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 20, 2008
Commission
file number 1-10948
OFFICE
DEPOT, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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59-2663954
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(State
or other jurisdiction of
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(I.R.S.
Employer
|
|
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incorporation
or organization)
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Identification
No.)
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2200
Old Germantown Road, Delray Beach, Florida
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33445
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(Address
of principal executive offices)
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(Zip
Code)
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(561)
438-4800
(Registrant’s
telephone number, including area code)
Former
name or former address, if changed since last report: N/A
ITEM
5.02. DEPARTURE
OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN
OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
On
February 26, 2008, Office Depot, Inc. (the “Company”) announced the resignation
of its Executive Vice President and Chief Financial Officer, Ms. Patricia A.
McKay. Ms. McKay’s employment will terminate effective March 1, 2008. Consistent
with the terms of her original employment offer, Ms. McKay will receive the
following severance benefits: (a) $840,000, which equates to 18 months of Ms.
McKay’s annual base salary; (b) $19,453.74, which equates to 18 months of the
current monthly COBRA premium in excess of applicable active employee
co-premiums for the type of coverage she had under the Company's group health
plan as of the Termination Date; and (c) $588,000, which equates to 1.5 times
Ms. McKay’s annual bonus
at
target. In addition, Office Depot agrees to pay Ms. McKay $482,484.60. These
payments will be paid in equal installments during normal pay periods over
a
24-month period, less applicable taxes and other deductions required by law.
A
condition to receiving these severance payments is Ms. McKay’s agreement to
execute a customary separation agreement and release.
Charles
E. Brown (age 54), President, International, has agreed to assume the role
of
acting Chief Financial Officer of the Company effective March 1, 2008. Mr.
Brown
was the Company’s Executive Vice President and Chief Financial Officer from 2001
to 2005. The Company plans to begin its search for a permanent Chief Financial
Officer immediately and will announce a successor when this process is
completed.
ITEM
9.01. FINANCIAL STATEMENTS AND EXHIBITS
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Exhibit
99.1
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News
release of Office Depot, Inc. issued on February 26, 2008.
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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.
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OFFICE
DEPOT, INC.
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Date:
February 26, 2008
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By:
/s/ Elisa Garcia
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Executive
Vice President, General Counsel and
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Corporate
Secretary
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CONTACTS:
BrianTurcotte
InvestorRelations
561-438-3657
brian.turcotte@officedepot.com
BrianLevine
PublicRelations
561-438-2895
brian.levine@officedepot.com
OFFICE
DEPOT ANNOUNCES FOURTH QUARTERRESULTS
Delray
Beach, Fla., February 26, 2008--Office
Depot,Inc. (NYSE: ODP), a leading global provider of office products and
services,today announced fourth quarter and full year results for the fiscal
period endedDecember 29, 2007.
FOURTHQUARTER
RESULTS1
Total
Company sales for the fourth quarter increased 1%to $3.9 billion. Sales in
the North American Retail Division were down 3% withcomparable store sales
down
7% for the quarter. The North American BusinessSolutions Division reported
a 4% sales decline in the quarter whileInternational Division sales increased
12% in U.S. dollars and 2% in localcurrencies.
Net
earnings were $19 million compared to earnings of$127 million in the same period
of 2006. Earnings per share on a diluted basiswere $0.07 for the quarter,
versus $0.45 in the fourth quarter of 2006. On anadjusted basis, diluted
earnings per share were $0.10 for the quarter, versus$0.51 in the same period
one year ago.
Total
Companyoperating expenses, as adjusted, represented 26.3% of sales, an increase
of 40basis points over the fourth quarter of 2006. EBIT, as adjusted, was
$6 millionin the fourth quarter of 2007 or 0.2% as expressed as a percentage
of
sales,compared to $201 million or 5.2% in the prior-year period.
Results
for the quarter included an as adjusted taxbenefit of $30 million. The
fourth quarter 2007 tax benefit was primarily dueto lower North American income
and a late quarter tax law change.
Return
on
Invested Capital for the trailing 4 quarters,adjusted for Charges and Credits,
was 11.3%. The Return on Equity adjusted forCharges and Credits for the
trailing four quarters was 15.2%.
FOURTHQUARTER
DIVISION RESULTS
NorthAmerican
Retail Division
Fourth
quarter sales in the North American RetailDivision were down 3% at $1.7
billion. Comparable store sales in the 1,158stores in theU.S.andCanadathat
have been open for morethan one year decreased 7% for the fourth quarter.
