UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date
of Report: November 5, 2007
Commission
file number 1-10948
OFFICE
DEPOT, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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59-2663954
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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2200
Old Germantown Road, Delray Beach,
Florida
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33445
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(Address
of principal executive
offices)
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(Zip
Code)
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(561)
438-4800
(Registrant’s
telephone number, including area code)
Former
name or former address, if changed since last report: N/A
ITEM
1.01
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On
November 5, 2007, Office Depot, Inc., a Delaware corporation (the “Company”),
entered into a Letter Waiver dated as of November 5, 2007 (the “Waiver”), with
respect to that certain Five Year Credit Agreement dated as of May 25, 2007,
by
and among the Company and Citicorp USA, Inc. and BNP Paribas as syndication
agents, Wachovia Bank, National Association as administrative agent, Citigroup
Global Markets Inc. and Wachovia Capital Markets, LLC and BNP Paribas Securities
Corp. as joint lead arrangers, and Citigroup Global Markets Inc. as the sole
bookrunner (collectively, the “Lenders”), as amended (the “Credit Agreement”).
As
previously reported by the Company in its Current Report on Form 8-K filed
on
October 29, 2007, and in a corresponding press release of the same date, the
Company has delayed reporting its third quarter financial results pending the
completion of an independent review by the Audit Committee of the Board of
Directors of the Company’s vendor program funds. As reported in Item 4.02 below,
the Company has decided to restate its financial statements for certain prior
periods. This restatement will result in a delay in the Company’s delivery of
its financial statements pursuant to the Credit Agreement and a delay in certain
of the Company’s filings with the Securities and Exchange Commission. Pursuant
to the Waiver, the Lenders have agreed to waive the impact of the matters
described above, including, without limitation, the impact of the events
described in the foregoing sentence, (i) to the extent that any restatements
of
the Company’s financial statements for prior financial periods do not result in
a net reduction in the aggregate reported earnings of the Company for all
periods affected of more than $40,000,000 in the aggregate, and (ii) with
respect to the delay in delivery of the financial statements required to be
delivered under the Credit Agreement, to the extent that such delay does not
extend beyond December 15, 2007 (the “Waived Matters”). The provisions of the
Waiver shall terminate on the earlier of (a) December 15, 2007 and (b) the
date,
if any, that holders of any Debt (as defined in the Credit Agreement)
outstanding in a principal or notional amount of at least $50,000,000 shall
accelerate or give notice of acceleration of such Debt. The preliminary results
of the review have fallen within the parameters of the waiver.
The
summary of the provisions of the Waiver is qualified in its entirety by
reference to Exhibit 10.1 to this Current Report on Form 8-K, which is
incorporated herein by reference.
ITEM
4.02 NON-RELIANCE
ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED
INTERIM REVIEW
On
October 29, 2007, Office Depot announced that its Audit Committee initiated
an
independent review principally focused on the accounting for certain vendor
program funds. The Audit Committee, with the assistance of independent legal
counsel and forensic accountants, assessed the timing of recognition of certain
vendor program arrangements. The investigation revealed errors in timing of
vendor program recognition and included evidence that some individuals within
the Company’s merchandising organization failed to provide Office Depot’s
accounting staff with complete or accurate documentation of future purchase
or
performance conditions in certain vendor programs that would have otherwise
required recognition of the related vendor funds to be deferred into future
periods in accordance with the Company’s established practices.
As
a
result of the Audit Committee’s review and after discussion with the Company’s
independent accountants, Deloitte & Touche LLP, on November 8, 2007, the
Board of Directors of the Company approved a restatement of the Company’s 2006
financial statements including changes in amounts reported in the third and
fourth quarters of the year and the first and second quarters of 2007
(collectively, the “Restated Periods”), and the Company will amend its Form 10-K
for the fiscal year 2006 and its Form 10-Qs for the first and second quarters
of
2007.
Based
on
the investigation described above, the Audit Committee concluded that the funds
due or received from vendors previously recognized from the third quarter of
2006 through the second quarter of 2007 should be deferred into later periods.
