1
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 (date of earliest event reported): January 16, 1995
----------------
OFFICE DEPOT, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10948 59-2663954
- ---------------------------- ------------------------ --------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2200 Old Germantown Road, Delray Beach, FL 33445
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 278-4800
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Page 1 of 34 Pages
Exhibit Index on Page 5
2
ITEM 5. OTHER EVENTS
In February 1994, Office Depot, Inc. (the "Company") issued 2,335,746
shares of common stock in connection with the acquisitions of L. E. Muran Co.,
Inc. ("Muran"), a Boston-based contract stationer and Yorkship Press, Inc.
("Yorkship"), a contract stationer servicing Philadelphia and Southern New
Jersey. In May 1994, the Company acquired all of the outstanding stock of
Midwest Carbon Company ("Midwest"), a Minneapolis based contract stationer, and
Silver's Inc. ("Silver's"), a Detroit based contract stationer. The Company
issued 1,448,591 shares of common stock in connection with the acquisitions of
Midwest and Silver's. Additionally, in August 1994, the Company acquired all
the outstanding stock of J. A. Kindel Company, Inc. ("Kindel"), a Cincinnati
based contract stationer, and Allstate Office Products, Inc. ("Allstate"), a
contract stationer in Tampa. The Company issued 1,916,009 shares of common
stock in connection with the acquisitions of Kindel and Allstate. These
acquisitions were accounted for as "pooling of interests" business combinations
in accordance with Accounting Principles Board Opinion No. 16. These
acquisitions do not individually or collectively meet the criteria for
reporting under Item 2 on Form 8-K.
Accordingly, the Company hereby restates the following items and
financial statements in its Annual Report on Form 10-K dated December 25, 1993
to include the effects of the above described acquisitions for all periods
presented:
Part II
Item 6. Selected Financial Data
Refer to page F-1 of this Form 8-K
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Refer to pages F-2 through F-5 of this Form 8-K
Item 8. Financial Statements
Refer to pages F-6 through F-23 of this Form 8-K
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
Page Number
(a)1. Financial Statements: in this Form 10-K
Independent Auditors' Report F-6
Consolidated Statements of Earnings, Fiscal Years
ended December 25, 1993, December 26, 1992 and
December 28, 1991 F-7
Consolidated Balance Sheets, December 25, 1993 and
December 26, 1992 F-8
Consolidated Statements of Stockholders' Equity, Fiscal
Years ended December 25, 1993, December 26, 1992
and December 28, 1991 F-9
Consolidated Statements of Cash Flows, Fiscal Years
ended December 25, 1993, December 26, 1992
and December 28, 1991 F-10
Notes to Consolidated Financial Statements F-11
2
3
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K Continued
Page Number
in this Form 10-K
2. Financial Statements Schedules
Schedule V - Property, Plant and Equipment S-1
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment S-2
Schedule VIII - Valuation and Qualifying Accounts and
Reserves S-3
Schedule X - Supplementary Income Statement Information S-4
3. Exhibits
The exhibits which are filed with this Form 10-K or are incorporated by
reference are set forth in the Exhibit Index, which immediately precedes the
exhibits to this report.
(b) Reports on Forms 8-K
None.
3
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OFFICE DEPOT, INC.
Date January 16, 1995 By: /s/ BARRY J. GOLDSTEIN
------------------------ ----------------------
Barry J. Goldstein
Vice President, Chief Financial
Officer
4
5
EXHIBIT INDEX
Exhibit Description
Number of Document
------ -----------
23.1 Consent of Deloitte & Touche LLP*
27 Financial Data Schedule (For SEC use only)
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* Filed on the date hereof by Edgar transmission
5
6
Office Depot Inc. And Subsidiaries
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts and statistical data)
________________________________________________________________________________
52 WEEKS 52 Weeks 52 Weeks 52 Weeks 52 Weeks
ENDED Ended Ended Ended Ended
DECEMBER December December December December
25, 1993 26, 1992 28, 1991 29, 1990 30, 1989
-------- -------- -------- -------- --------
STATEMENTS OF EARNINGS DATA:
Sales . . . . . . . . . . . . . . . . . . . . . $2,836,787 $1,962,953 $1,497,882 $1,087,455 $ 621,193
Cost of goods sold and occupancy costs . . . . 2,185,145 1,512,304 1,152,766 836,714 475,522
---------- ---------- ---------- ---------- ---------
Gross profit . . . . . . . . . . . . . . . . 651,642 450,649 345,116 250,741 145,671
Store and warehouse operating and
selling expenses . . . . . . . . . . . . . . 423,272 301,743 240,572 174,369 98,058
Pre-opening expenses . . . . . . . . . . . . . 9,073 7,453 7,774 8,838 7,782
General and administrative expenses . . . . . . 95,034 69,549 52,076 41,286 29,330
Amortization of goodwill . . . . . . . . . . . 1,617 49 --- --- ---
---------- ---------- ---------- ---------- ---------
Operating profit . . . . . . . . . . . . . . 122,646 71,855 44,694 26,248 10,501
Interest income . . . . . . . . . . . . . . . . 4,626 1,393 280 871 3,341
Interest expense . . . . . . . . . . . . . . . (11,322) (2,658) (3,992) (2,698) (1,729)
Merger costs . . . . . . . . . . . . . . . . . --- --- (8,950) --- ---
---------- ---------- ---------- ---------- ---------
Earnings before income taxes and
extraordinary credit (1) . . . . . . . . . . 115,950 70,590 32,032 24,421 12,113
Income taxes . . . . . . . . . . . . . . . . . 45,118 25,345 13,246 8,035 4,415
---------- ---------- ---------- ---------- ---------
Earnings before extraordinary
credit (1) . . . . . . . . . . . . . . . . 70,832 45,245 18,786 16,386 7,698
Extraordinary credit (2) . . . . . . . . . . --- 1,396 614 1,063 532
---------- ---------- ---------- ---------- ---------
Net earnings (1) . . . . . . . . . . . . . . $ 70,832 $ 46,641 $ 19,400 $ 17,449 $ 8,230
========== ========== ========== ========== =========
Per Common Share:
Earnings before extraordinary credit (1) . . $ .48 $ .32 $ .15 $ .14 $ .07
Extraordinary credit (2) . . . . . . . . . . --- .01 -- .01 .01
---------- ---------- ---------- ---------- ---------
Net earnings (1) . . . . . . . . . . . . . . $ .48 $ .33 $ .15 $ .15 $ .08
========== ========== ========== ========== =========
Dividends . . . . . . . . . . . . . . . . . . --- --- --- --- ---
STATISTICAL DATA:
Facilities open at end of period:
Stores . . . . . . . . . . . . . . . . . . . 351 284 228 173 99
Contract stationer/delivery warehouses . . . 23 13 10 10 8
DECEMBER December December December December
25, 1993 26, 1992 28, 1991 29, 1990 30, 1989
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . $ 471,114 $ 386,426 $ 203,326 $ 95,817 $ 87,371
Total assets . . . . . . . . . . . . . . . . . 1,531,092 908,585 607,938 401,135 277,838
Long-term debt (3) . . . . . . . . . . . . . . 367,602 158,313 9,259 24,889 5,460
Common stockholders' equity . . . . . . . . . . 590,284 413,907 331,699 167,301 142,017
- ------------
(1) Includes effect of $8,950,000 of merger costs in 1991.
(2) The extraordinary credit represents the benefit derived from the
utilization of a net operating loss carryforward. See Note E to
Consolidated Financial Statements.
(3) Excludes current maturities.
F-1
7
Office Depot Inc. And Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
________________________________________________________________________________
GENERAL
The Company opened its first store in October 1986. Two more stores were
opened in 1986 and an additional 12 stores were opened in 1987. The Company
continued its expansion program in 1988 and 1989 as part of a strategy to
establish itself as a leader in targeted market areas with high concentrations
of small- and medium-sized businesses. During 1988, the Company opened 26
stores in California, Colorado, Florida, Georgia, Kentucky, North Carolina,
Oregon, Tennessee and Texas, ending the year with 41 stores. During 1989, the
Company opened 58 new stores and ended 1989 with 99 stores. During 1990, the
Company opened 75 new stores and closed one store ending the year with 173
stores in 27 states. During 1991, the Company opened 57 new stores and closed
two stores ending the year with 228 stores. During 1992, the Company achieved
its expansion plans by opening 53 new stores and acquiring five stores. The
Company also closed two former Club stores, thus ending 1992 with 284 stores in
32 states, the District of Columbia and Canada. During 1993, the Company
opened 68 new stores and closed one store, ending the period with 351 stores in
33 states, the District of Columbia and Canada.
In April 1991, a subsidiary of the Company merged with and into The
Office Club, Inc. ("Club") and Club became a wholly-owned subsidiary of the
Company. The merger was accounted for in 1991 on a "pooling of interests"
basis for accounting and financial reporting purposes. Accordingly, financial
data in 1991, statistical data, financial statements and discussions of
financial and other information included for periods prior to the merger have
been restated to reflect the financial position and results of operations as if
they had merged as of the beginning of operations in 1986. Office Depot, Inc.
and The Office Club, Inc. before the merger will be referred to as "Depot" and
"Club," respectively. Also, as a result of the merger with Club, the Company
incurred merger costs of $8,950,000 in 1991.
