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30 years ago
we created an industry.
Now we’re
transforming it.
2015 Annual Report | Notice of Annual Meeting and Proxy Statement

Table of contents

  • Page 1
    2015 Annual Report | Notice of Annual Meeting and Proxy Statement 30 years ago we created an industry. Now we're transforming it.

  • Page 2
    ... business services and easy ways to shop, all backed with a lowest price guarantee. Staples offers businesses the convenience to shop and buy how and when they want - in store, online, via mobile or through social apps. Customers can either buy online and pick up in store or ship for free from...

  • Page 3
    ... opportunity to grow our share in this highly fragmented market. In 2015, we grew copy and print sales in stores and online in North America. Our copy and print account managers continued to drive strong business customer acquisition. We drove traffic to our stores and websites through an expanded...

  • Page 4
    ...categories beyond office supplies. Second, we'll work to expand our mid-market business in Contract. Third, we'll improve customer traffic in stores and online. We have a solid plan to get back to earnings growth in 2016. This year, Staples will celebrate its 30th anniversary. As we celebrate our...

  • Page 5
    ..., printing and downloading at www.proxyvote.com. You may request a copy of the materials relating to our annual meeting, including the proxy statement, form of proxy card for our 2016 Annual Meeting and the 2015 Annual Report, at www.proxyvote.com, or by sending an email to our Investor Relations...

  • Page 6
    ... stock required for shareholders to call a special meeting from 25% to 15%. FOR each 19 director nominee FOR 59 www.proxyvote.com FOR 60 Toll-free Telephone Mail AGAINST 62 1-800-690-6903 Follow instructions on your voting form AGAINST 65 Our Annual Meeting Website Staples 2016 Annual...

  • Page 7
    ... and CEO, Staples, Inc. Robert Sulentic President and CEO, CBRE, Inc. Vijay Vishwanath Partner, Bain & Company Paul F. Walsh Senior Managing Director, Calera Capital 68 58 52 54 43 64 62 60 59 56 66 YES YES YES YES YES YES YES NO YES YES YES 2012 2016 nominee 2015 2016 nominee 2015 2016 nominee...

  • Page 8
    ... of the year with shareholders representing nearly half of our shares outstanding, with direct involvement from two of our directors in several of these meetings. Timeline of Selected Corporate Governance Events 2016 March > Executive Compensation - In response to shareholder feedback, changed the...

  • Page 9
    ...our brand, and support profitable and responsible growth. For more information, visit www.staples.com/responsibility. Community & Giving • Enabling associates globally to direct funds to organizations they care about through the 2 Million & Change grant program • Providing educational support in...

  • Page 10
    ... Public Accounting Firm's Fees SHAREHOLDER PROPOSALS Shareholder Proposal Regarding Accelerated Vesting of Equity Awards (Item 4 on the Proxy Card) Shareholder Proposal Regarding Special Shareholder Meetings (Item 5 on the Proxy Card) BENEFICIAL OWNERSHIP OF COMMON STOCK INFORMATION ABOUT THE ANNUAL...

  • Page 11
    ...INC. 500 Staples Drive Framingham, Massachusetts 01702 PROXY STATEMENT For the Annual Meeting of Shareholders on June 14, 2016 This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors ("Board") of Staples, Inc. ("we," "us," "Staples" or the "Company...

  • Page 12
    ... for the 2016 Annual Meeting of Shareholders. Our proxy access by-laws: • Permit shareholders (not to exceed a group of 25) holding at least three percent of our outstanding shares continuously for three years to nominate up to two individuals or 20 percent of the directors serving, whichever...

  • Page 13
    ... of our independent registered public accounting firm or was a partner or employee of such firm who worked on our audit during the past three years. • None of our executive officers is on the compensation committee of the board of directors of a company that has employed any of the independent...

  • Page 14
    ... our directors or executive officers. In an effort to provide greater transparency to our shareholders, we provide the following additional information about sales of office supply products or related services, such as copying, branding of promotional products or technology services, to companies or...

  • Page 15
    ... each meeting. • Coordinates the annual performance review of the CEO. • Ensures availability for consultation and direct communication, if requested by a major shareholder. • Authority to retain independent advisors on behalf of the Board. • Assists the Nominating and Corporate Governance...

  • Page 16
    ...reviews committee meeting materials with management in advance of each Board committee meeting. Each of our standing Board committees operates under a written charter adopted by our Board, a copy of which is available at www.staples.com in the Corporate Governance section of the Investor Information...

  • Page 17
    ...person plans and other employee benefit plans (other than ERISA-governed broad-based benefit plans where administration is otherwise provided in the governing plan document). âœ" Oversees risks associated with the company's compensation policies and practices and evaluates the compensation program...

  • Page 18
    ... Board in connection with our acquisition of Office Depot. The Nominating and Corporate Governance Committee also focused heavily on investor feedback and developing responsive strategies to benefit all of the shareholders, including with respect to proxy access. 14 STAPLES Notice of Annual Meeting...

  • Page 19
    CORPORATE GOVERNANCE Finance Committee "Our prudent approach to managing our capital structure has enabled us to execute our reinvention strategy and put us in a stronger position to create long-term value for our shareholders." Rowland T. Moriarty Chairperson Other Committee Members Kunal S. ...

  • Page 20
    ... the Board and Board committee approved risk management strategy and for developing policies, controls, processes and procedures to identify and manage risks. Senior members of management make up our Enterprise Risk Committee, which meets at least quarterly to coordinate information sharing and...

