Office Depot, Inc. (ODP)
Q1 2010 Earnings Call
April 26, 2010 9:00 am ET
Brian Turcotte – Vice President of Investor Relations
Steve Odland – Chairman of the Board & Chief Executive Officer
Michael D. Newman – Chief Financial Officer & Executive Vice President
Steven M. Schmidt – President North American Business Solutions
Charles E. Brown – President International
Kevin Peters – President North American Retail
Chris Horvers – JP Morgan
Michael Baker – Deutsche Bank
Matt Fassler – Goldman Sachs
Kate McShane – Investment Research
Daniel T. Binder – Jefferies & Company, Inc.
Michael Lasser – Barclays Capital
Alan Rifkin – Bank of America Merrill Lynch
Joe Feldman – Telsey Advisory Group
Previous Statements by ODP
» Office Depot, Inc. Q4 2009 Earnings Call Transcript
» Office Depot, Inc.Q3 2009 Earnings Call Transcript
» Office Depot, Inc. Q2 2009 Earnings Call Transcript
Welcome to the first quarter 2010 earnings conference call. All lines will be on a listen only mode for today’s presentation after which instructions will be given in order to ask a question. At the request of Office Depot, today’s conference is being recorded. I would like to introduce Mr. Brian Turcotte, Vice President of Investor Relations, who will make a few opening comments.
Before we begin I would like to remind you that our discussion this morning may include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the company’s current expectations concerning future events, they are subject to a number of factors and uncertainties that could cause actual results to differ materially.
A detailed discussion of these factors and uncertainties is contained in the company’s filings with the SEC. In addition, during the conference call we may refer to certain non-GAAP or adjusted financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as well as our press release and accompanying webcast slides for today’s call are available on our website at
; click on investor relations under company information.
Office Depot’s Chairman and Chief Executive Officer Steve Odland will now make a few comments and then summarize our first quarter 2010 results.
Thank you for joining us for Office Depot’s first quarter 2010 earnings conference call and webcast. With me today are Mike Newman, Chief Financial Officer; Steve Schmidt, President of North American Business Solutions; Charlie Brown, President of International; and Kevin Peters, President of North American Retail. I’m very pleased to have Kevin assume this new leadership role at Office Depot. Not only is he very qualified having run supply chain, merchandising and store operations at this previous company, he’s also very experienced at Office Depot having been here for about three years.
Kevin has worked side-by-side with Chuck Rubin and Steve Schmidt as a member of our executive committee and he’s been my direct report. He’s been involved in most of the company’s major decisions and has spent considerable time in our retail stores working closely with our executive vice presidents of merchandising and store operations. So I’m sure Kevin won’t miss a beat in his new role and Kevin, welcome to the organization.
It goes without saying that we regret losing Chuck. Chuck made significant contributions to the retail organization and has been instrumental in building a strong team and driving the strategic vision for that business. We thank him for his hard work and dedication and certainly wish him well in his new role at [inaudible].
Before I cover our first quarter 2010 results, I’ll provide an overview of the economic and business environment in the US and globally from our perspective. Although the fourth quarter GDP data showed improvement and we assume the first quarter will be positive as well, the business environment remains challenging in the US, especially for our small business customers. Most notably, unemployment in the US is still hovering around 10% with mixed job creation data and cash strapped small businesses continuing to tightly manage their discretionary spending with limited access to capital.
The other issue facing US businesses is the projected cost relating to various reform legislation that has been passed and is still pending. Our small business customers are uncertain of the future cost of adding employees and are hesitant to do so. We especially see softness continuing in California with some improvement in Florida. Internationally, things are improving but weaker pockets remain in key markets like the UK. Unemployment levels are high across Europe and small business owners are facing liquidity challenges similar to their US counterparts.
The US dollar has weakened against the Pound Sterling and Euro compared to 2009 but recent trends in the currency market show that that trend is reversing. This economic environment continued to challenge our customers in the first quarter of 2010. Total company sales were $3.1 billion, a decrease of 5% compared to our first quarter results last year. This is the best sales trend we’ve had in seven quarters.
First quarter earnings were $20 million or $0.07 a share versus a loss of $55 million or $0.20 per share in the same period last year. I should note that the first quarter 2009 results include charges related to our restructuring activities which negatively impacted earnings per share by $0.30. Total operating expenses in the first quarter of 2010 decreased by 12% or $112 million from the first quarter last year. This decrease primarily reflects charges related to restructurings taken in the first quarter of 2009 and lower distribution costs in the first quarter of 2010. You may recall that we reduced operating expenses by over $190 million in the first quarter of 2009 versus the prior year and we’ve reduced operating expenses by about $600 million in the past year.