Office Depot 2003 Annual Report Download - page 53

OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
payments and certain investment assumptions. This informa-
tion is not available for the acquired plans.
The purchase and sale agreement related to the Guilbert
acquisition included a provision whereby the seller is required
to pay to Office Depot the amount of unfunded benefit obliga-
tion as measured at a future date, not to exceed five years fol-
lowing the acquisition. Because of the inability to reasonably
estimate the amount of that future payment, no receivable has
been recorded at December 27, 2003. The future settlement
will reduce goodwill when received.
NOTE K—Capital Stock
Preferred Stock
As of December 27, 2003, there were 1,000,000 shares of
$0.01 par value preferred stock authorized of which none
were issued or outstanding.
Stockholder Rights Plan
Our stockholder rights plan (“ the Plan”) was adopted by
the Board of Directors on September 4, 1996 and amended on
November 25, 2003. The Plan has certain anti-takeover provi-
sions that may cause substantial dilution to a person or group
that attempts to acquire the Company on terms not approved
by the Board of Directors. Under the 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 $95.00, subject to adjustment, for each outstanding
share of Office Depot common stock they own. These rights
are only exercisable if a single person or company acquires
20% or more of our outstanding common stock or if an
announced tender or exchange offer would result in 20% or
more of our common stock being acquired. If the Company
were acquired, each right, except those of the acquirer, shall
have the right to receive the number of shares of common
stock in the Company having a then-current 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
is not the surviving company, (2) the Company’s common
stock is changed or exchanged, or (3) 50% or more of the
Company’s assets or earning power are sold, then each right,
except those of the acquirer, will be exercisable for common
stock of the acquiring corporation having a market value of
twice the exercise price of the right. In addition, the Board of
Directors has the option of exchanging all or part of the rights
for an equal number of shares of common stock.
The Company may redeem the rights for $0.01 per right
at any time prior to an acquisition.
In response to a shareholder vote at the Company’s 2003
Annual Meeting, the Board of Directors adopted certain
amendments to the Plan, which became effective on November
25, 2003. Under the terms of this amendment, in the event of
a cash or marketable securities offer for all of the Company’s
common stock, and if requested to do so by the holders of at
least 10% of the Company’s issued and outstanding stock, the
Board of Directors shall either call a special stockholder
meeting within 60 days to allow a vote on a resolution to
redeem the rights or the rights automatically will be redeemed.
There are certain other conditions on what constitutes a
“ Qualifying Offer”which are detailed in the Company’s filings
on Form 8-K/A and Form 8-K with the SEC on November 25,
2003. The rights will expire on September 16, 2006, unless
earlier redeemed or exchanged.
Treasury Stock
The Board of Directors has approved stock repurchases
of up to $50 million per year until cancelled by the Board,
subject to their annual review. Under these plans, the shares
and dollar amount of repurchases for the indicated years were:
2003—3.2 million shares, for $50.1 million; 2002—2.9 mil-
lion shares, for $45.9 million and; 2001—252,000 shares, for
$4.2 million.
NOTE L—Earnings Per Share
Basic earnings per share is based on the weighted average
number of shares outstanding during each period. Diluted
earnings per share reflects the impact of assumed exercise of
dilutive stock options and, prior to redemption in 2002, the net
impact of convertible subordinated notes.
The information required to compute basic and diluted
net earnings per share is as follows:
(In thousands) 2003 2002 2001
Basic:
Weighted average
number of common
shares outstanding . . . . . 309,699 306,778 298,054
Diluted:
Net earnings . . . . . . . . . $276,295 $310,708 $201,043
Interest expense related
to convertible notes,
net of tax. . . . . . . . . . —4,795 7,238
Adjusted net earnings . . $276,295 $315,503 $208,281
Weighted average
number of common
shares outstanding . . 309,699 306,778 298,054
Shares issued upon
assumed conversion
of convertible notes . . —9,033 13,846
Shares issued upon
assumed exercise of
stock options. . . . . . . 3,989 6,389 4,524
Shares used in computing
diluted net earnings
per common share . . . . 313,688 322,200 316,424
51 Office Depot 2003 / Form 10-K