News Release
| Staples, Inc. Reports Second Quarter Results |
| WESTBOROUGH, Mass.--August 13, 1998-- Staples, Inc. (NASDAQ:SPLS), today announced a 33% increase in earnings per share before merger related charges for the second fiscal quarter ended August 1, 1998 to $0.12 per share as compared with $0.09 per share in the prior year. For the six months in the year to date period, earnings per share before merger related charges rose 26% to
$0.24 per share as compared with $0.19 per share in the prior year
period.
In the fiscal 1998 quarter and year to date periods, merger related charges were recorded for the acquisition of Quill Corporation. In the fiscal 1997 quarter and 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 acquisition of the Quill Corporation under the pooling of interests method of accounting. Total sales for the second quarter of fiscal 1998 rose 24% to $1.5 billion from $1.2 billion. For the six months in the year to date period, sales rose 27% to $3.1 billion from $2.5 billion in the prior year period. Comparable sales in the 669 stores and delivery hubs that have been open for more than one year increased 14% for the quarter and 13% for the six month period. Thomas G. Stemberg, Chairman and CEO commented, "Staples has again achieved some of the best results in all of the retail industry including our seventeenth consecutive quarter of earnings per share growth of over 30%. These results are truly extraordinary given our continued substantial investments in long-term sales and earnings growth in what is our seasonally slowest quarter." He continued, "During the second quarter we opened 48 new stores which set a new company record. In addition, we completed the acquisition of the Quill Corporation which further strengthens our mail order operations and creates exciting new opportunities both domestically and abroad." The Company ended the quarter with 652 stores in the United States, 114 stores in Canada, 44 stores in the United Kingdom and 20 stores in Germany for a total of 830 stores worldwide. Staples, Inc. is a $5 billion retailer of office supplies, furniture and technology to businesses from home based businesses to Fortune 50 companies in the United States, Canada, the United Kingdom and Germany. Staples, headquartered outside Boston, Mass., invented the office superstore concept and is the largest operator of office superstores in the world today. The Company, which has grown earnings per share at a 38% compounded rate over the last four years, has over 32,000 employees serving the business customer through 830 office superstores, mail order catalogs and a contract business. More information may be obtained from the Company's Investor Relations department by dialing (800) INV-SPL1 or from the Company's website at http://www.staples.com. Certain information presented within this press 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 the Company's most recent filing on Forms 10-K and 10-Q on file with the Securities and Exchange Commission.
STAPLES, INC. AND SUBSIDIARIES
Supplemental Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Share Data)
(Unaudited) (Unaudited)
13 Weeks Ended 26 Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Sales $1,475,705 $1,192,339 $3,146,316 $2,485,060
Cost of goods sold and
occupancy costs 1,120,780 905,718 2,403,376 1,893,773
Gross profit 354,925 286,621 742,940 591,287
Operating and other
expenses:
Operating and selling 213,969 181,264 469,617 379,862
Pre-opening 4,232 2,316 7,584 5,178
General and
administrative 70,694 55,174 138,180 102,205
Amortization of
goodwill 927 1,049 1,851 1,621
Merger-related and
integration costs 41,000 9,103 41,000 29,665
Interest and other
expense, net 5,920 5,892 10,614 9,828
Total operating and
other expenses 336,742 254,798 668,846 528,359
Income before equity
in loss of affiliates
and income taxes 18,183 31,823 74,094 62,928
Equity in gain/(loss)
of affiliates -- -- -- (5,953)
Income before income
taxes 18,183 31,823 74,094 56,975
Income tax expense 9,319 9,120 29,330 14,495
Net income before
minority interest 8,864 22,703 44,764 42,480
Minority interest 110 56 160 56
Net income $8,974 $22,759 $44,924 $42,536
Historical net income
per common share $0.03 $0.08 $0.16 $0.16
Historical net income
per common share
assuming dilution $0.03 $0.08 $0.16 $0.15
Pro forma:
Historical net income $22,759 $44,924 $42,536
Provision for income
taxes on previously
untaxed earnings of
pooled S-Corporation
income 3,182 1,814 7,730
Pro forma net income $19,577 $43,110 $34,806
Pro forma net income
per common share $0.07 $0.15 $0.13
Pro forma net income per
common share assuming
dilution $0.07 $0.15 $0.13
Number of shares used
in computing historical
and pro forma net
income per
common share 282,639,460 270,155,123 282,639,460 269,600,845
Number of shares used
in computing historical
and pro forma net
income per common
share assuming
dilution 291,033,327 279,191,526 289,161,513 278,271,092
STAPLES, INC. AND SUBSIDIARIES
Supplemental Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)
August 1, January 31,
1998 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 93,762 $ 381,088
Short-term investments 1,443 5,902
Merchandise inventories 1,293,654 1,124,642
Receivables, net 254,641 203,143
Prepaid expenses and other
current assets 80,825 71,365
Total current assets 1,724,325 1,786,140
Property and Equipment:
Land and buildings 195,378 150,947
Leasehold improvements 327,476 292,128
Equipment 334,041 304,177
Furniture and fixtures 197,821 173,711
Total property and equipment 1,054,716 920,963
Less accumulated depreciation and
amortization 352,915 310,701
Net property and equipment 701,801 610,262
Other Assets:
Lease acquisition costs, net
of amortization 77,695 43,244
Investments -- 16,450
Goodwill, net of amortization 135,818 139,753
Other 35,229 43,013
Total other assets 248,742 242,460
$ 2,674,868 $ 2,638,862
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 701,198 $ 672,956
Accrued expenses and other current
liabilities 310,523 266,023
Debt maturing within one year 4,443 43,501
Total current liabilities 1,016,164 982,480
Long-Term Debt 205,935 218,959
Other Long-Term Obligations 48,708 42,803
Convertible Debentures 300,000 300,000
Minority Interest (25) 135
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 284,483,644 shares at August 1,
1998 and 278,159,308 shares at
January 31, 1998 170 167
Additional paid-in capital 631,967 593,883
Cumulative foreign currency translation
adjustments (12,792) (10,315)
Unrealized gain/(loss) on short-term
investments 2 1,056
Retained earnings 492,977 510,040
Less: treasury stock, at cost, 352,948
shares at August 1, 1998 and 59,149
shares at January 31, 1998 (8,238) (346)
Total stockholders' equity 1,104,086 1,094,485
$ 2,674,868 $ 2,638,862
STAPLES, INC. AND SUBSIDIARIES
Supplemental Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
(Unaudited)
26 Weeks Ended
August 1, August 2,
1998 1997
Operating Activities:
Net income $ 44,924 $ 42,536
Adjustments to reconcile net income
to net cash provided by/(used in)
operating activities:
Minority interest (160) (56)
Depreciation and amortization 45,725 45,943
Equity in loss of affiliates -- 5,953
Net decrease in deferred tax assets (7,098) (10,665)
(Increase)/decrease in assets:
Merchandise inventories (169,012) (134,318)
Receivables (56,419) (2,655)
Prepaid expenses and other assets 8,616 (5,390)
Increase in accounts payable, accrued
expenses and other current liabilities 78,706 128,442
Increase in other long-term obligations 6,242 3,234
(93,400) 30,488
Net cash (used in)/provided by
operating activities (48,476) 73,024
Investing Activities:
Acquisition of property and equipment (136,713) (78,820)
Proceeds from sales and maturities of
short-term investments 11,313 10,061
Purchase of short-term investments (6,854) --
Proceeds from sales and maturities of
long-term investments 18,995 3,430
Purchase of long-term investments (2,545) (3,505)
Acquisition of businesses, net of
cash acquired -- (77,808)
Investment in affiliates (1,075) (1,606)
Acquisition of lease rights (36,690) (2,402)
Other (544) 2,059
Net cash used in investing activities (154,113) (148,591)
Financing Activities:
Proceeds from sale of capital stock 38,654 11,500
Proceeds from borrowings 38 762,914
Payments on borrowings (52,082) (677,375)
Purchase and retirement of
S-Corporation stock (48,102) --
Dividends to shareholders of acquired
S-Corporation (15,601) (14,257)
Other (7,892) --
Net cash (used in)/provided by
financing activities (84,985) 82,782
Effect of exchange rate changes on cash 248 (727)
Net (decrease)/increase in cash and
cash equivalents (287,326) 6,488
Cash and cash equivalents at beginning
of period 381,088 117,035
Cash and cash equivalents at end of period $ 93,762 $ 123,523
CONTACT: Media Contact:
Jean Papagni
Manager of Public Relations
(508) 370-8468
jean.papagni@staples.com
or
Investor Contact:
Samuel J. Levenson, CPA
Vice President of Investor Relations
(508) 370-7963
sam.levenson@staples.com
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