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 May 22, 2002
Commission file number 1-10948
OFFICE DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
--------------------------------- --------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
(Address of principal executive offices) (Zip Code)
(561) 438-4800
(Registrant's telephone number, including area code)
Former name or former address, if changed since last report: N/A
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99.1.1 Transcript of remarks made by CEO Bruce Nelson in an audio taped
statement available by Webcast at www.officedepot.com beginning on May
22, 2002.
ITEM 9. INFORMATION FURNISHED PURSUANT TO REGULATION FD
On May 22, 2002, Office Depot, Inc. issued an audio taped statement from its
Chief Executive Officer, Bruce Nelson, to update investors on the Company's
business performance midway through the second quarter of 2002. A copy of the
transcript of Mr. Nelson's remarks, which may be heard at www.officedepot.com,
is attached hereto as Exhibit 99.1 and incorporated by reference herein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OFFICE DEPOT, INC.
Date: May 22, 2002 By: /S/ DAVID C. FANNIN
David C. Fannin
Executive Vice President and
General Counsel
OFFICE DEPOT SECOND QUARTER 2002 - MID QUARTER UPDATE
MAY 22, 2002 - 8:00 A.M.
TRANSCRIPT OF A TAPED MESSAGE AVAILABLE AT
WWW.OFFICEDEPOT.COM/COMPANYINFO UNDER INVESTOR RELATIONS
BEGINNING ON MAY 22, 2002 AT 8:00 AM (ET)
EILEEN DUNN:
Welcome to our mid quarter update for the second quarter 2002.
Before Bruce begins his comments, let me remind you that except for historical
information, the matters discussed in this taped message are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
Forward-looking statements, including projections and anticipated levels of
future performance, involve risks and uncertainties, which may cause actual
results to differ materially from those discussed herein. These risks and
uncertainties are detailed from time to time by Office Depot in our filings with
the United States Securities and Exchange Commission, including without
limitation our 10-K's and 10-Q's. You are strongly urged to review all such
filings for a more detailed discussion of such risks and uncertainties.
Now let me turn the call over to Bruce Nelson, Office Depot's Chairman & CEO:
OFFICE DEPOT SECOND QUARTER 2002 - MID QUARTER UPDATE
MAY 22, 2002 - 8:00 A.M.
BRUCE NELSON:
Thanks Eileen... And thanks to all of you who have called in to listen to our
mid quarter business outlook for the second quarter, which ends June 29, 2002.
Similar to what our two major office supply competitors reported over the past
week, we are experiencing some early signs of an improving outlook for sales
growth. On an overall basis we are tracking in line with the raised expectations
we outlined on our first quarter earnings conference call in April.
Sales across all our business channels are on track to achieve our higher
forecasts, and we remain comfortable with the current earnings consensus of
$0.20 per share for the second quarter, which would be a more than 40% increase
over last year's second quarter results.
Overall, we are confident that the initiatives we have put in place to drive
sales and manage costs over the past twenty-two months will continue to reap
benefits for us as we move through the year.
I will summarize our mid quarter outlook by reporting segment.
NORTH AMERICAN RETAIL
Quarter to date, comparable North American retail sales have improved over first
quarter trends. Comps in April were slightly positive, for the first time since
August of last year. We still think that retail sales comps will be flat to
slightly positive in the second quarter, which would be an improvement over our
first quarter results of negative 2%, and the sixth consecutive quarterly
improvement for our Company. Important to note however, is our second quarter
retail sales are historically the lowest of any of our quarters during the year.
Gross margins are continuing the positive trends of the past three quarters, and
we continue to project improvement on a year-over-year basis as a result of
merchandise mix changes and the impact of our chain-wide re-merchandising
program that began in the second quarter of last year. Store operating expenses
continue to be in line with earlier projections, and as a result, we expect to
achieve a modest basis point improvement over last year. At the same time,
virtually all customer service metrics continue to be very positive.
BUSINESS SERVICES GROUP
In our BSG segment, our contract business has improved slightly from first
quarter levels. We continue to see strong growth in our e-commerce business, but
our North American catalog businesses remain soft, as expected. As a result we
are projecting total BSG sales to be flat for the quarter, better that our
OFFICE DEPOT SECOND QUARTER 2002 - MID QUARTER UPDATE
MAY 22, 2002 - 8:00 A.M.
previous guidance of slightly negative. Our worldwide e-commerce sales remain on
track to achieve our $2 billion sales forecast for the full year across all our
e-commerce businesses around the world.
BSG gross selling margins continue to benefit from our disciplined approach to
contract pricing and our emphasis on account profitability. Our North American
BSG supply chain continues to achieve the highest inventory turns in the
industry, while at the same time setting record in-stock customer service
levels. This means stronger cash flow and higher cash balances than previously
projected, but at the same time puts some short-term pressure on our vendor
volume purchase rebate programs. This reduced rebate level is likely to somewhat
negatively impact our reported gross margins for this segment, falling short of
our previous guidance, although our selling product margins remain strong, as
planned.
On the operating cost side, we continue to see the improvements in productivity
and efficiency we have planned and communicated to the Street of a more than 100
basis point improvement over last year. So far in the quarter, we are on target
to achieve our aggressive efficiency goals.
INTERNATIONAL
Quarter to date, sales in local currencies in our International segment have
continued to hold steady in the low to mid single digit positive range, slightly
ahead of first quarter trends. As we indicated last month, we anticipate some
continued sales softness in our European direct mail operations for the next few
quarters.
Gross margins are on plan and operating costs are tracking to forecast. Early
results in our newest country, Spain, continue to trend positive. We continue to
invest in our highly profitable and successful European business. So far in
2002, we have opened in two new countries, Switzerland and Spain, we have
launched our Viking Direct public site in Ireland, and we plan to launch Office
Depot BSD in Italy in the third quarter.
SO, TO SUMMARIZE, we are pleased to report that our results are on track with
our plans, and consistent with the increase in guidance we reported on our
conference call in April. As a result, we are also comfortable with the
consensus of $.20 EPS for the second quarter, a more than 40% increase over last
year.
Over the past 22 months we have made enormous progress in making Office Depot a
more compelling place to work, shop and invest. We are on track to achieve our
objectives and are very optimistic about our future.
We remain relentlessly focused on finding new and innovative ways to grow our
business and when the economy regains momentum, we have confidence that our
highly disciplined approach to expense control, focused working capital
management, a sound and conservative balance sheet, and continuous operating
improvements will pay huge rewards in the future... As I have stated many times,
I simply would not bet against Office Depot in the long term.
Thanks again for listening.