In 1993, the Company acquired two contract stationers with ten warehouses
through the acquisitions of Wilson Stationary and Printing Company ("Wilson")
and Eastman Office Products Corporation ("Eastman"), both of which were
accounted for as purchases. Subsequent to 1993, the Company also acquired the
outstanding stock of six contract stationers with eight warehouses; L. E. Muran
Co., Inc. and Yorkship Press, Inc. in February 1994, Midwest Carbon Company and
Silver's, Inc. in May 1994, and J. A. Kindel Company and Allstate Office
Products, Inc. in August 1994. Each of these 1994 acquisitions was accounted
for on a "pooling of interests" basis and, accordingly, the accompanying
financial data, statistical data, financial statements and discussions of
financial and other information included for periods prior to the acquisitions
have been restated to reflect the financial position and results of operations
of these companies for all periods presented. With the restatement for the
1994 acquisitions, the Company operated 23 delivery and contract stationer
warehouses at the end of 1993.
The Company's results are impacted by the costs incurred in connection
with its aggressive new store opening schedule. Pre-opening expenses are
charged to earnings as incurred. Corporate general and administrative expenses
are also incurred in anticipation of store openings. As the Company's store
base and sales volume continue to grow, the Company expects that the adverse
impact on profitability from new store openings will decrease as expenses
incurred prior to store openings continue to represent a declining percentage
of total sales.
RESULTS OF OPERATIONS FOR THE YEARS 1993, 1992 AND 1991
Sales. Sales increased to $2,836,787,000 in 1993 from $1,962,953,000 in
1992 and $1,497,882,000 in 1991. Sales in 1993 increased 45% from 1992 sales.
The increases in sales were due primarily to 67 additional stores and the
aquisitions of Eastman and Wilson in 1993 and 56 additional stores in 1992,
including the five Canadian stores acquired. The increases also were
attributable to same store sales growth. Comparable store sales in 1993 for
the 283 stores open for more than one year at December 25, 1993 increased 26%
from 1992. Comparable store sales in 1992 for the 226 stores open for more
than one year at December 26, 1992 increased 15% from 1991. Comparable store
sales in the future may be affected by competition from other stores, the
opening of additional stores in existing markets and economic conditions.
F-2
8
Office Depot Inc. And Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
________________________________________________________________________________
Gross Profit. Gross profit as a percentage of sales, 23.0%, was
consistent during 1993, 1992 and 1991. Purchasing efficiencies gained through
vendor volume discount programs and leveraging occupancy costs through higher
average sales per store were offset by somewhat lower gross margins resulting
from an increase in sales of lower margin business machines and computers. The
Company's management believes that gross profit as a percentage of sales may
fluctuate as a result of the expansion of its contract stationer base, the
result of competitive pricing in more market areas, increased occupancy costs
in certain new markets and in existing markets where the Company desires to add
stores and warehouses in particular locations to complete its market plan, and
purchasing efficiencies realized as total merchandise purchases increase.
Store and Warehouse Operating and Selling Expenses. Store and warehouse
operating and selling expenses as a percentage of sales were 14.9% in 1993,
15.4% in 1992 and 16.1% in 1991. Store and warehouse operating and selling
expenses, consisting primarily of payroll and advertising expenses, have
increased in the aggregate due to the Company's expansion program. While the
majority of these expenses vary proportionately with sales, there is a fixed
cost component to these expenses that, as sales increase within each store and
within a cluster of stores in a given market area, should decrease as a
percentage of sales. This benefit may not be fully realized, however, during
periods when a large number of new stores are being opened, as new stores
typically generate lower sales than the average mature store, resulting in
higher store operating and selling expenses as a percentage of sales for new
stores. This percentage is also affected when the Company enters large
metropolitan market areas where the advertising costs for the full market must
be absorbed by the small number of stores initially opened. As additional
stores in these large markets are opened, advertising costs, which are
substantially a fixed expense for a market area, will be reduced as a
percentage of sales. The Company has also continued a strategy of opening
stores in existing markets. While increasing the number of stores increases
operating results in absolute dollars, this also has the effect of increasing
expenses as a percentage of sales since the sales of certain existing stores in
the market may initially be adversely affected. During 1992 and 1993, the
combination of an increase in average sales per store and an increase in the
amount of cooperative advertising support received resulted in a decrease in
store and warehouse operating and selling expenses as a percentage of sales as
compared to prior periods.
Pre-opening Expenses. As a result of continued store openings,
pre-opening expenses incurred were $9,073,000 in 1993, $7,453,000 in 1992 and
$7,774,000 in 1991. Pre-opening expenses currently are approximately $125,000
per store and are predominantly incurred during a six-week period prior to the
store opening. Warehouse pre-opening expenses approximate $100,000, however,
these expenses may increase as the Company opens larger warehouses to service
the delivery customers. These expenses consist principally of amounts paid for
salaries and supplies. Since the Company's policy is to expense these items
during the period in which they occur, the amount of pre-opening expenses in
each quarter is generally proportional to the number of new stores opened.
General and Administrative Expenses. General and administrative expenses
as a percentage of sales were 3.4% in 1993 and 3.5% in 1992 and 1991. General
and administrative expenses include, among other costs, site selection expenses
and store management training expenses, and therefore vary with the number of
new store openings. During 1993, the Company has also increased its commitment
to improving the efficiency of its systems and significantly increased its
information systems programming staff. While this increases general and
administrative expenses in current periods, the Company believes the systems
investment will provide benefits in the future. These increases have been
partially offset by a decrease in general and administrative expenses as a
percentage of sales, primarily as a result of the Company's ability to increase
sales without a proportionate increase in corporate expenditures.
Additionally, general and administrative expenses have historically been higher
in the contract stationers' business than the retail stores. During 1992, the
increase in general and administrative expenses as a percentage of sales was
primarily attributable to expenses incurred in connection with the newly
acquired Canadian operation, expenses related to Hurricane Andrew disaster
relief efforts and the beginning of the significant investment in the ongoing
program to upgrade the Company's information systems.
Other Income and Expenses. During 1993, 1992 and 1991, interest expense
was $11,322,000, $2,658,000, and $3,992,000 respectively. The increase in
interest expense is primarily due to additional capitalization in 1992 and
1993. In June 1991, the Company received $40,040,000 as a result of a
private placement of 6,435,000 shares of its Common Stock to a subsidiary of
Carrefour, a French hypermarket retailer. Also in December 1991, the Company
completed a public offering of 10,350,000 shares of Common Stock raising net
proceeds of approximately $92 million. In December 1992 and November 1993, the
Company completed public offerings of zero coupon, convertible, subordinated
debt raising net proceeds of approximately $146 million and $185 million,
respectively. As the Company has utilized the funds raised in its public
offerings to fund its expansion, interest income has fluctuated. Interest
income during 1993, 1992, and 1991 was $4,626,000, $1,393,000, and $280,000,
respectively.
F-3
9
Office Depot Inc. And Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
________________________________________________________________________________
Net Earnings. The Company recorded amortization of goodwill of
$1,617,000 in 1993 and $49,000 in 1992. The increase in 1993 was attributable
to goodwill arising from the acquisition of Wilson in May 1993 and Eastman in
September 1993. Goodwill in 1994 will be higher than 1993 reflecting a full
year of amortization arising from the Wilson and Eastman acquisitions.
Earnings before income taxes and extraordinary credit were $115,950,000
in 1993, $70,590,000 in 1992, and $32,032,000 in 1991. In 1991, earnings were
negatively affected by merger costs of $8,950,000.
The effective income tax rate for 1991 was negatively impacted by certain
nondeductible merger costs. The effective income tax rate for 1993 was
negatively impacted by the increase in the federal statutory rate and by
nondeductible goodwill amortization. Additionally, the effective income tax
rate for all years is impacted by the combining of certain acquired companies
which had no provision for income taxes because they were organized as
S-Corporations (as defined under income tax regulations).
Net earnings were $70,832,000 in 1993, $46,641,000 in 1992, and
$19,400,000 in 1991. Net earnings for 1992 and 1991 include extraordinary
credits from the utilization of net operating loss carryforwards of $1,396,000
and $614,000, respectively. The increases in net earnings were attributable to
the significant increases in sales without commensurate increases in expenses.
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's inception in March 1986, the Company has relied upon
equity capital and convertible debt as the primary source of its funds.
Shortly after inception, the Company was capitalized with $250,000 and in 1986
and 1987 private placements of Common Stock and Preferred Stock provided
$25,704,000 in net proceeds to the Company. Additional net proceeds of
$31,932,000 were raised by the Company in public equity offerings in 1988. Net
proceeds of $24,070,000, $11,944,000 and $92,386,000 were raised by the Company
in subsequent public equity offerings completed in 1989, 1990 and 1991,
respectively. The Company also received proceeds of approximately $41,400,000
and $40,040,000 from private placements of its Common Stock with a subsidiary
of Carrefour, completed in July 1989 and June 1991, respectively. The Company
completed public offerings of zero coupon, convertible, subordinated debt in
1992 and 1993 raising net proceeds of approximately $146,000,000 and
$185,000,000, respectively. In the first half of 1994, the Company registered
approximately 10.5 million shares of common stock to be used for acquisitions
of which approximately 5.7 million shares has been issued in 1994.
