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B-5
STAPLES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Discontinued Operations: In conjunction with the strategic plan we announced in the third quarter of 2012, we are
pursuing the sale of our European Printing Systems Division business ("PSD"), a former component of our International Operations
segment which operates in five countries in Europe and focuses on the sale, rental and servicing of printing machinery. Loss from
discontinued operations, net of tax, was $50.0 million in 2012 compared with $3.6 million in 2011. The loss in 2012 includes
$20.1 million of restructuring charges related to severance and benefit costs associated with a plan to restructure PSD's operations
in connection with our ongoing effort to sell this business, as well as $4.5 million of incremental tax expense related to the planned
sale.
2011 Compared with 2010
Sales: Sales for 2011 were $24.66 billion, an increase of 2.2% from 2010. Our sales growth for 2011 reflects the positive
impact of foreign exchange rates of $401.9 million, and, to a lesser extent, growth in our contract and online businesses in North
America, partially offset by a decrease in comparable store sales in our European retail businesses.
Gross Profit: Gross profit as a percentage of sales was unchanged at 27.1% for 2011 and 2010. The favorable impact
of improved product margins in our North America Stores & Online segment was offset by the impact of higher fuel costs in our
delivery businesses around the world.
Selling, General and Administrative Expenses: Selling, general and administrative expenses were 20.2% of sales for
2011 compared to 20.0% for 2010. This increase reflects investments in labor to support growth initiatives and deleverage in
international fixed costs, partially offset by reduced incentive compensation and lower depreciation.
Integration and Restructuring Costs: There were no integration and restructuring costs for 2011 compared to $57.8
million for 2010. Integration and restructuring costs for 2010 included $37.6 million of consulting and other costs, $10.0 million
for severance and retention, and $10.2 million for facility closures and other asset write-downs.
Amortization of Intangibles: Amortization of intangibles was $64.9 million for 2011 compared to $61.7 million for 2010,
primarily reflecting the amortization of Corporate Express related tradenames, customer relationships and noncompetition
agreements. Amortization of intangibles resulting from our acquisition of Corporate Express was $53.1 million for 2011 compared
to $50.1 million for 2010.
Interest Income: Interest income remained unchanged at $7.4 million for 2011 and 2010. The unfavorable impact from
a decrease in our worldwide weighted-average cash balances and a slight decrease in U.S. interest rates was offset by the impact
of an increase in foreign interest rates.
Interest Expense: Interest expense decreased to $173.4 million for 2011 compared to $214.4 million for 2010. This
decrease was primarily due to a reduction in debt balances resulting from the repayment of the $500 million, 7.75% Notes (the
“April 2011 Notes”) on April 1, 2011, the repayment or refinancing of certain debt and liquidity facilities and the positive impact
of our interest rate swap agreements, slightly offset by an increase in foreign borrowings. We used interest rate swap agreements
to convert a portion of our fixed rate debt obligations into variable rate obligations. In September 2011, we terminated all of our
existing interest rate swap agreements. The interest rate swap agreements that were terminated reduced interest expense by $26.3
million for 2011 compared to $25.2 million for 2010.
Other Income (Expense), Net: Other expense was $3.1 million for 2011 compared to $9.8 million for 2010. The expense
in 2011 primarily reflects equity method losses related to our joint venture arrangement in India, partially offset by foreign exchange
gains, while the amount in 2010 primarily related to foreign exchange losses.