Note H – Earnings Per Share

The following table represents the calculation of net earnings (loss) per common share (“EPS”):


	Third Quarter						Year-to-Date
(In thousands, except per share amounts)	2013			2012			2013			2012
Basic Earnings Per Share
Numerator:
Net earnings (loss) available to common shareholders	$	132,861		$	(69,566	)	$	51,661		$	(92,560	)
Assumed distribution to participating securities		(13,490	)		—			—			—

Assumed undistributed earnings available to common stock	$	119,371		$	(69,566	)	$	51,661		$	(92,560	)
Denominator:
Weighted-average shares outstanding		283,631			280,238			281,906			279,438
Basic earnings (loss) per share	$	0.42		$	(0.25	)	$	0.18		$	(0.33	)

Diluted Earnings Per Share
Numerator:
Net earnings (loss) attributable to Office Depot, Inc.	$	160,900		$	(61,916	)	$	100,039		$	(69,795	)
Preferred stock redemption dividend		(22,333	)		—			(22,333	)		—

Net earnings (loss) available for assumed distribution	$	138,567		$	(61,916	)	$	77,706		$	(69,795	)
Denominator:
Weighted-average shares outstanding		283,631			280,238			281,906			279,438
Effect of dilutive securities:
Stock options and restricted stock		5,018			3,480			5,133			4,186
Redeemable preferred stock		45,594			79,371			69,434			77,450

Diluted weighted-average shares outstanding		334,243			363,089			356,473			361,074
Diluted earnings (loss) per share	$	0.41			N/A			N/A			N/A

Shares of the redeemable preferred stock have equal dividend participation rights with common stock. The Company has never paid a dividend on common stock, but the participation provisions require application of the two-class method for computing earnings per share. In periods of sufficient earnings, this method assumes an allocation of undistributed earnings to both participating stock classes. The two-class method impacted the computation of earnings for the third quarter of 2013, but was not applicable to the year-to-date 2013 because it would have been antidilutive. For the third quarter of 2013, basic EPS for common stock was $0.42, all undistributed. Basic EPS for redeemable preferred stock is also $0.42, composed of $0.13 distributed and $0.29 undistributed. The third quarter of 2013 diluted EPS was also impacted by the $22 million preferred stock redemption dividend (refer to Note C). Accounting rules require that if antidilutive, the redeemed preferred stock be considered separately from other shares not redeemed of the same class. The preferred stock redemption dividend is at a rate greater than basic EPS calculated under the two-class method and is therefore antidilutive. Using the weighted average share impact of the preferred stock, distribution to these shares would be $4.54 per share. Accordingly, the preferred stock redemption dividend is excluded in calculating diluted EPS for the third quarter of 2013 as that produces the most dilutive calculation. Additional shares of the redeemable preferred stock may be repurchased prior to closing of the merger. The two-class method impacted the computation of earnings for the first quarter of 2012, but was not applicable to the third quarter or year-to-date 2012 because it would have been antidilutive. The Preferred Stockholders are not required to fund losses.

Awards of options and nonvested shares representing approximately 4.7 million and 6.8 million additional shares of common stock were outstanding for the third quarter and year-to-date 2013, respectively, and 17.5 million and 15.6 million for the third quarter and year-to-date 2012, respectively, but were not included in the computation of diluted weighted-average shares outstanding because their effect would have been antidilutive. For purposes of calculating weighted average shares, no tax benefits have been assumed in jurisdictions where deferred tax valuation allowances have been recorded.