STAPLES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 3, 2017

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Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Information

On February 27, 2017, Staples, Inc. and subsidiaries (“Staples", or "the Company”) completed the sale of a controlling interest in its European operations (other than its retail business in the United Kingdom, the sale of which was completed on November 18, 2016 in a separate transaction). Beginning in the fourth quarter of 2016, the Company's European operations, including its retail business in the United Kingdom, have been reported as discontinued operations in the Company's consolidated financial statements. The accompanying unaudited pro forma condensed consolidated statements of operations for the 39 weeks ended October 29, 2016 and for fiscal years 2015, 2014 and 2013 give effect to both of these dispositions as if they had occurred on February 3, 2013, the first day of fiscal year 2013. The following unaudited pro forma condensed consolidated balance sheet gives effect to these dispositions as if they had occurred on October 29, 2016, the date of the Company’s most recently filed balance sheet.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Staples’ Form 10-K for the fiscal year ended January 30, 2016 filed with the SEC on March 4, 2016, and (ii) the unaudited condensed consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in Staples’ Form 10-Q for the three and nine months ended October 29, 2016 filed with the SEC on November 17, 2016.
The unaudited pro forma condensed consolidated financial statements are presented based on currently available information and are intended for informational purposes only. These unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what Staples’ results of operations or financial condition would have been had the dispositions been completed on the dates assumed. In addition, they are not necessarily indicative of Staples’ future results of operations or financial condition.




Staples Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
October 29, 2016
(amounts in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
As Reported
 
Disposal of UK Retail
 
Disposal of European Operations
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,076

 
$
28

(i)
$
129

(ii)
$
919

Receivables, net
 
1,865

 
10

 
303

 
1,552

Merchandise inventories, net
 
2,019

 
42

 
211

 
1,765

Prepaid expenses and other current assets
 
374

 
8

 
33

 
333

Total current assets
 
5,334

 
88

 
676

 
4,569

 
 
 
 
 
 
 
 
 
Net property and equipment
 
1,412

 
15

 
234

 
1,163

Intangible assets, net
 
202

 
—

 
5

 
197

Goodwill
 
2,010

 
—

 
—

 
2,010

Other assets
 
429

 
3

 
46

 
380

Total assets
 
$
9,387

 
$
106

 
$
961

 
$
8,320

 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
2,025

 
$
18

 
$
191

 
$
1,816

Accrued expenses and other current liabilities
 
1,193

 
14

 
162

 
1,017

Debt maturing within one year
 
23

 
—

 
2

 
21

Total current liabilities
 
3,241

 
32

 
355

 
2,854

 
 
 
 
 
 
 
 
 
Long-term debt
 
1,024

 
—

 
1

 
1,023

Other long-term obligations
 
467

 
(30
)
(iii)
79

 
418

 
 
 
 
 
 
 
 
 
Total stockholders’ equity
 
4,655

 
104

 
526

 
4,025

Total liabilities and stockholders’ equity
 
$
9,387

 
$
106

 
$
961

 
$
8,320


(i) Upon completion of this transaction on November 18, 2016, Staples delivered its retail business in the United Kingdom with approximately $28 million (£22 million) of cash on-hand.
(ii) Represents $182 million (€172 million) of cash on-hand at the European Operations as of February 27, 2017, the closing date of this transaction, net of $53 million (€50 million) of cash proceeds related to the sale. Cash on-hand included $175 million (€166 million) related to a preliminary estimate of the requisite unrestricted cash, as defined in the SPA, plus an additional $7 million (€6 million) related to other obligations outlined in the SPA.
(iii) Represents a $34 million incremental liability related to certain ongoing lease guarantees, net of $4 million of obligations that were transferred to the buyer. For the purpose of the pro forma financial information, the Company has assumed that amounts paid in the future related to the lease guarantees will be consistent with the liability reflected in the pro forma condensed consolidated balance sheet.






