Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 30, 2000
Or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
for the transition period from ____ to _____
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 (I.R.S. Employer
or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 438-4800
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Common Stock, par value $0.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Liquid Yield Option Notes due 2007 convertible into Common Stock New York Stock Exchange
Liquid Yield Option Notes due 2008 convertible into Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 9, 2001 was approximately $2,639,101,773.
As of March 9, 2001, the Registrant had 297,017,184 shares of Common
Stock outstanding.
Documents Incorporated by Reference:
Portions of our Annual Report to Stockholders for the fiscal year ended December
30, 2000 are incorporated by reference in Parts I and II, and the Proxy
Statement, to be mailed to stockholders on or about March 29, 2001 for the
Annual Meeting to be held on April 26, 2001, is incorporated by reference in
Part III.
2
PART I
ITEM 1. BUSINESS.
Office Depot Inc., together with our subsidiaries, is the largest supplier of
office products and services in the world. We sell to consumers and businesses
of all sizes through our three business segments: North American Retail
Division, Business Services Group ("BSG"), and International Division.
OFFICE PRODUCTS BUSINESS
Businesses in our industry primarily sell three broad categories of merchandise:
general office supplies, technology products and office furniture. Office
products distributors include contract stationers (selling at significant
discounts from list prices to their contract customers), mail order companies
(selling through catalogs) and retailers (including office superstores such as
the ones we operate). Most recently, Internet-based companies have emerged as a
new channel in this industry.
Although the office products business has changed in recent years, a significant
portion of the market is still served by small dealers. These dealers purchase a
significant portion of their merchandise from national or regional office supply
distributors who, in turn, purchase merchandise from manufacturers. Dealers
often employ a commissioned sales force that use the distributor's catalog,
showing products at retail list prices, for selection and price negotiation with
the customer. We believe that these dealers generally sell their products at
prices higher than those we offer to our customers.
Since the mid-1980s, high-volume office supply superstores have emerged
throughout the United States. These stores offer a wide selection of products, a
high level of customer service and low prices. High-volume office products
retailers typically offer substantial price savings to individuals and small- to
medium-sized businesses, which traditionally have had limited opportunities to
buy at significant discounts from retail list prices. Recently, other retailers,
including mass merchandisers and warehouse clubs, have begun offering a wide
variety of similar products at low prices and have become increasingly
competitive with office supply superstores. Direct mail and Internet-based
companies have also established a growing presence in the office products
industry.
Larger customers have been, and continue to be, served primarily by full service
contract stationers, which offer contract bids at discounts equivalent to or
greater than those offered by our retail stores and catalogs. These stationers,
including our own contract stationer business, traditionally serve their
customers through a commissioned sales force, purchase in large quantities
primarily from manufacturers, and offer competitive pricing and customized
services to their customers.
COMPETITION
We operate in a highly competitive environment. Historically, our markets have
been served by traditional office products dealers and contract stationers. We
believe that we compete favorably against dealers on the basis of price and
selection. We compete with other full service contract stationers on the basis
of service and value-added technology. We also compete with other office supply
superstores, wholesale clubs selling general merchandise, discount stores, mass
merchandisers, conventional retail stores, catalog showrooms, Internet-based
companies and direct mail companies. These companies, in varying degrees,
compete with us on both price and selection. Currently, we are the largest
seller of office products and services in the world in terms of dollar volume of
products and services sold, and we believe that our ability to buy in large
quantities directly from the manufacturers affords us a competitive advantage
over our smaller competitors.
We compete with several high-volume office supply chains that are similar to us
in terms of store format, pricing strategy and product selection and
availability in markets where we operate, primarily those in the United States
and Canada. We differentiate ourselves from these other superstore chains in
terms of the convenience of our store locations, our customer service, the
extent of our product selection, and our "in stock" position (i.e., having the
products we carry on the shelves for our customers). We anticipate that in the
future we will face increased competition from these chains as each of us
expands our operations.
In the delivery and contract stationer portions of the industry, our principal
competitors are national and regional full service contract stationers, national
and regional office furniture dealers, independent office products distributors,
discount superstores and, to a lesser extent, direct mail businesses, stationery
retail outlets and Internet-based merchandisers. Other office supply superstore
chains are also developing a presence in the contract stationer and Internet
1
3
channels of the business. We compete with these businesses in substantially all
of our current markets. In the future, we may face increased competition from
Internet-based merchandisers who dedicate all of their resources to electronic
commerce.
Some of the entities we compete against may have greater financial resources
than we do. We cannot assure you that increased competition will not have an
adverse effect on us. However, we believe that we compete effectively based on
price, selection, availability, location and customer service.
