Staples 2012 Annual Report Download - page 110

B-14
STAPLES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
(3) The operating lease payments reported above do not include common area maintenance or real estate taxes, which are
expected to approximate 25% to 28% of the related operating lease payments. Utility costs related to leased facilities
have also been excluded from this table because the payments do not represent contractual obligations until the services
have been provided. Future annual minimum payments include restructuring related obligations as of February 2, 2013.
(4) Amounts include the contractual obligations of our discontinued operations.
(5) Many of our purchase commitments may be cancelled by us without advance notice or payment, and we have excluded
such commitments, along with intercompany commitments. Contracts that may be terminated by us without cause or
penalty but require advance notice for termination are valued on the basis of an estimate of what we would owe under
the contract upon providing notice of termination.
(6) The amounts represent the par value of our debt obligations. See Note H Debt and Credit Agreements in the Notes to
the Consolidated Financial Statements for information related to the carrying value of these obligations as of February 2,
2013.
(7) As of February 2, 2013, Staples had open standby letters of credit totaling $111.1 million.
(8) We plan to repay the remaining balance of the January 2014 Notes upon their maturity.
January 2018 Notes and January 2023 Notes: In January 2013, the Company issued $500 million aggregate principal
amount of 2.75% senior notes due January 2018 (the "January 2018 Notes") and $500 million aggregate principal amount of
4.375% senior notes due January 2023 (the "January 2023 Notes", or collectively “the Notes”), for total net proceeds after the
original issue discount and the underwriters' fees of approximately $991 million. The Notes were issued with original discounts
at 99.727% and 99.808%, respectively. The Notes rank equally with all our other unsecured and unsubordinated indebtedness.
The indenture governing the notes contains covenants that will limit the Company's ability to create certain liens and engage in
certain sale and leaseback transactions. The indenture does not limit the amount of debt that we or any of our subsidiaries may
incur. Interest on these Notes is payable in cash on a semi-annual basis on January 12 and July 12 of each year. The interest rate
payable on the Notes will be subject to adjustments from time to time if Moody's Investors Service, Inc. or Standard & Poor's
Ratings Services downgrades (or downgrades and subsequently upgrades) the rating assigned to the Notes. We may redeem the
Notes at any time at certain redemption prices specified in the indenture governing the Notes. Upon the occurrence of both (a) a
change of control of Staples, Inc., as defined in the indenture, and (b) a downgrade of the Notes below an investment grade rating
by both of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services within a specified period, we will be required
to make an offer to purchase the Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the
date of repurchase. The Notes are not guaranteed by any of our subsidiaries.
January 2014 Notes: On January 15, 2009, we issued $1.5 billion aggregate principal amount of notes due January 15,
2014 (the "January 2014 Notes"), with a fixed interest rate of 9.75% payable semi-annually on January 15 and July 15 of each
year commencing on July 15, 2009. From the sale of the January 2014 Notes, we received net proceeds, after the underwriting
discount and estimated fees and expenses of $1.49 billion. In March 2010, we entered into an interest rate swap agreement to turn
half of the January 2014 Notes into variable rate obligations, and the swap agreement was subsequently terminated in September
2011 (see Note J - Derivative Instruments and Hedging Activities of the Notes to the Consolidated Financial Statements). In
January 2013, the Company repurchased approximately $632.8 million of the unhedged portion of the January 2014 Notes pursuant
to a cash tender offer, leaving $867.2 million aggregate principal balance still outstanding. The January 2014 Notes are not
guaranteed by any of our subsidiaries (see Note H - Debt and Credit Agreements of the Notes to the Consolidated Financial
Statements).
October 2012 Notes: We repaid the $325 million, 7.375% notes due October 2012 (the “October 2012 Notes”) on their
maturity date of October 1, 2012. Upon repayment, we took the actions required under the applicable guarantee fall-away provisions
to cause Staples the Office Superstore, LLC, Staples the Office Superstore, East Inc., Staples Contract & Commercial, Inc. and
Staples the Office Superstore Limited Partnership (collectively, the “Guarantor Subsidiaries”) to be legally released from their
guarantees of debt related to the January 2014 Notes, the November 2014 Revolving Credit Facility (as defined below) and the
Commercial Paper Program (as defined below). The Guarantor Subsidiaries no longer guarantee repayment of our debt.
Revolving Credit Facility: We have a revolving credit agreement with Bank of America, N.A., as Administrative Agent
and other lending institutions named therein (the "November 2014 Revolving Credit Facility") which provides for a maximum
borrowing of $1.0 billion, and which pursuant to an accordion feature may be increased to $1.5 billion upon our request and the
agreement of the lenders participating in the increase. At the end of 2012, no borrowings were outstanding under the November
2014 Revolving Credit Facility.
Borrowings made pursuant to the November 2014 Revolving Credit Facility may be syndicated loans, swing line loans,
multicurrency loans, or letters of credit, the combined sum of which may not exceed the maximum borrowing amount. Borrowings
made pursuant to the November 2014 Revolving Credit Facility will bear interest at various interest rates, depending on the type
of borrowing, plus a percentage spread based on our credit rating and fixed charge coverage ratio. Under the November 2014