Office Depot 2011 Annual Report Download - page 13

the sources of our income, any agreements we may have with taxing authorities in various jurisdictions, and the
tax filing positions we take in these jurisdictions, our overall tax rate may fluctuate significantly from other
companies or even our own past tax rates. 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.
We are subject to legal proceedings and legal compliance risks —We are involved in various legal proceedings,
which from time to time may involve class action lawsuits, federal, state and local governmental inquiries, audits
and investigations, employment, tort, consumer litigation and intellectual property litigation. At times, such
matters may involve directors and/or executive officers. Certain of these legal proceedings, including
government investigations, may be a significant distraction to management and could expose our company to
significant liability, including damages, fines, penalties, attorneys’ fees and costs, and non-monetary sanctions,
including suspensions and debarments from doing business with certain government agencies, any of which
could have a material adverse effect on our business and results of operations.
Failure to successfully manage domestic and international business could have an adverse effect on our
operations and financial results —Circumstances outside of our control could negatively impact anticipated
store openings, joint ventures and franchise arrangements. We cannot provide assurance that our new store
openings, including some newly sized or formatted stores or retail concepts, will be successful. There may be
unintended consequences of adding joint venture and franchising partners to the Office Depot model, such as the
potential for compromised operational control in certain countries and inconsistent international brand image.
These arrangements may also add complexity to our processes and may require as yet unforeseen operational
adjustments in the future that could adversely impact our operations and financial results.
We face risks associated with international business, such as foreign currency fluctuations, potential
unfavorable foreign trade policies or unstable political and economic conditions —As of December 31, 2011,
we sold to customers in 60 countries throughout North America, Europe, Asia and Latin America. We operate
wholly-owned entities, majority-owned entities and participate in joint ventures and alliances globally. Sales
from our operations outside the U.S. are denominated in local currency, which must be translated into U.S.
dollars for reporting purposes and therefore our consolidated earnings can be significantly impacted by
fluctuations in world currency markets. We are required to comply with multiple foreign laws and regulations
that may differ substantially from country to country, requiring significant management attention and cost. In
addition, the business cultures in certain areas of the world are different than those that prevail in the U.S., and
we may be at a competitive disadvantage against other companies that do not have to comply with standards of
financial controls, anti-corruption or business integrity that we are committed to maintaining as a U.S. publicly
traded company.
Changes in the regulatory environment may increase our expenses and may negatively impact our business —
We are subject to regulatory requirements relating to our corporate conduct and the conduct of our business,
including securities laws, consumer protection and safety laws, advertising regulations, and wage and hour
regulations. Certain jurisdictions have taken a particularly aggressive stance with respect to such matters and
have implemented new initiatives and reforms, including more stringent disclosure and compliance requirements.
To the extent that we are subject to more challenging regulatory environments and enhanced legal and regulatory
requirements, such exposure could have a material adverse effect on our business, including the added cost of
increased compliance measures that we may determine to be necessary.
Increases in fuel prices could have an adverse impact on our earnings —We operate a large network of stores
and delivery centers around the globe. As such, we purchase significant amounts of fuel needed to transport
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