  • Page 21
    ... each year, our full Board reviews the Company's near- and long-term strategies in detail. The meeting is typically held off-site and includes presentations by and discussions with senior management regarding strategic initiatives. The Board remains involved in strategic planning throughout the year...

  • Page 22
    ... to availability, as such representative of the independent directors. Shareholders who wish to send communications on any topic to our Board should address such communications to The Board of Directors, c/o Corporate Secretary, Staples, Inc., 500 Staples Drive, Framingham, Massachusetts 01702...

  • Page 23
    ... Expertise Corporate Governance Consumer and Business Sales E-Commerce / Marketing International Operations IT Management & Security Technology Leadership and Management M&A / Integration Real Estate Retail Risk Oversight Strategy Supply Chain / Logistics 7 3 8 7 8 4 9 6 3 5 5 10 4 5 to 10 years...

  • Page 24
    ... Massachusetts General Hospital. Age: 58 Director Since: New nominee Current Staples Board Committees - Not applicable Skills and Experience - Audit, Financial Expertise - Business Sales - IT Management and Security - Leadership and Management - Real Estate - Strategy Public Company Boards Current...

  • Page 25
    ...THE PROXY CARD) Age: 52 Director Since: 2015 Current Staples Board Committees - Audit Skills and Experience - Consumer and Business Sales - Ecommerce/Marketing - International Operations - IT Management and Security - Strategy Education - École Nationale Supérieure des Télécommunications (ENST...

  • Page 26
    ... Director Since: New nominee Current Staples Board Committees - Not applicable Skills and Experience - Audit, Financial Expertise - Consumer and Business Sales - International Operations - Leadership and Management - M&A/Integration - Retail - Strategy - Supply Chain/Logistics Public Company Boards...

  • Page 27
    ... - Executive Skills and Experience - Audit, Financial Expertise - Consumer and Business Sales - Corporate Governance - Ecommerce/Marketing - International Operations - Leadership and Management - M&A/Integration - Retail - Strategy - Supply Chain/Logistics Other Public Company Boards Current - The...

  • Page 28
    ...: 56 Director Since: 2007 Current Staples Board Committees - Executive, Nominating and Corporate Governance Skills and Experience - Consumer and Business Sales - Corporate Governance - E-commerce/Marketing - International Operations - M&A/Integration - Strategy Public Company Boards Prior - Yankee...

  • Page 29
    ... OF DIRECTORS (ITEM 1 ON THE PROXY CARD) Age: 66 Director Since: 1990 Current Staples Board Committees - Compensation, Finance Skills and Experience - Audit, Financial Expertise - Consumer and Business Sales - E-commerce/Marketing - International Operations - IT Management and Security - Leadership...

  • Page 30
    ...the fixed value by the closing price of our common stock on the date of grant. Upon a change-in-control of Staples or upon a director leaving our Board after reaching the age of 72, all of such director's restricted stock units would fully vest and be paid out. 2016 COMPENSATION In March 2016, each...

  • Page 31
    ...during our 2015 fiscal year. The aggregate fair value of these awards is based on the market price of our common stock on the date of grant. Fractional shares are rounded up to the nearest whole share. Awards made during 2015 represent Annual grant of restricted stock units to each director; For Mr...

  • Page 32
    ... outstanding stock options and restricted stock units held by our directors as of January 30, 2016, the end of our 2015 fiscal year. Total Options and Outstanding Restricted Stock Units as of 2015 FYE (1)(2)(3) Name Grant Date Award Type Number of Shares Awarded in FY 2015 Grant Date Fair Value...

  • Page 33
    ...) offers easy-to-shop stores and websites. • Our North American Commercial segment (37% of total company sales) consists of the U.S. and Canadian businesses that sell and deliver products and services directly to businesses, including Staples Business Advantage and Quill.com. • Our International...

  • Page 34
    ...company sales and non-GAAP earnings per share. Our closing stock price on the first and last day of fiscal 2015 was $17.05 and $8.92, respectively and, on April 18, 2016, the record date for the 2016 Annual Meeting, was $11.12. Total Shareholder Return Staples S&P Retail Index S&P 500 1-year 3-year...

  • Page 35
    ...on Staples corporate governance and compensation practices and invited them to engage in a governance dialogue with management. We ultimately held discussions with institutional shareholders representing nearly half of our shares outstanding. The Chair of our Compensation Committee and the Chair of...

  • Page 36
    ... cost and improve efficiency in our supply chain and retail store network. We also replaced the Beyond Office Supplies Sales Growth metric with Total Sales to better align with our 2016 business objectives of growing mid-market sales in our delivery business, and driving traffic in stores and online...

  • Page 37
    ...alignment of pay and performance • 89% of CEO compensation in 2015 was "at risk" • Both short- and long-term programs include performance goals • Rigorous, objective financial metrics on annual and performancebased long-term awards that are closely tied to business strategy • 3-year relative...

  • Page 38
    ...% Earnings Per Share • 25% Total Gross Margin Dollars • 25% Beyond Office Supplies Sales Growth • 50% Return on Net Asset (RONA) % • 50% Sales Growth % • +/- 25% based on 3-year Relative Total Shareholder Return (TSR) • Broad-based plans and limited executive perquisites Both our annual...

