FRAMINGHAM, Mass.--(BUSINESS WIRE)--Staples, Inc. (Nasdaq: SPLS) announced today the results for its fourth quarter and fiscal year ended January 28, 2017. Total company sales for the fourth quarter of 2016 were $4.6 billion, a decrease of three percent compared to the fourth quarter of 2015. On a GAAP basis, the company reported a net loss from continuing operations of $615 million, or $0.94 per share. Fourth quarter 2016 results from continuing operations include pre-tax charges of $791 million primarily related to goodwill impairment, restructuring costs, and the impairment of long-lived assets.
Total company comparable sales for the fourth quarter of 2016 declined one percent compared to the fourth quarter of 2015. Excluding the impact of charges taken during the fourth quarter of 2016, the company reported non-GAAP net income from continuing operations of $161 million, or $0.25 per diluted share, versus fourth quarter 2015 non-GAAP net income from continuing operations of $168 million, or $0.26 per diluted share.
“Our fourth quarter results were right in-line with our expectations, and I’m increasingly confident that we have the right plan and the right team to transform Staples and get back to sustainable sales and earnings growth,” said Shira Goodman, Staples’ Chief Executive Officer. “I am particularly proud of our ability to grow our delivery business by continuing to enhance our offering and satisfy our business customers.”
Fourth Quarter 2016 Financial Summary |
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Fourth Quarter | ||||||||||||
(dollar amounts in millions, except per share data) | 2016 | 2015 | Change | |||||||||
Total company sales | $4,560 | $4,695 | -2.9 | % | ||||||||
Total company comparable sales*^ | -0.9 | % | ||||||||||
GAAP operating income | -$548 | $170 | -$718 | |||||||||
Non-GAAP operating income* | $243 | $261 | -$18 | |||||||||
GAAP operating income rate | -12.0 | % | 3.6 | % | NM | |||||||
Non-GAAP operating income rate* | 5.3 | % | 5.5 | % | -21 basis points | |||||||
GAAP net income from continuing operations | -$615 | $130 | -$745 | |||||||||
Non-GAAP net income from continuing operations* | $161 | $168 | -$7 | |||||||||
GAAP earnings per share from continuing operations | -$0.94 | $0.20 | NM | |||||||||
Non-GAAP earnings per diluted share from continuing operations* | $0.25 | $0.26 | -4 | % | ||||||||
*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information” and the accompanying reconciliations for more detailed information about these non-GAAP measures. |
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^Total company comparable sales excludes the impact of acquisitions, divestitures, store closures and foreign currency translation. |
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Fourth Quarter 2016 Highlights
- Staples Business Advantage, the company’s North American contract business, achieved flat sales compared to the fourth quarter of 2015 on a GAAP basis, and a comparable sales increase of four percent.
- Improved total company gross profit rate by 93 basis points year over year to 27.1 percent and grew gross profit by $7 million.
- Generated $934 million of cash provided by operating activities, spent $255 million in capital expenditures, and generated $889 million of adjusted free cash flow in 2016 excluding the after-tax impact to cash provided by operating activities of $210 million related to charges associated with financing for the proposed acquisition of Office Depot and costs associated with the termination of the Office Depot merger agreement.
- Returned $311 million to shareholders through cash dividends in 2016.
- Ended the fourth quarter of 2016 with $2.2 billion in liquidity, including $1.1 billion in cash and cash equivalents.
- Acquired Capital Office Products, an independent office products dealer that generated more than $100 million of revenue in its last fiscal year.
- Completed the sale of the company’s retail business in the United Kingdom.
- Completed the sale of a controlling interest in the remainder of the company’s European operations in the first quarter of 2017.
Full Year 2016 Financial Summary |
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Full Year | ||||||||||||
(dollar amounts in millions, except per share data) | 2016 | 2015 |
Change |
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Total company sales | $18,247 | $18,764 | -2.8 | % | ||||||||
Total company comparable sales*^ | -0.7 | % | ||||||||||
GAAP operating income |
-$264 |
$713 | -$977 | |||||||||
Non-GAAP operating income* | $905 | $933 | -$28 | |||||||||
GAAP operating income rate | -1.5 | % | 3.8 | % | NM | |||||||
Non-GAAP operating income rate* | 5.0 | % | 5.0 | % | -1 basis point | |||||||
GAAP net income from continuing operations |
-$459 |
$462 |
-$921 |
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Non-GAAP net income from continuing operations* | $586 | $598 | -$12 | |||||||||
GAAP earnings per share from continuing operations | -$0.71 | $0.71 | NM | |||||||||
Non-GAAP earnings per diluted share from continuing operations* | $0.90 | $0.93 | -3 | % | ||||||||
*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information” and the accompanying reconciliations for more detailed information about these non-GAAP measures. |
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^Total company comparable sales excludes the impact of acquisitions, divestitures, store closures and foreign currency translation. |
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For the full year 2016, total company sales decreased three percent to $18.2 billion compared to full year 2015. Total company comparable sales declined one percent versus the prior year.
