Staples 2006 Annual Report Download - page 98

STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
B-4
Income Taxes: Our effective tax rate was 33.8% for fiscal 2006 and 36.5% for fiscal 2005 and fiscal 2004. Our
effective tax rate for 2006 reflects an adjustment for a change in estimate regarding certain tax uncertainties as well as
the favorable resolution of certain foreign and domestic tax matters, which were recorded as discrete items in the third
quarter. Our effective tax rate excluding the impact of discrete items was 36.0%. The decrease in our effective tax rate,
excluding the effect of the discrete items, resulted from changes in the geographic mix of our earnings.
Segment Performance:
The following tables provide a summary of our sales and business unit income by reportable segment and store
activity for the last three fiscal years (see reconciliation of business unit income to income before income taxes and
minority interest in Note K to the Consolidated Financial Statements):
Sales (Amounts in thousands)
2006
Increase From
2005
Increase From
2006 2005 2004 Prior Year Prior Year
North American Retail................. $ 9,938,885 $ 9,037,513 $ 8,324,299 10.0 % 8.6%
North American Delivery............... 5,863,094 4,945,661 4,196,882 18.6 % 17.8%
International Operations................ 2,358,810 2,095,678 1,927,197 12.6 % 8.7%
Consolidated Staples................. $ 18,160,789 $ 16,078,852 $ 14,448,378 12.9 % 11.3%
Business Unit Income (Amounts in thousands)
2006
% of
2005
% of
2004
% of
2006 2005 2004 Sales Sales Sales
North American Retail..................... $ 956,565 $ 843,140 $ 706,419 9.6 % 9.3% 8.5%
North American Delivery................... 624,729 507,131 396,065 10.7 % 10.3% 9.4%
International Operations.................... 50,511 13,616 69,253 2.1 % 0.6% 3.6%
Total..................................... $ 1,631,805 $ 1,363,887 $ 1,171,737 9.0 % 8.5% 8.1%
Equity compensation....................... (168,736) (129,806) (114,861)
Consolidated Staples..................... 1,463,069 $ 1,234,081 $ 1,056,876
Stores
Open at
Beginning Stores Net Stores Stores
Stores
Open at
End
Store Activity of Period Opened Acquired Closed of Period
2004 North American Retail................................. 1,358 77 — 9 1,426
2004 International Operations................................ 201 11 49 7 254
2004 Total................................................. 1,559 88 49 16 1,680
2005 North American Retail................................. 1,426 99 — 3 1,522
2005 International Operations................................ 254 8 — 4 258
2005 Total................................................. 1,680 107 — 7 1,780
2006 North American Retail................................. 1,522 99 — 1 1,620
2006 International Operations................................ 258 6 — — 264
2006 Total................................................. 1,780 105 — 1 1,884
North American Retail: Sales increased 10.0% in fiscal 2006 and 8.6% in fiscal 2005. Sales for 2006 include $210.1
million related to the additional week in 2006. Excluding the additional week in fiscal 2006, sales increased 7.6%.
Comparable store sales in North America, excluding the additional week in 2006, increased 3% in both 2006 and 2005.
Our sales growth in both fiscal 2006 and 2005 primarily reflects non-comparable store sales for the net stores opened
during the fiscal year as well as the increase in comparable store sales. The increase in sales also includes the positive
impact of the Canadian exchange rate to the U.S. dollar of $111 million in 2006 and $120 million in 2005. Our
comparable sales growth in 2006 reflects positive performance in office supplies, portable computers, our copy and print
business, ink and toner and computer peripherals. Our comparable sales growth in fiscal 2005 reflects positive