|Staples Inc. Reports Industry Leading Second Quarter Results; ...Earnings Per Share Up 38 Percent; Sales Rise 25 Percent; Net Income Increases 56 Percent|
| Business Editors|
FRAMINGHAM, Mass.--(BUSINESS WIRE)--Aug. 18, 1999--Staples Inc. (NASDAQ:SPLS), the pioneer of the office superstore industry, today reported net income of $52.7 million, or $.11 per common share on a diluted basis, for the second quarter, which ended July 31, 1999, compared with $33.8 million, or $.08 per common share on a diluted basis, for the prior year.
The earnings per share calculation for the prior year excludes a
one-time charge for the merger with Quill Corporation and includes a
three-for-two stock split in January 1999. Historical data has been
restated to reflect the merger with Quill under the pooling of
interests method of accounting.
Total sales for the quarter rose 25 percent to $1.84 billion from
$1.48 billion reported for the same period last year. Comparable sales
in the 800 stores that have been open for more than one year, and
delivery hubs, increased 9 percent for the second quarter.
"Staples associates achieved another quarter of impressive
growth, substantially outpacing and out-executing our competitors,"
said Staples Chairman and Chief Executive Officer Thomas G. Stemberg.
"In addition to our aggressive North American store expansion plan, we
will continue to drive revenue through enhancing services to our small
business customer, e-commerce initiatives, geographic expansion in
regions such as Europe, and a commitment to finding better ways to
serve our target market."
In a separate press release issued today, Staples announced two
strategic Internet investments to enhance the company's e-commerce
initiatives. Staples invested $6 million in HotOffice Technologies,
Inc., a Web-based intranet service provider to small- and medium-sized
businesses, and $3.5 million in DSL.net, which offers economical
high-speed Internet access, also to small- to medium-sized businesses.
Both agreements include extensive marketing initiatives that will
drive sales across nearly all Staples sales channels.
"These companies are focused on the same mission as Staples --
to help small business slash the cost and hassle of running an
office," said Stemberg. "Investments in Internet leaders that target
our key market segment will help us build our presence as the one-stop
e-commerce shop for small business."
--Opened 49 retail stores, ending the quarter with 1,009 stores
worldwide, including 791 stores in the United States; 139 stores in
Canada; 53 stores in the United Kingdom; and 26 stores in Germany;
--Made major European acquisitions to strengthen its presence in
Germany and enter operations in two new countries, the Netherlands and
--Improved infrastructure in its delivered office products
business, opening distribution centers in Vancouver, B.C., and
Stockton, Calif., and opening a low-cost, multilingual call center in
Halifax, N.S., to serve all channels of its delivered office supplies
--Focused on increasing Staples.com sales with a redesigned,
streamlined Web site;
--Continued its focus on becoming the service solution provider
to small business by rolling out payroll services nationwide, and
packaging and shipping services in select markets; and
--Developed special order capabilities to broaden in-store
product and service selection while minimizing investment in inventory
and floor space.
Staples Inc. is a $7 billion retailer of office supplies,
furniture and technology to consumers and businesses from home-based
businesses to Fortune 500 companies in the United States, Canada, the
United Kingdom and Germany. Headquartered outside Boston, Staples
invented the office superstore concept and today is the largest
operator of office superstores in the world. The company has over
44,000 employees serving customers through more than 1,000 office
superstores, mail order catalogs, e-commerce and a contract business.
More information about the company is available at
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 secondary offering of common
stock and other documents on file with the Securities and Exchange
STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollar Amounts in Thousands, Except Share Data) (Unaudited) (Unaudited) 13 Weeks Ended 26 Weeks Ended July 31, August 1, July 31, August 1, 1999 1998 1999 1998 Sales $1,840,110 $1,475,705 $3,912,176 $3,146,316 Cost of goods sold and occupancy costs 1,385,551 1,127,778 2,962,864 2,417,611 Gross profit 454,559 347,927 949,312 728,705 Operating and other expenses: Operating and selling 270,737 206,971 586,057 455,382 Pre-opening 4,899 4,232 9,407 7,584 General and administrative 85,510 70,694 174,250 138,180 Amortization of goodwill 2,971 927 5,258 1,851 Merger-related and integration costs -- 41,000 -- 41,000 Interest and other expense, net 3,976 5,920 5,392 10,614 Total operating and other expenses 368,093 329,744 780,364 654,611 Income before income taxes 86,466 18,183 168,948 74,094 Income tax expense 33,722 9,319 65,890 29,330 Net income before minority interest 52,744 8,864 103,058 44,764 Minority interest -- 110 -- 160 Net income $52,744 $8,974 $103,058 $44,924 Basic earnings per common share