DELRAY BEACH, Fla., Oct 14, 1999 (BUSINESS WIRE) --
Company Announces Resignation of John C. Macatee
as President and COO; Reorganizes Management Structure
Office Depot, Inc. (NYSE:ODP), the world's largest seller of office
products, today made the following announcements:
1) The Company earned $0.19 per share for the third quarter ended
September 25, 1999, excluding merger and restructuring costs and other
non-recurring charges, in line with Wall Street expectations.
2) John C. Macatee has resigned as President and Chief Operating
Officer of the Company in order to pursue other opportunities. His
resignation is effective today. Mr. Macatee also resigned as a Director
of the Company. In connection with Mr. Macatee's resignation, the
Company also announced a reorganization of its senior management
structure.
3) The Company has completed 98% of its previously announced stock
repurchase program.
Details on Quarterly Results Total sales for the quarter rose 15% to
$2.579 billion from $2.235 billion in the third quarter of 1998.
Comparable sales in the 633 stores and 39 delivery centers that have
been open for more than one year increased 7% for the third quarter of
1999.
Additional third quarter highlights include:
-- The Company continued to move aggressively on its real estate
program in the third quarter, opening 33 new stores and closing 3
stores in the United States and Canada during the period. Looking
ahead, the Company remains on track to add 125 new stores, net of
closures, in the United States and Canada in 1999.
-- Office Depot's Internet business continued to grow significantly
in the third quarter. Sales from the Company's public and
business-to-business Web sites increased 421% to $98.92 million
in the third quarter of 1999, as compared to $18.99 million in
the third quarter of 1998. Year-to-date, Internet sales are
$219.44 million or 492% above the comparable 1998 period.
-- The Company continued to benefit from its supply chain management
programs during the first three quarters of 1999. Before
considering the write-down for slow-moving inventories, inventory
levels increased only 1% with a 13% sales increase year-to-date.
In the third quarter, the Company recorded non-recurring charges
totaling $111.49 million ($73.33 million after tax benefits). In
addition to merger and restructuring costs related to the merger with
Viking Office Products, which totaled $8.96 million, these previously
announced charges reflect management's decision to accelerate its store
relocation and closing program for older and under-performing stores,
and to write-down slow moving inventories in its stores and warehouses.
The charge for store relocations and closures was $46.44 million, and
the inventory write-down, which is included in cost of goods sold,
totaled $56.10 million.
Results Reported by Segment The following discussion of segment results
excludes the non-recurring charges for inventory write-downs previously
discussed. Inventory write-down charges totaled $39.20 million in the
Stores Division, $15.50 million in the Business Services Group and
$1.40 million in the International Division. These charges are included
in cost of goods sold in the Company's attached Statements of Earnings.
Stores Division Sales in the Stores Division rose 17% to $1.46 billion
in the third quarter of 1999 as compared with $1.25 billion in the
third quarter of 1998. Comparable store sales in the 633 stores in the
United States and Canada that have been open for more than one year
rose 3% in the third quarter. Store operating profit was $119.82
million in the third quarter of 1999, as compared with $124.91 million
in the third quarter of 1998, reflecting higher expenses associated
with the 85 new stores added year-to-date.
During the third quarter, Office Depot continued to expand its store
base, adding 30 new stores, net of closures. At quarter's end, Office
Depot operated a total of 787 office superstores throughout the United
States and Canada.
Business Services Group Sales in the Business Services Group rose 9% to
$803.48 million in the third quarter of 1999, as compared with $736.66
million in the third quarter of 1998. Warehouse operating profit
increased 22% to $69.79 million in the third quarter of 1999, as
compared with $57.28 million in the third quarter of 1998, as the
Company realized purchasing synergies arising from the Viking merger
and lowered its warehouse operating expenses.
International Division Sales in the International Division rose 25% to
$313.49 million in the third quarter of 1999, as compared with $251.43
million in the third quarter of 1998. Store and warehouse operating
profit decreased to $34.61 million in the third quarter of 1999 from
$37.24 million in the third quarter of 1998. This decline is
attributable to previously announced losses associated with the
start-up of the Company's direct mail and retail operations in Japan.
