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Staples Inc. Posts 10 Percent Comp Sales Growth in Second Quarter; Staples.com revenue up 513 percent over second quarter 1999

Tuesday, August 15, 2000 7:00 am EDT

Dateline:

FRAMINGHAM, Mass.

Public Company Information:

NASDAQ:
SPLS
"The second quarter marks our 30th consecutive quarter of meeting or beating analysts' earnings expectations"

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Staples Inc. (NASDAQ: SPLS), the pioneer of the office superstore industry, today announced that total comparable sales increased an industry-leading 10 percent for the second quarter ended July 29, 2000. Comparable sales include stores open for more than a year plus the Direct business and the Staples.com site.

Revenues grew 20 percent to $2.2 billion for the second quarter, compared with $1.84 billion for the same period last year. Net income for the quarter was $42.56 million, compared to $52.74 million for the second quarter of 1999. Earnings per share were $0.10, beating analysts' consensus by one cent, compared with $0.11 for the same period a year earlier.

Revenues for Staples' e-commerce operation, Staples.com, which are included in the overall Staples Inc. revenue figure of $2.2 billion, totaled $95.7 million for the second quarter, 513 percent above the second quarter of 1999. Staples.com pre-tax losses for the quarter were below plan at $29.8 million, chiefly as a result of stronger than expected revenues. The Staples.com operation includes Staples Inc.'s e-commerce sites: Staples.com, Quill.com and StaplesLink.com, and its Canadian e-commerce business.

"The second quarter marks our 30th consecutive quarter of meeting or beating analysts' earnings expectations," said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. "By paying attention to what our customers want and by executing on our business plan, we grew total comparable sales by 10 percent, the best rate in our industry. These impressive numbers were achieved even though we did not have events such as the Office 2000 and Microsoft Network Internet store promotions that drove sales during the second quarter a year ago.

"In order to build on our great momentum, Staples is developing three additional areas to help fuel longer-term growth: Europe, Staples.com and business services," Stemberg added.

Highlights of the quarter:

-- Edward C. Harsant, formerly president of The Business Depot, Staples' Canadian operations, was named to the newly created position of president, North American Superstores, in July. Harsant, who implemented many innovations while building The Business Depot into one of the strongest and most profitable Staples operations, is responsible for Staples' 943 U.S. stores and has oversight for the 162 Staples stores in Canada.

-- Staples' European operation continued to build on its strong growth of the past several quarters, with comparable sales increasing 18 percent. Staples opened six stores during the quarter in Europe. At the end of the quarter, the company operated 149 stores in Europe and is on track to open approximately 20 stores this year.

-- The Staples.com site, bolstered by a major site relaunch in May that has earned industry accolades, has been ranked first in the number of unique visitors in the office supply industry each of the past four months, according to research firm MediaMetrix. All site metrics have equaled or surpassed plan, including customer acquisition costs, revenue growth, revenues from repeat customers and gross profit.

-- Business services, launched on Staples.com in the past year, are expected to be an increasingly important part of the company's revenue stream in the future. Staples.com offers a variety of services, including printing and delivery, Web design and payroll management.

About Staples

Staples Inc. (NASDAQ: SPLS) is a $9 billion retailer of office supplies, furniture, technology and services 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 over 50,000 employees serving customers through more than 1,200 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at http://www.staples.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Staples Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-Q for the most recently ended quarter.

STAPLES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Share Data)

       
 
(Unaudited) (Unaudited)
13 Weeks Ended 26 Weeks Ended
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
 
Sales $ 2,201,297 $ 1,840,110 $ 4,757,083 $ 3,912,176
Cost of goods sold
and occupancy costs 1,654,633 1,385,551 3,600,772 2,962,864
Gross profit 546,664 454,559 1,156,311 949,312
 
Operating and
other expenses:
Operating and
selling 361,796 271,275 781,153 587,004
Pre-opening 6,545 4,899 14,528 9,407
General and
administrative 90,714 84,972 195,700 173,303
Amortization of
goodwill 3,523 2,971 7,095 5,258
Store closure credit -- -- (7,250 ) --
Interest and
other expense, net 11,952 3,976 18,092 5,392
Total operating and
other expenses 474,530 368,093 1,009,318 780,364
 
Income before
income taxes 72,134 86,466 146,993 168,948
Income tax expense 29,575 33,722 60,267 65,890
Net income $ 42,559 $ 52,744 $ 86,726 $ 103,058
 
Net income (loss)
attributed to:
Staples, Inc. Stock $ -- $ 52,744 $ -- $ 103,058
Staples RD Stock 44,571 -- 91,580 --
Staples.com Stock (2,012 ) -- (4,854 ) --
$ 42,559 $ 52,744 $ 86,726 $ 103,058
 
Basic earnings per
common share
Net income per
common share -
Staples, Inc. Stock $ 0.11 $ 0.22
Net income per
common share -
Staples RD Stock $ 0.10 $ 0.20
Net loss per
common share -
Staples.com Stock $ (0.14 ) $ (0.35 )
 
