Office Depot (ODP)

Q2 2011 Earnings Call

July 26, 2011 9:00 am ET

Executives

Brian Turcotte - Vice President, Investor Relations

Charles Brown - President of International

Steven Schmidt - Executive Vice President of Corporate Strategy and New Business Development

Kevin Peters - President of North America

Compare to:
Previous Statements by ODP
» Office Depot's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Office Depot's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Office Depot Management Discusses Q3 2010 Results - Earnings Call Transcript

Neil Austrian - Chairman, Chief Executive Officer, Member of Corporate Governance & Nominating Committee, Member of Corporate Governance & Nominating Committee and Member of Finance Committee

Michael Newman - Chief Financial Officer and Executive Vice President

Analysts

Joseph Feldman - Telsey Advisory Group

Daniel Binder - Jefferies & Company, Inc.

Kate McShane - Citigroup Inc

Jason Campbell - Macquarie

Ryan Brinkman - JPMorgan

Christopher Horvers - JP Morgan Chase & Co

Colin McGranahan - Sanford C. Bernstein & Co., Inc.

Brian Nagel - Oppenheimer & Co. Inc.

Michael Baker - Deutsche Bank AG

Presentation

Operator

Good morning, and welcome to the Second Quarter 2011 Earnings Conference Call. [Operator Instructions] At the request of Office Depot, today's conference is being recorded. I would now like to introduce Mr. Brian Turcotte, Vice President of Investor Relations, who will make a few opening comments. Mr. Turcotte, you may now begin.

Brian Turcotte

Thank you and good morning. With me today are Neil Austrian, Chairman and Chief Executive Officer; Mike Newman, Chief Financial Officer; Kevin Peters, President, North America; Charlie Brown , President, International; and Steve Schmidt, Executive Vice President, Corporate Strategy and New Business Development.

Before we begin, I would to remind you that our discussion this morning includes 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 and 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 are contained in the company's filings with the SEC.

In addition, during the conference call, we 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 www.officedepot.com. Click on Investor Relations under Company Information.

Neil Austrian will now make a few opening comments and then summarize Office Depot's second quarter 2011 earnings. Neil?

Neil Austrian

Thanks, Brian, and good morning. Before I review our second quarter 2011 results, I would like to comment on the Board's decision to name me Chairman and CEO of Office Depot on May 23, and I'll also comment on our recent organizational announcement.

In regard to the CEO search, the search committee met with many qualified candidates who were excited about the opportunity. But near the end of the process, the Board recognized that I have made measurable progress during my 7 months as Interim CEO and began to rethink their decision to introduce a new leader at this time.

As a result, the Board decided that I was the best person to lead Office Depot to return to profitable growth and to attract talent and build bench strength for the feature. I'm both flattered and humbled by the strong confidence expressed in me by the Board, and I've committed to all of our 40,000 associates that we'll work together to return this company to the performance levels previously achieved.

Concerning the announcement made on July 13. We made organizational changes to drive profitable sales in all of our channels to better leverage our infrastructure and assets and build our brand. These changes included the appointment of Kevin Peters as President, North America, a new position combining the company's previous North American Retail at North American Business Solutions division. In his new role, Kevin will be responsible for all customer-facing sales channels including Retail, Contract, Direct and E-commerce and the PEL -- P&L in North America.

For the first time, we are consolidating all of our North American operations under one leader, allowing us to break down silos, increase our productivity and improve the execution of our key initiatives. We're confident that this approach will help us to better serve our business customers and consumers.

In addition, we announced several other changes including Steve Schmidt being named Executive Vice President, Corporate Strategy and New Business Development; Bob Moore was named Executive Vice President and Chief Marketing Officer; Farla Efros named Interim Head of Merchandising; and Michael Allison promoted to Executive Vice President, Human Resources.

I believe we now have the right priorities, the right people and the right structure in place to successfully execute our plans, accelerate our growth and make Office Depot a stronger competitor in the marketplace.

We thank Daisy Vanderlinde, our previous Head of Human Resources, and Monica Luechtefeld, our previous Head of E-commerce and Direct Marketing, for their many contributions to Office Depot and wish them well as they retire from the company after many years of valuable service.

We'd also like to thank Dave Fuente, who resigned as a member of the Board last week to pursue other professional interest. Dave has been a valuable member of our Board since 1987, and we wish him well.

Turning to Office Depot's second quarter 2011 results. Sales totaled $2.7 billion, essentially flat compared to our second quarter results in 2010. On a constant currency basis and excluding sales related to asset dispositions and deconsolidation in the fourth quarter of 2010 and an acquisition in the first quarter of 2011, total company sales in the second quarter of 2011 decreased about 2% versus prior year. The company reported a net loss, after preferred stock dividends, of $29 million or $0.11 a share in the second quarter of 2011 versus a net loss of $25 million or $0.09 a share in the same period a year ago.

Second quarter 2011 result included charges primarily related to restructuring activities and actions to improve future operating performance. Excluding these charges, which totaled $20 million before tax, the net loss after preferred dividends was $17 million or $0.06 a share.

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