Office Depot 2003 Annual Report Download - page 49

OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
been recorded in accumulated other comprehensive income on
the accompanying Consolidated Balance Sheet as of December
27, 2003. The proceeds on the treasury rate lock will be amor-
tized over the term of the notes, reducing the effective interest
rate to the Company on the Notes to 5.87%.
In April 2002, the Company replaced its 364-day credit
agreement, domestic credit facility, and its yen facility with a
single credit facility through a syndicate of banks. This new
revolving credit facility provides for borrowings in the aggre-
gate amount of $600 million, including up to $150 million for
issuance of standby and trade letters of credit. This agreement
is a three-year, unsecured revolving credit facility maturing on
April 24, 2005, though the Company may enter into a new
arrangement before this agreement expires. Borrowings up to
the equivalent of $100 million are allowed in U.S. dollars,
euro, British pounds, or yen and will bear interest at a bench-
mark variable rate plus a spread determined at the time of
usage. The remaining $500 million is available in U.S. dollars.
For U.S. dollar borrowings, interest can be based on the then-
current London Interbank Offering Rate (LIBOR) or U.S.
prime rate, at the Company’s election. For international borrow-
ings, interest will be based on the then-current Eurocurrency
rate. The Company can specify the benchmark rates for peri-
ods of one, two, three or six months. Based on the Company’s
current credit ratings, all borrowings would include a spread
of 0.925%. The facility contains restrictive covenants relating
to various financial ratios. As of December 27, 2003, yen bor-
rowings equivalent to $100.1 million were outstanding with
an average effective interest rate of 0.988%, and outstanding
letters of credit totaled $72.8 million.
In July 2001, the Company issued $250 million of seven
year, non-callable, senior subordinated notes due on July 15,
2008. The notes have a coupon interest rate of 10.00%,
payable semi-annually on January 15 and July 15. In August
2001, the Company entered into LIBOR-based variable rate
swap agreements to convert the fixed interest rate on these
notes. In September 2002, the Company terminated these
interest rate swap agreements and received proceeds totaling
$18.8 million. The benefit associated with these proceeds is
being amortized over the remaining term of the notes, lower-
ing the effective interest rate on this borrowing to 8.7%.
During 2002, the Company redeemed, before scheduled
maturity, all outstanding shares of its zero coupon, convertible
subordinated notes for $243.3 million, representing the original
issue price plus accrued interest.
The Company is in compliance with all restrictive
covenants included in the above debt agreements.
Under capital lease agreements, the Company is required
to make certain monthly, quarterly or annual lease payments
through 2020. The aggregate minimum capital lease payments
for the next five years and beyond, with their present value as
of December 27, 2003, are as follows:
December 27,
(Dollars in thousands) 2003
2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,766
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,270
2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,490
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,083
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,773
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,113
Total minimum lease payments . . . . . . . . . . . . . 120,495
Less amount representing interest at
5.00% to 10.27%. . . . . . . . . . . . . . . . . . . . . . . 39,909
Present value of net minimum lease payments . . 80,586
Less current portion . . . . . . . . . . . . . . . . . . . . . . 11,219
Long-term portion. . . . . . . . . . . . . . . . . . . . . . . . $ 69,367
NOTE H—Income Taxes
The income tax provision related to earnings from continuing
operations consisted of the following:
(Dollars in thousands) 2003 2002 2001
Current:
Federal. . . . . . . . . . . $70,802 $114,420 $ 66,074
State. . . . . . . . . . . . . (3,753) 14,181 12,904
Foreign. . . . . . . . . . . 42,915 29,127 33,122
Deferred . . . . . . . . . . . 33,052 9,994 196
Total provision for
income taxes . . . . . . $143,016 $167,722 $112,296
The components of earnings from continuing operations
before income taxes and cumulative effect of accounting
change consisted of the following:
(Dollars in thousands) 2003 2002 2001
North America . . . . . . . $227,962 $352,645 $176,711
International . . . . . . . . 217,078 126,560 137,242
Total. . . . . . . . . . . . . $445,040 $479,205 $313,953
47 Office Depot 2003 / Form 10-K