-----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, SF7/h0I+Mlpj2wBZygPBXiOG3gAA7RoSKl1M3PrFbBpd24OBbnC6XLeZ/TECjNyb aHlEmLg5gJQoqoFN9Vfa7w== 0000950144-06-007068.txt : 20060728 0000950144-06-007068.hdr.sgml : 20060728 20060728082129 ACCESSION NUMBER: 0000950144-06-007068 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060728 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060728 DATE AS OF CHANGE: 20060728 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: 1934 Act SEC FILE NUMBER: 001-10948 FILM NUMBER: 06985960 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 g02526e8vk.htm OFFICE DEPOT, INC. OFFICE DEPOT, INC.
 

 
 
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: July 28, 2006
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
incorporation or organization)
  (I.R.S. Employer
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
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Attached hereto as Exhibit 99.1.1 and incorporated by reference herein is Office Depot, Inc.’s news release dated July 28, 2006, announcing its financial results for its fiscal second quarter 2006. This release also contains forward-looking statements relating to Office Depot’s fiscal year 2006.
This information is furnished pursuant to Item 2.02 of Form 8-K. The information in this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
     
Exhibit 99.1.1
  News release of Office Depot, Inc. issued on July 28, 2006.

2


 

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: July 28, 2006  By:   /S/ DAVID C. FANNIN    
    David C. Fannin   
    Executive Vice President and
General Counsel 
 
 

3

EX-99.1.1 2 g02526exv99w1w1.htm EX-99.1.1 EX-99.1.1
 

Exhibit 99.1.1
(officedepot)
CONTACTS:
Ray Tharpe
Investor Relations
561/438-4540

ray.tharpe@officedepot.com
Brian Levine
Public Relations
561/438-2895

brian.levine@officedepot.com
OFFICE DEPOT ANNOUNCES RECORD SECOND QUARTER EARNINGS
39% growth in EPS to 43 cents non-GAAP1, 32% growth to 41 cents on a GAAP basis
Delray Beach, Fla., July 28, 2006 — Office Depot, Inc. (NYSE: ODP), a leading global provider of office products and services, today announced second quarter results for the fiscal period ended July 1, 2006.
SECOND QUARTER RESULTS
Total Company sales for the second quarter grew 4% to $3.5 billion compared to the second quarter of 2005. Sales in North America were up 5%, while International sales increased 1% in U.S. dollars and 2% in local currencies. North American Retail comparable store sales were up 1% for the quarter.
Net earnings for the quarter were $118 million compared to $100 million in the same quarter of the prior year, and diluted earnings per share were $0.41 in the second quarter of 2006 versus $0.31 in the same period a year ago. The second quarter 2006 results included the effects of charges related to exit costs and other operating items which we had previously announced and are more fully described in our Form 10-K and 10-Q filings with the Securities and Exchange Commission. Second quarter charges (the “Second Quarter Charges”) in 2006 had a $0.02 per diluted share negative impact on results. Without these charges, our second quarter 2006 net earnings were $125 million1 or $0.43 per share,1 up 39% from the second quarter earnings per share of the prior year.
During the quarter Office Depot completed the previously announced acquisitions of businesses in North America and South Korea, and acquired an incremental interest leading to a majority stake in the Company’s business in Israel. While each of these businesses provide growth opportunities in the future, they did not have a significant impact on second quarter performance.
 
1   This is non-GAAP information. Certain disclosures in this release eliminate the effect of charges recorded during the quarter that relate to projects identified in 2005 and were expected to continue into 2006 and later years. See additional disclosures of these projects in our 2005 Form 10-K filed with the SEC. Except where noted, all references in this news release to financial results are presented in accordance with generally accepted accounting principles, as adopted in the United States (GAAP). Non-GAAP results are presented where that presentation will afford investors an opportunity to make meaningful comparisons to results in prior periods. The presentation of such non-GAAP information is not intended to suggest that such information is superior to the presentation of GAAP information, but only to clarify some information and assist the reader. See reconciliations on our corporate website, www.officedepot.com, under the category Investor Relations.

 


 

For the quarter, gross profit as a percentage of sales was 30.9%, a 10 basis point improvement from the same period last year. Gross margin in the North American Retail Division increased during the quarter while the North American Business Solutions Division and the International Division posted slight decreases in gross margin as compared to the prior year, primarily due to cost pressures in certain product categories.
Total operating expenses as a percent of sales were 25.9%, an improvement of 70 basis points compared to the prior year. Second Quarter Charges of $8 million negatively impacted operating expenses as a percentage of sales by 20 basis points in the quarter.
In the second quarter, Office Depot repurchased approximately 7 million shares of common stock for $272 million under the repurchase programs previously approved by the Board of Directors.
Return on invested capital for the quarter was 10.5%. Charges taken in the twelve months prior to June 2006 negatively impacted the calculation of the Company’s current return on invested capital. Adjusted to exclude these charges, ROIC improved to 13.9% for the second quarter of 2006 as compared to 11.4% in the prior year.
“We are pleased with our overall performance in the second quarter with each of our Divisions contributing to the increase we achieved in earnings per share,” said Steve Odland, Office Depot’s Chairman and Chief Executive Officer. “We achieved sales growth in each of our Divisions, lowered total operating expenses, and expanded our operating margin. The North American Retail Division recorded its tenth consecutive quarter of positive comparable sales, our North American Business Solutions Division increased its sales by 6% and the International Division increased its sales in local currency by 2%. We also leave the quarter with continued improvement in working capital management and another increase in ROIC.1
SECOND QUARTER DIVISION RESULTS
North American Retail Division
Second quarter sales in the North American Retail Division increased 4% compared to the same period last year. Comparable store sales in the 986 stores in the U.S. and Canada that have been open for more than one year increased 1% in the second quarter. This represents the tenth consecutive quarter of positive comparable sales led by strength in the technology product category.
The North American Retail Division had an operating profit of $96 million for the quarter, up 26% from the same period in the prior year, and as a percentage of sales was 6.4%, up 110 basis points from the prior year. Second Quarter Charges negatively impacted operating results for the period by $1 million. Division operating profit margins expanded due to both a continuation of gross margin expansion and a reduction in the Division’s cost structure. Gross margins improved over last year, in part reflecting an expansion in product margins driven by category management and an increase in private brand sales. Cost management initiatives have resulted in reduced operating costs. These improvements in gross margin and savings from cost management initiatives continue to more than offset incremental expenses associated with new store openings and store remodel activities now underway.
Inventory per store was $995,000 as of the end of the second quarter, down from $1.06 million per store in the prior year.
During the second quarter, the Company opened 22 new stores and completed the remodel efforts for 49 stores. At the end of the second quarter, Office Depot operated a total of 1,071 stores throughout the U.S. and Canada.

2


 