MERCHANDISING AND PRODUCT STRATEGY
Our merchandising strategy is to offer a broad selection of office products,
under both our Office Depot(R) and Viking Office Products(R) brands, and to
provide our customers with a compelling combination of quality, assortment,
price and service. Our selection of office products includes general office
supplies, computers, software and computer supplies, business machines and
related supplies, and office furniture. In late 2000, we adopted a plan to
reduce the number of SKUs in our stores and warehouses in order to improve
customer service and efficiencies by having better "in stock" positions for
products our customers purchase most frequently. Once the reduction is complete,
our office supply superstores will stock approximately 7,000 SKUs, including
variations in color and size, and our Customer Service Centers ("CSCs") will
stock approximately 11,000 SKUs. We expect to complete this project by June,
2001.
We buy substantially all of our merchandise directly from manufacturers and
other primary suppliers. In some cases, we also have begun to source our own
merchandise from offshore locations under private label brands that are
exclusive to Office Depot and Viking. In most cases, our suppliers deliver the
merchandise directly to our stores or CSCs or to our ten cross-dock facilities.
Our supply chain operations, including the cross-docks, use a customized system
to manage the inbound flow of merchandise with the goal of minimizing our landed
cost. This system enables us to maintain optimal in-stock positions by
permitting a shorter lead time for reordering at the stores and CSCs, while
still meeting the minimum ordering requirements of our vendors. The use of
cross-docks also reduces our freight costs by centralizing the receiving
function.
Our BSG is party to multi-year contracts with many of its customers and
anticipates entering into similar contracts in the future as we grow our
contract business. Nonetheless, we have not entered into any material long-term
contracts or commitments with any vendor or customer, the loss of any one of
which would materially adversely affect our financial position or the results of
our operations. We have not experienced any material difficulty in obtaining
desired quantities of merchandise for sale, and we do not foresee having any
significant difficulties in the future.
Buyers located at our corporate headquarters are responsible for selecting and
purchasing merchandise. For merchandise offered to our retail store, direct mail
and Internet customers, our operating management determines pricing based upon
buyer recommendations. Our contract sales force in our BSG determines the price
of products sold to our contract customers. Replenishment buyers monitor
inventory levels and initiate product reorders with the assistance of our
customized replenishment system. This system allows buyers to devote more time
to selecting products, developing new product lines, analyzing competitive
developments and negotiating with vendors to obtain more favorable prices and
product availability. We transmit purchase orders by EDI to a significant number
of our vendors, and we electronically receive Advance Shipment Notices and
invoices back from them. This method of electronic ordering expedites orders and
promotes accuracy and efficiency. We plan to continue to expand this program to
the remainder of our vendors.
We buy substantially all of our inventory directly from manufacturers in large
quantities without using a central warehouse. We maintain substantially all of
our inventory on the sales floors of our stores, at our cross-docks and at our
CSCs.
STORE STRATEGY
Our retail stores conform to a model designed to achieve cost efficiency by
minimizing rent and eliminating the need for a central warehouse. Each store
displays virtually all its inventory on the sales floor using low-profile
fixtures, pallets, bins and industrial steel shelving, permitting the bulk
stacking of inventory and quick and efficient restocking. Shelving is positioned
to form aisles large enough to comfortably accommodate customer traffic and
merchandise movement. During 2001, we plan to further enhance the shopping
experience with the installation of new lighting, signage, and broadband
Internet capabilities across our entire chain.
Our stores sell primarily to small offices/home offices and individual
consumers. We carry a wide selection of merchandise, including brand name office
supplies, business machines and computers, computer software, office furniture
and other business-related products. Each store also contains a multipurpose
copy and print center offering printing, reproduction, mailing, shipping, and
2
4
other services. In 2000, through our partnership with UPS, we have initiated the
roll-out of UPS shipping centers within our stores. This enables us to offer our
customers a full selection of packaging and shipping supplies, as well as the
complete portfolio of U.S. domestic and international UPS shipping services at
regular UPS Customer Counter rates. In 2001, we plan to experiment with several
other store-within-store concepts.
CATALOG PRODUCTION AND CIRCULATION
We use our catalogs to market directly to both existing and prospective
customers throughout the world. Separate catalog assortments promote our dual
brand (Office Depot(R) and Viking Office Products(R)) mail order strategy. We
currently circulate both Viking Office Products(R) and Office Depot(R) brand
catalogs through our BSG and International Division. Each catalog is printed in
full color with pictures and narrative descriptions that emphasize key product
benefits and features. We have developed a distinctive style for our catalogs,
most of which are produced in-house by our designers, writers and production
artists, using a computer-based catalog creation system.
Our Viking Office Products(R) brand catalog mailings include monthly sale
catalogs, which are mailed to all active Viking customers and present our most
popular items. A complete "Buyers Guide," containing all of our products at the
regular discount prices, is delivered to our Office Depot(R) and Viking Office
Products(R) brand catalog customers every six months. The Buyers Guide, which is
mailed to all of our active customers, varies in size between countries.
