Office Depot 2004 Annual Report Download - page 68

OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
66 |Office Depot 2004 Annual Report
Senior management evaluates the performance of each business segment based on segment operating profit, which is defined
as sales less cost of goods sold, and store and warehouse operating expenses. General and administrative expenses, financing
costs and certain other items currently are not allocated to the business segments because they are viewed as corporate functions
that support all activities. A reconciliation of the measure of segment operating profit to consolidated earnings from continuing oper-
ations before income taxes follows.
(Dollars in thousands) 2004 2003 2002
Segment operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,218,882 $1,067,634 $992,606
(Add)/subtract:
General and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,825 578,840 486,279
Other operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,080 22,809 9,855
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,066 40,609 27,686
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,407 ——
Miscellaneous income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,729) (15,392) (7,183)
Earnings from continuing operations before income taxes and
cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461,233 $ 440,768 $475,969
We sell office products and services through either wholly owned operations or through joint ventures or licensing arrangements,
in Austria, Belgium, Canada, Costa Rica, El Salvador, France, Germany, Guatemala, Hungary, Ireland, Israel, Italy, Japan,
Luxembourg, Mexico, the Netherlands, Poland, Portugal, Spain, Switzerland, Thailand, the United Kingdom and the United States.
There is no single country outside of the United States in which we generate 10% or more of our total revenues. Geographic finan-
cial information relating to our business is as follows (in thousands).
Sales Property and Equipment
2004 2003 2002 2004 2003
United States . . . . . . . . . . . . . . . . . . . . . . $ 9,846,856 $ 9,469,563 $ 9,575,457 $1,055,460 $ 891,305
International . . . . . . . . . . . . . . . . . . . . . . . 3,717,843 2,889,003 1,781,176 407,568 402,450
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,564,699 $12,358,566 $11,356,633 $1,463,028 $1,293,755
NOTE O—Exit Costs and Other Activities
During 2004, we conducted a cost review across all busi-
ness units with the intent of identifying ways to streamline oper-
ations. During the fourth quarter, we announced a series of
initiatives, including consolidating call centers, transferring cer-
tain employees and functions to an outsourcing company, and
reducing staffing levels. Over 1,500 positions were transferred
or eliminated. Additionally, during 2004, our former Chairman
and CEO resigned and received severance payments under his
existing employment agreement. The severance-related costs
associated with these activities totaled $16.6 million, with $2.0
million incurred in North American Retail Division, $2.9 million
in BSG, $2.8 million in the International Group, and $8.9 million
at the corporate level. As of December 25, 2004, approximately
$5.2 million of the severance-related costs remained accrued.
In addition to severance-related costs, we accrued $1.7 million
for lease termination costs which was paid in January 2005.
All of the remaining payments will be made by the end of 2005.
An additional $1.4 million of lease termination costs, $2.7 of
termination benefits, and $6.1 of other exit activity costs are
expected to be recorded in BSG during 2005 as the liabilities
are incurred related to these announced programs.
During 2004, we also relocated one warehouse in Europe
and incurred exit related costs of $13.9 million.