Combining technological advances with old-fashioned hard work and a desire to do the best job possible, BSG recorded an impressive series of accomplishments. North American fill rates were at an all-time high, inventory turns rose to record levels and warehouse costs continued to decline significantly. The North American BSG segment achieved record returns, with sales of $3.9 billion and operating margins of over 9%. Customer service indices rose across the board, including such critically important measures as order quality index and on-time delivery.

In the highly competitive world of e-commerce, no one sells more office products over the Internet than Office Depot. While domestic e-commerce sales grew by 26%, sales on a global business basis rose to $2.1 billion in 2002, more than double the level experienced just two years earlier. Contributing significantly to this positive performance were Office Depot's flagship www.officedepot.com site and its technology-focused 4Sure.com business unit.

One of the highest-visibility accomplishments of the year under the e-commerce banner was the formation of a partnership with Amazon.com. Announced in September, this alliance resulted in the launch of an Office Depot store on the Amazon.com web site. Featuring more than 50,000 items, the venture represents the largest selection of Office Depot products to be found anywhere on the web. Another web offering we developed in 2002 that gained immediate popularity was Web Cafe™, a series of online seminars featuring nationally known experts discussing topics of vital interest to small business owners and entrepreneurs.

The Company anticipates further growth in market share and profits in its Business Services Group in the year ahead as, at all levels of the organization, Office Depot continues to work smarter and serve customers more effectively across all its channels.