Staples 2015 Annual Report Download - page 80

2 STAPLES Form 10-K
iPART I
ITEM 1. BUSINESS
Staples, Inc. and its subsidiaries (“we”, “Staples” or the
“Company”) is a world-class provider of products and services
that serve the needs of business customers and consumers.
We are committed to providing superior value to our customers
through a broad selection of products, easy to use websites
and mobile platforms, an integrated retail and online shopping
experience and a wide range of copy and print and technology
services. We pioneered the office products superstore
concept by opening the first office products superstore in
Brighton, Massachusetts in 1986 to serve the needs of small
businesses, and we currently serve businesses of all sizes
and consumers in North America, Europe, Australia, South
America and Asia. Our delivery businesses account for a
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 regarding
our operating segments is presented in Management’s
Discussion and Analysis of Financial Condition and Results of
Operations contained in this Annual Report on Form 10-K, and
financial information regarding these segments, and regarding
geographic areas, is provided in Note P - Segment Reporting in
the Notes to the Consolidated Financial Statements contained
in this Annual Report on Form 10-K.
Strategy
Our vision is we help businesses succeed. This reflects a
multi-year effort to evolve our business to become the product
and service destination for businesses in a rapidly evolving
and competitive marketplace. We view the industry in which
we sell our products and services as large, fragmented, and
diversified. We reach our customers through contract, online,
and retail sales channels. Our retail stores primarily target small
businesses, home offices and consumers. Our public websites
primarily target small businesses and organizations with up to
20 office workers. Our contract businesses primarily serve
mid-size businesses and organizations with 20 to 500 office
workers, as well as larger regional customers and Fortune
1000 companies. Our ability to address our customers' needs
expands our market opportunities and increases awareness
of the Staples brand. Serving customers in a global business
allows us to benefit from a number of important economies of
scale, such as enhanced efficiencies in purchasing, distribution,
advertising, and general and administrative expenses.
Our top priority is to continue to improve the service and value
we offer customers in a highly competitive industry. We will
focus on building scale and credibility in categories beyond
office supplies, including facilities supplies and breakroom
supplies, mail and ship supplies and services; increasing mid-
market penetration; improving traffic in stores and online; and
improving the productivity and efficiency of our store network.
Additionally, we are engaged in an ongoing effort to change
the way we work and aggressively reduce costs in areas like
supply chain, merchandising, store operations and real estate,
marketing, salesforce, business process and IT outsourcing,
and customer service.
Acquisition of Office Depot
On February 4, 2015, we announced that we had entered
into a definitive agreement to acquire Office Depot, Inc. The
acquisition will better position us to serve the changing needs
of customers and compete more effectively against a large and
diverse set of competitors. On December 7, 2015, the United
States Federal Trade Commission filed an administrative
complaint charging that the proposed acquisition would
violate antitrust laws, and authorized its staff to seek in federal
court a temporary restraining order and a preliminary injunction
to prevent Staples and Office Depot from consummating the
merger. Also on December 7, 2015, the Canadian Competition
Bureau filed an application to block the transaction with the
Canadian Competition Tribunal. On February 2, 2016, Office
Depot and Staples each agreed to waive, until May 16, 2016,
its respective rights to terminate the definitive agreement due
to a failure to complete the merger by February 4, 2016 or a
legal restraint under antitrust laws. The extension allows for
the expected completion of the ongoing federal court litigation
with the Federal Trade Commission.
On February 10, 2016, we announced that we had received
approval from European Union regulatory authorities to
acquire Office Depot, on the condition that we divest Office
Depot’s European contract business and all of Office Depot’s
operations in Sweden. We intend to meet these conditions,
and to also divest of Office Depot’s retail, catalog and online
operations in Europe. The divestitures are subject to the
closing of the acquisition. We have 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 Inc., for a purchase price of approximately
$22.5 million. The revenue related to the divested contracts
comes primarily from large corporate customers. The
divestiture is subject to the closing of the Office Depot
acquisition, as well as other customary closing conditions.