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B-1 STAPLES Form 10-K
iAPPENDIX B
STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Our fiscal year is the 52 or 53 weeks ending on the Saturday
closest to January 31. Fiscal year 2015 (“2015”) consisted
of the 52 weeks ended January 30, 2016, fiscal year 2014
(“2014”) consisted of the 52 weeks ended January 31, 2015
and fiscal year 2013 (“2013”) consisted of the 52 weeks ended
February 1, 2014.
RESULTS OF OPERATIONS
Major contributors to our 2015 results, as compared to the
results for 2014, are reviewed in detail in the Consolidated
Performance and Segment Performance discussions and are
summarized below:
• We generated $21.1 billion in sales, a decrease of 6.4%;
• North American Stores & Online sales decreased 8.7%
and business unit income rate was flat at 4.5%;
• North American Commercial sales increased 1.1% and
business unit income rate increased to 7.2% from 6.9%;
• International Operations sales decreased 16.3%, driven
by the negative impact of foreign exchange rates, while
business unit loss rate increased to 1.3% from 0.6%;
• Net income for 2015 was $379 million compared with
$135 million in 2014;
• Net Income for 2015 includes after-tax charges of
$199 million for restructuring-related costs, long-lived
asset impairment charges, merger-related costs, costs
associated with the previously announced PNI data
security incident, and a net loss on the sale of businesses
and assets,
• Non-GAAP net income was $578 million in 2015
compared with $623 million in 2014; and
• Earnings per diluted share from continuing operations was
$0.59 in 2015 compared to $0.21 in 2014. Non-GAAP
earnings per diluted share from continuing operations
was $0.89 in 2015 compared with $0.96 in 2014.
See the non-GAAP reconciliations in the “Non-GAAP
Measures” section further below.
OUTLOOK
For the first quarter of 2016, we expect sales to decrease
versus the first quarter of 2015. We expect to achieve fully
diluted non-GAAP earnings per share in the range of $0.16
to $0.18 for the first quarter of 2016, which excludes the
impact of costs associated with our proposed acquisition
of Office Depot and charges associated with the planned
closure of North American retail stores. Our guidance reflects
the unfavorable impact of the stronger U.S. dollar on sales
and earnings. For the full year 2016, we expect to generate
approximately $600 million of free cash flow excluding
the impact of payments associated with financing for the
acquisition of Office Depot.
2014 RESTRUCTURING PLAN
In 2014, we announced our plan to close at least 225 retail
stores in North America by the end of fiscal year 2015. We
have extended this plan and expect to close approximately
50 additional stores during 2016. In addition, as part of our
continuing efforts to transform our 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 and 2014 we
incurred charges related to these plans of $170 million and
$245 million, respectively. See Note B - Restructuring Charges
in the Notes to the Consolidated Financial Statements for
additional information.