Staples 2015 Annual Report Download - page 106

APPENDIX B
B-3 STAPLES Form 10-K
STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (continued)
52 Weeks Ended
January 31, 2015
GAAP Inventory write-downs Restructuring charges Accelerated depreciation
Impairment
of goodwill
& long-lived
assets
Gain on
sale of
businesses,
net Non-GAAP
Gross profit $5,801 $26 $— $— $— $— $5,827
Gross profit rate 25.8% 25.9%
Operating income 310 26 171 9 470 (27) 958
Interest and other expense, net 42 42
Income from continuing
operations before income taxes 268 916
Income taxes 133 133
Adjustments — 160
Adjusted income taxes 133 293
Income from continuing
operations $135 $623
Effective tax rate 49.8% 32.0%
Diluted earnings per
common share $0.21 $0.96
52 Weeks Ended
February 1, 2014
GAAP Restructuring charges Non-GAAP
Operating income $1,177 $64 $1,241
Interest and other expense, net (114) — (114)
Income from continuing operations before income taxes 1,063 64 1,127
Income tax expense 356 10 366
Income from continuing operations $707 $54 $761
Effective tax rate 33.5% 32.5%
Diluted earnings per common share from continuing operations $1.07 $1.16
CONSOLIDATED PERFORMANCE
2015 Compared with 2014
Sales: Sales for 2015 were $21.1 billion, a decrease of 6.4%
from 2014. The sales decline was primarily driven by a 4%
unfavorable impact from changes in foreign exchange rates
and approximately a 2% negative impact associated with
store closures. Comparable sales in North America Stores &
Online declined 3% while sales in North American Commercial
increased 1% (increase of 2% in local currency). Declines in
computers and mobility, business machines and technology
accessories, and ink and toner were partly offset by growth
in facilities supplies, copy and print, breakroom supplies
and furniture.
Gross Profit: Gross profit as a percentage of sales was 26.2%
for 2015 compared to 25.8% for 2014. The increase was
primarily driven by improved product margin rates in North
American Stores & Online. The increase also reflects the
impact of $26 million of inventory write-downs in 2014 related
to the rationalization of our SKU assortment and the closure of
North American retail stores, which compares with a $1 million
write-down in 2015. The favorable impact of these factors was
partially offset by the impact of increased logistics expenses
for North America Stores & Online.
Selling, General and Administrative Expenses: Selling,
general and administrative expenses in 2015 decreased by
$216 million or 4.5% from 2014. The decrease was driven
by the favorable impact from changes in foreign exchange
rates as well as a reduction in compensation, largely due to
headcount reductions associated with stores closures as well
as reduced incentive compensation.
Selling, general and administrative expenses in 2015 includes
$53 million in legal and professional services costs associated
with our planned acquisition of Office Depot and $18 million
of costs associated with the previously announced PNI data
security incident (see Note I - Commitments and Contingencies