Office Depot Announces First Quarter Results

Total Company sales for the first quarter grew 3% to $3.8 billioncompared to the first quarter of 2005. Excluding the effects offoreign exchange, total company sales were 5% higher than the firstquarter of last year. Sales in North America were up 6%. NorthAmerican Retail Division comparable store sales increased 3% for thequarter.

Net earnings for the quarter were $130 million compared to $115million in the same quarter of the prior year, and diluted earningsper share were $0.43 in the first quarter of 2006 versus $0.37 in thesame period a year ago. The first quarter 2006 results include theeffects of charges related to exit costs and other operating itemswhich we had previously announced and are more fully described in ourForm 10-Q filed on April 25 with the Securities and ExchangeCommission. First quarter charges (the "First Quarter Charges") in2006 had a $0.05 per diluted share negative impact on results. Withoutthese charges, our first quarter 2006 net earnings were $144million(1) or $0.48 per share,(1) up 30% from the first quarterearnings per share of the prior year.

For the quarter, gross profit as a percentage of sales was 31.5%,a 40 basis point improvement from the same period last year. Grossmargin in the North American Retail Division increased during thequarter while our North American Business Solutions Division declinedslightly. Our International Division posted a slight increase in grossmargin as compared to the prior year.

Total operating expenses, as a percentage of sales, were 26.5% forthe quarter, improving 10 basis points from the same period of theprior year. First Quarter Charges negatively impacted operating marginby 50 basis points in the current quarter.

Operating profit for the quarter was $192 million as compared to$165 million in the first quarter of the prior year. First QuarterCharges negatively impacted operating results by $19 million in 2006.

In the quarter, we repurchased approximately 12 million shares ofour common stock for $398 million under the repurchase programspreviously approved by the Board of Directors.

Return on invested capital for the quarter was 9.9%. Charges takenin the twelve months prior to April 2006 negatively impacted thecalculation of our current return on invested capital. Adjusted toexclude the First Quarter Charges, ROIC improved to 13.3% for thefirst quarter of 2006 as compared to 10.9% in the prior year.

"We are pleased with our overall performance in the firstquarter," said Steve Odland, Office Depot's Chairman and ChiefExecutive Officer. "We achieved sales growth in each of our Divisions,as well as expansion of each Division's operating margin excluding theimpact of First Quarter Charges. The North American Retail Divisionrecorded its ninth consecutive quarter of positive comparable sales,our North American Business Solutions Division increased its sales by8%, and for the first time in eight quarters, local currency saleswere up in our International Division.(1)"
FIRST QUARTER DIVISION RESULTS

Segment Reporting

As we have previously disclosed, we have been analyzing thefurther allocation of our general and administrative ("G&A") costs toour Division results for purposes of segment disclosure. Beginningwith this quarter, we now include in our Division operating profitthose G&A costs that have been identified as directly or closelyattributable to those units. After allocating these costs to theDivisions, a certain amount of Corporate G&A remains unallocated.These costs cannot be directly attributable to the activities of anyone Division and so are held out separately as corporate G&A. Webelieve this is the most appropriate way to measure each Division'sperformance and the Division performance has been recast to reflectthis new allocation methodology as well as certain other minorreclassifications.

North American Retail Division

First quarter sales in the North American Retail Divisionincreased 5% compared to the same period last year. Comparable storesales in the 966 stores in the U.S. and Canada that have been open formore than one year increased 3% in the first quarter.

The North American Retail Division had an operating profit of $134million for the quarter up 25% from the same period in the prior year,and as a percentage of sales was 7.5%, up 120 basis points from theprior year. First Quarter Charges negatively impacted operatingresults for the period by $1 million. Higher operating profit in 2006was achieved as the result of broad based product margin improvementsfrom category management initiatives and increased private brand salescoupled with reduced operating costs from our cost managementinitiatives. These improvements more than offset incremental expenseassociated with store remodel activities that are now underway.

During the first quarter, the Company opened 4 new stores, whileclosing 2 stores. At the end of the first quarter, Office Depotoperated a total of 1,049 stores throughout the U.S. and Canada.

North American Business Solutions Division

North American Business Solutions Division sales increased by 8%in the first quarter compared to the same period last year. Ourcontract business experienced growth in all three product categories,and our direct business successfully completed the catalog migrationprocess from Viking to Office Depot.

Division operating profit was $92 million for the quarter, up 24%from the prior year, and as a percentage of sales was 8.2%, up 110basis points from the same period in 2005. 2006 First Quarter Chargesnegatively impacted operating profit by $1 million.

Gross margin for the Division declined slightly as compared to theprior year due to cost pressures in certain categories. Expenseleverage was achieved from call center optimization efforts andadvertising efficiencies, including those realized from theconsolidation of our catalog operations.

International Division

International Division first quarter sales increased 2% in localcurrencies, but decreased 6% in U.S. dollars compared to the sameperiod in 2005. In the quarter, direct and contract sales were up, andretail comparable store sales in Europe grew by 4%. The change inexchange rates from the corresponding prior year period decreasedsales reported in U.S. dollars by approximately $80 million for thequarter.

Division operating profit was $53 million or 5.9% of sales ascompared to $58 million or 6.0% of sales in the prior year's firstquarter. First Quarter Charges negatively impacted operating profit by$16 million, or 180 basis points as a percentage of sales.

Gross margin increased slightly in the quarter despite continuedpricing and cost pressures in key product categories, and broad basedexpense savings also contributed to performance in the quarter.

Acquisitions

After the end of the quarter, we completed the acquisition of acontrolling interest in a $44 million South Korean office supplybusiness, Best Office. Earlier this month we also announced that weincreased our ownership interest to a majority stake in Office DepotIsrael which generated revenue in excess of $100 million in 2005. Wewill fully consolidate the results of these businesses into ourresults in the second quarter of 2006.

Non-GAAP Reconciliation

A reconciliation of GAAP results to results excluding FirstQuarter Charges may be accessed on our corporate website,officedepot.com, under the category Company Info.

Conference Call Information

Office Depot will hold a conference call for investors andanalysts at 9:00 a.m. (Eastern Daylight Time) on April 26. Theconference call will be available to all investors via Web cast athttp://investor.officedepot.com. Interested parties may contactInvestor Relations at 561-438-7893 for further information.

About Office Depot

With annual sales of over $14 billion, Office Depot provides moreoffice products and services to more customers in more countries thanany other company. Incorporated in 1986 and headquartered in DelrayBeach, Florida, Office Depot conducts business in 23 countries andemploys about 47,000 people worldwide. The Company operates under theOffice Depot(R), Viking Office Products(R), and Viking Direct(R) brandnames.

Office Depot is a leader in every distribution channel - fromretail stores and contract delivery to catalogs and e-commerce. Withover $3.8 billion of sales, the Company is one of the world's largeste-commerce retailers. As of April 1, 2006, Office Depot had 1,049retail stores in North America. Internationally, the Company conductswholly-or majority-owned operations in 16 countries, and operatesretail stores under joint venture and license arrangements in anotherfive countries.

The company's common stock is listed on the New York StockExchange under the symbol ODP and is included in the S&P 500 Index.Additional press information can be found at:http://mediarelations.officedepot.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS: Exceptfor historical information, the matters discussed in this pressrelease are forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995, as amended.Forward-looking statements, including without limitation all of theprojections and anticipated levels of future performance, involverisks and uncertainties which may cause actual results to differmaterially from those discussed herein. These risks and uncertaintiesare detailed from time to time by Office Depot in its filings with theUnited States Securities and Exchange Commission ("SEC"), includingwithout limitation its most recent filing on Form 10-K, filed onFebruary 15, 2006 and its 10-Q and 8-K filings made from time to time.You are strongly urged to review all such filings for a more detaileddiscussion of such risks and uncertainties. The Company's SEC filingsare readily obtainable at no charge at www.sec.gov and atwww.freeEDGAR.com, as well as on a number of other commercial websites.
(1) This is non-GAAP information. Certain disclosures in this release
eliminate the effect of charges recorded in the first quarter that
relate to projects identified in 2005 and were expected to
continue into 2006 and later years. See additional disclosures of
these projects in our 2005 Form 10-K filed with the SEC. Except
where noted, all references in this news release to financial
results are presented in accordance with generally accepted
accounting principles, as adopted in the United States (GAAP).
Non-GAAP results are presented where that presentation will afford
investors an opportunity to make meaningful comparisons to results
in prior periods. The presentation of such non-GAAP information is
not intended to suggest that such information is superior to the
presentation of GAAP information, but only to clarify some
information and assist the reader. See reconciliations on our
corporate website, officedepot.com, under the category Investor
Relations.
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