North American Business Solutions Division
North American Business Solutions Division sales increased by 6% in the second quarter compared to the same period last year. The Business Solutions Division experienced growth in key product categories, and average order values increased compared to the second quarter of 2005. In the second quarter the Company also completed the acquisition of Allied Office Products, a contract stationer, whose results have been consolidated into Office Depot’s results for part of the second quarter.
Division operating profit was $101 million for the quarter, up 16% from the prior year, and as a percentage of sales was 8.9%, up 80 basis points from the same period in 2005. 2006 Second Quarter Charges negatively impacted operating profit by $4 million.
Division operating profit margins expanded due to improvements in costs, which were slightly offset by a modest decline in gross margin. Overall gross margin for the Division was negatively impacted by cost pressures in certain product categories and a shift in the mix of sales. Expense leverage was achieved from call center optimization efforts initiated in past quarters and from current period advertising efficiencies. Office Depot continued to invest in the expansion of the Company’s sales force in the quarter.
International Division
International Division second quarter sales increased 1% in U.S. dollars, and increased 2% in local currencies compared to the same period in 2005. The change in exchange rates from the corresponding prior year period decreased sales reported in U.S. dollars by approximately $8 million for the quarter. This quarter Office Depot completed the previously announced acquisition of Best Office, an office supply company located in South Korea and increased the Company’s ownership interest to a majority stake in Office Depot Israel. Their results have been consolidated into our results for part of the second quarter.
Division operating profit was $46 million or 5.3% of sales as compared to $51 million or 6% of sales in the prior year’s second quarter. Second Quarter Charges negatively impacted operating profit by $3 million, or 30 basis points as a percentage of sales. The comparison for the second quarter is impacted by the allocation of certain one-time credits realized in 2005 that increased the prior year operating margin by as much as 70 basis points.
The operating profit margin for 2006 was impacted by a slight decline in gross margin which was due to the effect of mix of sales, and continued pricing and cost pressures in key product categories. This decline was offset by broad based expense savings resulting from consolidation and cost management efforts.
Non-GAAP Reconciliation
A reconciliation of GAAP results to results excluding Second Quarter Charges may be accessed on our corporate website, www.officedepot.com, under the category Company Info.

Conference Call Information
Office Depot will hold a conference call for investors and analysts at 9:00 a.m. (Eastern Daylight Time) on July 28. The conference call will be available to all investors via Web cast at http://investor.officedepot.com. Interested parties may contact Investor Relations at 561-438-7893 for further information.

3


 

About Office Depot
Office Depot provides more office products and services to more customers in more countries than any other company.
Incorporated in 1986 and headquartered in Delray Beach, Fla., Office Depot has annual sales of nearly $15 billion, and employs approximately 50,000 associates around the world. Currently, the Company sells to customers in 33 countries, and has affiliates in another five.
Office Depot is a leader in every distribution channel — from retail stores and contract delivery to catalogs and e-commerce. As of July 1, 2006, Office Depot had 1,071 retail stores in North America and another 322 stores, either company-owned, licensed or franchised, in other parts of the world. Office Depot serves a wide range of customers through a dedicated sales force, telephone account managers, direct mail offerings, and multiple web sites. With over $3.8 billion in online sales, the Company is also one of the world’s largest e-commerce retailers.
Office Depot’s common stock is listed on the New York Stock Exchange under the symbol ODP and is included in the S&P 500 Index. Additional press information can be found at: http://mediarelations.officedepot.com.
CAUTIONARY STATEMENT 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 without limitation all of the 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 its filings with the United States Securities and Exchange Commission (“SEC”), including without limitation its most recent filing on Form 10-K, filed on February 15, 2006 and its 10-Q and 8-K filings made from time to time. You are strongly urged to review all such filings for a more detailed discussion of such risks and uncertainties. The Company’s SEC filings are readily obtainable at no charge at www.sec.gov and at www.freeEDGAR.com, as well as on a number of other commercial web sites.

4


 

OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
                         
    As of     As of     As of  
    July 1,     December 31,     June 25,  
    2006     2005     2005  
Assets
                       
 
                       
Current assets:
                       
Cash and cash equivalents
  $ 341,350     $ 703,197     $ 628,059  
Short-term investments
    ¯       200       217,000  
Receivables, net
    1,314,333       1,232,107       1,276,096  
Inventories, net
    1,450,440       1,360,274       1,366,547  
Deferred income taxes
    121,750       136,998       139,885  
Prepaid expenses and other current assets
    116,749       97,286       67,364  
 
                 
Total current assets
    3,344,622       3,530,062       3,694,951  
 
                       
Property and equipment, net
    1,326,128       1,311,737       1,420,234  
Goodwill
    1,091,427       881,182       975,681  
Other assets
    445,508       375,544       353,521  
 
                 
Total assets
  $ 6,207,685     $ 6,098,525     $ 6,444,387  
 
                 
 
                       
Liabilities and stockholders’ equity
                       
 
                       
Current liabilities:
                       
