|Staples, Inc. First Quarter Earnings Exceed Expectations; Company Achieves Significant Progress on Back to Brighton Profit Improvement Plan|
|FRAMINGHAM, Mass., May 21, 2002 (BUSINESS WIRE) -- Staples, Inc. (Nasdaq: SPLS)
today announced the results for the first quarter ended May 4, 2002. The company
reported net income of $94 million for the quarter, or $0.20 per share on a
diluted basis. Excluding a one-time tax benefit recorded in the first quarter,
related to the Q4 2000 asset impairment charge for Staples Communications, the
company achieved net income of $65 million or $0.14 per share. This performance
exceeded the First Call consensus estimate of $0.11, and represents a 75 percent
increase over earnings per share of $0.08 in the first quarter of 2001.
13 Weeks Ended 13 Weeks Ended May 4, 2002 May 5, 2001 Net income (in thousands): As reported (GAAP) $93,869 $39,507 Adjustments: One-time tax benefit ($29,000) - As adjusted $64,869 $39,507 13 Weeks Ended 13 Weeks Ended May 4, 2002 May 5, 2001 Diluted earnings per share: As reported (GAAP) - Staples, Inc. stock $0.20 As reported (GAAP) - Staples RD stock $0.09 Adjustments: One-time tax benefit ($0.06) - Adjustment for conversion of Staples.com stock - ($0.01) As adjusted $0.14 $0.08Sales grew to $2.74 billion, an increase of three percent, versus $2.67 billion reported for the same period the prior year. Overall company comparable sales for the quarter were flat, with retail only comparable sales down two percent, a significant improvement from the previous quarter. Continued strong comparable sales performance in consumables categories of six percent was overshadowed by weakness in technology and furniture as business customers continue to exercise restraint in purchases of capital goods.
"We are very pleased with our strong results for the first quarter," said Ron Sargent, Staples' president and chief executive officer. "Solid improvement in key metrics measuring sales and earnings momentum, such as customer count comparables, customer service levels and new store revenue productivity, give us confidence that we are on track to achieve our goals this year and beyond."
Staples North American Retail
In the North American Retail business, sales for the first quarter were $1.73 billion, up one percent versus last year. Business unit income was $59 million, a dramatic improvement of 53 percent compared to the prior year. During the first quarter, Staples opened 17 stores in North America, ending the quarter operating 1,247 stores. In 2002, the company plans to open no more than 75 new stores in the US, and 20 stores in Canada.
Staples North American Delivery
Staples North American Delivery reported first quarter sales of $812 million, up nine percent versus the first quarter of last year. Business unit income was $48 million, a 23 percent increase compared to the same period in 2001. Contract account acquisition continued its industry-leading momentum, achieving double-digit sales growth and adding 3,000 new accounts in the first quarter while customer retention rates and profitability levels continue to increase.
Staples European Business
Staples continued to make progress in its European operations. The company reported revenues of $206 million in Europe, a seven percent increase versus the previous year's first quarter. Comparable sales grew six percent and business unit income improved 53 percent to a loss of $1.6 million versus the first quarter 2001. The company successfully launched its first European Web site in Germany and opened five stores in Europe during the quarter.
Back to Brighton Results
"Back to Brighton," a comprehensive improvement plan launched at the end of last year, is comprised of three key initiatives: restoring profit margins to historical levels, improving asset turnover and driving profitable sales growth. Initial results are encouraging.
Operating Margin Improvements
"Our first quarter performance clearly indicates that Back to Brighton is working," said Sargent. "A strong team is in place to execute the plan and drive significant improvement in our results. We are encouraged by the progress we have made and confident that our continued efforts will result in achieving returns 200 basis points above our cost of capital over time."
Outlook for Second Quarter and Fiscal Year 2002
In view of the significant investments in the Dover remodel program and in marketing activities planned for the second quarter, historically Staples' smallest quarter of the year, the company does not anticipate attaining the same magnitude of earnings growth achieved in the first quarter. The company expects to achieve second quarter earnings per share consistent with current First Call consensus of $0.12 per share.
The company announced that it is increasing its expectations for earnings per share to be in the range of $0.79 to $0.83 for the full year, with the anticipation of a mid to high single digit increase in revenue for 2002. "Our industry-leading delivery businesses and the successful Dover store format, combined with a tight control on operating expenses, are paving the way for us to deliver a strong performance in 2002," said Sargent.
Staples will host a live Internet broadcast of its first quarter 2002 earnings conference call today at 8:00 a.m. E.D.T. 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. E.D.T. on May 21, through midnight on Tuesday, May 28.
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 approximately 53,000 associates 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 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 risks and uncertainties, including but not limited to: Staples' market is highly competitive and Staples may not continue to compete successfully; Staples may be unable to continue to successfully open new stores; Staples' new Dover format store may not be successful; Staples' quarterly operating results are subject to significant fluctuation impacted by the extent to which sales in new stores result in the loss of sales in existing stores, the mix of products sold, pricing actions of competitors, the level of advertising and promotional expenses and seasonality; Staples' operating results may be impacted by changes and uncertainty in the economy; Staples' stock price may fluctuate based on market expectations; Staples' growth may continue to strain operations; Staples' European operations may not become profitable; Staples' International operations expose Staples to the unique risks inherent in foreign operations; Staples may be unable to obtain adequate future financing; and those factors discussed in Staples' Annual Report on Form 10-K for the year ending February 2, 2002, which is on file with the Securities and Exchange Commission. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.
