-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RGKUv6kUO0ygeVxd1mIMFDc5tnOTUL4DKOIPLb4jp9VQxvt2Y+MBaukwEKEtu1Wt Z3sXLql29bgwWBlhtkhA1g== 0000914760-99-000196.txt : 19991018 0000914760-99-000196.hdr.sgml : 19991018 ACCESSION NUMBER: 0000914760-99-000196 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991014 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991014 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OFFICE DEPOT INC CENTRAL INDEX KEY: 0000800240 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 592663954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10948 FILM NUMBER: 99728533 BUSINESS ADDRESS: STREET 1: 2200 OLD GERMANTOWN RD CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 5612664800 MAIL ADDRESS: STREET 1: 2200 OLD GERMANTOWN ROAD STREET 2: 2200 OLD GERMANTOWN ROAD CITY: DELRAY BEACH STATE: FL ZIP: 33445 8-K 1 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 EX-99.1 2 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 -----END PRIVACY-ENHANCED MESSAGE-----