|Staples, Inc. Reports Best Year for Sales and Earnings in Company's History|
FRAMINGHAM, Mass.--(BUSINESS WIRE)--March 5, 2003--
Company Reports Three Percent Increase in Retail Comparable Sales for the Quarter and 33 Percent Earnings Per Share Growth in 2002
Staples, Inc. (Nasdaq: SPLS) announced today the results for the fourth quarter and full year ended Feb. 1, 2003. The company achieved a record performance with net income excluding special items of $417 million for the full year, or $0.88 per share, on a diluted basis. Earnings per share grew 33 percent from 2001, excluding special items, or a 65 percent increase on a GAAP basis, despite a difficult business environment. Sales for the year reached $11.6 billion, an eight percent increase compared to 2001, with increasing momentum and profitability gains throughout the year.
"Staples had a phenomenal year that reflects the power of people unified behind a winning strategy," said Ron Sargent, Staples president and CEO. "The outstanding performance by Staples associates drove record results and advanced our ability to truly make buying office products easy. We now look to build on our momentum, capitalize on the investments we made this past year, and deliver sustainable results going forward."
Total company sales for the fourth quarter grew to $3.3 billion, an increase of 14 percent versus the same quarter last year. North American Retail comparable sales increased three percent, up from one percent in the third quarter, continuing the momentum seen throughout the year. Including acquisitions, sales grew 16 percent for North American Delivery and 67 percent for European operations.
Staples' net income of $165 million for the quarter, or $0.35 per share on a diluted basis, exceeded analyst expectations of $0.33. This is a 21 percent increase over earnings per share of $0.29 reported for the fourth quarter of 2001, excluding special items. On a GAAP basis, fourth quarter earnings per share grew 75 percent.
13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended February 1, February 2, February 1, February 2, 2003 2002 2003 2002 Net income (in thousands): Net income as reported (GAAP) $164,658 $93,798 $446,100 $264,970 Special items (net of applicable taxes): Inventory writedown for store closures (included in cost of goods sold) - 4,551 - 4,551 Store closure charge - 30,807 - 30,807 Asset impairment and other charges - 6,591 - 6,591 Tax benefit - - (29,000) - Net income excluding special items $164,658 $135,747 $417,100 $306,919 13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended February 1, February 2, February 1, February 2, 2003 2002 2003 2002 Diluted earnings per share: Diluted earnings per share as reported (GAAP): - Staples, Inc. Stock $0.35 $0.20 $0.94 $0.40 - Staples RD Stock 0.17 Special items (net of applicable taxes): Inventory writedown for store closures (included in cost of goods sold) - 0.01 - 0.01 Store closure charge - 0.07 - 0.07 Asset impairment and other charges - 0.01 - 0.01 Tax benefit - - (0.06) - Diluted earnings per share excluding special items $0.35 $0.29 $0.88 $0.66
Staples' success was fueled by outstanding operational execution, investments in productivity improvements, and excellent customer service that drove top line and margin growth. In 2002, Staples also drove significant structural shifts to attain record performance. Highlights include:
From a Staples business unit perspective, Q4 and year-end highlights include:
North American Retail
Fourth quarter sales were $2.06 billion, up seven percent versus a year ago. Business unit income for the quarter was $173 million, up 16 percent versus last year. Staples ended the year operating 1,300 stores in North America, with the addition of 72 new stores during the year. Staples expects to open between 75 to 90 new stores in North America in 2003.
Staples' Retail business benefited from strong sales during the holiday season and through January, the start of the important "back to business" selling season, which continues into the first quarter of 2003.
North American Delivery
Consistent with its performance all year, the fourth quarter yielded outstanding results with $886 million in sales, up 16 percent versus a year ago, and leading the industry with 10 percent organic growth. Business unit income was $85 million for the quarter, an increase of 30 percent versus last year, including Medical Arts Press. Total e-commerce sales exceeded $450 million in the fourth quarter and reached $1.6 billion for the full year. The number of orders placed electronically reached 53 percent of volume in the fourth quarter, versus 45 percent a year ago.
The Contract business added 10,600 new accounts this year, 2,200 in Q4, and continues to gain share at a rapid pace. Staples Business Delivery had its strongest sales growth of the year in the fourth quarter and Quill finished the year with record performance in account acquisition and retention, while remaining the most profitable business in the Staples portfolio.