Staples Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
39 Weeks Ended October 29, 2016
(amounts in millions, except per share data)

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
As Reported
 
Disposal of UK Retail
 
Disposal of European Operations
 
Pro Forma
 
 
 
 
 
 
 
 
 
Sales
 
$
15,208

 
$
177

 
$
1,345

 
$
13,686

Cost of goods sold and occupancy costs
 
11,285

 
132

 
991

 
10,162

Gross profit
 
3,923

 
45

 
354

 
3,524

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative
 
3,277

 
52

 
358

 
2,867

Merger termination fee
 
250

 
—

 
—

 
250

Impairment of goodwill and long-lived assets
 
704

 
3

 
683

 
18

Restructuring charges
 
17

 
(1
)
 
1

 
17

Amortization of intangibles
 
44

 
—

 
6

 
38

Total operating expenses
 
4,292

 
54

 
1,048

 
3,190

 
 
 
 
 
 
 
 
 
Loss on the sale of businesses, property and equipment
 
(50
)
 
—

 
—

 
(50
)
 
 
 
 
 
 
 
 
 
Operating (loss) income
 
(419
)
 
(9
)
 
(694
)
 
284

 
 
 
 
 
 
 
 
 
Interest income
 
5

 
—

 
—

 
5

Interest expense
 
(71
)
 
—

 
—

 
(71
)
Loss on early extinguishment of debt
 
(26
)
 
—

 
—

 
(26
)
Other income (expense), net
 
3

 
—

 
(3
)
 
6

Interest and other expense, net
 
(89
)
 
—

 
(3
)
 
(86
)
(Loss) income before income taxes
 
(508
)
 
(9
)
 
(697
)
 
198

Income tax expense (benefit)
 
37

 
—

 
(4
)
 
41

Net (loss) income
 
$
(545
)
 
$
(9
)
 
$
(693
)
 
$
157

 
 
 
 
 
 
 
 
 
Basic and diluted earnings per share
 
$
(0.84
)
 
 
 
 
 
$
0.24

 
 
 
 
 
 
 
 
 
Basic shares
 
648

 
 
 
 
 
648

Diluted shares
 
648

 
 
 
 
 
652

 
 
 
 
 
 
 
 
 






Staples Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
52 Weeks Ended January 30, 2016
(amounts in millions, except per share data)

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
As Reported
 
Disposal of UK Retail
 
Disposal of European Operations
 
Pro Forma
 
 
 
 
 
 
 
 
 
Sales
 
$
21,059

 
$
302

 
$
1,993

 
$
18,764

Cost of goods sold and occupancy costs
 
15,545

 
232

 
1,456

 
13,857

Gross profit
 
5,514

 
70

 
537

 
4,907

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative
 
4,600

 
87

 
520

 
3,993

Impairment of long-lived assets
 
50

 
2

 
12

 
37

Restructuring charges
 
151

 
7

 
39

 
105

Amortization of intangibles
 
67

 
—

 
13

 
54

Total operating expenses
 
4,868

 
96

 
584

 
4,189

 
 
 
 
 
 
 
 
 
Loss on the sale of businesses, property and equipment
 
(5
)
 
—

 
—

 
(5
)
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
641

 
(26
)
 
(47
)
 
713

 
 
 
 
 
 
 
 
 
Interest income
 
3

 
—

 
—

 
3

Interest expense
 
(139
)
 
—

 
—

 
(139
)
Other income (expense), net
 
(13
)
 
—

 
—

 
(13
)
Interest and other expense, net
 
(149
)
 
—

 
—

 
(149
)
Income (loss) before income taxes
 
492

 
(26
)
 
(47
)
 
564

Income tax expense
 
113

 
—

 
11

 
102

Net income (loss)
 
$
379

 
$
(26
)
 
$
(58
)
 
$
462

 
 
 
 
 
 
 
 
 
Basic and diluted earnings per share
 
$
0.59

 
 
 
 
 
$
0.71

 
 
 
 
 
 