Prospecting catalogs with special offers designed to attract new customers are
mailed frequently. In addition, Office Depot(R) and Viking Office Products(R)
specialty catalogs are delivered to selected customers monthly.
During 2000, we mailed approximately 305 million copies of over 180 different
Office Depot(R) and Viking(R) brand catalogs. During 1999 and 1998, we mailed
approximately 296 million and 248 million copies, respectively, of over 100
different catalogs to existing and prospective customers.
SELLING AND MARKETING
We are able to maintain our competitive pricing policy primarily as a result of
the significant cost efficiencies we achieve through our operating format and
purchasing power. Our marketing programs are designed to attract new customers
and to persuade existing customers to make additional purchases. We advertise in
the major newspapers in most of our local markets. These advertisements are
supplemented with local and national radio and network and cable television
advertising campaigns and direct marketing efforts. We continuously acquire new
customers by selectively mailing specially designed catalogs to prospective
customers. Sometimes we obtain the names of prospective customers in new and
existing markets through the use of selected mailing lists from outside
marketing information services and other sources. We use a proprietary mailing
list system for our Viking Office Products(R) brand catalogs and other
promotional mailings. We plan to use this same technology to increase the
effectiveness of our Office Depot(R) brand catalogs in the future. Catalogs are
also distributed through our contract sales force and are available in each of
our stores.
We have a low price guarantee policy for our Office Depot(R) brand. Under this
policy, we will match any competitor's comparable lower price. This program
assures customers that they can always receive low prices from us even during
periodic sales promotions by our competitors. Monthly competitive pricing
analyses are performed to monitor each market, and prices are adjusted as
necessary to adhere to this pricing philosophy and ensure competitive
positioning.
Our customers nationwide can place orders over the Internet, by telephone or by
fax using toll-free telephone numbers that route the calls through call centers
located in Florida, Georgia, Texas, Ohio, Connecticut, Kansas and California. We
electronically transmit any orders received at the call centers or via the
Internet to the store or CSC closest to our customer for pick-up or delivery at
a nominal delivery fee (free with a minimal order size). Orders are packaged,
invoiced and shipped for next-day delivery or same-day delivery in the case of
Viking orders in selected markets.
Through our BSG, we provide our contract customers with specialized services
designed to aid them in achieving efficiencies and eliminating waste in their
overall office products and office furniture costs. These services include
electronic ordering, stockless office procurement, desktop delivery, business
forms management services, and comprehensive product usage reports. Desktop
delivery entails delivering the merchandise to individual departments within our
3
5
customers' facilities, rather than delivering the packages to one central
receiving point. We also develop customized Intranet sites in tandem with our
customers, allowing them to set rules and limitations on their employees'
electronic ordering abilities. Customer orders from these Intranet sites are
transmitted to us via the Internet.
In addition to the normal payment options available to all of our customers, we
offer our contract and qualified commercial customers the option of purchasing
on credit through open accounts. We also offer revolving credit terms to Office
Depot(R) brand customers through the use of private label credit cards. These
credit cards are issued without charge to credit-qualified customers. Sales
transactions using the private label credit cards are transmitted electronically
to financial services companies, which credit our bank account with the net
proceeds within two days. We offer our contract customers a store purchasing
card which allows them to purchase office supplies at one of our retail stores,
while still taking advantage of their contract pricing. No single customer in
any of our segments accounts for more than 1% percent of our total sales. All of
our credit card operations are conducted by third parties with whom we contract
to perform this service.
INFORMATION SYSTEMS
In operating our business, we use IBM ES9000 mainframes, IBM AS/400 computers
and client/server technologies. Our information systems include advanced
software packages that have been customized for our specific business
operations. By maximizing our application of these technologies, we have
improved our ability to manage our inventories, order processing, replenishment
and marketing efforts.
Inventory data is updated instantaneously in our systems when the merchandise is
scanned for receiving or transfer, and sales and certain inventory data is
updated in our systems each night by downloading information from our
point-of-sale and our telemarketing order entry systems. Our point-of-sale
systems permit the entry of sales data through the use of bar code laser
scanning. The systems also have a price "look-up" capability that permits
immediate price checking and the efficient movement of customers through the
check-out process. Data from all of our locations and order sources is
transmitted to our headquarters at the end of each day, permitting a perpetual
daily inventory and the calculation of average unit cost by SKU for each of our
stores and CSCs. Daily compilation of sales and gross margin data allows us to
analyze profitability and inventory by item and product line, as well as monitor
the success of our sales promotions. For all SKUs, we have immediate access to
on-hand daily unit inventory, units on order, current and past rates of sale and
other information pertinent to the management of our inventory.