  • Page 39
    ... under the plan in relation to Staples' pay-for-performance philosophy. In light of Staples' performance in 2015, particularly with respect to Total Shareholder Return, Mr. Sargent elected to forego any annual cash incentive payment for 2015. Annual Cash Incentive Award Target Value $ Actual Value...

  • Page 40
    ...our CEO over the 2013-2015 fiscal years was $36,237,408. Actual compensation (salary and incentives) earned and paid over the same period, excluding any payments in connection with awards granted prior to 2013, was $10,447,202 or 28.8% of target, including the 2013-2015 performance share payout paid...

  • Page 41
    ... successful and tenured management team • RONA %, Sales Growth % Base Salary Base salaries are reviewed and established annually, upon promotion, or following a change in job responsibilities, based on market data, internal pay equity and each executive's level of responsibility, experience...

  • Page 42
    ... as sales, net of direct product costs (including the impact of vendor rebates or other promotional monies), reserves for returns and allowances, and charges/credits for obsolescence, shrink, and other margin additives. The target goal was $8,328.6 million, in line with the Company's 2015 financial...

  • Page 43
    ...like office supplies, ink, toner, paper and business technology, as well as the negative impact to sales from the company's ongoing store closure program. The tables below set forth for each NEO the target award for the three-year performance period 2013-2015, actual shares earned, and the level of...

  • Page 44
    ... to shareholder feedback. The target awards for the grants made in 2014 and 2015 are set forth below. 3 Year Performance Period Achievement (2014 - 2016) 2014 (RONA% and Sales Growth%) 2015 (RONA% and Sales Growth%) 2016 (RONA% and Sales Growth%) Target Award ($) Target Award (Shares) Ronald...

  • Page 45
    ... benefits in connection with his assignment to the Netherlands in his role as President Staples Europe. Executive Perquisites Our executive compensation program is relatively free of perquisites. The Committee has adopted a policy prohibiting gross up payments to cover taxes triggered by a change...

  • Page 46
    ... and Board meetings • Supporting the Committee in staying current on the latest legal, regulatory and other industry considerations affecting executive compensation and benefit programs • Providing general advice to the Committee with respect to all compensation decisions pertaining to the CEO...

  • Page 47
    ...AutoNation, Inc. Best Buy Co., Inc. Costco Wholesale Corporation* FedEx Corporation Gap Inc. The Home Depot, Inc.* * considered the increase in Staples' projected revenue if the acquisition is completed, and determined to retain thirteen of the existing peer group companies (new companies are shown...

  • Page 48
    ...), target long-term incentive (LTI) and total compensation at target compared to total shareholder return, earnings per share growth, revenue growth, and return on invested capital in 2014 against the peer group. Percentile vs. Peer Group - One-Year NEO Position Base Salary Target Bonus Target LTI...

  • Page 49
    ... Metric Percentile vs. Peer Group - 2014 Total Shareholder Return Revenue Growth EPS Growth Return on Invested Capital 41st 1st 1st 21st Conclusions The Committee reviewed the compensation levels of our NEOs in November 2015 and determined that overall compensation was appropriate in view of...

  • Page 50
    ... group, compensation mix, performance metrics, performance goals and payout curves, payment timing and adjustments, equity incentives, stock ownership guidelines/ trading policies, performance appraisal process and leadership/culture. In addition, the Committee reviewed the major compensation plans...

  • Page 51
    EXECUTIVE COMPENSATION AND COMPENSATION DISCUSSION AND ANALYSIS Tax and Accounting Implications Under Section 162(m) of the U.S. Internal Revenue Code, certain executive compensation in excess of $1 million paid to our CEO and to our three most highly compensated officers (other than the CEO and ...

  • Page 52
    ... awards granted under the 2014 Stock Incentive Plan. The fair value of these awards is based on the closing price of our common stock ($16.59) on March 4, 2015 (grant date) and is calculated at the target share payout for all three years of the performance period. For information about the threshold...

  • Page 53
    ..., target and maximum payout levels for the 2015-2017 performance share awards granted pursuant to our 2014 Stock Incentive Plan. Amounts earned under performance share awards may be increased or decreased by 25% based on Staples' three-year TSR relative to the returns generated by the S&P 500 over...

  • Page 54
    ... the 2015 annual cash incentive awards under the Amended and Restated Executive Officer Incentive Plan, as well as the threshold, target and maximum payment levels. See "CD&A" for information about 2015 goal achievement. Vesting Provisions of Plan-Based Awards 2015 Compensation Program: Annual Cash...

  • Page 55
    ...Special Performance and Retention Awards was determined in March 2013 based on achievement of performance objectives over the fiscal year 2010-2012 performance period. 33% of such shares vested in March 2013, 33% vested in March 2014 and 34% vested in March 2015 based on continued service to Staples...

  • Page 56
    ... at 2015 Fiscal Year End The following table sets forth summary information regarding the outstanding equity awards held by each of the NEOs as of the end of our 2015 fiscal year. Option Awards Stock Awards Equity Equity Incentive Incentive Plan Awards: Plan Awards: Market or Number of Payout Value...

  • Page 57
    ...for 2015 Fiscal Year " table above. The expiration date for stock options is typically the tenth anniversary of the date of grant. The shares in the Equity Incentive Plan Awards column represent performance share awards based on target share payout. Based on the fair market value of our common stock...

  • Page 58
    ... distribution schedule based on the requirements of Section 409A under the Internal Revenue Code. Potential Payments Upon Termination or Change-in-Control The tables below show the estimated incremental value transfer to each current named executive officer under various scenarios relating...

