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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 29, 2001
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 or organization) (I.R.S. Employer 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 1, 2002 was approximately $5,787,894,988.
As of March 1, 2002, the Registrant had 310,510,285 shares of Common
Stock outstanding.
Documents Incorporated by Reference:
Portions of our Annual Report to Stockholders for the fiscal year ended December
29, 2001 are incorporated by reference in Parts I and II, and the Proxy
Statement, to be mailed to stockholders on or about March 25, 2002 for the
Annual Meeting to be held on April 25, 2002, is incorporated by reference in
Part III.
PART I
ITEM 1. BUSINESS.
Office Depot Inc., together with our subsidiaries, ("Office Depot" or the
"Company") 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). Over the past few years, 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. During the late 1990s,
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 have developed a presence in the contract stationer and Internet 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 domestic stores and warehouses in order to
improve customer service and efficiencies by having better "in stock" positions
for products our customers purchase most frequently. During 2001, the SKU
reduction was completed. Our domestic office supply superstores now stock
approximately 7,900 SKUs, including variations in color and size, and our
domestic Customer Service Centers ("CSCs") stock approximately 10,200 SKUs.
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 CSCs, cross-dock facilities or stores. 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 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 further enhanced the shopping experience
with the installation of new lighting, signage, and broadband Internet
capabilities across our entire North American Retail 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
other services. Through our partnership with UPS, we established UPS shipping
centers within our North American Retail 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.
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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 Office Depot(R) and Viking Office Products(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. This 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 2001, we mailed approximately 307 million copies of Office Depot(R) and
Viking(R) brand catalogs to existing and prospective customers. During 2000 and
1999, we mailed approximately 305 million and 296 million copies, respectively.
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 products sold
in stores and through catalogs. 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, New Jersey,
Arizona 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
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
3
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. Worldwide, we
offer a total of 15 business-to-business electronic commerce sites. These 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 1, 2002, we had approximately 45,000 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.
INFORMATION INCORPORATED BY REFERENCE
The following information is included in Exhibit 13. Such information is set
forth in Office Depot's 2001 Annual Report to Stockholders and is incorporated
herein by reference:
General description of our business segments - Pages 18-20
Financial information about segments - Pages 20-25 and 50-51
Revenues by product group - Page 20
Seasonality of the business - Page 29
Financial information about geographic areas - Page 51
4
EXECUTIVE OFFICERS OF THE REGISTRANT
BRUCE NELSON AGE: 57
Mr. Nelson has served as Chief Executive Officer of Office Depot, Inc. since
July 17, 2000 and Chairman of our Board of Directors since December 29, 2001.
Previously, he served both as President of Office Depot International and as
President of our subsidiary, Viking Office Products, Inc. He has been one of our
directors since he joined us in August 1998. From January 1996 until August
1998, he served as President and as a director of Viking. From July 1995 until
January 1996, Mr. Nelson was Chief Operating Officer of Viking, and from January
1995 until July 1995, he was Executive Vice President of Viking. From 1990 until
July 1994, Mr. Nelson was President and Chief Executive Officer of BT Office
Products USA. He had previously worked for over 22 years at Boise Cascade Office
Products in a number of executive positions.
JERRY COLLEY AGE: 49
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: 48
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 Dunn & Bradstreet Corporation.
ROLF Van KALDEKERKEN AGE: 58
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.
CHARLES E. BROWN AGE: 49
Mr. Brown has been our Executive Vice President and Chief Financial Officer
since October 2001. Prior to assuming that position, Mr. Brown was 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.
JOCELYN CARTER-MILLER AGE: 44
Ms. Carter-Miller joined our Company in February 2002 as Executive Vice
President, Marketing, and Chief Marketing Officer. From 1992 to 2002, she was
employed by Motorola, Inc. in various positions, including Corporate Vice
President/Chief Marketing Officer and in various divisional capacities. From
1983 to 1991, Ms. Carter-Miller was employed by Mattel, Inc. in various
marketing positions, including Vice President, Marketing and Product Development
from 1987 to 1991. Ms. Carter-Miller is also a director of Principal Financial
Group, Inc., a publicly traded company.
JAY CROSSON AGE: 51
Mr. Crosson has been our Executive Vice President, Human Resources since June
2001. From November 2000 until June 2001, he served as Senior Vice President,
Human Resources and from July 2000 until November 2000, he was our Senior Vice
President, HR Operations. He joined our Company in November 1997 as Vice
President of Human Resources (Stores Division). Prior to joining our Company,
Mr. Crosson served in various officer level human resources positions with
Sherwin-Williams Company, Cleveland, Ohio.