As of As of
April 1, 2006 December 31, 2005
------------------ -----------------
Assets

Current assets:
Cash and cash equivalents $ 447,725 $ 703,197
Short-term investments 102,350 200
Receivables, net 1,300,636 1,232,107
Merchandise inventories, net 1,297,442 1,360,274
Deferred income taxes 135,912 136,998
Prepaid expenses and other
current assets 110,738 97,286
----------------- ----------------

Total current assets 3,394,803 3,530,062

Property and equipment, net 1,282,904 1,311,737

Goodwill 892,950 881,182
Other assets 410,991 375,544
----------------- ----------------
Total assets $ 5,981,648 $ 6,098,525
================= ================

Liabilities and stockholders' equity

Current liabilities:
Trade accounts payable $ 1,386,453 $ 1,324,198
Accrued expenses and other
current liabilities 1,017,489 979,796
Income taxes payable 97,726 117,487
Short-term borrowings and
current maturities of
long-term debt 13,080 47,270
----------------- ----------------

Total current liabilities 2,514,748 2,468,751

Deferred income taxes and other
long-term liabilities 350,930 321,455
Long-term debt, net of current
maturities 572,100 569,098

Commitments and Contingencies

Stockholders' Equity
Common stock - authorized
800,000,000 shares of $.01 par
value; outstanding shares -
422,313,787 in 2006 and
419,812,671 in 2005 4,223 4,198
Additional paid-in capital 1,575,712 1,517,373
Accumulated other comprehensive
income 166,047 140,745
Retained earnings 2,996,594 2,867,067
Treasury stock, at cost -
134,603,101 shares in 2006 and
122,787,210 shares in 2005 (2,198,706) (1,790,162)
----------------- ----------------
Total stockholders' equity 2,543,870 2,739,221
----------------- ----------------
Total liabilities and
stockholders' equity $ 5,981,648 $ 6,098,525
================= ================
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)

13 Weeks Ended
-----------------------------------

April 1, March 26,
2006 2005
----------------- -----------------

Sales $ 3,815,700 $ 3,702,891
Cost of goods sold and occupancy
costs 2,613,794 2,551,236
---------------- ----------------

Gross profit 1,201,906 1,151,655

Store and warehouse operating and
selling expenses 843,521 827,807
General and administrative expenses 166,553 158,908
---------------- ----------------
1,010,074 986,715
---------------- ----------------

Operating profit 191,832 164,940

Other income (expense):
Interest income 6,259 5,469
Interest expense (11,066) (10,383)
Miscellaneous income, net 7,464 4,700
---------------- ----------------

Earnings before income taxes 194,489 164,726

Income taxes 64,959 49,418
---------------- ----------------

Net earnings $ 129,530 $ 115,308
================ ================


Net earnings per share:
Basic $ 0.44 $ 0.37
Diluted 0.43 0.37

Weighted average number of common
shares outstanding:
Basic 291,552 311,940
Diluted 298,338 315,526
OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

13 Weeks Ended
-----------------------------------

April 1, March 26,
2006 2005
----------------- -----------------

Cash flows from operating activities:
Net earnings $ 129,530 $ 115,308
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating
activities:
Depreciation and amortization 74,772 71,811
Charges for losses on
inventories and receivables 30,958 31,508
Changes in working capital and
other 32,536 (279,264)
---------------- ----------------
Net cash provided by (used in)
operating activities 267,796 (60,637)
---------------- ----------------

Cash flows from investing activities:
Capital expenditures (57,005) (80,472)
Proceeds from disposition of
assets 899 7,348
Purchase of short-term
investments (896,275) (168,755)
Sale of short-term investments 794,125 263,022
---------------- ----------------
Net cash (used in) provided by
investing activities (158,256) 21,143
---------------- ----------------

