EX-99 3 a4456985_ex991.txt STAPLES EXHIBIT 99.1 Exhibit 99.1 Staples, Inc. Reports 38 Percent Increase In Second Quarter Earnings Per Share FRAMINGHAM, Mass.--(BUSINESS WIRE)--Aug. 19, 2003-- Company Posts 18 Percent Sales Growth, A Six Percent Increase In North American Retail Comparable Sales, And Raises Full Year Earnings Guidance Staples, Inc. (Nasdaq: SPLS) announced today the results for its second quarter ended Aug. 2, 2003. The company achieved a 47 percent increase in net income to $87.8 million for the quarter, or $0.18 per share on a diluted basis. This exceeds analyst consensus of $0.16, and is a 38 percent increase over earnings per share of $0.13 reported for the second quarter of 2002. Total company sales for the quarter grew to $2.87 billion, an increase of 18 percent versus $2.43 billion reported for the same quarter in the prior year. North American Retail comparable sales increased six percent, with strong performance across all categories. "We are seeing tremendous strength and terrific results in every single part of our business," said Ron Sargent, Staples president and chief executive officer. "Staples associates are clearly focused on operational excellence and delivering an easy shopping experience for our customers." The company continues to benefit from its focus on small business customers; the "Back To Brighton" improvement plan to drive profitable sales, margin expansion and asset productivity; and by bringing the "easy" brand promise to life, with improved customer satisfaction. This quarter's highlights include: -- North American Retail sales increased 11 percent for the quarter, driven by strong execution on many levels including a sustained focus on customer service and improved in-stock levels. -- North American Delivery outpaced all major competitors with 14 percent sales growth, or 10 percent organically, as a result of acquiring more than 3000 new contract accounts and strong customer retention in all three delivery businesses. -- Both the European Retail and Delivery businesses had strong sales and were profitable, with Retail posting a four percent increase in comparable sales. -- Operating margins improved across the board. Total company operating margins were 5.03 percent, exceeding the 4.92 percent second quarter historical high achieved in 1999. -- Customer service performance continues to result in the highest retail Mystery Shop and delivery Perfect Order scores in the Company's history. Outlook As a result of the strong momentum in the second quarter and an anticipated second half of the year that will exceed current analyst consensus, Staples is raising earnings guidance on a pro forma basis to $1.09, versus the current analyst consensus of $1.05, for the full year 2003. About Staples Staples, Inc. is headquartered outside of Boston and sells a wide range of office products, including supplies, technology, furniture, and business services. With 2002 sales of $11.6 billion, Staples is committed to make buying office products easy. Nearly 58,000 associates serve consumers and businesses of all sizes -- from home-based businesses to Fortune 500 companies in the US, Belgium, Canada, France, Germany, Italy, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. Staples invented the office superstore concept and today, with approximately 1,500 office superstores, is the largest operator of office superstores in the world. Staples also serves its customers through its mail order catalog, e-commerce and contract businesses. More information 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 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; 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; the SEC review of certain accounting practices of major New England retailers; a California wage and hour class action lawsuit; and those other factors discussed in our quarterly report on Form 10-Q for the quarter ended May 3, 2003, 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 information follows. STAPLES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollar Amounts in Thousands, Except Share Data) August 2, February 1, 2003 2003 (Unaudited) ASSETS Current assets: Cash and cash equivalents $583,210 $596,064 Merchandise inventories, net 1,578,683 1,555,205 Receivables, net 357,642 364,419 Deferred income taxes 133,502 96,229 Prepaid expenses and other current assets 111,532 105,559 Total current assets 2,764,569 2,717,476 Property and equipment: Land and buildings 550,703 524,730 Leasehold improvements 653,903 621,713 Equipment 990,339 951,439 Furniture and fixtures 492,997 472,935 Total property and equipment 2,687,942 2,570,817 Less accumulated depreciation and amortization 1,246,794 1,123,065 Net property and equipment 1,441,148 1,447,752 Lease acquisition costs, net of accumulated amortization 47,982 51,450 Intangible assets, net of accumulated amortization 213,342 216,391 Goodwill 1,209,785 1,207,824 Other assets 63,969 80,495 Total assets $5,740,795 $5,721,388 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,091,850 $1,092,172 Accrued expenses and other current liabilities 657,037 755,483 Debt maturing within one year 716 327,671 Total current liabilities 1,749,603 2,175,326 Long-term debt 725,146 732,041 Deferred income taxes 35,951 50,267 Other long-term obligations 129,544 104,862 Stockholders' equity: Preferred stock - authorized 5,000,000 shares of $.01 par value; no shares issued - - Common stock - authorized 2,100,000,000 shares of $.0006 par