On a GAAP basis, the company reported a net loss from continuing operations of $459 million, or $0.71 per share, compared to net income of $462 million, or $0.71 per diluted share, in the full year 2015. On a non-GAAP basis, the company reported net income from continuing operations of $586 million, or $0.90 per diluted share, during 2016, compared to $598 million, or $0.93 per diluted share, during the prior year.
New Segment Reporting Structure
The company changed its
business segments during the fourth quarter of 2016 to align with its
20/20 strategic plan, and reflect its priorities to accelerate growth in
North American Delivery and preserve profit in North American Retail.
Under the new structure, the North American Delivery segment includes
Staples Business Advantage, staples.com, staples.ca and quill.com. The
North American Retail segment includes the company’s retail stores in
the U.S. and Canada. The company’s European results are presented as
discontinued operations, and its remaining results of operations outside
of North America are presented as a reconciling item in the company’s
segment reporting. For comparability, 2015 and 2016 quarterly results
have been recast to align with the company’s new structure and can be
accessed on the company’s investor relations website at
investor.staples.com.
North American Delivery | ||||||||||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||||||||||
(dollar amounts in millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Sales | $2,649 | $2,680 | -1.2 | % | $10,636 | $10,731 | -0.9 | % | ||||||||||||||||
Comparable sales*^ | 1 | % | 1 | % | ||||||||||||||||||||
Operating income | $168 | $168 | $1 | $672 | $621 | $51 | ||||||||||||||||||
Operating income rate | 6.4 | % | 6.3 | % | 10 basis points | 6.3 | % | 5.8 | % | 52 basis points | ||||||||||||||
*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information” and the accompanying reconciliations for more detailed information about these non-GAAP measures. |
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^North American Delivery comparable sales excludes the impact of acquisitions, divestitures and foreign currency translation. |
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North American Delivery sales for the fourth quarter of 2016 were $2.6 billion, a decline of one percent compared to the fourth quarter of 2015. North American Delivery comparable sales grew one percent compared to the fourth quarter of 2015. The improvement in fourth quarter comparable sales primarily reflects growth in facilities supplies, computers, and breakroom supplies, partially offset by declines in tablets, ink and toner and office supplies. Staples Business Advantage sales were about flat on a GAAP basis and comparable sales increased four percent versus the fourth quarter of 2015.
Operating income rate increased 10 basis points to 6.4 percent compared to the fourth quarter of 2015. This improvement primarily reflects increased product margin rate. This was partially offset by increased incentive compensation expense, supply chain costs, and marketing expense.
North American Retail | ||||||||||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||||||||||
(dollar amounts in millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Sales | $1,649 | $1,797 | -8.2 | % | $6,662 | $7,169 | -7.1 | % | ||||||||||||||||
Comparable store sales | -7 | % | -5 | % | ||||||||||||||||||||
Operating income | $99 | $106 | -$7 | $317 | $379 | -$62 | ||||||||||||||||||
Operating income rate | 6.0 | % | 5.9 | % | 11 basis points | 4.8 | % | 5.3 | % | -52 basis points | ||||||||||||||
North American Retail sales for the fourth quarter of 2016 were $1.6 billion, a decrease of eight percent compared to the fourth quarter of 2015. Store closures negatively impacted fourth quarter 2016 sales growth by approximately two percent. Comparable store sales decreased seven percent versus the prior year. Sales declines in mobility, business machines, technology accessories, and ink and toner were partially offset by growth in print and marketing services.
Operating income rate increased 11 basis points to 6.0 percent compared to the fourth quarter of 2015. This primarily reflects increased product margin rate. This was partially offset by increased incentive compensation expense and the negative impact of lower sales on fixed expenses.
The company closed 13 stores during the fourth quarter of 2016 and 48 stores for the full year in North America and ended the year with 1,255 stores in the U.S. and 304 stores in Canada.