All of our computer operations are managed internally in state-of-the-art
facilities that capitalize on advanced technologies. Our help desk is manned 24
hours per day, 7 days per week. We utilize off-site disaster recovery facilities
and redundancies. These operations result in industry leading system
availability and reliability.
We have invested in a new data warehouse system that now allows us to perform
trend and market basket analyses, manage our customer relationships, and produce
more effective advertising campaigns. We strive for superior customer
satisfaction, and our information systems initiatives are designed with that
goal in mind. Our new data warehouse solution is designed to use sales
transaction and customer interaction information to market on a more personal
basis with each of our customers. Our international initiatives include
launching several electronic commerce sites throughout the world and building a
world-class network and computing infrastructure.
Our Office Depot public Web site--WWW.OFFICEDEPOT.COM--has won a number of
awards from information technology industry and customer groups. Our
business-to-business electronic commerce sites have sophisticated work-flow
components that help our customers electronically manage their ordering process
for office supplies, with thousands of customer orders processed each day.
Internet-enabled applications allow our suppliers to directly interact with our
systems, improving order flow and supply chain management. We use our corporate
Intranet to improve employee productivity and responsiveness and reduce our
administrative costs.
EMPLOYEES
As of March 9, 2001, we had approximately 48,000 employees worldwide. Virtually
all of these are full time employees. Our labor relations generally are good,
and the overwhelming majority of our facilities are not organized by any labor
union. In the most recent labor organizing activity in a large facility in
California, our employees rejected the efforts of the labor union to organize
that workforce.
4
6
INFORMATION INCORPORATED BY REFERENCE
The following information is included in Exhibit 13 at the page location(s)
specified. Such information is set forth in Office Depot's 2000 Annual Report to
Stockholders and is incorporated herein by reference:
General description of our business segments - Pages 14-15
Restructuring activities and other one-time charges - Pages 16-18
Financial information about segments - Pages 18-22 and 46-47
Revenues by product group - Page 18
Seasonality of the business - Page 25
Financial information about geographic areas - Page 47
5
7
EXECUTIVE OFFICERS OF THE REGISTRANT
JERRY COLLEY AGE: 48
Mr. Colley joined Office Depot in February 2001 as our President, North American
Retail Stores. Prior to joining Office Depot, he was Senior Vice President,
Stores and Customer Satisfaction for AutoZone, Inc., from 1997 to 2001. Prior to
his tenure at AutoZone, Mr. Colley was Executive Vice President of Tire Kingdom
from January 1996 to July 1996, and President of Rose Auto Parts, a regional
retail chain, from February 1995 to December 1995, and Vice President,
Stores/Regional Manager for AutoZone/AutoShack from 1987 to 1995.
ROBERT J. KELLER AGE: 47
Mr. Keller has been President, Business Services Group since August 2000.
Previously, he served as Executive Vice President, Business Services Division
from June 1999 to August 2000 and Senior Vice President, Contract Sales from
February 1998 to June 1999. Before joining Office Depot, Mr. Keller was
Executive Vice President (1993 to 1998) and Senior Vice President (1988 to 1993)
of Dun & Bradstreet Corporation.
ROLF Van KALDEKERKEN AGE: 57
Mr. Van Kaldekerken has been President, European Operations since August 2000.
Prior to that appointment, he served as Executive Vice President, European
Operations from January 2000 to August 2000. Previously, he was President &
Country Manager for Germany from 1998 to January 2000 for Office Depot
International and Managing Director and Vice President, Germany, Benelux and
Austria for Viking Office Products from November 1994 until August 1998, when
Viking was merged into our Company. Prior to joining Viking, Mr. Van Kaldekerken
was European Operations Manager and European Purchasing Manager for INMAC
Corporation.
DAVID C. FANNIN AGE: 55
Mr. Fannin has been our Executive Vice President, General Counsel and Secretary
since August 2000. Previously, he was Senior Vice President and General Counsel
since he joined our Company in November 1998, and our Corporate Secretary since
January 1999. Mr. Fannin was Executive Vice President, General Counsel and
Corporate Secretary of Sunbeam Corporation, a manufacturer and wholesaler of
durable household and outdoor consumer products, from January 1994 until August
1998. From October 1979 until December 1993, Mr. Fannin was a partner in the law
firm Wyatt, Tarrant & Combs, in Louisville, Kentucky.
THOMAS KROEGER AGE: 52
Mr. Kroeger has been Executive Vice President, Organization and People since he
joined us in July 1997. Before joining Office Depot, he was employed by The
Sherwin-Williams Company where he served as Corporate Vice President of Human
Resources from October 1987 to July 1997.