Historical net income per common share $0.11 $0.02 $0.22 $0.11 Diluted earnings per common share Historical net income per common share $0.11 $0.02 $0.22 $0.10 Pro forma: Historical net income $44,924 Provision for income taxes on previously untaxed earnings of pooled S-Corporation income 1,814 Pro forma net income $43,110 Basic earnings per common share Pro forma net income per common share $0.10 Diluted earnings per common share Pro forma net income per common share $0.10 Number of shares used in computing historical and pro forma basic net income per common share 462,421,805 423,959,190 462,627,140 421,493,259 Number of shares used in computing historical and pro forma diluted net income per common share 476,032,234 436,549,991 476,416,623 433,742,268 See notes to consolidated financial statements. STAPLES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar Amounts in Thousands, Except Share Data) July 31, 1999 January 30, (Unaudited) 1999 ASSETS Current Assets: Cash and cash equivalents $ -- $357,993 Short-term investments 1,252 17,428 Merchandise inventories 1,518,768 1,340,432 Receivables, net 378,114 221,836 Deferred income taxes 79,397 75,261 Prepaid expenses and other current assets 51,700 51,150 Total current assets 2,029,231 2,064,100 Property and Equipment: Land and buildings 246,948 231,378 Leasehold improvements 407,722 372,451 Equipment 460,788 400,225 Furniture and fixtures 260,868 239,755 Total property and equipment 1,376,326 1,243,809 Less accumulated depreciation and amortization 449,763 403,520 Net property and equipment 926,563 840,289 Other Assets: Lease acquisition costs, net of amortization 70,098 75,127 Investments 20,906 -- Goodwill, net of amortization 301,323 148,201 Deferred income taxes 30,819 28,735 Other 26,306 22,814 Total other assets 449,452 274,877 $3,405,246 $3,179,266 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $863,878 $794,427 Accrued expenses and other current liabilities 444,224 438,311 Debt maturing within one year 43,997 32,594 Total current liabilities 1,352,099 1,265,332 Long-Term Debt 263,560 205,015 Other Long-Term Obligations 55,909 52,033 Stockholders' Equity: Preferred stock, $.01 par value-authorized 5,000,000 shares; no shares issued -- -- Common stock, $.0006 par value-authorized 1,000,000,000 shares; issued 465,744,215 at July 31, 1999 and 461,538,061 shares at January 30, 1999 279 277 Additional paid-in capital 1,096,308 1,043,194 Cumulative foreign currency translation adjustments (12,772) (11,675) Unrealized gain on investments (31) 7 Retained earnings 736,378 633,321 Less: treasury stock at cost, 3,119,153 shares at July 31, 1999 and 488,922 shares at January 30, 1999 (86,484) (8,238) Total stockholders' equity 1,733,678 1,656,886 $3,405,246 $3,179,266 See notes to consolidated financial statements. STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar Amounts in Thousands) (Unaudited) 26 Weeks Ended July 31, August 1, 1999 1998 Operating Activities: Net income $103,058 $44,924 Adjustments to reconcile net income to net cash used in operating activities Minority interest -- (160) Depreciation and amortization 81,577 45,725 Merger-related and integration costs -- 41,000 Expense from 401K and PARS stock contribution 8,460 3,073 Deferred income tax benefit (6,208) (7,098) Change in assets and liabilities, net of companies acquired using purchase accounting: Increase in merchandise inventories (170,321) (169,012) Increase in receivables (136,723) (56,419) (Increase)/Decrease in prepaid expenses and other assets (977) 8,616 Increase in accounts payable, accrued expenses and other current liabilities 32,566 37,706 Increase in other long-term obligations 2,863 6,242 (188,763) (90,327) Net cash used in operating activities (85,705) (45,403) Investing Activities: Acquisition of property and equipment (147,787) (136,713) Acquisition of businesses, net of cash acquired (137,625) -- Proceeds from sales and maturities of short-term investments 32,765 11,313 Purchase of short-term investments (16,651) (6,854) Proceeds from sales and maturities of long-term investments -- 18,995 Purchase of long-term investments (20,906) (2,545) Acquisition of lease rights 1,946 (36,690) Other 88 (1,619) Net cash used in investing activities (288,170) (154,113) Financing Activities: Proceeds from sale of capital stock 25,243 35,581 Proceeds from borrowings 316,984 38 Payments on borrowings (248,326) (52,082) Purchase of dissenting shareholder S-Corporation stock -- (48,102) Purchase of treasury stock (78,246) (7,892) Dividends to shareholders of acquired S-Corp -- (15,601) Net cash provided by/(used in) financing activities 15,655 (88,058) Effect of exchange rate changes on cash 227 248 Net decrease in cash and cash eqivalents (357,993) (287,326) Cash and cash equivalents at beginning of period 357,993 381,088 Cash and cash equivalents at end of period $ -- $93,762 See notes to consolidated financial statements.
--30--bh/bos* CONTACT: Staples Inc. Media Contact: Shannon Lapierre, 508/253-8468 firstname.lastname@example.org or Investor Contact: Catherine Woods, 508/253-7342 email@example.com KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: COMED COMPUTERS/ELECTRONICS RETAIL EARNINGS