Cash flows from financing activities:
Proceeds from exercise of stock
options and sale of stock under
employee stock purchase plans 40,345 54,183
Tax benefits from employee
share-based payments 11,954 -
Acquisition of treasury stock (398,477) (28,229)
Net payments on long- and
short-term borrowings (25,850) (5,599)
---------------- ----------------
Net cash (used in) provided by
financing activities (372,028) 20,355
---------------- ----------------

Effect of exchange rate changes on
cash and cash equivalents 7,016 (10,607)
---------------- ----------------

Net decrease in cash and cash
equivalents (255,472) (29,746)
Cash and cash equivalents at
beginning of period 703,197 793,727
---------------- ----------------
Cash and cash equivalents at
end of period $ 447,725 $ 763,981
================ ================
OFFICE DEPOT, INC.
DIVISION INFORMATION
(In millions)
(Unaudited)

We have been analyzing the further allocation of our general and
administrative costs to our Division results for purposes of segment
disclosure. Beginning with this quarter, we now include in our
Division operating profit those G&A costs that have been identified as
directly or closely attributable to those units. After allocating
these costs to the Divisions, a certain amount of corporate G&A
remains unallocated. These costs cannot be directly attributable to
the activities of any one Division and so are held out separately as
corporate G&A. We believe this is the most appropriate way to measure
each Division's performance and the Division performance has been
recast to reflect this new allocation methodology as well as certain
other minor reclassifications.

The Division operating profit for the first quarter of 2006 and 2005
which reflects this allocation of G&A as well as certain other minor
reclassifications is provided below.

North American Retail Division
------------------------------

First Quarter
--------------------------------
(Dollars in millions) 2006 2005
Sales $1,790.7 $1,698.2
% change 5% 6%

Division operating profit $133.8 $106.9
% of sales 7.5% 6.3%

Of the total pre-tax 2006 First Quarter Charges, approximately $1
million were recorded in North American Retail.
North American Business Solutions Division
------------------------------------------

First Quarter
--------------------------------
(Dollars in millions) 2006 2005
Sales $1,130.0 $1,051.0
% change 8% 2%

Division operating profit $92.5 $74.2
% of sales 8.2% 7.1%

Of the total pre-tax 2006 First Quarter Charges, approximately $1
million were recorded in North American Business Solutions.
International Division
----------------------

First Quarter
--------------------------------
(Dollars in millions) 2006 2005
Sales $895.0 $954.3
% change (6)% (2)%

Division operating profit $53.0 $57.7
% of sales 5.9% 6.0%

Of the total pre-tax 2006 First Quarter Charges, approximately $16
million were recorded in International.
Percentage of Sales by Division
North American Retail 46.9% 45.8%
North American Business
Solutions Division 29.6% 28.4%
International Division 23.5% 25.8%
Total Company by Quarter - 2005

The following presents each of the quarters of 2005 recast for
this new allocation methodology.

(Dollars in First Second Third Fourth Total
millions) Quarter Quarter Quarter Quarter Year
----------------------------------------------------------------------
Sales $3,702.9 $3,364.0 $3,492.9 $3,719.1 $14,278.9
----------------------------------------------------------------------
Cost of goods sold 2,551.2 2,327.8 2,446.3 2,561.6 9,886.9
----------------------------------------------------------------------
Gross profit 1,151.7 1,036.2 1,046.6 1,157.5 4,392.0
----------------------------------------------------------------------
Store and warehouse
operating and
selling expenses 821.6 736.2 836.2 826.1 3,220.1
----------------------------------------------------------------------
Asset impairments - - 121.9 11.6 133.5
----------------------------------------------------------------------
Division operating
profit - as
reported 330.1 300.0 88.5 319.8 1,038.4
----------------------------------------------------------------------