WILLIAM P. SELTZER AGE: 62
Mr. Seltzer has been our Executive Vice President, Information Systems since
August 1992. He was Senior Vice President--Distribution and Systems of Revco
Drug Stores, Inc. from November 1987 to July 1992. Mr. Seltzer was Vice
President of Systems for the H.E. Butt Grocery Company from 1977 to 1987, and
was Corporate Manager of Information Processing from 1972 to 1977 with SCM
Corporation.
CHARLES E. BROWN AGE: 48
Mr. Brown has been our Senior Vice President, Finance and Controller since he
joined our Company in May 1998. He was Senior Vice President and Chief Financial
Officer of Denny's, Inc. from January 1996 until May 1998; from August 1994
until December 1995, he was Vice President and Chief Financial Officer of
ARAMARK International; and from September 1989 until July 1994, he was Vice
President and Controller of Pizza Hut International, a Division of PepsiCo, Inc.
JEFFREY AIKEN AGE: 42
Mr. Aiken has been our Senior Vice President of Tax since November 1999.
Previously he was our Vice President of Tax from July 1997 to November 1999 and
Director of Taxes from November 1994 until July 1997. Prior to joining our
Company, Mr. Aiken was Director of Taxes for Berol Corporation from 1993 to
1994; Director of International Taxes for Toys "R" Us from 1992 to 1993 and
Senior International Tax Manager for Price Waterhouse from 1990 to 1992.
Information with respect to our directors, including our executive officers who
are also directors is incorporated herein by reference to the information under
the caption "Election of Directors/Biographical Information of the Candidates"
in the Proxy Statement for our 2001 Annual Meeting of Stockholders.
6
8
ITEM 2. PROPERTIES.
As of March 9, 2001, we operate 787 office supply stores in 45 states and the
District of Columbia, 34 office supply stores in five Canadian provinces and 132
office supply stores (including those operated under licensing and joint venture
agreements) in seven countries outside of the United States and Canada. We also
operate 25 CSCs in 18 U.S. states and 18 CSCs in 11 countries outside of the
United States. The following table sets forth the locations of these facilities.
STORES
- ----------------------------------------------------------------------------------------------------------------
STATE/COUNTRY # STATE/COUNTRY # STATE/COUNTRY #
- ------------- --- ------------- --- ------------- ---
UNITED STATES:
Alabama 14 Kansas 9 North Dakota 3
Alaska 2 Kentucky 12 Ohio 11
Arizona 3 Louisiana 25 Oklahoma 12
Arkansas 9 Maryland 13 Oregon 15
California 128 Michigan 19 Pennsylvania 9
Colorado 25 Minnesota 10 South Carolina 13
Delaware 1 Mississippi 11 South Dakota 1
District of Columbia 2 Missouri 17 Tennessee 19
Florida 83 Montana 1 Texas 99
Georgia 35 Nebraska 5 Utah 4
Hawaii 3 Nevada 9 Virginia 18
Idaho 6 New Jersey 6 Washington 28
Illinois 33 New Mexico 4 West Virginia 3
Indiana 16 New York 13 Wisconsin 11
Iowa 3 North Carolina 23 Wyoming 1
-----------------
Total United States 787
CANADA: FRANCE 28
Alberta 8 HUNGARY 3
British Columbia 8 ISRAEL 23
Manitoba 3 JAPAN 7
Ontario 13 MEXICO 53
Saskatchewan 2 POLAND 16
------------- THAILAND 2
Total Canada 34 -----------------
Total Outside the 132
United States
CSCs
- ----------------------------------------------------------------------------------------------------------------
STATE/COUNTRY # STATE/COUNTRY # STATE/COUNTRY #
- ------------- --- ------------- --- ------------- ---
UNITED STATES:
Arizona 1 Massachusetts 1 AUSTRALIA 2
California 3 Michigan 1 BELGIUM 1
Colorado 2 Minnesota 1 FRANCE 2
Connecticut 1 New Jersey 1 ISRAEL 1
Florida 2 North Carolina 1 GERMANY 2
Georgia 1 Ohio 1 THE NETHERLANDS 1
Illinois 1 Texas 3 IRELAND 1
Louisiana 1 Utah 1 ITALY 1
Maryland 2 Washington 1 JAPAN 2
MEXICO 2
UNITED KINGDOM 3
----------
-----------------
Total United States 25 Total Outside the 18
United States
Most of our facilities are leased or subleased, with lease terms (excluding
renewal options) expiring in various years through 2021, except for the 69
facilities and our corporate offices and systems data center, which we own. Our
owned facilities are located in 16 states, primarily in Florida, Texas and
California; three Canadian provinces; the United Kingdom; the Netherlands;
Australia; Mexico and France.
