Office Depot Reports Second Quarter Results; EPS Before
Merger Related Costs Increased 22% to $.22 Per Share
PR Newswire - July 17, 1997 17:57
ODP %REA %ERN V%PRN P%PRN
DELRAY BEACH, Fla., July 17 /PRNewswire/ -- Office Depot, Inc.
(NYSE: ODP), the world's largest seller of office products, today announced
its financial results for the second quarter ended June 28, 1997.
Total sales for the second quarter of fiscal 1997 rose 11% to $1.532
billion from $1.381 billion for the same quarter last year. Comparable sales
in the 526 stores and 23 delivery centers that have been open for more than
one year increased 6% for the quarter. This is on top of a 6% increase in
comparable store sales during the second quarter of 1996.
The Company continued to enjoy sales and earnings growth from previous
year levels. Prior to a charge in the second quarter of approximately $9.5
million ($.03 per share after taxes) associated with the Company's
unsuccessful efforts to merge with Staples, Inc., Office Depot reported:
* A 21% increase in operating profit in the second quarter, to $64.9
million from $53.7 million in the second quarter of 1996. This increase in
operating profit is nearly twice the Company's growth rate in sales for the
quarter.
* Net earnings increased by 29% in the second quarter to $36.3 million
from $28.2 million last year.
* Earnings per share rose 22% to $.22 in the second quarter from $.18 for
the comparable quarter in 1996.
For the six months ended June 28, 1997, the Company reported the following
results, excluding approximately $16.1 million ($.06 per share after taxes) in
merger costs:
* Sales were $3.304 billion, a 10% increase over the $3.014 billion in
sales for the comparable period last year.
* Operating profit was $141.7 million, a 23% increase over the $115.4
million reported for the same period in 1996.
* Net earnings were $79.2 million ($.48 per share), a 28% increase over
the $61.7 million ($.38 per share) reported for the same period in 1996.
In reviewing the Company's second quarter 1997, David I. Fuente, Chairman
and Chief Executive Officer of Office Depot, Inc., commented: "Office Depot's
total sales and average sales per store continue to be the highest in the
office products industry.
"Once the Federal Trade Commission voted on April 4, 1997 to oppose the
merger between Office Depot and Staples, Inc., the Company ceased all
integration activities and concentrated on growing our own sales and earnings.
As a result, the Company saw continued improvement in operating profit during
the second quarter of 1997 in both our Retail and Business Services
Divisions," Fuente added.
Office Depot and Staples announced on July 2, 1997 that the merger
agreement between the two companies had been terminated. The action was taken
several days after U.S. District Court Judge Thomas Hogan granted the Federal
Trade Commission's request for a preliminary injunction to block the proposed
merger. At that time, Fuente said that even without the merger, the
experience had still "been beneficial for Office Depot. The combined
Integration Task Forces spent months analyzing our business and developing
'Best Practices' recommendations that Office Depot is already implementing.
Furthermore, because Office Depot's information systems were going to be the
base platform for the combined company, we invested heavily in building a
stronger, more reliable Management Information Systems structure. As a
result, we now have in place a highly sophisticated MIS system that covers
both our retail and delivery businesses and will easily accommodate future
growth."
In discussing accomplishments made by Office Depot during the second
quarter of 1997, Fuente cited the following:
* Office Depot opened four new office products superstores, including two
stores in California and one each in Illinois and Ohio, ending the quarter
with a total of 575 stores throughout the United States and Canada. In
addition, the Company converted one Images location in South Florida to an
Office Depot Express. Office Depot expects to open approximately 40 new
stores in 1997 and at least 80 stores next year.
* Office Depot enhanced its focus on inventory management and reduced
inventory levels in substantially all product categories, with an emphasis on
the computer category, while maintaining the best in-stock positions in the
Company's history.
* Office Depot continued to expand internationally, with additional
locations opening in both France and Mexico. Through joint ventures and
international licensing agreements, there are now 10 Office Depot locations in
Mexico, eight in Israel, five in Colombia, four in Poland, three in France and
two in Thailand, for a total of 32 international locations. In addition, the
first Office Depot location in Japan is expected to open later this year.
In its effort to strengthen its organizational structure once the merger
agreement with Staples had been terminated, the Company immediately initiated
searches to fill open positions and strengthen Office Depot's current
management team.
Except for the historical information contained herein, the matters
discussed in this press release are forward looking statements that involve
risks and uncertainties detailed from time to time in the Company's reports
filed with the Securities and Exchange Commission, including the Company's
most recent Forms 10-K/A and 10-Q.
As of June 28, 1997, the Company operated 575 stores. In the United
States, this includes 529 office supply superstores, five Furniture at Work
stores in California, Florida and Texas, three Images and two Office Depot
Express locations in South Florida, in addition to a national business-to-
business delivery network that includes 23 delivery centers and three national
Telecenters. The Company also operates 36 office supply superstores in
Canada. Office Depot is traded on the New York Stock Exchange under the
symbol "ODP."
OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(Unaudited)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Sales $1,531,825 $1,381,365 $3,304,269 $3,014,360
Cost of goods sold
and occupancy
costs 1,171,291 1,056,661 2,544,194 2,334,278
Gross Profit 360,534 324,704 760,075 680,082
Store and warehouse
operating and
selling expenses 247,904 224,982 522,521 471,755
Pre-opening
expenses 792 4,357 1,583 5,498
General and
administrative
expenses 45,581 40,387 91,647 84,830
Amortization of
goodwill 1,311 1,306 2,623 2,636
Operating Profit 64,946 53,672 141,701 115,363
Interest expense
(income), net 4,306 6,318 9,059 11,174
Equity and franchise
loss (income), net 728 (78) 1,973 367
Merger costs 9,483 0 16,094 0
Earnings before
income taxes 50,429 47,432 114,575 103,822
Income Taxes 19,955 19,195 45,314 42,102
Net earnings $30,474 $28,237 $69,261 $61,720
Earnings per common
and common equivalent
share:
Primary $0.19 $0.18 $0.44 $0.39
Fully diluted $0.19 $0.18 $0.43 $0.38
Average common and common
equivalent shares:
Primary 158,864 158,718 159,080 158,424
Fully diluted 175,744 175,285 175,880 174,998
SOURCE Office Depot, Inc.
CONTACT: Barry Goldstein, Executive Vice President-CFO, 561-265-4237, or
Gary Schweikhart, Director of Public Relations, 561-265-4399, both of Office
Depot
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