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Staples, Inc. Announces Third Quarter Results; Achieves 11 Percent Earnings Per Share Growth In The Third Quarter

Tuesday, November 20, 2001 7:00 am EST

Dateline:

FRAMINGHAM, Mass.

Public Company Information:

NASDAQ:
SPLS
"We have planned conservatively for the year and expect to achieve earnings for the fourth quarter in the range of $0.25 to $0.27 per share. Looking ahead to next year, a strong management team, expense control initiatives and a renewed focus on improving returns all position Staples for solid earnings growth"

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Staples, Inc. (Nasdaq:SPLS) today reported sales of $2.83 billion for the third quarter, which ended November 3, a one percent increase versus the $2.80 billion reported for the same period last year. The company recorded net income for the quarter of $91.31 million, or $0.20 per diluted common share, an 11 percent earnings per share increase compared with the $84.66 million, or $0.18 per diluted common share for the same period last year, adjusted to reflect the conversion of Staples.com stock. Overall comparable sales for the quarter were negatively impacted by two percentage points by the events of September 11, and were down three percent, with retail comparable sales down five percent.

"Despite challenging economic times and the tragic events of September 11, Staples delivered on earnings expectations and achieved earnings growth," said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. "Our performance is clearly improving and we are back on track to deliver sustained earnings growth through strategic initiatives including a more conservative real estate strategy, a successful new store format and expense containment."

In the North American Retail business, store sales for the quarter were $1.85 billion, down one percent versus a year ago. Focusing on profitable growth, Staples plans to open fewer than 80 new stores in the United States in 2002, significantly down from previous guidance of 100 stores. Additionally, the successful new Dover store format, chain-wide customer service initiatives and an enhanced labor model are improving revenue productivity and returns.

Sales for the Staples Delivery business, including Staples Direct, Staples Contract and Quill, combined with their e-commerce counterparts, were $778 million, a nine percent increase over the third quarter of last year.

Through customer acquisition combined with increasing customer loyalty, traffic across all Staples' businesses continues to experience growth. Staples North American Retail customer count comparables for the third quarter were up two percent. In the StaplesDirect.com business, customer count comparables grew by 19 percent in the quarter. The Staples Contract business dramatically outperformed the industry during the quarter, acquiring more than 2,000 new accounts, adding to 3,500 new accounts in the first half of the year.

Staples European business revenues were $205 million representing 23 percent top line growth. Comparable sales growth was 11 percent and the business broke even for the quarter.

"We have planned conservatively for the year and expect to achieve earnings for the fourth quarter in the range of $0.25 to $0.27 per share. Looking ahead to next year, a strong management team, expense control initiatives and a renewed focus on improving returns all position Staples for solid earnings growth," added Stemberg.

Staples will host a live Internet broadcast of its third quarter 2001 earnings conference call today at 8:00 a.m. (Eastern). Individuals may access the broadcast from Staples' Web site directly at http://investor.staples.com. A replay of the quarterly earnings conference call will be available at http://investor.staples.com from 11:30 a.m. (Eastern) on November 20, through midnight on Tuesday, November 27.

About Staples

Staples, Inc. is an $11 billion retailer of office supplies, business services, furniture and technology to consumers and businesses from home-based businesses to Fortune 500 companies in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal. Headquartered outside Boston, Staples invented the office superstore concept and today is the largest operator of office superstores in the world. The company has over 50,000 employees serving customers through more than 1,400 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at http://www.staples.com. 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. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors including risks related to Staples' ability to compete in its highly competitive market, Staples' ability to continue to successfully open new stores, Staples' quarterly operating results being subject to significant fluctuation, Staples' stock price fluctuating based on the expectations of professional securities analysts, the strain on operations due to Staples' rapid growth which can affect operating results, the ability of Staples' foreign operations and Staples.com to become profitable and the ability of Staples to obtain adequate future financing. Additional information concerning these factors is contained in Staples' Quarterly Report on Form 10-Q dated September 17, 2001, which is on file with the Securities and Exchange Commission.

STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Income

(Amounts in Thousands,Except Per Share Data)

 
 
  (Unaudited)   (Unaudited)
13 Weeks Ended 39 Weeks Ended

November 3,

 

October 28,

November 3,

 

October 28,

  2001   2000   2001   2000
 
Sales $ 2,833,861 $ 2,801,769 $ 7,815,166 $ 7,558,852
Cost of goods
sold and
occupancy costs 2,146,724 2,125,486 5,961,692 5,726,258
Gross profit 687,137 676,283 1,853,474 1,832,594
 
Operating and
other expenses:
Operating and
selling 431,337 406,655 1,238,888 1,187,808
Pre-opening 3,245 5,064 12,392 19,592
General and
administrative 95,997 103,732 295,496 299,433
Amortization of
goodwill 1,646 3,621 4,938 10,716
Store closure credit -- -- -- (7,250)
Interest and
other expense, net 6,437 13,718 23,432 31,809
Total operating
and other expenses 538,662 532,790 1,575,146 1,542,108
 
Income before
income taxes 148,475 143,493 278,328 290,486
Income tax expense 57,163 58,832 107,156 119,099
Net income $ 91,312 $ 84,661 $ 171,172 $ 171,387
 
Net income/(loss)
attributed to:
Staples, Inc. Stock $ 91,312 $ -- $ 91,312 $ --
Staples RD Stock -- 86,039 79,740 177,619
Staples.com Stock -- (1,378) 120 (6,232)
$ 91,312 $ 84,661 $ 171,172 $ 171,387
 
Basic earnings/(loss)
per common share:
Earnings per
common share:
Staples, Inc.
Stock $ 0.20 $ -- $ 0.20 $ --
Earnings per
common share -
Staples RD Stock $ -- $ 0.19 $ 0.18 $ 0.39
Earnings/(loss)
per common share -
Staples.com Stock $ -- $ (0.10) $ 0.01 $ (0.45)
 
Diluted
earnings/(loss)
per common share
Earnings per
common share -
Staples, Inc.
Stock $ 0.20 $ -- $ 0.20 $ --
Earnings per
common share -
Staples RD Stock $ -- $ 0.19 $ 0.17 $ 0.38
Earnings/(loss)
per common share -
Staples.com Stock $ -- $ (0.10) $ 0.01 $ (0.45)
 
 
Number of shares
used in computing
basic earnings/(loss)
per common share:
Staples, Inc. Stock 459,864 -- 459,864 --
Staples RD Stock -- 453,307 455,399 454,972
Staples.com Stock -- 13,893 7,980 13,923
 
Number of shares
used in computing
diluted earnings/(loss)
per common share:
Staples, Inc. Stock 465,508 -- 465,508 --
Staples RD Stock -- 457,613 461,379 461,874
Staples.com Stock -- 13,893 9,819 13,923
 
STAPLES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)
 
 
  November 3,  
  2001 February 3,
(Unaudited)   2001
 
ASSETS
Current Assets:
Cash and cash equivalents $ 111,315 $ 263,560
Merchandise inventories 1,580,922 1,639,698
Receivables, net 473,451 297,916
Deferred income taxes 66,242 43,955
Other current assets 120,389 110,982
 
Total current assets 2,352,319 2,356,111
 
Property and Equipment:
Land and buildings 425,207 400,971
Leasehold improvements 559,989 519,681
Equipment 788,823 692,783
Furniture and fixtures 393,713 352,712
 
Total property and equipment 2,167,732 1,966,147
 
Less accumulated depreciation
and amortization 806,275 665,622
 
Net property and equipment 1,361,457 1,300,525
 
Other Assets:
Lease acquisition costs,
net of amortization 54,295 58,596
Goodwill, net of amortization 233,598 238,536
Other 65,967 30,155
 
Total other assets 353,860 327,287
$ 4,067,636 $ 3,983,923
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 956,736 $ 983,851
Other current liabilities 557,267 542,923
Debt maturing within one year 177,142 184,505
 