STAPLES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar Amounts in Thousands, Except Share Data) May 4, February 2, 2002 2002 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 487,756 $ 394,824 Merchandise inventories 1,480,162 1,459,792 Receivables, net 331,529 338,581 Deferred income taxes 110,861 117,560 Prepaid expenses and other current assets 86,393 92,070 Total current assets 2,496,701 2,402,827 Property and Equipment: Land and buildings 440,544 433,569 Leasehold improvements 572,492 552,250 Equipment 845,287 820,053 Furniture and fixtures 424,037 406,565 Total property and equipment 2,282,360 2,212,437 Less accumulated depreciation and amortization 915,933 853,685 Net property and equipment 1,366,427 1,358,752 Other Assets: Lease acquisition costs, net of amortization 53,405 54,557 Goodwill, net of amortization 223,718 223,718 Other 53,317 53,181 Total other assets 330,440 331,456 $4,193,568 $4,093,035 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 922,136 $ 935,442 Accrued expenses and other current liabilities 611,958 655,274 Debt maturing within one year 6,699 4,983 Total current liabilities 1,540,793 1,595,699 Long-Term Debt 356,777 350,225 Deferred Tax Liability 3,386 6,738 Other Long-Term Obligations 90,147 86,199 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 495,187,848 shares at May 4, 2002 and 491,564,105 shares at February 2, 2002 297 295 Additional paid-in capital 1,408,293 1,364,355 Cumulative foreign currency translation adjustments (16,163) (27,129) Retained earnings 1,366,860 1,272,991 Less: Staples, Inc. treasury stock at cost, 27,723,775 shares at May 4, 2002, and 27,569,880 shares at February 2, 2002 (556,822) (556,338) Total stockholders' equity 2,202,465 2,054,174 $4,193,568 $4,093,035 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollar Amounts in Thousands, Except Per Share Data) (Unaudited) 13 Weeks Ended May 4, May 5, 2002 2001 Sales $ 2,744,766 $ 2,667,076 Cost of goods sold and occupancy costs 2,084,848 2,050,469 Gross profit 659,918 616,607 Operating and other expenses: Operating and selling 445,610 427,424 Pre-opening 1,886 5,176 General and administrative 107,084 109,889 Amortization of goodwill - 1,646 Interest and other expense, net 2,372 8,233 Total operating and other expenses 556,952 552,368 Income before income taxes 102,966 64,239 Income tax expense 9,097 24,732 Net income $ 93,869 $ 39,507 Net income attributed to: Staples, Inc. Stock $ 93,869 $ - Staples RD Stock - 39,683 Staples.com Stock - (176) $ 93,869 $ 39,507 Basic earnings per common share: Staples, Inc. Stock $ 0.20 $ - Staples RD Stock $ - $ 0.09 Staples.com Stock $ - $ (0.02) Diluted earnings per common share: Staples, Inc. Stock $ 0.20 $ - Staples RD Stock $ - $ 0.09 Staples.com Stock $ - $ (0.02) Number of shares used in computing basic earnings per common share: Staples, Inc. Stock 463,854 - Staples RD Stock - 454,793 Staples.com Stock - 8,531 Number of shares used in computing diluted earnings per common share: Staples, Inc. Stock 471,828 - Staples RD Stock - 461,530 Staples.com Stock - 8,531 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar Amounts in Thousands) (Unaudited) 13 Weeks Ended May 4, May 5, 2002 2001 Operating Activities: Net income $ 93,869 $ 39,507 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 63,117 58,558 Tax benefit from worthless stock deduction (29,000) - Deferred tax expense (benefit) 7,349 (6,285) Other 11,551 9,138 Change in assets and liabilities, net of companies acquired/divested using purchase accounting: (Increase) Decrease in merchandise inventories (11,472) 43,600 Decrease (Increase) in receivables 9,101 (25,307) Decrease (Increase) in prepaid expenses and other assets 5,942 (14,855) Decrease in accounts payable, accrued expenses and other current liabilities (24,158) (167,606) Increase in other long-term obligations 3,428 2,618 35,858 (100,139) Net cash provided by (used in) operating activities 129,727 (60,632) Investing Activities: Acquisition of property and equipment (62,944) (88,332) Purchase of long-term investments - (250) Acquisition of lease rights (276) (251) Net cash used in investing activities (63,220) (88,833) Financing Activities: Proceeds from sale of capital stock 24,415 5,095 Proceeds from borrowings 1,425 323,110 Payments on borrowings (677) (304,432) Increase in retained securitized accounts receivable - (86,109) Purchase of treasury stock (484) (7,366) Net cash provided by (used in) financing activities 24,679 (69,702) Effect of exchange rate changes on cash 1,746 (2,545) Net increase (decrease) in cash and cash equivalents 92,932 (221,712) Cash and cash equivalents at beginning of period 394,824 263,560 Cash and cash equivalents at end of period $ 487,756 $ 41,848 STAPLES, INC. AND SUBSIDIARIES Segment Reporting (Dollar Amounts in Thousands) (Unaudited) 13 Weeks Ended May 4, May 5, 2002 2001 Sales by Segment: North American Retail $ 1,726,893 $ 1,706,101 North American Delivery 811,991 743,689 European Operations 205,882 192,106 Total $ 2,744,766 $ 2,641,896 Divested Business - 25,180 Consolidated $ 2,744,766 $ 2,667,076 Business Unit Income/(Loss): North American Retail $ 59,218 $ 38,725 North American Delivery 47,734 38,694 European Operations (1,614) (3,410) Total business unit income $ 105,338 $ 74,009 Divested Business - (1,537) Interest and other expense, net (2,372) (8,233) Income before income taxes $ 102,966 $ 64,239