Office Depot 2011 Annual Report Download

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ÈAnnual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
or
Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-10948
Office Depot, Inc.
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6600 North Military Trail, Boca Raton, Florida 33496
(Address of principal executive offices) (Zip Code)
(561) 438-4800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on
which registered
Common Stock, par value $0.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ÈNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days: Yes ÈNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files): Yes ÈNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer” “accelerated filer,” and “smaller reporting company “ in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ÈAccelerated filer Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No È
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 25, 2011 (based on the closing market price on
the Composite Tape on June 24, 2011) was approximately $1,155,715,383 (determined by subtracting from the number of shares outstanding
on that date the number of shares held by affiliates of Office Depot, Inc.).
The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At February 15, 2012, there were
280,853,676 outstanding shares of Office Depot, Inc. Common Stock, $0.01 par value.

Table of contents

  • Page 1
    ...Address of principal executive offices) 59-2663954 (I.R.S. Employer Identification No.) 33496 (Zip Code) (561) 438-4800 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which registered New York Stock Exchange...

  • Page 2
    ... Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Directors, Executive Officers and Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 3
    ... American Retail Division, North American Business Solutions Division and International Division. Sales are processed through multiple channels, consisting of office supply stores, a contract sales force, an outbound telephone account management sales force, internet sites, direct marketing catalogs...

  • Page 4
    North American Business Solutions Division Our North American Business Solutions Division sells nationally branded and our own brand office supplies, technology products, furniture and services by means of a dedicated sales force, through catalogs and electronically through our internet sites. We ...

  • Page 5
    ... for Europe in The Netherlands and for Asia in Hong Kong. Our International Division sells office products and services through direct mail catalogs, contract sales forces, internet sites and retail stores, using a mix of company-owned operations, joint ventures, licensing and franchise agreements...

  • Page 6
    ... Open at End of Period 2009 ...2010 ...2011 ...(3) 43 39 26 1 1 1 5 14(3) - 39 26 27 10 of these locations relate to the deconsolidation of Office Depot India. Merchandising Our merchandising strategy is to meet our customers' needs by offering a broad selection of nationally branded office...

  • Page 7
    ... Service. In addition to the in-store locations, we operate nine regional print facilities, which support copy and print orders taken in our North American Retail and North American Business Solutions Divisions. We also offer copy and print services to our customers in Europe through our e-commerce...

  • Page 8
    ... basis to North America. Outside of the U.S., we sell through contract and catalog channels in 17 countries and operate retail stores in four countries through wholly-owned or majority-owned entities. Additionally, our International Division provides office products and services in 41 countries...

  • Page 9
    ... President and Director of Human Resources for National City Bank. Farla Efros - Age: 39 Ms. Efros was appointed as Executive Vice President and Chief Merchandising Officer for Office Depot in January 2012. Ms. Efros previously served as Interim Head of Merchandising for the company since July 2011...

  • Page 10
    ... was appointed President, International in November 2011 after serving as Executive Vice President, Corporate Strategy and New Business Development since July 2011 and as President, North American Business Solutions since July 2007. Prior to joining Office Depot, Mr. Schmidt spent 11 years with the...

  • Page 11
    ... time and expense without any assurance that we will win a contract. Our ability to compete successfully for and retain business with the federal and various state and local governments is highly dependent on cost-effective performance and is also sensitive to changes in national and international...

  • Page 12
    ...identify new customers and provide desired products and personalized customer service to existing customers. Changes in factors, such as overall unemployment levels, local competition for qualified personnel, prevailing wage rates, changes in employment law, as well as rising employee benefits costs...

  • Page 13
    ... 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...

  • Page 14
    ...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. This may include names, addresses, phone numbers...

  • Page 15
    ...This may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their common stock as part of a sale of our company. We also entered into a related Investor Rights Agreement pursuant to which we granted certain...

  • Page 16
    ...Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico South Carolina South Dakota Tennessee Texas Utah Virginia Washington West Virginia Wisconsin Wyoming TOTAL UNITED STATES INTERNATIONAL FRANCE HUNGARY SOUTH KOREA SWEDEN TOTAL INTERNATIONAL 11 7 9 39...

  • Page 17
    ... affect our financial position, results of our operations or cash flows. On April 6, 2011, a putative class action lawsuit was filed against the company and certain current and former executive officers alleging violations of the Securities Exchange Act of 1934 and seeking damages, fees, costs 15

  • Page 18
    ... enacted in 2009. As a result, on April 6, 2011, the company restated its financial results to revise the accounting treatment regarding its original tax position. The periods covered by the restatement are the fiscal year ended December 25, 2010 and each of the quarters ended June 26, 2010 and...

  • Page 19
    ..., Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "ODP." As of the close of business on January 28, 2012, there were 6,917 holders of record of our common stock. The last reported sale price of...

  • Page 20
    ...26/09 12/25/10 12/31/11 Office Depot, Inc. S&P 500 S&P Specialty Stores *$100 invested on 12/30/06 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis. Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. The foregoing...

  • Page 21
    ... Statistical Data: Facilities open at end of period: United States: Office supply stores ...Distribution centers ...Crossdock facilities ...International(6): Office supply stores ...Distribution centers ...Call centers ...Total square footage - North American Retail Division ...Percentage of sales...

  • Page 22
    ... related to developed software. Additionally, tax benefits and interest reversals of approximately $41 million were recognized from settlements. See Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information. (4) Fiscal year 2009 Net earnings...

  • Page 23
    ... and print center offering printing, reproduction, mailing and shipping. The North American Business Solutions Division sells office supply products and services in the U.S. and Canada directly to businesses through catalogs, internet web sites and a dedicated sales force. Our International Division...

  • Page 24
    ... open for more than one year decreased 1%. The 53rd week in 2011 added approximately $78 million to the Division's full year reported sales. Transaction counts were lower in both 2011 and 2010, consistent with the comparable store sales declines. Sales in technology services, Copy and Print Depot...

  • Page 25
    ... Also, fiscal year 2011 included benefits discrete to the period from removing recourse provisions and changing terms and conditions in the Office Depot private label credit card program and adjustments relating to customer incentives. Variable based pay linked to performance was higher in 2011. The...

  • Page 26
    ... direct operations to continued cash flow from product sales and other arrangements. The company anticipates recognizing additional charges in 2012 as operational consolidation continues and the related accounting recognition criteria are met. The decreases in Division operating profit in 2011, 2010...

  • Page 27
    ...consistent with the internal reporting used to manage the business and allocate resources. In addition to severance costs which usually require cash payment within 60 days of the initial accounting expense recognition, a significant amount of the Charges in 2009 related to closed store accruals, and...

  • Page 28
    ... of tax audits and the expiration of the statute of limitations on previously open tax years. The 2010 effective rate includes the reversal of approximately $30 million of UTP accruals. In addition, 2011 and 2010 include approximately $9 million and $10 million, respectively, of discrete benefits...

  • Page 29
    ...With few exceptions, we are no longer subject to active U.S. federal, state or local income tax examinations for years before 2009. The U.S. federal tax returns for 2009, 2010 and 2011 are under review. Significant international tax jurisdictions include the U.K., the Netherlands, France and Germany...

  • Page 30
    ... $121.5 million. We also had short-term borrowings of $15.1 million at December 31, 2011 under various local currency credit facilities for our international subsidiaries that had an effective interest rate at the end of the year of approximately 2.2%. The maximum month end amount occurred in May at...

  • Page 31
    ... of goods, credit terms, timing of promotions, vendor production planning, new product introductions and working capital management. The timing of payments at the end of 2011 resulted in increases to certain accounts payable and accrued expense balances that could be a use of cash in 2012. For our...

  • Page 32
    ...and 2010, compared to a source of cash of $173 million in 2009. The use of cash in 2011 included the cash dividends paid on our convertible preferred stock of approximately $37 million, repayments of long and short term borrowings of $69 million, and $10 million in fees related to the Amended Credit...