Sales for the fourth quarter of $393 million were up 67 percent versus the same quarter last year, or 46 percent in local currencies. Business unit income was $14 million for the quarter. The newly established Delivery platform is performing well, with results of the acquired business ahead of plan.
While retail comparable sales declined three percent in the fourth quarter, impacted by weak performance in Germany, store operations in the UK, Netherlands and Portugal performed well with improved sales and profitability for 2002. Staples opened three new stores in Europe in the fourth quarter and 14 for the year, for a total of 188 stores in the four countries where it operates retail stores.
For 2003, Staples anticipates 20 percent earnings per share growth for the year. The company expects to achieve mid to high single digit organic revenue growth, and two to three percent additional growth from recent acquisitions. The company expects North American Retail comparable sales to remain in the low single digits.
For the first quarter of this year, Staples expects to achieve earnings per share in the range of $0.16 to $0.17. Revenues in the first quarter are expected to increase in the range of high single to low double digits, with North American Retail comparable sales in the low single digit range.
Staples, Inc. is an $11.6 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 58,000 associates serving customers in approximately 1,500 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 open new stores successfully; our Dover format store may not be successful; our growth may continue to strain operations, which could adversely affect our business and financial results; 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 and international conflict; our stock price may fluctuate based on market expectations; our expanding 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 November 2, 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.
STAPLES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar Amounts in Thousands, Except Share Data) February 1, February 2, 2003 2002 ASSETS Current Assets: Cash and cash equivalents $596,064 $394,824 Merchandise inventories, net 1,555,205 1,459,792 Receivables, net 364,419 338,581 Deferred income taxes 96,229 117,560 Prepaid expenses and other current assets 105,559 92,070 Total current assets 2,717,476 2,402,827 Property and Equipment: Land and buildings 524,730 433,569 Leasehold improvements 621,713 552,250 Equipment 951,439 820,053 Furniture and fixtures 472,935 406,565 Total property and equipment 2,570,817 2,212,437 Less accumulated depreciation and amortization 1,123,065 853,685 Net property and equipment 1,447,752 1,358,752 Lease Acquisition Costs, Net of Accumulated Amortization 51,450 54,557 Intangible Assets, Net of Accumulated Amortization 216,391 - Goodwill 1,207,824 223,718 Other Assets 80,495 53,181 Total assets $5,721,388 $4,093,035 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $1,092,172 $935,442 Accrued expenses and other current liabilities 755,483 655,274 Debt maturing within one year 327,671 4,983 Total current liabilities 2,175,326 1,595,699 Long-Term Debt 732,041 350,225 Deferred Tax Liability 50,267 6,738 Other Long-Term Obligations 104,862 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 500,831,408 shares at February 1, 2003 and 491,564,105 shares at February 2, 2002 299 295 Additional paid-in capital 1,484,833 1,364,355 Cumulative foreign currency translation adjustments 11,481 (27,129) Retained earnings 1,719,091 1,272,991 Less: Staples, Inc. treasury stock at cost, 27,724,578 shares at February 1, 2003 and 27,569,880 shares at February 2, 2002 (556,812) (556,338) Total stockholders' equity 2,658,892 2,054,174 Total liabilities and stockholders' equity $5,721,388 $4,093,035 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollar Amounts in Thousands, Except Per Share Data) (Unaudited) 13 Weeks Ended 52 Weeks Ended February 1, February 2, February 1, February 2, 2003 2002 2003 2002 Sales $3,335,109 $2,929,207 $11,596,075 $10,744,373 Cost of goods sold and occupancy costs 2,452,321 2,212,188 8,652,593 8,173,880 Gross profit 882,788 717,019 2,943,482 2,570,493 Operating and other expenses: Operating and selling 478,007 412,958 1,795,428 1,651,846 Pre-opening 2,121 1,293 8,746 13,685 General and administrative 128,713 84,009 454,501 379,505 Amortization of intangibles 