<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 1-10948
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OFFICE DEPOT, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2663954
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Old Germantown Road, Delray Beach, Florida 33445
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(Address of principal executive offices) (Zip Code)
(561) 278-4800
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
---- ----
The registrant had 157,838,901 shares of common stock outstanding as of August
8, 1997.
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OFFICE DEPOT, INC.
INDEX
Page
Part I. FINANCIAL INFORMATION
ITEM 1 Financial Statements
------
Consolidated Statements of Earnings for the
13 and 26 Weeks Ended June 28, 1997 and
June 29, 1996 3
Consolidated Balance Sheets as of
June 28, 1997 and December 28, 1996 4
Consolidated Statements of Cash Flows for the
26 Weeks Ended June 28, 1997 and
June 29, 1996 5
Notes to Consolidated Financial Statements 6 - 8
ITEM 2 Management's Discussion and Analysis of
------ Financial Condition and Results of Operations 9 - 16
Part II. OTHER INFORMATION 17
SIGNATURE 18
INDEX TO EXHIBITS 19
2
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OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
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
----------- ---------- ----------- -----------
295,588 271,032 618,374 564,719
----------- ---------- ----------- -----------
Operating profit 64,946 53,672 141,701 115,363
Other expense (income)
Interest expense, net 4,306 6,318 9,059 11,174
Equity and franchise (income) loss, net 728 (78) 1,973 367
Merger costs 9,483 --- 16,094 ---
----------- ---------- ----------- -----------
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
</TABLE>
3
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OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
----------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 69,905 $ 51,398
Receivables, net of allowances 382,781 401,900
Merchandise inventories 1,154,705 1,324,506
Deferred income taxes 35,570 29,583
Prepaid expenses 12,594 14,209
---------- ----------
Total current assets 1,655,555 1,821,596
Property and equipment, net 667,034 671,648
Goodwill, net of amortization 187,403 190,052
Other assets 64,624 57,021
---------- ----------
$2,574,616 $2,740,317
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 641,163 $ 781,963
Accrued expenses 200,623 177,680
Income taxes 27,477 25,819
Short-term borrowings and current maturities
of long-term debt 2,393 142,339
---------- ----------
Total current liabilities 871,656 1,127,801
Long-term debt, less current maturities 15,851 17,128
Deferred taxes and other credits 46,672 39,814
Zero coupon, convertible subordinated notes 408,656 399,629
Common stockholders' equity
Common stock - authorized 400,000,000 shares of
$.01 par value; issued 159,891,479 in 1997 and
159,417,089 in 1996 1,599 1,594
Additional paid-in capital 637,736 630,049
Foreign currency translation adjustment (2,190) (1,073)
Retained earnings 596,386 527,125
Less: 2,163,447 shares of treasury stock, at cost (1,750) (1,750)
---------- ----------
1,231,781 1,155,945
---------- ----------
$2,574,616 $2,740,317
========== ==========
</TABLE>
4
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OFFICE DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Change in Cash and Cash Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
June 28, June 29,
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Cash received from customers $3,279,285 $3,019,591
Cash paid for merchandise inventories (2,360,515) (2,431,936)
Cash paid for store and warehouse operating,
selling and general and administrative expenses (675,714) (596,391)
Interest received 1,363 725
Interest paid (1,955) (3,286)
Income taxes paid (47,260) (42,597)
---------- ----------
Net cash provided by (used in) operating activities 195,204 (53,894)
---------- ----------
Cash flows from investing activities
Capital expenditures, net (39,474) (79,380)
---------- ----------
Net cash used in investing activities (39,474) (79,380)
---------- ----------
Cash flows from financing activities
Proceeds from exercise of stock options and sales
of stock under employee stock purchase plan 5,117 9,367
Foreign currency translation adjustment (1,117) 33
Proceeds from long- and short-term borrowings --- 120,833
Payments on long- and short-term borrowings (141,223) (41,363)
---------- ----------
Net cash (used in) provided by financing activities (137,223) 88,870
---------- ----------
Net increase (decrease) in cash and cash equivalents 18,507 (44,404)
Cash and cash equivalents at beginning of period 51,398 61,993
---------- ----------
Cash and cash equivalents at end of period $ 69,905 $ 17,589
========== ==========
Reconciliation of net earnings to net cash
provided by operating activities
Net earnings $ 69,261 $ 61,720
---------- ----------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Depreciation and amortization 47,898 39,025
Provision for inventory shrinkage and bad debts 21,019 10,608
Accreted interest on zero coupon, convertible
subordinated notes 9,027 8,420
Contributions of common stock to employee
benefit and stock purchase plans 1,617 1,895
Changes in assets and liabilities
Decrease in receivables 14,590 42,035
Decrease (increase) in merchandise inventories 153,311 (3,674)
Increase in prepaid expenses, deferred income
taxes and other assets (13,136) (16,198)
Decrease in accounts payable, accrued
expenses and deferred credits (108,383) (197,725)
---------- ----------
Total adjustments 125,943 (115,614)
---------- ----------
Net cash provided by (used in) operating activities $ 195,204 $ (53,894)
========== ==========
</TABLE>
5
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OFFICE DEPOT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim financial statements as of June 28, 1997 and for the 13 and
26 week periods ended June 28, 1997 and June 29, 1996 are unaudited;
however, such interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the financial position and the results of operations
for the interim periods presented. The results of operations for the
interim periods presented are not necessarily indicative of the results
to be expected for the full year. Certain reclassifications were made
to prior year statements to conform to current year presentations. The
interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 28, 1996.
2. Net earnings per common and common equivalent share is based upon the
weighted average number of common shares and common share equivalents
outstanding during each period. Stock options are considered common
stock equivalents. The zero coupon, convertible subordinated notes are
not common stock equivalents. Net earnings per common and common
equivalent share assuming full dilution was determined on the
assumption that the convertible notes were converted as of the
beginning of the periods. Net earnings under this assumption have been
adjusted for interest, net of its income tax effect.
The information required to compute net earnings per share on a primary
and fully diluted basis is as follows:
<TABLE>
<CAPTION>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Weighted average number of common
and common equivalent shares 158,864 158,718 159,080 158,424
======== ======== ======== ========
Fully Diluted:
Net Earnings $30,474 $28,237 $69,261 $61,720
Interest expense related to convertible
notes, net of tax 2,860 2,596 5,552 5,136
-------- -------- -------- --------
Adjusted net earnings $33,334 $30,833 $74,813 $66,856
======== ======== ======== ========
Weighted average number of common and
common equivalent shares 159,179 158,720 159,315 158,433
Shares issued upon assumed conversion
of convertible notes 16,565 16,565 16,565 16,565
-------- -------- -------- --------
Shares used in computing net earnings per
common and common equivalent share
assuming full dilution 175,744 175,285 175,880 174,998
======== ======== ======== ========
</TABLE>
6
<PAGE> 7
3. In September 1996, the Company entered into an agreement and plan of
merger with Staples, Inc. ("Staples") and Marlin Acquisition Corp., a
wholly-owned subsidiary of Staples. On April 4, 1997, the Federal Trade
Commission ("FTC") initiated legal action to challenge the proposed
merger. The Company and Staples contested the FTC's efforts to
challenge the merger, and a preliminary injunction hearing in the
Federal District Court in Washington, DC was held in May 1997. On June
30, 1997, the judge granted the FTC's request for a preliminary
injunction to block the proposed merger, and on July 2, 1997, the
Company and Staples announced that the merger agreement had been
terminated.
