Staples 2015 Annual Report Download - page 136

APPENDIX C
C-19 STAPLES Form 10-K
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Notes 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 a maximum of $88 million. At
January 30, 2016, the Company had outstanding borrowings
of $2 million, leaving $86 million of available credit at that date.
There were no instances of default during 2015 under any of
the Company’s debt agreements.
See Note R for information related to sources of financing for
the Company’s proposed acquisition of Office Depot.
Deferred Financing Fees
In connection with the issuance of certain debt instruments, the
Company incurred financing fees which are being amortized
over the terms of the related debt instruments. Amortization
of the financing fees is classified as interest expense. Deferred
financing fees amortized to interest expense were $2 million,
$2 million and $3 million for 2015, 2014 and 2013, respectively.
NOTE G — FAIR VALUE MEASUREMENTS
ASC Topic 820 establishes a fair value hierarchy that prioritizes
the inputs used to measure fair value. The hierarchy gives the
highest priority to quoted prices in active markets for identical
assets or liabilities (Level 1 measurement), then priority to
quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are
not active and model-based valuation techniques for which all
significant assumptions are observable in the market (Level 2
measurement), then the lowest priority to unobservable inputs
(Level 3 measurement).
The fair values of cash and cash equivalents, receivables,
accounts payable, accrued expenses, other current liabilities,
and short-term debt approximate their carrying values
because of their short-term nature. The carrying value of the
Company's capital lease obligations approximates fair value.
The following table shows the difference between the financial
statement carrying value and fair value of the Company's debt
obligations (see Note F - Debt and Credit Agreements) as
of January 30, 2016 and January 31, 2015 (in millions). The
fair values of these notes were determined based on quoted
market prices and are classified as Level 1 measurements.
January 30, 2016 January 31, 2015
Carrying Value Fair Value Carrying Value Fair Value
January 2018 Notes $498 $496 $497 $507
January 2023 Notes 496 488 496 511
From time to time the Company has investments in money
market funds that are measured and recorded in the financial
statements at fair value on a recurring basis. The fair values
are based on quotes received from third-party banks and are
classified as Level 1 measurements. There were no material
money market investments as of January 30, 2016. As
of January 31, 2015, the fair value of these investments, which
are classified in Cash and cash equivalents in the consolidated
balance sheet, was $14 million.
The fair values of the assets in the Company's pension plans
are described in detail in Note L - Pension and Other Post-
Retirement Benefit Plans. There are no other material assets
or liabilities measured at fair value.
NOTE H — DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES
From time to time, Staples uses interest rate swap
agreements, foreign currency swap and foreign currency
forward agreements to offset certain operational and balance
sheet exposures related to changes in interest or foreign
exchange rates. These agreements are entered into to
support transactions made in the normal course of business
and accordingly are not speculative in nature. The derivatives
qualify for hedge accounting treatment if the derivatives have
been highly effective in offsetting the underlying exposures
related to the hedge.
All derivatives are recorded at fair value and the changes in fair
value are immediately included in earnings if the derivatives
do not qualify as effective hedges. If a derivative is designated
as a fair value hedge, then changes in the fair value of the
derivative are offset against the changes in the fair value
of the underlying hedged item in earnings. If a derivative is
designated as a cash flow hedge, then the effective portion
of the changes in the fair value of the derivative is recognized
as a component of accumulated other comprehensive
income (loss) until the underlying hedged item is recognized in