We operate our retail stores under the Office Depot(R), Office Depot Express(R)
and Office Place(R) (in Ontario, Canada) names. Our contract and catalog
businesses operate under the names Office Depot(R) and Viking Office
Products(R).
Our corporate offices in Delray Beach, Florida consist of approximately 575,000
square feet in three adjacent buildings--two of which are owned and one is
leased. We also own a corporate office building in Torrance, California which is
7
9
approximately 180,000 square feet in size, and a systems data center in
Charlotte, North Carolina which is approximately 53,000 square feet in size.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in litigation arising in the normal course of our business.
While from time to time claims are asserted that make demands for large sums of
money (including from time to time, actions which are asserted to be
maintainable as class action suits), we do not believe that any of these
matters, either individually or in the aggregate, will materially affect our
financial position or the results of our operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
8
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Our common stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "ODP." As of March 9, 2001, there were 4,062 holders of record of our
common stock. The last reported sale price of the common stock on the NYSE on
March 9, 2001 was $9.24.
The following table sets forth, for the periods indicated, the high and low sale
prices of our common stock, as quoted on the NYSE Composite Tape. These prices
do not include retail mark-ups, mark-downs or commission.
HIGH LOW
---- ---
2000
----
First Quarter $14.8750 $9.8750
Second Quarter 14.7500 6.0000
Third Quarter 8.3125 5.8750
Fourth Quarter 8.7500 6.0000
1999
----
First Quarter (1) $26.0000 $20.3333
Second Quarter 25.8333 18.2500
Third Quarter 23.0000 9.8125
Fourth Quarter 13.1875 9.0000
- --------------
(1) Prices have been adjusted to reflect the three-for-two stock split which
occurred on April 1, 1999.
We have never declared or paid cash dividends on our common stock, and we do not
currently intend to pay cash dividends in the foreseeable future. Earnings and
other cash resources will continue to be used in the expansion of our business.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is set forth in Exhibit 13.1 under the
heading "Financial Highlights" as of and for the fiscal years ended December 30,
2000, December 25, 1999, December 26, 1998, December 27, 1997 and December 28,
1996. This information is set forth in our Annual Report to Stockholders for the
fiscal year ended December 30, 2000 (on page 13) and is incorporated herein by
this reference and made a part hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is set forth in Exhibit 13.1 under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Cautionary Statements for Purposes of the `Safe
Harbor' Provisions of the Private Securities Litigation Reform Act of 1995."
This information is set forth in our Annual Report to Stockholders for the
fiscal year ended December 30, 2000 (on pages 14-28) and is incorporated herein
by reference and made a part hereof.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item is set forth in Exhibit 13.1 under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations". This information is set forth in our Annual Report to
Stockholders for the fiscal year ended December 30, 2000 (on page 25) and is
incorporated herein by reference and made a part hereof.
ITEM 8. FINANCIAL STATEMENTS
The information required by this Item is set forth in Exhibit 13.1 under the
headings "Independent Auditors' Report of Deloitte & Touche LLP on Consolidated
Financial Statements," "Consolidated Balance Sheets," "Consolidated Statements
of Earnings," "Consolidated Statements of Stockholders' Equity," "Consolidated
Statements of Cash Flows" and "Notes to Consolidated Financial Statements" as of
December 30, 2000 and December 25, 1999 and for the fiscal years ended December
30, 2000, December 25, 1999 and December 26, 1998. This information is set forth
in our Annual Report to Stockholders for the fiscal year ended December 30, 2000
(on pages 29-47) and is incorporated herein by this reference and made a part
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
9
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning our executive officers is set forth in Item 1 of this
Form 10-K under the caption "Executive Officers of the Registrant."
Information with respect to our directors is incorporated herein by reference to
the information "Election of Directors/Biographical Information on the
Candidates" in the Proxy Statement for our 2001 Annual Meeting of Stockholders.
Information required by Item 405 of Regulation S-K is incorporated herein by
reference to "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Proxy Statement for our 2001 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is incorporated herein by
reference to the information under the caption "Executive Compensation" in the
Proxy Statement for our 2001 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners and
management is incorporated herein by reference to the information under the
caption "Stock Ownership Information" in the Proxy Statement for our 2001 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related transactions is
incorporated herein by reference to the information under the captions "Matters
to be Considered by our Shareholders - Election of Directors - Item I -
Biographical Information on the Candidates" and "Executive Compensation -
Contractual Agreements with David Fuente" in the Proxy Statement for our 2001
Annual Meeting of Stockholders.
10
12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. The financial statements listed in Item 8.
2. The financial statement schedule listed in "Index to
Financial Statement Schedule."
3. The exhibits listed in the "Index to Exhibits."
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the year ended
December 30, 2000 except those disclosed in our 2000 Quarterly
Reports on Form 10-Q, except that the following reports on
Form 8-K were filed in the fourth quarter ended December 30,
2000.
