Office Depot 2002 Annual Report Download

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2002 Annual Report
OUR PEOPLE
OUR BRAND

Table of contents

  • Page 1
    OUR PEOPLE OUR BRAND 2002 Annual Report

  • Page 2
    ... and Canada; the Business Services Group Division, reflecting results from all of the Company's North American delivery channels including catalog, e-commerce and contract sales; and its International Division, incorporating operating results from the Company's wholly owned international mail order...

  • Page 3
    ... brand. From the copy center manager or cashier in the retail stores, to the call center representative taking a telephone order, to the warehouse employee filling orders and the driver delivering the products, every Office Depot employee shares a common goal. On any given day, each of us strives...

  • Page 4
    ... growth in four new contract businesses, while adding two new sales forces in Italy and Germany. We added a net of seven new stores in France, made several changes to our Japanese operations and launched nine new European web sites for our Office Depot contract and Viking Direct sales channels. We...

  • Page 5
    ... destination of choice for office products and solutions for all segments of the market. We see opportunities to grow our business across all of our channels worldwide. We plan to leverage our market leadership position in order to capture increased market share and build consumer preference with...

  • Page 6
    ...Manager Pictured far right other retail formats in the northeastern United States, and plans are underway to expand on this novel concept. Furthermore, the Company continued to build the depth and breadth of its private label brands as another way to offer high-quality products at affordable prices...

  • Page 7
    ... has changed for the better since Bruce Nelson has become CEO." -Raquel S. Fernandez/Office Lead Reconciliation Dept. Weston CSC "Office Depot creates an environment where people work together and respect each other. That makes it easy to focus on our customers." -Rich Lettman Director of Credit 5

  • Page 8
    ... Senior Manager Telecommunications, NA Pictured far right The most frequently encountered faces of Office Depot's Business Services Group (BSG) belong to its friendly and knowledgeable sales force, helpful and efficient phone representatives, courteous and service-oriented warehouse and delivery...

  • Page 9
    ... changed me for the better. "The management is always there for us. "It's all about customer service. My clients can see me smile over the phone." -Colleen Kelly Call Center "Office Depot has recognized my abilities and has rewarded me with promotions, salary increases and continuing growth." -Laura...

  • Page 10
    ... Accounts Director Pictured far right "Office Depot is a company with a clear vision and goals, in which the well being of the employees is very important. The values are not just printed on paper, they are being lived." -Arno Wiedefeld Regional Sales Manager German Contract Division Pictured far...

  • Page 11
    ... | OUR BRAND | OUR PEOPLE | "Office Depot is a growth oriented company and there are new challenges constantly, new perspectives arise often and therefore it never gets boring." -Sabine Zwinscher Vice President Marketing Europe "Because of the growth within Europe, several nice opportunities came up...

  • Page 12
    ...attract new customers. Through its philanthropic programs, Office Depot touched the lives of hundreds of thousands of men, women and children around the world. Its financial and in-kind contributions helped to put food on the table for hungry families, prepare youngsters for the school year with new...

  • Page 13
    ..., Office Depot assisted the U.S. Marine Corps Reserve Toys for Tots Program, which benefited from sales of a special commemorative stuffed bear during the holiday season. The Company's partnerships with America's Second Harvest and the Canadian Association of Food Banks resulted in thousands of new...

  • Page 14
    ... per share (3): Basic Diluted (3) $ $ $ $ $ $ Statistical Data: Facilities open at end of period: United States and Canada: Office supply stores Customer service centers Call centers International (4): Office supply stores Customer service centers Call centers 867 24 13 171 20 20 $ 1,217,706...

  • Page 15
    ...North American Retail Division, Business Services Group, and International Division. These segments include multiple sales channels consisting of office supply stores, a contract sales force, Internet sites, and catalog and call centers, all supported by our warehousing and delivery operations. Each...

  • Page 16
    ...171 Opened 19 15 32 Closed 5 4 4 Customer Service Centers (1) International Division Our International Division sells office products and services in 20 countries outside the United States and Canada through Office Depot retail stores, Office Depotா brand and Viking Directா brand direct mail...

