Staples 2003 Annual Report Download - page 77

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STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE B Business Acquisitions and Dispositions (Continued)
goodwill of approximately $158 million. During fiscal year 2000, the Company reviewed the recoverability of the carrying
value of this goodwill using expected future undiscounted cash flows and determined that the goodwill was impaired. As
a result of this review, an impairment charge, as discussed in Note C, was recorded during fiscal year 2000. On April 3,
2001, Staples sold Staples Communications to Platinum Equity L.L.C. The sale of Staples Communications includes the
subsidiary’s three primary businesses which provide hardware sales and services, long distance services and local network
services to small and medium sized business customers.
NOTE C Asset Impairment and Other Charges
During fiscal year 2001, Staples committed to a plan related to workforce reductions and distribution and call center
closures. As a result, the Company recognized charges totaling $10.7 million, comprised of $6.8 million of severance
related to the elimination of positions in Staples’ corporate offices and certain call centers and distribution centers and
$3.9 million for net lease obligations and asset write-offs related to the closure of a distribution center, two call centers
and a delivery office in the Company’s North American Delivery segment. The following is a rollforward of the charges
utilized during fiscal year 2002 (in thousands):
Balance at Charges Balance at
February 2, Utilized in February 1,
2002 2002 2003
Severance ..................................................... $ 6,798 $(6,455) $ 343
Lease terminations .............................................. 1,793 (192) 1,601
$ 8,591 $(6,647) $1,944
Asset write-offs ................................................. 2,126
$10,717
During the fourth quarter of fiscal year 2000, Staples recognized impairment losses of $205.8 million. Staples
identified certain negative conditions at Staples Communications as indicators of asset impairment. In accordance with
Company policy at that time, management assessed the recoverability of the long-lived assets of Staples Communications
by using expected future undiscounted cash flows to value the assets’ carrying value. Based on this assessment, Staples
recognized impairment losses of $156.3 million related to the goodwill and fixed assets of Staples Communications. Also
included in this charge is the write-down of investment values in various e-commerce companies of $49.5 million due to a
decline in fair value that is other than temporary. These write-downs were a result of significant reductions in valuations
for Internet stocks, discontinued operations at certain companies and significant devaluation of certain companies due to
cash constraints and failed business models.
C-14