In July 1999, we entered into term loan and revolving credit agreements with several Japanese banks (the “yen facilities”) to provide financing for our operating and expansion activities in Japan. The yen facilities provide for maximum aggregate borrowings of ¥9.76 billion (the equivalent of $85.3 million at December 30, 2000) at an interest rate of 0.875% over the Tokyo Interbank Offered Rate (“TIBOR”). These facilities are available to us until July 2002. The yen facilities loan agreements are tied to the covenants in our domestic facilities described earlier. As of December 30, 2000, we had outstanding yen borrowings equivalent to $64.0 million under these yen facilities, with an average effective interest rate of 1.252%. Effective October 28, 1999, we entered into a yen interest rate swap with a financial institution for a principal amount equivalent to $21 million at December 30, 2000 in order to hedge against the volatility of the interest payments on a portion of our yen borrowings. The terms of the swap specify that we pay an interest rate of 0.700% and receive TIBOR. The swap will mature in July 2002.

In addition to bank borrowings, we have historically used equity capital, convertible debt and capital equipment leases as supplemental sources of funds.

In August 1999, our Board approved a $500 million stock repurchase program reflecting its belief that our common stock represented a significant value at its then-current trading price. We purchased 46.7 million shares of our stock at a total cost of $500 million plus commissions during the third and fourth quarters of 1999. During the first half of 2000, our Board approved additional stock repurchases of up to $300 million, bringing our total authorization to $800 million. We completed these programs during 2000, purchasing an additional 35.4 million shares of our stock at a total cost of $300 million plus commissions.

In 1992 and 1993, we issued Liquid Yield Option Notes (“ LYONs®î) which are zero coupon, convertible subordinated notes maturing in 2007 and 2008, respectively. Each LYON® is convertible at the option of the holder at any time on or prior to its maturity into Office Depot common stock at conversion rates of 43.895 and 31.851 shares per 1992 and 1993 LYON®, respectively. On November 1, 2000, the majority of the holders of our 1993 LYONs® required us to purchase the LYONs® from them at the issue price plus accrued original issue discount. We paid the holders $249.2 million in connection with this repur-chase, and reclassified the remaining 1993 LYONs® obligation to long-term on our balance sheet. Our 1992 LYONs® has a similar provision whereby the holders may require us to purchase these notes at the issue price plus accrued original issue dis-count on December 11, 2002. If the holder decides to exercise their put option, we have the choice of paying the holder in cash, common stock or a combination of the two.

Our stock repurchase and the repurchase of our 1993 LYONs® make up the majority of cash used in financing activities for 2000. We began borrowing from our domestic credit facilities during the fourth quarter of 2000, primarily to fund the LYONs® repurchase. The decline in cash from our financing activities in 1999, as compared to 1998, was driven by our stock repurchases.

We continually review our financing options. Although we currently anticipate that we will finance all of our 2001 expansion, integration and other activities through cash on hand, funds generated from operations, equipment leases and funds available under our credit facilities, we will consider alternative financing as appropriate for market conditions.

Significant Trends, Developments, and Uncertainties

Over the years, we have seen continued development and growth of competitors in all segments of our business. In particular, mass merchandisers and warehouse clubs have increased their assortment of home office merchandise, attracting additional back-to-school customers and year-round casual shoppers. We also face competition from other office supply superstores that compete directly with us in numerous markets. These other office supply superstores compete with us in geographical locations where we have traditionally been the market leader, just as we have begun penetrating markets where they have historically held the dominant market share. This competition is likely to result in increased competitive pressures on pricing, product selection and services provided.

We have also seen growth in new and innovative competitors that offer office products over the Internet, featuring special purchase incentives and one-time deals (such as close-outs). Through our own successful Internet and business-to-business Web sites, we believe that we have positioned ourselves competitively in the electronic commerce arena. We have invested in strategic partnerships with several business-to-business Internet companies offering innovative solutions to small businesses, a target customer group. We are committed to supporting our Internet channel to meet the needs of our customers, including investing in new and innovative electronic commerce business enterprises.