Since the Company's store sales are substantially on a cash and carry
basis, cash flow generated from operating stores provides a source of liquidity
to the Company. Working capital requirements are reduced by vendor credit
terms that allow the Company to finance a portion of its inventory. The
Company utilizes private label credit card programs administered and financed
by financial services companies, which allow the Company to expand store sales
without the burden of additional receivables. All credit card receivables sold
to the financial service company under one program were sold on a recourse
basis. Proceeds to the Company for such receivables sold with recourse were
approximately $185,000,000, $138,000,000 and $123,000,000 in 1993, 1992 and
1991, respectively. The outstanding balance of such receivables at December
25, 1993 was $39,900,000. The Company has also utilized capital equipment
financings to fund working capital requirements.
Sales made from the contract stationer warehouses are made under regular
commercial credit terms where the Company carries its own receivables. This
contributed to the increase in receivables in 1993 from 1992. As the Company
expands into servicing additional large companies in the contract stationer
portion of its business, it is expected that a greater portion of the Company's
receivables will be carried.
F-4
10
Office Depot Inc. And Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
________________________________________________________________________________
The Company added (net of closures) 67 stores in 1993, 56 stores in 1992,
and 55 stores in 1991. As stores mature and become more profitable, and as the
number of new stores opened in a year becomes a smaller percentage of the
existing store base, cash generated from operations will provide a greater
portion of funds required for new store inventories and other working capital
requirements, therefore, net cash provided (used) in operating activities was
$86,226,000, $(10,291,000), and $(39,288,000) for 1993, 1992 and 1991,
respectively. Cash generated from operations will be affected by an increase
in receivables carried without outside financing and increases in inventory at
the stores as the Company continues to expand its efforts in computers and
business machines. Capital expenditures are also affected by the number of
stores and warehouses opened or acquired each year and the increase in computer
and other equipment at the corporate office required to support such expansion.
Cash utilized for capital expenditures was $104,568,000 in 1993, $62,899,000 in
1992 and $54,778,000 in 1991.
The Company opened 71 stores and closed 2 stores in 1994. Management
estimates that the Company's cash requirements, exclusive of pre-opening
expenses, were approximately $1,200,000 for each additional store. These
expenditures include an average of approximately $600,000 for leasehold
improvements, fixtures, point-of-sale terminals and other equipment in the
stores, as well as approximately $600,000 for the portion of the store
inventory that is not financed by vendors. In addition, management estimates
that each new store required pre-opening expenses of approximately $125,000.
The Company's expansion through 1994 was financed through cash on hand, funds
generated from operations, equipment leased under the Company's lease facility
and funds borrowed under the Company's revolving credit facility. The
Company's financing requirements beyond 1994 will be affected by the number of
new stores or warehouses opened or acquired.
During 1993, the Company's cash balance increased by $7,501,000 and long-
and short-term debt increased by $203,945,000 (including $161,318,000 assumed
in the acquisitions of Eastman and Wilson of which $145,522,000 was paid off in
1993). This increase in cash and debt was primarily attributable to cash
provided and debt incurred in the public debt offering, partially offset by
payments for fixed assets and inventories for new stores. Additionally, cash
of $136,573,000 was utilized in various transactions associated with the
acquisition of Eastman and redemption of outstanding Eastman debt (see Note I
to Consolidated Financial Statements).
The Company has a credit agreement with its principal bank and a
syndicate of commercial banks to provide for a working capital line of
$200,000,000. The credit agreement provides that funds borrowed will bear
interest, at the Company's option, at either 3/4% over the LIBOR rate or at a
base rate linked to the prime rate. The Company must also pay a fee of 1/4%
per annum on the available and unused portion of the credit facility. The
credit facility currently expires in September 1996. As of December 25, 1993,
the Company had no outstanding borrowings under the credit facility. In
addition to the credit facility, the bank has provided a lease facility to the
Company under which the bank has agreed to purchase up to $15,000,000 of
equipment from the Company and lease such equipment back to the Company. As of
December 25, 1993, the Company has utilized approximately $7,711,000 of this
lease facility.
INFLATION AND SEASONALITY
Although the Company cannot accurately determine the precise effects of
inflation, it does not believe inflation has a material effect on sales or
results of operations. The Company considers its business to be somewhat
seasonal with sales generally slightly higher during the first and fourth
quarters of each year.
F-5
11
Office Depot Inc. And Subsidiaries
INDEPENDENT AUDITORS' REPORT
________________________________________________________________________________
To the Board of Directors of Office Depot, Inc.
We have audited the consolidated balance sheets of Office Depot, Inc. and
Subsidiaries as of December 25, 1993 and December 26, 1992, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the three years in the period ended December 25, 1993. Our audits also
included the financial statement schedules listed in the Index at Item 14(a)2.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Office Depot, Inc. and Subsidiaries as of December 25, 1993 and December 26,
1992 and the results of their operations and their cash flows for each of the
three years in the period ended December 25, 1993 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida
February 8, 1994 (January 10, 1995 as to the effects of the business
combinations and stock split described in Note L)
F-6
12
Office Depot Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
________________________________________________________________________________
52 WEEKS 52 Weeks 52 Weeks
ENDED Ended Ended
DECEMBER 25, December 26, December 28,
1993 1992 1991
------------ ------------ ------------
Sales . . . . . . . . . . . . . . . . . . . . . . $2,836,787 $1,962,953 $1,497,882
Cost of goods sold and occupancy costs . . . . . . . 2,185,145 1,512,304 1,152,766
---------- ---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . 651,642 450,649 345,116
Store and warehouse operating and selling expenses . 423,272 301,743 240,572
Pre-opening expenses . . . . . . . . . . . . . . . . 9,073 7,453 7,774
General and administrative expenses . . . . . . . . . 95,034 69,549 52,076
Amortization of goodwill . . . . . . . . . . . . . . 1,617 49 ---
---------- --------- ----------
528,996 378,794 300,422
---------- --------- ----------
Operating profit . . . . . . . . . . . . . . 122,646 71,855 44,694
Other income (expense)
Interest income . . . . . . . . . . . . . . . . . 4,626 1,393 280
Interest expense . . . . . . . . . . . . . . . . . (11,322) (2,658) (3,992)
Merger costs . . . . . . . . . . . . . . . . . . . --- --- (8,950)
---------- --------- ----------
Earnings before income taxes and extraordinary
credit . . . . . . . . . . . . . . . . . . 115,950 70,590 32,032
Income taxes . . . . . . . . . . . . . . . . . . . . 45,118 25,345 13,246
---------- --------- ----------
Earnings before extraordinary credit . . . . 70,832 45,245 18,786
Extraordinary credit . . . . . . . . . . . . . . . . --- 1,396 614
---------- --------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . $ 70,832 $ 46,641 $ 19,400
========== ========= ==========
Earnings per common and
common equivalent share
Earnings before extraordinary credit . . . . . . $ .48 $ .32 $ .15
Extraordinary credit . . . . . . . . . . . . . . --- .01 ---
--------- --------- ----------
Net earnings . . . . . . . . . . . . . . . . . . $ .48 $ .33 $ .15
========= ========= ==========
The accompanying notes are an integral part of these statements.
F-7
13
Office Depot Inc. And Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
________________________________________________________________________________
DECEMBER 25, December 26,
1993 1992
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 142,471 $ 134,970
Receivables, net of allowances of $3,251 in
1993 and $659 in 1992 . . . . . . . . . . . . . . . . 201,989 93,180
Merchandise inventories . . . . . . . . . . . . . . . . 663,147 473,501
Deferred income taxes . . . . . . . . . . . . . . . . . 26,166 9,348
Prepaid expenses and refundable income taxes . . . . . . 5,069 6,992
---------- ---------
Total current assets . . . . . . . . . . . . . . . 1,038,842 717,991
---------- ---------
Property and Equipment, at Cost . . . . . . . . . . . . . . 354,943 232,906
Less accumulated depreciation and amortization . . . 86,777 59,247
---------- ---------
268,166 173,659
Goodwill, net of amortization . . . . . . . . . . . . . . . 200,714 2,227
Other Assets . . . . . . . . . . . . . . . . . . . . . . . 23,370 14,708
---------- ---------
$1,531,092 $ 908,585
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 412,491 $ 255,563
Accrued expenses . . . . . . . . . . . . . . . . . . . 132,691 69,676
Income taxes . . . . . . . . . . . . . . . . . . . . . 13,242 432
Current maturities of long-term debt . . . . . . . . . 9,304 5,894
---------- ---------
Total current liabilities . . . . . . . . . . . . . 567,728 331,565
Long-Term Debt, less current maturities . . . . . . . . . . 17,304 7,233
Deferred Taxes and Other Credits . . . . . . . . . . . . . 5,478 4,800
Zero Coupon, Convertible, Subordinated Notes . . . . . . . 350,298 151,080
Commitments and Contingencies . . . . . . . . . . . . . . . --- ---
Common Stockholders' Equity
Common stock - authorized 300,000,000 shares of $.01
par value; issued 149,114,196 in 1993 and
142,088,182 in 1992 . . . . . . . . . . . . . . . . 1,491 1,421
Additional paid-in capital . . . . . . . . . . . . . 428,891 320,421
Foreign currency translation adjustment . . . . . . . 383 98
Retained earnings . . . . . . . . . . . . . . . . . . 161,269 93,717
Less: 2,163,447 shares of treasury stock, at
cost . . . . . . . . . . . . . . . . . . . . . . . (1,750) (1,750)
---------- ---------
590,284 413,907
---------- ---------
$1,531,092 $ 908,585
========== =========
The accompanying notes are an integral part of these statements.