  • Page 33
    ... additional information on those policies. Vendor arrangements - Our inventory purchases from vendors are generally under arrangements that automatically renew until cancelled with periodic updates or annual negotiated agreements. Many of these arrangements require the vendors to make payments to...

  • Page 34
    ...cost of goods sold and the remaining inventory balances are adjusted to reflect that change in our outlook. We review sales projections and related purchases against vendor program estimates at least quarterly and adjust these balances accordingly. In recent years, the company has reduced the number...

  • Page 35
    ... in the International Division's European reporting unit and $19 million was in the North American Business Solutions Division's direct reporting unit. The European reporting unit has the greatest sensitivity to potential changes in economic conditions, company performance and the related impacts on...

  • Page 36
    ... were removed during 2010 and 2011 because sufficient positive financial information existed, resulting in tax benefit recognition of $10 million and $9 million, respectively. Our effective tax rate in future periods may be positively or negatively impacted by changes in related judgments about...

  • Page 37
    ...North American Business Solutions Division are predominantly small and home office businesses. Accordingly, these customers may continue to curtail their spending in reaction to macroeconomic conditions, such as changes in the housing market and commodity costs, credit availability and other factors...

  • Page 38
    ...impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates over the next year. Interest rate changes on obligations may result from external market factors, as well as changes in our credit rating. We manage our exposure to...

  • Page 39
    ...the holiday sales cycle in the fourth quarter. Certain working capital components may build and recede during the year reflecting established selling cycles. Business cycles can and have impacted our operations and financial position when compared to other periods. NEW ACCOUNTING STANDARDS Effective...

  • Page 40
    ... on our financial condition, results of operations or cash flows. However, the Financial Accounting Standards Board has issued proposed accounting rules relating to leasing transactions that, if passed in their current form, would have significant impacts to our financial statements. Among other...

  • Page 41
    ..., the company's internal control over financial reporting. As a result of the identification of the issue that led to the restatements and the related reassessment of internal control over financial reporting in early April 2011, the company has developed certain remediation steps to address the...

  • Page 42
    ...Integrated Framework. Based on our assessment, management has concluded that the company's internal control over financial reporting was effective as of December 31, 2011. Our internal control over financial reporting as of December 31, 2011, has been audited by Deloitte & Touche LLP, an independent...

  • Page 43
    ... Board (United States), the consolidated financial statements as of and for the fiscal year ended December 31, 2011 of the Company and our report dated February 28, 2012 expressed an unqualified opinion on those financial statements. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Boca Raton...

  • Page 44
    ...level of eligible receivables and currency exchange rates. As of February 27, 2012, no trade receivables had been sold under this agreement. PART III Item 10. Directors, Executive Officers and Corporate Governance. The names of our current directors and related biographical information are set forth...

  • Page 45
    ... perspectives on human resources and governance issues. BRENDA J. GAINES - AGE: 62 Ms. Gaines has been a Director on our Board since 2002. Ms. Gaines retired in 2004 from her position as President and Chief Executive Officer of Diners Club North America, a Division of Citigroup, a position she held...

  • Page 46
    ... in financial services, including the credit card and payment industry. As Chief Executive Officer of Diners Club North America, she managed a company with three distinct customer groups, that included retail consumers, small businesses and large multinational corporations. While working as...

  • Page 47
    ...knowledge gives her an insight into a number of issues facing Office Depot. As a sitting chief executive officer of a public retail company, Ms. Mason is able to offer our Board of Directors sound business and financial strategies to address evolving complex audit issues. JAMES S. RUBIN - AGE: 44 Mr...

  • Page 48
    ...the company's risks, directly and through its Committees. The Board oversees a formal enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance shareholder...

  • Page 49
    ..., the Audit Committee focuses on assessing and mitigating financial risk, including internal controls, and receives an annual risk assessment report from the company's internal auditors. As part of its annual executive compensation review in setting executive compensation, the Compensation Committee...

  • Page 50
    ... Chief Executive Officer ("Chair and CEO"). Consolidation of North America Division: In July 2011, Mr. Austrian changed the company's reporting structure by combining the reporting for the company's North America Retail Division and its Business Solutions Division into one new North America Division...

  • Page 51
    ... Mr. Austrian's letter agreement to change the cash bonus performance and payment periods from a quarterly to an annual basis, to align with the performance and payment periods in effect for the other NEOs. There are no gross-up provisions in any of the arrangements with the Chair and CEO. NEO base...

  • Page 52
    ... of the net shares (after shares are disposed of to pay for taxes upon acquisition). • Risk assessment review: In December 2011, the Compensation Committee reviewed a risk assessment of the company's global incentive plans and had a joint review meeting with the Audit Committee in February 2012 as...

  • Page 53
    ... our Directors, executive officers and all other employees. In February 2010, the Board adopted a policy for recoupment of incentive compensation. The policy provides that if the company restates its reported financial results for any period beginning after January 1, 2010, the Board will review the...

  • Page 54
    ... under our annual cash bonus program, our NEOs also successfully executed the annual initiatives approved by the Board under the company's annual operating plan. These key initiatives are intended to strategically position the company for a positive impact on performance in 2011 and later years and...

  • Page 55
    ... company's 2011 annual operating plan. The Board reviewed performance of the key initiatives at each of its quarterly meetings. • Pricing and promotions. The Board charged management with increasing margins through implementation of strategic pricing in the Retail and Business Solutions Division...

  • Page 56
    ... company's Peer Group for 2010. Mr. Austrian's other compensation (excluding his time-based restricted stock grant) represents 53% of his total compensation and is at-risk. Mr. Austrian was eligible for a 2011 target bonus of 140% of his annual base salary, pro-rated for his service as Chair and CEO...

  • Page 57
    ...and execution of the company's non-financial annual initiatives in the prior year as well as the company's compensation objectives, market competitiveness, and any changes in positions or responsibilities of NEOs. During the review process in February 2011, based on the company's performance in 2010...

  • Page 58
    ...the 2011 bonus. The Compensation Committee reviewed the level of achievement for each of the bonus metrics under the 2011 annual cash bonus plan based on the company's 2011 audited financial statements approved by the Board's Audit Committee. For purposes of the 2011 corporate annual cash bonus plan...

  • Page 59
    ...at the time of Mr. Odland's departure and in light of the uncertainty at the CEO position to retain the company's Chief Financial Officer for the next two annual reporting cycles. On March 11, 2011, Mr. Newman received the first payment of $937,500 under his Retention Agreement. In addition, in 2010...

  • Page 60
    In connection with the 2011 Say on Pay vote, the company and the Compensation Committee Chair engaged in thorough discussions of the executive compensation program with certain of the company's largest shareholders. A number of these shareholders informed us that the dialogue had enabled them to ...

  • Page 61
    ... company's financial and operating performance, so that executives are held accountable through their compensation for the performance of the businesses for which they are responsible and for achieving the company's annual operating plan. Accountability for Long-Term Performance. Compensation should...

  • Page 62
    ... executive compensation plans; reviews its charter and recommends changes to the Board where applicable; engages and directly monitors independent compensation consultant(s) to study and make recommendations regarding Director or NEO compensation matters; and reviews the risks related to the company...

  • Page 63
    ... criteria used in 2011 were the same as 2010 and included, but were not limited to: companies with revenues within one half to two times the company's revenue, a retail or direct to customer business model, a business to business model, significant global operations, and a significant distribution...

  • Page 64
    ... appropriately balance risk and reward consistent with the company's enterprise risk management efforts. Pay-For-Performance The Compensation Committee views the annual cash bonus plan and the long-term equity incentive plan as key links between NEO compensation and the creation of shareholder value...

  • Page 65
    ... or make material changes to the company's business or strategy. In addition, the 2007 Long-Term Incentive Plan awards that vest over a three-year period mitigate against taking short-term risks. Finally, the equity component of the company's compensation program coupled with the company's stock...

