. Retail - Taking Care of Business Update: Margin |
| North American Retail Expand entry-level price points for core business essentials Partner with key vendors to secure opportunistic one-time purchases that deliver exceptional value Offer bonus packs that provide additional product to the customer for little to no additional spend Sell product and service bundles that offer a complete solution to the customer while also saving them money Merchandise value products in high traffic areas N. A. Retail - Taking Care of Business Update: Sales |
| Growing Loyalty Program - Worklife Rewards |
| Services - Design, Print & Ship (DPS) Xerox Certified Specialists Service Offering: Print on demand Wide format printing Full-color business card printing Custom Logo / Website design |
| Services - Tech Depot Services Service Offering: Protection and performance Diagnostic and repair Software installation PC tune-up Data protection Network installation |
| Services - Recycling Program Tech Recycling Ink / Toner Recycling |
| North American Business Solutions Implementing customer contact strategy Successfully completed pilot test National rollout implementation completed Implementing redesigned telephone account management (TAM) program Instituting key performance indicators New catalog / direct marketing team making changes to the business model Increased circulation to drive revenue Decline of the business reduced by 50% in less than two months of new plan Web optimization plan being executed Customer-focused enhancements N.A. Business Solutions - Taking Care of Business Update |
| N.A. Business Solutions TAM Catalog |
| International Improving sales in the U.K. Customer service metrics are back on track Focused marketing strategies Adding Design, Print and Ship services Expanding Tech Depot to U.K., France and Germany Exploring use of Tech Services in International Improving productivity in existing businesses Successfully transitioned all back-office transaction accounting functions from the U.K., France, and Germany Improved execution with each transition Leveraging global sourcing office Increasing direct import and driving private brand penetration in Europe and Asia Launch of Foray writing instruments in Europe was a success International - Taking Care of Business Update |
| Private Brand/Global Sourcing Initiative Private brand penetration percentage is currently in the high 20's Private Brand Penetration/Global Sourcing to improve margin Opened Office Depot sourcing office in Shenzhen, China in 2007 Supplemented with third-party sourcing resources Expanding categories of products sourced and countries utilized Independent audits of all factories and chain of custody of goods for environmental, social, and quality issues All Private Brand meets or exceeds industry testing requirements Private Brand/Global Sourcing |
| Private Brands |
| Centralization Financial Back Office Call Center North America-Utilize third parties for a number of financial functions Some in North America, some offshore Assign credit Collections and cash application International-Near Shoring financial functions into Office Depot in Eastern Europe Credit, collections, cash applications Successfully transitioned back office functions in the U.K., France and Germany through Q2 2008 North America-Global Accounts, Executive Customer Service, E- Commerce handled in 2 centers in US Balance of inbound calls near shore and offshore International-In the process of consolidating EU call centers |
| Global Supply Chain Initiative North America Two separate NA Supply Chains 12 cross docks (NA Retail) 21 distribution centers (NA Business Solutions) 7.2M square feet over 33 buildings Environment Initiative International Convert to 12 combination facilities with about 7M square feet as leases expire Capacity for approximately 9M square feet Each facility will have pick/pack and flow through capability to optimize service for Retail and Business Solutions Improve global supply chain expense as a percent of sales by 50 basis points Global Benefits Environment Initiative Reduce supply chain network to 15 facilities Consolidate to one warehouse management system Open two facilities, close four in 2008 Supply chain network of 21 facilities in Europe 7 warehouse management systems |