F-8
14
Office Depot Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Period from December 30, 1990 to December 25, 1993 (In thousands, except for
number of shares)
________________________________________________________________________________
FOREIGN
COMMON COMMON ADDITIONAL CURRENCY
STOCK STOCK PAID-IN TRANSLATION RETAINED TREASURY
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS STOCK
------ ------ ------- ---------- -------- -----
Balance at December 30, 1990 . . . . . . . . . 116,314,741 $1,164 $136,570 $ --- $31,317 $(1,750)
Sale of common stock, net of related costs . . 16,785,000 168 132,258 --- --- ---
Exercise of stock options
(including tax benefits) . . . . . . . . . . 3,193,641 32 13,348 --- --- ---
Sale of stock under employee purchase plan . . 39,564 --- 225 --- --- ---
401k plan matching contributions . . . . . . . 58,181 --- 359 --- --- ---
S-Corporation distribution to stockholders . . --- --- --- --- (1,392) ---
Net earnings for the period . . . . . . . . . . --- --- --- --- 19,400 ---
----------- ------ -------- ------ ------- -------
Balance at December 28, 1991 . . . . . . . . . 136,391,127 1,364 282,760 --- 49,325 (1,750)
Exercise of stock options (including tax
benefits) . . . . . . . . . . . . . . . . . . 5,581,980 57 36,513 --- --- ---
Sale of stock under employee purchase plan . . 59,898 --- 705 --- --- ---
401k plan matching contributions . . . . . . . 55,177 --- 443 --- --- ---
S-Corporation distribution to stockholders . . --- --- --- --- (2,249) ---
Foreign currency translation adjustment . . . . --- --- --- 98 --- ---
Net earnings for the period . . . . . . . . . . --- --- --- --- 46,641 ---
----------- ------ -------- ------ ------- ------
Balance at December 26, 1992 . . . . . . . . . 142,088,182 1,421 320,421 98 93,717 (1,750)
Issuance of common stock for acquisitions . . . 5,035,401 50 94,647 --- ---
Exercise of stock options (including
tax benefits) . . . . . . . . . . . . . . . . 1,841,505 18 11,272 --- --- ---
Sale of stock under employee purchase plan . . 89,489 1 1,604 --- --- ---
401k plan matching contributions . . . . . . . 59,619 1 947 --- --- ---
S-Corporation distribution to stockholders . . --- --- --- --- (3,280) ---
Foreign currency translation adjustment . . . . --- --- --- 285 --- ---
Net earnings for the period . . . . . . . . . . --- --- 70,832 ---
----------- ------ -------- ------ -------- -------
Balance at December 25, 1993 . . . . . . . . . 149,114,196 $1,491 $428,891 $ 383 $161,269 $(1,750)
=========== ====== ======== ====== ======== =======
The accompanying notes are an integral part of these statements.
F-9
15
Office Depot Inc. And Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase in Cash and Cash Equivalents (in thousands)
________________________________________________________________________________
52 WEEKS 52 Weeks 52 Weeks
ENDED Ended Ended
DECEMBER 25, December 26, December 28,
1993 1992 1991
------------ ----------- -----------
Cash flows from operating activities
Cash received from customers . . . . . . . . . . $ 2,805,053 $ 1,909,402 $ 1,480,081
Cash paid for inventory . . . . . . . . . . . . . (2,130,771) (1,500,727) (1,162,121)
Cash paid for store and warehouse operating,
selling and general and administrative
expenses . . . . . . . . . . . . . . . . . . . (559,440) (408,528) (344,409)
Interest received . . . . . . . . . . . . . . . . 4,654 1,373 247
Interest paid . . . . . . . . . . . . . . . . . . (2,595) (2,637) (3,959)
Taxes paid . . . . . . . . . . . . . . . . . . . (30,675) (9,174) (9,127)
----------- ----------- -----------
Net cash provided (used) in operating
activities . . . . . . . . . . . . . . . . . 86,226 (10,291) (39,288)
----------- ----------- -----------
Cash flows from investing activities
Capital expenditures - net . . . . . . . . . . . (104,568) (62,899) (54,778)
Purchase of Eastman common stock . . . . . . . . (20,001) --- ---
Acquisition cash overdraft assumed, net . . . . . (4,106) --- ---
----------- ----------- -----------
Net cash used in investing activities . . . . (128,675) (62,899) (54,778)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock . . . . . --- --- 132,426
Proceeds from exercise of stock options . . . . . 10,308 15,836 7,257
Foreign currency translation adjustment . . . . . 285 98 ---
Proceeds from long- and short-term borrowing . . 192,559 152,170 4,067
Payments on long- and short-term debt . . . . . . (149,922) (3,192) (18,366)
S-Corporation distribution to stockholders . . . (3,280) (2,249) (1,412)
----------- ----------- -----------
Net cash provided by financing activities . . 49,950 162,663 123,972
----------- ----------- -----------
Net increase in cash and cash equivalents . . 7,501 89,473 29,906
Cash and cash equivalents at beginning of period . . 134,970 45,497 15,591
----------- ----------- -----------
Cash and cash equivalents at end of period . . . . . $ 142,471 $ 134,970 $ 45,497
=========== =========== ===========
Reconciliation of net earnings to net cash
provided (used) in operating activities
Net earnings . . . . . . . . . . . . . . . . . $ 70,832 $ 46,641 $ 19,400
Adjustments to reconcile net earnings to net cash
provided (used) in operating activities
Depreciation and amortization . . . . . . . . . . 31,762 20,722 16,287
Changes in assets and liabilities (net of effect of the
Eastman and Wilson aquisitions)
Increase in receivables . . . . . . . . . . . . . (50,200) (33,129) (21,928)
Increase in merchandise inventories . . . . . . . (151,991) (122,429) (107,718)
Increase in prepaid expenses, deferred income
taxes and other assets . . . . . . . . . . . . (15,646) (16,920) ( 9,792)
Increase in accounts payable, accrued
expenses and deferred credit . . . . . . . . . 201,469 94,824 64,463
----------- ----------- -----------
Total adjustments . . . . . . . . . . . . . 15,394 (56,932) (58,688)
----------- ----------- -----------
Net cash provided (used)
in operating activities . . . . . . . . $ 86,226 $ (10,291) $ (39,288)
=========== =========== ===========
The accompanying notes are an integral part of these statements.
F-10
16
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Office Depot, Inc. and subsidiaries (the "Company") operates a chain of
high-volume office supply stores and contract stationer/delivery warehouses
throughout the country. The Company was incorporated in March 1986 and opened
its first store in October 1986.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated in consolidation.
All common stock share and per share amounts for all periods presented have
been adjusted for a three-for-two stock split in June 1993 and a two-for-one
stock split in May 1992 effected in the form of stock dividends. Additionally,
all common stock share and per share amounts for all periods presented have
been adjusted for a three-for-two stock split effected in the form of a stock
dividend which occurred subsequent to the year ended December 25, 1993 (See
Note L).
Certain reclassifications were made to prior year statements to conform to
current presentations.
Cash and Cash Equivalents
The Company considers any highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Receivables
Receivables are comprised of trade receivables not financed through outside
programs as well as amounts due from vendors under rebate and cooperative
advertising programs.
Merchandise Inventories
Inventories are stated at the lower of weighted average cost or market
value.
Income Taxes
The Company currently provides for Federal and state income taxes currently
payable as well as for those deferred because of temporary differences between
reporting assets and liabilities for tax purposes and for financial statement
purposes using the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Under this standard, deferred tax
assets and liabilities represent the tax effects, based on current tax law, of
future deductible or taxable amounts attributable to events that have been
recognized in the financial statements. In prior years, the Company had
provided for income taxes using the provisions of APB No. 11.
Property and Equipment
Depreciation and amortization are provided in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives
on a straight line basis. Leasehold improvements are amortized over the terms
of the respective leases or the service lives of the improvements.
F-11
17
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_______________________________________________________________________________
Goodwill
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible assets of businesses acquired. Goodwill is
amortized on a straight-line basis over 40 years. Accumulated amortization of
goodwill was $1,666,000 and $49,000 as of December 25, 1993 and December 26,
1992, respectively. Goodwill will be adjusted for a permanent decline in
value, if any, as measured by the recoverability from projected future cash
flows from the acquired businesses.
Pre-opening Expenses
Pre-opening expenses related to new store openings are expensed as incurred.
Acquisition of The Office Club, Inc.
On April 10, 1991, the Company completed its acquisition of The Office
Club, Inc. ("Club"). The merger with Club was accounted for in 1991 on a
"pooling of interests" basis for accounting and financial reporting purposes.