During the period, the Company also expanded its international store
base by ten stores. At the end of the quarter, Office Depot operated 24
stores in France and five stores in Japan. In addition, through joint
ventures and licensing agreements, there were 76 stores operating under
the Office Depot name in six countries outside of the United States and
Canada at the end of the third quarter, including 37 in Mexico, 20 in
Israel, 11 in Poland, four in Hungary, two in Colombia, and two in
Thailand.
In addition, the Company's licensee, Retail Investment Concepts, Inc.,
which owns and operates retail stores in Central Europe under the
Office Depot name, has acquired the chain of six Office Centre
superstores in Poland previously owned by the German retailer METRO AG.
Company Announces New Senior Management Structure David I. Fuente,
Office Depot's Chairman and CEO, provided the following details
regarding the Company's new senior management structure: "With today's
announcements, there will be several changes in our management
reporting structure. Shawn McGhee is today being named to the position
of President, Merchandising Group and will report directly to me. In
addition to merchandising and marketing, Shawn McGhee's areas of
responsibility will now include our retail stores, catalog sales and
Internet sales."
Mr. Fuente added, "Other executives who formerly reported to the Chief
Operating Officer - Bob Keller, EVP of our Business Services Division,
and Ron Weissman, EVP of Sales Support - also will now report directly
to me. Kevin Phillips, EVP and head of our retail stores group, will
report to Shawn McGhee, as will Gayle Aertker, Senior Vice President of
our real estate department. All of these changes are effective
immediately."
Fuente continued, "In our reorganized reporting structure, Bruce Nelson
will take a more active role in the operations of Viking domestic,
while continuing to serve as President, International. We have many
talented executives in our management structure, who we believe can,
and will, provide the strong leadership to pursue our long term growth
objectives."
Stock Repurchase Program Mr. Fuente also commented on the Company's
stock repurchase program, stating, "On August 30 of this year, we
announced that our Board had authorized a repurchase of up to $500
million in market value of our stock through open market purchases and
block transactions. I am pleased to report that as of the end of our
fiscal third quarter, we had acquired 36,294,500 shares of our stock in
the open market at a total cost of $390,174,431 plus commissions.
Subsequently, in the month of October, we have acquired an additional 9,
397,300 shares, bringing the total shares acquired to 45,691,800, at an
average share price of $10.69 per share and at a total cost of $488,419,
750 plus commissions. We are close to our goal and believe this is a
solid investment in the future of our Company."
As of September 25, 1999, the Company operated 787 office supply
superstores in the United States and Canada, in addition to a national
business-to-business delivery network supported by 30 delivery centers,
more than 60 local sales offices and seven regional call centers.
Furthermore, the Company owned and operated 24 office supply stores in
France and five stores in Japan; had mail order and delivery operations
in 11 countries outside of the United States and Canada; and under
joint venture and licensing agreements, had 76 additional stores under
the Office Depot name in six foreign countries. The Company also
operates an award-winning U.S. Internet business at www.officedepot.com
where customers can access Office Depot's low competitive prices seven
days a week, twenty-four hours a day. Office Depot's common stock is
traded on the New York Stock Exchange under the symbol ODP and is
included in the S&P 500 index.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: Except for
historical information, the matters discussed in this press release are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Forward-looking statements,
including projections and anticipated levels of performance, involve
risks and uncertainties which may cause actual results to differ
materially from those discussed herein. These risks and uncertainties
are detailed from time to time by Office Depot in its filings with the
United States Securities and Exchange Commission ("SEC"), including the
Company's 1998 Annual Report on Form 10-K filed during the first
quarter. Certain other risks and uncertainties were contained in the
Company's press release issued on August 30, 1999 and filed with the
SEC on Form 8-K on the same date. You are urged to review such filings,
which are incorporated by reference herein, for a more detailed
discussion of such risks and uncertainties. |