  • Page 66
    ...value and exercise price for vested in-the-money stock options. The current guidelines are deemed competitive according to market data. The Compensation Committee annually reviews each NEO's progress toward meeting the ownership guidelines. As of February 15, 2012, all of our currently employed NEOs...

  • Page 67
    ...the Board; • service-based vesting conditions with respect to equity-based awards; and • incentive pay recoupment policy which provides for recoupment of incentive compensation in the event of a financial restatement. The Compensation Committee periodically monitors the company's incentive plans...

  • Page 68
    ...term compensation that the company paid to its NEOs (or deferred for, or that was attributable to/earned) for services rendered during the 2009, 2010, and 2011 fiscal years. Summary Compensation Table for Fiscal Years 2009 - 2011 (a) (b) (c) (d) (e) (f) (g) (3) Non-Equity Incentive Plan Compensation...

  • Page 69
    ... received stock awards for his service as a director of the company prior to his appointment as Chair and CEO, which is reflected in the "Director Compensation Table for Fiscal Year 2011." Pursuant to the terms of his Retention Agreement which is described under the "Summary of Executive Agreements...

  • Page 70
    ...in the Executive Benefits Program. Amounts also include imputed income for premiums paid on life insurance in excess of $50,000. The amounts in column (e) reflect the company cost of matching contributions under our 401(k) Plan of up to 2% of eligible compensation for the 2011 fiscal year subject to...

  • Page 71
    ... and other welfare benefit plan monthly premiums. Payment of all amounts will be paid to him in cash on March 26, 2012. In August 2011, Ms. Vanderlinde, Executive Vice President of Human Resources, was terminated, and pursuant to her Separation Agreement, received a severance payment of $1,572,296...

  • Page 72
    ...,333 70 Column (c) reflects the minimum payments each NEO could expect to receive if the company reached at least its threshold performance goal in fiscal year 2011 under the 2011 Annual Corporate Bonus Plan. Fiscal year 2011 consisted of a 53-week period which is reflected in the payout amounts...

  • Page 73
    ..." as the closing stock price on the New York Stock Exchange on the grant date. Computed in accordance with FASB ASC Topic 718 for stock-based compensation. See Note A of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2011 regarding assumptions...

  • Page 74
    Outstanding Equity Awards at 2011 Fiscal Year-End Option Awards (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options Stock Awards (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested 600,000 (a) (b) ...

  • Page 75
    ... as part of his compensation for serving on the Board of Directors for prior years. Mr. Austrian was granted non-qualified stock options to purchase 400,000 shares of common stock of the company on November 2, 2010 pursuant to and subject to the terms of the company's 2007 LTIP. Additionally, Mr...

  • Page 76
    ...negotiated Employment Offer Letter Agreement. Market value of unvested restricted stock awards computed by multiplying the number of shares by $2.15, the closing price of the company's common stock on the New York Stock Exchange on December 30, 2011, the last day the New York Stock Exchange was open...

  • Page 77
    ...contribution retirement savings plan (i.e., 401(k) plan), the company continues to maintain three non-qualified deferred compensation plans for the benefit of its executive officers, including the NEOs, which remain frozen to new contributions. The following table reflects information related to the...

  • Page 78
    ... prior year. By granting equity compensation to Directors using restricted stock, long-term interest of the Directors in the company is achieved without the additional risk that would be created if a stock option grant was used. In connection with the search for a new CEO, the Board formed a Search...

  • Page 79
    ...as CEO. Mr. Austrian has not received any compensation for his service as a Director beginning May 23, 2011. Director Legacy Program A predecessor company, Viking Office Products, Inc., established a director legacy program in 1996. Under this program, any member of the Viking board of directors was...

  • Page 80
    ... of the annual retainer fee and chair fees, if applicable, in restricted stock as discussed further in the "Director Compensation" section. The BC Partners Directors received their 2011 compensation entirely in cash. In connection with the search for a new CEO, the Board formed a Search Committee...

  • Page 81
    .... "All Other Compensation" also includes for Mr. Fuente the cost of participating in our Executive Medical Plan ($57,690). Mr. Fuente is entitled to these benefits pursuant to the residual terms of the employment agreement that the company had with Mr. Fuente when he was the CEO of Office Depot. Mr...

  • Page 82
    ... Employment Agreements, Offer Letters, Retention Agreements and Change in Control Agreements with the NEOs. Material items addressed in these agreements include the term of the arrangement (including renewal provisions), the elements of the executive's compensation, the amounts and benefits payable...

  • Page 83
    ...comply with the compensation and benefit provisions in the agreement ...Material change in the office or location at which executive is based or requiring executive to travel on company business to a substantially greater extent than required immediately prior to the change in control effective date...

  • Page 84
    ... (3) Division) Resources) Actions that Constitute "Change in Control" If any person or group (other than an exempt person) becomes the beneficial owner of 30% or more of the combined voting power of the outstanding securities of the company without the approval of the company's Board of Directors...

  • Page 85
    ... position until a Chief Executive Officer was hired by the company. On May 23, 2011, the Board elected Mr. Austrian to serve as the company's Chairman and Chief Executive Officer ("Chair and CEO"). The company and Mr. Austrian entered into a new Letter Agreement dated May 23, 2011 (the "Agreement...

  • Page 86
    ...position until a permanent chief executive officer was hired by the company. Under the Interim Agreement, Mr. Austrian was eligible to receive a monthly salary of $200,000. Mr. Austrian was also granted a non-qualified stock option to purchase 400,000 shares of common stock of the company (the "2010...

  • Page 87
    ... calendar year, Mr. Austrian shall participate in the company's 2008 Bonus Plan for Executive Management Employees ("Executive Bonus Plan") pursuant to such plan's terms and in accordance with performance targets established by the Board or its Compensation Committee. 2010 Options. Pursuant...

  • Page 88
    ...on the New York Stock Exchange ("NYSE") equals or exceeds $5.50 for 30 consecutive trading days, and (ii) for the additional 300,000 Restricted Shares if the closing trading price of the company's Common Stock on the NYSE equals or exceeds $7.00 for 30 consecutive trading days. • Service Condition...

  • Page 89
    ... the company's employee benefit plans (including, without limitation, any bonus earned in respect of a previously completed calendar year or other vested benefits that Mr. Austrian is entitled to receive pursuant to the Agreement). Following his election to serve as the Chair and CEO on May 23, 2011...

  • Page 90
    ...a payment of 18 times the difference between the company's monthly COBRA premium for the type of coverage in effect for executive on the date of termination and the applicable active employee monthly premium for such coverage; • a pro-rata annual bonus, based on actual performance, for the year of...

  • Page 91
    .... On April 21, 2010 Mr. Peters was promoted to President, North American Retail Division and on July 17, 2011 he was promoted to President, North America. The company is also a party to a Change in Control Agreement with Mr. Peters dated December 17, 2010. Employment Offer Letter Agreement with Mr...

  • Page 92
    ...'s new Executive Vice President, Corporate Strategy and New Business Development. On November 14, 2011, Mr. Schmidt was appointed as the President, International of the company. The company is also a party to a Change in Control Agreement with Mr. Schmidt dated December 16, 2010. Employment Offer...

  • Page 93
    ... to receive the following: • a base salary of $440,000 per annum, subject to annual review by the Compensation Committee; • the right to participate in the company's bonus plans and equity plans for senior executive officers; and • certain benefits and perquisites. Ms. Garcia's employment is...

  • Page 94
    • a payment of 18 times the difference between the company's monthly COBRA premium for the type of coverage in effect for executive on the date of termination and the applicable active employee monthly premium for such coverage; • a pro-rata annual bonus for the year of termination; and • a ...

  • Page 95
    ...'s Change in Control Agreement in effect at the time. The company was also a party to a Change in Control Agreement with Mr. Brown dated December 16, 2010. Payment of Severance Benefits under Executive Employment Agreement for Charles Brown. On September 26, 2011, Mr. Brown, President, International...

