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STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE A Summary of Significant Accounting Policies (Continued)
activity be recognized when the liability is incurred. Prior to the adoption of SFAS No. 146, certain exit costs were
recognized when the Company committed to a restructuring plan, which may have been before the liability was incurred.
The Company adopted the provisions of SFAS No. 146 in December, 2002. The adoption of this statement had no impact
on the Company’s financial position or results of operations.
In December, 2002, the FASB issued Statement No. 148, ‘‘Accounting for Stock-Based Compensation—Transition
and Disclosure’’ (‘‘SFAS No. 148’’). SFAS No. 148 presents additional alternatives for transitioning to the fair value
method of accounting for stock-based compensation, prescribes the format to be used for pro forma disclosures and
requires the inclusion of similar pro forma disclosures in interim financial statements. The provisions of SFAS No. 148
are effective for the Company in fiscal 2003. Management has not yet determined the impact the adoption of this
statement will have on the Company’s financial position or results of operations.
In January, 2003, the FASB issued Interpretation No. 46, ‘‘Consolidation of Variable Interest Entities,’’
(‘‘Interpretation 46’’) to clarify the conditions under which assets, liabilities and activities of another entity should be
consolidated into the financial statements of a company. Interpretation 46 requires the consolidation of a variable
interest entity (including a special purpose entity such as that utilized in an accounts receivable securitization
transaction) by a company that bears the majority of the risk of loss from the variable interest entity’s activities, is
entitled to receive a majority of the variable interest entity’s residual returns or both. The provisions of Interpretation 46
are required to be adopted by the Company in fiscal 2003. The Company does not believe the adoption of Interpretation
46 will have a material impact on its overall financial position or results of operations.
Reclassifications: Certain previously reported amounts have been reclassified to conform with the current period
presentation.
NOTE B Business Acquisitions and Dispositions
In accordance with SFAS No. 141 ‘‘Business Combinations,’’ Staples records acquisitions under the purchase
method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible
assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as
goodwill. Under SFAS No. 142, goodwill and purchased intangibles with indefinite lives are not amortized but will be
reviewed for impairment annually, or more frequently, if impairment indicators arise. Purchased intangibles with definite
lives are amortized over their respective useful lives.
European Mail Order Businesses:
On October 18, 2002, Staples acquired the European mail order businesses of Guilbert SA, a subsidiary of Pinault
Printemps Redoute SA (the ‘‘European mail order acquisition’’). The aggregate cash purchase price of 806 million Euros
(approximately $788 million), net of cash acquired of $5.0 million and net of capital leases assumed of $12.9 million, was
funded by the proceeds from the September 2002 offering of senior notes, the October 2002 364-Day Term Loan
Agreement (see Note F) and cash from operations. The results of the businesses acquired have been included in the
consolidated financial statements since that date. The acquired companies are reported as part of the European
Operations segment for segment reporting. The European mail order acquisition allowed Staples to enter the
fast-growing office supplies mail order market in France, Italy, Spain and Belgium and strengthens its mail order
presence in the United Kingdom. The acquired European mail order businesses consist of leading direct mail office
products sellers to small businesses in Europe operating under different brands in five countries: JPG and Bernard in
France and Belgium, Kalamazoo in Spain, Neat Ideas in the United Kingdom and MondOffice in Italy.
In connection with the European mail order acquisition, Staples recorded $852.4 million of goodwill and intangible
assets, which were assigned to our European Operations segment. Staples also recorded a provision for merger-related
and integration costs of approximately $11.8 million, which consisted primarily of transaction related costs. As of
February 1, 2003, approximately $9.1 million of payments have been charged against this accrual and $2.7 million
remains accrued for these merger-related and integration costs.
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