During the 13 and 26 week periods ended June 28, 1997, the Company
expensed approximately $9,483,000 and $16,094,000, respectively, of
costs directly related to the terminated merger. These costs,
consisting primarily of legal fees, investment banker fees and
personnel retention costs, represent estimated costs incurred through
June 28, 1997; however, final billings have not, as yet, been
determined for certain litigation and other costs.
4. The Consolidated Statements of Cash Flows do not include the following
non-cash investing and financing transactions:
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
June 28, June 29,
1997 1996
-------------- --------------
(in thousands)
<S> <C> <C>
Additional paid-in capital related
to tax benefit on stock options exercised $ 957 $2,021
Equipment purchased under capital leases --- 5,252
Conversion of convertible subordinated --- 6
notes to common stock
</TABLE>
5. In February 1997, Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share," was issued. SFAS No. 128, which
supersedes Accounting Principles Board ("APB") Opinion No. 15, requires
a dual presentation of basic and diluted earnings per share on the face
of the income statement. Basic earnings per share excludes dilution and
is computed by dividing income or loss attributable to common
stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the entity. Diluted earnings per share is computed
similarly to fully diluted earnings per share under APB Opinion No. 15.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier
application is not permitted. When adopted, all prior-period earnings
per share data are required to be restated. For the 13 and 26 weeks
ended June 28, 1997 and June 29, 1996, basic earnings per common share,
as computed under SFAS No. 128, would be the same as primary earnings
per common and common equivalent share shown on the
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accompanying consolidated statements of earnings. Similarly, for the 13
and 26 weeks ended June 28, 1997 and June 29, 1996, diluted earnings
per common share, as computed under SFAS No. 128, would be the same as
fully diluted earnings per common and common equivalent share shown on
the accompanying consolidated statements of earnings.
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued. SFAS No. 131
establishes standards for the way that public companies report selected
information about operating segments in annual financial statements and
requires that those companies report selected information about
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131, which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to report information about
major customers, requires that a public company report financial and
descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources
and in assessing performance. Generally, financial information is
required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources
to segments. SFAS No. 131 requires that a public company report a
measure of segment profit or loss, certain specific revenue and expense
items, and segment assets. However, SFAS No. 131 does not require the
reporting of information that is not prepared for internal use if
reporting it would be impracticable. SFAS No. 131 also requires that a
public company report descriptive information about the way that the
operating segments were determined, the products and services provided
by the operating segments, differences between the measurements used in
reporting segment information and those used in the enterprise's
general-purpose financial statements, and changes in the measurement of
segment amounts from period to period. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. The
Company has not determined the effects, if any, that SFAS No. 131 will
have on the disclosures in its consolidated financial statements.
8
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales increased 11% to $1,531,825,000 in the second quarter of 1997 from
$1,381,365,000 in the second quarter of 1996 and 10% to $3,304,269,000 for the
first six months of 1997 from $3,014,360,000 for the first six months of 1996.
Approximately 38% of the increase in sales for the first six months of 1997 was
due to the 38 new office supply stores opened subsequent to the second quarter
of 1996. Comparable sales for stores and delivery facilities open for more than
one year at June 28, 1997 increased 6% for the second quarter of 1997 and 4% for
the first six months of 1997. Sales of computers, business machines and related
supplies rose slightly as a percentage of total sales in the second quarter of
1997 over the comparable 1996 period, driven primarily by increases in sales of
machine supplies. The average unit sales prices and comparable unit sales of
computers have decreased from 1996. Average unit retail prices for copy paper
and related products were approximately 20% below prior year levels as a result
of a soft paper market.
The Company opened four and closed one office supply store in the second quarter
of 1997, bringing the total number of office supply stores open at the end of
the second quarter to 565, compared with 527 stores open at the end of the
second quarter of 1996. The Company also operated 23 contract stationer and
delivery warehouses (customer service centers ("CSC's")) at the end of the
second quarters of both 1997 and 1996. Several of these are newer, larger
facilities which replaced existing facilities acquired as part of the contract
stationer acquisitions in 1993 and 1994. As of June 28, 1997, the Company also
operated three Images(TM), two Office Depot Express(TM) and five Furniture At
Work(TM) stores.
Gross profit as a percentage of sales was 23.5% and 23.0% during the second
quarter and first half of 1997, respectively, as compared with 23.5% and 22.6%
during the comparable quarter and first six months of 1996, respectively.
Improvements in margin for the first six months of 1997 have been realized
primarily through the decrease in sales of computers as a percentage of total
sales. The Company's management believes that gross profit as a percentage of
sales can fluctuate as a result of numerous factors, including continued
expansion of its contract stationer business, competitive pricing in more market
areas, continued change in product mix, continued fluctuation in paper prices,
as well as the Company's ability to achieve purchasing efficiencies through
growth in total merchandise purchases. Additionally, occupancy costs can
increase in new markets and in certain existing markets where the Company plans
to add new stores and warehouses to complete its market plan.
Store and warehouse operating and selling expenses as a percentage of sales were
16.2% and 15.8% in the second quarter and first six months of 1997,
respectively, as compared to 16.3% and 15.7% in the second quarter and first six
months of 1996, respectively. Store and warehouse operating and selling expenses
consist primarily of payroll and advertising expenses. While store and warehouse
operating and selling expenses as a percentage of sales continue to be
significantly higher in the contract
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stationer business than in the retail business, principally due to the need for
a more experienced and more highly compensated sales force, these expenses have
begun to decline as a percentage of sales as the Company progresses toward full
integration of this business. Management expects that as the Company continues
this progress, certain fixed expenses should decrease as a percentage of sales,
thereby improving the Company's overall store and warehouse operating expenses
as a percentage of sales. In the retail business, while the majority of store
expenses vary proportionately with sales, there is a fixed cost component to
these expenses that, as sales increase within each store and within a cluster of
stores in a given market area, should decrease as a percentage of sales. This
benefit in the retail business did not significantly improve the Company's
operating margins for the first six months of 1997, since new store openings
were limited during this period. When the Company first enters a large
metropolitan market area where the advertising costs for the full market must be
absorbed by the small number of facilities opened, advertising expenses are
initially higher as a percentage of sales. As additional stores are opened in
the same market, advertising costs, which are substantially a fixed expense for
a market area, have been and should continue to be reduced as a percentage of
total sales. The Company has also continued, while on a more limited scale than
in prior periods, a strategy of opening stores in existing markets. While
increasing the number of stores increases operating results in absolute dollars,
this also has the effect of increasing expenses as a percentage of sales since
the sales of certain existing stores in the market may be adversely affected.
