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Staples, Inc. Announces Fourth Quarter And Full Year 2012 Performance

Stocks in this article: SPLS

Today's Conference Call

The company will host a conference call today at 8:00 a.m. (ET) to review these results and its outlook. Investors may listen to the call at http://investor.staples.com.

About Staples

Staples is the world’s largest office products company and second largest internet retailer. For 26 years, Staples has served the needs of business customers and its vision is to provide every product businesses need to succeed. Through its world-class retail, online and delivery capabilities, Staples offers office supplies, technology products and services, facilities and breakroom supplies, furniture, copy and print services and a wide range of other product categories. With thousands of associates worldwide dedicated to making it easy for businesses of all sizes, Staples operates throughout North and South America, Europe, Asia, Australia and New Zealand. The company is headquartered outside Boston. More information about Staples (Nasdaq: SPLS) is available at www.staples.com/media.

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 including, but not limited to, the information set forth under “Outlook” and other statements regarding our future business and financial performance. Any statements contained in this news release that are not statements of historical fact should be considered forward-looking statements. You can identify forward-looking statements by the use of the words “believes”, “expects”, “anticipates”, “plans”, “may”, “will”, “would”, “intends”, “estimates”, and other similar expressions, whether in the negative or affirmative, although not all forward-looking statements include such words. Forward-looking statements are based on a series of expectations, assumptions, estimates and projections which involve substantial uncertainty and risk, including the review of our assessments by our outside auditor and changes in management’s assumptions and projections. 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: global economic conditions could adversely affect our business and financial performance; we face uncertainties in connection with the implementation of our strategies to transform our business; we have recognized substantial goodwill impairment charges in the current fiscal year and may be required to recognize additional goodwill impairment charges in the future; our market is highly competitive and we may not be able to continue to compete successfully; if the products and services that we offer fail to meet our customer needs, our performance could be adversely affected; we may be unable to continue to enter new markets successfully; our international operations expose us to risks inherent in foreign operations; failure to manage growth and our operations successfully could adversely affect our financial results; our effective tax rate may fluctuate; fluctuations in foreign exchange rates could lead to lower earnings; we may be unable to attract, train, engage and retain qualified associates; our quarterly operating results are subject to significant fluctuation; our indebtedness could adversely affect us by reducing our flexibility to respond to changing business and economic conditions; our expanded offering of proprietary branded products may not improve our financial performance and may expose us to intellectual property liability, product liability, import/export liability, government investigations and claims, and other risks associated with global sourcing; problems in our information systems and technologies may disrupt our operations; compromises of our information systems or unauthorized access to confidential information or our customers’ or associates’ personal information may materially harm our business or damage our reputation; our business may be adversely affected by the actions of and risks associated with third-party vendors and service providers; various legal proceedings may adversely affect our business and financial performance; failure to comply with laws, rules and regulations could negatively affect our business operations and financial performance; and those factors discussed or referenced in our most recent annual report on Form 10-K filed with the SEC, under the heading “Risk Factors” and elsewhere, and any subsequent periodic or current reports filed by us with the SEC. In addition, any forward-looking statements represent our estimates only as of the date such statements are made (unless another date is indicated) 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

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands, Except Share Data)

(Unaudited)

 
  February 2, 2013   January 28, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 1,334,302 $ 1,264,149
Receivables, net 1,815,586 2,033,680
Merchandise inventories, net 2,314,058 2,431,845
Deferred income tax assets 218,899 305,611
Prepaid expenses and other current assets 346,773 255,535
Current assets of discontinued operations 170,819    
Total current assets 6,200,437 6,290,820
 
Property and equipment:
Land and buildings 1,015,225 1,034,983
Leasehold improvements 1,300,258 1,330,373
Equipment 2,625,949 2,462,351
Furniture and fixtures 1,088,669   1,084,358  
Total property and equipment 6,030,101 5,912,065
Less: Accumulated depreciation 4,066,926   3,831,704  
Net property and equipment 1,963,175 2,080,361
 
Intangible assets, net of accumulated amortization 384,609 449,781
Goodwill 3,221,162 3,982,130
Other assets 510,622   627,530  
Total assets $ 12,280,005   $ 13,430,622  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,896,040 $ 2,220,414
Accrued expenses and other current liabilities 1,405,752 1,414,721
Debt maturing within one year 987,161 439,143
Current liabilities of discontinued operations 129,672    
Total current liabilities 4,418,625 4,074,278
 
Long-term debt, net of current maturities 1,001,943 1,599,037
Other long-term obligations 723,343 735,094
 
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued
Common stock, $.0006 par value, 2,100,000,000 shares authorized; issued and outstanding 932,246,614 and 669,182,785 shares at February 2, 2013 and 922,126,579 shares and 695,743,547 shares at January 28, 2012, respectively 559 553
Additional paid-in capital 4,711,113 4,551,299
Accumulated other comprehensive loss (388,773 ) (319,743 )
Retained earnings 6,694,207 7,199,060
Less: Treasury stock at cost, 263,063,829 shares at February 2, 2013 and 226,383,032 shares at January 28, 2012 (4,888,953 ) (4,416,018 )
Total Staples, Inc. stockholders’ equity 6,128,153 7,015,151
Noncontrolling interests 7,941   7,062  
Total stockholders’ equity 6,136,094   7,022,213  
Total liabilities and stockholders’ equity $ 12,280,005   $ 13,430,622  
 

 

STAPLES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Amounts in Thousands, Except Per Share Data)

(Unaudited)

 
  14 and 13 Weeks Ended   Fiscal Year Ended

February 2, 2013

 

January 28, 2012

February 2, 2013

 

January 28, 2012

Sales $ 6,567,980 $ 6,374,306 $ 24,380,510 $ 24,664,752
Cost of goods sold and occupancy costs 4,848,571   4,655,424   17,889,249   17,974,884  
Gross profit 1,719,409 1,718,882 6,491,261 6,689,868
Operating expenses:
Selling, general and administrative 1,210,686 1,234,602 4,884,284 4,991,195
Impairment of goodwill and long-lived assets 810,996
Integration and restructuring costs 176,620 207,016
Amortization of intangibles 18,434   15,459   78,900   64,902  
Total operating expenses 1,405,740   1,250,061   5,981,196   5,056,097  
 
Operating income 313,669 468,821 510,065 1,633,771
 
Other (expense) income:
Interest income 1,089 1,708 5,340 7,370
Interest expense (38,282 ) (41,972 ) (162,477 ) (173,394 )
Loss on early extinguishment of debt (56,958 ) (56,958 )
Other income (expense), net (27,078 ) 1,125   (30,547 ) (3,103 )
Income from continuing operations before income taxes 192,440 429,682 265,423 1,464,644
Income tax expense 102,490   146,092   426,270   477,247  
Income (loss) from continuing operations, including the portion attributable to the noncontrolling interests 89,950 283,590 (160,847 ) 987,397
Discontinued Operations:
Loss from discontinued operations, net of income taxes (11,892 ) (69 ) (49,978 ) (3,564 )
Consolidated net income (loss) 78,058 283,521 (210,825 ) 983,833
Loss attributed to the noncontrolling interests   (72 ) (119 ) (823 )
Income (loss) attributed to Staples, Inc. $ 78,058   $ 283,593   $ (210,706 ) $ 984,656  
 
Amounts attributable to Staples, Inc.
Income (loss) from continuing operations $ 89,950 $ 283,662 $ (160,728 ) $ 988,220
Loss from discontinued operations (11,892 ) (69 ) (49,978 ) (3,564 )
Income (loss) attributed to Staples, Inc. $ 78,058   $ 283,593   $ (210,706 ) $ 984,656  
 
Basic Earnings Per Common Share:
Continuing operations attributed to Staples, Inc. $ 0.14 $ 0.41 $ (0.24 ) $ 1.42
Discontinued operations attributed to Staples, Inc. (0.02 )   (0.07 )  
Net (loss) income attributed to Staples, Inc. $ 0.12   $ 0.41   $ (0.31 ) $ 1.42  
Diluted Earnings Per Common Share:
Continuing operations attributed to Staples, Inc. $ 0.14 $ 0.41 $ (0.24 ) $ 1.40
Discontinued operations attributed to Staples, Inc. (0.02 )   (0.07 )  
Net (loss) income attributed to Staples, Inc. $ 0.12   $ 0.41   $ (0.31 ) $ 1.40  
 
Weighted Average Shares Outstanding:
Basic 658,653 683,505 669,479 694,986
Diluted 664,947 691,993 669,479 704,019
 
Dividends declared per common share $ 0.11   $ 0.10   $ 0.44   $ 0.40  
 

 

STAPLES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

 
Condensed Consolidated Statements of Comprehensive Income
  14 and 13 Weeks Ended

February 2, 2013

 

January 28, 2012

Comprehensive (loss) income from consolidated operations $ 70,361 $ (41,847 )
Comprehensive income (loss) attributed to noncontrolling interests 765   1,389  
Comprehensive (loss) income attributed to Staples, Inc. $ 69,596   $ (43,236 )
 
 
Fiscal Year Ended

February 2, 2013

  January 28, 2012
Consolidated net (loss) income $ (210,825 ) $ 983,833
 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments 36,602 (191,972 )
Derivative gains (losses) arising from cash flow hedging activities, net 2,022 (1,505 )
Deferred benefit costs (106,656 )   (27,520 )
Other comprehensive (loss) income, net of tax (68,032 ) (220,997 )
 
Consolidated comprehensive (loss) income (278,857 ) 762,836
Comprehensive income (loss) attributed to noncontrolling interests 879     990  
Comprehensive (loss) income attributed to Staples, Inc. $ (279,736 )   $ 761,846  
 

 