Results continue to benegatively impacted by difficult housing-related economic
conditions in keymarkets, particularlyFloridaandCalifornia. Combined,these
two states represented 26% of total store sales and about 40% of the
totalcomparable sales decrease in the fourth quarter. This economic
weakness hasspread to otherU.S.retail markets with housingissues, creating
additional pressure on sales and margins.
Sales
in
the Northeast moderated slightly versus theprevious quarter, but continued
to be
the Division’s best performing region inNorth America despite a limited retail
presence in that market. Other driversnegatively impacting comparable
sales included cannibalization from the newstore build out, competitive
intrusion and private brand penetration. TheDesign, Print and Ship
business continued to perform well in the fourth quarter,slightly offsetting
the
negative drivers.
Operating
profit in the North American Retail Divisionwas $23 million for the fourth
quarter, a decline from $109 million in the sameperiod of the prior year.
Although costs were managed effectively in the fourthquarter, broader economic
factors continued to pressure profit margins, whichdecreased 490 basis points
versus the fourth quarter 2006. A number of factorscontributed to the
operating margin decline, including lower than expectedvendor program funding,
lower product margins, a de-leveraging of fixed propertycosts, and higher
shrink. Partially offsetting some of the decline was theimpact of lower
operational expenses.
Comparable
average sales per square foot in the fourthquarter decreased to $231 and average
order value was up about 2.3% in thefourth quarter.
During
thefourth quarter, Office Depot opened 12 new stores and closed 2 stores,
bringingthe total store count to 1,222. The Company also remodeled 12
stores, bringingthe yearly total to 177. As of year end, more than half of
the chain wasoperating under the M2 format.
Inventory
per store was $960 thousand as of the end ofthe fourth quarter of 2007, 3%
greater than the same period last year. Averageinventory per store during
the quarter was $1,030 thousand for the fourthquarter of 2007, flat versus
the
same period last year.
NorthAmerican
Business Solutions Division
Total
sales in the North American Business SolutionsDivision were $1.1 billion, down
4% compared to the fourth quarter of lastyear. Sales to small- to
mid-sized customers were down 13%. This decreaseovershadowed solid sales
growth of 5% among large, national account customersand 10% sales growth to
the
public sector in the fourth quarter. Growth instate government and the
K-12 educational sectors have been driving the resultsin the public sector,
both
delivering double-digit increases for all fourquarters of 2007.
The
North
American Business Solutions Division had anoperating profit of $1 million for
the fourth quarter of 2007 compared to $72million for the same period of the
prior year. Operating
margins declined by 640 basispoints versus the fourth quarter 2006.
Contributing factors to the margindecline included a less-favorable customer
mix, lower vendor program funding,higher reserves for inventory clearance and
returned product, and product costincreases that could not be fully passed
through in higherprices.
InternationalDivision
The
International Division reported a sales increase of12% in the fourth quarter
compared with the same period last year and organicsales in local currency
increased by 2%. This marks the eighth consecutivequarter the division has
grown the top-line in local currency. In particular,the Contract channel
continued its strong performance, growing sales in localcurrency by 8% in the
quarter. This is a reflection of the strength of OfficeDepot’s global
brand with an increasingly global customer base.
Division
operating profit was $60 million in the fourthquarter compared to $77 million
in
the prior year's fourth quarter. Operatingprofit margin declined by 230
basis points to 5.3%, from 7.6% in the prior year,as theU.K.business continued
tostruggle.
Continued
overall weakness in theU.K.businessaccounted for much of the profit decline
and
operating margin compression. Continued investment, including establishing
regional offices in Asia and LatinAmerica, centralization of certain support
functions in Europe, green-fieldbusiness expansion inPoland,and consolidation
of
warehouse facilities to better support the multi-channelbusiness portfolio
inEurope, accounted for theremainder of the margin decline. Growth in the
large customer segment, whichhas a lower margin rate than the small- to
medium-sized customer segments, droveunfavorable customer mix and compressed
overall operating margins aswell.
FULLYEAR
RESULTS2
For
the
full year, sales increased 3% to $15.5 billion. Net earnings for fiscal
2007 were $396 million compared to earnings of $503million in the same period
of
2006. Earnings per share on a diluted basis were$1.43 in 2007, compared to
$1.75 in the prior year. The as adjusted dilutedearnings per share for
fiscal 2007 were $1.54 versus, $1.90 in2006.
For
the
full year, EBIT, as adjusted, decreased 31% fromthe prior year and EBIT margins
compressed by 180 basis points to 3.5%. The asadjusted effective tax rate
for the full year was 15%.
Capital
expenditures for 2007 were $461 million. Capital expenditure estimates for
2008 are expected to be around $375 million,reflecting a reduction in the number
of planned new store openings from 150 toabout 75, approximately 100 M2 store
remodels, and investments in the Company’sglobal supply chain and IT
initiatives. The Company will continue to evaluatespending in accordance
with operating performance and financial guidelines, andthe overall business
environment.
In
2007, the Company repurchased approximately 5.7million shares of its common
stock for $200 million. The Company alsopreviously announced that its
Board has authorized the repurchase of anadditional $500 million of its common
stock. Current plans are to repurchasecommon stock if cash flow
permits. Over the past three years, the Company hasreturned to
shareholders about 140% of as adjusted after-tax earnings, 106% ofoperating
cash
flow and 140% of net cash flow, excluding share repurchases.
OtherMatters
Office
Depot is announcing that its Executive VicePresident and Chief Financial
Officer, Patricia A. McKay, is leaving the Companyeffective March 1, 2008.
Charles E. Brown, the Company’s President,International, has agreed to assume
the role of acting Chief Financial Officer following McKay’s departure.
Brown was Office Depot’s Executive Vice Presidentand Chief Financial Officer
from 2001 to 2005. Office Depot plans to begin itssearch for a permanent
Chief Financial Officer immediately and will announce asuccessor when this
process is completed.
Commenting
on McKay’s departure, Steve Odland, OfficeDepot’s Chief Executive Officer, said:
“Pat has made valuable contributions tothe Company since joining the management
team in 2005. We thank her for hertireless work and dedication to the
Company. We also wish her all the best inher future
endeavors.”
Additionally,
Kim Maguire, Executive Vice President,Merchandising, is leaving at the end
of
the month for personal reasons. TheCompany hopes to fill this role
quickly.
Non-GAAPReconciliation
A
reconciliation of GAAP results to non-GAAP resultsexcluding certain items is
presented in this release and also may be accessed onthe corporate
website,www.officedepot.com,
under
the category CompanyInfo.
About
OfficeDepot
Every
day, Office Depot is Taking Care of Business formillions of customers around
the
globe. For the local corner store as well asFortune 500 companies, Office
Depot provides products and services to itscustomers through more than 1,600
worldwide retail stores, a dedicated salesforce, top-rated catalogs and a $4.9
billion e-commerce operation. Office Depothas annual sales of
approximately $15.5 billion, and employs about 49,000associates around the
world. The Company provides more office products andservices to more customers
in more countries than any other company, andcurrently sells to customers
directly or through affiliates in 43 countries.
Office
Depot’s common stock is listed on the New YorkStock 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 REGARDINGFORWARD-LOOKING STATEMENTS: The Private Securities Litigation
Reform Act of1995, as amended (the “Act”) provides protection from liability in
privatelawsuits for “forward-looking” statements made by public companies under
certaincircumstances, provided that the public company discloses with
specificity therisk factors that may impact its future results. We want to
take
advantage ofthe “safe harbor” provisions of the Act. Certain statements made in
this pressrelease are ‘forward-looking’ statements under the Act. Except
for historicalfinancial and business performance information, statements made
in
this pressrelease should be considered ‘forward-looking’ as referred to in the
Act. Muchof the information that looks towards future performance of our
company is basedon various factors and important assumptions about future events
that may or maynot actually come true. As a result, our operations and financial
results in thefuture could differ materially and substantially from those we
have discussed inthe forward-looking statements made in
this press
release.
Certain risks anduncertainties are detailed from time to time in our
filings with theUnited StatesSecurities andExchange Commission (“SEC”).
Youare
strongly urged to review all such filings for a more detailed
discussionofsuchrisks and uncertainties.The
Company’s SEC filings are readilyobtainable at no charge atwww.sec.govand
atwww.freeEDGAR.com,
aswell as on a number of other commercial web sites.
1Includes
non-GAAP information. Fourth quarter resultsinclude impacts of previously
announced programs, a legal settlement and a 2006gain on building sale
(“Charges” or “Charges and Credits”). Additionalinformation is provided in
our Form 10-K filing. Reconciliations from GAAP tonon-GAAP financial
measures can be found in this release, as well as on thecorporate web
site,www.officedepot.com,
under
the category InvestorRelations.
2Includes
non-GAAPinformation. Full year results include impacts of previously
announcedprograms, a legal settlement and a 2006 gain on building sale
(“Charges” or“Charges and Credits”). Additional information is provided in
our Form 10-Kfiling. Reconciliations from GAAP to non-GAAP financial
measures can be foundin this release, as well as on the corporate web
site,www.officedepot.com,
under
the category InvestorRelations.