  • Page 96
    ... plans and other employee programs); one point five (1.5) times base salary; a pro rata portion of the target annual bonus; a payment of 18 times the company's monthly COBRA and other welfare plan premiums for the type of coverage in effect for executive on the date of termination; and a special...

  • Page 97
    ... to receive the following: • a base salary of $440,000 per annum, subject to annual review by the Compensation Committee; • the right to participate in the company's bonus plans and equity plans for senior executive officers; and • certain benefits and perquisites. Ms. Vanderlinde's employment...

  • Page 98
    ...Chair and CEO during Fiscal Year 2011" section. Amounts shown reflect the value of all unvested restricted stock based on the closing price of the company's stock on December 30, 2011. The amounts shown also assume that Mr. Austrian does not remain a director of the company. Mr. Austrian's Agreement...

  • Page 99
    ..., (ii) Mr. Austrian's annualized pro-rated 2011 target bonus, (iii) the product of 18 and the monthly COBRA premium on December 30, 2011 for the type of group health plan coverage in effect for Mr. Austrian on December 30, 2011. Under Mr. Austrian's Change in Control Agreement, if his termination is...

  • Page 100
    ...on the closing price of the company's stock on December 30, 2011. Reflects a payment under Mr. Newman's Employment Offer Letter dated August 22, 2008, as amended December 31, 2008 and April 24, 2010, equal to the sum of: (i) 1.5 times his base salary in effect on December 30, 2011, (ii) his 2011 pro...

  • Page 101
    ... three times Mr. Newman's average taxable compensation received from the company for the five year period ending December 31, 2010, and if he would receive more on an after tax basis by reducing the payments than he would receive by getting all the payments and paying the 20% excise tax imposed...

  • Page 102
    ...and 2010 fiscal years; provided that, he was employed by the company at the end of the 2011 fiscal year. Mr. Peters' highest bonus was earned under the bonus plan during the 2009 fiscal year. Reflects the value of a 24-month outplacement services package under Mr. Peters' Change in Control Agreement...

  • Page 103
    ...2010 fiscal years; provided that, he was employed by the company at the end of the 2011 fiscal year. Mr. Schmidt's highest bonus was earned under the bonus plan during the 2009 fiscal year. Reflects the value of a 24-month outplacement services package under Mr. Schmidt's Change in Control Agreement...

  • Page 104
    ... monthly COBRA premium on December 30, 2011 for the type of group health plan coverage in effect for Ms. Garcia on December 30, 2011 and the active employee for such coverage. In addition, under Ms. Garcia's Retention Agreement dated November 2, 2010, she is entitled to a special retention payment...

  • Page 105
    ... 2010 fiscal years; provided that, she was employed by the company at the end of the 2011 fiscal year. Ms. Garcia's highest bonus was earned under the bonus plan during the 2009 fiscal year. Reflects the value of a 24-month outplacement services package under Ms. Garcia's Change in Control Agreement...

  • Page 106
    ... termination by the company on September 26, 2011 as discussed in Footnotes 8 and 9 to the Summary Compensation Table. Under Mr. Brown's previously negotiated Executive Employment Agreement, he is eligible to receive a payment equal to 1.5 times the sum of his base salary in effect on September 26...

  • Page 107
    ... the company dated September 1, 2011, received a total severance payment of $1,572,296. Represents a payment equal to 2 times Ms. Vanderlinde's annual bonus at target pursuant to the terms of her Separation Agreement. Represents the payment of COBRA and other welfare benefit plan monthly premiums...

  • Page 108
    ... ...Kevin Peters, President, North America ...Steven M. Schmidt, President, International ...Michael D. Newman, Executive Vice President and CFO ...Daisy Vanderlinde, Former Executive Vice President, Human Resources (7) ...Directors and Executive Officers as a Group (19 Persons in Total) ...106...

  • Page 109
    ... CIE Management II Limited and LMBO Europe SAS), applicable percentage of ownership for all Shareholders listed in the table above is based on 280,853,676 shares of common stock outstanding as of February 15, 2012. In computing the number of shares of common stock beneficially owned by a person and...

  • Page 110
    ... Garcia ...All Executive Officers and Directors as a Group (19 Persons) ...Underwater Options Based on the closing price of our common stock on February 15, 2012, the following number of options that are or will be exercisable within 60 days of February 15, 2012, for each applicable person named in...

  • Page 111
    ... Committee and the Board of Directors. A copy of the Policy is available for review on the company's web site at www.officedepot.com under the headings "Company Information/Investor Relations/Corporate Governance." On an annual basis, each Director and Executive Officer is required to complete...

  • Page 112
    ... tax planning fees) Audit Fees - Consists of fees for professional services rendered in connection with the audits of our consolidated financial statements and the effectiveness of our internal controls over financial reporting for the fiscal years ended December 31, 2011, and December 25, 2010...

  • Page 113
    ... a part of this report: 1. The financial statements listed in "Index to Financial Statements." 2. The financial statement schedules listed in "Index to Financial Statement Schedules." 3. The exhibits listed in the "Index to Exhibits." (b) Exhibit 99 1. Financial statements of Office Depot de Mexico...

  • Page 114
    ... undersigned, thereunto duly authorized on this 28th day of February 2012. OFFICE DEPOT, INC. By /s/ NEIL R. AUSTRIAN Neil R. Austrian Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 115
    ...Public Accounting Firm ...Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of Comprehensive Income (Loss) ...Consolidated Statements of Stockholders' Equity ...Consolidated Statements of Cash Flows ...Notes to Consolidated Financial Statements ...Report...

  • Page 116
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Office Depot, Inc.: We have audited the accompanying consolidated balance sheets of Office Depot, Inc. and subsidiaries (the "Company") as of December 31, 2011 and December 25, 2010, and the related consolidated statements...

  • Page 117
    OFFICE DEPOT, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2011 December 25, 2010 ASSETS Current assets: Cash and cash equivalents ...Receivables, net of allowances of $19,671 in 2011 and $28,047 in 2010 ...Inventories ...Prepaid expenses and ...

  • Page 118
    OFFICE DEPOT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) 2011 2010 2009 Sales ...Cost of goods sold and occupancy costs ...Gross profit ...Store and warehouse operating and selling expenses ...Other asset impairments ...General and administrative expenses ...

  • Page 119
    ... STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) 2011 2010 2009 Net earnings (loss) ...$ 95,691 $(46,205) $(598,724) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ...(21,816) (32,224) 25,769 Amortization of gain on cash...

  • Page 120
    ...Change in deferred cash flow hedge ...Other ...Comprehensive loss, net of tax ...Preferred stock dividends ...Grant of long-term incentive stock ...258,074 3 Forfeiture of restricted stock ...(405,931) (4) Share-based payments (including income tax benefits and withholding) ...Direct stock purchase...

  • Page 121
    ... stock ...(36,852) (27,639) - Proceeds from issuance of borrowings ...9,598 52,488 24,321 Payments on long- and short-term borrowings ...(69,169) (30,284) (175,863) Net cash provided by (used in) financing activities ...(98,576) (30,898) 173,294 Effect of exchange rate changes on cash and cash...

  • Page 122
    ... a joint venture selling office products and services in Mexico and Central and South America that is accounted for using the equity method with its results presented in miscellaneous income, net in the Consolidated Statements of Operations. Our investment at year end 2011 and 2010 of $196.9 million...

  • Page 123
    ... in North America and the first-in-first-out method is used for inventory held within our international operations. Income Taxes: Income tax expense is recognized at applicable U.S. or international tax rates. Certain revenue and expense items may be recognized in one period for financial statement...

  • Page 124
    ... the discounted amount of estimated store-specific cash flows. Impairment losses of $11.4 million, $2.3 million and $3.5 million were recognized in 2011, 2010 and 2009, respectively, relating to certain under-performing retail stores. Facility Closure Costs: We regularly review store performance...