 
 
 
Basic shares
 
642

 
 
 
 
 
642

Diluted shares
 
647

 
 
 
 
 
647

 
 
 
 
 
 
 
 
 





Staples Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
52 Weeks Ended January 31, 2015
(amounts in millions, except per share data)

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
As Reported
 
Disposal of UK Retail
 
Disposal of European Operations
 
Pro Forma
 
 
 
 
 
 
 
 
 
Sales
 
$
22,492

 
$
359

 
$
2,449

 
$
19,684

Cost of goods sold and occupancy costs
 
16,691

 
268

 
1,777

 
14,646

Gross profit
 
5,801

 
91

 
672

 
5,038

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative
 
4,816

 
98

 
622

 
4,096

Impairment of goodwill and long-lived assets
 
470

 
—

 
1

 
469

Restructuring charges
 
171

 
2

 
11

 
158

Amortization of intangibles
 
62

 
—

 
14

 
48

Total operating expenses
 
5,518

 
100

 
648

 
4,771

 
 
 
 
 
 
 
 
 
Gain (loss) on the sale of businesses, property and equipment
 
27

 
—

 
(2
)
 
29

 
 
 
 
 
 
 
 
 
Operating income (loss)
 
310

 
(9
)
 
22

 
296

 
 
 
 
 
 
 
 
 
Interest income
 
3

 
—

 
1

 
2

Interest expense
 
(49
)
 
—

 
(1
)
 
(48
)
Other income (expense), net
 
4

 
—

 
1

 
3

Interest and other expense, net
 
(42
)
 
—

 
1

 
(43
)
Income (loss) before income taxes
 
268

 
(9
)
 
23

 
253

Income tax expense
 
133

 
—

 
5

 
128

Net income (loss)
 
$
135

 
$
(9
)
 
$
18

 
$
125

 
 
 
 
 
 
 
 
 
Basic and diluted earnings per share
 
$
0.21

 
 
 
 
 
$
0.19

 
 
 
 
 
 
 
 
 
Basic shares
 
641

 
 
 
 
 
641

Diluted shares
 
646

 
 
 
 
 
646

 
 
 
 
 
 
 
 
 





Staples Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
52 Weeks Ended February 1, 2014
(amounts in millions, except per share data)

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
As Reported
 
Disposal of UK Retail
 
Disposal of European Operations
 
Pro Forma
 
 
 
 
 
 
 
 
 
Sales
 
$
23,114

 
$
357

 
$
2,577

 
$
20,180

Cost of goods sold and occupancy costs
 
17,082

 
274

 
1,894

 
14,915

Gross profit
 
6,032

 
83

 
683

 
5,265

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative
 
4,735

 
95

 
622

 
4,017

Restructuring charges
 
64

 
1

 
43

 
20

Amortization of intangibles
 
55

 
—

 
14

 
41

Total operating expenses
 
4,855

 
96

 
679

 
4,080

 
 
 
 
 
 
 
 
 
Operating income (loss)
 
1,177

 
(13
)
 
4

 
1,186

 
 
 
 
 
 
 
 
 
Interest income
 
5

 
—

 
—

 
5

Interest expense
 
(119
)
 
—

 
—

 
(119
)
Other income (expense), net
 
—

 
—

 
—

 
—

Interest and other expense, net
 
(114
)
 
—

 
—

 
(114
)
Income (loss) before income taxes
 
1,063

 
(13
)
 
4

 
1,072

Income tax expense
 
356

 
—

 
20

 
336

Net income (loss)
 
$
707

 
$
(13
)
 
$
(16
)
 
$
736

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
1.08

 
 
 
 
 
$
1.13

Diluted earnings per share
 
$
1.07

 
 
 
 
 
$
1.12

 
 
 
 
 
 
 
 
 
Basic shares
 
652

 
 
 
 
 
652

Diluted shares
 
658

 
 
 
 
 
658

 
 
 
 
 
 
 
 
 




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