Pre-opening expenses decreased to $792,000 in the second quarter of 1997 from
$4,357,000 in the comparable quarter of 1996 and decreased to $1,583,000 from
$5,498,000 in the first half of 1997, as compared to the same period in 1996.
The Company added five new and one replacement office supply store in the first
half of 1997, four of which were added in the second quarter, as compared with
26 new stores in the comparable 1996 period, 22 of which were added in the
second quarter. Pre-opening expenses, which currently approximate $150,000 per
standard office supply store, are predominately incurred during a six-week
period prior to the store opening. CSC pre-opening expenses are approximately
$500,000; however, these expenses may vary with the size and type of future
CSC's. These expenses consist principally of amounts paid for salaries and
property expenses. Since the Company's policy is to expense these items during
the period in which they occur, the amount of pre-opening expenses in each
period is generally proportional to the number of new stores or customer service
centers opened or in the process of being opened during the period.
General and administrative expenses increased as a percentage of sales to 3.0%
for the quarter ended June 28, 1997 from 2.9% for the comparable 1996 period,
while these expenses were 2.8% as a percentage of sales for both the first half
of 1997 and 1996. Still impacting these expenses is the Company's commitment to
improving the efficiency of its management information systems and increasing
its information systems programming staff. While this investment in systems has
and will continue to increase general and administrative expenses in the short
term, the Company believes it will provide benefits in the future. Increases
resulting from this initiative have been partially offset by decreases in other
general and administrative expenses, both as a result of the Company's ability
to increase sales without a proportionate increase in
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corporate expenditures, and as a result of reduction in certain costs achieved
through systems initiatives already being implemented. However, there can be no
assurance that the Company will be able to continue to increase sales without a
proportionate increase in corporate expenditures. Additionally, uncertainty
surrounding the terminated merger with Staples has, to some extent, resulted in
a decline in corporate personnel costs and, thus, reduced general and
administrative expenses the first half of 1997.
During the second quarter and first half of 1997, the Company expensed
approximately $9,483,000 and $16,094,000, respectively, of costs directly
related to the terminated merger with Staples. These costs, consisting primarily
of legal fees, investment banker fees and personnel retention costs, represent
estimated costs incurred through June 28, 1997; however, final billings have
not, as yet, been determined for certain litigation and other costs. The Company
does not expect to incur significant additional costs associated with the
terminated merger in future periods.
TERMINATED MERGER
In September 1996, the Company entered into an agreement and plan of merger with
Staples, Inc. ("Staples") and Marlin Acquisition Corp., a wholly-owned
subsidiary of Staples. On April 4, 1997, the Federal Trade Commission ("FTC")
initiated legal action to challenge the proposed merger. The Company and Staples
contested the FTC's efforts to challenge the merger, and a preliminary
injunction hearing in the Federal District Court in Washington, DC was held in
May 1997. On June 30, 1997, the judge granted the FTC's request for a
preliminary injunction to block the proposed merger, and on July 2, 1997, the
Company and Staples announced that the merger agreement had been terminated.
While the Company believed that the merger with Staples would have been in the
best interests of its customers and shareholders, the Company has prepared
itself to continue on a stand alone basis. Many of the initiatives undertaken in
planning for the merger have and will continue to strengthen the Company's
support systems and operating practices.
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's inception in March 1986, the Company has relied on equity
capital, convertible debt and bank borrowings as the primary sources of its
funds. Since the Company's store sales are substantially on a cash and carry
basis, cash flow generated from operating stores provides a source of liquidity
to the Company. Working capital requirements are reduced by vendor credit terms,
which allow the Company to finance a portion of its inventories. The Company
utilizes private label credit card programs administered and financed by
financial service companies, which allow the Company to expand its store sales
without the burden of additional receivables. The Company has also utilized
equipment financings as a source of funds in previous periods.
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Sales made to larger customers are generally made under regular commercial
credit terms where the Company carries its own receivables, as opposed to sales
made to smaller customers, in which payments are generally tendered in cash or
by credit card. Thus, as the Company continues to expand into servicing
additional large companies, it is expected that the Company's trade receivables
will continue to grow.
Receivables from vendors under rebate, cooperative advertising and marketing
programs, which comprise a significant percentage of total receivables, tend to
fluctuate seasonally, growing during the second half of the year and declining
during the first half. This is the result of collections generally made after an
entire program year is completed.
In the first six months of 1997, the Company added five and replaced one office
supply store and added one Furniture At Work(TM) store, compared with 26 new
office supply stores, two new Images(TM) and one new Furniture At Work(TM) store
added in the comparable period of 1996. Uncertainty and a loss of certain real
estate personnel, both resulting from the terminated merger with Staples, has
had a negative short-term effect on the Company's store opening program. Net
cash provided by operating activities was $195,204,000 in the six months of
1997, compared with net cash used by operating activities of $53,894,000 in the
comparable 1996 period. As stores mature and become more profitable, and as the
number of new stores opened in a year becomes a smaller percentage of the
existing store base, cash generated from operations of existing stores should
provide a greater portion of funds required for new store inventories and other
working capital requirements. Cash utilized for capital expenditures was
$39,474,000 and $79,380,000 in the first six months of 1997 and 1996,
respectively.
During the 26 weeks ended June 28, 1997, the Company's cash balance increased by
$18,507,000 and long- and short-term debt decreased by $141,223,000, excluding
$9,027,000 in non-cash accretion of interest on the Company's zero coupon,
convertible subordinated debt.
The Company has a credit agreement with its principal bank and a syndicate of
commercial banks which provides for a working capital line and letters of credit
totaling $300,000,000. The credit agreement provides that funds borrowed will
bear interest, at the Company's option, at either .3125% over the LIBOR rate,
1.75% over the Federal Funds rate, a base rate linked to the prime rate, or
under a competitive bid facility. The Company must also pay a facility fee of
.1875% per annum on the total credit facility. The credit facility currently
expires June 30, 2000. As of June 28, 1997, the Company had no outstanding
borrowings under the line of credit and had outstanding letters of credit
totaling $10,828,000 under the credit facility. The credit agreement contains
certain restrictive covenants relating to various financial statement ratios. In
addition to the credit facility, the bank has provided a lease facility to the
Company under which the bank has agreed to purchase up to $25,000,000 of
equipment on behalf of the Company and lease such equipment to the Company. As
of June 28, 1997, the Company had utilized approximately $18,321,000 of this
lease facility. In July 1996, the Company entered into an additional lease
facility with another bank for up to
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$25,000,000 of equipment. As of June 28, 1997, the Company had utilized
approximately $21,484,000 of this additional lease facility.
