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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 OCTOBER 14, 1999
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 5. OTHER EVENTS
On October 14, 1999, Office Depot, Inc. issued a press release announcing third
quarter 1999 results and certain management changes. A copy of the press release
is attached hereto as Exhibit 99.1 and incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99.1 Press Release dated October 14, 1999
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: October 14, 1999 By: /S/ DAVID C. FANNIN
David C. Fannin
Senior Vice President and
General Counsel
OFFICE DEPOT ANNOUNCES THIRD QUARTER 1999 RESULTS
COMPANY REPORTS EPS OF $0.19, EXCLUSIVE OF MERGER AND RESTRUCTURING AND OTHER
NON-RECURRING CHARGES
COMPANY ANNOUNCES RESIGNATION OF JOHN C. MACATEE AS PRESIDENT AND COO;
REORGANIZES MANAGEMENT STRUCTURE
DELRAY BEACH, Fla.--(BUSINESS WIRE)--Oct. 14, 1999-- Office Depot, Inc.
(NYSE:ODP - news), the world's largest seller of office products, today made the
following announcements:
1) The Company earned $0.19 per share for the third quarter ended September 25,
1999, excluding merger and restructuring costs and other non-recurring charges,
in line with Wall Street expectations.
2) John C. Macatee has resigned as President and Chief Operating Officer of the
Company in order to pursue other opportunities. His resignation is effective
today. Mr. Macatee also resigned as a Director of the Company. In connection
with Mr. Macatee's resignation, the Company also announced a reorganization of
its senior management structure.
3) The Company has completed 98% of its previously announced stock repurchase
program.
Details on Quarterly Results
Total sales for the quarter rose 15% to $2.579 billion from $2.235 billion in
the third quarter of 1998. Comparable sales in the 633 stores and 39 delivery
centers that have been open for more than one year increased 7% for the third
quarter of 1999.
Additional third quarter highlights include:
- -- The Company continued to move aggressively on its real estate
program in the third quarter, opening 33 new stores and closing 3 stores in
the United States and Canada during the period. Looking ahead, the Company
remains on track to add 125 new stores, net of closures, in the United
States and Canada in 1999.
- -- Office Depot's Internet business continued to grow significantly in the
third quarter. Sales from the Company's public and business-to-business Web
sites increased 421% to $98.92 million in the third quarter of 1999, as
compared to $18.99 million in the third quarter of 1998. Year-to-date,
Internet sales are $219.44 million or 492% above the comparable 1998
period.
- -- The Company continued to benefit from its supply chain management programs
during the first three quarters of 1999. Before considering the write-down
for slow-moving inventories, inventory levels increased only 1% with a 13%
sales increase year-to-date.
In the third quarter, the Company recorded non-recurring charges totaling
$111.49 million ($73.33 million after tax benefits). In addition to merger and
restructuring costs related to the merger with Viking Office Products, which
totaled $8.96 million, these previously announced charges reflect management's
decision to accelerate its store relocation and closing program for older and
under-performing stores, and to write-down slow moving inventories in its stores
and warehouses. The charge for store relocations and closures was $46.44
million, and the inventory write-down, which is included in cost of goods sold,
totaled $56.10 million.
Results Reported by Segment
The following discussion of segment results excludes the non-recurring charges
for inventory write-downs previously discussed. Inventory write-down charges
totaled $39.20 million in the Stores Division, $15.50 million in the Business
Services Group and $1.40 million in the International Division. These charges
are included in cost of goods sold in the Company's attached Statements of
Earnings.
Stores Division
Sales in the Stores Division rose 17% to $1.46 billion in the third quarter of
1999 as compared with $1.25 billion in the third quarter of 1998. Comparable
store sales in the 633 stores in the United States and Canada that have been
open for more than one year rose 3% in the third quarter. Store operating profit
was $119.82 million in the third quarter of 1999, as compared with $124.91
million in the third quarter of 1998, reflecting higher expenses associated with
the 85 new stores added year-to-date.