  • Page 125
    ... expenses for executive management and various staff functions, such as information technology, most human resources functions, finance, legal, internal audit, and certain merchandising and product development functions. Gains, losses and impairment charges relating to assets used to support these...

  • Page 126
    ... a vendor agreement, are estimated throughout the year and reduce the cost of inventory and cost of goods sold during the year. This estimate is regularly monitored and adjusted for current or anticipated changes in purchase levels and for sales activity. Other promotional consideration received is...

  • Page 127
    ... costs, as well as $13 million of compensation-related costs following the departure of our former CEO. The $253 million of Charges recognized in 2009 followed a strategic review that led to closure of DCs in North America and Europe, closures of stores in North America and Japan, losses on sale...

  • Page 128
    ... restructuring-related costs that are addressed above are as follows: Non-cash Settlements and Accretion Currency and Other Adjustments (Dollars in millions) Beginning Balance Charges Incurred Cash Payments Ending Balance 2011 Termination benefits ...Accelerated depreciation ...Lease, contract...

  • Page 129
    ... the following table: North American Retail Division North American Business Solutions Division (Dollars in thousands) International Division Total Balance as of December 26, 2009 Goodwill ...Accumulated impairment losses ...2010 Changes Balance as of December 25, 2010 ...Goodwill ...Accumulated...

  • Page 130
    ..., subject to certain terms and conditions, including obtaining increased commitments from existing or new lenders. The amount that can be drawn on the Facility at any given time is determined based on percentages of certain accounts receivable, inventory and credit card receivables (the "Borrowing...

  • Page 131
    ... various local currency credit facilities for our international subsidiaries that had an effective interest rate at the end of the year of approximately 2.2%. The majority of these short-term borrowings represent outstanding balances on uncommitted lines of credit, which do not contain financial...

  • Page 132
    ...Total long-term debt ...NOTE F - INCOME TAXES $ 55,128 435,859 35,314 34,893 30,677 224,198 816,069 (131,355) 684,714 (36,401) $ 648,313 The income tax expense (benefit) related to earnings (loss) from operations consisted of the following: (Dollars in thousands) 2011 2010 2009 Current: Federal...

  • Page 133
    ... 31, 2011 December 25, 2010 U.S. and foreign net operating loss carryforwards ...Deferred rent credit ...Vacation pay and other accrued compensation ...Accruals for facility closings ...Inventory ...Self-insurance accruals ...Deferred revenue ...State credit carryforwards, net of Federal benefit...

  • Page 134
    ... from equity compensation deductions that if realized in future period would benefit additional paid-in capital. The following is a reconciliation of income taxes at the Federal statutory rate to the provision (benefit) for income taxes: (Dollars in thousands) 2011 2010 2009 Federal tax computed...

  • Page 135
    ... state and local income tax examinations for years before 2009. Our U.S. federal filings for 2009 and 2010 are under routine examination, and it is reasonably possible that audits for some of these periods will be closed prior to the end of 2012. Additionally, the U.S. federal tax return for 2011 is...

  • Page 136
    ... affect our financial position, results of our operations or cash flows. On April 6, 2011, a putative class action lawsuit was filed against the company and certain current and former executive officers alleging violations of the Securities Exchange Act of 1934 and seeking damages, fees, costs and...

  • Page 137
    ... payment is currently anticipated. NOTE H - EMPLOYEE BENEFIT PLANS Long-Term Incentive Plan During 2007, the company's board of directors adopted, and the shareholders approved, the Office Depot, Inc. 2007 Long-Term Incentive Plan (the "Plan"). The Plan permits the issuance of stock options, stock...

  • Page 138
    Long-Term Incentive Stock Plan During 2010, the company implemented a one-time voluntary stock option exchange program that had been approved by the board of directors and the company's shareholders. The fair value exchange program resulted in the tender of 3.8 million shares of eligible options in ...

  • Page 139
    ...The number of exercisable shares was 10.8 million shares of common stock at December 31, 2011 and 8.3 million shares of common stock at December 25, 2010. Restricted Stock Restricted stock grants typically vest annually over a three-year service period; however, grants made to the company's board of...

  • Page 140
    ..., $4.7 million and $4.9 million in 2011, 2010, and 2009, respectively. Pension Plan The company has a defined benefit pension plan covering a limited number of employees in Europe. During 2008, curtailment of that plan was approved by the trustees and future service benefits ceased for the remaining...

  • Page 141
    ...) 2011 2010 2009 Service cost ...Interest cost ...Expected return on plan assets ...Net periodic pension cost ...Assumptions used in calculating the funded status included: $ - $ - $ - 9,838 10,466 9,006 (9,336) (8,039) (6,291) 502 $ 2,427 $ 2,715 $ 2011 2010 2009 Long-term rate of return on...

  • Page 142
    ...the related assets of $1.7 million in 2011 and $0.4 million in 2010. The fair values of our interest rate swaps, foreign currency contracts and fuel contracts are the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current interest rates, exchange...

  • Page 143
    are corroborated by market data. There were no interest rate swap agreements in place at the end of 2011 and the amounts receivable or payable under foreign currency and fuel contracts were not significant at the end of 2011. See Note J for additional information on our derivative instruments and ...

  • Page 144
    ... end of the 2011, the company had entered into a series of monthly option contracts for approximately 10 million gallons of fuel through December 2012 that may or may not be executed. Interest rate changes on our obligations may result from external market factors, as well as changes in our credit...

  • Page 145
    ...the amounts receivable or payable to terminate the agreements at the reporting date, taking into account current exchange rates. The values are based on market-based inputs or unobservable inputs that are corroborated by market data. NOTE K - REDEEMABLE PREFERRED STOCK On June 23, 2009, Office Depot...

  • Page 146
    ... Stock dividend amounts. The board of directors approved cash dividends on the Preferred Stock for each of the quarterly periods of 2010 and the first three quarters of 2011. Dividends were accrued and paid in-kind for the quarterly periods of 2009 and the fourth quarter of 2011. The stated-rate...

  • Page 147
    ..., no tax benefits have been assumed in jurisdictions with valuation allowances. The diluted share amounts for 2011, 2010 and 2009 are provided for informational purposes, as the level of earnings (loss) for the periods causes basic earnings per share to be the most dilutive. Following the company...

  • Page 148
    ... Additional supplemental information related to the Consolidated Statements of Cash Flows is as follows: (Dollars in thousands) 2011 2010 2009 Cash interest paid (net of amounts capitalized) ...Cash taxes paid (refunded) ...Non-cash asset additions under capital leases ...Non-cash paid-in-kind...

  • Page 149
    ..., and wireless communications products. The furniture and other category includes products such as desks, chairs, luggage, sales in our copy and print centers, and other miscellaneous items. Total company sales by product group were as follows: 2011 2010 2009 Supplies ...Technology ...Furniture and...

  • Page 150
    ... reported earnings per share for the year. Net earnings includes approximately $99 million of tax and related interest benefits from the reversal of uncertain tax positions. Fiscal year 2011 includes 53 weeks in accordance with our 52- week, 53-week retail calendar; accordingly, the fourth quarter...

  • Page 151
    ... will be recognized in the company's first quarter 2012 financial statements as a credit to income. The cash received from the seller has been contributed to the pension plan in February 2012, reducing the unfunded position that existed at December 31, 2011. This contribution will be presented...

  • Page 152
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Office Depot, Inc.: We have audited the financial statements of Office Depot, Inc. and subsidiaries (the "Company") as of December 31, 2011 and December 25, 2010, and for each of the three fiscal years in the period ended...

  • Page 153
    INDEX TO FINANCIAL STATEMENT SCHEDULES Page Schedule II - Valuation and Qualifying Accounts and Reserves ... 152 All other schedules have been omitted because they are not applicable, not required or the information is included elsewhere herein. 151

  • Page 154
    ...) Column A Column B Column C Column D Deductions- Write-offs, Payments and Other Adjustments Column E Description Balance at Beginning of Period Additions- Charged to Expense Balance at End of Period Allowance for doubtful accounts: 2011 ...2010 ...2009 ...$28,047 $32,802 $45,990 13,603 10,954...

  • Page 155
    ... (23) the Chief Financial Officer of Office Depot, Inc.* Offer Letter dated August 22, 2008, for the Employment of Michael Newman as the Chief (14) Financial Officer of Office Depot, Inc.* Office Depot, Inc. 2007 Long-Term Incentive Plan* Amendment to Executive Employment Agreement dated as of July...

  • Page 156
    ...and Charles E. Brown* 2008 Office Depot, Inc. Bonus Plan for Executive Management Employees* (8) (12) Securities Purchase Agreement, dated as of June 23, 2009, by and among Office Depot, Inc. and (15) the investors named in the Securities Purchase Agreement Change of Control Agreement, dated as of...

  • Page 157
    ... Agent, and the other lenders referred to therein. List of Office Depot, Inc.'s Subsidiaries Consent of Independent Registered Public Accounting Firm Consent of Independent Auditors Certification of CEO required by Securities and Exchange Commission Rule 13a-14(a) or 15d-14(a) Certification...

  • Page 158
    ....'s Annual Report on Form 10-K for the year ended December 27, 2008, filed with the SEC on February 24, 2009. (15) Incorporated by reference from Office Depot, Inc.'s Current Report on Form 8-K, filed with the SEC on June 23, 2009. (16) Incorporated by reference from Office Depot, Inc.'s Quarterly...

  • Page 159
    ... Annual Report on Form 10-K for the year ended December 26, 2009, filed with the SEC on February 23, 2010. (23) Incorporated by reference from Office Depot, Inc.'s Current Report on Form 8-K, filed with the SEC on April 1, 2011 (24) Incorporated by reference from Office Depot, Inc.'s Current Report...

  • Page 160
    ... in Office Depot's Long-Term Equity Incentive Plan commensurate with your position, beginning in the first quarter of 2006. The specific number, type and value of stock-based awards are determined annually by the Compensation Committee of the Board of Directors. If you had received a grant...

  • Page 161
    ... the specific terms of our compensation plans at any time in the future. Benefits: You will participate in Office Depot's group benefit programs. You will also be eligible to participate in Office Depot's Executive Car Allowance Program at the level appropriate to your position. You will receive the...

  • Page 162
    ... A. Although your job duties, title, compensation, benefits, or the Company's policies, practices and procedures may change from time to time, the "at-will" nature of your employment may only be changed in an express writing signed by you and the Chief Executive Officer of the Company. Except as to...

  • Page 163
    ...and data (and copies thereof) relating to the Confidential Information or the business of the Company or any Subsidiary of the Company that Executive may possess or have under her control. Agreement of Non-Competition; Non-Solicitation; No-Hire; Non-Interference. (a) During the period of time during...

  • Page 164
    ...any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary (including, without limitation, making any negative statements or communications about the Company or its Subsidiaries). 3. Reformation of this Agreement. This...

  • Page 165
    ... for an additional period of time equivalent to the time during which Executive was in breach of this Noncompete Agreement. Executive's Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and...

  • Page 166
    .... Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed by first class mail, return receipt requested, to the recipient at the address below indicated: Notices to Executive: Daisy Vanderlinde c/o Office Depot, Inc. 2200 Old Germantown Road...

  • Page 167
    ...) that would cause the application of the laws of any jurisdiction other than the State of Florida. In Testimony whereof, the parties have signed this Noncompete Agreement as of the 19th day of Sept, 2005. Executive /s/ Daisy Vanderlinde Daisy Vanderlinde Office Depot, Inc. By /s/ Steve Odland...

  • Page 168
    ... the Company and Executive arising out of or relating to Executive's employment or termination of employment, including but not limited to disputes involving discrimination arising under common law, and/or federal, state and local laws, shall be settled by arbitration administered by the American...

  • Page 169
    ... our management team as Executive Vice President, Human Resources for Office Depot. I look forward to your response as soon as practicable. Sincerely, /s/ Steve Odland Steve Odland Agreed to and Accepted by: /s/ Daisy Vanderlinde Daisy Vanderlinde cc: Lee Ault, Chairman, Compensation Committee Board...

  • Page 170
    ... the Company's monthly COBRA charge on your date of employment termination for the type of Company-provided group health plan coverage in effect for you on that date and the applicable active employee charge for such coverage, and (iii) 1.5 times your target annual bonus in effect for the year in...

  • Page 171
    ... your job duties, title, compensation, benefits, or the Company's policies, practices and procedures may change from time to time, the 'at-will' nature of your employment may only be changed in an express writing signed by you and the Chief Executive Officer of the Company." 3. The following new...

  • Page 172
    ... you are solely responsible for all taxes due with respect to such compensation and benefits Office Depot, Inc. By: /s/ Stephen R. Calkins Name: Stephen R. Calkins Title: Vice President, Associate General Counsel Agreed to and Accepted by Executive, /s/ Daisy Vanderlinde Daisy Vanderlinde Date: 12...

  • Page 173
    ... due Office Depot, within fifteen (15) days following the expiration of the Release Period. Of this $1,516,196 payable to Executive, a total of $76,296 equates to 18 months of COBRA premiums for medical, dental, and vision based on the coverage rates in effect on the Separation Date. No payments...

  • Page 174
    ... Express Card for personal expenses from her severance payment, under this Agreement. Any and all amounts due to Office Depot, as the result of any employee loan, will be deducted from the amounts received under this Agreement, until the loan has been satisfied. Executive affirms that, if applicable...

  • Page 175
    ... without the prior written consent of Office Depot's Executive Vice President, General Counsel, except that this Agreement shall not prohibit Executive from required confidential disclosures to her attorney, accountant, or to any governmental taxing authority, or discussing the matter with her...

  • Page 176
    ... be received by the Executive Vice President, General Counsel no later than the close of business on the seventh day after Executive signs this Agreement. Executive understands and acknowledges that no monies will be paid to her pursuant to Section 1 of this Agreement until the Revocation Period has...

  • Page 177
    ...FULLY READ, HAVE RECEIVED AN EXPLANATION OF, AND COMPLETELY UNDERSTAND THE PROVISIONS OF THIS GENERAL RELEASE, THAT OFFICE DEPOT HEREBY ADVISES ME TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS GENERAL RELEASE, THAT I HAVE BEEN GIVEN AT LEAST TWENTY-ONE (21) CALENDAR DAYS TO REVIEW AND CONSIDER THE...

  • Page 178
    ... you the revised terms of our offer of employment with Office Depot. We are looking forward to having you as part of our team. This letter confirms the details of the offer, which are set forth below. Position: Salary: Location: Start Date: Next Performance Review: Executive Vice President, General...

  • Page 179
    ... Death & Dismemberment Insurance Short and Long Term Group Disability Flexible Spending Accounts Office Depot, Inc. Retirement Savings Plan (401(k) Plan) Deferred Compensation Plan (DCP) (enrollment in the DCP will not be available until January 2008) Employee Stock Purchase Plan (ESPP) 2 Benefits:

  • Page 180
    ... will receive a cash sign-on bonus of $162,500, payable ninety (90) days following your first date of employment by Office Depot, subject to normal withholding for wages paid to you. In the event you do not receive vesting of certain stock options scheduled to vest at your current employer in July...

  • Page 181
    ... to receive (a) a lump sum amount equal to the sum of eighteen (18) months of your annual base salary determined at the time of separation, (b) a lump sum amount equal to eighteen (18) months of the monthly COBRA premium for the type of coverage you may have under the Office Depot group health plan...

  • Page 182
    ... offer of employment by Office Depot to you to join our Company as Executive Vice President, General Counsel and Corporate Secretary. No other elements of compensation, "make whole" amounts, loss on sale of residence or other payments or benefits of any kind may be inferred from any of the terms...