| Global Information Technology Initiative Environment Initiative Benefits Costly and complex: Historical "home grown" legacy systems Acquired systems through past major acquisitions Multiple channels No single global integrated system - an expensive environment to operate Minimal process definition and sophistication Simplify, consolidate, globalize and standardize processes and practices, and support them with common applications and platforms Install Oracle ERP system to replace many separate platforms utilized to run the entire corporation Narrow the Company's many different warehouse management systems to one (Manhattan Associates) Reduce IT costs as a percent of sales from current level of 1.7% and, coupled with other benefits, reduce costs by 40 bps+ Enable faster and easier integration of future business expansions and acquisitions Provide a consistent customer experience across the globe Provide better business data, information and tools |
| Second Quarter 2008 Results |
| Second Quarter 2008 Summary Results continued to be negatively impacted by a challenging economic environment Business trends worsened in June Company continued to execute strategic plans and margin expansion initiatives Total Company sales declined approximately 1% versus second quarter of 2007 GAAP loss of $2 million, loss per share on a diluted basis of $0.01 Adjusted earnings of $10 million, adjusted earnings per share on a diluted basis of $0.04 |
| Summary and Outlook Disappointed with second quarter results Sales were much worse than expected; hit our fixed cost levels very quickly and de-levered Q3 and Q4 have historically been about 25-26% of NAR annual sales versus 22% for Q2 and should be able to expand margins sequentially by leveraging fixed costs Will make every effort to profitably grow the top line, cut costs, reduce capital spending and improve cash flow |
| 1Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com. Consolidated Financials - Second Quarter 2008 in millions, except ratios, returns and per share data Q2 2008 Q2 2008 Q2 2008 Q2 2008 Q2 2007 Q2 2007 Q2 2007 Q2 2007 Amount % Sales Amount Amount % Sales Sales $ 3,605 $ 3,605 -- $ 3,632 $ 3,632 -- Operating Expenses(1) $ 970 $ 970 26.9% $ 936 $ 936 25.8% EBIT(1) $ 21 $ 21 0.6% $ 170 $ 170 4.7% Net Earnings (1) $ 10 $ 10 0.3% $ 114 $ 114 3.1% Net Earnings (Loss) - GAAP $ (2) $ (2) -0.1% $ 106 $ 106 2.9% Diluted Shares 273.4 273.4 -- 276.0 276.0 -- EPS - GAAP $ (0.01) $ (0.01) -- $ 0.38 $ 0.38 -- EPS(1) $ 0.04 $ 0.04 -- $ 0.41 $ 0.41 -- |
| North American Retail - Results in millions, except ratios and statistics Q2 08 Q2 07 Sales $ 1,433 $ 1,525 Comparable Sales -10% -5% Division Operating Profit (Loss) $ (4) $ 99 Division Operating Margin -0.3% 6.5% |
| North American Retail - Results & Variance Analysis Sales were down 6% and comparable store sales were 10% lower in the second quarter of 2008 Operating loss of $4 million versus $99 million profit one year ago Broader economic factors continued to challenge profit margins De-leveraging of fixed costs and operating expenses as sales declined Lower product margins due to less vendor program support, inventory clearancing and product mix Inventory shrink SG&A was flat on a dollar basis versus year ago Operating Margin Q2 2007 6.5% De-leveraging of fixed costs and operating expenses -290 bps Product margins -220 bps Inventory shrink -170 bps Q2 2008 -0.3% |
| North American Business Solutions - Results in millions, except ratios and statistics Q2 08 Q2 07 Sales $ 1,064 $ 1,123 Division Operating Profit $ 49 $ 78 Division Operating Margin 4.6% 7.0% |
| N.A. Business Solutions - Results & Variance Analysis Sales were down 5% in the second quarter of 2008 Low single digit sales growth with large, national account customers and public sector Offset by 10% lower sales to small- to mid-size customers Operating profit of $49 million versus $78 million one year ago Factors driving operating margin included: Lower product margin due to customer mix, higher promotional activity and cost increases Lower vendor program support Inventory shrink and fixed costs de-leveraging Slightly offset by lower operating expenses Operating Margin Q2 2007 7.0% Product margins -160 bps Vendor program support -40 bps Inventory shrink and fixed costs de-leveraging -70 bps Operating expenses +30 bps Q2 2008 4.6% |
| International - Results In millions, except ratios and statistics Q2 08 Q2 07 Sales $ 1,108 $ 983 Change in Local Currency Sales 2% 7% Division Operating Profit $ 51 $ 42 Division Operating Margin 4.6% 4.3% |
| International - Results & Variance Analysis Operating Margin Q2 2007 4.3% Lower pension costs +120 bps Investment spending and other, net -90 bps Q2 2008 4.6% Sales were up 13% in the second quarter of 2008 Local currency sales were up 2% Operating profit was $51 million versus $42 million one year ago Factors driving operating margin included: A gain from lower pension costs Strategic investment spending in regional offices, the centralization of support functions and the consolidation of warehouses |
| Office Depot de Mexico The Company has received recently an unsolicited non-binding proposal from its partner in its Mexican joint venture Joint venture partner proposes to acquire the capital stock in the joint venture owned by the Company for approximately $430 million The Company has not yet engaged in substantive discussions with its joint venture partner regarding this non-binding proposal There can be no assurance that any agreement on financial or other terms satisfactory to the Company will result from such proposal or that any transaction involving the Company will be approved or completed |
| Charges from 2005 Plan During the third quarter of 2005, we announced a number of material charges relating to asset impairments, exit costs and other operating decisions (the "Charges"). This announcement followed a wide-ranging assessment of assets and commitments which began in the second quarter of 2005. We indicated that these actions would continue to impact our results for several years, and expenses associated with future activities would be recognized as the individual plans are implemented and the applicable accounting recognition criteria are met. As with any estimate, the amounts may change when expenses are incurred. in millions Q2 Q2 Q2 Q2 Q2 Q2 Projected Projected Projected Projected Projected 2008 2007 Program to Date Program to Date 2008 Q3-Q4 2009 Total Income Statement Charges $ 16 $ 12 $ 412 $ 412 $ 20 $ 40 $ 472 Cash Flow Impact Cash $ 8 $ 8 $ 149 $ 149 $ 18 $ 30 $ 197 Non-Cash $ 8 $ 4 $ 263 $ 263 $ 2 $ 10 $ 275 |
| Cash Flow Highlights 1Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com. in millions 2008 2007 % Change Net Cash Provided by Operating Activities $ 138 $ 293 -53% Depreciation & Amortization $ 130 $ 140 -7% EBITDA1 $ 249 $ 532 -53% CAPEX $ 207 $ 225 -8% Free Cash Flow (Use) - - (Before Share Repurchases) $ (69) $ 68 -202% Share Repurchases - $ 200 -100% Acquisitions $ 85 $ 48 78% |
| Credit Facility During the first quarter of 2008, Office Depot amended its Revolving Credit Facility Based on current projected operating results, the Company anticipates remaining in compliance with all of the restrictive covenants Given the uncertain economic environment, the Company is seeking a new credit facility to replace its existing facility Office Depot has obtained commitments for a fully underwritten facility in excess of $1 billion that will be in place by the end of the third quarter 2008 The Amended Credit Agreement will be collateralized by the Company's accounts receivable and inventory in the U.S. and significant international subsidiaries |
