Office Depot 2011 Annual Report Download - page 14

products to our stores and customers as well as shipping costs to import products from overseas. While we may
hedge our anticipated fuel purchases, the underlying commodity costs associated with this transport activity have
been volatile in recent years 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 energy costs to operate
our stores and DCs. Fluctuations in the availability or cost of our energy could have a material adverse effect on
our profitability.
Disruptions of our computer systems could adversely affect our operations —We rely heavily on computer
systems to process transactions, manage our inventory and supply-chain and to summarize and analyze our
global business. Certain systems are at, or near the end of life, and need to be replaced. If our systems are
damaged or fail to function properly, or, if we do not replace or upgrade certain systems, we may incur
substantial costs to repair or replace them and may experience an interruption of our normal business activities or
loss of critical data. We are undertaking certain system enhancements and conversions to increase productivity
and efficiency, that, if not done properly, could divert the attention of our workforce during development and
implementation and constrain for some time our ability to provide the level of service our customers demand.
Also, once implemented, the new systems and technology may not provide the intended efficiencies or
anticipated benefits and could add costs and complications to our ongoing operations.
We may be subject to breaches of our information technology systems, which could adversely affect our
reputation, business partner and customer relationships and access to online stores. Such breaches could
subject us to reputational and financial consequences, disrupt our operations and expose us to litigation —
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. This may include names, addresses, phone numbers, email addresses, contact
preferences, and payment account information. We also gather and retain information about our employees in the
normal course of business. We may share information about such persons with vendors that assist with certain
aspects of our business. In addition, our online operations at www.officedepot.com depend upon the secure
transmission of confidential information over public networks, such as information permitting cashless payments.
We have instituted safeguards for the protection of such information. These security measures may be
compromised as a result of third party security breaches, employee error, malfeasance, faulty password
management, or other irregularity, and result in persons obtaining unauthorized access to company data or
accounts. 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. We may experience a breach of our systems and may be
unable to protect sensitive data. Moreover, if a computer security breach affects our systems or results in the
unauthorized release of personal information, our reputation and brand could be materially damaged and use of
our products could decrease. The company would also be exposed to a risk of loss or litigation and possible
liability, which could result in a material adverse effect on our business, results of operations and financial
condition.
Our business could be disrupted due to weather related factors — Because of our heavy concentration in the
southern U.S. (including Florida and the Gulf Coast), we may be more susceptible than some of our competitors
to the effects of tropical weather disturbances, such as hurricanes. In addition, winter storm conditions in areas
that have a large concentration of our business activities could also result in lost retail sales, supply chain
constraints or other business disruptions. We believe that we have taken reasonable precautions to prepare for
weather-related events, but our precautions may not be adequate to deal with such events in the future.
The unionization of a significant portion of our workforce could increase our overall costs and adversely
affect our operations —We have a large employee base and while our management believes that our employee
relations are good, we cannot be assured that we will not experience pressure from labor unions or become the
target of campaigns similar to those faced by our competitors. The potential for unionization could increase if
federal legislation is passed that would facilitate labor organization. Significant union representation would
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