Office Depot Announces Record Second Quarter Earnings; 39% Growth In EPS To 43 Cents Non-GAAP(1), 32% Growth To 41 Cents On A GAAP Basis

Second Quarter Results

Total Company sales for the second quarter grew 4% to $3.5 billioncompared to the second quarter of 2005. Sales in North America were up5%, while International sales increased 1% in U.S. dollars and 2% inlocal currencies. North American Retail comparable store sales were up1% for the quarter.

Net earnings for the quarter were $118 million compared to $100million in the same quarter of the prior year, and diluted earningsper share were $0.41 in the second quarter of 2006 versus $0.31 in thesame period a year ago. The second quarter 2006 results included theeffects of charges related to exit costs and other operating itemswhich we had previously announced and are more fully described in ourForm 10-K and 10-Q filings with the Securities and ExchangeCommission. Second quarter charges (the "Second Quarter Charges") in2006 had a $0.02 per diluted share negative impact on results. Withoutthese charges, our second quarter 2006 net earnings were $125million(1) or $0.43 per share(1), up 39% from the second quarterearnings per share of the prior year.

During the quarter Office Depot completed the previously announcedacquisitions of businesses in North America and South Korea, andacquired an incremental interest leading to a majority stake in theCompany's business in Israel. While each of these businesses providesgrowth opportunities in the future, they did not have a significantimpact on second quarter performance.

For the quarter, gross profit as a percentage of sales was 30.9%,a 10 basis point improvement from the same period last year. Grossmargin in the North American Retail Division increased during thequarter while the North American Business Solutions Division and theInternational Division posted slight decreases in gross margin ascompared to the prior year, primarily due to cost pressures in certainproduct categories.

Total operating expenses as a percent of sales were 25.9%, animprovement of 70 basis points compared to the prior year. SecondQuarter Charges of $8 million negatively impacted operating expensesas a percentage of sales by 20 basis points in the quarter.

In the second quarter, Office Depot repurchased approximately 7million shares of common stock for $272 million under the repurchaseprograms previously approved by the Board of Directors.

Return on invested capital for the quarter was 10.5%. Chargestaken in the twelve months prior to June 2006 negatively impacted thecalculation of the Company's current return on invested capital.Adjusted to exclude these charges, ROIC improved to 13.9% for thesecond quarter of 2006 as compared to 11.4% in the prior year.

"We are pleased with our overall performance in the second quarterwith each of our Divisions contributing to the increase we achieved inearnings per share," said Steve Odland, Office Depot's Chairman andChief Executive Officer. "We achieved sales growth in each of ourDivisions, lowered total operating expenses, and expanded ouroperating margin. The North American Retail Division recorded itstenth consecutive quarter of positive comparable sales, our NorthAmerican Business Solutions Division increased its sales by 6% and theInternational Division increased its sales in local currency by 2%. Wealso leave the quarter with continued improvement in working capitalmanagement and another increase in ROIC.(1)"

Second Quarter Division Results

North American Retail Division

Second quarter sales in the North American Retail Divisionincreased 4% compared to the same period last year. Comparable storesales in the 986 stores in the U.S. and Canada that have been open formore than one year increased 1% in the second quarter. This representsthe tenth consecutive quarter of positive comparable sales led bystrength in the technology product category.

The North American Retail Division had an operating profit of $96million for the quarter, up 26% from the same period in the prioryear, and as a percentage of sales was 6.4%, up 110 basis points fromthe prior year. Second Quarter Charges negatively impacted operatingresults for the period by $1 million. Division operating profitmargins expanded due to both a continuation of gross margin expansionand a reduction in the Division's cost structure. Gross marginsimproved over last year, in part reflecting an expansion in productmargins driven by category management and an increase in private brandsales. Cost management initiatives have resulted in reduced operatingcosts. These improvements in gross margin and savings from costmanagement initiatives continue to more than offset incrementalexpenses associated with new store openings and store remodelactivities now underway.

