Staples 2004 Annual Report Download - page 98

Download and view the complete annual report

Please find page 98 of the 2004 Staples annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 129

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE A Summary of Significant Accounting Policies
Nature of Operations: Staples, Inc. and subsidiaries (‘‘Staples’’ or ‘‘the Company’’) pioneered the office products
superstore concept, and Staples is a leading office products company. Staples operates three business segments: North
American Retail, North American Delivery and International Operations, formerly referred to as European Operations.
The Company’s North American Retail segment consists of the U.S. and Canadian business units that operate office
products stores. The North American Delivery segment consists of the U.S. and Canadian business units that sell and
deliver office products and services directly to customers, and includes Staples Business Delivery, Quill and the
Company’s Contract operations (Staples National Advantage and Staples Business Advantage). The International
Operations segment consists of operating units that operate office products stores and that sell and deliver office
products and services directly to customers in 18 countries in Europe and South America.
Basis of Presentation: The consolidated financial statements include the accounts of Staples, Inc. and its wholly
owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Fiscal Year: Staples’ fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. Fiscal year 2004,
2003 and 2002 consisted of the 52 weeks ended January 29, 2005, January 31, 2004 and February 1, 2003, respectively.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting
principles requires management of Staples to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents: Staples considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Short-term Investments: Short-term investments, which primarily consist of market auction rate preferred stock and
debt securities, are classified as ‘‘available for sale’’ under the provisions of Statement of Financial Accounting Standards
(‘‘SFAS’’) No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities.’’ Accordingly, the short-term
investments are reported at fair value, with any related unrealized gains and losses included as a separate component of
stockholders’ equity, net of applicable taxes. Realized gains and losses and interest and dividends are included in interest
income or interest expense, as appropriate. At January 29, 2005, the available for sale investments had contractual
maturities ranging from February 2005 through July 2042.
Receivables: Receivables include trade receivables financed under regular commercial credit terms and other non-
trade receivables. Gross trade receivables were $380.5 million at January 29, 2005 and $319.3 million at January 31, 2004.
Concentrations of credit risk with respect to trade receivables are limited due to Staples’ large number of customers and
their dispersion across many industries and geographic regions.
An allowance for doubtful accounts has been recorded to reduce trade receivables to an amount expected to be
collectible from customers based on specific evidence as well as historical trends. The allowance recorded at January 29,
2005 and January 31, 2004 was approximately $16.5 million and $14.0 million, respectively.
Other non-trade receivables were $121.1 million at January 29, 2005 and $105.0 million at January 31, 2004 and
consisted primarily of amounts due from vendors under various incentive and promotional programs.
In fiscal year 2000, Staples entered into a receivables securitization agreement, which was terminated on Decem-
ber 29, 2003, under which it sold participating interests in non-interest bearing accounts receivable of Quill and Staples’
Contract business at a discount to an unrelated third party financier. The transfers qualified for sales treatment under
SFAS No. 140 ‘‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.’’ As a
result of renegotiating the termination provision in this agreement, on December 29, 2003 the third party financier sold
its interest in the outstanding receivables, which represented $25.0 million, back to the Company.
Merchandise Inventories: Merchandise inventories are valued at the lower of weighted-average cost or market
value.
C-7