Financial statements for periods prior to the merger have been restated to
reflect the financial position and results of operations of the combined
companies as if they had merged as of the beginning of the earliest period
reported. Club became a wholly-owned subsidiary of the Company through the
exchange of 38,956,172 shares of the Company's common stock for all of the
outstanding stock of Club on a ratio of 1.791 shares of Depot stock for each
Club share. References to Office Depot, Inc. and to The Office Club, Inc.
before the merger will be referred to as "Depot" and "Club," respectively.
Costs of $8,950,000 associated with the merger have been reflected in the
results of operations for 1991.
Acquisitions of Contract Stationers
Subsequent to December 25, 1993, the Company acquired six contract
stationer companies. These acquisitions were accounted for on a "pooling of
interests" basis for accounting and financial reporting purposes, therefore,
the financial statements for the periods prior to the acquisitions have been
restated to include the financial position, results of operations and cash
flows of these companies as if they had been acquired as of the beginning of
the earliest period presented. (See Note L)
Earnings Per Common and Common Equivalent Shares
Net earnings per common equivalent share is based upon the weighted average
number of shares and equivalents outstanding during each period. The weighted
average number of common and common equivalent shares outstanding for the years
ended December 25, 1993, December 26, 1992 and December 28, 1991 were
147,640,000, 143,263,000 and 125,967,000, respectively. Stock options and
warrants are considered common stock equivalents. The zero coupon,
convertible, subordinated notes are not a common stock equivalent and are
anti-dilutive in the fully diluted computation.
Fiscal Year
The Company is on a 52 or 53 week fiscal year ending on the last Saturday in
December.
Postretirement Benefits
The Company does not currently provide postretirement benefits for its
employees.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments", requires disclosure of the fair value of
financial instruments, both assets and liabilities, recognized and not
recognized in the Consolidated Balance Sheet of the Company, for which it is
practicable to estimate fair value. The estimated fair values of financial
instruments which are presented herein have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value.
F-12
18
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
Accordingly, the estimates presented herein are not necessarily indicative of
amounts the Company could realize in a current market exchange.
The following methods and assumptions were used to estimate fair value:
- - the carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate fair value due to their short term nature;
- - discounted cash flows using current interest rates for financial
instruments with similar characteristics and maturity were used to
determine the fair value of short-term and long-term debt; and,
- - market prices were used to determine the fair value of the zero coupon,
convertible, subordinated notes.
There was no significant difference as of December 25, 1993 in the carrying
value and fair market value of financial instruments except for the zero
coupon, convertible, subordinated notes which had a carrying value of
$350,298,000 and a fair value of $419,750,000.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consists of:
DECEMBER 25, December 26,
1993 1992
------------ ------------
(in thousands)
Land and buildings . . . . . . . . . . . . . . . $ 38,217 $ 19,222
Furniture, fixtures and equipment . . . . . . . . 139,842 89,283
Automotive equipment . . . . . . . . . . . . . . 15,837 9,207
Leasehold improvements . . . . . . . . . . . . . 144,769 102,295
Equipment under capital lease . . . . . . . . . . 16,278 12,899
---------- ----------
354,943 232,906
Less accumulated depreciation and amortization 86,777 59,247
---------- ----------
$ 268,166 $ 173,659
========== ==========
Equipment under capital leases included above consists of:
DECEMBER 25, December 26,
1993 1992
------------ ------------
(in thousands)
Equipment . . . . . . . . . . . . . . . . . . . . $ 16,278 $ 12,899
Accumulated depreciation . . . . . . . . . . . . 11,105 8,458
---------- ---------
$ 5,173 $ 4,441
========== =========
F-13
19
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
NOTE C - LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 25, December 26,
1993 1992
------------ -------------
(in thousands)
Capital lease obligations collateralized by certain
equipment and fixtures . . . . . . . . . . . . $ 5,496 $ 4,258
13% senior subordinated notes, unsecured and due 2002 10,368 ---
Notes payable interest rates ranging from 7% to 12%,
payable on demand . . . . . . . . . . . . . . 2,274 1,781
Short-term bank borrowings . . . . . . . . . . . 3,099 3,761
Installment notes, interest rates ranging from 5.9%
to 18.7%, payable in monthly installments through
April 1998, collateralized by certain telephone
equipment and vehicles . . . . . . . . . . . . 5,371 3,327
-------- ---------
26,608 13,127
Less current portion . . . . . . . . . . . . . . 9,304 5,894
-------- ---------
$ 17,304 $ 7,233
======== =========
Maturities of long-term debt are as follows:
DECEMBER 25,
1993
------------
(IN THOUSANDS)
1994 . . . . . . . . . . . . . . . . . . . . . . $ 9,304
1995 . . . . . . . . . . . . . . . . . . . . . . 2,122
1996 . . . . . . . . . . . . . . . . . . . . . . 764
1997 . . . . . . . . . . . . . . . . . . . . . . 689
1998 and after . . . . . . . . . . . . . . . . . 13,729
--------
$ 26,608
========
Future minimum lease payments under capital leases together with the
present value of the net minimum lease payments as of December 25, 1993 are as
follows:
DECEMBER 25,
1993
------------
(IN THOUSANDS)
1994 . . . . . . . . . . . . . . . . . . . . . . $ 2,624
1995 . . . . . . . . . . . . . . . . . . . . . . 1,271
1996 . . . . . . . . . . . . . . . . . . . . . . 542
1997 . . . . . . . . . . . . . . . . . . . . . . 437
1998 and after . . . . . . . . . . . . . . . . . 1,927
--------
Minimum lease payments . . . . . . . . . . . . . 6,801
Less: amount representing interest at 9.5% to 15.0% 1,305
--------
Present value of net minimum lease payments . . . 5,496
Less: current portion . . . . . . . . . . . . . . 2,264
-------
Noncurrent portion . . . . . . . . . . . . . . . $ 3,232
=======
The Company has a credit agreement with its principal bank and a syndicate
of commercial banks to provide for a working capital line of $200,000,000.
The agreement provides that funds borrowed will bear interest, at the Company's
option, at either 3/4% over the LIBOR rate or at a base rate linked to the
prime rate. The Company must also pay a fee of 1/4% per annum on the available
F-14
20
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
and unused portion of the credit facility. The credit facility currently
expires in September 1996. In addition to the credit facility, the bank has
provided a lease facility to the Company under which the bank has agreed to
purchase up to $15,000,000 of equipment from the Company and lease such
equipment back to the Company. As of December 25, 1993, the Company had no
outstanding borrowings under the revolving credit facility and had utilized
approximately $7,711,000 of the lease facility. The loan agreement contains
covenants relating to various financial statement ratios and provides for a
limitation on the payment of cash dividends on common stock, not to exceed 25%
of net earnings, without the bank's consent.
Short-term bank borrowings consisted of a $3,000,000 line of credit
arrangement with a bank for one of the contract stationers and various 180 day
renewable loans. The line of credit borrowings are subject to limitations
based on qualified accounts receivable. The outstanding balance as of December
25, 1993 was $1,101,000. Interest payments are due monthly, at prime plus 1%
which was 7% as of December 25, 1993. The 180 day renewable loans accrue
interest at rates ranging from prime to prime plus 1% per annum. The balance
of these borrowings at December 25, 1993 was $1,998,000.
NOTE D - ZERO COUPON, CONVERTIBLE, SUBORDINATED NOTES
On December 11, 1992, the Company issued $316,250,000 principal amount of
Liquid Yield Option Notes (LYONs) with a price to the public of $150,769,000.
The issue price of each such LYON was $476.74 and there will be no periodic
payments of interest. The LYONs will mature on December 11, 2007 at $1,000 per
LYON representing a yield to maturity of 5% (computed on a semi-annual bond
equivalent basis).
On November 1, 1993, the Company issued $345,000,000 principal amount of
LYONs with a price to the public of $190,464,000. The issue price of each such
LYONs was $552.07 and there will be no periodic payments of interest. These
LYONs will mature on November 1, 2008 at $1,000 per LYON, representing a yield
to maturity of 4% (computed on a semi-annual bond equivalent basis).
All LYONs are subordinated to all existing and future senior indebtedness
of the Company.
Each LYON is convertible at the option of the holder at any time on or
prior to maturity, unless previously redeemed or otherwise purchased by the
Company, into common stock of the Company at a conversion rate of 29.263 shares
per 1992 LYON and 21.234 shares per 1993 LYON. The LYONs may be required to be
purchased by the Company, at the option of the holder, as of December 11, 1997
and December 11, 2002 for the 1992 LYONs and as of November 1, 2000 for the
1993 LYONs, at the issue price plus accrued original issue discount. The
Company, at its option, may elect to pay the purchase price on any particular
purchase date in cash or common stock, or any combination thereof.
In addition, prior to December 11, 1997 for the 1992 LYONs and prior to
November 1, 2000 for the 1993 LYONs, the LYONs will be purchased for cash by
the Company, at the option of the holder, in the event of a change in control
of the Company. Beginning on December 11, 1996, for the 1992 LYONs and on
November 1, 2000 for the 1993 LYONs, the LYONs are redeemable for cash at any
time at the option of the Company in whole or in part at the issue price plus
accrued original issue discount through the date of redemption.