Discontinued Operations
During the fourth quarter of 2016,
the company completed the sale of its retail business in the United
Kingdom. The company also entered into an agreement to sell a
controlling interest in its remaining European operations during the
fourth quarter of 2016, and completed this sale in February 2017. As a
result of these transactions, the results of the company’s European
operations have been classified as discontinued operations. The company
recorded an after-tax loss from discontinued operations of $337 million
in the fourth quarter, which includes $231 million of pre-tax charges
related to impairment of long-lived assets and a $114 million pre-tax
loss on the sale of the company’s retail business in the United Kingdom.
This compares to an after-tax loss of $44 million from discontinued
operations in the fourth quarter of 2015.
For the full year 2016, the company recorded an after-tax loss from discontinued operations of $1.0 billion related to its European businesses, which includes $918 million of charges related to impairment of goodwill and long-lived assets. This compares to an after-tax loss from discontinued operations of $83 million during 2015.
Outlook
For the first quarter of 2017, the company expects
to achieve fully diluted non-GAAP earnings per share from continuing
operations in the range of $0.15 to $0.18. The company’s earnings
guidance excludes potential charges related to the company’s strategic
plans, including restructuring and related initiatives and the sale of
its European operations. For the full year 2017, the company expects to
generate at least $500 million of free cash flow. The company plans to
close approximately 70 stores in North America in 2017.
Presentation of Non-GAAP Information
This press release
presents certain results with and without the impairment of goodwill,
restructuring and related charges, long-lived asset impairment, gains
and losses related to the sale of businesses and assets, costs related
to the proposed acquisition of Office Depot, costs related to litigation
and PNI data security incident costs. This press release also presents
certain results both with and without the impact of acquisitions,
divestitures, store closures, and foreign currency translation. The
presentation of these results, as well as the presentation of free cash
flow, are non-GAAP financial measures that should be considered in
addition to, and should not be considered superior to, or as a
substitute for, the presentation of results determined in accordance
with GAAP. Management believes that the non-GAAP financial measures
assist management and investors to analyze the company’s performance by
providing meaningful information that facilitates the comparability of
underlying business results from period to period. Management uses these
non-GAAP financial measures to evaluate the operating results of the
company’s business against prior year results and its operating plan,
and to forecast and analyze future periods. Management recognizes there
are limitations associated with the use of non-GAAP financial measures
as they may reduce comparability with other companies that use different
methods to calculate similar non-GAAP measures. Management generally
compensates for these limitations by considering GAAP as well as
non-GAAP results. In addition, management provides a reconciliation to
the most comparable GAAP financial measure, other than financial
guidance which is only provided on a non-GAAP basis given that potential
charges to be incurred related to the company’s strategic plans,
including restructuring and related initiatives, and the potential
related impact on cash flow cannot be reasonably estimated.
Today's Conference Call
The company will host a conference
call today at 8:00 a.m. (ET) to review these results and its outlook.
The webcast of the conference call and accompanying slides can be
accessed on the company’s investor relations website at
investor.staples.com. A replay will also be available on the company’s
investor relations website after the call.
About Staples, Inc.
Staples helps small business customers
make more happen by providing a broad assortment of products, expanded
business services and easy ways to shop – in stores, online via mobile
or through social apps. Staples Business Advantage, the
business-to-business division, caters to mid-market, commercial and
enterprise-sized customers by offering a one-source solution for the
products and services they need, combined with best-in-class customer
service, competitive pricing and a state-of-the-art ecommerce site.
Headquartered outside of Boston, Staples, Inc. operates throughout North
and South America, Asia, Australia and New Zealand. More information
about Staples (NASDAQ: SPLS) is available at www.staples.com.
Safe Harbor for Forward-looking Statements
Certain
information contained in this news release constitutes forward-looking
statements for purposes of the safe harbor provisions of The Private
Securities Litigation Reform Act of 1995 including, but not limited to,
the information set forth under “Outlook” and other statements regarding
our future business and financial performance. Any statements contained
in this news release that are not statements of historical fact should
be considered forward-looking statements. You can identify
forward-looking statements by the use of the words “believes”,
“expects”, “anticipates”, “plans”, “may”, “will”, “would”, “intends”,
“estimates”, and other similar expressions, whether in the negative or
affirmative, although not all forward-looking statements include such
words. Forward-looking statements are based on a series of expectations,
assumptions, estimates and projections which involve substantial
uncertainty and risk, including the review of our assessments by our
outside auditor and changes in management’s assumptions and projections.
