Staples
Skip to Content

News and Events

News Release

BACK
Staples Reports 35 Percent Increase in Third Quarter Earnings Per Share
WESTBOROUGH, Mass.--(BUSINESS WIRE)--Nov. 12, 1998--

    ....Net Income Jumps 33 Percent....

    ....Total Revenue Up 22 Percent Over Prior Year Period....


Staples Inc. (NASDAQ:SPLS), which pioneered the office products superstore industry and is the largest operator of office superstores in the world, today announced net income of $69.2 million or $0.23 per common share on a diluted basis, for the third quarter which ended Oct. 31, 1998, compared to $52.0 million, or $0.17 per common share on a diluted basis, reported a year ago.

For the first nine months of the fiscal year, net income was $137.1 million, or $.46 per common share on a diluted basis, compared to $101.6 million, or $.36 per common share on a diluted basis, before merger related charges in both periods.

Total sales for the quarter rose 22 percent to $1.9 billion from $1.6 billion reported for the same period last year. For the first nine months of the fiscal year, sales rose 25 percent to $5.0 billion from $4.0 billion in the same period last year. Comparable sales in the 711 stores and delivery hubs that have been open for more than one year increased 12 percent for the quarter and for the nine month period.

"We are extremely pleased to have delivered another strong quarter," said Thomas G. Stemberg, Staples chairman and chief executive officer. "The continued strength in our revenue growth is the result of our customer service-oriented associates who are constantly looking for ways to cut the costs and hassle of running the offices of small businesses."

Highlights of the quarter:

  • 46 stores were opened and 1 store was closed including 37 in the U.S., 5 in Canada, 3 in the United Kingdom and 1 in Germany. For the nine month period, 137 stores were opened and 1 was closed;
  • The acquisition of the office and manufactured products of Ivan Allen Inc., a $60 million in revenue contract stationer locatedin Atlanta. The acquisition was consummated last week and will give Staples a significant presence in the Southeast market.
  • The addition of former U.S. Sen. George Mitchell, (D-Maine) to the Board of Directors. Mitchell's international experience will benefit Staples as it expands its operations worldwide.
  • The announcement of a unique partnership with CompuCom Systems Inc. of Dallas to offer small business technology and computer networking products and services to small business customers in select Staples stores in the Northeast starting in December.
  • The naming of Staples as a component of the Standard & Poors 500 Index.

The company today also announced that its Board of Directors has declared a 3-for-2 split of its common stock in the form of a 50 percent stock dividend, subject to shareholder approval of an increase in Staples' authorized number of common shares.

Staples shareholders will vote on the increase in additional capital at a special meeting scheduled for January 21, 1999. If the increase is approved, the dividend will be distributed on January 28, 1999, to shareholders of record on the close of business on January 18, 1999.

Staples shareholders also will be asked at the special meeting to approve a change in compensation for members of the Board of Directors to an all equity-based plan.

"This change to our Board of Directors compensation plan will more closely align the interests of the board members to the interests of our shareholders," said John J. Mahoney, executive vice president and chief administrative officer. "It will also help Staples attract the type of directors it needs to continue to move the company forward."

In the fiscal 1998 year-to-date periods, merger related charges were recorded for the acquisition of Quill Corporation. In the fiscal 1997 year-to-date periods, merger related charges were recorded for the attempted merger with Office Depot, Inc. Historical data has been restated to reflect the merger with Quill Corporation under the pooling of interests method of accounting.

Certain information presented within this news release may constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which are discussed in our most recent 10-Q and the prospectus for the recent secondary offering of common stock and other documents on file with the Securities and Exchange Commission.

Staples Inc. is a $5 billion retailer of office supplies, furniture and technology to consumers and businesses from home-based businesses to Fortune 50 companies in the United States, Canada, the United Kingdom and Germany. Staples, headquartered outside Boston, invented the office superstore concept and today is the largest operator of office superstores in the world. The company has more than 37,000 associates serving the business customer through 878 office superstores, mail order catalogs and a contract business. More information is available on the company at http://www.staples.com.