During the third quarter, Office Depot continued to expand its store base,
adding 30 new stores, net of closures. At quarter's end, Office Depot operated a
total of 787 office superstores throughout the United States and Canada.
Business Services Group
Sales in the Business Services Group rose 9% to $803.48 million in the third
quarter of 1999, as compared with $736.66 million in the third quarter of 1998.
Warehouse operating profit increased 22% to $69.79 million in the third quarter
of 1999, as compared with $57.28 million in the third quarter of 1998, as the
Company realized purchasing synergies arising from the Viking merger and lowered
its warehouse operating expenses.
International Division
Sales in the International Division rose 25% to $313.49 million in the third
quarter of 1999, as compared with $251.43 million in the third quarter of 1998.
Store and warehouse operating profit decreased to $34.61 million in the third
quarter of 1999 from $37.24 million in the third quarter of 1998. This decline
is attributable to previously announced losses associated with the start-up of
the Company's direct mail and retail operations in Japan.
During the period, the Company also expanded its international store base by ten
stores. At the end of the quarter, Office Depot operated 24 stores in France and
five stores in Japan. In addition, through joint ventures and licensing
agreements, there were 76 stores operating under the Office Depot name in six
countries outside of the United States and Canada at the end of the third
quarter, including 37 in Mexico, 20 in Israel, 11 in Poland, four in Hungary,
two in Colombia, and two in Thailand.
In addition, the Company's licensee, Retail Investment Concepts, Inc., which
owns and operates retail stores in Central Europe under the Office Depot name,
has acquired the chain of six Office Centre superstores in Poland previously
owned by the German retailer METRO AG.
Company Announces New Senior Management Structure
David I. Fuente, Office Depot's Chairman and CEO, provided the following details
regarding the Company's new senior management structure: "With today's
announcements, there will be several changes in our management reporting
structure. Shawn McGhee is today being named to the position of President,
Merchandising Group and will report directly to me. In addition to merchandising
and marketing, Shawn McGhee's areas of responsibility will now include our
retail stores, catalog sales and Internet sales."
Mr. Fuente added, "Other executives who formerly reported to the Chief
Operating Officer - Bob Keller, EVP of our Business Services Division, and Ron
Weissman, EVP of Sales Support - also will now report directly to me. Kevin
Phillips, EVP and head of our retail stores group, will report to Shawn McGhee,
as will Gayle Aertker, Senior Vice President of our real estate department. All
of these changes are effective immediately."
Fuente continued, "In our reorganized reporting structure, Bruce Nelson will
take a more active role in the operations of Viking domestic, while continuing
to serve as President, International. We have many talented executives in our
management structure, who we believe can, and will, provide the strong
leadership to pursue our long term growth objectives."
Stock Repurchase Program
Mr. Fuente also commented on the Company's stock repurchase program, stating,
"On August 30 of this year, we announced that our Board had authorized a
repurchase of up to $500 million in market value of our stock through open
market purchases and block transactions. I am pleased to report that as of the
end of our fiscal third quarter, we had acquired 36,294,500 shares of our stock
in the open market at a total cost of $390,174,431 plus commissions.
Subsequently, in the month of October, we have acquired an additional 9,397,300
shares, bringing the total shares acquired to 45,691,800, at an average share
price of $10.69 per share and at a total cost of $488,419,750 plus commissions.
We are close to our goal and believe this is a solid investment in the future of
our Company."
As of September 25, 1999, the Company operated 787 office supply superstores in
the United States and Canada, in addition to a national business-to-business
delivery network supported by 30 delivery centers, more than 60 local sales
offices and seven regional call centers. Furthermore, the Company owned and
operated 24 office supply stores in France and five stores in Japan; had mail
order and delivery operations in 11 countries outside of the United States and
Canada; and under joint venture and licensing agreements, had 76 additional
stores under the Office Depot name in six foreign countries. The Company also
operates an award-winning U.S. Internet business at www.officedepot.com where
customers can access Office Depot's low competitive prices seven days a week,
twenty-four hours a day. Office Depot's common stock is traded on the New York
Stock Exchange under the symbol ODP and is included in the S&P 500 index.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: Except for historical
information, the matters discussed in this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, as amended. Forward-looking statements, including projections and
anticipated levels of performance, involve risks and uncertainties which may
cause actual results to differ materially from those discussed herein. These
risks and uncertainties are detailed from time to time by Office Depot in its
filings with the United States Securities and Exchange Commission ("SEC"),
including the Company's 1998 Annual Report on Form 10-K filed during the first
quarter. Certain other risks and uncertainties were contained in the Company's
press release issued on August 30, 1999 and filed with the SEC on Form 8-K on
the same date. You are urged to review such filings, which are incorporated by
reference herein, for a more detailed discussion of such risks and
uncertainties.
OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(UNAUDITED)
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
September 25, September 26, September 25, September 26,
1999 1998 1999 1998
Sales $ 2,578,500 $ 2,234,900 $ 7,544,387 $ 6,702,135
Cost of goods
sold and
occupancy
costs 1,872,408 1,612,864 5,431,212 4,875,956
Inventory
write-down 56,100 -- 56,100 --
Gross profit 649,992 622,036 2,057,075 1,826,179
Store and
warehouse
operating
and selling
expenses 481,954 402,737 1,406,833 1,206,704
Pre-opening
expenses 5,007 3,663 16,709 7,676
General and
administrative
expenses 106,129 83,772 285,559 233,065
Merger and
restructuring
costs 8,955 87,815 24,434 87,815
Store closure
costs 46,438 -- 46,438 --
648,483 577,987 1,779,973 1,535,260
Operating
profit 1,509 44,049 277,102 290,919
Other income
(expense)
Interest
income 8,654 6,760 27,076 16,807
Interest
expense (6,505) (5,697) (19,556) (16,777)
Miscellaneous
income
(expense), net (461) (2,246) (4,106) (13,359)
Earnings
before income
taxes 3,197 42,866 280,516 277,590
Income taxes 4,270 27,118 106,897 113,072
Net earnings
(loss) $ (1,073) $ 15,748 $ 173,619 $ 164,518
Earnings per
common share:
Basic $ 0.00 $ 0.04 $ 0.47 $ 0.45
Diluted 0.00 0.04 0.45 0.43
Weighted average number of common shares outstanding:
Basic 368,878 367,706 371,989 366,401
Diluted 374,673(a) 378,549(a) 405,859 402,000
(a) Weighted average shares exclude 24,743,000 shares in the
quarter ended September 25, 1999 and 24,800,000 shares in the quarter ended
September 26, 1998 attributable to convertible debt, as the assumed conversion
of these shares has an anti-dilutive effect on earnings per share.
OFFICE DEPOT, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
AS OF AS OF
SEPTEMBER 25, DECEMBER 26,
1999 1998
----------- -----------
(UNAUDITED)
ASSETS
Current assets
Cash & cash equivalents $ 503,340 $ 704,541
Short-term investment 72,013 10,424
Receivables, net of allowances 810,212 721,446
Merchandise inventories 1,215,943 1,258,355
Deferred income taxes 75,119 52,422
Prepaid expenses 45,853 33,247
Total current assets 2,722,480 2,780,435
Fixed assets
Property & equipment, at cost 1,695,178 1,434,863
Less accumulated depreciation &
amortization 558,962 499,456
Net fixed assets 1,136,216 935,407
Goodwill, net of amortization 246,170 227,964
Other assets 135,403 125,413
TOTAL ASSETS $ 4,240,269 $ 4,069,219
LIABILITIES
Current liabilities
Accounts payable $ 1,174,785 $ 1,027,591
Accrued expenses 507,677 430,666
Income taxes 33,543 69,910
Short term borrowings &
current maturities of long-term debt 7,858 2,834
Total current liabilities 1,723,863 1,531,001
Long term debt, less current maturities 83,369 35,490
Deferred taxes and other credits 50,850 38,628
Zero coupon, convertible subordinated
notes 449,465 435,221
TOTAL LIABILITIES 2,307,547 2,040,340
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - authorized 800,000,000
shares of $.01 par value; issued 378,443,292
in 1999 and 373,817,704
in 1998 3,784 3,738
