Office Depot 2008 Annual Report Download - page 15

14
Operating Costs: We operate a large network of stores and delivery centers around the globe. As such, we purchase
significant amounts of fuel needed to transport products to our stores and customers. We also incur significant
shipping costs to bring products from overseas producers to our distribution systems. While we may hedge our
anticipated fuel purchases, the underlying commodity costs associated with this transport activity have been volatile
in recent periods and disruptions in availability of fuel could cause our operating costs to rise significantly to the
extent not covered by our hedges. Additionally, we rely on predictable and available energy costs to light our stores
and operate our equipment. Increases in any of the components of energy costs could have an adverse impact on our
earnings, as well as our ability to satisfy our customers in a cost effective manner. Any of these factors that could
impact the availability or cost of our energy resources could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Possible Changes to Our Global Tax Rate: As a result of our operations in many foreign countries, in addition to
the United States, our global tax rate is derived from a combination of applicable tax rates in the various
jurisdictions in which we operate. Depending upon the sources of our income, any agreements we may have with
taxing authorities in various jurisdictions, and the tax filing positions we take in various jurisdictions, our overall tax
rate may be lower or higher than that of other companies or higher or lower than our tax rates have been in the past.
At any given point in time, we base our estimate of an annual effective tax rate upon a calculated mix of the tax rates
applicable to our company and to estimates of the amount of income likely to be generated in any given geography.
The loss of one or more agreements with taxing jurisdictions, a change in the mix of our business from year to year
and from country to country, changes in rules related to accounting for income taxes, changes in tax laws in any of
the multiple jurisdictions in which we operate or adverse outcomes from the tax audits that regularly are in process
in any of the jurisdictions in which we operate could result in an unfavorable change in our overall tax rate, which
change could have a material adverse effect on our business, financial condition, results of operations and cash
flows.
Regulatory Environment: While businesses are subject to regulatory matters relating to the conduct of their
businesses, including consumer protection laws, advertising regulations, wage and hour regulations and the like,
certain jurisdictions have taken a particularly aggressive stance with respect to such matters and have stepped up
enforcement, including fines and other sanctions. We transact substantial amounts of business in certain such
jurisdictions, and to the extent that our business locations are exposed to what might be termed an overly aggressive
enforcement environment or legal or regulatory systems that authorize or encourage private parties to pursue relief
under so-called private attorney general laws and similar authorizations for private parties to pursue enforcement of
governmental laws and regulations, the resulting fines and exposure to third party liability (such as monetary
recoveries and recoveries of attorneys fees) could have a material adverse effect on our business and results of
operations, including the added cost of increased preventative measures that we may determine to be necessary to
conduct business in such locales.
Compromises of our Information Security: Through our sales and marketing activities, we collect and store
certain personal information that our customers provide to purchase products or services, enroll in promotional
programs, register on our web site, or otherwise communicate and interact with us. We also gather and retain
information about our associates in the normal course of business. We may share information about such persons
with vendors that assist with certain aspects of our business. Despite instituted safeguards for the protection of such
information, we cannot be certain that all of our systems are entirely free from vulnerability to attack. A breach of
our security system resulting in customer or employee personal information being obtained by unauthorized persons
could adversely affect our reputation, disrupt our operations and expose us to claims from customers, financial
institutions, payment card associations and other persons, which could have a material adverse effect on our
business, financial condition and results of operations. In addition, our online operations at www.officedepot.com
depend upon the secure transmission of confidential information over public networks, including information
permitting cashless payments.
Pursuit or Execution of New Business Ventures: Our growth strategy includes expansion via new business
ventures, strategic alliances and acquisitions both in the U.S. and abroad. While we employ several different
valuation methodologies to assess a potential opportunity, we can give no assurance that new business ventures and
strategic alliances will positively affect our financial performance. Acquisitions may result in the diversion of our
capital and our management’s attention from other business issues and opportunities. We may not be able to
assimilate or integrate successfully companies that we acquire, including their personnel, financial systems,