Actual results may differ materially from those indicated by such
forward-looking statements as a result of risks and uncertainties,
including but not limited to our ability to meet the changing needs of
our customers; our ability to successfully transform our business,
including that the investments we plan to make to accelerate growth in
our mid-market contract business may not generate incremental revenue or
increase profitability, in which case the costs of such investments will
adversely affect our future operating results; industry, operating and
competitive pressures and global economic conditions, including their
impact on prices and demand for our products and services, our financial
condition and our results of operations; compromises of our information
security; our ability to retain qualified employees; risks related to
international operations and fluctuations in foreign exchange rates;
changes in our effective tax rate; the impact of regulation and
regulatory, investigative and legal proceedings and legal compliance
risks; and factors discussed or referenced in our Annual Report on Form
10-K filed on March 9, 2017 under the heading “Risk Factors” and
elsewhere, and any subsequent periodic or current reports filed by us
with the SEC. In addition, any forward-looking statements represent our
estimates only as of the date such statements are made (unless another
date is indicated) and should not be relied upon as representing our
estimates as of any subsequent date. While we may elect to update
forward-looking statements at some point in the future, we specifically
disclaim any obligation to do so, even if our estimates change.
STAPLES, INC. AND SUBSIDIARIES |
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Condensed Consolidated Balance Sheets |
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(Dollar Amounts in Millions, Except Share Data) |
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(Unaudited) |
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January 28, 2017 | January 30, 2016 | |||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 1,137 | $ | 825 | ||||||
Receivables, net | 1,538 | 1,543 | ||||||||
Merchandise inventories, net | 1,737 | 1,791 | ||||||||
Prepaid expenses and other current assets | 251 | 273 | ||||||||
Current assets of discontinued operations | 568 | 680 | ||||||||
Total current assets | 5,231 | 5,112 | ||||||||
Property and equipment, net | 1,147 | 1,286 | ||||||||
Intangible assets, net of accumulated amortization | 205 | 235 | ||||||||
Goodwill | 1,290 | 2,032 | ||||||||
Other assets | 398 | 497 | ||||||||
Noncurrent assets of discontinued operations | — | 1,010 | ||||||||
Total assets | $ | 8,271 | $ | 10,172 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 1,706 | $ | 1,685 | ||||||
Accrued expenses and other current liabilities | 1,023 | 1,160 | ||||||||
Debt maturing within one year | 519 | 15 | ||||||||
Current liabilities of discontinued operations | 402 | 405 | ||||||||
Total current liabilities | 3,650 | 3,265 | ||||||||
Long-term debt | 529 | 1,016 | ||||||||
Other long-term obligations | 396 | 441 | ||||||||
Noncurrent liabilities of discontinued operations | — | 66 | ||||||||
Stockholders’ equity: | ||||||||||
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued | — | — | ||||||||
Common stock, $.0006 par value, 2,100,000,000 shares authorized;
issued and |
1 | 1 | ||||||||
Additional paid-in capital | 5,067 | 5,010 | ||||||||
Accumulated other comprehensive loss | (1,053 | ) | (1,116 | ) | ||||||
Retained earnings | 5,092 | 6,900 | ||||||||
Less: Treasury stock at cost, 301,241,189 shares at January 28, 2017 and January 30, 2016 | (5,419 | ) | (5,419 | ) | ||||||
Total Staples, Inc. stockholders’ equity | 3,688 | 5,376 | ||||||||
Noncontrolling interests | 8 | 8 | ||||||||
Total stockholders’ equity | 3,696 | 5,384 | ||||||||
Total liabilities and stockholders’ equity | $ | 8,271 | $ | 10,172 |
STAPLES, INC. AND SUBSIDIARIES |
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Condensed Consolidated Statements of Income |