Inventory per store was $995,000 as of the end of the secondquarter, down from $1.06 million per store in the prior year.

During the second quarter, the Company opened 22 new stores andcompleted the remodel efforts for 49 stores. At the end of the secondquarter, Office Depot operated a total of 1,071 stores throughout theU.S. and Canada.

North American Business Solutions Division

North American Business Solutions Division sales increased by 6%in the second quarter compared to the same period last year. TheBusiness Solutions Division experienced growth in key productcategories, and average order values increased compared to the secondquarter of 2005. In the second quarter the Company also completed theacquisition of Allied Office Products, a contract stationer, whoseresults have been consolidated into Office Depot's results for part ofthe second quarter.

Division operating profit was $101 million for the quarter, up 16%from the prior year, and as a percentage of sales was 8.9%, up 80basis points from the same period in 2005. 2006 Second Quarter Chargesnegatively impacted operating profit by $4 million.

Division operating profit margins expanded due to improvements incosts, which were slightly offset by a modest decline in gross margin.Overall gross margin for the Division was negatively impacted by costpressures in certain product categories and a shift in the mix ofsales. Expense leverage was achieved from call center optimizationefforts initiated in past quarters and from current period advertisingefficiencies. Office Depot continued to invest in the expansion of theCompany's sales force in the quarter.

International Division

International Division second quarter sales increased 1% in U.S.dollars, and increased 2% in local currencies compared to the sameperiod in 2005. The change in exchange rates from the correspondingprior year period decreased sales reported in U.S. dollars byapproximately $8 million for the quarter. This quarter Office Depotcompleted the previously announced acquisition of Best Office, anoffice supply company located in South Korea and increased theCompany's ownership interest to a majority stake in Office DepotIsrael. Their results have been consolidated into our results for partof the second quarter.

Division operating profit was $46 million or 5.3% of sales ascompared to $51 million or 6% of sales in the prior year's secondquarter. Second Quarter Charges negatively impacted operating profitby $3 million, or 30 basis points as a percentage of sales. Thecomparison for the second quarter is impacted by the allocation ofcertain one-time credits realized in 2005 that increased the prioryear operating margin by as much as 70 basis points.

The operating profit margin for 2006 was impacted by a slightdecline in gross margin which was due to the effect of mix of sales,and continued pricing and cost pressures in key product categories.This decline was offset by broad based expense savings resulting fromconsolidation and cost management efforts.

Non-GAAP Reconciliation

A reconciliation of GAAP results to results excluding SecondQuarter Charges may be accessed on our corporate website,http://www.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 July 28. 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

Office Depot provides more office products and services to morecustomers in more countries than any other company.

Incorporated in 1986 and headquartered in Delray Beach, Fla.,Office Depot has annual sales of nearly $15 billion, and employsapproximately 50,000 associates around the world. Currently, theCompany sells to customers in 33 countries, and has affiliates inanother five.

Office Depot is a leader in every distribution channel -- fromretail stores and contract delivery to catalogs and e-commerce. As ofJuly 1, 2006, Office Depot had 1,071 retail stores in North Americaand another 322 stores, either company-owned, licensed or franchised,in other parts of the world. Office Depot serves a wide range ofcustomers through a dedicated sales force, telephone account managers,direct mail offerings, and multiple web sites. With over $3.8 billionin online sales, the Company is also one of the world's largeste-commerce retailers.

Office Depot'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 http://www.sec.gov and athttp://www.freeEDGAR.com, as well as on a number of other commercialweb sites.