The Company currently plans to open approximately 35 new office supply stores
and relocate one delivery warehouses during the second half of 1997. Management
estimates that the Company's cash requirements, exclusive of pre-opening
expenses, will be approximately $1,900,000 for each additional office supply
store, which includes an average of approximately $1,100,000 for leasehold
improvements, fixtures, point-of-sale terminals and other equipment in the
stores, as well as approximately $800,000 for the portion of the store
inventories that is not financed by vendors. The cash requirements, exclusive of
pre-opening expenses, for a delivery warehouse is expected to be approximately
$5,300,000, which includes an average of $3,100,000 for leasehold improvements,
fixtures and other equipment and $2,200,000 for the portion of inventories not
financed by vendors. In addition, management estimates that each new store and
warehouse will require pre-opening expenses of between $115,000 and $500,000,
depending on the type of facility. In January 1996, the Company entered into a
lease commitment for an additional corporate office building which was completed
in July 1997. The lease is classified as a capital lease and will be recorded as
such in the third quarter of 1997. This lease will result in a capital lease
asset and obligation of approximately $24,000,000 and initial annual lease
commitments of approximately $2,200,000.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" was issued. SFAS No. 128, which supersedes Accounting
Principles Board ("APB") Opinion No. 15, requires a dual presentation of basic
and diluted earnings per share on the face of the income statement. Basic
earnings per share excludes dilution and is computed by dividing income or loss
attributable to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. Diluted
earnings per share is computed similarly to fully diluted earnings per share
under APB Opinion No. 15. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. When adopted, all prior-period earnings
per share data are required to be restated. For the 13 and 26 weeks ended June
28, 1997 and June 29, 1996, basic earnings per common share, as computed under
SFAS No. 128, would be the same as primary earnings per common and common
equivalent share shown on the accompanying consolidated statements of earnings.
Similarly, for the 13 and 26 weeks ended June 28, 1997 and June 29, 1996,
diluted earnings per common share, as computed under SFAS No. 128, would be the
same as fully diluted earnings per common and common equivalent share shown on
the accompanying consolidated statements of earnings.
13
<PAGE> 14
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 establishes standards for the way
that public companies report selected information about operating segments in
annual financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131, which supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers, requires
that a public company report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. SFAS No. 131 requires that a public company report a measure of
segment profit or loss, certain specific revenue and expense items, and segment
assets. However, SFAS No. 131 does not require the reporting of information that
is not prepared for internal use if reporting it would be impracticable. SFAS
No. 131 also requires that a public company report descriptive information about
the way that the operating segments were determined, the products and services
provided by the operating segments, differences between the measurements used in
reporting segment information and those used in the enterprise's general-purpose
financial statements, and changes in the measurement of segment amounts from
period to period. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company has not determined the effects,
if any, that SFAS No. 131 will have on the disclosures in its consolidated
financial statements.
FUTURE OPERATING RESULTS
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including those discussed below. The factors discussed below
could affect the Company's actual results and could cause the Company's actual
results during the remainder of 1997 and beyond to differ materially from those
expressed in any forward-looking statement made by the Company.
With respect to the terminated merger, the Company and its Board of Directors
believed that the merger would have been in the best interests of its customers
and shareholders; however the Company is fully prepared to continue on a
stand-alone basis. Many of the initiatives undertaken in planning for the
terminated merger have and will continue to strengthen the Company's support
systems and operating practices.
The Company's strategy of aggressive store growth has been negatively affected
in the short-term by the uncertainty of the terminated merger. The Company
currently plans
14
<PAGE> 15
to open approximately 35 additional stores during the second half of 1997. There
can be no assurance that the Company will be able to find favorable store
locations, negotiate favorable leases, hire and train employees and store
managers, and integrate the new stores in a manner that will allow it to meet
its expansion schedule. The failure to be able to expand by opening new stores
on plan could have a material adverse effect on the Company's future sales
growth and profitability.
The Company competes with a variety of retailers, dealers and distributors in a
highly competitive marketplace. High-volume office supply chains, mass
merchandisers, warehouse clubs, computer stores and contract stationers that
compete directly with the Company operate in most of its geographic markets.
This competition will increase in the future as both the Company and these and
other companies continue to expand their operations. There can be no assurance
that such competition will not have an adverse effect on the Company's business
in the future. The opening of additional Office Depot stores, the expansion of
the Company's contract stationer business in new and existing markets,
competition from other office supply chains, mass merchandisers, warehouse
clubs, computer stores and contract stationers, and regional and national
economic conditions will all affect the Company's comparable sales results. In
addition, the Company's gross margin and profitability would be adversely
affected if its competitors were to attempt to capture market share by reducing
prices.
In addition, as the Company expands the number of its stores in existing
markets, sales of existing stores can suffer. New stores typically take time to
reach the levels of sales and profitability of the Company's existing stores and
there can be no assurance that new stores will ever be as profitable as existing
stores because of competition from other store chains and the tendency of
existing stores to share sales as the Company opens new stores in its more
mature markets.
Fluctuations in the Company's quarterly operating results have occurred in the
past and may occur in the future. A variety of factors such as new store
openings with their concurrent pre-opening expenses, the extent to which new
stores are less profitable as they commence operations, the effect new stores
have on the sales of existing stores in more mature markets, the pricing
activity of competitors in the Company's markets, changes in the Company's
product mix, increases and decreases in advertising and promotional expenses,
the effects of seasonality, acquisitions of contract stationers and stores of
competitors or other events could contribute to this quarter to quarter
variability.
The Company has grown dramatically over the past several years and has shown
significant increases in its sales, stores in operation, employees and warehouse
and delivery operations. In addition, the Company acquired a number of contract
stationer operations, and the expenses incurred in the integration of acquired
facilities in its delivery business have contributed to increased warehouse
expenses. These integration costs are expected to continue to impact store and
warehouse expenses at decreasing levels through the end of 1997. The failure to
achieve the projected decrease in integration costs towards the end of 1997
could result in a significant impact on the Company's net income. The Company's
growth, through both store openings and acquisitions, will continue to require
the expansion and upgrading of the
15
<PAGE> 16
Company's operational and financial systems, as well as necessitate the hiring
of new managers at the store and supervisory level.
The Company has entered a number of international markets using licensing
agreements and joint venture arrangements. The Company intends to enter other
international markets as attractive opportunities arise. In addition to the
risks described above that face the Company's domestic store and delivery
operations, internationally the Company also faces the risk of foreign currency
fluctuations, local conditions and competitors, obtaining adequate and
appropriate inventory and, since its foreign operations are not wholly-owned, a
lack of operating control in certain countries.
The Company believes that its current cash and cash equivalents, equipment
leased under the Company's existing or new lease financing arrangements and
funds available under its revolving credit facility should be sufficient to fund
its planned store and delivery center openings and other operating cash needs,
including investments in international joint ventures, for at least the next
twelve months. However, there can be no assurance that additional sources of
financing will not be required during the next twelve months as a result of
unanticipated cash demands or opportunities for expansion or acquisition,
changes in growth strategy or adverse operating results. Also, alternative
financing will be considered if market conditions make it financially
attractive. There also can be no assurance that any additional funds required by
the Company, whether within the next twelve months or thereafter, will be
available to the Company on satisfactory terms.
16
<PAGE> 17
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
- ------
Items 2-5 Not applicable.
- ---------
Item 6 Exhibits and Reports on Form 8-K
- ------
a. See "Index to Exhibits"
b. The Company filed a Current Report on Form 8-K on May 30, 1997,
effective May 27, 1997, disclosing that it had executed Amendment No. 2
to the September 4, 1996 Agreement and Plan of Merger by and among
Office Depot, Staples, Inc. and Marlin Acquisition Corp., a
wholly-owned subsidiary of Staples. The amendment modified the merger
agreement with respect to various termination provisions. On July 2,
1997, subsequent to a Federal Trade District Court judge granting the
Federal Trade Commission a preliminary injunction to block the merger,
the Company and Staples, Inc. terminated the merger agreement.
17
<PAGE> 18
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.
OFFICE DEPOT, INC.
------------------
(Registrant)
Date: August 12, 1997 By: /s/ BARRY J. GOLDSTEIN
--------------------------------
Barry J. Goldstein
Executive Vice President-Finance
and Chief Financial Officer
18
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
3.1 Amended and Restated Bylaws
27.1 Financial Data Schedule (for SEC use only)
19
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED BY-LAWS
OF
OFFICE DEPOT, INC.
A DELAWARE CORPORATION
ARTICLE I
---------
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be located at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware, County of New Castle. The name of the
corporation's registered agent at such address shall be The Corporation Trust
Company. The registered office and/or registered agent of the corporation may be
changed from time to time by resolution of the Board of Directors.
SECTION 2. OTHER OFFICES. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders shall
be held each year within two hundred eighty-five (285) days after the close of
the immediately preceding fiscal year of the corporation for the purpose of
electing directors and conducting such other proper business as may come before
the meeting. The date, time and place of the annual meeting shall be determined
by the Chairman of the Board or the Chief Executive Officer of the corporation;
provided, that if the Chairman of the
<PAGE> 2
Board or the Chief Executive Officer does not act, the Board of Directors shall
determine the date, time and place of such meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be
called for any purpose and may be held at such time and place as shall be stated
in a notice of meeting or in a duly executed waiver of notice thereof. Such
meetings may be called at any time by the Chairman of the Board, the Chief
Executive Officer or, if directed by resolution of the Board of Directors, the
Secretary.
SECTION 3. PLACE OF MEETINGS. Annual and special meetings may be held
within or without the State of Delaware. If no designation is made, the place of
meeting shall be the principal executive office of the corporation.
SECTION 4. NOTICE. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the Chairman of the Board, the Chief Executive Officer or the Secretary, and
if mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the stockholder at his, her or
its address as the same appears on the records of the corporation. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
unless such person attends for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 5. STOCKHOLDER PROPOSALS. At an annual meeting of stockholders,
only such business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting, (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who complies with the requirements of this Article II, Section 5 and
as shall otherwise be proper subjects for stockholder action and shall be
properly introduced at the meeting. For a proposal to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
advance notice thereof in
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<PAGE> 3
writing to the Secretary of the corporation. To be timely in connection with an
annual meeting, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the corporation not less than 90
days prior to the date of the previous year's annual meeting; provided, however,
that if the date of an annual meeting differs from that of the previous year by
more than 30 days, notice by the stockholder, to be timely, must be so delivered
or received not later than seven days after notice of such meeting has been
given (or such greater period of time as is set forth in such notice). To be
timely in connection with a special meeting, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
corporation not less than seven days after notice of such meeting has been given
(or such greater period of time as is set forth in such notice). A stockholder's
notice to the Secretary shall set forth, as to each matter the stockholder
proposes to bring before the meeting, (i) a description of the proposal desired
to be brought before the meeting and the reasons for conducting such business at
the meeting, (ii) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business and any other stockholders
known by such stockholder to be supporting such proposal, (iii) the class and
number of shares of the corporation's stock which are beneficially owned by the
stockholder on the date of such notice, the dates upon which such shares were
acquired and documentary support for such beneficial ownership claim, (iv) any
financial interest of the stockholder in such proposal, and (v) if such proposal
includes the nomination of directors, the information required by Article III,
Section 3. The presiding officer of the meeting of stockholders shall determine
whether the requirements of this Article II, Section 5 have been met with
respect to any stockholder proposal. If the presiding officer determines that a
stockholder proposal was not made in accordance with the terms of this Article
II, Section 5, he or she shall notify the proposing stockholder of such
determination within a reasonable period of time prior to the meeting and shall
so declare at the meeting, and any such proposal shall not be acted upon at the
meeting. At a special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as (i) shall have been
set forth in the notice relating to such meeting required by Article II, Section
4 or as shall constitute matters incident to the conduct of the meeting as the
presiding officer of the meeting shall determine to be appropriate or (ii) as
shall have been brought before such special meeting by any stockholder of the
corporation who complies
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<PAGE> 4
with the requirements of this Article II, Section 5, as shall otherwise be
proper subjects for stockholder action at such special meeting and as shall be
properly introduced at such meeting.
SECTION 6. STOCKHOLDERS LIST. The officer having charge of the stock
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 7. QUORUM. The holders of a majority of the outstanding shares
of common stock present in person or represented by proxy shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote at the meeting may adjourn the meeting to
another time and/or place. When a quorum is once present to commence a meeting
of stockholders, it shall not be broken by the subsequent withdrawal of the
stockholders or their proxies.
SECTION 8. ADJOURNED MEETINGS. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
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<PAGE> 5
SECTION 9. VOTING BY STOCKHOLDERS ON MATTERS OTHER THAN THE ELECTION OF
DIRECTORS. With respect to any matters as to which no other voting requirement
is specified by the General Corporation Law of the State of Delaware, the
certificate of incorporation of the corporation or these by-laws, the
affirmative vote required for stockholder action shall be that of a majority of
the shares present in person or represented by proxy (as counted for purposes of
determining the existence of a quorum) and entitled to vote at a meeting of
stockholders at which a quorum is present. In the case of a matter submitted for
a vote of the stockholders as to which a stockholder approval requirement is
applicable under the stockholder approval policy of the New York Stock Exchange,
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") or any provision of the Internal Revenue Code of 1986 (the
"Code"), including Code Section 162(m), in each case for which no higher voting
requirement is specified by the General Corporation Law of the State of
Delaware, the certificate of incorporation of the corporation or these by-laws,
the vote required for approval shall be the requisite vote specified in such
stockholder approval policy, Rule 16b-3 or such Code provision, as the case may
be (or the highest such requirement if more than one is applicable). For the
approval of the appointment of independent public accountants (if submitted for
a vote of the stockholders), the vote required for approval shall be a majority
of the votes cast on the matter.
