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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

For the transition period from ___________ to ___________

Commission file number 1-10948

OFFICE DEPOT, INC.

(561) 438-4800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

The registrant had 308,787,891 shares of common stock outstanding as of March 29, 2003.

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

OFFICE DEPOT, INC.

The accompanying notes are an integral part of these statements.

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OFFICE DEPOT, INC.

The accompanying notes are an integral part of these statements.

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OFFICE DEPOT, INC.

The accompanying notes are an integral part of these statements.

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OFFICE DEPOT, INC.

(Tabular amounts in thousands)

Note A – Basis of Presentation

Office Depot, Inc., including consolidated subsidiaries (the “Company”), is a global supplier of office products and services. Fiscal years are based on a 52- or 53-week period ending on the last Saturday in December and quarters are based on 13-week periods. The condensed consolidated balance sheet at December 28, 2002 has been derived from audited financial statements at that date. The condensed interim financial statements as of March 29, 2003 and for the 13-week period ending March 29, 2003 (also referred to as “the first quarter of 2003”) and March 30, 2002 (also referred to as “the first quarter of 2002”) are unaudited. However, in our opinion, these financial statements reflect all adjustments (consisting only of normal, recurring items) necessary to provide a fair presentation of our financial position, results of operations and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current year’s presentation.

These interim results are not necessarily indicative of the results that should be expected for the full year. For a better understanding of the Company and its financial statements, we recommend reading these condensed interim financial statements in conjunction with the Company’s audited financial statements for the year ended December 28, 2002, which are included in our 2002 Annual Report on Form 10-K, filed on March 13, 2003.

Note B – Cumulative Effect of Accounting Change

Effective December 29, 2002, the beginning of our 2003 fiscal year, we adopted Emerging Issues Task Force (“EITF”) Issue No. 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor. This guidance primarily affects our accounting for cooperative advertising arrangements. Under these rules, there is a presumption that amounts received from vendors should be considered a reduction of product costs. This presumption can be overcome if certain restrictive provisions are met. We adopted a policy of considering all cooperative advertising arrangements to be a reduction of product cost, because the cost of tracking actual advertising costs by vendor to meet these criteria would exceed the benefit. These arrangements were previously accounted for as a reduction of advertising expense. A portion will now be deferred in inventory and will reduce the cost of products as they are sold, similar to the current practice for vendor rebate arrangements. The amounts deferred for both arrangements will be adjusted quarterly and changes in the deferral will impact quarterly earnings, but based on projected inventory balances and vendor arrangements, the full year impact is not expected to be significant.

To record the initial amount of cooperative advertising deferred in inventory at the beginning of the year, we recorded an after-tax cumulative effect adjustment of $25.9 million, or $0.08 per share. The impact of the new accounting method decreased cost of goods sold for the first quarter of 2003 by $83.0 million and increased advertising expense by $66.0 million. The impact to cost of goods sold reflects the reclassification of the cooperative advertising credit, as well as $17.0 million from change in amounts deferred in inventory, for a positive impact on diluted earnings per share of $0.03 for the quarter. Prior periods have not been restated. However, the estimated impact of applying this method in the first quarter of 2002 would have been to decrease cost of goods sold by $105.8 million and increase advertising expense by $85.2 million. Pro forma operating profit would have increased by $20.6 million, net earnings by $13.4 million and diluted earnings per share by $0.04.

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Note C – Accounting for Stock-Based Compensation

     The Company accounts for its stock-based compensation plans under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. The pro forma information below is based on provisions of Statement of Financial Accounting Standard (“FAS”) No. 123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure, issued in December 2002.

(In thousands, except per share amounts)

Compensation cost charged against income for restricted shares issued under the Long-Term Equity Incentive Plan and Long-Term Incentive Stock Plan, as well as the Company’s match under the retirement savings plan for the first quarter of 2003 and 2002 totaled $3.8 million and $1.7 million, respectively.

Note D – Discontinued Operations

The Company completed the sale of its Australian operations in the early part of January 2003, recognizing an after tax gain of $1.2 million. The results for Australia, including the gain on sale in 2003, have been reported as a discontinued operation for both periods presented. Accordingly, the accompanying Condensed Consolidated Statement of Earnings for the first quarter of 2002 has been restated to reflect such classification. Additionally, Australia’s assets and liabilities have been classified as held for sale and included in prepaid expenses and other current assets and in accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet as of December 28, 2002.

Australia’s revenues were $18.7 million the first quarter of 2002, with no reported pretax income. Basic and diluted net earnings per share were not affected by discontinued operations in either period.

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Note E – Comprehensive Income

Comprehensive income represents all non-owner changes in stockholders’ equity and consists of the following:

Note F – Earnings Per Share (“EPS”)

     The information required to compute basic and diluted EPS is as follows:

Options to purchase approximately 19.2 million shares of common stock were not included in our computation of diluted earnings per share for the first quarter of 2003 because their weighted average effect would have been anti-dilutive.

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Note G – Segment Information

The following is a summary of our significant accounts and balances by segment, reconciled to consolidated totals: