|Staples, Inc. Reports Record Third Quarter Sales and Earnings|
Company Exceeds Third Quarter 2002 Expectations With 35 Percent; Earnings Per Share Growth And A Three Percent Increase In Overall Comparable Sales
FRAMINGHAM, Mass.--(BUSINESS WIRE)--Nov. 19, 2002--Staples, Inc. (Nasdaq: SPLS) announced today the results for its third quarter ended Nov. 2, 2002. The company achieved net income of $128 million for the quarter, or $0.27 per share on a diluted basis, exceeding analyst consensus of $0.24, and a 35 percent increase over earnings per share of $0.20 reported for the third quarter of 2001.
Total company sales for the quarter grew to $3.1 billion, an increase of nine percent versus $2.8 billion reported for the same quarter of the prior year. Overall comparable sales were up three percent and retail only comparable sales increased more than one percent.
"Staples associates delivered the best third quarter in the company's history, with both sales and earnings ahead of expectations," said Ron Sargent, Staples president and CEO. "We have strong momentum from the first half of the year and a keen focus on customer service and operational excellence that is driving our record performance."
Key drivers of Staples' performance are stronger than expected top line growth, solid margin growth and continued success in improving operating margins. Staples' comprehensive profit improvement plan, called Back to Brighton, remains on track and the focal point of the company's sustained efforts to drive returns. The plan, composed of three key elements: driving profitable sales growth; improving operating margins; and enhancing asset utilization, is exceeding expectations for business improvement.
Additional highlights include:
"Our third quarter demonstrates more than just great earnings," added Sargent. "It's a reflection of how customers are responding to our higher service levels, and the steps we are taking to differentiate the Staples customer experience."
Based on outperforming in the third quarter, Staples expects to achieve full year earnings results $.03 higher than current analyst estimates. Staples expects to achieve earnings consistent with current analyst estimates in the fourth quarter of 2002.
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, France, Italy, Spain, Belgium, 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 55,000 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 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 risks and uncertainties, including but not limited to: our market is highly competitive and we may not continue to compete successfully; we may be unable to continue to successfully open new stores; our Dover format store may not be successful; our growth may continue to strain operations, which could adversely affect our business and financial results; we could encounter difficulties in integrating the new European mail order businesses and Medical Arts Press, Inc.; our quarterly operating results are subject to significant fluctuation and are 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; our operating results may be impacted by changes in the economy; our stock price may fluctuate based on market expectations; our European operations may not become profitable; our International operations expose us to the unique risks inherent in foreign operations; our debt level could impact our ability to obtain future financing and continue our growth strategy; and those other factors discussed in our quarterly report on Form 10-Q for the quarter ending August 3, 2002, which is on file with the Securities and Exchange Commission, and any subsequent periodic reports filed by us 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.
Financial tables to follow.
STAPLES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar Amounts in Thousands, Except Share Data) November 2, February 2, 2002 2002 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $226,189 $394,824 Merchandise inventories 1,615,222 1,459,792 Receivables, net 431,866 338,581 Deferred income taxes 87,428 117,560 Prepaid expenses and other current assets 93,225 92,070 Total current assets 2,453,930 2,402,827 Property and Equipment: Land and buildings 504,274 433,569 Leasehold improvements 611,544 552,250 Equipment 890,498 820,053 Furniture and fixtures 484,832 406,565 Total property and equipment 2,491,148 2,212,437 Less accumulated depreciation and amortization 1,060,871 853,685 Net property and equipment 1,430,277 1,358,752 Other Assets: Lease acquisition costs, net of amortization 52,658 54,557 Goodwill, net of amortization 1,135,798 223,718 Intangible assets, net of amortization 218,534 - Other 87,012 53,181 Total other assets 1,494,002 331,456 $5,378,209 $4,093,035 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $1,121,668 $935,442 Accrued expenses and other current liabilities 652,908 655,274 Debt maturing within one year 332,346 4,983 Total current liabilities 2,106,922 1,595,699 Long-Term Debt 728,486 350,225 Deferred Tax Liability 4,597 6,738 Other Long-Term Obligations 98,021 