                    STAPLES, INC. AND SUBSIDIARIES
            Supplemental Consolidated Statements of Income
           (Dollar Amounts in Thousands, Except Share Data)

                        (Unaudited)                   (Unaudited)
                      13 Weeks Ended                39 Weeks Ended
                        
                   October 31,   November 1,  October 31,  November 1,
                       1998          1997         1998        1997
                                                                 
Sales              $  1,899,770 $  1,552,393 $  5,046,086 $  4,037,453
Cost of goods sold
 and occupancy 
 costs                1,423,857    1,176,922    3,827,233    3,070,695
 Gross profit           475,913      375,471    1,218,853      966,758

Operating expenses:
Operating and 
 selling                272,314      227,531      741,931      607,393
Pre-opening               4,011        2,773       11,595        7,951

General and
 administrative          79,958       58,734      218,138      160,939

Amortization of
 goodwill                   901        1,008        2,752        2,629

Merger-related and
 integration costs         --           --         41,000       29,665

Total operating
 expenses               357,184      290,046    1,015,416      808,577

Operating income        118,729       85,425      203,437      158,181
Interest and other
 expense, net            (4,485)      (6,212)     (15,099)     (16,040)

Income before 
 equity in loss of 
 affiliates
 and income taxes       114,244       79,213      188,338      142,141
Equity in gain/
 (loss) of 
 affiliates               --           --           --         (5,953)

Income before
 income taxes           114,244       79,213      188,338      136,188
Income tax expense       45,171       27,198       74,501       41,693

Net income before
 minority interest       69,073       52,015      113,837       94,495
Minority interest           113           15          273           71

Net income         $     69,186 $     52,030 $    114,110 $     94,566

Historical net 
 income
 per common share  $       0.24 $       0.19 $       0.40 $       0.35

Historical net 
 income per 
 common share
 assuming dilution $       0.23 $       0.18 $       0.39 $       0.34

Pro forma:
 Historical net 
 income                         $     52,030 $    114,110 $     94,566           
                                                                      
Provision for                                                         
 income taxes on                                                             
 previously untaxed earnings                                                     
 of pooled S-Corporation 
 income                                3,428        1,814       11,159
                                                                      
Pro forma net 
 income                         $     48,602 $    112,296 $     83,407
                                                                      
Pro forma net                                                         
 income                                                               
 per common share               $       0.18 $       0.40 $       0.31
                                                                      
Pro forma net                                                         
 income                                                               
 per common share                                                     
 assuming dilution              $       0.17 $       0.38 $       0.30
                                
Number of shares 
 used in computing
 historical and 
 pro forma net 
 income
 per common share   284,122,452  272,820,608  282,037,821  270,674,099

Number of shares 
 used in computing
 historical and pro 
 forma net income
 per common share
 assuming dilution  313,178,753  301,567,837  310,796,127  279,218,490



                    STAPLES, INC. AND SUBSIDIARIES
               Supplemental Consolidated Balance Sheets
           (Dollar Amounts in Thousands, Except Share Data)

                                             October 31,
                                                   1998    January 31,
                                             (Unaudited)         1998
ASSETS
Current Assets:
     Cash and cash
      equivalents                          $   193,645        381,088
     Short-term
      investments                                1,459          5,902
     Merchandise
      inventories                            1,303,329      1,124,642
     Receivables, net                          270,421        203,143
     Prepaid expenses
      and other current
      assets                                    96,079         71,365
        Total current assets                 1,864,933      1,786,140

Property and Equipment:
     Land and buildings                        215,904        150,947
     Leasehold improvements                    349,409        292,128
     Equipment                                 371,125        304,177
     Furniture and fixtures                    219,972        173,711
        Total property and
        equipment                            1,156,410        920,963
     Less accumulated
      depreciation and
      amortization                             379,512        310,701
        Net property and
        equipment                              776,898        610,262

Other Assets:
     Lease acquisition costs,
      net of amortization                       77,363         43,244
     Investments                                  --           16,450
     Goodwill, net of
      amortization                             134,917        139,753
     Other                                      40,566         43,013
        Total other assets                     252,846        242,460
                                           $ 2,894,677    $ 2,638,862

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable                      $   726,537    $   672,956
     Accrued expenses and other
      current liabilities                      395,744        266,023
     Debt maturing within one year               3,420         43,501
        Total current liabilities            1,125,701        982,480

Long-Term Debt                                 231,925        218,959
Other Long-Term Obligations                     49,403         42,938
Convertible Debentures                         299,835        300,000
Stockholders' Equity:
     Preferred stock, $.01 par
      value-authorized 5,000,000
      shares; no shares issued
      Common stock, $.0006 par
      value-authorized 500,000,000
      shares; issued 285,573,929
      shares at October 31, 1998
      and 278,159,308 shares at
      January 31, 1998                             172            167
     Additional paid-in capital                647,420        593,883
     Cumulative foreign currency
      translation adjustments                  (13,672)       (10,315)
     Unrealized gain/(loss) on
      short-term investments                        11          1,056
     Retained earnings                         562,120        510,040
     Less: treasury stock, at cost,
      352,948 shares at
      October 31, 1998
      and 59,149 shares
      at January 31, 1998                       (8,238)          (346)
        Total stockholders' equity           1,187,813      1,094,485
                                           $ 2,894,677    $ 2,638,862



                    STAPLES, INC. AND SUBSIDIARIES
          Supplemental Consolidated Statements of Cash Flows
                     (Dollar Amounts in Thousands)

                                                   (Unaudited)
                                                  39 Weeks Ended

                                            October 31,    November 1,
                                                1998          1997
Operating Activities:
 Net income                                  $ 114,110      $  94,566
  Adjustments to reconcile net
   income to net cash provided by/
   (used in) operating activities:

 Minority interest                                (273)           (66)
 Depreciation and amortization                  74,597         69,272
 Equity in loss of affiliates                     --            5,953
 Net decrease in
  deferred tax assets                          (23,388)        (8,025)
(Increase)/decrease in assets:
 Merchandise inventories                      (177,353)      (179,673)
 Receivables                                   (74,394)       (52,970)
                                                              
 Prepaid expenses and other assets               4,501         (3,405)
                                                                
Increase in accounts payable, accrued
 expenses and other current liabilities        191,366        260,695
Increase in other
 long-term obligations                           7,267          4,992
                                                 2,323         96,773
Net cash (used in)/ provided by operating
 activities                                    116,433        191,339

Investing Activities:
Acquisition of property and equipment         (239,055)      (141,983)
Proceeds from sales and maturities
 of short-term investments                      11,356         19,769
Purchase of short-term investments              (6,899)        (7,743)
                                                               
Proceeds from sales
 and maturities of long-term investments        18,995             --
                                                            
Purchase of long-term investments               (2,545)            --
Acquisition of
 businesses, net of cash acquired                   --        (77,808)
Acquisition of lease rights                    (37,705)        (2,533)
Other                                            2,994          5,093
Net cash used in
 investing activities                         (252,859)      (205,205)

Financing Activities:
 Proceeds from sale
  of capital stock                              48,348         28,241
Proceeds from borrowings                        26,171        813,408
                                                               
Payments on borrowings                         (53,598)      (675,534)
Purchase and
 retirement of acquired
 S-Corporation stock                           (48,101)            --
Dividends to shareholders
 of acquired S-Corporation                     (15,904)       (19,703)
Other                                           (8,057)            --
                                                           
Net cash (used in)
 /provided by financing activities             (51,141)       146,412
Effect of exchange rate changes on cash            124         (2,083)

Net (decrease)/
 increase in cash and  cash equivalents       (187,443)       130,463
Cash and cash
 equivalents at beginning of period            381,088        117,035
Cash and cash
 equivalents at end of period                $ 193,645      $ 247,498


     CONTACT: Media Contact:
              Staples Inc.           
              Dan Kaferle            
              (508) 370-8635         
              dan.kaferle@staples.com
                    or
              Investor Contact: 
              Staples Inc.
              Catherine Woods
              (508) 424-7342
              catherine.woods@staples.com