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(Amounts in Millions, Except Per Share Data) |
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(Unaudited) |
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13 Weeks Ended | 52 Weeks Ended | |||||||||||||||||||
January 28, 2017 |
January 30, 2016 |
January 28, 2017 |
January 30, 2016 |
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Sales | $ | 4,560 | $ | 4,695 | $ | 18,247 | $ | 18,764 | ||||||||||||
Cost of goods sold and occupancy costs | 3,326 | 3,468 | 13,489 | 13,857 | ||||||||||||||||
Gross profit | 1,234 | 1,227 | 4,758 | 4,907 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | 977 | 988 | 3,845 | 3,993 | ||||||||||||||||
Merger termination fee | — | — | 250 | — | ||||||||||||||||
Impairment of goodwill and long-lived assets | 766 | 11 | 783 | 37 | ||||||||||||||||
Restructuring charges | 21 | 37 | 38 | 105 | ||||||||||||||||
Amortization of intangibles | 13 | 14 | 51 | 54 | ||||||||||||||||
Total operating expenses | 1,777 | 1,050 | 4,967 | 4,189 | ||||||||||||||||
Loss on sale of businesses and assets, net | (5 | ) | (7 | ) | (55 | ) | (5 | ) | ||||||||||||
Operating (loss) income | (548 | ) | 170 | (264 | ) | 713 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 1 | 1 | 6 | 3 | ||||||||||||||||
Interest expense | (10 | ) | (49 | ) | (81 | ) | (139 | ) | ||||||||||||
Loss on early extinguishment of debt | — | — | (26 | ) | — | |||||||||||||||
Other income (expense), net | 8 | (4 | ) | 13 | (13 | ) | ||||||||||||||
(Loss) income from continuing operations before income taxes | (549 | ) | 118 | (352 | ) | 564 | ||||||||||||||
Income tax expense | 66 | (12 | ) | 107 | 102 | |||||||||||||||
(Loss) income from continuing operations | (615 | ) | 130 | (459 | ) | 462 | ||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Pretax income (loss) of discontinued operations | 5 | (37 | ) | (700 | ) | (72 | ) | |||||||||||||
Loss recognized on classification as held for sale | (231 | ) | — | (231 | ) | — | ||||||||||||||
Loss on sale | (114 | ) | — | (114 | ) | — | ||||||||||||||
Total pretax loss of discontinued operations | (340 | ) | (37 | ) | (1,045 | ) | (72 | ) | ||||||||||||
Income tax (benefit) expense | (3 | ) | 7 | (7 | ) | 11 | ||||||||||||||
Loss from discontinued operations, net of income taxes | (337 | ) | (44 | ) | (1,038 | ) | (83 | ) | ||||||||||||
Net (loss) income | $ | (952 | ) | $ | 86 | $ | (1,497 | ) | $ | 379 | ||||||||||
Basic Earnings per share | ||||||||||||||||||||
Continuing operations | $ | (0.94 | ) | $ | 0.20 | $ | (0.71 | ) | $ | 0.71 | ||||||||||
Discontinued operations | (0.52 | ) | (0.07 | ) | (1.60 | ) | (0.12 | ) | ||||||||||||
Consolidated operations | $ | (1.46 | ) | $ | 0.13 | $ | (2.31 | ) | $ | 0.59 | ||||||||||
Diluted Earnings per Share: | ||||||||||||||||||||
Continuing operations | $ | (0.94 | ) | $ | 0.20 | $ | (0.71 | ) | $ | 0.71 | ||||||||||
Discontinued operations | $ | (0.52 | ) | (0.07 | ) | (1.60 | ) | (0.12 | ) | |||||||||||
Consolidated operations | $ | (1.46 | ) | $ | 0.13 | $ | (2.31 | ) | $ | 0.59 | ||||||||||
Dividends declared per common share | $ | 0.12 | $ | 0.12 | $ | 0.48 | $ | 0.48 |
STAPLES, INC. AND SUBSIDIARIES | ||||||||||
Consolidated Statements of Comprehensive Income | ||||||||||
(Amounts in Millions) | ||||||||||
13 Weeks Ended | ||||||||||
January 28, 2017 | January 30, 2016 | |||||||||
Consolidated comprehensive (loss) income | $ | (909 | ) | $ | 83 | |||||
52 Weeks Ended | ||||||||||
January 28, 2017 | January 30, 2016 | |||||||||
Consolidated net (loss) income | $ | (1,497 | ) | $ | 379 | |||||
Other comprehensive income (loss), net of tax: | ||||||||||
Foreign currency translation adjustments | 25 | (132 | ) | |||||||
Disposal of foreign business, net | 6 | — | ||||||||
Settlements and curtailments of pension and other post-retirement obligations | 23 | — | ||||||||
Deferred pension and other post-retirement benefit costs, net | 9 | 57 | ||||||||
