Staples 2004 Annual Report Download - page 104

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STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
NOTE C Business Acquisitions and Equity Method Investments (Continued)
2004 Acquisitions:
On November 29, 2004, the Company acquired Officenet SA, a mail order and Internet company operating in
Argentina and Brazil, for $23.2 million. This acquisition represents Staples’ entry into South America.
In September 2004, the Company acquired Pressel Versand International GmbH, a mail order company based in
Austria and operating in nine European countries, for 25.0 million Euros (approximately $30.5 million) and Malling
Beck A/S, a mail order company based in Denmark, for $4.0 million. These acquisitions expand Staples’ delivery business
into Eastern Europe and Denmark and strengthen the Company’s business in western Europe through access to new
customers and product categories.
On August 4, 2004, the Company acquired the United Kingdom office products company Globus Office World plc
(‘‘Office World’’) for 31.3 million British Pounds Sterling (approximately $57.0 million), strengthening Staples’ retail
presence in the United Kingdom. In connection with this acquisition, Staples accrued approximately $28.3 million for
merger-related and integration costs, reflecting costs associated with planned Office World store closures, a distribution
center closure, severance and transaction related costs. As of January 29, 2005, approximately $3.9 million has been
charged against this accrual and $24.4 million remains accrued for these merger-related and integration costs.
The results of the businesses acquired have been included in the consolidated financial statements since the dates of
acquisition and are reported as part of our International Operations segment for segment reporting. As of January 29,
2005, the Company recorded $119.5 million of goodwill and $16.2 million of intangible assets for all acquisitions
completed in 2004. $3.5 million of the goodwill recorded is expected to be deductible for tax purposes. Of the
$16.2 million recorded for intangible assets, $8.4 million was assigned to a trade name that has an indefinite life and will
not be subject to amortization, and $7.8 million was assigned to trade names and customer-related intangible assets that
will be amortized over a weighted average life of 4.7 years.
2004 Investment:
On October 22, 2004, the Company invested approximately $9.7 million in OA365 (China), a mail order and
Internet company in the People’s Republic of China, and in January 2005, the Company invested an additional
$19.6 million. This investment has been accounted for as an equity method investment.
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 as of the acquisition date), 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 E) 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 International 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
strengthened 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 $845.2 million of goodwill and intangible
assets, net of fiscal 2003 purchase price adjustments, which were assigned to our International Operations segment. None
of the goodwill recorded is expected to be deductible for tax purposes. Staples also accrued for merger-related and
integration costs of approximately $11.8 million, which consisted primarily of transaction related costs. As of January 29,
2005, approximately $11.3 million has been charged against this accrual and $0.5 million remains accrued for these
merger-related and integration costs.
C-13