Trade accounts payable
  $ 1,477,506     $ 1,324,198     $ 1,215,486  
Accrued expenses and other current liabilities
    1,068,020       979,796       907,471  
Income taxes payable
    117,774       117,487       134,141  
Short-term borrowings and current maturities of long-term debt
    34,114       47,270       16,026  
 
                 
Total current liabilities
    2,697,414       2,468,751       2,273,124  
 
                       
Deferred income taxes and other long-term liabilities
    368,170       321,455       337,176  
Long-term debt, net of current maturities
    581,761       569,098       557,549  
Minority interest
    10,270       ¯       ¯  
 
                       
Commitments and contingencies
                       
 
                       
Stockholders’ equity:
                       
Common stock — authorized 800,000,000 shares of $.01 par value; issued and outstanding shares — Q2 2006: 425,075,847, Q4 2005: 419,812,671, and Q2 2005: 414,190,717
    4,251       4,198       4,142  
Additional paid-in capital
    1,652,554       1,517,373       1,355,076  
Accumulated other comprehensive income
    249,752       140,745       171,150  
Retained earnings
    3,114,903       2,867,067       2,808,682  
Treasury stock, at cost — Q2 2006: 141,798,878, Q4 2005: 122,787,210, and Q2 2005: 97,410,684
    (2,471,390 )     (1,790,162 )     (1,062,512 )
 
                 
Total stockholders’ equity
    2,550,070       2,739,221       3,276,538  
 
                 
Total liabilities and stockholders’ equity
  $ 6,207,685     $ 6,098,525     $ 6,444,387  
 
                 

5


 

OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
                                 
    13 Weeks Ended     26 Weeks Ended  
    July 1,     June 25,     July 1,     June 25,  
    2006     2005     2006     2005  
Sales
  $ 3,494,907     $ 3,364,052     $ 7,310,607     $ 7,066,943  
Cost of goods sold and occupancy costs
    2,416,665       2,327,805       5,030,459       4,879,041  
 
                       
 
                               
Gross profit
    1,078,242       1,036,247       2,280,148       2,187,902  
 
                               
Store and warehouse operating and selling expenses
    756,505       740,345       1,600,026       1,568,152  
General and administrative expenses
    150,324       153,390       316,877       312,298  
 
                       
 
                               
Operating profit
    171,413       142,512       363,245       307,452  
 
                               
Other income (expense):
                               
Interest income
    1,086       5,761       7,345       11,230  
Interest expense
    (11,347 )     (15,179 )     (22,413 )     (25,562 )
Miscellaneous income, net
    6,625       7,691       14,089       12,391  
 
                       
 
                               
Earnings before income taxes
    167,777       140,785       362,266       305,511  
 
                               
Income taxes
    49,471       40,686       114,430       90,104  
 
                       
 
                               
Net earnings
  $ 118,306     $ 100,099     $ 247,836     $ 215,407  
 
                       
 
                               
Earnings per common share:
                               
Basic
  $ 0.42     $ 0.32     $ 0.87     $ 0.69  
Diluted
    0.41       0.31       0.85       0.68  
 
                               
Weighted average number of common shares outstanding:
                               
Basic
    280,726       314,216       286,139       313,078  
Diluted
    287,326       318,938       292,832       317,232  

6


 

OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                 
    26 Weeks Ended  
    July 1,     June 25,  
    2006     2005  
Cash flow from operating activities:
               
Net earnings
  $ 247,836     $ 215,407  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
    137,373       135,483  
Charges for losses on inventories and receivables
    42,716       39,411  
Changes in working capital and other
    55,863       (303,919 )
 
           
Net cash provided by operating activities
    483,788       86,382  
 
           
 
               
Cash flows from investing activities:
               
Capital expenditures
    (121,489 )     (155,081 )
Acquisitions, net of cash acquired
    (176,022 )     ¯  
Proceeds from disposition of assets
    21,042       36,920  
Purchase of short-term investments
    (961,450 )     (590,675 )
Sale of short-term investments
    961,650       533,822  
 
           
Net cash used in investing activities
    (276,269 )     (175,014 )
 
           
 
               
Cash flows from financing activities:
               
Proceeds from exercise of stock options and sale of stock under employee stock purchase plans
    82,111       79,607  
Tax benefits from employee share-based payments
    32,502       ¯  
Acquisition of treasury stock
    (670,222 )     (90,574 )
Net payments on long- and short-term borrowings
    (22,651 )     (32,813 )
 
           
Net cash used in financing activities
    (578,260 )     (43,780 )
 
           
 
               
Effect of exchange rate changes on cash and cash equivalents
    8,894       (33,256 )
 
           
 
               
Net (decrease) in cash and cash equivalents
    (361,847 )     (165,668 )
Cash and cash equivalents at beginning of period
    703,197       793,727  
 
           
Cash and cash equivalents at end of period
  $ 341,350     $ 628,059  
 
           

7


 

Office Depot, Inc.
DIVISION INFORMATION
(Unaudited)
Beginning with the first quarter of 2006, we now include in our Division operating profit those general and administrative (“G&A”) costs that have been identified as directly or closely attributable to those units. Division operating profit for the second quarter and first half of 2006 and 2005, which reflects this allocation of G&A as well as certain other minor reclassifications is provided below.
North American Retail Division
                                 
    Second Quarter     First Half  
(Dollars in millions)   2006     2005     2006     2005  
Sales
  $ 1,507.6     $ 1,451.1     $ 3,298.3     $ 3,149.4  
% change
    4 %     8 %     5 %     7 %
 
                               
Division operating profit
  $ 95.9     $ 76.2     $ 229.7     $ 183.1  
% of sales
    6.4 %     5.3 %     7.0 %     5.8 %
North American Retail Division operating profit includes $1 million of Second Quarter Charges and $2 million of First Half Charges for the related 2006 periods.
North American Business Solutions Division
                                 
    Second Quarter     First Half  
(Dollars in millions)   2006     2005     2006     2005  
Sales
  $ 1,128.7     $ 1,065.9     $ 2,258.7     $ 2,116.9  
% change
    6 %     7 %     7 %     5 %
 
                               
Division operating profit
  $ 100.8     $ 86.8     $ 193.3     $ 161.0  
% of sales
    8.9 %     8.1 %     8.6 %     7.6 %
North American Business Solutions Division operating profit includes $4 million of Second Quarter Charges and $5 million of First Half Charges for the related 2006 periods.
International Division
                                 
    Second Quarter     First Half  
(Dollars in millions)   2006     2005     2006     2005  
Sales
  $ 858.6     $ 847.8     $ 1,753.6     $ 1,802.1  
% change
    1 %     3 %     (3 %)     %
 
                               
Division operating profit
  $ 45.5     $ 51.1     $ 98.5     $ 108.8  
% of sales
    5.3 %     6.0 %     5.6 %     6.0 %
International Division operating profit includes $3 million of Second Quarter Charges and $19 million of First Half Charges for the related 2006 periods. The comparison for the second quarter and the first half is impacted by the allocation of certain one-time credits realized in the second quarter of 2005 that increased the prior year operating margin by as much as 70 basis points.
Percentage of Sales by Division
                                 
    Second Quarter     First Half  
    2006     2005     2006     2005  
North American Retail
    43.1 %     43.1 %     45.1 %     44.6 %
North American Business Solutions Division
    32.3 %     31.7 %     30.9 %     29.9 %
International Division
    24.6 %     25.2 %     24.0 %     25.5 %

8


 

Office Depot, Inc.
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
Other Selected Financial Information
(In thousands, except operational data)
                 
    26 Weeks Ended  
    July 1, 2006     June 25, 2005  
Cumulative share repurchases ($):
  $ 670,222     $ 90,574  
 
               
Cumulative share repurchases (shares):
    19,013       4,629  
Shares outstanding, end of quarter
    283,277       316,780  
Selected Operating Highlights
                                 