NOTE E - INCOME TAXES
Effective December 27, 1992, the Company adopted the provisions of
Statement No. 109, "Accounting for Income Taxes." The Company's adoption in
1993 of Statement No. 109 did not result in a material adjustment and was
recognized in the results of operations. The Company chose not to restate
prior years' results or disclosures as permitted by the Statement.
Club commenced operations in 1986 and incurred losses through 1989. The
resulting net operating loss carryforward was partially utilized in 1991 and
fully utilized in 1992.
F-15
21
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
Four of the contract stationers acquired in 1994 were organized as
S-corporations and therefore did not provide for income taxes prior to their
respective acquisitions.
The income tax provision consists of the following:
52 WEEKS 52 Weeks 52 Weeks
ENDED Ended Ended
DECEMBER 25, December 26, December 28,
1993 1992 1991
------------ ----------- ------------
(in thousands)
Current
Federal . . . . . . . . . . . . . . . . . . . $ 40,068 $ 24,152 $ 12,854
State . . . . . . . . . . . . . . . . . . . . 9,449 3,392 2,909
Deferred (benefit) . . . . . . . . . . . . . . . (4,399) (2,199) (2,517)
-------- -------- --------
Total provision for income taxes . . . . . . . . $ 45,118 $ 25,345 $ 13,246
======== ======== ========
The tax effected components of deferred income tax accounts as of December 25,
1993 are as follows:
ASSETS LIABILITIES
------ -----------
(in thousands)
Interest premium on notes redeemed . . . . . . . $ 7,832
Self-insurance costs . . . . . . . . . . . . . . 6,466
Inventory costs capitalized for tax purposes . . 3,215
Excess of tax over book depreciation . . . . . . --- $3,208
Capitalized leases . . . . . . . . . . . . . . . --- 3,160
Other items . . . . . . . . . . . . . . . . . . . 14,435 3,218
------- ------
$31,948 $9,586
======= ======
The components of deferred income tax (benefit) are as follows:
52 Weeks 52 Weeks
Ended Ended
December 26, December 28,
1992 1991
------------ ------------
(in thousands)
Excess of tax over book depreciation . . . . . . $ 438 $ 67
Inventory costs capitalized for tax purposes . . (535) (435)
Vacation pay . . . . . . . . . . . . . . . . . . (380) (305)
Self-insurance costs . . . . . . . . . . . . . . (3,032) (1,941)
Capitalized leases . . . . . . . . . . . . . . . 720 368
Deferred book loss benefit recognized . . . . . . 888 148
Other items, net . . . . . . . . . . . . . . . . (298) (61)
Pre-opening costs . . . . . . . . . . . . . . . . --- (358)
------- -------
Total deferred benefit . . . . . . . . . . . . . $(2,199) $(2,517)
======= =======
F-16
22
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
The following schedule is a reconciliation of income taxes at the federal
statutory rate to the provision for income taxes:
52 WEEKS 52 Weeks 52 Weeks
ENDED Ended Ended
DECEMBER 25, December 26, December 28,
1993 1992 1991
------------ ----------- ------------
(in thousands)
Tax computed at the statutory rate . . . . . . . $ 40,583 $ 24,000 $ 10,890
State taxes net of federal benefit . . . . . . . 5,748 3,539 1,727
Effect of S-corporation income prior to
acquisitions . . . . . . . . . . . . . . . . . (1,709) (1,888) (1,132)
Nondeductible goodwill amortization . . . . . . . 483 --- ---
Nondeductible merger costs . . . . . . . . . . . --- --- 1,700
Other items, net . . . . . . . . . . . . . . . . 13 (306) 61
---------- --------- ---------
Provision for income taxes . . . . . . . . . . . $ 45,118 $ 25,345 $ 13,246
========== ========= =========
NOTE F - COMMITMENTS AND CONTINGENCIES
Leases
The Company conducts its operations in various leased facilities under
leases that are classified as operating leases for financial statement
purposes. The leases provide for the Company to pay real estate taxes, common
area maintenance, and certain other expenses, including, in some instances,
contingent rentals based on sales. Lease terms, excluding renewal option
periods exercisable by the Company at escalated rents, expire between 1994 and
2015. In addition to the base lease term, the Company has various renewal
option periods. Also, certain equipment used in the Company's operations is
leased under operating leases. A schedule of fixed operating lease commitments
follows:
DECEMBER 25,
1993
--------------
(in thousands)
1994 . . . . . . . . . . . . . . . . . . . . . . $ 96,169
1995 . . . . . . . . . . . . . . . . . . . . . . 94,493
1996 . . . . . . . . . . . . . . . . . . . . . . 87,328
1997 . . . . . . . . . . . . . . . . . . . . . . 81,252
1998 . . . . . . . . . . . . . . . . . . . . . . 77,436
Thereafter . . . . . . . . . . . . . . . . . . . 321,764
---------
$ 758,442
=========
The above amounts include 27 stores leased but not yet opened as of
December 25, 1993. The Company is in the process of opening new stores in the
ordinary course of business and leases signed subsequent to December 25, 1993
are not included in the above described commitment amount. Rent expense,
including equipment rental, was approximately $94,017,000, $74,738,000 and
$64,332,000, during 1993, 1992 and 1991, respectively.
F-17
23
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
Other
Certain holders of the Company's common stock have limited demand
registration rights. The costs of such registration will generally be borne by
the Company.
The Company is involved in litigation arising in the normal course of its
business. In the opinion of management, these matters will not materially
affect the financial position or results of operations of the Company.
As of December 25, 1993, the Company has reserved 16,580,313 shares of
unissued common stock for conversion of the subordinated notes (see Note D).
NOTE G - EMPLOYEE BENEFIT PLANS
Stock Option Plans
As of December 25, 1993, the Company had reserved 17,050,704 shares of
common stock for issuance to officers and key employees under its 1986 and 1987
Incentive Stock Option Plans, its 1988 and 1989 Employees Stock Option Plans,
its Directors Stock Option Plan and the Club Incentive Stock Option Plan.
Under these plans, the option price must be equal to or in excess of the market
price of the stock on the date of the grant or, in the case of employees who
own 10% or more of common stock, the minimum price must be 110% of the market
price.
Options granted to date become exercisable from one to four years after the
date of grant, provided that the individual is continuously employed by the
Company. All options expire no more than ten years after the date of grant.
Options to purchase 3,835,272 shares and 2,350,809 shares were exercisable at
December 25, 1993 and December 26, 1992, respectively. No amounts have been
charged to income under the plan.
NUMBER OF OPTION PRICE
SHARES PER SHARE
------------- --------------
Outstanding at December 30, 1990 . . . . . . . . 8,946,779 $ .02--- 5.84
Granted . . . . . . . . . . . . . . . . . . . . . 4,826,295 $ 2.10--- 8.72
Canceled . . . . . . . . . . . . . . . . . . . . 546,917 $ 1.98--- 8.00
Exercised . . . . . . . . . . . . . . . . . . . . 2,368,836 $ .02--- 5.78
----------
Outstanding at December 28, 1991 . . . . . . . . 10,857,321 $ .02--- 8.72
Granted . . . . . . . . . . . . . . . . . . . . . 2,558,363 $ 8.88---15.28
Canceled . . . . . . . . . . . . . . . . . . . . 764,532 $ .42---12.94
Exercised . . . . . . . . . . . . . . . . . . . . 3,914,957 $ .02--- 8.72
----------
Outstanding at December 26, 1992 . . . . . . . . 8,736,195 $ .02---15.28
Granted . . . . . . . . . . . . . . . . . . . . . 2,214,702 $ 13.22---23.84
Canceled . . . . . . . . . . . . . . . . . . . . 449,628 $ 1.76---17.92
Exercised . . . . . . . . . . . . . . . . . . . . 1,785,528 $ .30---15.00
----------
Outstanding at December 25, 1993 . . . . . . . . 8,715,741 $ .02---23.84
==========
Other Stock Options
On December 28, 1987, a nonqualified option to purchase 3,149,996 shares of
common stock was issued to the Company's chief executive officer. The option
with respect to 449,996 shares was exercisable upon issuance, with the balance
exercisable one-third each year commencing one year from the date of issue.
Options to purchase an aggregate of 337,496 shares were also issued to two of
the Company's principal officers.
F-18
24
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
The exercise price on the above described nonqualified options is $.42 per
share. Options for 449,996 shares were exercised in February 1988. In 1990,
options for 224,996 shares were exercised and options for 112,500 shares were
canceled. In 1991, options for 900,000 shares were exercised. In 1992, options
for the remaining 1,800,000 shares were exercised.
Employee Stock Purchase Plan
In October 1989, the Board of Directors approved an Employee Stock Purchase
Plan, which permits eligible employees to purchase common stock from the
Company at 90% of its fair market value through regular payroll deductions.
The maximum number of shares eligible for purchase under the plan is 1,125,000.
Retirement Savings Plan
In February 1990, the Board of Directors approved a Retirement Savings
Plan, which permits eligible employees to make contributions to the plan on a
pretax salary reduction basis in accordance with the provisions of Section
401(k) of the Internal Revenue Code. The Company makes a matching stock
contribution of 50% of the employee's pretax contribution up to a maximum of 3%
of the employee's compensation in any calendar year. The Office Club plan
provided a cash match up to certain limits. The Office Club Plan was
terminated in early 1993 and all employees were given the opportunity to join
the Depot plan. Retirement savings plans of the acquired companies will be
merged into the Office Depot Plan in 1994 and 1995.