SECTION 10. VOTING BY STOCKHOLDERS IN THE ELECTION OF DIRECTORS. Unless
otherwise provided in the certificate of incorporation of the corporation,
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors at a meeting of stockholders at which a quorum is present.
SECTION 11. VOTING RIGHTS. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
SECTION 12. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to
- 5 -
<PAGE> 6
corporate action in writing without a meeting may authorize another person or
persons to act for him or her by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. Any
proxy is suspended when the person executing the proxy is present at a meeting
of stockholders and elects to vote, except that when such proxy is coupled with
an interest and the fact of the interest appears on the face of the proxy, the
agent named in the proxy shall have all voting and other rights referred to in
the proxy, notwithstanding the presence of the person executing the proxy. At
each meeting of the stockholders, and before any voting commences, all proxies
filed at or before the meeting shall be submitted to and examined by the
Secretary or a person designated by the Secretary, and no shares may be
represented or voted under a proxy that has been found to be invalid or
irregular.
SECTION 13. ACTION BY WRITTEN CONSENT. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested, provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until
received at the registered office. All consents properly delivered in accordance
with this section shall
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<PAGE> 7
be deemed to be recorded when so delivered. No written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered to the corporation as required by
this section, written consents signed by the holders of a sufficient number of
shares to take such corporate action are so recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent or consents of the
stockholders shall have the same force and effect as if taken by the
stockholders at a meeting thereof.
ARTICLE III
-----------
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors.
SECTION 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of directors
which shall constitute the Board of Directors shall be established from time to
time by resolution of the Board of Directors. The Board of Directors shall be
elected at the annual meeting of the stockholders and each director elected
shall hold office until the next annual meeting of stockholders or until a
successor is duly elected and qualified or until his or her earlier resignation
or removal as hereinafter provided.
SECTION 3. NOMINATION OF DIRECTORS. Subject to such rights of the
holders of one or more outstanding series of preferred stock of the corporation
to elect one or more directors in case of arrearages in the payment of dividends
as shall be prescribed in the certificate of incorporation of the corporation or
in the resolutions of the Board of Directors providing for the establishment of
any such series, only persons who are nominated in accordance with the
procedures set forth in this Article III, Section 3 shall be eligible for
election as, and to serve as, directors. Nominations of persons for election to
the Board of Directors may be made at a meeting of the stockholders at which
directors are to be elected (i) by or at the direction of the Board of Directors
or (ii) by any stockholder of the corporation entitled to vote at such meeting
in the election of directors who complies with the requirements of this Article
III, Section 3. Such
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<PAGE> 8
nominations, other than those made by or at the direction of the Board of
Directors, shall be preceded by timely advance notice in writing to the
Secretary of the corporation. To be timely in connection with an annual meeting,
a stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the corporation not less than 90 days prior to
the date of the previous year's annual meeting; PROVIDED, HOWEVER, that if the
date of an annual meeting differs from that of the previous year by more than 30
days, notice by the stockholder, to be timely, must be so delivered or received
not later than seven days after notice of such meeting has been given (or such
greater period of time as is set forth in such notice). To be timely in
connection with a special meeting, a stockholder's notice must be delivered to,
or mailed and received at, the principal executive offices of the corporation
not less than seven days after notice of such meeting has been given (or such
greater period of time as is set forth in such notice). A stockholder's notice
to the Secretary shall set forth (x) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the number of shares of each
class of capital stock of the corporation beneficially owned by such person,
(iv) the written consent of such person to having such person's name placed in
nomination at the meeting and to serve as a director if elected, and (v) any
other information required by Regulation 14(a)-8 under the Securities Exchange
Act of 1934 or any replacement thereof and (y) as to the stockholder giving the
notice, (i) the name and address, as they appear on the corporation's books, of
such stockholder and (ii) the number of shares of each class of voting stock of
the corporation which are then beneficially owned by such stockholder, the dates
upon which such shares were acquired and documentary support for such beneficial
ownership claim. The presiding officer of the meeting of stockholders shall
determine whether the requirements of Article III, Section 3 have been met with
respect to any nomination or intended nomination. If the presiding officer
determines that any nomination was not made in accordance with the requirements
of this Article III, Section 3, he shall notify the proposing stockholder of
such determination within a reasonable period of time prior to the meeting and
shall so declare at the meeting, and the defective nomination shall be
disregarded.
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<PAGE> 9
SECTION 4. REMOVAL AND RESIGNATION. Any director or the entire Board of
Directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors, except
as otherwise provided by law. Any director may resign at any time upon written
notice to the corporation. Such written resignation shall take effect at the
time specified therein, and if no time be specified, at the time of its receipt
by the Chairman of the Board, Chief Executive Officer or the Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, even if less than a quorum, or by
a sole remaining director. Each director so chosen shall hold office until the
next annual meeting of stockholders or until a successor is duly elected and
qualified or until his or her earlier resignation or removal as herein provided.
SECTION 6. ANNUAL MEETINGS. The annual meeting of each newly elected
Board of Directors shall be held without other notice than this By-law
immediately after, and at the same place as, the annual meeting of stockholders.
SECTION 7. OTHER MEETINGS AND NOTICE. Regular meetings, other than the
annual meeting, of the Board of Directors may be held within or without the
State of Delaware and without notice at such time and at such place as shall
from time to time be determined by resolution of the Board of Directors.
Special meetings of the Board of Directors may be called (i) by the Chairman of
the Board or the Chief Executive Officer on at least 24 hours prior notice to
each director, either personally, by telephone, by mail, by telegraph or by
telecopy or (ii) upon the request of any director, by the Secretary on at least
72 hours such prior notice.
SECTION 8. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
appointed by resolution of the Board of Directors and shall preside at all
meetings of the Board of Directors and stockholders.
SECTION 9. QUORUM, REQUIRED VOTE AND ADJOURNMENT. A majority of the
total number of directors shall constitute a quorum for the transaction of
business, except as otherwise provided by
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<PAGE> 10
statute or by the certificate of incorporation. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 10. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these By-laws shall have and may
exercise the powers of the Board of Directors in the management and affairs of
the corporation, except as otherwise limited by law. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names and have as many members
as may be determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
SECTION 11. COMMITTEE RULES. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the Board of Directors as
provided in Section 8 of this Article III, of such committee is or are absent
or disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member.
