Staples Logo
 

Staples Inc. Reports Industry Leading Second Quarter Results; ...Earnings Per Share Up 38 Percent; Sales Rise 25 Percent; Net Income Increases 56 Percent

Wednesday, August 18, 1999 7:00 am EDT

Dateline:

FRAMINGHAM, Mass.

Public Company Information:

NASDAQ:
SPLS
"These companies are focused on the same mission as Staples -- to help small business slash the cost and hassle of running an office"

FRAMINGHAM, Mass.--(BUSINESS WIRE)--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."

In addition, this quarter Staples:

--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 Portugal;

--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 business;

--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.

About Staples

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 http://www.staples.com.

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 Commission.

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.

Contact:

Staples Inc.
Media Contact:
Shannon Lapierre, 508/253-8468
shannon.lapierre@staples.com
or
Investor Contact:
Catherine Woods, 508/253-7342
catherine.woods@staples.com

Stay Informed

Learn about Staples news as it's happening.
Sign up to have press releases emailed directly to you.

Join us on: