Staples 2014 Annual Report Download - page 145

APPENDIX C
STAPLES C-13
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The Company’s estimates of future charges could change as
the Company’s plans evolve and become finalized.
See Note C - Goodwill and Long-Lived Assets for additional
information related to the $36.9 million of fixed asset
impairment charges recorded in 2014. The Company also
recorded accelerated depreciation of $9.4 million in 2014,
primarily related to the planned closure of facilities supporting
the Company’s North American delivery operations.
During 2014, the Company recognized inventory write-downs
of $26.3 million primarily related to the rationalization of
certain SKU’s pursuant to the Company’s efforts to improve
efficiencies in its delivery fulfillment operations, as well as the
retail store closures. The inventory write-downs are included in
Cost of goods sold and occupancy costs in the consolidated
statement of comprehensive income.
The table below shows the restructuring charges recorded
during the 2014 and the related liability balances as of
January 31, 2015 for each major type of cost associated with
the 2014 Plan (in thousands):
2014 Plan
Employee
Related
Contractual
Obligations Other Total
Accrued restructuring balance as of February 1, 2014 $— $— $— $—
Charges 45,326 109,494 17,271 172,091
Cash payments (13,829) (24,455) (15,495) (53,779)
Foreign currency translations (828) (1,557) (9) (2,394)
Accrued restructuring balance as of January 31, 2015 $30,669 $83,482 $1,767 $115,918
Of the $172.1 million of restructuring charges incurred during
2014 related to the 2014 Plan, approximately $133.7 million
relates to North American Stores & Online, $23.6 million
relates to North American Commercial and $14.8 million
relates to International Operations. For the restructuring
liabilities associated with the 2014 Plan, $51.6 million of
contractual obligations costs are included within Other long-
term obligations and the remaining balances are included
within Accrued expenses and other current liabilities in the
Company’s consolidated balance sheet as of January 31,
2015. The Company expects that payments related to
employee related liabilities associated with the 2014 Plan will
be substantially completed by the end of fiscal 2015. The
Company anticipates that payments related to facility lease
obligations will be completed by fiscal year 2024.
The restructuring charges related to the 2014 Plan are
presented within Restructuring charges in the Company’s
consolidated statement of income. The table below shows
how the $172.1 million of restructuring charges would have
been allocated if the Company had recorded the expenses
within the functional departments of the restructured activities
(in thousands):
Fiscal Year Ended
January 31, 2015
Cost of goods sold and occupancy costs $123,709
Selling, general and administrative 48,382
Total $172,091
2013 Restructuring Plan
In the third quarter of 2013, the Company initiated a
restructuring plan (“the 2013 Plan”) to streamline its operations
and general and administrative functions. Pursuant to the 2013
Plan, certain distributed general and administrative functions
are being centralized and certain operational resources are
being consolidated, which the Company believes will decrease
costs, without negatively impacting customer service.
As a result of this plan, the Company recorded pre-tax
restructuring charges of $78.3 million, including $75.5 million
for employee severance costs related to the elimination of
positions throughout the organization and $2.8 million for other
associated costs. Of these amounts, $62.7 million relates
to the Company’s International Operations segment and
$15.6 million relates to the Company’s corporate headquarters
and North American operations. The Company expects to
substantially complete the actions required under the 2013
Plan by the end of fiscal 2015.
During 2014, the Company recorded adjustments to increase
the employee-related liability associated with the 2013 Plan by
$5.1 million and to decrease the liability for other associated costs
by $1.2 million. The adjustment to the employee-related liability
stemmed from changes in estimates regarding the number of
headcount reductions and the amount of severance benefits per
associate, primarily related to the closure of a distribution center
in Europe and the Company’s restructuring of its European
marketing and merchandising organizations. The adjustment to
the liability for other associated costs resulted from changes in
estimates related to professional fees incurred in connection with
the 2013 Plan. The Company does not expect to incur material
costs in future periods related to the 2013 Plan.