Diluted earnings per share were $0.69, compared with $0.61 in 1998. Excluding non-recurring charges and credits, diluted earnings per share were $0.86, compared with $0.82 in 1998. On August 30, 1999, the Company announced a $500 million stock repurchase program that we completed during the third and fourth quarters of fiscal 1999. This program reduced the number of shares outstanding by 46.7 million in 1999. In addition, on January 7, 2000, our Board of Directors expanded our stock repurchase program by another $100 million dollars, which we completed in March of 2000.

In 1999, we continued to improve our working capital management. By focusing on our supply chain more aggressively, we were able to reduce our domestic per-store investment in inventories, excluding incremental Y2K-related purchasing, by 10%, while at the same time supporting in-store comparable sales growth of 2%, adding 123 new stores, and maintaining the best in-stock position in the Company’s history. We expect our continued emphasis on supply chain management initiatives to improve our inventory turns and our return on assets in 2000.

In addition to these accomplishments, Office Depot maintained its strong financial position, closing 1999 with a debt-to-capital ratio of 23.1%, among the lowest in corporate America.

Excelling in the New Millennium
As we enter the new millennium, Office Depot looks forward to a bright and prosperous future. The worldwide office products industry continues to grow, providing us with greater opportunities to expand our global market share. And Office Depot is poised to capitalize on these opportunities.

We are one of the world’s largest sellers of office products and services, with 1999 sales exceeding $10 billion. We are a global industry leader in every distribution channel, including stores, direct mail, contract delivery, the Internet and business-to-business electronic commerce.

We have a clear strategy for continued growth. We have a united and experienced management team, supported by a dedicated and hard working team of associates. We have cultivated strong relationships with the world’s leading office products vendors, who share our commitment to innovation and growth. We have millions of loyal, satisfied customers who are dedicated to saving every day, every way, everywhere. And, we have the support and confidence of our valued stockholders.

Looking ahead, we see great potential to continue to grow our business in every channel worldwide. We are confident that we can leverage our resources toward this end. We are equally confident that, with the continued support of our shareholders, associates, vendors and customers, we can strengthen our competitive position and build an even stronger and more profitable company.

Sincerely,

David I. Fuente
Chairman of the Board
Chief Executive Officer