  • Page 59
    ... Restated Executive Officer Incentive Plan in addition to any Survivor Death Benefit Payout. Mr. Parneros left Staples on March 31, 2016, and received (or will receive) under his severance agreement (i) a cash severance payment in the amount of $986,932, which represents the continuation of salary...

  • Page 60
    ...of Plan Based Awards for 2015 Fiscal Year" table earlier in this proxy statement), amounts represent the intrinsic value of all unvested stock options as of fiscal year end. • Continuation of Benefits. The continuation of benefits for Messrs. Sargent and Doody represents the provision of long-term...

  • Page 61
    ... Compensation. For all NEOs, amounts represent the target value of the 2015-2017, 2014-2016, and 2013-2015 performance share awards, minus amounts earned for completed plan years. In addition, for all NEOs other than Mr. Wilson, amounts include the intrinsic value of all unvested stock options...

  • Page 62
    ... ANALYSIS EQUITY COMPENSATION PLAN INFORMATION AT 2015 FISCAL YEAR END Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) (1) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) (2) Number of Securities Remaining Available for...

  • Page 63
    ... 2015 fiscal year ended January 30, 2016. In accordance with Section 14A of the Exchange Act, our Board is asking shareholders to approve, on an advisory basis, Staples' named executive officer compensation by approving the following resolution: "RESOLVED, that the compensation paid to the Company...

  • Page 64
    ... on December 1, 2015, a copy of which is available in the Corporate Governance section of our Investor Information webpage at www.staples.com. The members of the Audit Committee are independent Directors, as defined by its charter and the rules of the Rule 10A-3 of the Securities Exchange Act of...

  • Page 65
    ... and related schedules be included in Staples' Annual Report on Form 10-K for the year ended January 30, 2016 for filing with the Securities and Exchange Commission. Audit Committee: Basil L. Anderson, Chair Paul-Henri Ferrand Robert Sulentic Raul Vazquez INDEPENDENT REGISTERED PUBLIC ACCOUNTING...

  • Page 66
    ... affect any contractual rights in existence on the date this proposal is adopted, and it shall apply only to equity awards made under equity incentive plans or plan amendments that shareholders approve after the date of the 2016 annual meeting. Supporting Statement Staples, Inc. ("Company") allows...

  • Page 67
    ... agreement to 2.99 times the sum of an executive's salary and target annual cash incentive award. In addition, in January 2015, we eliminated a legacy tax gross-up provision in our CEO's severance agreement. These changes were made after taking into account shareholder feedback, as described...

  • Page 68
    ..., non-management directors and whose chair regularly engages with numerous shareholders on compensation practices, is in the best position to develop our executive compensation principles and practices in line with market conditions and our strategic objectives. In June 2014, approximately...

  • Page 69
    ... existing special meeting rights reflect market standards and are complemented by our other robust governance practices that empower shareholders. Our current 25% ownership threshold is in line with the majority of large public companies. According to published reports, 70% of S&P 500 companies with...

  • Page 70
    ... April 18, 2016 by (1) each person who is known by us to beneficially own more than 5% of the outstanding shares of our common stock, (2) each current director and nominee of the Staples Board for director; (3) each of the named executive officers listed in the Summary Compensation Table included in...

  • Page 71
    BENEFICIAL OWNERSHIP OF COMMON STOCK (8) Reflects shares beneficially owned as of December 31, 2015, as set forth in a Schedule 13G filed on February 4, 2016. Of these shares, Pzena Investment Management, LLC reported to have sole dispositive power with respect to 33,304,711 shares and sole voting ...

  • Page 72
    ... your stock ownership in Staples as of the record date to be allowed into the meeting. You may obtain directions to the location of our Annual Meeting by writing, emailing or calling our Investor Relations department at 500 Staples Drive, Framingham, Massachusetts 01702, email: [email protected]...

  • Page 73
    ... in person at the meeting or by proxy. If you decide to vote by proxy, you may do so over the Internet, by telephone or by mail. • Over the Internet. After reading the proxy materials, you may use a computer to access the website www.proxyvote.com. You will be prompted to enter your control number...

  • Page 74
    ...you if you write, email or call our Investor Relations department at 500 Staples Drive, Framingham, Massachusetts 01702, email: [email protected], or telephone: (800) 468-7751. If you want to receive separate copies of the proxy statement, annual report or notice of Internet availability of proxy...

  • Page 75
    ... at 500 Staples Drive, Framingham, Massachusetts 01702, email: [email protected], or telephone: (800) 468-7751. Securities and Exchange Commission Filings We file annual, quarterly and current reports, as well as other information with the Securities and Exchange Commission ("SEC"). You may read...

  • Page 76
    ... year average monthly exchange rates. See pages B-7 and C-13 of Staples' 2015 Form 10-K for more detail regarding our store closure program. STAPLES, INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Sales Growth (Unaudited) 52 Weeks Ended January 30, 2016 GAAP sales growth Impact of change...

  • Page 77
    ...our brand, and support profitable and responsible growth. COMMUNITY & GIVING Staples is dedicated to providing education and career skills development to communities where our customers and associates live and work. We contribute through large-scale initiatives as well as local, grassroots programs...

  • Page 78
    ... training. • Provided live training to business units domestically and internationally to help ensure that associates are familiar with relevant laws and company policies. • Maintained Staples Supplier Code of Conduct, which is designed to ensure that workers making Staples brand products...