DAVID C. FANNIN AGE: 56
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
5
August 1998. In connection with his tenure at Sunbeam Corporation, Mr. Fannin
was the subject of administrative proceedings brought by the U.S. Securities
and Exchange Commission with respect to Section 17(a)(3) of the Securities Act
of 1933. These proceedings culminated in Mr. Fannin's consent in May 2001
(without admitting or denying any liability) to the entry of a Commission
cease-and-desist order.
PATRICIA MORRISON AGE: 42
Ms. Morrison joined our Company in January 2002 as Executive Vice President and
Chief Information Officer. From 2000 to December 2001, she was Vice
President-Information Systems & Chief Information Officer of Quaker Oats
Company. From 1997 to 2000, she was employed by the General Electric Company, as
Chief Information Officer of GE Industrial Systems (1998-2000) and Chief
Information Officer, GE Electrical Distribution & Control (1997-1998). Prior to
her employment at GE, Ms. Morrison was employed by Procter & Gamble Company from
1981 to 1997, in various positions, including Manager-Management Systems for the
Cosmetics & Fragrance Division (1995-1997); Associate Director - Center for
Excellence (1993-1995) and Associate Director, U.S. Finance & Accounting Systems
(1992-1993).
JAMES A. WALKER AGE: 45
Mr. Walker has been Senior Vice President, Finance, and Controller since October
2001. Prior to assuming that position, Mr. Walker served as Vice President,
Retail Stores Group Finance from 1999 until 2001. From May 1996 until February
1999, when he joined Office Depot, Mr. Walker served as Vice President,
Financial Planning for Advantica Restaurants, Inc. (operator of
Denny's(R)Restaurants); from May 1991 until May 1996, Mr. Walker was employed by
PepsiCo, Inc. in various capacities in the finance and strategic planning areas.
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 2002 Annual Meeting of Stockholders.
6
ITEM 2. PROPERTIES.
As of March 1, 2002, we operate 822 office supply stores in 44 states and the
District of Columbia, 35 office supply stores in five Canadian provinces and 144
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 24 CSCs in 18 U.S. states and 24 CSCs in 13 countries outside of the
United States. The following table sets forth the locations of these facilities.
STORES
- -------------------------------------------------------------------------------------------------------------
Stores
State/country # State/country # State/country #
- ------------- --- ------------- -- ------------- --
UNITED STATES:
Alabama 15 Kansas 8 North Dakota 2
Alaska 2 Kentucky 13 Ohio 11
Arizona 3 Louisiana 27 Oklahoma 14
Arkansas 10 Maryland 14 Oregon 15
California 130 Michigan 19 Pennsylvania 9
Colorado 26 Minnesota 10 South Carolina 14
Delaware 1 Mississippi 12 South Dakota 1
District of Columbia 2 Missouri 19 Tennessee 23
Florida 88 Montana 2 Texas 104
Georgia 38 Nebraska 5 Utah 4
Hawaii 3 Nevada 12 Virginia 18
Idaho 5 New Jersey 5 Washington 28
Illinois 33 New Mexico 4 West Virginia 3
Indiana 17 New York 13 Wisconsin 11
Iowa 3 North Carolina 25 Wyoming 1
---
Total United States 822
CANADA: FRANCE 30
Alberta 8 HUNGARY 3
British Columbia 9 ISRAEL 23
Manitoba 3 JAPAN 10
Ontario 13 MEXICO 61
Saskatchewan 2 POLAND 15
--- THAILAND 2
Total Canada 35 ---
Total Outside the 144
United States
CSCS
- -----------------------------------------------------------------------------------------------------------
Stores
State/country # State/country # State/country #
- ------------- --- ------------- -- ------------- --
UNITED STATES:
Arizona 1 Massachusetts 1 AUSTRALIA 3
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 3
Georgia 1 Ohio 1 THE NETHERLANDS 1
Illinois 1 Texas 2 IRELAND 1
Louisiana 1 Utah 1 ITALY 1
Maryland 2 Washington 1 JAPAN 2
MEXICO 2
POLAND 3
SWITZERLAND 1
UNITED KINGDOM 3
---
Total United States 24 Total Outside the 24
United States
7
Most of our facilities are leased or subleased, with lease terms (excluding
renewal options) expiring in various years through 2020, except for the 76
facilities and our corporate offices and systems data center, which we own. Our
owned facilities are located in 18 states, primarily in Florida, Texas and
California; two Canadian provinces; the United Kingdom; the Netherlands;
Australia; Mexico and France.
