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Office Depot Supplies Its Own CFO

After lengthy search, company promotes controller to top finance spot. Also: staffing struggles at Heidrick & Struggles?
Jennifer CaplanOctober 18, 2001
  • Management at office supplies retailer Office Depot Inc. has ended its long quest to locate a new chief financial officer. Ironically, after a 14-month, nationwide search, the Delray Beach, Florida-based company promoted its controller, Charles Brown, to the CFO post. (For a closer look at the search — and for insight into what CEOs want in a finance chief — see “Taking Care of Business? Office Depot Still Looking for a CFO.”)

    Brown joined the company in 1998 and served as SVP of finance and controller before landing the top finance job. James Walker will take over Brown’s former duties.

    Although third-quarter performance was strong for the retailer, the company’s near-term prospects remain somewhat troublesome. Net income in the third quarter, excluding one-time charges, increased to $80 million (26 cents a share), up from $42 million (14 cents a share) last year. Operating profit rose a hefty 107 percent. Managers said that despite a substantial drop in sales following 9/11, the retailer will still be able to generate $525 million in free cash flow during the first nine months of 2001.

    Impressive numbers. But Office Depot management warned that the fourth quarter will probably be weaker than the third quarter. The outlook for the holiday season remains grim. Based on sales trends in the early part of the fourth quarter, management believes Q4 earnings per share could drop by 3 to 5 cents.

    Analysts polled by researcher Thomson Financial/First Call expect a profit in the range of 75 cents to 86 cents in the fourth quarter, with a mean estimate of 81 cents. Over the past year, the share price of Office Depot stock has increased in value by about 146 percent. During that same period, the price of a share of common stock of rival Staples Inc. has risen 45 percent.

  • Executive search firm Heidrick & Struggles is currently conducting a search of its own. Donald Kilinski announced his resignation from the CFO spot—effective year’s end. Kilinski, with Heidrick & Struggles since December 1997, will remain with the company until his replacement is found.

    But that’s not the only big change of late at the Chicago-based recruitment company. In early August, Piers Marmion was chosen as the company’s new chief executive, replacing Patrick Pittard (Pittard will stay on as chairman of the board). In addition, David Anderson, CEO of the company’s executive search arm, was named COO at Heidrick & Struggles International Inc.

    Marmion joined Heidrick & Struggles in 2000 following ten years with Spencer Stuart, where he was chief operating officer of worldwide business, and head of the company’s European and Asian operations. Anderson joined Heidrick & Struggles in 1992 as managing partner of the company’s Dallas office. Since then, he has held several positions at the company, including managing partner for North America and president of the Americas’ business.

    The timing of these changes comes as no surprise. The recruitment industry relies heavily on labor shortages and job mobility. And, obviously, there’s not a lot of either right now. Not surprisingly, second-quarter earnings at Heidrick & Struggles plunged 86 percent from the same period the year before. Consolidated revenue for the second quarter came in at $123 million, a drop of 26 percent from Q2 last year. Management attributed the results to a lessening of demand for middle- and lower-level managers in the U.S., as well as a decrease in business at the company’s overseas units.

  • James Ide is the new CFO at Next Level Communications Inc., a Rohnert Park, Calif.-based provider of broadband access systems. Ide replaces James Wandrey, who resigned in July after Next Level reported a wider than expected second-quarter net loss.

Ide, who has been serving as acting CFO since Wandrey left, was previously Next Level’s vice president of finance, as well as the company controller. Prior to joining Next Level, he was director of finance for Motorola Corp.’s international telecom carrier joint ventures. He spent four years during the early 1990s establishing Motorola’s cellular handset manufacturing operations and market headquarters in China, which grew to produce more than $1 billion in sales during his tenure. Wandrey also served as chief financial officer at Cwill Telecommunications, a wireless technology company. He began his career as a senior auditor at Arthur Andersen & Co. He holds a BA in accounting and Spanish from Gonzaga University, and a master’s degree in international finance from Thunderbird.

Ide is likely to experience some of the same pressures as his predecessor. In the second quarter, management reported a net loss of $102 million ($1.20 a share), compared with a loss of $15 million (18 cents a share) in the same quarter last year. The net loss included a $72 million write-down related to excess inventory, and $8 million in other charges related to the write-down of other investments. Excluding those charges, Next Level reported a loss of $18 million, or 21 cents a share for the quarter. Quarterly revenue came in at $32 million, well below the $40 million in revenues the company generated in the second quarter of 2000.

Things aren’t looking so hot in the third quarter, either. Managers expect third-quarter revenue to come in around $30 million, with operating expenses of $24.5 to $25.5 million. Just this week, analysts at W.R. Hambrecht and CSFB lowered their ratings for Next Level.

  • Managers at Cypress Biosciences Inc., a biotechnology company that makes products for patients with fibromyalgia syndrome (FMS), appointed Lisa Walters- Hoffert to the position of EVP and CFO.

    Walters-Hoffert joins Cypress with more than 20 years of corporate- finance and investment-banking experience, most recently with Roth Capital Partners LLC. Prior to that, she was co-head of Citicorp Securities Inc.’s corporate finance activities in Central America. Walters-Hoffert also worked in the investment banking division at Oppenheimer & Co., where she covered biotechnology companies. She holds a B.S. in management sciences from Duke University. Walters-Hoffert is also on the board of directors of the San Diego Venture Group and is a committee member of BIOCOM.

    Cypress reported a net loss of $930,000 for its fiscal year 2001, compared to a $2 million loss in 2000. The company’s products are designed to help patients with FMS, a chronic disease that causes pain and stiffness throughout the body. FMS is second only to osetoarthritis as the most commonly diagnosed rheumatological disorder.