SECTION 12. EXECUTIVE COMMITTEE. The Executive Committee shall consist
of members of the Board of Directors who shall from time to time be appointed to
such committee by resolution of the Board of Directors. To the extent provided
in the resolution
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<PAGE> 11
establishing the Executive Committee or any subsequent resolution of the Board
of Directors, the Executive Committee shall have and may exercise all of the
authority of the Board of Directors in the management of the corporation, except
that the committee shall have no authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease, or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
amending the By-laws of the corporation, electing or removing directors or
officers of the corporation or members of the Executive Committee, declaring
dividends or amending, altering, or repealing any resolution of the Board of
Directors which, by its terms, provides that it shall not be amended, altered or
repealed by the Executive Committee.
SECTION 13. AUDIT COMMITTEE. The Audit Committee shall consist of
members of the Board of Directors who shall from time to time be appointed to
such committee by resolution of the Board of Directors. The Audit Committee
shall recommend to the Board of Directors the appointment of the corporation's
independent accountants. The Audit Committee shall meet with the independent
auditors to discuss the scope of the audit, any nonaudit related assignments,
fees, the independence of the accountants, the results of the audit and the
effectiveness of the corporation's internal accounting controls, which
discussions the Audit Committee shall then report to the Board of Directors. The
Audit Committee shall be accessible to the independent accountants, with or
without management's knowledge, to discuss auditing and any other accounting
matters.
SECTION 14. COMPENSATION COMMITTEE. The Compensation Committee shall
consist of members of the Board of Directors who shall from time to time be
appointed to such committee by resolution of the Board of Directors. The
Compensation Committee shall recommend action by the Board of Directors
regarding the salaries and incentive compensation of elected officers of the
corporation. The Compensation Committee shall also review the compensation of
certain other principal management employees and administer the employee benefit
plans of the corporation.
SECTION 15. NOMINATING COMMITTEE. The Nominating Committee shall
consist of members of the Board of Directors who shall from time to time be
appointed to such committee by resolution of the
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Board of Directors. The Nominating Committee shall evaluate the performance of
incumbent directors, consider nominees recommended by management or stockholders
of the corporation, and develop its recommendations to be presented to the Board
of Directors for their approval.
SECTION 16. STOCK OPTION PLAN COMMITTEE. The Board of Directors may
appoint a Stock Option Plan Committee comprised of two or more directors, each
of whom meet the qualifications for "disinterested directors" as set forth under
Rule 16b-3 under the Exchange Act and for "outside directors" as set forth under
Section 162(m) of the Code. Unless otherwise directed by resolution of the Board
of Directors, the Stock Option Plan Committee shall administer the stock option
plans of the corporation. If no Stock Option Plan Committee is appointed, the
Compensation Committee shall perform the functions of the Stock Option Plan
Committee, in which case the Compensation Committee shall be comprised of two or
more directors, each of whom meet the qualifications for "disinterested
directors" as set forth under Rule 16b-3 and for "outside directors" as set
forth under Section 162(m).
SECTION 17. USE OF COMMUNICATIONS EQUIPMENT. Members of the Board of
Directors or any committee thereof may participate in and act at any meeting of
the Board of Directors or committee through the use of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in the meeting pursuant to
this section shall constitute attendance and presence in person at the meeting
of the person or persons so participating.
SECTION 18. WAIVER OF NOTICE AND PRESUMPTION OF ASSENT. Any member of
the Board of Directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting, unless
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the Secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the Secretary of the
corporation immediately after the adjournment of the
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meeting. Such right to dissent shall not apply to any member who voted in favor
of such action.
SECTION 19. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the certificate of incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors or committee.
SECTION 20. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation, the Board of Directors shall have the authority to
fix the compensation of directors by written resolution. Nothing herein shall be
construed to preclude any director from serving the corporation in any other
capacity as an officer, employee, agent or otherwise, and receiving compensation
therefor.
ARTICLE IV
----------
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be elected by
the Board of Directors and shall consist of a Chief Executive Officer, a
President, a Chief Financial Officer, one or more Vice-Presidents, a Treasurer,
a Secretary and such other officers and assistant officers as may be deemed
necessary or desirable by the Board of Directors. Any number of offices may be
held by the same person, except that neither the Chairman of the Board nor the
President shall also hold the office of either Treasurer or Secretary. In its
discretion, the Board of Directors may choose not to fill any office for any
period as it may deem advisable, except that the office of Secretary shall be
filled as expeditiously as possible.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any meeting
of the Board of Directors. Each officer shall hold office until the next annual
meeting of the Board of Directors or until a successor is
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duly elected and qualified or until his or her earlier resignation or removal as
herein provided.
SECTION 3. REMOVAL. Any officer or agent elected by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. VACANCIES. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by
resolution of the Board of Directors.
SECTION 5. COMPENSATION. Compensation of all officers shall be fixed by
the Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
SECTION 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
be the chief executive officer of the corporation and shall have the powers and
perform the duties incident to that position. Subject to the powers of the Board
of Directors, the Chief Executive Officer shall have general and active charge
of the entire business and affairs of the corporation, and shall be its chief
policy making officer. The Chief Executive Officer shall have such other powers
and perform such other duties as the Board of Directors or these By-laws may,
from time to time, prescribe. Whenever the office of President is vacant or the
President is unable to serve, by reason of sickness, absence or otherwise, the
Chief Executive Officer shall perform all the duties and responsibilities and
exercise all the powers of the President.
SECTION 7. THE PRESIDENT. The President shall be the chief operating
officer and, subject to the powers of the Board of Directors and the Chief
Executive Officer, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the corporation. The
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President shall have such other powers and perform such other duties as the
Board of Directors, the Chief Executive Officer, or these By-laws may, from time
to time, prescribe.
SECTION 8. CHIEF FINANCIAL OFFICER. The Chief Financial Officer of the
corporation shall, under the direction of the Chief Executive Officer, be
responsible for all financial and accounting matters and for the direction of
the office of Treasurer. The Chief Financial Officer shall have such other
powers and perform such other duties as the Board of Directors, the Chief
Executive Officer, the President, or these By-laws may, from time to time,
prescribe. If no Treasurer is elected, the Chief Financial Officer shall perform
all the duties and responsibilities and exercise all of the powers of the
Treasurer.
SECTION 9. VICE-PRESIDENTS. The Vice-President, or if there shall be
more than one, the Vice-Presidents, shall perform such other duties and have
such other powers as the Board of Directors, the Chief Executive Officer, the
President, or these By-laws may, from time to time, prescribe.
SECTION 10. THE TREASURER AND ASSISTANT TREASURER. The Treasurer shall
have the custody of the corporate funds and securities, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation, shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the Board of Directors,
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular meeting
or when the Board of Directors so requires, an account of the Treasurer's
actions. The Treasurer shall have such other powers and perform such other
duties as the Board of Directors, the Chief Executive Officer, the President, or
these By-laws may, from time to time, prescribe. If required by the Board of
Directors, the Treasurer shall give the corporation a bond (which shall be
rendered every six years) in such sums and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Treasurer and for the restoration to the corporation, in
case of death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the possession or
under the control of the Treasurer belonging to the corporation. The Assistant
Treasurer, or if there
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shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, shall in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors, the Chief Executive
Officer, the President, or these By-laws may, from time to time, prescribe.
SECTION 11. THE SECRETARY AND ASSISTANT SECRETARIES. The Secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings in a book or books
to be kept for that purpose. Under the President's supervision, the Secretary
shall give, or cause to be given, all notices required to be given by these
By-laws or by law; shall have such powers and perform such duties as the Board
of Directors, the Chief Executive Officer, the President, or these By-laws may,
from time to time, prescribe and shall have custody of the corporate seal of the
corporation. The Secretary, or an Assistant Secretary, shall have authority to
affix the corporate seal to any instrument requiring it and when so affixed, it
may be attested by his or her signature or by the signature of such Secretary or
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his or her signature. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors, the Chief Executive Officer, the
President, or these By-laws may, from time to time, prescribe.
SECTION 12. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.
SECTION 13. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to
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any other officer or to any director, or to any other person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
SECTION 1. COVERAGE. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she is or was a director or
officer of the corporation (which term shall include any predecessor corporation
of the corporation) or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans ("indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee, fiduciary or agent or in any other capacity while serving as a
director, officer, employee, fiduciary or agent, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights
than said law permitted the corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection therewith and
such indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided however, that, except
as provided in Section 2 of this Article V with respect to proceedings to
enforce rights to indemnification, the corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) which has been
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors. The right to indemnification conferred in
this Article V shall be a contract right and, subject to Section 2 hereof, shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
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however, that if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it ultimately is determined by final judicial decision from which
there is no further right to appeal that such indemnitee is not entitled to be
indemnified for such expenses under this Article V or otherwise.
SECTION 2. CLAIMS. Any indemnification of a director or officer of the
corporation or advance of expenses under Section 1 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation fails to respond within 30 days to a written request for
indemnity, the corporation shall be deemed to have approved the request. If the
corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within 30 days, the right to indemnification or advances as granted by
this Article V shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed, but the burden
of such defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor
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an actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
SECTION 3. RIGHTS NOT EXCLUSIVE. The rights conferred on any person by
Sections 1 and 2 of this Article V shall not be exclusive of any other rights
which such person may have or hereafter acquire under these By-laws, any
statute, the certificate of incorporation, any agreement, any vote of
stockholders or disinterested directors or otherwise.
SECTION 4. EMPLOYEES AND AGENTS. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation may be indemnified and may have their expenses paid to the
extent and subject to such terms and conditions as may be authorized at any time
or from time to time by the Board of Directors.
SECTION 5. INSURANCE. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her and incurred by him or her in any such capacity, whether or not the
corporation would have the power to indemnify such person against such liability
under this Article V.
SECTION 6. CONTRACT RIGHT. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
SECTION 7. MERGER OR CONSOLIDATION. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation
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(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article V with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the corporation shall be
entitled to have a certificate signed by or in the name of the corporation by
the Chairman of the Board, the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2) by
a registrar, other than the corporation or its employee, the signature of any
such Chairman of the Board, President, Vice-President, Treasurer, Assistant
Treasurer, Secretary, or Assistant Secretary may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation whether because of death, resignation or
otherwise before such certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the books of the
corporation. Shares of stock of the corporation shall only be transferred on the
books of the corporation by the holder of
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record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to issue
a new certificate to the person entitled thereto, cancel the old certificate or
certificates and record the transaction on its books. The Board of Directors may
appoint a bank or trust company organized under the laws of the United States or
any state thereof to act as its transfer agent or registrar or both in
connection with the transfer of any class or series of securities of the
corporation.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to indemnify the corporation
or to give the corporation a bond sufficient to indemnify the corporation
against any claim that may be made against the corporation on account of the
loss, theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 3. FIXING A RECORD DATE FOR STOCKHOLDER MEETINGS. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which
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the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 4. FIXING A RECORD DATE FOR ACTION BY WRITTEN CONSENT. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
SECTION 5. FIXING A RECORD DATE FOR OTHER PURPOSES. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than 60 days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
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close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 6. REGISTERED STOCKHOLDERS. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
ARTICLE VII
-----------
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
SECTION 2. CHECKS, DRAFTS OR ORDERS. All checks, drafts, or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers or agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the Board of Directors or a duly
authorized committee thereof.
SECTION 3. CONTRACTS. The Board of Directors may authorize any officer
or officers or any agent or agents of the corporation to enter into any
contract or to execute and deliver any
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instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 4. LOANS. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
SECTION 5. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
SECTION 6. CORPORATE SEAL. The Board of Directors may provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
SECTION 7. VOTING SECURITIES OWNED BY CORPORATION. Voting securities in
any other company held by the corporation shall be voted by the Chief Executive
Officer or the President, unless the Board of Directors specifically confers
authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with or
without general power of substitution.
SECTION 8. INSPECTION OF BOOKS AND RECORDS. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In
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every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in the State of Delaware or at its
principal place of business.
SECTION 9. SECTION HEADINGS. Section headings in these By-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
SECTION 10. INCONSISTENT PROVISIONS. In the event that any provision of
these By-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these By-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
SECTION 11. ELECTION OUT OF SECTION 203. The corporation expressly
elects not to be governed by Section 203 of the General Corporation Law of
Delaware. The By-law amendment adopting this provision shall not be further
amended by the Board of Directors of the corporation.
ARTICLE VIII
------------
AMENDMENTS
These By-laws may be amended, altered, or repealed and new By-laws
adopted at any meeting of the Board of Directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the By-laws has been conferred
upon the Board of Directors shall not divest the stockholders of the same
powers.
- 25 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OFFICE DEPOT, INC. FOR THE QUARTER ENDED JUNE 28, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 69,905
<SECURITIES> 0
<RECEIVABLES> 248,149
<ALLOWANCES> 14,531
<INVENTORY> 1,154,705
<CURRENT-ASSETS> 1,655,555
<PP&E> 963,990
<DEPRECIATION> 296,956
<TOTAL-ASSETS> 2,574,616
<CURRENT-LIABILITIES> 871,656
<BONDS> 426,900
0
0
<COMMON> 1,599
<OTHER-SE> 1,230,182
<TOTAL-LIABILITY-AND-EQUITY> 2,574,616
<SALES> 3,304,269
<TOTAL-REVENUES> 3,304,269
<CGS> 2,514,194
<TOTAL-COSTS> 3,068,298
<OTHER-EXPENSES> 94,270
<LOSS-PROVISION> 4,526
<INTEREST-EXPENSE> 10,513
<INCOME-PRETAX> 114,575
<INCOME-TAX> 45,314
<INCOME-CONTINUING> 69,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,261
<EPS-PRIMARY> .44
<EPS-DILUTED> .43
</TABLE>