We operate through retail stores under the Office Depot(R) and The Office
Place(R) (in Ontario, Canada) names, and via the Internet, under 4Sure.com(R),
Computers4Sure.com(R) and Solutions4Sure.com(R). Our contract and catalog
businesses operate under the names Office Depot(R), Viking Office Products(R),
Viking Direct(R) and Sands & McDougall(TM).
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
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.
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 1, 2002, there were 3,872 holders of record of our
common stock. The last reported sale price of the common stock on the NYSE on
March 1, 2002 was $19.00.
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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
---- ---
2001
First Quarter $10.200 $7.125
Second Quarter 10.650 8.250
Third Quarter 14.250 9.740
Fourth Quarter 18.580 13.330
2000
First Quarter $14.875 $9.875
Second Quarter 14.750 6.000
Third Quarter 8.313 5.875
Fourth Quarter 8.750 6.000
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 29,
2001, December 30, 2000, December 25, 1999, December 26, 1998 and December 27,
1997. This information is set forth in our Annual Report to Stockholders for the
fiscal year ended December 29, 2001 (on page 17) 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 29, 2001 (on pages 18-32) 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 31, 2001 (on pages 28-29) 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 29, 2001 and December 30, 2000 and for the fiscal years ended December
29, 2001, December 30, 2000 and December 25, 1999. This information is set forth
in our Annual Report to Stockholders for the fiscal year ended December 29, 2001
(on pages 34-51) 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.
None.
9
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 2002 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 2002 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 2002 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 2002 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to such contractual relationships is incorporated
herein by reference to the information under the captions "CEO Compensation" and
"Contractual Arrangement with our Vice-Chairman, Irwin Helford" in the Proxy
Statement for our 2002 Annual Meeting of Stockholders.
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 29, 2001 except those disclosed in our 2001 Quarterly
Reports on Form 10-Q, and the following report on Form 8-K
filed in the fourth quarter ended December 29, 2001.
1. The Company filed a report dated November 28, 2001,
which reported under Items 7 and 9 regarding a press
release with respect to mid-quarter results for the
fourth quarter of 2001.
10
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 19th day of
March 2002.
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 19, 2002.
Signature Capacity
--------- --------
/s/ M. Bruce Nelson Chief Executive Officer (Principal Executive
- ---------------------------- Officer) and Chairman of the Board
M. Bruce Nelson
/s/ Irwin Helford Vice Chairman and Director
- ----------------------------
Irwin Helford
/s/ Charles E. Brown Executive Vice President, Finance and Chief
- ---------------------------- Financial Officer (Principal Financial Officer)
Charles E. Brown
/s/ James A. Walker Senior Vice President, Finance and Controller
- ---------------------------- (Principal Accounting Officer)
James A. Walker
/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/ David I. Fuente Director
- ----------------------------
David I. Fuente
/s/ Brenda J. Gaines Director
- ----------------------------
Brenda J. Gaines
/s/ Bruce S. Gordon Director
- ----------------------------
Bruce S. Gordon
/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
11
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 29, 2001.
F-1
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. as
of December 29, 2001 and December 30, 2000 and for each of the three years in
the period ended December 29, 2001, and have issued our report thereon dated
February 13, 2002; such consolidated financial statements and report are
included in the Company's Annual Report to Stockholders for the fiscal year
ended December 29, 2001 and are incorporated herein by reference. Our audits
also included the financial statement schedule of Office Depot, Inc. 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 13, 2002
F-2
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.