1. The Company filed a report dated October 12, 2000 which
reported under Items 7 and 9 regarding a press release
with respect to results for the third quarter of 2000.
2. The Company filed a report dated November 6, 2000, which
reported under Items 7 and 9 regarding press releases with
respect to certain business developments described
therein.
11
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 26th day of
March, 2001.
OFFICE DEPOT, INC.
By /s/ M. BRUCE NELSON
------------------------------
M. Bruce Nelson
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 26, 2001.
SIGNATURE CAPACITY
--------- --------
/s/ M. BRUCE NELSON Chief Executive Officer (Principal Executive Officer)
- ----------------------------------
M. Bruce Nelson
/s/ DAVID I. FUENTE Chairman of the Board
- ----------------------------------
David I. Fuente
/s/ IRWIN HELFORD Vice Chairman and Director
- ----------------------------------
Irwin Helford
/s/ CHARLES E. BROWN Senior Vice President, Finance and Controller
- ---------------------------------- (Principal Financial and Accounting Officer)
Charles E. Brown
/s/ LEE A. AULT, III Director
- ----------------------------------
Lee A. Ault, III
/s/ NEIL R. AUSTRIAN Director
- ----------------------------------
Neil R. Austrian
/s/ CYNTHIA R. COHEN Director
- ----------------------------------
Cynthia R. Cohen
/s/ W. SCOTT HEDRICK Director
- ----------------------------------
W. Scott Hedrick
/s/ JAMES L. HESKETT Director
- ----------------------------------
James L. Heskett
/s/ MICHAEL J. MYERS Director
- ----------------------------------
Michael J. Myers
/s/ FRANK P. SCRUGGS, JR. Director
- ----------------------------------
Frank P. Scruggs, Jr.
/s/ PETER J. SOLOMON Director
- ----------------------------------
Peter J. Solomon
12
14
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report of Deloitte & Touche LLP on Consolidated Financial Statements... *
Consolidated Balance Sheets ................................................................. *
Consolidated Statements of Earnings ......................................................... *
Consolidated Statements of Stockholders' Equity ............................................. *
Consolidated Statements of Cash Flows ....................................................... *
Notes to Consolidated Financial Statements .................................................. *
Independent Auditors' Report of Deloitte & Touche LLP on Financial Statement Schedule ....... F-2
- -------------------------
* Incorporated herein by reference to the respective information in our
Annual Report to Stockholders for the fiscal year ended December 30, 2000.
F-1
15
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Office Depot, Inc.:
We have audited the consolidated financial statements of Office Depot, Inc. and
Subsidiaries as of December 30, 2000 and December 25, 1999 and for each of the
three years in the period ended December 30, 2000, and have issued our report
thereon dated February 15, 2001; such consolidated financial statements and
report are included in the Company's Annual Report to Stockholders for the
fiscal year ended December 30, 2000 and are incorporated herein by reference.
Our audits also included the financial statement schedule of Office Depot, Inc.
and Subsidiaries listed in the Index to Financial Statement Schedule. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
February 15, 2001
F-2
16
INDEX TO FINANCIAL STATEMENT SCHEDULE
PAGE
----
Schedule II - Valuation and Qualifying Accounts and Reserves........... S-1
All other schedules have been omitted because they are inapplicable, not
required or the information is included elsewhere herein.
F-3
17
SCHEDULE II
OFFICE DEPOT, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
DEDUCTIONS--
BALANCE AT WRITE-OFFS,
BEGINNING OF ADDITIONS-- PAYMENTS AND OTHER BALANCE AT
DESCRIPTION PERIOD CHARGED TO EXPENSE ADJUSTMENTS END OF PERIOD
- ----------- ------------- ------------------ ------------------ -------------
Allowance for Doubtful
Accounts:
2000 $27,736 $30,448 $23,723 $34,461
1999 25,927 22,940 21,131 27,736
1998 25,587 23,702 23,362 25,927
Accrued Merger Costs:
2000 $21,268 $6,146 $23,494 $3,920
1999 40,832 26,035 45,599 21,268
1998 1,416 73,329 33,913 40,832
S-1
18
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE +
- ------- ------- -------------
3.1 Restated Certificate of Incorporation, as amended to date (1)
3.2 Bylaws (2)
4.1 Form of Certificate representing shares of Common Stock (3)
4.2 Form of Indenture (including form of LYON(R)) between the Company (4)
and The Bank of New York, as Trustee
4.3 Form of Indenture (including form of LYON(R)) between the Company (5)
and Bankers Trust Company, as Trustee
4.4 Rights Agreement dated as of September 4, 1996 between Office Depot, (6)
Inc. and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
including the form of Certificate of Designation, Preferences and
Rights of Junior Participating Preferred Stock, Series A attached
thereto as Exhibit A, the form of Rights Certificate attached
thereto as Exhibit B and the Summary of Rights attached thereto as
Exhibit C.