2,135 - 2,135 - Amortization of goodwill - 1,646 - 6,584 Asset impairment and other charges - 10,717 - 10,717 Store closure charge - 50,092 - 50,092 Interest and other expense, net 10,450 3,787 20,609 27,219 Total operating and other expenses 621,426 564,502 2,281,419 2,139,648 Income before income taxes 261,362 152,517 662,063 430,845 Income tax expense 96,704 58,719 215,963 165,875 Net income $164,658 $93,798 $446,100 $264,970 Net income attributed to: Staples, Inc. Stock $164,658 $93,798 $446,100 $185,110 Staples RD Stock - - - 79,740 Staples.com Stock - - - 120 $164,658 $93,798 $446,100 $264,970 Basic earnings per common share: Staples, Inc. Stock $0.35 $0.20 $0.96 $0.40 Staples RD Stock $- $- $- $0.18 Staples.com Stock $- $- $- $0.01 Diluted earnings per common share: Staples, Inc. Stock $0.35 $0.20 $0.94 $0.40 Staples RD Stock $- $- $- $0.17 Staples.com Stock $- $- $- $0.01 Number of shares used in computing basic earnings per common share: Staples, Inc. Stock 469,214 460,859 466,768 460,362 Staples RD Stock - - - 455,399 Staples.com Stock - - - 7,980 Number of shares used in computing diluted earnings per common share: Staples, Inc. Stock 474,406 467,475 472,695 466,491 Staples RD Stock - - - 461,379 Staples.com Stock - - - 9,819 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar Amounts in Thousands) Fiscal Year Ended February 1, February 2, 2003 2002 Operating Activities: Net income $446,100 $264,970 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 267,209 248,965 Asset impairment and other charges - 10,717 Store closure charge - 50,092 Deferred income tax expense (benefit) 226 (80,370) Other 35,767 19,278 Change in assets and liabilities, net of companies acquired/divested: (Increase) decrease in merchandise inventories (15,781) 148,687 Decrease in receivables 62,460 1,855 Increase in prepaid expenses and other assets (3,574) (684) Increase in accounts payable, accrued expenses and other current liabilities 113,026 94,438 Increase in other long-term obligations 8,917 12,960 468,250 505,938 Net cash provided by operating activities 914,350 770,908 Investing Activities: Acquisition of property and equipment (264,692) (340,118) Acquisition of businesses, net of cash acquired (1,171,187) - Proceeds from sales and maturities of short-term investments - 25,535 Proceeds from sales and maturities of long-term investments - 1,654 Purchase of long-term investments - (250) Acquisition of lease rights (347) (2,568) Net cash used in investing activities (1,436,226) (315,747) Financing Activities: Proceeds from sale of capital stock 78,895 53,549 Proceeds from borrowings 730,897 522,110 Payments on borrowings (95,235) (800,194) (Repayments) borrowings under receivables securitization agreement - (86,109) Termination of interest rate swap agreement - 18,027 Purchase of treasury stock (474) (26,083) Net cash provided by (used in) financing activities 714,083 (318,700) Effect of exchange rate changes on cash 9,033 (5,197) Net increase in cash and cash equivalents 201,240 131,264 Cash and cash equivalents at beginning of period 394,824 263,560 Cash and cash equivalents at end of period $596,064 $394,824 STAPLES, INC. AND SUBSIDIARIES Segment Reporting (Dollar Amounts in Thousands) (Unaudited) (Unaudited) 13 Weeks Ended 52 Weeks Ended February 1, February 2, February 1, February 2, 2003 2002 2003 2002 Sales by Segment: North American Retail $2,055,638 $1,928,830 $7,166,105 $6,914,219 North American Delivery 886,349 764,663 3,389,625 3,008,618 European Operations 393,122 235,714 1,040,345 796,356 Total $3,335,109 $2,929,207 $11,596,075 $10,719,193 Divested Business - - - 25,180 Consolidated sales $3,335,109 $2,929,207 $11,596,075 $10,744,373 Business Unit Income: North American Retail (1) $172,630 $142,046 $413,895 $321,364 North American Delivery 85,462 65,575 265,055 205,630 European Operations 13,720 9,492 3,722 (6,584) Total business unit income $271,812 $217,113 $682,672 $520,410 Divested Businesses - - - (1,537) Store Closure Charge - (50,092) - (50,092) Asset Impairment and Other Charges - (10,717) - (10,717) Interest and Other Expense, Net (10,450) (3,787) (20,609) (27,219) Consolidated income before income taxes $261,362 $152,517 $662,063 $430,845 (1) Business Unit Income for the 13 and 52 weeks ended February 2, 2002 includes a $7.4 million charge related to the write-down of inventory to net realizable value for 31 stores closed in Q1 2002.