NOTE H - CAPITAL STOCK
In May 1993, the Board of Directors and stockholders approved an amendment
to the Company's Certificate of Incorporation, which increased the authorized
number of shares of common stock from 200,000,000 to 300,000,000 shares. As of
December 25, 1993, there were 1,000,000 shares of $.01 par value preferred
stock authorized of which none are issued or outstanding.
Common Stock
On June 7, 1991, 6,435,000 shares of common stock were sold to a subsidiary
of Carrefour, a French hypermarket retailer, at a price of $6.22 per share.
On December 24, 1991, the Company completed a public offering of 10,350,000
shares of common stock at $9.33 per share.
NOTE I - ACQUISITIONS
On May 17, 1993, the Company acquired substantially all of the assets and
assumed certain of the liabilities of the office supply business of Wilson
Stationery & Printing Company ("Wilson"), a contract stationer based in Houston
Texas. The Company issued 995,821 shares of common stock, representing
$15,000,000 at market value at date of issuance, in exchange for the acquired
net assets of Wilson. This acquisition was accounted for as a purchase.
On September 13, 1993, the Company acquired the common stock of Eastman
Office Products Corporation ("Eastman"), a contract stationer and office
furniture dealer headquartered in California that operates primarily in the
western United States. In connection with the acquisition, the Company issued
4,039,580 shares of common stock with a market value of approximately
$79,707,000 and paid out $20,001,000 in cash. This acquisition was accounted
for as a purchase. The Company has allocated the purchase price to the assets
acquired and liabilities assumed based on information obtained to date. The
allocation will be finalized when all necessary information regarding the fair
values of the assets and liabilities is available. The Company also acquired
the outstanding preferred stock of Eastman for $13,158,000. Additionally, the
Company offered to purchase for cash pursuant to a tender offer of $90,000,000
principal amount of Eastman, Inc.'s 13% Series B Subordinated Notes due 2002
(the "Notes"). Pursuant to the tender offer, in October 1993 the Company
purchased $81,750,000 principal amount of the Notes for $103,414,000 in cash.
F-19
25
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
________________________________________________________________________________
The excess of the cost over the fair value of net assets acquired for the
above acquisitions is being amortized over 40 years on a straight-line method.
The Company's Consolidated Statement of Earnings includes the operating results
of acquisitions from the respective dates of the purchases. The following
represents the pro forma results of operations assuming the acquisitions of
Eastman and Wilson had taken place on December 29, 1991.
52 WEEKS 52 Weeks
ENDED Ended
DECEMBER 25, 1993 December 26, 1992
----------------- -----------------
(in thousands, except per share amounts)
(unaudited)
Sales . . . . . . . . . . . . . . . . . . . . . . $3,085,923 $2,308,492
Net Earnings Before Extraordinary Credit . . . . 69,935 45,294
Net Earnings Before Extraordinary Credit
Per Share . . . . . . . . . . . . . . . . . . . . .46 .31
This pro forma information is not necessarily indicative of the actual
results of operations that would have occurred had the acquisitions been made
as of December 29, 1991, or of results which may occur in the future.
NOTE J - SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND FINANCING ACTIVITIES
The Consolidated Statements of Cash Flows for 1993 and 1992 do not include
noncash financing transactions of $3,525,000 and $21,882,000, respectively,
relating to additional paid-in capital associated with tax benefits of stock
options exercised and $8,754,000 for 1993 associated with accreted interest on
convertible, subordinated notes.
The Consolidated Statement of Cash Flows for 1993 does not include noncash
investing and financing transactions associated with common stock issued for
the acquisition of net assets of Wilson and of Eastman. The components of the
transactions are as follows:
(in thousands)
Fair value of assets acquired (including goodwill) $328,603
Liabilities assumed . . . . . . . . . . . . . . . (213,895)
---------
Net assets acquired . . . . . . . . . . . . . . . 114,708
Total issuance of common stock . . . . . . . . . 94,707
---------
Cash used to purchase Eastman
common stock . . . . . . . . . . . . . . . . . $ 20,001
=========
NOTE K - RECEIVABLES SOLD WITH RECOURSE
The Company has two private label credit card programs which are managed by
financial services companies. All credit card receivables sold to the
financial services company under one of these programs were sold on a recourse
basis. Proceeds to the Company for such receivables sold with recourse were
approximately $185,000,000, $138,000,000 and $123,000,000 in 1993, 1992 and
1991, respectively. The Company's maximum exposure to off-balance sheet credit
risk is represented by the outstanding balance of private label credit card
receivables with recourse, which totaled approximately $39,900,000 at December
25, 1993. The financial services company periodically estimates the percentage
to be withheld from proceeds for receivables sold to achieve the necessary
reserve for potential uncollectible amounts. The Company expenses such
withheld amounts at the time of sale to the financial services company.
F-20
26
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
________________________________________________________________________________
NOTE L - SUBSEQUENT EVENTS
In February 1994, the Company issued 2,335,746 shares of common stock in
connection with the acquisitions of L. E. Muran Co. Inc. ("Muran"), a
Boston-based contract stationer and Yorkship Press, Inc. ("Yorkship"), a
contract stationer servicing Philadelphia and southern New Jersey. In May
1994, the Company acquired all of the outstanding stock of Midwest Carbon
Company ("Midwest"), a Minneapolis based contract stationer, and Silver's Inc.
("Silver's"), a Detroit based contract stationer. The Company issued 1,448,591
shares of common stock in connection with the acquisitions of Midwest and
Silver's. Additionally, in August 1994, the Company acquired all the
outstanding stock of J. A. Kindel Company, Inc. ("Kindel"), a Cincinnati based
contract stationer, and Allstate Office Products, Inc. ("Allstate"), a contract
stationer in Tampa. The Company issued 1,916,009 shares of common stock in
connection with the acquisitions of Kindel and Allstate. These acquisitions
were accounted for on a "pooling of interests" basis and, accordingly, the
accompanying financial statements have been restated to include the accounts
and operations of these companies for all periods presented.
Following is a summary of the effect of the restatement of the "pooling of
interests" basis for previously issued financial statements as of December 25,
1993 and for the fiscal years ended December 25, 1993, December 26, 1992 and
December 28, 1991.
OFFICE DEPOT, INC. AND SUBSIDIARIES
COMBINED RESTATED BALANCE SHEET
December 25, 1993
(In thousands)
Pooling
Office Depot Adjustments
(as previously for Acquired Combined
reported) Companies Restated
--------- --------- ---------
Accounts receivable, net allowance $ 165,182 $ 36,807 $ 201,989
Merchandise inventories 643,773 19,374 663,147
Other current assets 169,207 4,499 173,706
----------- -------- -----------
Total current assets 978,162 60,680 1,038,842
Property and equipment, net of
accumulated depreciation 262,144 6,022 268,166
Goodwill, net of accumulated amortization 200,462 252 200,714
Other assets 23,131 239 23,370
----------- --------- -----------
Total assets $ 1,463,899 $ 67,193 $ 1,531,092
=========== ========= ===========
Accounts payable $ 393,185 $ 19,306 $ 412,491
Other current liabilities 144,020 11,217 155,237
----------- --------- -----------
Total current liabilities 537,205 30,523 567,728
Long-term debt 366,527 1,075 367,602
Other non-current liabilities 5,478 --- 5,478
Common stockholders' equity 554,689 35,595 590,284
----------- --------- -----------
Total liabilities and stockholders' equity $ 1,463,899 $ 67,193 $ 1,531,092
=========== ========= ===========
F-21
27
NOTE L - SUBSEQUENT EVENTS (CONTINUED)
OFFICE DEPOT, INC. AND SUBSIDIARIES
COMBINED RESTATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
52 Weeks Ended December 25, 1993 52 Weeks Ended December 26, 1992
Pooling Pooling
Adjustment Adjustment
Office for Acquired Combined Office for Acquired Combined
Depot (1) Companies Restated Depot (1) Companies Restated
--------- --------- -------- --------- --------- --------
Sales $2,579,494 $257,293 $2,836,787 $1,732,965 $229,988 $1,962,953
Cost of goods sold and occupancy
costs 1,996,462 188,683 2,185,145 1,345,295 167,009 1,512,304
---------- -------- ---------- ---------- -------- ----------
Gross profit 583,032 68,610 651,642 387,670 62,979 450,649
Operating expenses 470,470 58,526 528,996 325,461 53,333 378,794
---------- -------- ---------- ---------- -------- ----------
Operating profit 112,562 10,084 122,646 62,209 9,646 71,855
Other income (expense) (6,042) (654) (6,696) (156) (1,109) (1,265)
---------- -------- ---------- ---------- -------- ----------
Earnings before income taxes and
extraordinary credit 106,520 9,430 115,950 62,053 8,537 70,590
Income taxes 43,103 2,015 45,118 24,261 1,084 25,345
---------- -------- ---------- ---------- -------- ----------
Earnings before extraordinary credit 63,417 7,415 70,832 37,792 7,453 45,245
Extraordinary credit --- --- --- 1,396 --- 1,396
---------- -------- ---------- ---------- -------- ----------
Net earnings $ 63,417 $ 7,415 $ 70,832 $ 39,188 $ 7,453 $ 46,641
========== ======== ========== ========== ========= ==========
Earnings per common and common
equivalent share $ 0.45 $ 0.48 $ 0.28 $ 0.33
========== ========== ========== ==========
Average common and common equivalent
shares 141,941 147,640 137,564 143,263
========== ========== ========== ==========
52 Weeks Ended December 28, 1991
Pooling
Adjustment
Office for Acquired Combined
Depot (1) Companies Restated
--------- --------- --------
Sales $1,300,847 $197,035 $1,497,882
Cost of goods sold and occupancy
costs 1,009,059 143,707 1,152,766
---------- -------- ----------
Gross profit 291,788 53,328 345,116
Operating expenses 253,731 46,691 300,422
---------- -------- ----------
Operating profit 38,057 6,637 44,694
Other income (expense) (11,185) (1,477) (12,662)
---------- -------- ----------
Earnings before income taxes and
extraordinary credit 26,872 5,160 32,032
Income taxes 12,495 751 13,246
---------- -------- ----------
Earnings before extraordinary credit 14,377 4,409 18,786
Extraordinary credit 614 --- 614
---------- -------- ----------
Net earnings $ 14,991 $ 4,409 $ 19,400
========== ======== ==========
Earnings per common and common
equivalent share $ 0.12 $ 0.15
========== ==========
Average common and common equivalent
shares 120,267 125,966
========== ==========
(1) As previously reported with certain reclassifications.