----------------------------------------------------------------------
Allocated G&A
expenses and other 91.5 85.9 77.9 94.5 349.8
----------------------------------------------------------------------
Division operating
profit - further
allocated 238.6 214.1 10.6 225.3 688.6
----------------------------------------------------------------------
Corporate G&A 73.7 71.6 107.3 88.0 340.6
----------------------------------------------------------------------
Operating profit
(loss) $164.9 $142.5 $(96.7) $137.3 $348.0
----------------------------------------------------------------------
Division results - 2005

North
North American
(Dollars % American % Business % %
in Total of Retail of Solutions of Intl of
millions) Company Sales Division Sales Division Sales Division Sales
----------------------------------------------------------------------
First
Quarter

Sales $3,702.9 $1,698.2 $1,051.0 $954.3
Division
operating
profit:
As
reported $330.1 8.9% $130.1 7.7% $101.3 9.6% $98.8 10.4%
Further
allocated $238.6 6.4% $106.9 6.3% $74.2 7.1% $57.7 6.0%
Corporate
G&A $73.7 2.0% - - - - - -
Operating
profit $164.9 4.4% - - - - - -

----------------------------------------------------------------------
Second
Quarter

Sales $3,364.0 $1,451.1 $1,065.9 $847.8
Division
operating
profit:
As
reported $300.0 8.9% $99.6 6.9% $115.7 10.9% $84.7 10.0%
Further
allocated $214.1 6.4% $76.2 5.3% $86.8 8.1% $51.1 6.0%
Corporate
G&A $71.6 2.1% - - - - - -
Operating
profit $142.5 4.2% - - - - - -

----------------------------------------------------------------------
Third
Quarter

Sales $3,492.9 $1,635.9 $1,080.9 $776.9
Division
operating
profit
(loss):
As
reported $88.5 2.5% $(29.9)(1.8)% $59.5 5.5% $59.0 7.6%
Further
allocated $10.6 0.3% $(47.8)(2.9)% $26.6 2.5% $31.8 4.1%
Corporate
G&A $107.3 3.1% - - - - - -
Operating
loss $(96.7)(2.8)% - - - - - -

----------------------------------------------------------------------
Fourth
Quarter

Sales $3,719.1 $1,725.0 $1,103.0 $891.9
Division
operating
profit:
As
reported $319.8 8.6% $119.1 6.9% $129.9 11.8% $70.9 7.9%
Further
allocated $225.3 6.1% $95.5 5.5% $100.5 9.1% $29.3 3.3%
Corporate
G&A $88.0 2.4% - - - - - -
Operating
profit $137.3 3.7% - - - - - -

----------------------------------------------------------------------
Full Year
2005

Sales $14,278.9 $6,510.2 $4,300.8 $3,470.9
Division
operating
profit:
As
reported $1,038.4 7.3% $318.9 4.9% $406.4 9.4% $313.4 9.0%
Further
allocated $688.6 4.8% $230.8 3.5% $288.1 6.7% $169.9 4.9%
Corporate
G&A $340.6 2.4% - - - - - -
Operating
profit $348.0 2.4% - - - - - -

Total Company results are net of intercompany transactions.
OFFICE DEPOT, INC.
OTHER SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts, return and operating data)
(Unaudited)

Other Selected Financial Information
13 Weeks Ended
------------------------------
April 1, 2006 March 26, 2005
------------------------------

Cumulative share repurchases ($): $398,477 $28,229

Cumulative share repurchases (shares): 11,765 1,605
Shares outstanding, end of quarter 287,711 315,275

Trailing 4 Quarters
------------------------------
April 1, 2006 March 26, 2005
------------------------------

Adjusted Return on Equity (ROE)(1) 16.1% 12.0%

Adjusted Return on Invested Capital
(ROIC)(1) 13.3% 10.9%
Selected Operating Highlights
13 Weeks Ended
-------------------------------
April 1, 2006 March 26, 2005
-------------------------------
Store Count and Square Footage

United States and Canada:
Store count:
Stores opened 4 29
Stores closed 2 3
Stores relocated 2 1
Total U.S. and Canada stores 1,049 995

North American Retail Division
square footage: 26,257,699 25,289,417
Average square footage per NAR
store 25,031 25,416
Average sales per square foot $273 $272
International Division company-
owned:
Store count:
Stores opened - -
Stores closed - 1
Total International
company-owned stores 70 77