Strategic Initiatives, Restructuring and Related Charges

Restructuring Initiatives Related to Staples 20/20 Strategic Plan

In May 2016 the Company announced a strategic plan ("20/20 Plan") under which it plans to:


•	accelerate mid-market growth


•	increase its focus on growth categories, including facilities supplies, breakroom supplies, furniture, technology solutions, and promotional products


•	preserve profitability and rationalize excess capacity in its North American Retail stores


•	drive profit improvement and cost reduction across the company


•	narrow its geographic focus to North America

In connection with the 20/20 Plan, the Company also announced a new multi-year cost savings plan which is expected to generate approximately $300 million of annualized pre-tax cost savings by the end of 2018, primarily by reducing end-to-end product costs, continuing to evolve promotional strategies, increasing the mix of Staples Brand products, driving savings in supply chain, eliminating fixed costs in retail stores, and generating additional efficiency savings across the entire organization.

In connection with its plan to preserve profitability in its North American retail stores, the Company expects to close approximately 70 North American retail stores in 2017. The Company does not expect to incur material charges in 2017 related to these closures. The Company expects to incur charges in 2017 and beyond related to other initiatives under the 20/20 Plan. The nature and timing of such charges will depend upon the actions that are taken, and cannot be reasonably estimated at this time.

In connection with the 20/20 Plan, in the first quarter of 2017 the Company recorded restructuring charges of $2 million primarily related to the closure of retail stores in the U.S. and exiting certain contractual vendor arrangements. These charges primarily relate to the North American Retail segment.

The table below shows a reconciliation of the beginning and ending liability balances related to continuing operations for each major type of cost associated with the 20/20 Plan (in millions):



	20/20 Plan
	Employee-Related			Contractual Obligations			Other			Total
Accrued restructuring balance as of January 28, 2017	$	20		$	—		$	—		$	20
Charges	—			1			1			2
Cash payments	(7		)	(1		)	(1		)	(9		)
Accrued restructuring balance as of April 29, 2017	$	13		$	—		$	—		$	13

The $13 million accrued restructuring liability is recorded in Accrued expenses and other current liabilities on the condensed consolidated balance sheet at April 29, 2017. The Company expects that payments related to these liabilities will be substantially completed by the end of 2018.

2014 Restructuring Plan

In 2014 the Company announced a plan to close at least 225 retail stores in North America. Pursuant to this plan, the Company closed 290 stores from 2014 to 2016.

In addition, in 2014 the Company initiated a cost savings plan to generate annualized pre-tax savings of approximately $500 million by the end of fiscal 2015. The Company reinvested some of the savings in its strategic initiatives.

The actions taken related to the $500 million cost savings plan, together with the actions taken related to the store closure Plan, are referred to as the "2014 Plan". This plan is substantially complete.

During the first quarter of 2017, the Company recorded restructuring charges of $3 million primarily related to ongoing expenses associated with closed retail stores. These charges relate to the North American Retail segment.

The table below shows a reconciliation of the beginning and ending liability balances related to continuing operations for each major type of cost associated with the 2014 Restructuring Plan (in millions):



	2014 Plan
	Employee-Related			Contractual Obligations			Other			Total
Accrued restructuring balance as of January 28, 2017	$	6		$	48		$	—		$	54
Charges	—			—			3			3
Cash payments	(1		)	(7		)	(2		)	(10		)
Accrued restructuring balance as of April 29, 2017	$	5		$	41		$	1		$	47

In addition to the contractual obligations shown in the tables above, the Company also had related liabilities of $14 million and $12 million recorded on the consolidated balance sheet as of April 29, 2017 and January 28, 2017, respectively, which primarily represent amounts previously accrued to reflect rent expense on a straight-line basis for leased properties which the Company has now ceased using.

For the restructuring liabilities associated with the 2014 Restructuring Plan, $19 million of contractual obligations are included within Other long-term obligations and the remaining balances are included within Accrued expenses and other current liabilities in the Company's condensed consolidated balance sheet as of April 29, 2017. The Company expects that payments related to employee related liabilities associated with the 2014 Plan will be substantially completed by the end of fiscal year 2017. The Company anticipates that payments related to facility lease obligations will be completed by the end of fiscal year 2026.

During the first quarter of 2016, the Company recorded restructuring charges of $11 million primarily related to lease obligations for closed retail stores.