(1) This is non-GAAP information. Certain disclosures in thisrelease eliminate the effect of charges recorded during the quarterthat relate to projects identified in 2005 and were expected tocontinue into 2006 and later years. See additional disclosures ofthese projects in our 2005 Form 10-K filed with the SEC. Except wherenoted, all references in this news release to financial results arepresented in accordance with generally accepted accounting principles,as adopted in the United States (GAAP). Non-GAAP results are presentedwhere that presentation will afford investors an opportunity to makemeaningful comparisons to results in prior periods. The presentationof such non-GAAP information is not intended to suggest that suchinformation is superior to the presentation of GAAP information, butonly to clarify some information and assist the reader. Seereconciliations on our corporate website, http://www.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 As of
July 1, December 31, June 25,
2006 2005 2005
------------- ------------ -----------
Assets

Current assets:
Cash and cash equivalents $ 341,350 $ 703,197 $ 628,059
Short-term investments -- 200 217,000
Receivables, net 1,314,333 1,232,107 1,276,096
Inventories, net 1,450,440 1,360,274 1,366,547
Deferred income taxes 121,750 136,998 139,885
Prepaid expenses and other
current assets 116,749 97,286 67,364
------------- ------------ -----------
Total current assets 3,344,622 3,530,062 3,694,951

Property and equipment, net 1,326,128 1,311,737 1,420,234
Goodwill 1,091,427 881,182 975,681
Other assets 445,508 375,544 353,521
------------- ------------ -----------
Total assets $6,207,685 $6,098,525 $6,444,387
============= ============ ===========

Liabilities and stockholders'
equity

Current liabilities:
Trade accounts payable $1,477,506 $1,324,198 $1,215,486
Accrued expenses and other
current liabilities 1,068,020 979,796 907,471
Income taxes payable 117,774 117,487 134,141
Short-term borrowings and
current maturities
of long-term debt 34,114 47,270 16,026
------------- ------------ -----------
Total current liabilities 2,697,414 2,468,751 2,273,124

Deferred income taxes and other
long-term liabilities 368,170 321,455 337,176
Long-term debt, net of current
maturities 581,761 569,098 557,549
Minority interest 10,270 -- --

Commitments and contingencies

Stockholders' equity:
Common stock - authorized
800,000,000 shares
of $.01 par value; issued
and outstanding shares -
Q2 2006: 425,075,847, Q4
2005: 419,812,671, and Q2
2005: 414,190,717 4,251 4,198 4,142
Additional paid-in capital 1,652,554 1,517,373 1,355,076
Accumulated other
comprehensive income 249,752 140,745 171,150
Retained earnings 3,114,903 2,867,067 2,808,682
Treasury stock, at cost - Q2
2006: 141,798,878, Q4 2005:
122,787,210, and Q2 2005:
97,410,684 (2,471,390) (1,790,162) (1,062,512)
------------- ------------ -----------
Total stockholders' equity 2,550,070 2,739,221 3,276,538
------------- ------------ -----------
Total liabilities and
stockholders' equity $6,207,685 $6,098,525 $6,444,387
============= ============ ===========

OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)

13 Weeks Ended 26 Weeks Ended
----------------------- -----------------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Sales $3,494,907 $3,364,052 $7,310,607 $7,066,943
Cost of goods sold and
occupancy costs 2,416,665 2,327,805 5,030,459 4,879,041
----------- ----------- ----------- -----------

Gross profit 1,078,242 1,036,247 2,280,148 2,187,902

Store and warehouse
operating and selling
expenses 756,505 740,345 1,600,026 1,568,152
General and
administrative
expenses 150,324 153,390 316,877 312,298
----------- ----------- ----------- -----------

Operating profit 171,413 142,512 363,245 307,452

Other income (expense):
Interest income 1,086 5,761 7,345 11,230
Interest expense (11,347) (15,179) (22,413) (25,562)
Miscellaneous
income, net 6,625 7,691 14,089 12,391
----------- ----------- ----------- -----------

Earnings before
income taxes 167,777 140,785 362,266 305,511

Income taxes 49,471 40,686 114,430 90,104
----------- ----------- ----------- -----------

Net earnings $ 118,306 $ 100,099 $ 247,836 $ 215,407
=========== =========== =========== ===========


Earnings per common
share:
Basic $ 0.42 $ 0.32 $ 0.87 $ 0.69
Diluted 0.41 0.31 0.85 0.68