F-22
28
Office Depot Inc. And Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
________________________________________________________________________________
NOTE L - SUBSEQUENT EVENTS (CONTINUED)
In June 1994, the Company completed a three-for-two split of the Company's
common stock. All historical share and per share information has been restated
to reflect the stock split (see Note A).
NOTE M - QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED DECEMBER 25, 1993
Net sales . . . . . . . . . . . . . . . . . . . $ 643,501 $ 587,817 $ 727,018 $ 878,451
Gross profit (a) . . . . . . . . . . . . . . . 146,669 134,866 164,510 205,597
--------- --------- --------- ---------
Net earnings . . . . . . . . . . . . . . . . . $ 15,675 $ 12,181 $ 19,314 $ 23,662
========= ========= ========= =========
Net earnings per common share . . . . . . . . . $ .11 $ .08 $ .13 $ .16
========= ========= ========= =========
FISCAL YEAR ENDED DECEMBER 26, 1992
Net sales . . . . . . . . . . . . . . . . . . . $ 488,989 $ 439,282 $ 492,192 $ 542,490
Gross profit (a) . . . . . . . . . . . . . . . 112,644 101,471 112,656 123,878
Earnings before extraordinary item . . . . . . 11,082 8,449 11,943 13,771
Extraordinary item . . . . . . . . . . . . . . --- --- --- 1,396
--------- --------- --------- ---------
Net earnings . . . . . . . . . . . . . . . . . $ 11,082 $ 8,449 $ 11,943 $ 15,167
========= ========= ========= =========
Earnings per common share before
extraordinary item . . . . . . . . . . . . $ .08 $ .06 $ .08 $ .10
Exraordinary item . . . . . . . . . . . . . . . -- -- -- .01
--------- --------- --------- ---------
Net earnings per common share . . . . . . . . . $ .08 $ .06 $ .08 $ .11
- --------------- ========= ========= ========= =========
(a) Gross profit is net of occupancy costs.
F-23
29
SCHEDULE V
OFFICE DEPOT INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
---------- -------- -------- -------- -------- --------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END OF
CLASSIFICATIONS OF PERIOD AT COST RETIREMENTS CHANGES PERIOD
- -------------------- --------- ------------ ----------- ----------- ------------
Period Ended December 25, 1993
Land and buildings $ 19,222 $ 21,133 $(2,138) $ 0 $ 38,217
Furniture, fixtures and equipment 89,283 52,659 (2,100) 0 139,842
Automotive equipment 9,207 7,358 (728) 0 15,837
Leasehold Improvements 102,295 43,620 (1,146) 0 144,769
Equipment under capital lease 12,899 3,436 (57) 0 16,278
-------- -------- ------- --------- ---------
$232,906 $128,206 $(6,169) $ 0 $ 354,943
======== ======== ======= ========= =========
Period Ended December 26, 1992
Land and buildings $ 8,574 12,375 $(1,727) $ 0 $ 19,222
Furniture, fixtures and equipment 68,780 21,367 (864) 0 89,283
Automotive equipment 7,226 2,203 (222) 0 9,207
Leasehold Improvements 76,564 26,736 (1,005) 0 102,295
Equipment under capital lease 12,899 0 0 0 12,899
-------- -------- ------- --------- ---------
$174,043 $ 62,681 $(3,818) $ 0 $ 232,906
======== ======== ======= ========= =========
Period Ended December 28, 1991
Land and buildings $ 6,574 $ 2,440 $ (440) $ 0 $ 8,574
Furniture, fixtures and equipment 44,191 25,992 (288) (1,115) 68,780
Automotive equipment 4,925 1,283 (97) 1,115 7,226
Leasehold Improvements 49,828 27,160 (424) 0 76,564
Equipment under capital lease 12,552 347 $ 0 $ 0 12,899
-------- -------- ------- --------- ---------
$118,070 $ 57,222 $(1,249) $ 0 $ 174,043
======== ======== ======= ========= =========
S-1
30
SCHEDULE VI
OFFICE DEPOT INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
---------- -------- -------- -------- -------- --------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END OF
CLASSIFICATIONS OF PERIOD AT COST RETIREMENTS CHANGES PERIOD
--------------- --------- ------------ ----------- ----------- ------------
Period Ended December 25, 1993
Land and buildings $ 1,158 $ 382 $ (5) $ 0 $ 1,535
Furniture, fixtures and equipment 29,253 16,491 (934) 0 44,810
Automotive equipment 5,107 2,469 (560) 0 7,016
Leasehold Improvements 15,271 7,491 (451) 0 22,311
Equipment under capital lease 8,458 2,704 (57) 0 11,105
------- --------- --------- --------- --------
$59,247 $ 29,537 $ (2,007) $ 0 $ 86,777
======= ========= ======= ========= ========
Period Ended December 26, 1992
Land and buildings $ 965 $ 214 $ (21) $ 0 $ 1,158
Furniture, fixtures and equipment 18,319 11,374 (440) 0 29,253
Automotive equipment 3,621 1,669 (183) 0 5,107
Leasehold Improvements 10,126 5,674 (529) 0 15,271
Equipment under capital lease 6,047 2,411 0 0 8,458
------- --------- -------- --------- --------
$39,078 $ 21,342 $ (1,173) $ 0 $ 59,247
======= ========= ======= ========= ========
Period Ended December 28, 1991
Land and buildings $ 831 $ 465 $ 0 $ (331) $ 965
Furniture, fixtures and equipment 10,745 7,368 (125) 331 18,319
Automotive equipment 1,897 1,736 (12) 0 3,621
Leasehold Improvements 5,863 4,414 (151) 0 10,126
Equipment under capital lease 3,616 2,431 0 0 6,047
------- --------- -------- --------- --------
$22,952 $ 16,414 $ (288) $ 0 $ 39,078
======= ========= ======= ========= ========
S-2
31
SCHEDULE VIII
OFFICE DEPOT INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
COLUMN A COLUMN B COLUMN C
-------- -------- ------------------------------------------------------------
ADDITIONS
------------------------
CHARGED TO CHARGED TO BALANCE AT
BALANCE AT BEGINNING COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
- ----------- -------------------- ---------- ---------- ---------- ----------
ALLOWANCES FOR DOUBTFUL
ACCOUNTS:
1993 $659 $1,024 $1,909(1) $341 $ 3,251
1992 513 555 0 409 659
1991 461 402 0 350 513
(1) ALLOWANCE FOR DOUBFUL ACCOUNTS OF EASTMAN AND WILSON AT THE RESPECTIVE
DATES OF ACQUISITION.
S-3
32
SCHEDULE X
OFFICE DEPOT INC. AND SUBSIDIARIES
SUPPLMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
COLUMN B - CHARGED TO
COLUMN A - ITEM COSTS AND EXPENSES
--------------- ---------------------
ADVERTISING COSTS, NET
1993 $29,020
1992 24,792
1991 29,644
S-4
1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-26972, No. 33-31743, No. 33-40057, No. 33-40058, and No. 33-40059 of Office
Depot, Inc. on Forms S-8 of our report dated February 8, 1994 (January 10, 1995
as to the effects of the business combinations and stock split described in
Note L) appearing in this Report on Form 8-K of Office Depot, Inc.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida
January 16, 1995
5
1,000
YEAR
DEC-28-1993
DEC-28-1993
142,471
0
205,240
3,251
663,147
1,038,842
354,943
86,777
1,531,092
567,728
367,602
1,491
0
0
588,793
1,531,092
2,836,787
2,836,787
2,185,145
2,617,490
96,651
0
6,696
115,950
45,118
70,832
0
0
0
70,832
.48
0