Other comprehensive income (loss), net of tax | 63 | (75 | ) | |||||||
Consolidated comprehensive (loss) income | $ | (1,434 | ) | $ | 304 |
STAPLES, INC. AND SUBSIDIARIES | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(Amounts in Millions) | |||||||
(Unaudited) | |||||||
52 Weeks Ended | |||||||
January 28, 2017 | January 30, 2016 | ||||||
Operating Activities: | |||||||
Net (loss) income | $ | (1,497 | ) | $ | 379 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Depreciation | 378 | 388 | |||||
Amortization of intangibles | 58 | 67 | |||||
Loss on sale of businesses and assets, net | 168 | 5 | |||||
Interest and fees paid from restricted cash account, net | 66 | — | |||||
Impairment of goodwill and long-lived assets | 1,700 | 50 | |||||
Inventory write-downs related to restructuring activities | — | 1 | |||||
Stock-based compensation | 61 | 63 | |||||
Excess tax benefits from stock-based compensation arrangements | — | (5 | ) | ||||
Deferred income tax expense | 57 | 28 | |||||
Other | 19 | 11 | |||||
Changes in assets and liabilities: | |||||||
Decrease (increase) in receivables | 21 | (19 | ) | ||||
Decrease in merchandise inventories | 63 | 18 | |||||
Decrease (increase) in prepaid expenses and other assets | 34 | (41 | ) | ||||
Increase in accounts payable | 4 | 63 | |||||
(Decrease) increase in accrued expenses and other liabilities | (140 | ) | 110 | ||||
Decrease in other long-term obligations | (58 | ) | (140 | ) | |||
Net cash provided by operating activities | 934 | 978 | |||||
Investing Activities: | |||||||
Acquisition of property and equipment | (255 | ) | (381 | ) | |||
Proceeds from the sale of property and equipment | 14 | 27 | |||||
Sale of businesses, net | 55 | 2 | |||||
Increase in restricted cash | (66 | ) | — | ||||
Acquisition of businesses, net of cash acquired | (44 | ) | (22 | ) | |||
Cost method investments | (15 | ) | — | ||||
Net cash used in investing activities | (311 | ) | (374 | ) | |||
Financing Activities: | |||||||
Proceeds from the exercise of stock options and sale of stock under employee stock purchase plans | 30 | 41 | |||||
Proceeds from borrowings | 187 | 7 | |||||
Payments on borrowings, including payment of deferred financing fees and capital lease obligations | (211 | ) | (99 | ) | |||
Cash dividends paid | (311 | ) | (308 | ) | |||
Excess tax benefits from stock-based compensation arrangements | — | 5 | |||||
Repurchase of common stock | (13 | ) | (24 | ) | |||
Net cash used in financing activities | (318 | ) | (378 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 7 | (28 | ) | ||||
Net increase in cash and cash equivalents | 312 | 198 | |||||
Cash and cash equivalents at beginning of period | 825 | 627 | |||||
Cash and cash equivalents at the end of the period | $ | 1,137 | $ | 825 |
STAPLES, INC. AND SUBSIDIARIES | ||||||||||||||||||||
Segment Reporting | ||||||||||||||||||||
(Amounts in Millions) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
13 Weeks Ended | 52 Weeks Ended | |||||||||||||||||||
January 28, 2017 | January 30, 2016 | January 28, 2017 | January 30, 2016 | |||||||||||||||||
Sales | ||||||||||||||||||||
North American Delivery | $ | 2,649 | $ | 2,680 | $ | 10,636 | $ | 10,731 | ||||||||||||
North American Retail | 1,649 | 1,797 | 6,662 | 7,169 | ||||||||||||||||
Other | 262 | 218 | 949 | 864 | ||||||||||||||||
Total sales | $ | 4,560 | $ | 4,695 | $ | 18,247 | $ | 18,764 | ||||||||||||
Business Unit Income (Loss) | ||||||||||||||||||||
North American Delivery | $ | 168 | $ | 168 | $ | 672 | $ | 621 | ||||||||||||
North American Retail | 99 | 106 | 317 | 379 | ||||||||||||||||
Other | (2 | ) | (3 | ) | (11 | ) | (16 | ) | ||||||||||||
Total business unit income | 265 | 271 | 978 | 984 | ||||||||||||||||
Unallocated expense | (22 | ) | (10 | ) | (73 | ) | (49 | ) | ||||||||||||
Impairment of goodwill and long-lived assets | (766 | ) | (11 | ) | (783 | ) | (37 | ) | ||||||||||||
Loss related to sale of businesses and assets, net | (5 | ) | (7 | ) | (55 | ) | (5 | ) | ||||||||||||