  • Page 17
    ... and related products category, which also includes machine supplies, has increased in both years. Sales of office furniture declined in 2002 and 2001, reflecting lower volume and unit prices, as many business customers deferred large purchases because of concerns about the economy. Office Depot...

  • Page 18
    ... products declined 10% in 2002 and 31% in 2001; and business furniture comparable sales declined 6% in 2002 and 13% in 2001. Sales of machine supplies, which includes ink and toner, and the contribution from our copy centers increased in both periods. Sales and margin of core supplies and paper...

  • Page 19
    ... end of 2000 was focused on the North American Retail Division. As a result of the business review, we recorded $103.8 million as facility closure costs in 2000, primarily relating to lease obligations for closed stores, net of anticipated sublease income. During both 2002 and 2001, our obligation...

  • Page 20
    ... new web sites. We expect to continue to grow each sales channel in our European operations. Although the Office Depotா brand continues to grow as a percentage of the total sales in this segment, our Viking Office Productsா brand still accounts for the vast majority of our international business...

  • Page 21
    ... inventories that will not be financed by our vendors. In addition, our average new office supply store requires pre-opening expenses of approximately $0.2 million. We also plan to further consolidate Office Depot and Viking CSCs and expand our European Business Service Division into new countries...

  • Page 22
    ...its common stock each year, subject to their annual review, until rescinded by the Board. The repurchased shares are to be added to the Company's treasury shares and will effectively offset a portion of the Company's near-term requirements for its stock option plans. Under this program, we purchased...

  • Page 23
    ... advertising arrangements can change between years. These arrangements can be influenced by increases or reductions in inventory purchases compared to company plans and programs offered by the vendors. While there are long-standing volume and pricing conventions in the office products business...

  • Page 24
    ... pressures on pricing, product selection and services provided. Many of these retail competitors, including discounters, warehouse clubs, and even drug stores and grocery chains, carry at least limited numbers of basic office supply products, including ink jet and toner cartridges, printer paper and...

  • Page 25
    ... Division and Business Services Group slightly higher during the first and third quarters of each year, and sales in our International Division slightly higher in the first and fourth quarters. New Accounting Standards In July 2001, the Financial Accounting Standards Board (FASB) issued Statement...

  • Page 26
    ...-Contract and Commercial: We compete with a number of contract stationers, mail order and Internet operators and retailers who supply office products and services to large and small businesses, both nationally and internationally. In order to achieve and maintain expected profitability levels...

  • Page 27
    ... a number of factors, including the opening of additional Office Depot stores; the expansion of our contract stationer business in new and existing markets; competition from other office supply chains, mass merchandisers, warehouse clubs, computer stores, other contract stationers and Internet-based...

  • Page 28
    ... sales in international locations may not progress at the same rate as in North America. Global Sourcing of Products/Private Label: In recent years, we have substantially increased the number and types of products which we sell under our own Office Depotா, Vikingீ, and other private label...

  • Page 29
    ... Public Company Accounting Oversight Board. New regulations may dramatically change the manner in which the Company is required to report its results of operations, balance sheet items and other aspects of financial accounting in the future. While Office Depot believes that it has been at all times...

  • Page 30
    ... the appointment of our new Chief Executive Officer in July 2000, we have continued to evolve our management organization to better address the future goals of our Company. In 2002, we filled key positions by adding Executive Vice Presidents in the areas of Information Technology, Merchandising and

  • Page 31
    Independent Auditors' Report To the Board of Directors of Office Depot, Inc. We have audited the accompanying consolidated balance sheets of Office Depot, Inc. (the "Company") as of December 28, 2002 and December 29, 2001 and the related consolidated statements of earnings, stockholders' equity and ...

  • Page 32
    ... long-term debt Total current liabilities Deferred income taxes and other credits Long-term debt, net of current maturities Zero coupon, convertible subordinated notes Commitments and contingencies Stockholders' equity: Common stock-authorized 800,000,000 shares of $.01 par value; issued 393,905,052...

