Office Depot 2004 Annual Report Download - page 66

64 |Office Depot 2004 Annual Report
NOTE K—Capital Stock
Preferred Stock
As of December 25, 2004, 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 Office Depot board of directors on September 4, 1996 and
amended on November 25, 2003. The Plan has certain anti-
takeover provisions that may cause substantial dilution to a
person or group that attempts to acquire Office Depot 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 Office Depot were
acquired, each right, except those of the acquirer, shall have the
right to receive the number of shares of common stock in Office
Depot having a then-current market value of twice the exercise
price of the right.
In addition, if Office Depot becomes involved in a merger
or other business combination where (1) Office Depot is not
the surviving company, (2) Office Depot’s common stock is
changed or exchanged, or (3) 50% or more of Office Depot’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 exer-
cise price of the right. In addition, the board of directors has the
option of exchanging all or part of the rights for an equal num-
ber of shares of common stock.
Office Depot may redeem the rights for $0.01 per right at
any time prior to an acquisition.
In response to a shareholder vote at the 2003 annual meet-
ing, 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 Office Depot’s common stock, and if
requested to do so by the holders of at least 10% of Office
Depot’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 condi-
tions on what constitutes a “Qualifying Offer” which are detailed
in our filings with the SEC. The rights will expire on Septem-
ber 16, 2006, unless earlier redeemed or exchanged.
Treasury Stock
The Office Depot board of directors has approved two
common stock repurchase plans, both of which were in effect
during 2004. In 2001, the board approved an annual share
repurchase plan, subject to their annual review, of up to $50 mil-
lion per year until cancelled by the board. Under this plan, we
purchased 3.0 million shares in 2004, at a cost of $50.0 million;
3.2 million shares in 2003, for $50.0 million; and 2.9 million
shares in 2002, for $45.9 million.
In September 2004, the board of directors authorized an
additional $500 million common stock repurchase program to
be completed over the following 12 to 24 months. The $50 mil-
lion annual purchases in each of 2005 and 2006 that would be
available under that program are included in this $500 million
program. At December 25, 2004 approximately 900,000 shares
have been repurchased for $15.6 million under this program.
NOTE L—Earnings Per Share
Basic earnings per share is based on the weighted aver-
age 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) 2004 2003 2002
Basic:
Weighted average
number of common
shares outstanding . . . 311,760 309,699 306,778
Diluted:
Net earnings . . . . . . . . . . $335,504 $273,515 $308,640
Interest expense
related to convertible
notes, net of tax . . . . . . —— 4,795
Adjusted net
earnings............ $335,504 $273,515 $313,435
Weighted average
number of common
shares outstanding . . . 311,760 309,699 306,778
Shares issued upon
assumed conversion
of convertible notes . . . —— 9,033
Shares issued upon
assumed exercise
of stock options ...... 3,865 3,989 6,389
Shares used in
computing diluted
net earnings per
common share. . . . . . . . . 315,625 313,688 322,200
OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)