    13 Weeks Ended     26 Weeks Ended  
    July 1, 2006     June 25, 2005     July 1, 2006     June 25, 2005  
Store Statistics
                               
 
                               
United States and Canada:
                               
Store count:
                               
Stores opened
    22       17       26       46  
Stores closed
          1       2       4  
Stores relocated
    2       4       4       5  
Total U.S. and Canada stores
    1,071       1,011       1,071       1,011  
 
                               
North American Retail Division square footage:
    26,722,772       25,553,663                  
Average square footage per NAR store
    24,951       25,276                  
Average sales per square foot
  $ 229     $ 229     $ 251     $ 250    
Inventory per store (end of period)
  $ 995,000     $ 1,062,000                    
 
                               
International Division company-owned:
                               
Store count:
                               
Stores opened
    8       1       8       1  
Stores closed
          2             3  
Stores acquired
    42             42        
Total International company-owned stores
    120       76       120       76  

9


 

OFFICE DEPOT, INC.
Comparative Trailing Four Quarters Data
(Unaudited)
The following data has been compiled from the trailing four quarters ended with the second quarter of 2006 and 2005. THIS INFORMATION IS COMPRISED PRIMARILY OF NON-GAAP INFORMATION. Therefore, most line items exclude amounts that are determined in accordance with accounting principles generally accepted in the United States of America. This non-GAAP presentation is not intended to suggest that such information is superior to the presentation of GAAP information, but only to clarify some information and assist the reader. We review non-GAAP data, as well as GAAP data, when assessing our business performance and believe it can provide insight into current operational aspects of the business.
Material asset impairments, exit cost and other charges recorded during the past year can result in financial indicators that do not fully reflect the impacts of current business transactions. For additional information on these charges, please review our Form      10-K for the year 2005 and subsequent Form 10-Q filings with the Securities and Exchange Commission. We have also provided the same or most closely related financial measure on a GAAP basis for comparison. In addition to adjusting for certain items, we have compiled the data on a trailing four quarters basis.
The inclusion of this data is not intended to suggest that we believe our company to be highly-seasonal, but to provide perspective on the results of events that have transpired during the course of a year. Our management reviews this information to assess growth initiatives, streamlining and cost control measures and other operational activities put in place during the period. A reconciliation of non-GAAP to GAAP financial measures can be found on our web site at www.officedepot.com under the Investor Relations category.
                         
Total Company   Trailing 4 Quarters        
(Dollars in millions)   July 1,     June 25,        
    2006     2005       Change    
Sales
  $ 14,522.6     $ 13,864.2       5%
 
                       
EBIT — adjusted1
  $ 738.1     $ 599.2       23%
% of sales
    5.1%     4.3%    80 bps
EBIT
  $ 429.1     $ 565.8       -24%
% of sales
    3.0%     4.1%   -110 bps
 
                       
Net earnings — adjusted1
  $ 496.6     $ 397.1       25%
Net earnings
  $ 306.2     $ 356.8       -14%
 
                       
Diluted Earnings Per Share — adjusted1
  $ 1.64     $ 1.26       30%
Diluted Earnings Per Share
  $ 1.01     $ 1.13       -11%
 
                       
EBITDA — adjusted1
  $ 1,008.1     $ 873.8       15%
% of sales
    6.9%     6.3%    60 bps
EBITDA 1
  $ 699.1     $ 840.4       -17%
% of sales
    4.8%     6.1%   -130 bps
 
                       
Return on Equity (ROE) — adjusted1
    17.6%     12.6%   500 bps
ROE
    10.9%     11.3%   -40 bps
 
                       
Return on Invested Capital (ROIC) - adjusted 1
    13.9%     11.4%   250 bps
ROE
    10.5%     10.7%   -20 bps
 
                       
Average shares
    303.0       316.3       -4%
1 Non-GAAP financial measure. (bps = basis points)

10

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