  • Page 79
    ... year ended: January 30, 2016 to Commission File Number: 0-17586 (Exact name of registrant as specified in its charter) STAPLES, INC. Delaware (State or other jurisdiction of incorporation or organization) Five Hundred Staples Drive, Framingham, MA 01702 (Address of principal executive office...

  • Page 80
    ... majority of our sales and many of our delivery customers place their orders online, making Staples one of the largest internet resellers in the world. We operate three business segments: North American Stores & Online, North American Commercial and International Operations. Additional information...

  • Page 81
    ... Staples Advantage and Quill.com, that sell and deliver products and services directly to businesses. Our strategies for North American Commercial focus on expanding our offering in categories beyond office supplies, increasing our share of wallet with existing customers, and acquiring new customers...

  • Page 82
    PART I Staples Australia serves primarily contract and government customers in Australia and New Zealand. In addition, we operate a public website which targets small business and home office customers. Our strategies focus on improving sales force productivity by increasing customer acquisition ...

  • Page 83
    ... on making shopping easy for customers; a wide assortment of products and services, in stores and on our websites; fast checkout; easy to use websites and mobile platforms; reliability and speed of order shipment; convenient store locations; hassle-free returns and competitive prices. Trademarks...

  • Page 84
    ... in 1992, including Senior Vice President of Staples Direct, Senior Vice President of Brand Marketing, and Vice President of Contract & Commercial. Christine T. Komola, age 48 Ms. Komola has served as Executive Vice President and Chief Financial Officer since March 2013. Prior to that she served as...

  • Page 85
    ... Depot, a global supplier of office products, services and solutions for the workplace. On December 7, 2015, the Federal Trade Commission and Canadian Commissioner of Competition each filed lawsuits against us and Office Depot, seeking to block the proposed merger. On February 2, 2016, each company...

  • Page 86
    ...the number of outstanding shares and equity awards of Office Depot at the time the merger is completed. The anticipated dilutive effect of the issuance of these new shares could negatively impact the market price for our common stock. In addition, Office Depot stockholders may decide not to hold the...

  • Page 87
    ... office products and services, opening new stores near our existing stores, and offering direct delivery of office products, and we expect this trend to continue going forward. Some of our current and potential competitors are larger than we are, may have more experience in selling certain products...

  • Page 88
    ... associates. For example, we handle, collect and store personal information in connection with our customers purchasing products or services, enrolling in our promotional or rewards programs, registering on our web site or otherwise communicating or interacting with us. We also accept payments using...

  • Page 89
    ..., working closely with payment card companies and law enforcement and with the assistance of outside data security experts. We also have taken steps to further enhance the security of our point of sale systems, including the use of new encryption tools. We continue to evaluate cybersecurity policies...

  • Page 90
    ... internet or our technology infrastructure, including a disruption or incident affecting our web sites and information systems, including without limitation a denial of service attack, may cause a decline in our customer satisfaction, jeopardize accurate financial reporting, impact our sales volumes...

  • Page 91
    ... Employee Retirement Income Security Act ("ERISA"), securities laws, import and export laws (including customs regulations), privacy and information security regulations, unclaimed property laws, and many others. The complexity of the regulatory environment in which we operate and the related cost...

  • Page 92
    FORWARD-LOOKING STATEMENTS The following table sets forth the locations of our facilities as of January 30, 2016: Retail Stores Country/State/Province/Region/Territory Number of Stores Country/State/Province/Region/Territory Number of Stores United States Alabama Arizona Arkansas California ...

  • Page 93
    ...by us with initial lease terms expiring between 2016 and 2030. In most instances, we have renewal options at increased rents. Leases for 134 of the existing stores provide for contingent rent based upon sales. We own our Framingham, Massachusetts corporate office, which consists of approximately 650...

  • Page 94
    ... traded on the NASDAQ Global Select Market under the symbol "SPLS". The following table sets forth for the periods indicated the high and low sales prices per share of our common stock on the NASDAQ Global Select Market, as reported by NASDAQ. High Low 52 Weeks Ended January 30, 2016 First Quarter...

  • Page 95
    ... Performance Graph The following graph compares the cumulative total stockholder return on Staples' common stock, the Standard & Poor's 500 Index and the Standard & Poor's Retail Index during our 2011 through 2015 fiscal years, assuming the investment of $100.00 on January 29, 2011 with dividends...

  • Page 96
    ...II Other Information For information regarding securities authorized for issuance under our equity compensation plans, please see Note K - Equity Based Employee Benefit Plans in the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K. At March 2, 2016, we had...

  • Page 97
    ... 30, 2016, management, the chief executive officer and the chief financial officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level at that date. 2. Internal Control over Financial Reporting (a) Management's Annual Report on Internal...

  • Page 98
    ... in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended January 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 20 STAPLES Form...

  • Page 99
    ... 2016 Annual Meeting of Stockholders (the "Proxy Statement"), which we will file with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Report. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Certain information required...

  • Page 100
    ...in the applicable accounting regulations of the Securities and Exchange Commission other than the one listed above are not required under the related instructions or are not applicable and, therefore, have been omitted. 3. Exhibits. The exhibits which are filed or furnished with this report or which...