Weighted average number
of common shares
outstanding:
Basic 280,726 314,216 286,139 313,078
Diluted 287,326 318,938 292,832 317,232

OFFICE DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

26 Weeks Ended
-------------------
July 1, June 25,
2006 2005
--------- ---------
Cash flow from operating activities:
Net earnings $247,836 $215,407
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 137,373 135,483
Charges for losses on inventories and
receivables 42,716 39,411
Changes in working capital and other 55,863 (303,919)
--------- ---------
Net cash provided by operating activities 483,788 86,382
--------- ---------

Cash flows from investing activities:
Capital expenditures (121,489) (155,081)
Acquisitions, net of cash acquired (176,022) --
Proceeds from disposition of assets 21,042 36,920
Purchase of short-term investments (961,450) (590,675)
Sale of short-term investments 961,650 533,822
--------- ---------
Net cash used in investing activities (276,269) (175,014)
--------- ---------

Cash flows from financing activities:
Proceeds from exercise of stock options and sale
of stock under employee stock purchase plans 82,111 79,607
Tax benefits from employee share-based payments 32,502 --
Acquisition of treasury stock (670,222) (90,574)
Net payments on long- and short-term borrowings (22,651) (32,813)
--------- ---------
Net cash used in financing activities (578,260) (43,780)
--------- ---------

Effect of exchange rate changes on cash
and cash equivalents 8,894 (33,256)
--------- ---------

Net (decrease) in cash and cash equivalents (361,847) (165,668)
Cash and cash equivalents at beginning of
period 703,197 793,727
--------- ---------
Cash and cash equivalents at end of period $341,350 $628,059
========= =========

Office Depot, Inc.
DIVISION INFORMATION
(Unaudited)

Beginning with the first quarter of 2006, we now include in our
Division operating profit those general and administrative ("G&A")
costs that have been identified as directly or closely attributable to
those units. Division operating profit for the second quarter and
first half 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
------------------------------
Second Quarter First Half
------------------- -------------------
(Dollars in millions) 2006 2005 2006 2005
--------------------- --------- --------- --------- ---------

Sales $1,507.6 $1,451.1 $3,298.3 $3,149.4
% change 4% 8% 5% 7%

Division operating profit $95.9 $76.2 $229.7 $183.1
% of sales 6.4% 5.3% 7.0% 5.8%


North American Retail Division operating profit includes $1 million of
Second Quarter Charges and $2 million of First Half Charges for the
related 2006 periods.

North American Business Solutions Division
------------------------------------------
Second Quarter First Half
------------------- -------------------
(Dollars in millions) 2006 2005 2006 2005
--------------------- --------- --------- --------- ---------

Sales $1,128.7 $1,065.9 $2,258.7 $2,116.9
% change 6% 7% 7% 5%

Division operating profit $100.8 $86.8 $193.3 $161.0
% of sales 8.9% 8.1% 8.6% 7.6%


North American Business Solutions Division operating profit includes
$4 million of Second Quarter Charges and $5 million of First Half
Charges for the related 2006 periods.


International Division
----------------------
Second Quarter First Half
------------------- -------------------
(Dollars in millions) 2006 2005 2006 2005
--------------------- --------- --------- --------- ---------

Sales $858.6 $847.8 $1,753.6 $1,802.1
% change 1% 3% (3%) --%

Division operating profit $45.5 $51.1 $98.5 $108.8
% of sales 5.3% 6.0% 5.6% 6.0%


International Division operating profit includes $3 million of Second
Quarter Charges and $19 million of First Half Charges for the related
2006 periods. The comparison for the second quarter and the first half
is impacted by the allocation of certain one-time credits realized in
the second quarter of 2005 that increased the prior year operating
margin by as much as 70 basis points.