The impact of these errors is to reduce previously reported gross profit,
operating profit, net earnings and earnings per share in prior quarters and
recognize related amounts into future periods. The Company currently estimates
a
reduction in diluted earnings per share of $0.02 in the quarter ended September
30, 2006, $0.03 in the quarter ended December 30, 2006, $0.01 in the quarter
ended March 31, 2007, and $0.02 in the quarter ended June 30, 2007. The diluted
EPS impact of approximately $0.07 per share will be recognized beginning in
the
second half of 2007 and in decreasing amounts in years from 2008 through 2010.
As a result, the financial restatements are estimated to result in reductions
of
previously reported Company gross profit of approximately $7 million in the
quarter ended September 30, 2006, $14 million in the quarter ended December
30,
2006, $3 million in the quarter ended March 31, 2007, and $6 million in the
quarter ended June 30, 2007. Approximately $4 million of vendor program funds
in
the quarter ended September 29, 2007 will also be deferred as a result of this
review. The aggregate deferrals will be recognized in decreasing amounts through
2010, with approximately $12 million expected to be recognized in the quarter
ending December 29, 2007 and $15 million in fiscal year 2008. The Company
intends to file an amended Form 10-K/A for the fiscal year 2006 and amended
Forms 10-Q/A for the first and second quarters of 2007 by the end of November.
While the Company expects to report the estimated impacts described above,
there
can be no assurance that the final adjustments that are made as part of the
restatement will not differ materially from these estimates.
In
accordance with Section 404 of the Sarbanes-Oxley Act of 2002, our management
has been assessing the effectiveness of our internal control over financial
reporting that existed as of restated period ends. Based on both the
quantitative and qualitative factors, management has concluded that the findings
detected during the investigation of the accounting for certain vendor program
funds has resulted in the identification of a material weakness in internal
controls over financial reporting. Management is evaluating and implementing
changes in internal control over financial reporting relating to the timing
of
the recognition of vendor program funds in order to address the identified
areas
of the material weakness.
The
Company also is cooperating with the staff of the United States Securities
and
Exchange Commission (“SEC”) in an informal inquiry that commenced in July
2007. The SEC’s informal inquiry relates to the Company’s contacts and
communications with financial analysts as well as certain other matters,
including inventory receipt, timing of vendor payments and certain intercompany
loans. Prior to filing its quarterly report on Form 10-Q for the quarter ended
June 30, 2007, the Company completed a review of the accounting matters related
to inventory receipt, timing of vendor payments and certain intercompany loans,
with the assistance of independent forensic accountants, and with review by
its
independent auditors. The SEC has recently expanded its inquiry into the timing
of recognition of vendor program funds.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: Except for historical
information, the matters discussed in this Current Report on Form 8-K are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Forward-looking statements, including
statements regarding the review of the Company’s Audit Committee, the Company’s
intent to restate its prior financial statements and the estimated amounts
to be
restated, involve risks and uncertainties which may cause actual results to
differ materially from those discussed herein. The Company makes no commitment
to revise or update any forward-looking statements in order to reflect events
or
circumstances after the date any such statement is made. Please refer to the
risks and uncertainties detailed from time to time by Office Depot in its
filings with the SEC made from time to time. You are strongly urged to review
all such filings for a more detailed discussion of such risks and uncertainties.
The Company's SEC filings are readily obtainable at no charge at www.sec.gov
and
at www.freeEDGAR.com, as well as on a number of other commercial web
sites.
ITEM
9.01. FINANCIAL
STATEMENTS AND EXHIBITS
| Exhibit
10.1 |
Letter
Waiver dated as of November 5, 2007.
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| Exhibit
99.1 |
News
release of Office Depot, Inc. issued on November 8, 2007, incorporated
by
reference to the Company’s Report on Form 8-K dated November 8, 2007.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
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OFFICE
DEPOT,
INC. |
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| Date:
November 9, 2007 |
By: |
/s/ Elisa D. Garcia C. |
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Elisa D. Garcia C. |
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Executive
Vice
President, General Counsel and
Corporate Secretary |
EXHIBIT
INDEX
| Exhibit
10.1 |
Letter
Waiver dated as of November 5,
2007.
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| Exhibit
99.1 |
News
release of Office Depot, Inc. issued on November 8, 2007, incorporated
by
reference to the Company’s Report on Form 8-K dated November 8, 2007.
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