  • Page 183
    Sincerely, /s/ Steve Odland Steve Odland Chairman & Chief Executive Officer 6

  • Page 184
    ... TO OFFER LETTER Effective December 31, 2008 Office Depot, Inc., a Delaware corporation ("Company"), set out the terms of its offer of employment to the executive named below ("Executive") pursuant to a letter with the date specified below ("Offer Letter"). The Company and the Executive desire...

  • Page 185
    ...that you are solely responsible for all taxes due with respect to such compensation and benefits Office Depot, Inc. By: /s/ Stephen R. Calkins Name: Stephen R. Calkins Title: Vice President, Associate General Counsel Agreed to and Accepted by Executive /s/ Elisa D. Garcia C. Name: Elisa Garcia Date...

  • Page 186
    ...the Company for a specified period of time; and WHEREAS, any benefits Executive may become entitled to under this Agreement shall be in addition to any severance benefits Executive may become entitled to pursuant to the Offer Letter, or as set forth in any then applicable Change in Control Agreement...

  • Page 187
    ... the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. 2.5 "Company" shall mean Office Depot, Inc. or any successor to its business and/or assets. 2.6 "Effective Date" shall mean the date this Agreement is signed by the Executive. 2.7 "Executive...

  • Page 188
    .... Such Retention Payment shall be payable to Executive in addition to any severance benefits that may be payable to Executive pursuant to the Offer Letter upon separation from employment, or as set forth in any then applicable Change in Control Agreement the Executive and the Company may be Parties...

  • Page 189
    ... the Company. 4.2 Withholding. The Company may deduct and withhold from any amounts payable under this Agreement such federal, state, local, foreign or other taxes as are required to be withheld pursuant to any applicable law or regulation. 4.3 Assignment. This Agreement is personal to Executive and...

  • Page 190
    ...: If to the Company: Office Depot, Inc. c/o EVP, Human Resources 6600 North Military Trail Boca Raton, Florida 33496 If to Executive: To Executive's last known address on file with the Company. Any Party may change the address to which notices, requests, demands and other communications shall be...

  • Page 191
    ... effect of this Agreement shall be governed by and be construed and enforced in accordance with the laws of the State of Florida. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. EXECUTIVE: By: /s/ Elisa D. Garcia C. Elisa D. Garcia C. EMPLOYER...

  • Page 192
    ...Restated Credit Agreement dated as of May 25, 2011 (the "Credit Agreement"), among Office Depot, Inc., Office Depot International (UK) Ltd., Office Depot UK Ltd., Office Depot International B.V., Office Depot B.V., Office Depot Finance B.V., OD International (Luxembourg) Finance S.À R.L. and Viking...

  • Page 193
    ...). Section 6.11 of the Credit Agreement is hereby amended by deleting clause (v) thereof in its entirety and inserting in lieu thereof, the following new clause (v): "(v) the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured or unsecured high yield...

  • Page 194
    ... of the Credit Agreement, as amended and restated, are and shall remain in full force and effect. XI. Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. XII...

  • Page 195
    ... to be executed and delivered by their duly authorized officers as of the date first above written. OFFICE DEPOT, INC. By: Name: Title: OFFICE DEPOT INTERNATIONAL (UK) LTD. By: Name: Title: OFFICE DEPOT UK LTD. By: Name: Title: OFFICE DEPOT INTERNATIONAL B.V. By: Name: Title: OFFICE DEPOT B.V. By...

  • Page 196
    VIKING FINANCE (IRELAND) LTD. By: Name: Title: First Amendment Signature Page

  • Page 197
    JPMORGAN CHASE BANK, N.A., as Administrative Agent, US Collateral Agent and as a Lender By: Name: Title: JPMORGAN CHASE BANK, N.A., LONDON BRANCH, as European Collateral Agent By: Name: Title: First Amendment Signature Page

  • Page 198
    [INSERT LENDER NAME], as a Lender By: Name: Title: First Amendment Signature Page

  • Page 199
    ... Office Supplies, LLC ...OD France, LLC ...Swinton Avenue Trading Limited, Inc...Neighborhood Retail Development Fund, LLC ...HC Land Company LLC ...2300 South Congress LLC ...Notus Aviation, Inc...OD Brazil Holdings, LLC ...OD Medical Solutions LLC ...Office Depot N.A. Shared Services LLC ...Office...

  • Page 200
    ...BV...Office Depot - Viking Holdings B.V...Guilbert International B.V...Office Depot (Operations) Holding B.V...Office Depot Coöperatief W.A...Office Depot Europe B.V...Xtreme Office B.V...OD Panama SA ...Office Depot Poland Sp z.o.o...Office Depot Puerto Rico, LLC ...Office Depot Service Center SRL...

  • Page 201
    ......Viking Direct (Holdings) Limited ...Office Depot UK Limited ...Guilbert UK Pension Trustees Ltd ...Guilbert UK Holdings Ltd ...Niceday Distribution Centre Ltd ...Office 1 (1995) Ltd ...Office 1 Ltd ...Reliable UK Ltd ...Office Depot Holdings Ltd...Office Depot Holdings 2 Ltd...Office Depot Europe...

  • Page 202
    ... report relating to the financial statements and financial statement schedule of Office Depot, Inc., and the effectiveness of Office Depot, Inc.'s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Office Depot, Inc. for the fiscal year ended December 31, 2011...

  • Page 203
    ... of America, the nature and effects of which are presented in Note 17 in such consolidated financial statements), appearing in the Annual Report on Form 10-K of Office Depot, Inc. for the year ended December 31, 2011. /s/ Juan Antonio Rodriguez Espínola Galaz, Yamazaki, Ruiz Urquiza, S.C. Member of...

  • Page 204
    ... the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act...

  • Page 205
    ... the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act...

  • Page 206
    ... Annual Report on Form 10-K of Office Depot, Inc. (the "Company") for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Neil R. Austrian, as Chief Executive Officer of the Company, and Michael D. Newman, as Chief Financial...

  • Page 207
    ... (A 50% Owned Subsidiary of Grupo Gigante, S. A. B. de C. V. and 50% Owned Affiliate of Office Depot Delaware Overseas Finance 1, LLC) Consolidated Financial Statements for the Years Ended December 31, 2011, 2010 (Unaudited) and 2009 (Unaudited) and Independent Auditors' Report Dated February 15...

  • Page 208
    ... Consolidated Financial Statements for 2011, 2010 (Unaudited) and 2009 (Unaudited) Table of contents Page Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes...

  • Page 209
    ...We have audited the accompanying consolidated balance sheet of Office Depot de México, S. A. de C. V. and subsidiaries (the "Company") as of December 31, 2011, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended. These financial...

  • Page 210
    ... of Office Depot Delaware Overseas Finance 1, LLC) Consolidated Balance Sheets As of December 31, 2011 and 2010 (Unaudited) (In thousands of Mexican pesos) 2011 2010 (Unaudited) Assets Current assets: Cash and cash equivalents Accounts receivable and recoverable taxes - Net Due from related parties...

  • Page 211
    ...of Office Depot Delaware Overseas Finance 1, LLC) Consolidated Statements of Income For the years ended December 31, 2011, 2010 (Unaudited) and 2009 (Unaudited) (In thousands of Mexican pesos) 2011 2010 (Unaudited) 2009 (Unaudited) Revenues: Net sales Other Costs and expenses: Cost of sales Selling...

  • Page 212
    ...Statements of Changes in Stockholders' Equity For the years ended December 31, 2011, 2010 (Unaudited) and 2009 (Unaudited) (In thousands of Mexican pesos) Common Stock Retained Earnings Foreign Currency Translation Total Stockholders' Equity Balances as of January 1, 2009 (Unaudited) Dividends paid...

