Staples 2012 Annual Report Download - page 104

B-8
STAPLES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
North American Commercial
2012 Compared with 2011
Sales increased 1.7% for 2012 compared to 2011. Sales for 2012 include $158.9 million of revenue related to the additional
week in 2012. Excluding the additional week, sales for 2012 decreased by 0.3% from 2011. This decrease was primarily driven
by the decision late in 2011 to not renew two large customer contracts that did not deliver adequate returns and, to a lesser extent,
a decline in sales of core supplies, partially offset by increased sales of facilities and breakroom supplies, furniture and copy and
print services.
Business unit income as a percentage of sales increased to 8.4% for 2012 from 8.3% for 2011, primarily reflecting reduced
incentive compensation as well as lower marketing costs and increased supply chain efficiencies. This increase was partially offset
by inflationary pressures on core office supplies and increased costs associated with legal settlements.
2011 Compared with 2010
Sales increased 1.8% for 2011 compared to 2010. This increase was driven by organic sales growth, our fourth quarter
2010 Print South acquisition and, to a lesser extent, the positive impact of foreign exchange rates of $17.9 million. Our sales growth
was favorably impacted by an increase in facilities and breakroom supplies, promotional products and technology products. This
growth was partially offset by softness in paper and copier and fax cartridges.
Business unit income as a percentage of sales increased to 8.3% for 2011 from 8.2% for 2010, primarily driven by improved
profitability in our facilities and breakroom and promotional products businesses in the U.S. and in our contract business in Canada,
as well as overall reduced incentive compensation. This was partially offset by investments in labor to support growth initiatives,
unfavorable product margins and higher fuel costs.
International Operations
2012 Compared with 2011
Sales decreased 10.2% for 2012 compared to 2011. Sales for 2012 include $80.8 million of revenue related to the additional
week in 2012. Excluding the 53rd week, sales decreased 11.8% for 2012 compared to 2011. This decrease was driven by declines
in our Australian and European businesses and the negative impact of foreign exchange rates of $180.6 million. Broad-based
weakness in the sales environment drove an 8% decrease in comparable store sales in Europe.
Business unit (loss) income as a percentage of sales decreased to (0.5)% for 2012 from 2.1% for 2011. The decrease was
primarily driven by deleverage of fixed costs on lower sales, $20.0 million of accelerated tradename amortization, declines in
European product margins resulting from adverse product and customer mix, an increase in investments to drive sales, and an
increase in severance-related costs across our International businesses. These factors were partially offset by savings related to
headcount reductions in our European and Australian businesses.
In 2012, International Operations recorded the following charges which are excluded from the definition of business
unit income:
 Goodwill impairment charges of $303.3 million and $468.1 million related to our Europe Retail and Europe Catalog
reporting units, respectively, primarily due to a strategic decision to reallocate resources to other Staples business units
with greater growth potential, which reflects the effects of industry trends and ongoing economic weakness in Europe.
 Long-lived asset impairment charges of $29.6 million related to the write-down of fixed assets in connection with the
closure of 46 retail stores and the consolidation of certain sub-scale delivery businesses in Europe, and $4.8 million of
charges related to leasehold improvement assets held for use in ongoing operations by our Europe Retail reporting unit
that we determined were not fully recoverable from future cash flows projected to be generated by the related stores.
 Restructuring charges of $177.1 million for contractual lease obligations, severance and other associated costs
primarily related to the closure of the retail stores and the consolidation of the sub-scale delivery businesses in Europe.
2011 Compared with 2010
Sales increased 4.0% for 2011 compared to 2010. This increase was driven by the positive impact of foreign exchange
rates of $303.0 million and, to a lesser extent, a full year of sales from our second quarter 2010 acquisition of Oy Lindell AB, an
office products distributor based in Finland. These increases were partially offset by a 9% decrease in comparable store sales in
Europe and decreased sales in our Australian business.