Additional paid-in capital 909,476 838,122
Accumulated other comprehensive income (29,135) (18,078)
Unamortized value of long-term
incentive stock grant (2,205) (2,874)
Retained earnings 1,383,340 1,209,721
Treasury stock, at cost - 39,539,670
shares in 1999 and 3,245,170 shares
in 1998 (332,538) (1,750)
TOTAL STOCKHOLDERS' EQUITY 1,932,722 2,028,879
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 4,240,269 $ 4,069,219
Office Depot, Inc. and Subsidiaries
Statements of Operating Profit by Segment
(UNAUDITED)
(In thousands)
BSG Stores International Other TOTAL
3rd Quarter
1999
Sales $ 803,484 $1,462,416 $ 313,489 $ (889) $2,578,500
Cost of
goods sold
& occupancy
costs 552,125 1,130,345 190,460 (522) 1,872,408
Inventory
write-down 15,500 39,200 1,400 -- 56,100
Gross
profit 235,859 292,871 121,629 (367) 649,992
Store and
warehouse
operating
and selling
expenses 181,572 212,248 88,416 (282) 481,954
Store and
warehouse
operating
profit $ 54,287 $ 80,623 $ 33,213 $ (85) $ 168,038
Store and
warehouse
operating
profit,
excluding
inventory
write
-down $ 69,787 $ 119,823 $ 34,613 $ (85) $ 224,138
Year-to-date
September 1999
Sales $2,337,771 $4,264,756 $ 944,926 $ (3,066) $7,544,387
Cost of
goods
sold &
occupancy
costs 1,599,038 3,270,759 563,250 (1,835) 5,431,212
Inventory
write-down 15,500 39,200 1,400 -- 56,100
Gross
profit 723,233 954,797 380,276 (1,231) 2,057,075
Store and
warehouse
operating
and selling
expenses 538,564 605,747 263,574 (1,052) 1,406,833
Store and
warehouse
operating
profit $ 184,669 $ 349,050 $ 116,702 $ (179) $ 650,242
Store and
warehouse
operating
profit,
excluding
inventory
write
-down $ 200,169 $ 388,250 $ 118,102 $ (179) $ 706,342
3rd Quarter
1998(b)
Sales $ 736,663 $1,247,700 $ 251,426 $ (889) $2,234,900
Cost of
goods
sold &
occupancy
costs 511,145 954,821 147,525 (627) 1,612,864
Inventory
write-down -- -- -- -- --
Gross
profit 225,518 292,879 103,901 (262) 622,036
Store and
warehouse
operating
and selling
expenses 168,234 167,969 66,666 (132) 402,737
Store and
warehouse
operating
profit $ 57,284 $ 124,910 $ 37,235 $ (130) $ 219,299
Store and
warehouse
operating
profit,
excluding
inventory
write
-down $ 57,284 $ 124,910 $ 37,235 $ (130) $ 219,299
Year-to-date
September 1998(b)
Sales $2,189,269 $3,747,203 $ 768,323 $ (2,660) $6,702,135
Cost of
goods
sold &
occupancy
costs 1,534,711 2,889,483 453,539 (1,777) 4,875,956
Inventory
write-down -- -- -- -- --
Gross
profit 654,558 857,720 314,784 (883) 1,826,179
Store and
warehouse
operating
and selling
expenses 504,819 498,158 204,239 (512) 1,206,704
Store and
warehouse
operating
profit $ 149,739 $ 359,562 $ 110,545 $ (371) $ 619,475
Store and
warehouse
operating
profit,
excluding
inventory
write
-down $ 149,739 $ 359,562 $ 110,545 $ (371) $ 619,475
(b) Restated to conform to current year segment definitions.
Contact:
Office Depot, Inc., Delray Beach
Investor Contact: Barry Goldstein
EVP, Chief Financial Officer
561/438-4237
or
Media Contact: Gary Schweikhart
VP, Public Relations
561/438-4399