10.01 Revolving Credit and Line of Credit Agreement dated as of February (7)
20, 1998 by and among the Company and SunTrust Bank, Central
Florida, National Association, individually and as Administrative
Agent; Bank of America National Trust and Savings Association,
individually and as Syndication Agent; NationsBank, National
Association, individually and as Documentation Agent; Royal Bank of
Canada, individually and as Co-Agent; Citibank, N.A., individually
and as Co-Agent; The First National Bank of Chicago, individually
and as Co-Agent; CoreStates Bank, N.A.; PNC Bank, National
Association; Fifth Third Bank; and Hibernia National Bank. (Exhibits
to the Revolving Credit and Line of Credit Agreement have been
omitted)
10.02 Office Depot, Inc. Long-Term Equity Incentive Plan* (8)
10.03 1997-2001 Office Depot, Inc. Designated Executive Incentive Plan* (7)
10.04 Form of Change of Control Agreement, dated as of September 4, 1996, (9)
by and between Office Depot, Inc. and each of Thomas Kroeger and
William P. Seltzer.
10.05 Form of Indemnification Agreement, dated as of September 4, 1996, by (9)
and between Office Depot, Inc. and each of David I. Fuente, Cynthia
R. Cohen, W. Scott Hedrick, James L. Heskett, Michael J. Myers,
Peter J. Solomon, William P. Seltzer, and Thomas Kroeger
10.06 Form of Executive Employment Agreement, dated as of October 21, (7)
1997, by and between Office Depot, Inc. and each of Thomas Kroeger
and William P. Seltzer
10.07 Executive Part-time Employment Agreement, dated as of September 30, (10)
1999, by and between Office Depot, Inc. and Irwin Helford
10.08 Executive Employment Agreement, dated as of January 1, 2000, by and (11)
between Office Depot, Inc. and Bruce Nelson
10.09 Revolving Credit Agreement dated as of June 2, 2000 by and among (11)
Office Depot, Inc. and Suntrust Bank, individually and as
Administrative Agent; Bank of America, N.A., individually and as
Syndication Agent; Bank One, NA, individually and as Documentation
Agent; and Citibank, N.A., individually and as Managing Agent.
(Exhibits to the Revolving Credit Agreement have been omitted)
10.10 Executive Severance Agreement, including Release and Non-competition (12)
Agreement, dated September 19, 2000 by and between the Company and
David I. Fuente (schedules and exhibits omitted).
II-1
19
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE +
------- -------------
10.11 Non-executive Chairman Agreement dated September 19, 2000 by and (12)
between the Company and David I. Fuente.
10.12 Executive Retirement Agreement dated July 17, 2000 by and between (12)
the Company and Barry J. Goldstein (Attachment A omitted)
10.13 Executive Employment Agreement dated January 30, 2001 by and between
the Company and Jerry Colley
10.14 Change of Control Agreement, dated as of January 30, 2001, by and
between the Company and Jerry Colley
10.15 Executive Employment Agreement dated May 29, 1998 by and between the
Company and Charles E. Brown
10.16 Change of Control Agreement, dated as of May 28, 1998, by and
between the Company and Charles E. Brown
10.17 Executive Employment Agreement dated July 25, 2000 by and between
the Company and Robert J. Keller
10.18 Change of Control Agreement, dated as of July 25, 2000, by and
between the Company and Robert J. Keller
10.19 First Amendment dated December 21, 2000 to the Revolving Credit
Agreement dated as of June 2, 2000
10.20 Second Amendment dated December 21, 2000 to the Revolving Credit and
Line of Credit Agreement dated as of February 20, 1998
13.1 Certain portions of the Company's Annual Report to Stockholders
21.1 List of subsidiaries
23.1 Consent of Deloitte & Touche LLP
- ----------------
+ This information appears only in the manually signed original copies of
this report.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the respective exhibit to the Proxy Statement
for the Company's 1995 Annual Meeting of Stockholders.
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on August 12, 1996.
(3) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-39473.
(4) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-54574.
(5) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-70378.
(6) Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on September 6, 1996.
(7) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the year ended December 27, 1997.
(8) Incorporated by reference to the respective exhibit to the Proxy Statement
for the Company's 1997 Annual Meeting of Stockholders.
(9) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the year ended December 28, 1996.
(10) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the year ended December 30, 1999.
(11) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on August 4, 2000.
(12) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on October 31, 2000.
Upon request, the Company will furnish a copy of any exhibit to this
report upon the payment of reasonable copying and mailing expenses.
II-2