  • Page 213
    ... activities Net (decrease) increase in cash and cash equivalents Effects of inflation on cash flows Effects of exchange rate changes on cash flows Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year See accompanying notes to consolidated financial statements...

  • Page 214
    ... stores in Mexico, five in Costa Rica, six in Guatemala, three in El Salvador, two in Honduras, three in Panama, 12 in Colombia, nine distribution centers, a cross dock in Mexico that sell office supplies and electronic goods, and a printing service specializing in the retail and catalogue business...

  • Page 215
    ... company of subsidiaries specialized in the retail, catalogue business for office supplies, located in Colombia. Provides administrative services to Mexican related parties, located in Mexico. Stores specializing in the sale of services and office supplies, located in Guatemala. Stores specializing...

  • Page 216
    ... acquisition and leasing of all types of real estate. This company has not initiated operations as of the date of these consolidated financial statements (subsidiary of Centro de Apoyo, S. A. de C. V.), located in Mexico. Stores specializing in the sale of services and office supplies (subsidiary of...

  • Page 217
    ... between the cost of inventory under normal credit terms and the actual amount paid, be recognized as a financial cost during the financing period. The standard also permits the reversal previous inventory impairment losses against current earnings of the period in which the change in estimate...

  • Page 218
    ..., as that term is defined in MFRS. However, assets and stockholders' equity include the restatement effects recognized by those entities through December 31, 2007. The cumulative inflation rate in Mexico for the three fiscal years prior to those ended December 31, 2011, 2010 and 2009 was 12.26...

  • Page 219
    ...-term highly-liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Concentration of credit risk-The Company sells products to customers primarily in the retail trade in Mexico. The Company conducts periodic evaluations of its customers' financial...

  • Page 220
    ... orders. Revenue is recognized at the point of sale for retail transactions and at the time of successful delivery for contract, catalog and internet sales. Sales taxes collected are not included in reported sales. The Company does not charge shipping and handling costs to its customers; such costs...

  • Page 221
    ... financial statements as of and for the year ended December 31, 2011. q. 4. Cash and cash equivalents 2011 2010 (Unaudited) Checking accounts Readily available daily investments $290,598 12,058 $302,656 $ 279,572 113,345 $ 392,917 5. Accounts receivable and recoverable taxes 2011 2010...

  • Page 222
    ...729,063 Movements in the allowance for obsolete inventories for the years ended December 31 are as follows: Balance at beginning of period Additional charged to expenses Balance at ending of period Shrinkage 2011 2010 (Unaudited) 2009 (Unauidted) 7. Property, equipment and leasehold improvements...

  • Page 223
    ... a. The Company pays seniority premium benefits to its employees, which consist of a lump sum payment of 12 days' wage for each year worked, calculated using the most recent salary, not to exceed twice the minimum wage established by law. The related liability and annual cost of such benefits are...

  • Page 224
    ... Minimum wage increase rate d. Net cost for the period includes the following items: 2011 7.98 5.86 4.27 7.98 5.86 4.27 The transition liability balance generated in 2007 will be amortized over a five-year period. 2010 (Unaudited) 2009 (Unaudited) Service cost Interest cost Amortization of...

  • Page 225
    ...2011 and 2010, the legal reserve, in historical pesos, was $111,007. Stockholders' equity, except restated paid-in capital and tax retained earnings will be subject to ISR payable by the Company at the rate in effect upon distribution. Any tax paid on such distribution may be credited against annual...

  • Page 226
    ...19,825 534 120,977 4,551 504 Mexican peso exchange rates in effect at the dates of the consolidated balance sheets and the date of the related independent auditors' report were as follows: 2011 December 31, 2010 (Unaudited) February 15, 2012 Mexican pesos per one U. S. dollar 12. Transactions and...

  • Page 227
    ...micos Gigante, S. A. de C. V. Gigante, S. A. de C. V. Other related parties $144 16 14 13 10 - 27 $224 $ $ 85 21 20 19 8 2 8 163 13. Other expenses a. Detail is as follows: 2011 2010 (Unaudited) 2009 (Unaudited) PTU Colombian equity tax Gain (loss) on sale of fixed assets 19 $(10,265) (39,334...

  • Page 228
    ..., in accordance with the regulations of each country. The tax rates applicable in other countries where the Company operates and the period in which tax losses may be applied, are as follows: Statutory income tax rate (%) 2011 2010 2009 Period of expiration Colombia Costa Rica El Salvador Guatemala...

  • Page 229
    ... ISR asset are: 2011 2010 (Unaudited) Deferred ISR asset: Effect of tax loss carryforwards Property, equipment and leasehold improvements Accrued liabilities Allowance for doubtful accounts Other, net Deferred ISR asset Deferred ISR liability: Inventories Advanced payments Deferred ISR liability...

  • Page 230
    ... tax losses Balance at ending of period 2011 2010 (Unaudited) 2009 (Unaudited) d. 79,242 33,155 2,566 21,147 46,087 30,589 24,802 - - 75,587 79,242 33,155 As of December 31, the main items that give rise to a deferred IETU liability are: 2010 2009 (Unaudited) Deferred IETU liability: Accounts...

  • Page 231
    ... in 2011, the Mexican Board for Research and Development of Financial Information Standards ("CINIF") issued the following NIFs, INIFs and improvements to NIFs, which will become effective as of January 1, 2012: B-3, Statement of Comprehensive Income B-4, Statement of Changes in Stockholders' Equity...

  • Page 232
    ... of income under the cost and expense line items corresponding to other related employee benefits and not under other income and expenses. Other Improvements to Mexican Financial Reporting Standards 2012 were issued that do not generate accounting changes, including the requirement of further...

  • Page 233
    ... Company's consolidated net income, consolidated stockholders' equity, presentation of consolidated financial information and the relevant disclosures are summarized below: 2011 2010 (Unaudited) 2009 (Unaudited) Consolidated net income under MFRS (i) Elimination effects of inflation (ii) Employee...

  • Page 234
    ... Benefit obligation at end of year $ 41,780 $ 35,518 35,518 9,255 2,880 3,558 1,371 (7,830) (2,972) $ 41,780 $ 25,713 9,096 2,029 1,848 2,445 (1,838) (3,775) 35,518 Employee retirement obligations 2011 Employee retirement obligations 2010 (Unaudited) Components of net periodic cost: Service...

  • Page 235
    ... and net periodic benefit cost as of and for the year ended December 31, 2011 and 2010: Discount of the projected benefit obligation at present value Salary increase Minimum wage increase rate (iii) 7.98 5.86 4.27 Rent holidays-Under MFRS, rental expense is recorded beginning when the related store...

  • Page 236
    ...): Allowance for doubtful accounts Inventories Accrued liabilities Advanced payments Current deferred ISR liability - Net Non - current deferred ISR assets (liabilities): Rents holidays Property, equipment and leasehold improvements Effect of tax loss carryforwards Other, net Valuation allowance for...

  • Page 237
    ... amount of the benefit taken will be sustained upon review, based on technical merits of the position taken. The tax years that remain subject to examination by tax authorities are 2000 to 2010. (vii) Additional presentation and disclosure differences (a) Fair value of financial instruments and fair...

  • Page 238
    ... Deferred income tax Net periodic cost Unrealized foreign exchange loss (gain) Changes in operating assets and liabilities: Accounts receivable and recorvable taxes Due to/from related parties Inventories Trade accounts payable Accrued expenses Accrued taxes Other liabilities Cash flows provided by...

  • Page 239
    ... to related party Repayments of banks borrowings Dividends paid Net cash used in financing activities Effect of exchange rate changes on cash Cash and cash equivalents: Net increase (decrease) for the year Beginning of year End of the year Supplemental disclosures of cash flow information Cash paid...

  • Page 240
    ... for any reporting unit in any period and proceed directly to the first step of the two-step impairment test. ASU 2011-08 is effective for interim and annual periods beginning after December 15, 2011 but early adoption is permitted. The Company is currently evaluating the effects of adopting...