Staples 2014 Annual Report Download - page 131

APPENDIX B
STAPLES B-13
STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Sources of Liquidity
To cover seasonal fluctuations in cash flows and to support
our various initiatives, we use cash generated from operations
and borrowings available under various credit facilities and a
commercial paper program. As of January 31, 2015, we had
$1.69 billion in total cash and funds available through credit
agreements, which consisted of $1.06 billion of available credit
and $627.2 million of cash and cash equivalents.
Of the $627.2 million in cash and cash equivalents,
$326.2 million is held in jurisdictions outside the United
States. During the first quarter of 2014, we repatriated
$127.3 million of cash held by one of our foreign subsidiaries.
As a result, during the first quarter of 2014 we recorded
income tax expense of $11.2 million related to taxable income
generated in the U.S. stemming from this repatriation. For the
undistributed earnings that remain in our foreign subsidiaries
after this repatriation that have not been previously taxed in
the U.S., our intention remains to indefinitely reinvest those
funds outside of the U.S., and accordingly deferred taxes have
not been provided for these funds. The determination of the
amount of the unrecognized deferred tax liability related to the
remaining undistributed earnings is not practicable because of
the complexities associated with its hypothetical calculation.
On May 31, 2013, we entered into a credit agreement (the
“May 2018 Revolving Credit Facility”) with Bank of America
N.A. and other lending institutions that 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. We also have a commercial paper program
(“Commercial Paper Program”) that allows us to issue up to
$1.0 billion of unsecured commercial paper notes from time
to time. The May 2018 Revolving Credit Facility serves as a
back-up to the Commercial Paper Program. See Note F -
Debt and Credit Agreements in the Notes to the Consolidated
Financial Statements for additional information related to these
agreements. We did not borrow under the May 2018 Revolving
Credit Facility during 2014, and no amounts were outstanding
at January 31, 2015. The maximum amount outstanding under
the Commercial Paper Program during 2014 was $150.0
million. As of January 31, 2015, no Commercial Paper Notes
were outstanding. We also have various other lines of credit
under which we may borrow a maximum of $138.9 million.
During 2014, we entered into $39.8 million of new capital lease
obligations. We did not incur any new capital lease obligations
in 2013.
Taking into consideration the amount of cash expected to be
required for our planned acquisition of Office Depot and the
financing commitments from Bank of America Merrill Lynch and
Barclays, we expect that our cash generated from operations,
together with our current cash, funds available under our
existing credit agreements and other alternative sources
of financing, will be sufficient to fund our planned capital
expenditures, obligations associated with our restructuring
and transformation initiatives, and other operating cash needs
for at least the next twelve months.
Uses of Capital
As a result of our proposed acquisition of Office Depot,
we have temporarily suspended our share repurchase
program to focus on building up cash reserves ahead of
the acquisition. Under the repurchase plan approved by
our Board of Directors in 2011 (the “2011 Repurchase
Plan”), we are authorized to repurchase up to $1.5 billion of
common stock in both open market and privately negotiated
transactions. The 2011 Repurchase Plan has no expiration
date and may be suspended or discontinued at any time. As
of January 31, 2015, we have spent a total of $1.13 billion to
repurchase 83.4 million shares under the 2011 Repurchase
Plan, and therefore, the remaining repurchase authorization
is $373.3 million. While we do not plan to resume share
repurchases in 2015, over the long-term we expect to continue
buying back stock.
We may use capital to engage in strategic acquisitions such as
the proposed acquisition of Office Depot. We consider many
types of acquisitions for their strategic and other benefits.
For example, on July 11, 2014 we completed the acquisition
of PNI Digital Media Inc. (“PNI”) for a net $67.9 million. PNI
provides a software platform that enables retailers to sell
personalized products such as photo prints, photo books,
calendars, business cards, documents, wedding invitations,
stationery and more. We plan to invest in PNI so that we can
leverage its platform to grow our copy and print businesses, as
well as to help PNI grow its existing customer base.
We are committed to maintaining our current quarterly
dividend of $0.12 per share. We paid quarterly dividends
of $0.12 per share during 2014 and 2013, and quarterly
dividends of $0.11 per share in 2012. While it is our intention to
continue to pay quarterly cash dividends for 2015 and beyond,
any decision to pay future cash dividends will be made by our
Board of Directors and will depend upon our earnings, financial
condition and other factors.
We expect a modest increase in capital spending in 2015
compared with 2014, driven by investments in our online
businesses and other strategic initiatives, as well as investments
aimed at improving the productivity of existing stores. We
expect the source of funds for our capital expenditures to
come from operating cash flows.