Diluted earnings
per common share
Net income per
common share -
Staples, Inc. Stock $ 0.11 $ 0.22
Net income per
common share -
Staples RD Stock $ 0.10 $ 0.20
Net loss per
common share -
Staples.com Stock $ (0.14 ) $ (0.35 )
 

STAPLES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)
   
 
 
July 29, January 29,
2000 2000
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 77,525 $ 110,483
Short-term investments 1,049 1,071
Merchandise inventories 1,676,571 1,607,516
Receivables, net 445,564 360,901
Deferred income taxes 15,749 39,730
Prepaid expenses and
other current assets 82,104 73,750
Total current assets 2,298,562 2,193,451
 
Property and Equipment:
Land and buildings 346,281 328,994
Leasehold improvements 501,649 442,119
Equipment 612,542 547,309
Furniture and fixtures 327,579 286,260
Total property and equipment 1,788,051 1,604,682
Less accumulated
depreciation and amortization 602,104 509,920
Net property and equipment 1,185,947 1,094,762
 
Other Assets:
Lease acquisition costs,
net of amortization 63,934 68,832
Investments 152,150 34,755
Goodwill, net of amortization 385,927 387,595
Deferred income taxes 16,068 34,912
Other 37,893 31,769
Total other assets 655,972 557,863
$ 4,140,481 $ 3,846,076
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 907,418 $ 897,523
Accrued expenses and
other current liabilities 470,573 545,162
Debt maturing within one year 34,065 12,219
Total current liabilities 1,412,056 1,454,904
 
Long-Term Debt 826,568 500,903
Other Long-Term Obligations 66,588 61,456
Stockholders' Equity:
Preferred stock,
$ .01 par value
5,000,000 shares
authorized;
no shares issued -- --
Common stock:
Staples RD Stock,
$.0006 par value
1,500,000,000 shares
authorized; shares
issued: 473,801,951
at July 29, 2000
and 470,752,253 shares
at January 29, 2000;
outstanding: 453,710,214
shares at July 29, 2000
and 457,083,510 shares
at January 29, 2000 283 282
Staples.com Stock, $.0006
par value 600,000,000
shares authorized;
issued: 14,084,239 shares
at July 29, 2000 and
13,626,093 at January 29,
2000; outstanding:
13,867,241 shares at
July 29, 2000 and
13,626,093 at
January 29, 2000 9 8
Additional paid-in capital 1,233,144 1,196,512
Cumulative foreign
currency translation
adjustments (7,335 ) (4,473 )
Unrealized gain
on investments 41,045 6,651
Retained earnings 1,035,035 948,309
Less: Staples RD
treasury stock
at cost, 20,091,737
shares at July 29, 2000
and 13,668,743 shares
at January 29, 2000 (466,207 ) (318,476 )
 
Staples.com treasury
stock at cost, 216,998
shares at July 29, 2000
and 0 shares at
January 29, 2000 (705 ) --
Total stockholders' equity 1,835,269 1,828,813
$ 4,140,481 $ 3,846,076
 
STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
   
 
(Unaudited)
26 Weeks Ended
July 29, July 31,
2000 1999
Operating Activities:
Net income $ 86,726 $ 103,058
Adjustments to reconcile
net income to net cash
(used in)/provided by
operating activities:
Depreciation and
amortization 109,360 81,577
Store closure credit (7,250 ) --
Expense from 401K and
PARS stock contribution 4,478 8,460
Deferred income tax
expense/(benefit) 18,327 (6,208 )
Change in assets and
liabilities, net of
companies acquired
using purchase accounting:
Increase in merchandise
inventories (85,531 ) (170,321 )
Increase in receivables (88,184 ) (136,723 )
Increase in prepaid
expenses and other assets (21,184 ) (977 )
Increase/(Decrease) in
accounts payable, accrued
expenses and other
current liabilities (32,136 ) 32,566
Increase in other
long-term obligations 5,851 2,863
(96,269 ) (188,763 )
Net cash used in
operating activities (9,543 ) (85,705 )
 
Investing Activities:
Acquisition of
property and equipment (199,392 ) (145,841 )
Acquisition of businesses,
net of cash acquired -- (137,625 )
Proceeds from sales and
maturities of
short-term investments 74 32,765
Purchase of
short-term investments -- (16,651 )
Purchase of
long-term investments (58,782 ) (20,906 )
Other (226 ) 88
Net cash used in
investing activities (258,326 ) (288,170 )
 
Financing Activities:
Proceeds from sale
of capital stock 23,982 25,243
Proceeds from borrowings 2,343,485 316,984
Payments on borrowings (1,984,364 ) (248,326 )
Settlement of equity
forward purchase agreement (78,684 ) --
Purchase of treasury stock (66,736 ) (78,246 )
Net cash provided by
financing activities 237,683 15,655
 
Effect of exchange
rate changes on cash (2,772 ) 227
 
Net decrease in cash
and cash equivalents (32,958 ) (357,993 )
Cash and cash equivalents
at beginning of period 110,483 357,993
Cash and cash
equivalents at end of period $ 77,525 $ --

Contact:

Staples Inc.
Tom Nutile, 508-253-1833
tom.nutile@staples.com
or
Staples Inc.
Laurel Lefebvre, 508-253-4080
laurel.lefebvre@staples.com

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