| Balance Sheet Highlights 1 WC = (current assets - cash and short-term investments) - (current liabilities - current maturities of long-term debt) 2 WC as % of Sales = ((WC Q2 current year + WC Q2 prior year) / 2) / Trailing four quarter sales 3 Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com. in millions, except ratios and returns 2008 2007 % Change NAR Inventory Per Store (end of period) $ 0.909 $ 0.965 -6% Inventories $ 1,647 $ 1,586 4% Inventories (net of foreign exchange) 1% Working Capital1 $ 825 $ 586 41% Working Capital as a % of Sales2 4.6% 3.0% 53% Net Debt (end of period) $ 756 $ 510 48% Return on Invested Capital, Adjusted3 8.1% 15.2% -710 bps |
| 1Non-GAAP numbers. A reconciliation of GAAP to non-GAAP numbers can be found on the Office Depot web site at www.officedepot.com. Consolidated Financials - Trailing Four Quarters in millions, except ratios, returns and per share data Trailing Four Quarters (Ending Q2 2008) Trailing Four Quarters (Ending Q2 2008) Trailing Four Quarters (Ending Q2 2008) Trailing Four Quarters (Ending Q2 2007) Trailing Four Quarters (Ending Q2 2007) Trailing Four Quarters (Ending Q2 2007) Amount % Sales Amount % Sales Sales $ 15,369 -- $ 15,425 -- EBIT(1) $ 280 1.8% $ 814 5.3% Net Earnings (1) $232 1.5% $ 557 3.6% Diluted Shares 273.5 -- 280.3 -- EPS(1) $ 0.85 -- $ 1.99 -- ROIC(1) 8.1% 15.2% -- |
| Competitive Performance |
| Same Store Sales Comparison Note: Selected competitors. For illustrative purposes only. Source: Companies' Form 10-Ks. OfficeMax Office Depot Staples 2004 1.3% 3.0% 4.0% 2005 -1.0% 3.0% 3.0% 2006 0.1% 2.0% 3.0% 2007 -1.2% -5.0% -3.0% Q4 2007 -7.3% -7.0% -6.0% Q1 2008 -9.0% -9.0% -6.0% North America Growth has outpaced OfficeMax and is comparable to Staples |
| Operating Margin Comparison - Total Company Note: Selected competitors. For illustrative purposes only. 1 Represents Adjusted Operating Income Margin, a non-GAAP number; adjusted for special items. Source: Earnings press releases and Office Max - March 19, 2008 Investor Day Presentation. 2 Financial information for Office Depot adjusted for certain charges and credits. Represents a Non-GAAP number. A reconciliation of GAAP to non- GAAP numbers can be found on the Office Depot web site at www.officedepot.com 3 Represents Operating Margin, a non-GAAP number, adjusted for certain nonrecurring items. Source: Earnings press releases and Form 10-Ks. OfficeMax1 Office Depot2 Staples3 2004 0.6% 4.1% 7.3% 2005 1.1% 4.4% 7.7% 2006 3.5% 5.1% 8.1% 1H 2007 3.6% 5.1% 6.8% 2H 2007 3.9% 1.6% 9.4% FY 2007 3.8% 3.4% 8.2% Margins are a historical opportunity |
| Operating Margin Comparison - Divisions Note: Selected competitors. For illustrative purposes only. Source: OfficeMax - Investor Day Presentations of March 19, 2008 and March 20, 2007. Adjusted for special items. Staples and Office Depot - Companies' Form 10-Ks. 2004 2005 2006 2007 North American Retail North American Retail OfficeMax 0.5% 1.0% 4.1% 4.1% Office Depot 4.9% 6.0% 6.7% 5.2% Staples 8.5% 9.3% 9.7% 9.5% North American Contract / Direct North American Contract / Direct North American Contract / Direct OfficeMax 2.4% 2.5% 4.4% 4.3% Office Depot 6.8% 8.2% 8.0% 4.9% Staples 9.4% 10.3% 10.6% 10.8% International OfficeMax N/A N/A N/A N/A Office Depot 7.8% 6.0% 6.8% 5.5% Staples 3.6% 0.6% 2.1% 3.6% Margins exceeded OfficeMax in N. America and Staples in International |
| Channel Mix Comparison - Divisions Note: Selected competitors. For illustrative purposes only. Figures represent channel mix as a percent of total sales. Source: Office Depot, Staples and OfficeMax - Companies' Form 10-Ks. 1OfficeMax 2004 results exclude sales from Paper and Building Solutions businesses. 2OfficeMax's results exclude Canada 20041 2005 2006 2007 North American Retail OfficeMax2 48.9% 47.6% 45.3% 44.4% Office Depot 43.8% 45.6% 45.2% 43.9% Staples 57.6% 56.1% 54.7% 51.7% North American Contract / Direct North American Contract / Direct OfficeMax2 38.2% 38.4% 39.7% 38.7% Office Depot 29.8% 30.1% 30.5% 29.1% Staples 29.0% 30.9% 32.5% 34.1% International OfficeMax 12.9% 14.0% 15.0% 16.9% Office Depot 26.4% 24.3% 24.3% 27.0% Staples 13.3% 13.0% 13.0% 14.1% Each Company competes in multiple business lines |
| Investor Presentation July 2008 |