Percentage of Sales by Division
-------------------------------
Second Quarter First Half
---------------- ------------
2006 2005 2006 2005
--------- --------- --------- ---------
North American Retail 43.1% 43.1% 45.1% 44.6%
North American Business
Solutions Division 32.3% 31.7% 30.9% 29.9%
International Division 24.6% 25.2% 24.0% 25.5%

Office Depot, Inc.
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)


Other Selected Financial Information
(In thousands, except operational data) 26 Weeks Ended
----------------------------------
July 1, 2006 June 25, 2005
----------------------------------

Cumulative share repurchases ($): $670,222 $90,574

Cumulative share repurchases (shares): 19,013 4,629
Shares outstanding, end of quarter 283,277 316,780
Selected Operating Highlights
13 Weeks Ended 26 Weeks Ended
----------------------- -----------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
----------- ----------- -------- --------
Store Statistics

United States and Canada:
Store count:
Stores opened 22 17 26 46
Stores closed -- 1 2 4
Stores relocated 2 4 4 5
Total U.S. and Canada
stores 1,071 1,011 1,071 1,011

North American Retail
Division square footage: 26,722,772 25,553,663
Average square footage per
NAR store 24,951 25,276
Average sales per square
foot $229 $229 $251 $250
Inventory per store (end of
period) $995,000 $1,062,000
International Division
company-owned:
Store count:
Stores opened 8 1 8 1
Stores closed -- 2 -- 3
Stores acquired 42 -- 42 --
Total International company-
owned stores 120 76 120 76

OFFICE DEPOT, INC.
Comparative Trailing Four Quarters Data
(Unaudited)

The following data has been compiled from the trailing four quarters
ended with the second quarter of 2006 and 2005. THIS INFORMATION IS
COMPRISED PRIMARILY OF NON-GAAP INFORMATION. Therefore, most line
items exclude amounts that are determined in accordance with
accounting principles generally accepted in the United States of
America. This non-GAAP presentation 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. We review
non-GAAP data, as well as GAAP data, when assessing our business
performance and believe it can provide insight into current
operational aspects of the business.

Material asset impairments, exit cost and other charges recorded
during the past year can result in financial indicators that do not
fully reflect the impacts of current business transactions. For
additional information on these charges, please review our Form 10-K
for the year 2005 and subsequent Form 10-Q filings with the Securities
and Exchange Commission. We have also provided the same or most
closely related financial measure on a GAAP basis for comparison. In
addition to adjusting for certain items, we have compiled the data on
a trailing four quarters basis.

The inclusion of this data is not intended to suggest that we believe
our company to be highly-seasonal, but to provide perspective on the
results of events that have transpired during the course of a year.
Our management reviews this information to assess growth initiatives,
streamlining and cost control measures and other operational
activities put in place during the period. A reconciliation of
non-GAAP to GAAP financial measures can be found on our web site at
http://www.officedepot.com under the Investor Relations category.


Total Company Trailing 4 Quarters
------------- -------------------
(Dollars in millions) July 1, June 25,
--------------------- 2006 2005 Change
---------- ---------- --------
Sales $14,522.6 $13,864.2 5%

EBIT - adjusted(1) $738.1 $599.2 23%
% of sales 5.1% 4.3% 80 bps
EBIT $429.1 $565.8 -24%
% of sales 3.0% 4.1% -110 bps

Net earnings - adjusted(1) $496.6 $397.1 25%
Net earnings $306.2 $356.8 -14%

Diluted Earnings Per Share - adjusted(1) $1.64 $1.26 30%
Diluted Earnings Per Share $1.01 $1.13 -11%

EBITDA - adjusted(1) $1,008.1 $873.8 15%
% of sales 6.9% 6.3% 60 bps
EBITDA(1) $699.1 $840.4 -17%
% of sales 4.8% 6.1% -130 bps

Return on Equity (ROE) - adjusted(1) 17.6% 12.6% 500 bps
ROE 10.9% 11.3% -40 bps

Return on Invested Capital (ROIC) -
adjusted( 1) 13.9% 11.4% 250 bps
ROIC 10.5% 10.7% -20 bps

Average shares 303.0 316.3 -4%

(1) Non-GAAP financial measure. (bps = basis points)