Restructuring charges and costs related to strategic plans | (23 | ) | (37 | ) | (45 | ) | (105 | ) | ||||||||||||
Interest and other expense, net | (1 | ) | (52 | ) | (88 | ) | (149 | ) | ||||||||||||
Merger-related costs | — | (20 | ) | (272 | ) | (53 | ) | |||||||||||||
Litigation costs | 3 | — | (14 | ) | — | |||||||||||||||
Inventory write-downs | — | — | — | (1 | ) | |||||||||||||||
Accelerated depreciation | — | — | — | (3 | ) | |||||||||||||||
PNI data security incident costs | — | (16 | ) | — | (18 | ) | ||||||||||||||
(Loss) income from continuing operations before income taxes | $ | (549 | ) | $ | 118 | $ | (352 | ) | $ | 564 |
STAPLES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Income Statement Disclosures | ||||||||||||||||||||||||||||||
(Dollar Amounts in Millions, Except Per Share Data) | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
For the non-GAAP measures related to results of operations, reconciliations to the most directly comparable GAAP measures are shown below: |
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13 Weeks Ended | ||||||||||||||||||||||||||||||
January 28, 2017 | ||||||||||||||||||||||||||||||
GAAP | Impairment of goodwill and long-lived assets | Loss on sale of businesses and assets, net | Costs related to restructuring and strategic plans | Litigation | Non-GAAP | |||||||||||||||||||||||||
Operating (loss) income | $ | (548 | ) | $ | 766 | $ | 5 | $ | 23 | $ | (3 | ) | $ | 243 | ||||||||||||||||
Interest and other expense, net | 1 | — | — | — | $ | — | 1 | |||||||||||||||||||||||
(Loss) income from continuing operations before income taxes | (549 | ) | 242 | |||||||||||||||||||||||||||
Income tax expense | 66 | 66 | ||||||||||||||||||||||||||||
Adjustments | — | 15 | ||||||||||||||||||||||||||||
Adjusted income tax expense | 66 | 81 | ||||||||||||||||||||||||||||
(Loss) income from continuing operations | $ | (615 | ) | $ | 161 | |||||||||||||||||||||||||
Effective tax rate | (12.0 | )% | 33.5 | % | ||||||||||||||||||||||||||
(Loss) income from continuing operations per common share: | ||||||||||||||||||||||||||||||
Diluted earnings per common share | $ | (0.94 | ) | $ | 0.25 |
52 Weeks Ended | ||||||||||||||||||||||||||||
January 28, 2017 | ||||||||||||||||||||||||||||
GAAP | Impairment of goodwill and long-lived assets | Merger-related costs | Loss on sale of businesses and assets, net | Litigation | Costs related to restructuring and strategic plans | Non-GAAP | ||||||||||||||||||||||
Gross profit | $ | 4,758 | $ | — | $ | — | $ | — | $ | — | $ | 4 | $ | 4,762 | ||||||||||||||
Operating (loss) income | (264 | ) | 783 | 272 | 55 | 14 | 45 | 905 | ||||||||||||||||||||
Interest and other expense, net | 62 | (37 | ) | 25 | ||||||||||||||||||||||||
Loss on early extinguishment of debt | 26 | (26 | ) | — | ||||||||||||||||||||||||
(Loss) income from continuing operations before income taxes | (352 | ) | 880 | |||||||||||||||||||||||||
Income tax expense | 107 | 107 | ||||||||||||||||||||||||||
Adjustments | — | 187 | ||||||||||||||||||||||||||
Adjusted income tax expense | 107 | 294 | ||||||||||||||||||||||||||
(Loss) income from continuing operations | $ | (459 | ) | $ | 586 | |||||||||||||||||||||||
Effective tax rate | (30.5 | )% | 33.5 | % | ||||||||||||||||||||||||
(Loss) income from continuing operations per common share: | ||||||||||||||||||||||||||||
Diluted earnings per common share | $ | (0.71 | ) | $ | 0.90 | |||||||||||||||||||||||
Weighted average common shares outstanding | 649 | 649 | ||||||||||||||||||||||||||
Effect of dilutive securities | — | 4 | ||||||||||||||||||||||||||
Weighted average common shares outstanding assuming dilution | 649 | 653 |
13 Weeks Ended | ||||||||||||||||||||||||||||
January 30, 2016 | ||||||||||||||||||||||||||||
GAAP | Restructuring charges | Loss on sale of businesses and assets, net | Impairment of long lived assets | Merger-related costs | PNI data security incident costs | Non-GAAP | ||||||||||||||||||||||
Operating income | $ | 170 | $ | 37 | $ | 7 | $ | 11 | $ | 20 | $ | 16 | $ | 261 | ||||||||||||||