value; issued 518,118,832 shares at August 2, 2003 and 500,831,408 shares at February 1, 2003 311 299 Additional paid-in capital 1,798,289 1,484,833 Cumulative foreign currency translation adjustments 31,411 11,481 Retained earnings 1,831,639 1,719,091 Treasury stock at cost - 27,927,168 shares at August 2, 2003, and 27,724,578 shares at February 1, 2003 (561,099) (556,812) Total stockholders' equity 3,100,551 2,658,892 Total liabilities and stockholders' equity $5,740,795 $5,721,388 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Amounts in Thousands, Except Per Share Data) (Unaudited) 13 Weeks Ended 26 Weeks Ended August 2, August 3, August 2, August 3, 2003 2002 2003 2002 Sales $2,868,527 $2,426,475 $6,015,283 $5,171,241 Cost of goods sold and occupancy costs 2,081,488 1,828,513 4,485,411 3,913,361 Gross profit 787,039 597,962 1,529,872 1,257,880 Operating and other expenses: Operating and selling 513,089 400,006 1,080,001 845,616 Pre-opening 2,409 2,346 3,647 4,232 General and administrative 125,360 98,698 251,866 205,782 Amortization of intangibles 1,943 - 3,885 - Interest and other expense, net 4,885 2,381 11,825 4,753 Total operating and other expenses 647,686 503,431 1,351,224 1,060,383 Income before income taxes 139,353 94,531 178,648 197,497 Income tax expense 51,561 34,976 66,100 44,073 Net income $87,792 $59,555 $112,548 $153,424 Basic earnings per common share: $0.18 $0.13 $0.24 $0.33 Diluted earnings per common share: $0.18 $0.13 $0.23 $0.32 Number of shares used in computing basic earnings per common share: 479,947 466,507 475,438 465,181 Number of shares used in computing diluted earnings per common share: 487,690 472,835 482,755 472,332 STAPLES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollar Amounts in Thousands) (Unaudited) 26 Weeks Ended August 2, August 3, 2003 2002 Operating Activities: Net income $112,548 $153,424 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 142,022 128,326 Deferred tax (benefit) expense (37,054) 17,274 Other 17,066 17,365 Change in assets and liabilities: Increase in merchandise inventories (1,529) (212,653) Decrease in receivables 10,785 13,899 (Increase) decrease in prepaid expenses and other assets (5,395) 7,972 (Decrease) increase in accounts payable (17,808) 31,044 Decrease in accrued expenses and other current liabilities (91,864) (89,107) Increase in other long-term obligations 4,443 2,909 Net cash provided by operating activities 133,214 70,453 Investing Activities: Acquisition of property and equipment (109,564) (133,257) Acquisition of businesses, net of cash acquired (2,910) (383,192) Other - (403) Net cash used in investing activities (112,474) (516,852) Financing Activities: Proceeds from sale of capital stock 292,105 43,122 Proceeds from borrowings - 85,568 Payments on borrowings (328,156) (1,097) Advances under accounts receivable securitization agreement - 100,000 Purchase of treasury stock (4,287) (484) Net cash (used in) provided by financing activities (40,338) 227,109 Effect of exchange rate changes on cash and cash equivalents 6,744 (654) Net decrease in cash and cash equivalents (12,854) (219,944) Cash and cash equivalents at beginning of period 596,064 394,824 Cash and cash equivalents at end of period $583,210 $174,880 STAPLES, INC. AND SUBSIDIARIES Segment Reporting (Dollar Amounts in Thousands) (Unaudited) 13 Weeks Ended 26 Weeks Ended August 2, August 3, August 2, August 3, 2003 2002 2003 2002 Sales: North American Retail $1,618,651 $1,456,129 $3,461,371 $3,183,022 North American Delivery 893,047 780,712 1,812,567 1,592,703 European Operations 356,829 189,634 741,345 395,516 Total sales $2,868,527 $2,426,475 $6,015,283 $5,171,241 Business Unit Income / (Loss): North American Retail $66,869 $45,790 $142,572 $105,008 North American Delivery 72,492 57,145 131,404 104,879 European Operations 4,877 (6,023) 14,472 (7,637) Total business unit income $144,238 $96,912 $288,448 $202,250 Interest and other expense, net (4,885) (2,381) (11,825) (4,753) Impact of change in accounting principle 0 - (97,975) 0 Income before income taxes $139,353 $94,531 $178,648 $197,497 STAPLES, INC. AND SUBSIDIARIES Pro Forma Consolidated Statements of Income (Amounts in Thousands, Except Per Share Data) (Unaudited) Pro Forma Pro Forma for the for the 13 Weeks Ended 26 Weeks Ended August 2, August 3, August 2, August 3, 2003 2002 2003 2002 Sales $2,868,527 $2,426,475 $6,015,283 $5,171,241 Cost of goods sold and occupancy costs 2,081,488 1,777,309 4,387,436 3,805,692 Gross profit 787,039 649,166 1,627,847 1,365,549 Operating and other expenses: Operating and selling 513,089 451,210 1,080,001 953,285 Pre-opening 2,409 2,346 3,647 4,232 General and administrative 125,360 98,698 251,866 205,782 Amortization of intangibles 1,943 - 3,885 - Interest and other expense, net 4,885 2,381 11,825 4,753 Total operating and other expenses 647,686 554,635 1,351,224 1,168,052 Income before income taxes 139,353 94,531 276,623 197,497 Income tax expense 51,561 34,976 102,351 44,073 Net income $87,792 $59,555 $174,272 $153,424 Basic earnings per common share: $0.18 $0.13 $0.37 $0.33 Diluted earnings per common share: $0.18 $0.13 $0.36 $0.32 Number of shares used in computing basic earnings per common share: 479,947 466,507 475,438 465,181 Number of shares used in computing diluted earnings per common share: 487,690 472,835 482,755 472,332 CONTACT: Staples, Inc. Media Contact: Paul Capelli/Deb Hohler, 508-253-8530/8509 or Investor Contact: Laurel Lefebvre, 508-253-4080