  • Page 101
    ...on March 4, 2016. STAPLES, INC. By: /s/ RONALD L. SARGENT Ronald L. Sargent, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 102
    ... in Millions, Except Store and Per Share Data) Fiscal Year Ended January 30, 2016 (1) (52 Weeks) January 31, 2015 (2) (52 Weeks) February 1, 2014 (3) (52 Weeks) February 2, 2013 (4) (53 Weeks) January 28, 2012 (5) (52 Weeks) Statement of Income Data: Sales Gross profit Income (loss) from continuing...

  • Page 103
    ... the Company's business in Australia. Income from continuing operations for this period reflects the receipt of a $21 million tax benefit related to a refund due to Corporate Express N.V. ("Corporate Express") from the Italian government that was previously deemed uncollectible. Working capital...

  • Page 104
    ... business, we announced a cost savings plan to generate annualized pre-tax savings of approximately $500 million by the end of fiscal 2015. The cost savings plan was substantially complete as of the end of 2015, and we do not expect to incur material costs in the future related to this plan. In 2015...

  • Page 105
    ... for gross profit rate, net income, earnings per share, effective tax rate, and free cash flow (which we define as net cash provided by operating activities less capital expenditures and, in the case of our guidance, payments associated with financing for our proposed acquisition of Office Depot...

  • Page 106
    ... offset by growth in facilities supplies, copy and print, breakroom supplies and furniture. Gross Profit: Gross profit as a percentage of sales was 26.2% for 2015 compared to 25.8% for 2014. The increase was primarily driven by improved product margin rates in North American Stores & Online. The...

  • Page 107
    ... tax expense by taxing jurisdiction are not directly related. The earnings generated primarily by our entities in Canada, Hong Kong and the Netherlands contribute to the foreign tax rate differential impacting the effective tax rate in 2015 and 2014. 2014 Compared with 2013 Sales: Sales for 2014...

  • Page 108
    ... 26.1% for 2013. The decrease in gross profit rate was driven by pricing investments in Staples.com and Quill, and increased delivery expense in North America primarily resulting from growth in delivery sales. These factors were partly offset by improved product margins in Europe resulting from our...

  • Page 109
    ... growth in Staples.com, increased incentive compensation, and increased marketing expense to drive awareness of our expanded product offerings. These expenses were partially offset by reduced retail labor costs and increased gross margin rates in retail stores. North American Commercial 2015...

  • Page 110
    ... for 2015 compared to 0.6% for 2014. This increased loss was primarily driven by the impact of lower sales on fixed expenses in Europe and lower product margin rates in our European contract business, partially offset by improved profitability in Australia and China. 2014 Compared with 2013 Sales...

  • Page 111
    ...on our current and projected sales mix, profit improvement opportunities and market conditions. • The discount rate, which is used to measure the present value of the reporting unit's projected future cash flows, including those relating to the reporting unit's terminal value. The discount rate is...

  • Page 112
    ...We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, we...

  • Page 113
    ... an opening of a new store. For foreign locations, comparable stores sales exclude the impact of foreign currency translation. Comparable store sales figures exclude online sales. Transactions at in-store kiosks are included in comparable store sales if payment is made through the Company's point-of...

  • Page 114
    ...reduction in cash used to repurchase shares compared with fiscal 2013. Contractual Obligations and Commercial Commitments A summary, as of January 30, 2016, of our contractual obligations and balances available under credit agreements is presented below (amounts in millions): Payments Due By Period...

  • Page 115
    ... program. We also have various other lines of credit under which we may currently borrow a maximum of $88 million. At January 30, 2016, we had outstanding borrowings and letters of credit of $2 million, leaving $86 million of available credit at that date. During 2015 and 2014 we entered into new...

  • Page 116
    ... a variable rate term loan agreement in connection with our planned acquisition of Office Depot, with the proceeds deposited into escrow accounts pending the closing of the acquisition. See Note R for additional information related to this loan. In certain instances we may use interest rate swap...

  • Page 117
    ... materially adversely impacted by changes in these or other factors. As exchange rates vary, our international financial results may vary from expectations and adversely impact our overall operating results. In accordance with our risk management policies, we use derivative instruments on a limited...

  • Page 118
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets - January 30, 2016 and January 31, 2015 Consolidated Statements of Income - Fiscal years ended January 30, 2016, January 31, 2015 and February 1, 2014 Consolidated Statements of...

  • Page 119
    ... as a whole, present fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Staples, Inc.'s internal control over financial reporting as of January 30, 2016, based on...

  • Page 120
    ...723,603 shares at January 30, 2016 and 941,561,541 shares and 640,320,352 shares at January 31, 2015, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Less: Treasury stock at cost, 301,241,189 shares at January 30, 2016 and January 31, 2015 Total Staples...

  • Page 121
    APPENDIX C STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollar Amounts in Millions, Except Share Data) Fiscal Year Ended January 30, 2016 January 31, 2015 February 1, 2014 Sales Cost of goods sold and occupancy costs Gross profit Operating expenses: Selling, general and ...

  • Page 122
    ... Year Ended January 30, 2016 January 31, 2015 February 1, 2014 Consolidated net income Other comprehensive income (loss), net of tax: Foreign currency translation adjustments Disposal of foreign business, net Deferred pension and other post-retirement benefit costs, net Other comprehensive loss...

  • Page 123
    ... Share Amounts in Millions) Equity Attributed to Staples, Inc. Outstanding Common Stock Additional Common Paid-In Stock Capital Accumulated Other Comprehensive Loss NonTotal Treasury controlling Stockholders Stock Interests Equity Retained Earnings Balances at February 2, 2013 Issuance of common...

  • Page 124
    ... Attributed to Staples, Inc. Outstanding Common Common Stock Stock Accumulated Additional Other Paid-In Comprehensive Capital Loss NonTreasury controlling Stock Interests Total Stockholders Equity Retained Earnings Issuance of common stock for stock options exercised Net tax expense related to...

  • Page 125
    ... sale of stock under employee stock purchase plans Proceeds from borrowings Payments on borrowings, including payment of deferred financing fees and capital lease obligations Cash dividends paid Excess tax benefits from stock-based compensation arrangements Repurchase of common stock Net cash used...

  • Page 126
    ... provider of products and services that serve the needs of business customers and consumers. Through its retail, online and delivery capabilities, Staples lets customers shop however and whenever they want, whether it's in-store, online or on mobile devices. The Company has three reportable segments...

  • Page 127
    ... or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured. Revenue is recognized for product sales at the point of sale for the Company's retail operations and at the time of shipment for its delivery sales. The Company offers its customers...

  • Page 128
    ... 31, 2015, respectively. The cost of communicating an advertisement is expensed when the communication occurs. Total advertising and marketing expense was $478 million, $496 million and $499 million for 2015, 2014 and 2013, respectively. Stock-Based Compensation: The Company accounts for stock-based...

  • Page 129
    ... Stores & Online segment. The Company does not expect material costs to be incurred after 2016 related to the Store Closure Plan. In addition, in 2014 the Company initiated a cost savings plan to generate annualized pre-tax savings of approximately $500 million by the end of fiscal 2015. The Company...

  • Page 130
    ... incurred 2015 2014 Employee related costs Contractual obligations Other associated costs Total restructuring charges Impairment of long-lived assets and accelerated depreciation Inventory write-downs Total pre-tax charges North American Stores & Online North American Commercial International...

  • Page 131
    ... material costs in future periods related to the 2013 Plan. The table below shows a reconciliation of the beginning and ending liability balances associated with the 2013 Plan (in millions): 2013 Plan Employee Related Other Total Accrued restructuring balance as of February 1, 2014 Cash payments...

  • Page 132
    ... with the Company's annual cycle for planning and budgeting, in the fourth quarter of 2014 the Company updated its fiscal 2015 and long-term financial projections for its reporting units. Based on these updates, the Company reflected lower long-term sales growth and profit rate projections in...

  • Page 133
    ... Company's plans to close at least 225 retail stores in North America and to generate annualized pre-tax savings of approximately $500 million by the end of 2015 (see Note B). All of these charges in 2015 relate to the Company's North American Stores & Online segment; for 2014, $36 million related...

  • Page 134
    ... and equipment, as well as a small business unit in Australia. The company recognized a net loss of $5 million in 2015 related to these sales. During the first quarter of 2014, the Company completed the sale of its Smilemakers, Inc. business unit, recognizing a gain of $23 million. Smilemakers...

  • Page 135
    ...a small business in Europe. Interest paid by Staples totaled $49 million, $51 million and $128 million for 2015, 2014 and 2013, respectively. There was no interest capitalized in 2015, 2014 or 2013. January 2018 Notes and January 2023 Notes: In January 2013, the Company issued $500 million aggregate...

  • Page 136
    ... vary, but may not exceed 397 days from the date of issue. The Company did not borrow under the Commercial Paper Program during 2015, and as of January 30, 2016 no Commercial Paper Notes were outstanding. Other Lines of Credit: The Company has various other lines of credit under which it may borrow...

  • Page 137
    ... $720 million and paid 750 million Canadian dollars per the terms of the contracts. The forward agreements were accounted for as a fair value hedge. In 2012, the Company settled 500 million Canadian dollars of the notional amount relating to this forward, realizing a loss of $24 million which...

  • Page 138
    ... the incident, working closely with payment card companies and law enforcement and with the assistance of outside data security experts. The Company also has taken steps to further enhance the security of its point of sale systems, including the use of new encryption tools. The Company continues to...

  • Page 139
    ... on current year operating losses that the Company has determined are not more-likely-than-not realizable. For financial reporting purposes, income from continuing operations before income taxes includes the following components (in millions): 2015 2014 2013 Pretax income (loss): United States...

  • Page 140
    ... is related to foreign operations. A reconciliation of the federal statutory tax rate to Staples' effective tax rate on income from continuing operations is as follows: 2015 2014 2013 Federal statutory rate State effective rate, net of federal benefit Effect of foreign taxes Tax credits Changes...

  • Page 141
    ... associates share ownership through certain equity-based employee compensation and benefit plans. In connection with these plans, Staples recognized $63 million, $64 million and $81 million of compensation expense for 2015, 2014 and 2013, respectively. The total income tax benefit related to stock...

  • Page 142
    ... the three year performance period. Target number of shares (millions) Grant date fair value (millions) % of target shares earned Performance period Award date 2015 2014 2013 March 2015 March 2014 April 2013 March 2014 April 2013 April 2013 0.5 0.5 0.5 0.6 0.5 0.5 $7 $9 $8 $7 $6 $7 78.4% 87...

  • Page 143
    ... each year pursuant to this plan. Shares Available for Issuance At January 30, 2016, 70 million shares of common stock were reserved for issuance under Staples' 2014 Plan, 2004 Plan, 401(k) Plan and employee stock purchase plans. NOTE L - PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS The company...