Interest and other expense, net | 52 | — | — | — | (38 | ) | — | 14 | ||||||||||||||||||||
Income from continuing operations before income taxes | 118 | 247 | ||||||||||||||||||||||||||
Income tax benefit | (12 | ) | (12 | ) | ||||||||||||||||||||||||
Adjustments | — | 91 | ||||||||||||||||||||||||||
Adjusted income tax expense | (12 | ) | 79 | |||||||||||||||||||||||||
Income from continuing operations | $ | 130 | $ | 168 | ||||||||||||||||||||||||
Effective tax rate | (10.7 | )% | 31.8 | % | ||||||||||||||||||||||||
Income from continuing operations per common share: | ||||||||||||||||||||||||||||
Diluted earnings per common share | $ | 0.20 | $ | 0.26 |
52 Weeks Ended | ||||||||||||||||||||||||||||
January 30, 2016 | ||||||||||||||||||||||||||||
GAAP | Restructuring charges | Impairment of long-lived assets and accelerated depreciation | Loss on sale of assets, net | Merger-related costs | PNI data security incident costs | Non-GAAP | ||||||||||||||||||||||
Operating income | $ | 713 | $ | 105 | $ | 39 | $ | 5 | $ | 53 | $ | 18 | $ | 933 | ||||||||||||||
Interest and other expense, net | 149 | — | — | — | 94 | — | 55 | |||||||||||||||||||||
Income from continuing operations before income taxes | 564 | 878 | ||||||||||||||||||||||||||
Income taxes | 102 | 102 | ||||||||||||||||||||||||||
Adjustments | — | 178 | ||||||||||||||||||||||||||
Adjusted income taxes | 102 | 280 | ||||||||||||||||||||||||||
Income from continuing operations | $ | 462 | $ | 598 | ||||||||||||||||||||||||
Effective tax rate | 18.1 | % | 31.8 | % | ||||||||||||||||||||||||
Income from continuing operations per common share: | ||||||||||||||||||||||||||||
Diluted earnings per common share | $ | 0.71 | $ | 0.93 |
Note that certain percentage figures shown in the tables above may not recalculate due to rounding.
STAPLES, INC. AND SUBSIDIARIES | ||||||||
Reconciliation of GAAP to Non-GAAP Sales Growth | ||||||||
(Unaudited) | ||||||||
Total Company Comparable Sales Growth | ||||||||
Fourth quarter of Fiscal 2016 | Fiscal Year 2016 | |||||||
GAAP sales growth | (2.9 | )% | (2.8 | )% | ||||
Impact of foreign exchange | 0.3 | % | (0.4 | )% | ||||
Impact of store closures | (0.8 | )% | (0.8 | )% | ||||
Impact of acquisitions and divestitures | (1.5 | )% | (0.9 | )% | ||||
Comparable sales growth | (0.9 | )% | (0.7 | )% |
North American Delivery Comparable Sales Growth | ||||||||
Fourth quarter of Fiscal 2016 | Fiscal Year 2016 | |||||||
GAAP sales growth | (1.2 | )% | (0.9 | )% | ||||
Impact of foreign exchange | 0.2 | % | (0.1 | )% | ||||
Impact of divestitures | (3.5 | )% | (2.0 | )% | ||||
Impact of acquisitions | 0.9 | % | 0.3 | % | ||||
Comparable sales growth | 1.2 | % | 0.9 | % |
Staples Business Advantage Comparable Sales Growth | ||||
Fourth quarter of Fiscal 2016 | ||||
GAAP sales growth | (0.2 | )% | ||
Impact of foreign exchange | 0.2 | % | ||
Impact of divestitures | (5.3 | )% | ||
Impact of acquisitions | 1.3 | % | ||
Comparable sales growth | 3.6 | % |
STAPLES, INC. AND SUBSIDIARIES | ||||||||
Reconciliation of Free Cash Flow Disclosures | ||||||||
(Amounts in Millions) | ||||||||
(Unaudited) | ||||||||
52 Weeks Ended | ||||||||
January 28, 2017 | January 30, 2016 | |||||||
Net cash provided by operating activities | $ | 934 | $ | 978 | ||||
Acquisition of property and equipment | (255 | ) | (381 | ) | ||||
Free cash flow | $ | 679 | $ | 597 | ||||
Financing and break-up fees related to acquisition of Office Depot, net of taxes | 210 | — | ||||||
Adjusted free cash flow | $ | 889 | $ | 597 | ||||
Free cash flow is not defined under U.S. GAAP. Therefore, it should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. The company defines free cash flow as net cash provided by operating activities less capital expenditures. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The company believes free cash flow is a useful measure of performance and uses this measure as an indication of the company's ability to generate cash and invest in its business. |