SCHEDULE II
OFFICE DEPOT, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
- -------- ------------ ------------- ----------------- ----------
Deductions --
Balance at Additions -- Write-offs, Balance at
Beginning of Charged to Payments and End of
Description Period Expense Other Adjustments Period
- ----------- ------------ ------------- ----------------- ----------
Allowance for Doubtful
Accounts:
2001 $34,461 $23,475 $25,254 $32,682
2000 27,736 30,448 23,723 34,461
1999 25,927 22,940 21,131 27,736
Accrued Merger Costs:
2001 $ 3,920 $ 4,401 $ 3,417 $ 4,904
2000 21,268 6,146 23,494 3,920
1999 40,832 26,035 45,599 21,268
S-1
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Exhibit Page+
- ------ ------- ------------
3.1 Restated Certificate of Incorporation, as amended to date 1
3.2 Bylaws 13
4.1 Form of Certificate representing shares of Common Stock 2
4.2 Form of Indenture (including form of LYON(R)) between the Company and The Bank of 3
New York, as Trustee
4.3 Form of Indenture (including form of LYON(R)) between the Company and Bankers 4
Trust Company, as Trustee
4.4 Rights Agreement dated as of September 4, 1996 between Office Depot, Inc. and 5
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 20, 1998 by 6
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* 7
10.03 1997-2001 Office Depot, Inc. Designated Executive Incentive Plan* 6
10.04 Form of Indemnification Agreement, dated as of September 4, 1996, by and 8
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
10.05 Executive Part-time Employment Agreement, dated as of September 30, 1999, by and 9
between Office Depot, Inc. and Irwin Helford
10.06 Revolving Credit Agreement dated as of May 10, 2001 by and among Office Depot, 12
Inc. and Suntrust Bank, individually and as Administrative Agent; Solomon Smith
Barney, Inc. (SSBI) and Bank One, N.A., as joint lead arrangers, SSBI as sole
bookrunner; Citibank, N.A., individually and as sole Syndication Agent; Bank
One, N.A., individually and as Documentation Agent; and BNP Paribas and Wells
Fargo Bank, N.A. individually and as Co-Documentation Agents and First Union
National Bank, Fleet National Bank and the Royal Bank of Scotland. (Exhibits
to the Revolving Credit Agreement have been omitted, but a copy may be obtained
free of charge upon request to the Company)
10.07 Executive Severance Agreement, including Release and Non-competition Agreement, 10
dated September 19, 2000 by and between the Company and David I. Fuente
(schedules and exhibits omitted).
10.08 Executive Retirement Agreement dated July 17, 2000 by and between the Company 10
and Barry J. Goldstein (Attachment A omitted).
10.09 Executive Employment Agreement dated January 30, 2001 by and between the 11
Company and Jerry Colley
10.10 Change of Control Agreement, dated as of January 30, 2001, by and between the 11
Company and Jerry Colley
10.11 Change of Control Agreement, dated as of May 28, 1998, by and between the 11
Company and Charles E. Brown
II-1
Sequentially
Exhibit Numbered
Number Exhibit Page+
- ------ ------- ------------
10.12 Executive Employment Agreement dated July 25, 2000 by and between the Company 11
and Robert J. Keller
10.13 Change of Control Agreement, dated as of July 25, 2000, by and between the 11
Company and Robert J. Keller
10.14 First Amendment dated December 21, 2000 to the Revolving Credit Agreement dated 11
as of June 2, 2000
10.15 Second Amendment dated December 21, 2000 to the Revolving Credit and Line of 11
Credit Agreement dated as of February 20, 1998
10.16 Executive Employment Agreement dated October 8, 2001 by and between the Company
and Charles E. Brown
10.17 Executive Employment Agreement including Change of Control Agreement dated as
of December 29, 2001 by and between the Company and M. Bruce Nelson
10.18 Consulting Agreement dated as of March 1, 2002 by and between the Company and
Irwin Helford
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 respective exhibit to the Company's
Registration Statement No. 33-39473.
(3) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-54574.
(4) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-70378.
(5) Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on September 6, 1996.
(6) Incorporated by reference to the respective exhibit to the Company's
Annual Report on Form 10-K for the year ended December 27, 1997.
(7) Incorporated by reference to the respective exhibit to the Proxy Statement
for the Company's 1997 Annual Meeting of Stockholders.
(8) Incorporated by reference to the respective exhibit to the Company's
Annual Report on Form 10-K for the year ended December 28, 1996.
(9) Incorporated by reference to the respective exhibit to the Company's
Annual Report on Form 10-K for the year ended December 25, 1999.
(10) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on October 31, 2000.
(11) Incorporated by reference to the respective exhibit to the Company's
Annual Report on Form 10-K for the year ended December 30, 2000.
(12) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on July 28, 2001.
(13) Incorporated by reference to the Company's Quarterly Report on Form 10-Q,
filed with the Commission on November 2, 2001.
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