Staples 2014 Annual Report Download - page 124

APPENDIX B
B-6 STAPLES Form 10-K
STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The high effective tax rate for 2012 reflected the fact that
we incurred charges of $811.0 million for goodwill and long-
lived asset impairment, $207.0 million related to restructuring
activities and $26.2 million related to the termination of our
joint venture arrangement in India, the majority of which do not
result in a related income tax benefit. Our tax rate in 2012 also
reflects additional tax expense related to establishing valuation
allowances for previously recorded deferred tax assets as a
result of the closure of certain operations in our Europe Retail
and Europe Catalog reporting units. Excluding the impact of
these items, our effective tax rate was 32.5% in 2012.
See Note J Income Taxes in the Notes to the Consolidated
Financial Statements for a reconciliation of the federal
statutory tax rate to our effective tax rates in 2013 and 2012
and for information relating to the undistributed earnings of our
foreign subsidiaries.
Discontinued Operations: The results of discontinued
operations in 2013 and 2012 pertain to PSD. See
Note D Divestitures in the Notes to the Consolidated Financial
Statements for more information.
SEGMENT PERFORMANCE
We have three reportable segments: North American Stores
& Online, North American Commercial and International
Operations. North American Stores & Online sells products
and services to customers in the United States and Canada.
North American Commercial consists of the U.S. and Canadian
businesses that sell and deliver products and services
directly to businesses and includes Staples Advantage and
Quill.com. The International Operations segment consists of
businesses that sell and deliver products and services directly
to consumers and businesses in 23 countries in Europe,
Australia, South America and Asia.
Historically we have evaluated performance and allocated
resources based on profit or loss from operations before
goodwill and long-lived asset impairment charges,
restructuring costs, stock-based compensation, interest and
other expense, non-recurring items and the impact of changes
in accounting principles (“business unit income”). Beginning
in 2014, business unit income also excludes accelerated
depreciation and amortization and inventory write-downs
associated with restructuring activities. Segment information
for 2012 and 2013 has been restated to reflect this change.
Intersegment sales and transfers are recorded at our cost;
therefore, there is no intercompany profit or loss recognized
on these transactions.
See additional geographic information and a reconciliation
of total business unit income to income from continuing
operations before income taxes in Note P - Segment Reporting
in the Notes to the Consolidated Financial Statements.
Sales:
(Amounts in thousands) 2014 Increase
(Decrease)
From Prior Year
2013
Decrease
From Prior Year2014 2013 2012
North American Stores & Online $10,448,603 $11,103,160 $11,827,906 (5.9)% (6.1)%
North American Commercial 8,270,682 8,041,613 8,108,402 2.8% (0.8)%
International Operations 3,773,075 3,969,490 4,444,202 (4.9)% (10.7)%
Total segment sales $22,492,360 $23,114,263 $24,380,510 (2.7)% (5.2)%
(Amounts in thousands) 2014
% of Sales
2013
% of Sales
2012
% of SalesBusiness Unit Income: 2014 2013 2012
North American Stores & Online $473,068 $733,465 $987,025 4.5% 6.6% 8.3%
North American Commercial 570,831 603,972 680,011 6.9% 7.5% 8.4%
International Operations (21,181) (15,219) (1,097) (0.6)% (0.4)% —%
Business unit income $1,022,718 $1,322,218 $1,665,939 4.5% 5.7% 6.8%
Store Activity
Stores Open at
Beginning of Period Stores Opened Stores Closed
Stores Open at
End of Period
2013 North American Stores & Online 1,886 2 42 1,846
2013 International Operations 329 1 7 323
2013 Total 2,215 3 49 2,169
2014 North American Stores & Online 1,846 2 169 1,679
2014 International Operations 323 9 28 304
2014 Total 2,169 11 197 1,983