  • Page 33
    ...1,017 49,332 0.16 0.16 0.16 0.16 Sales Cost of goods sold and occupancy costs Gross profit Store and warehouse operating and selling expenses General and administrative expenses Facility closure costs Other operating expenses Operating profit Other income (expense): Interest income Interest expense...

  • Page 34
    ... on investment securities, net of tax Comprehensive (loss) Acquisition of treasury stock Grant of long-term incentive stock Cancellation of long-term incentive stock Exercise of stock options (including income tax benefits) Issuance of stock under employee stock purchase plans Matching contributions...

  • Page 35
    ... on inventories and receivables Net earnings from equity method investments Accreted interest on zero coupon, convertible subordinated notes Employee stock benefit plans Deferred income taxes Net loss (gain) on investment securities Loss (gain) on disposal of property and equipment Facility closure...

  • Page 36
    ... United States and Canada under the Office Depotா, Viking Office Productsா, Viking Directா, and 4Sure.comா brand names. Products and services are offered through wholly owned retail stores, contract businessto-business sales relationships, commercial catalogs and multiple web sites providing...

  • Page 37
    ... on quoted market prices. Interest Rate Swaps and Foreign Currency Contracts: The fair values of our interest rate swaps and foreign currency contracts are the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current interest and exchange rates...

  • Page 38
    ... is recognized at the point of sale for retail transactions and at the time of successful delivery for contract, catalog and Internet sales. An allowance for sales returns has been recorded based on past experience. Revenue from sales of extended warranty service plans is either recognized at the...

  • Page 39
    ... number of facilities were closed, assets were written down and employees were severed. Separate from this review, other charges and credits were recorded so that the net charge recorded for the year 2000 totaled $260.6 million. Activity relating to the business review included facility closure...

  • Page 40
    ... 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 28, 2002, are as follows: (Dollars...

  • Page 41
    ...2001 and 2000. Guarantee of Private Label Credit Card Receivables: Office Depot has private label credit card programs that are managed by a financial services company. The Company acts as the guarantor of all loans between our commercial customers and the financial services company. The difference...

  • Page 42
    ... the year. Tax benefits received in excess of compensation expense recorded on nonqualified stock options are credited to additional paid-in capital. Long-Term Incentive Stock Plan Prior to our merger with Viking Office Products ("Viking") in 1998, Viking's Long-Term Incentive Stock Plan allowed...

  • Page 43
    ... this plan. Retirement Savings Plans The Office Depot retirement savings plan, which was approved by the Board of Directors, allows eligible employees to contribute up to 18% of their salary, commissions and bonuses, up to $11,000 annually, to the The following is a summary of the Company's equity...

  • Page 44
    ... M-Segment Information Office Depot operates in three reportable segments: North American Retail Division, Business Services Group ("BSG"), and International Division. Each of these segments is managed separately primarily because it serves different customer groups. The accounting policies for each...

  • Page 45
    ... operations before income taxes The Company sells office products and services through either wholly owned operations or through joint ventures or licensing arrangements, in Austria, Belgium, Canada, Costa Rica, France, Germany, Guatemala, Hungary, Ireland, Israel, Italy, Japan, Luxembourg, Mexico...

  • Page 46
    ...nominee security position listings. Direct Stock Purchase Plan New investors and current stockholders of record may acquire shares of Office Depot's common stock through the Company's direct stock purchase plan. Enrollment materials, including the prospectus, are available on the Company's web site...

  • Page 47
    ... Business Direct REX CIAVOLA, JR. Senior Vice President Global Creative Services & Production GRAHAM CUNDICK Senior Vice President European Merchandising & Marketing MARK HOLIFIELD Senior Vice President Supply Chain Management TIMOTHY TOEWS Senior Vice President Information Technology-Europe...

  • Page 48
    2200 Old Germantown Road Delray Beach, FL 33445 (561) 438-4800 www.officedepot.com Printed on Recycled Paper