Staples 2005 Annual Report Download - page 98

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-13
NOTE C Business Acquisitions and Equity Method Investments
In accordance with SFAS No. 141 “Business Combinations,” Staples records acquisitions under the purchase
method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible
assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as
goodwill. Under SFAS No. 142, goodwill and purchased intangibles with indefinite lives are not amortized but are
reviewed for impairment annually, or more frequently, if impairment indicators arise. Purchased intangibles with definite
lives are amortized over their respective useful lives.
During 2004 and the first three quarters of 2005, the Company invested in a mail order and internet company in the
People’s Republic of China, Staples Commerce and Trade (“Staples China”). The Company has been the majority
shareholder of Staples China since the first quarter of 2005 and has included the operating results of Staples China in the
consolidated financial statements since then. The results of Staples China are reported as part of its International
Operations segment for segment reporting.
As of January 28, 2006, the Company recorded $77.5 million of goodwill and $22.5 million of intangible assets for all
acquisitions and investments completed in 2005. None of the goodwill recorded is expected to be deductible for tax
purposes. The $22.5 million recorded for intangible assets was assigned to trade names and customer related intangible
assets that will be amortized over a weighted average life of 13.0 years.
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 $17.2 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 28, 2006, approximately $5.5 million has been
charged against this accrual and $11.7 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 the Company’s International Operations segment for segment reporting. As of
January 28, 2006, the Company recorded $107.6 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.