  • Page 144
    ... tables present a summary of the total net periodic cost recorded in the Consolidated Statement of Comprehensive Income for 2015, 2014 and 2013 related to the plans (in millions): 2015 Pension Plans U.S. Plans International Plans Total Post-retirement Benefit Plan Total Service cost Interest cost...

  • Page 145
    ... Weeks Ended October 5, 2013 Service cost Interest cost Expected return on plan assets Total cost $4 2 (2) $4 The following table presents the changes in benefit obligations during 2014 and 2015 (in millions): Post-retirement Benefit Plans Total Total Pension Plans U.S. Plans International Plans...

  • Page 146
    ... following table presents the changes in pension plan assets for each of the defined benefit pension plans during 2014 and 2015 (in millions): International Plans U.S. Plans Total Fair value of plan assets at February 1, 2014 Actual return on plan assets Employer's contributions Plan participants...

  • Page 147
    ...return on plan assets, rate of compensation increases, interest rates and mortality rates. The following table presents the assumptions used to measure the net periodic cost and the year-end benefit obligations for the defined benefit pension and post-retirement benefit plans for 2015, 2014 and 2013...

  • Page 148
    ...deployed. Staples acts in a consulting and governance role via its board representatives in reviewing investment strategy, with final decisions on asset allocation and investment managers made by local trustees. The Company's pension plans' actual and target asset allocations at January 30, 2016 and...

  • Page 149
    ... to be returned to the Company during 2016. Information on Fair Value of Plan Assets The fair values of the Company's pension plan assets at January 30, 2016 and January 31, 2015 by asset category are as follows (in millions): January 30, 2016 U.S. Pension Plans Quoted Prices in Active Markets for...

  • Page 150
    ... its international plan during fiscal 2016. There are no expected benefit payments and contributions associated with the other post-retirement benefit plans. Employees' 401(k) Savings Plan and Other Defined Contribution Plans Staples' Employees' 401(k) Savings Plan (the "401(k) Plan") is available...

  • Page 151
    ... 2015 2014 2013 Selling, general and administrative Gain on sale of businesses, net Income before tax Income tax expense Income (loss) from continuing operations Loss from discontinued operations Net income $17 - (17) - (17) - $(17) $12 (2) (10) (3) (7) - $(7) $14 - (14) (4) (10) 3 $(7) STAPLES...

  • Page 152
    ...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...

  • Page 153
    ... (continued) Staples' North American Stores & Online and North American Commercial segments are managed separately because the way they sell and market products is different and the classes of customers they service are different. International Operations is considered a separate reportable segment...

  • Page 154
    ...table shows the Company's sales by each major category as a percentage of total sales for the periods indicated: Fiscal Year Ended January 30, 2016 January 31, 2015 February 1, 2014 Core office supplies Ink and toner Business technology Paper Facilities and breakroom Computers and mobility Services...

  • Page 155
    ... C STAPLES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) First Quarter (5) Second Quarter (6) Third Quarter (7) Fourth Quarter (8) Fiscal Year Ended January 31, 2015 Sales Gross profit Consolidated net income (loss) Basic and diluted earnings per common share...

  • Page 156
    ... acquisition. The Company has also received regulatory clearances in Australia, New Zealand and China. On February 16, 2016, Staples and Office Depot announced they had entered into an agreement to sell customer contracts representing more than $550 million of revenue and related assets to Essendant...

  • Page 157
    ...limit dividends to $0.15 per share per quarter, subject to certain exceptions. The Company expects that the proceeds from the term loan, borrowings available under the asset-based revolving credit facility, and cash on hand will be sufficient to finance the acquisition of Office Depot. STAPLES C-40

  • Page 158
    ... for Doubtful Accounts Balance at Beginning of Period Deductions- Write-offs, Payments and Other Adjustments Additions Charged to Expense Balance at End of Period Fiscal year ended: February 1, 2014 January 31, 2015 January 30, 2016 34 31 38 23 36 27 26 29 33 31 38 32 C-41 STAPLES Form 10...

  • Page 159
    ... Incentive Plan. Filed as Exhibit 10.1 to the Company's 8-K filed on June 2, 2014. Form of Non-Employee Director Restricted Stock Unit Award Agreement (Annual Grant) under the 2014 Stock Incentive Plan. Filed as Exhibit 10.4 to the Company's Form 10-Q for the quarter ended August 2, 2014. STAPLES...

  • Page 160
    ... Employee Stock Purchase Plan. Filed as Exhibit 10.1 to the Company's Form 8-K filed on June 2, 2015. Non-Management Director Compensation Summary. Filed as Exhibit 10.7 to the Company's Form 10-Q for the quarter ended August 2, 2014. Form of Severance Benefits Agreement signed by executive officers...

  • Page 161
    ...Taxonomy Calculation Linkbase Document XBRL Taxonomy Definition Linkbase Document. XBRL Taxonomy Label Linkbase Document. XBRL Taxonomy Presentation Linkbase Document. A management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report pursuant to Item...

  • Page 162
    .... common stock can be made through a Direct Stock Purchase Plan administered by Computershare. Dividends on Staples, Inc. common stock may be automatically invested in additional shares. Contact Computershare at 888-875-9002 for more information. Board of Directors Basil L. Anderson Chief Executive...

  • Page 163
    Staples, Inc., 500 Staples Drive, Framingham, MA 01702 | 508-253-5000 | staples.com®