Total current liabilities 1,691,145 1,711,279
 
Long-Term Debt 372,425 441,257
Deferred Tax Liability 268 8,916
Other Long-Term Obligations 77,198 73,047
Stockholders' Equity:
Preferred stock, $.01 par value
5,000,000 shares authorized;
no shares issued - -
Common stock:
Staples, Inc. Stock, $.0006 par
value 2,100,000,000 shares
authorized; issued 488,503,011
shares at November 3, 2001 293 -
Staples RD Stock, $.0006 par
value 1,500,000,000 shares
authorized; issued 477,111,602
shares at February 3, 2001 - 285
Staples.com Stock, $.0006 par
value 600,000,000 shares
authorized; issued 14,105,821
shares at February 3, 2001 - 8
Additional paid-in capital 1,326,049 1,285,719
Cumulative foreign currency
translation adjustments (22,609) (14,353)
Unrealized gain on investments - (1)
Retained earnings 1,179,193 1,008,021
Less: Staples, Inc. treasury
stock at cost, 27,540,507 shares
at November 3, 2001, and
24,743,420 shares at
February 3, 2001 (556,326) (530,255)
 
Total stockholders' equity 1,926,600 1,749,424
$ 4,067,636 $ 3,983,923
STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
 
 
  (Unaudited)
39 Weeks Ended
 
November 3, October 28,
  2001   2000
 
Operating Activities:
Net income $ 171,172 $ 171,387
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 183,450 168,594
Store closure credit - (7,250)
Other non-cash items
affecting income (25,671) 15,149
Change in assets and liabilities,
net of companies acquired/divested
using purchase accounting:
Decrease/(Increase) in
merchandise inventories 31,582 (90,972)
Increase in receivables (131,378) (171,890)
Increase in retained securitized
accounts receivable (86,109) -
Increase in other assets (12,060) (20,410)
Increase in accounts payable and
other current liabilities 53,752 162,440
Increase in other long-term
obligations 5,954 9,212
19,520 64,873
 
Net cash provided by operating
activities 190,692 236,260
 
Investing Activities:
Acquisition of property and
equipment (258,232) (327,632)
Proceeds from the sale of
short-term investments 8,938 108
Purchase of long-term investments (250) (58,947)
Proceeds from the sale and
maturity of long-term investments 1,654 1,951
Other (515) (2,861)
 
Net cash used in investing activities (248,405) (387,381)
 
Financing Activities:
Proceeds from sale of capital stock 26,347 37,885
Proceeds from borrowings 597,110 2,819,719
Payments on borrowings (683,800) (2,528,069)
Settlement of equity forward
purchase agreement - (78,684)
Purchase of treasury stock (26,071) (97,583)
Net cash (used in)/provided by
financing activities (86,414) 153,268
 
Effect of exchange rate changes on cash (8,118) (7,361)
 
Net decrease in cash and cash
equivalents (152,245) (5,214)
Cash and cash equivalents at
beginning of period 263,560 110,483
 
Cash and cash equivalents
at end of period $ 111,315 $ 105,269
STAPLES, INC. AND SUBSIDIARIES
Segment Reporting
(Dollar Amounts in Thousands)
 
  (Unaudited)   (Unaudited)

13 Weeks Ended

39 Weeks Ended

 
November 3,   October 28, November 3,   October 28,
2001 2000 2001 2000
 
 
Sales by Segment:
North American
Retail $ 1,851,660 $ 1,877,586 $ 4,985,389 $ 4,935,100
North American
Delivery 777,598 715,072 2,243,955 1,997,643
European Operations 204,603 165,820 560,642 492,721
 
Total $ 2,833,861 $ 2,758,478 $ 7,789,986 $ 7,425,464
Divested Businesses - 43,291 25,180 133,388
 
Consolidated $ 2,833,861 $ 2,801,769 $ 7,815,166 $ 7,558,852
 
Business Unit Income/(Loss):
North American
Retail $ 100,464 $ 129,781 $ 179,318 $ 289,481
North American
Delivery 54,710 41,860 138,959 74,816
European Operations (262) (6,521) (14,980) (26,498)
Total business unit
income $ 154,912 $ 165,120 $ 303,297 $ 337,799
Divested Businesses - (7,909) (1,537) (22,754)
Store closure credit - - - 7,250
Interest and other
expense, net (6,437) (13,718) (23,432) (31,809)
Income before income
taxes $ 148,475 $ 143,493 $ 278,328 $ 290,486

Contact:

Staples, Inc.
INVESTOR CONTACT
Laurel Lefebvre
Director, Investor Relations
508-253-4080
or
MEDIA CONTACTS
Tom Nutile
Vice President, Public Relations
508-253-1833
or
Deborah Hohler
Public Relations Manager
508-253-8509

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