Office Depot 2002 Annual Report Download - page 43

Office Depot, Inc. and Subsidiaries 41
Employee Stock Purchase Plan
The Employee Stock Purchase Plan, which was approved by the Company’s
stockholders, effective July 1999, permits eligible employees to purchase
our common stock at 85% of its fair market value. A similar plan is
available to employees in the United Kingdom. Effective April 2002, share
needs under this plan are now satisfied through open market purchases.
However, the Company is authorized to issue up to 1,862,843 shares
under 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
plan on a pretax basis in accordance with the provisions of Section 401(k)
of the Internal Revenue Code. Matching contributions of common stock
that are made into the plan are equivalent to 50% of the first 6% of
an employee’s contributions. However, discretionary matching common
stock contributions in addition to the normal match may be made. A
separate, but identical, retirement savings plan is offered to employees
of 4Sure.com. The Company also has a deferred compensation plan that
permits eligible employees who are limited in the amount they can
contribute to the 401(k) plan to alternatively make tax-deferred contri-
butions of up to 18% of their salary, commissions and bonuses to this
plan. Matching contributions to the deferred compensation plan are
similar to those under our 401(k) retirement savings plan described above.
During 2002, 2001, and 2000, $8.4 million, 4.0 million and 5.8 million,
respectively, was recorded as compensation expense under these programs.
Note J—Capital Stock
Preferred Stock
As of December 28, 2002, there were 1,000,000 shares of $.01 par value
preferred stock authorized of which none are issued or outstanding.
Stockholder Rights Plan
Effective September 4, 1996, the Company adopted a Stockholder
Rights Plan (the “Rights Plan”). Under this Rights Plan, each stockholder
is issued one right to acquire one one-thousandth of a share of Junior
Participating Preferred Stock, Series A at an exercise price of $63.33,
subject to adjustment, for each outstanding share of Office Depot com-
mon stock they own. These rights are only exercisable if a single person
or company were to acquire 20% or more of our outstanding common
stock or if the Company announced a tender or exchange offer that
would result in 20% or more of our common stock being acquired.
If the Company were acquired, each right, except those of the acquirer,
can be exchanged for shares of common stock in the Company with a
market value of twice the exercise price of the right. In addition, if the
Company becomes involved in a merger or other business combination
where (1) the Company was not the surviving company, (2) the Company’s
common stock was changed or exchanged, or (3) 50% or more of the
Company’s assets or earning power was sold, then each right, except
those of the acquirer, and an amount equal to the exercise price of the
right can be exchanged for shares of the Company’s common stock
with a market value of twice the exercise price of the right.
The Company may redeem the rights for $0.01 per right at any time
prior to an acquisition.
Treasury Stock
During 2000, under a program approved by the Board of Directors, the
Company repurchased 35.4 million shares of stock at a total cost of
$300.8 million. In 2001, the Board approved stock repurchases of up to
$50 million per year until cancelled by the Board, subject to their annual
review. Approximately 252,000 shares were purchased under this program
in 2001 for a total cost of $4.2 million. During 2002, 2.9 million shares
were purchased under this program at a total cost of $45.9 million.
Note K—Earnings Per Share
Basic earnings per share is based on the weighted average number
of shares outstanding during each period. Diluted earnings per share
further assumes that the zero coupon, convertible subordinated notes,
if outstanding and dilutive, are converted as of the beginning of the
period and that, under the treasury stock method, dilutive stock options
are exercised. Net earnings under this assumption have been adjusted
for interest on the zero coupon, convertible subordinated notes when
outstanding, net of the related income tax effect.
The following is a summary of the Company’s equity compensation plans:
Number of securities to be issued Number of securities
upon exercise of outstanding Weighted average remaining available
Plan options, warrants, and rights exercise price for future issuance
Long-Term Equity Incentive Plan (including the
Long-Term Incentive Stock Plan)(1) 31,499,632 $14.69 9,436,540
Employee Stock Purchase Plan (ESPP) Not Applicable Not Applicable 1,862,843(2)
Retirement Savings Plans Not Applicable Not Applicable Not Applicable(2)
(1) Outstanding options under the Long-Term Incentive Stock Plan are satisfied upon exercise with available securities from the Long-Term Equity Incentive Plan.
(2) Effective April 2002, the Company now settles share needs under the ESPP, the 401(k) Plan, and related deferred compensation plan, by open market purchases through the
respective plan administrators.