This summary is based on the second quarter fiscal 2008 earnings call conducted by Office Depot Inc. (ODP: chart) on July 30, 2008.

Management:

- Chairman of the Board, Chief Executive Officer: Steve Odland
- President, North American Retail: Carl Rubin
- President, North American Business Solutions: Steven M. Schmidt
- Acting Chief Financial Officer; President- International: Charles E. Brown
- Investor Relations: Brian Turcotte

Key Investors Issues

- Sales were $3.6 billion, a decrease of 1% from $3.63 billion in 2007.
- The net loss was $2 million or 1 cent a share, down from of $106 million or 38 cents a share in 2007.
- The firm ended with $157 million in cash and short-term investments.

Half Year Highlights:

- Sales dropped 2% to $7.57 billion from $7.73 billion in 2007.
- Net income was $66.8 million or 24 cents a share, down 74% from $259 million or 95 cents a share in 2007.

Second Quarter Highlights

Company sales were $3.6 billion, a decrease of 1% from $3.63 billion in the prior year due to the difficult environ.

- The net loss was $2 million or 1 cent a share, down from of $106 million or 38 cents a share in 2007 due to higher costs.
- Total company operating expenses as adjusted represented 26.9% of sales, an increase of 110 basis points over 2007.
- EBIT as adjusted was $21 million, or 0.6% as expressed as a percentage of sales, compared to $170 million or 4.7% in the same period last year.
- To profitably grow the top line, the firm is expanding entry level price points for core business essentials in North American retail as well as rolling out tech services nationally.
- It is also bundling newly expanded services with products and aggressively growing Worklife Rewards sign-ups.

It is increasing focus on direct marketing in the business solutions division, particularly in the catalog area, and implementing the customer contact strategy.

- In international, it is focusing on marketing strategies on retaining and expanding existing customers in the U.K., and is rolling out Tech Depot and the design print and ship services there.
- To cut costs and reduce CapEx, Office depot is reducing the number of anticipated store openings to less than 15 stores this year and remodels to eight for the balance of the year in North American retail.
- It is conducting line reviews with vendors and initiated a voluntary exit incentive program for certain employees, and is working to reduce working capital through reduction in the global inventory and the receivables level.

Cash provided by operating activities totaled $138 million, compared to $293 million during the same period last year, with the decrease primarily reflecting a reduction in net earnings.

- Depreciation and amortization decreased by $10 million year over year, as the firm recognized less accelerated depreciation in charges in the first half of 2008.
- Working capital increased by $239 million as compared to the second quarter of the prior year, with the majority of the increase related to the timing of payments, changes in foreign exchange rates, and duplicate inventories from warehouse consolidations.

The firm ended with $157 million in cash and short-term investments and investment in inventory totaled $1.6 billion globally, up 4% from the same period last year.

- This increase was driven primarily by the impact of foreign exchange rates and duplicate inventories for warehouse consolidations in Europe.
- On an average basis, inventory per store was $927,000, reflecting a reduction of 9% from the same period a year ago, reflecting the result of improved inventory management, as well as mitigation of inventory risk through clearancing activities.

Divisional Highlights:

- In North Americansales were down 6% to $1.4 billion and comparable store sales in the 1,178 stores in the U.S. and Canada that have been open for more than one year decreased 10%.
- The firm experienced sales declines in the major product categories of furniture, supplies, and technology.
- Sales slowed noticeably at the end of the second quarter but comp sales trends have improved slightly thus far in July.
- The firm continues to be negatively impacted by weakening business conditions in North America, specifically weakness in Florida and California continue to weigh heavily on results.

The firm opened six new stores, closed one, and relocated three, bringing total store count to 1,272.

- Mystery shop scores were 96%, up nearly 4% versus last year and the in-stock service rate in the top 200 selling SKUs was over 99%.
- The operating loss in the North American retail division was $4 million, a decline from record second quarter operating profit margins of 6.5% in the same period of the prior year.
- With lower sales levels versus year ago, fixed cost and operating expenses deleveraging reduced margins by 290 basis points compared to last year.

The operating expenses impact was driven primarily by deleveraging of payroll as the firm reached a base level of staffing.

- Office depot is accelerating the product assortment reviews to reduce overall SKU count to ensure the lowest possible costs and thereby improve margins.
- It is micro assorting the key technology departments to better match offering to the individual store sales volume and customer profile.
- It is also implementing stringent inventory controls to support more conservative sales forecasts, which are roughly comparable to what have been seen year-to-date.

Update on Taking Care of Business: