Office Depot (NASDAQ: ODP) reported Q3 EPS of $0.10, $0.01 better than the analyst estimate of $0.09. Revenue for the quarter came in at $4.07 billion versus the consensus estimate of $4.05 billion.

Comps fell 3 percent.

“Our third quarter results reflect excellence in execution against our critical priorities and merger integration objectives, and we are very pleased to have more than doubled our adjusted operating income from last year’s combined pro forma results,” said Roland Smith, chairman and chief executive officer for Office Depot, Inc. “We continue to make significant progress on merger integration and have exceeded our synergy targets for the quarter. Accordingly, we are raising our 2014 outlook for adjusted operating income to a range of $255 million to $265 million, which is more than 150% higher than pro forma 2013. Looking ahead, our preliminary estimate for 2015 adjusted operating income is approximately $475 million, which is an 80% increase from our 2014 outlook.”

Outlook

For the remainder of 2014, Office Depot continues to expect challenging market trends and the impact of store closures to negatively impact sales. Therefore, the company continues to anticipate total sales in 2014 will be lower than 2013 combined pro forma sales.

Office Depot expects the benefit from merger integration synergies and efficiencies to more than offset the flow-through impact of continued lower sales trends and a year-over-year increase in incentive compensation expense. The company now expects to generate adjusted operating income of $255-$265 million in 2014, compared with its prior outlook of not less than $200 million.

In fiscal 2015, Office Depot preliminarily expects to generate approximately $475 million in adjusted operating income, driven largely by realization of incremental merger integration synergies.

Including at least $100 million in previously disclosed annual run-rate benefit from the optimization of the U.S. retail store portfolio, the company raised its estimate of total annual run-rate merger synergy benefits to more than $750 million by the end of 2016, compared to its prior outlook of more than $700 million. Based primarily upon earlier than expected realization of integration synergies in the third quarter, the company now expects to realize approximately $260 million of merger integration synergies during 2014, compared to its prior outlook of at least $220 million, and to end the year with an annual run-rate of at least $400 million, not including any benefits from the retail store optimization.

Office Depot continues to estimate that $400 million of cash merger integration expenses will be required during the three-year period of 2014 through 2016 to substantially complete the integration, excluding costs related to optimizing the U.S. retail store portfolio. Approximately $300 million of these cash integration expenses will be incurred in 2014. The company anticipates integration capital spending of approximately $200 million during the 2014 through 2016 period. In 2014, Office Depot expects total capital spending to be approximately $150 million, including $25 million in integration capital expenditures. Depreciation and amortization is expected to be approximately $300 million in 2014.

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