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 498,103,724 shares at November 2, 2002 and 491,564,105 shares at February 2, 2002 298 295 Additional paid-in capital 1,444,652 1,364,355 Cumulative foreign currency translation adjustments (2,388) (27,129) Retained earnings 1,554,433 1,272,991 Less: Staples, Inc. treasury stock at cost, 27,724,573 shares at November 2, 2002, and 27,569,880 shares at February 2, 2002 (556,812) (556,338) Total stockholders' equity 2,440,183 2,054,174 $5,378,209 $4,093,035 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollar Amounts in Thousands, Except Per Share Data) (Unaudited) (Unaudited) 13 Weeks Ended 39 Weeks Ended November 2, November 3, November 2, November 3, 2002 2001 2002 2001 Sales $3,089,725 $2,833,861 $8,260,966 $7,815,166 Cost of goods sold and occupancy costs 2,286,911 2,146,724 6,200,272 5,961,692 Gross profit 802,814 687,137 2,060,694 1,853,474 Operating and other expenses: Operating and selling 471,805 431,337 1,317,421 1,238,888 Pre-opening 2,393 3,245 6,625 12,392 General and administrative 120,006 95,997 325,788 295,496 Amortization of goodwill - 1,646 - 4,938 Interest and other expense, net 5,406 6,437 10,159 23,432 Total operating and other expenses 599,610 538,662 1,659,993 1,575,146 Income before income taxes 203,204 148,475 400,701 278,328 Income tax expense 75,186 57,163 119,259 107,156 Net income $128,018 $91,312 $281,442 $171,172 Net income attributed to: Staples, Inc. Stock $128,018 $91,312 $281,442 $91,312 Staples RD Stock - - - 79,740 Staples.com Stock - - - 120 $128,018 $91,312 $281,442 $171,172 Basic earnings per common share: Staples, Inc. Stock $0.27 $0.20 $0.60 $0.20 Staples RD Stock $- $- $- $0.18 Staples.com Stock $- $- $- $0.01 Diluted earnings per common share: Staples, Inc. Stock $0.27 $0.20 $0.60 $0.20 Staples RD Stock $- $- $- $0.17 Staples.com Stock $- $- $- $0.01 Number of shares used in computing basic earnings per common share: Staples, Inc. Stock 467,498 459,864 465,953 459,864 Staples RD Stock - - - 455,399 Staples.com Stock - - - 7,980 Number of shares used in computing diluted earnings per common share: Staples, Inc. Stock 471,712 465,508 472,125 465,508 Staples RD Stock - - - 461,379 Staples.com Stock - - - 9,819 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar Amounts in Thousands) (Unaudited) 39 Weeks Ended November 2, November 3, 2002 2001 Operating Activities: Net income $281,442 $171,172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 195,097 183,450 Tax benefit from worthless stock deduction (29,000) - Deferred tax expense (benefit) 34,679 (40,864) Other 24,790 15,193 Change in assets and liabilities, net of companies acquired/divested using purchase accounting: (Increase) decrease in merchandise inventories (96,502) 31,582 Increase in receivables (13,777) (131,378) Decrease (increase) in prepaid expenses and other assets 6,463 (12,060) Increase in accounts payable, accrued expenses and other current liabilities 94,171 53,752 Increase in other long-term obligations 3,719 5,954 219,640 105,629 Net cash provided by operating activities 501,082 276,801 Investing Activities: Acquisition of property and equipment (192,442) (258,232) Acquisition of businesses, net of cash acquired (1,171,187) - Proceeds from the sale of short-term investments - 8,938 Purchase of long-term investments - (250) Proceeds from the sale and maturity of long-term investments - 1,654 Other 624 (515) Net cash used in investing activities (1,363,005) (248,405) Financing Activities: Proceeds from sale of capital stock 46,138 26,347 Proceeds from borrowings 730,655 597,110 Payments on borrowings (85,785) (683,800) Repayments under accounts receivable securitization agreement - (86,109) Purchase of treasury stock (474) (26,071) Net cash provided by (used in) financing activities 690,534 (172,523) Effect of exchange rate changes on cash 2,754 (8,118) Net decrease in cash and cash equivalents (168,635) (152,245) Cash and cash equivalents at beginning of period 394,824 263,560 Cash and cash equivalents at end of period $226,189 $111,315 STAPLES, INC. AND SUBSIDIARIES Segment Reporting (Dollar Amounts in Thousands) (Unaudited) (Unaudited) 13 Weeks Ended 39 Weeks Ended November 2, November 3, November 2, November 3, 2002 2001 2002 2001 Sales by Segment: North American Retail $1,927,445 $1,851,660 $5,110,467 $4,985,389 North American Delivery 910,573 777,598 2,503,276 2,243,955 European Operations 251,707 204,603 647,223 560,642 Total $3,089,725 $2,833,861 $8,260,966 $7,789,986 Divested Business - - - 25,180 Consolidated Sales $3,089,725 $2,833,861 $8,260,966 $7,815,166 Business Unit Income/(Loss): North American Retail $136,257 $100,464 $241,265 $179,318 North American Delivery 74,714 54,710 179,593 140,055 European Operations (2,361) (262) (9,998) (16,076) Total business unit income $208,610 $154,912 $410,860 $303,297 Divested Business - - - (1,537) Interest and other expense, net (5,406) (6,437) (10,159) (23,432) Consolidated income before income taxes $203,204 $148,475 $400,701 $278,328
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