STAPLES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

(Unaudited)

 
  Fiscal Year Ended

February 2, 2013

 

January 28, 2012

Operating Activities:
Consolidated net (loss) income, including loss from the noncontrolling interests $ (210,825 ) $ 983,833
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 408,413 417,154
Amortization of intangible assets 78,900 64,902
Impairment of goodwill and long-lived assets 810,996
Stock-based compensation 117,813 151,822
Excess tax benefits from stock-based compensation arrangements (185 ) (1,805 )
Deferred income tax expense 112,148 6,706
Loss on early extinguishment of debt 56,958
Loss related to equity method investment 26,211
Other 7,208 4,452
Changes in assets and liabilities:
Decrease (increase) in receivables 122,628 (73,670 )
Decrease (increase) in merchandise inventories 87,246 (82,343 )
(Increase) decrease in prepaid expenses and other assets (48,145 ) 123,660
(Decrease) increase in accounts payable (260,263 ) 23,677
Decrease in accrued expenses and other liabilities (111,246 ) (117,389 )
Increase in other long-term obligations 21,331   75,476  
Net cash provided by operating activities 1,219,188 1,576,475
 
Investing Activities:
Acquisition of property and equipment (349,574 ) (383,654 )
Proceeds from the sale of property and equipment 9,500
Acquisition of businesses, net of cash acquired (1,941 )  
Net cash used in investing activities (342,015 ) (383,654 )
 
Financing Activities:
Proceeds from the exercise of stock options and the sale of stock under employee stock purchase plans 49,993 73,866
Proceeds from borrowings 1,087,843 301,843
Payments on borrowings (485,554 ) (820,631 )
Early settlement of debt (689,740 )
Purchase of noncontrolling interest (7,910 ) (10,000 )
Cash dividends paid (294,147 ) (277,936 )
Excess tax benefits from stock-based compensation arrangements 185 1,805
Purchase of treasury stock, net (472,935 ) (629,041 )
Net cash used in financing activities (812,265 ) (1,360,094 )
Effect of exchange rate changes on cash and cash equivalents 5,245   (29,835 )
Net increase (decrease) in cash and cash equivalents 70,153 (197,108 )
Cash and cash equivalents at beginning of period 1,264,149   1,461,257  
Cash and cash equivalents at end of period $ 1,334,302   $ 1,264,149  
 

 

STAPLES, INC. AND SUBSIDIARIES

Segment Reporting

(Dollar Amounts in Thousands)

(Unaudited)

 
  14 and 13 Weeks Ended   Fiscal Year Ended
February 2, 2013   January 28, 2012 February 2, 2013   January 28, 2012
Sales
North American Stores & Online $ 3,297,555 $ 3,197,396 $ 11,827,906 $ 11,741,998
North American Commercial 2,102,370 1,962,028 8,108,402 7,974,860
International Operations 1,168,055   1,214,882   4,444,202   4,947,894  
Total segment sales $ 6,567,980   $ 6,374,306   $ 24,380,510   $ 24,664,752  
 
Business Unit Income (Loss)
North American Stores & Online $ 317,029 $ 295,558 $ 987,025 $ 1,021,442
North American Commercial 194,699 175,667 680,011 660,822
International Operations 5,968   32,345   (21,146 ) 103,329  
Business unit income 517,696 503,570 1,645,890 1,785,593
Equity compensation (27,407 ) (34,749 ) (117,813 ) (151,822 )
Impairment of goodwill and long-lived assets (810,996 )
Integration and restructuring costs (176,620 ) (207,016 )
Interest and other expense, net (121,229 ) (39,139 ) (244,642 ) (169,127 )
Income from continuing operations before income taxes $ 192,440   $ 429,682   $ 265,423   $ 1,464,644  
 

 

STAPLES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Income Statement Disclosures

(Dollar Amounts in Thousands, Except Per Share Data)

(Unaudited)

 
  53 Weeks Ended
February 2, 2013
GAAP  

Impairment of goodwill & long lived assets (1)

 

Restructuring charges (2)

 

Accelerated trade-name amortization (3)

 

Loss on early extinguishment of debt (4)

 

Termination of JV arrangement in India (5)

  Non-GAAP
Operating income $ 510,065 $ 810,996 $ 207,016 $ 20,049 $ $ $ 1,548,126
Interest and other expense, net (244,642 ) 56,958 26,211 (161,473 )
Income from continuing operations before income taxes 265,423 1,386,653
 
Income taxes 426,270 426,270
Adjustments (6)   24,390  
Adjusted income taxes 426,270 450,660
 
(Loss) income from continuing operations (160,847 ) 935,993
Loss attributed to noncontrolling interests (119 ) (119 )
(Loss) income from continuing operations attributed to Staples, Inc. $ (160,728 ) $ 936,112  
 
Effective tax rate 160.6 % 32.5 %
 
Per share (loss) income from continuing operations attributed to Staples, Inc:
Basic earnings per common share $ (0.24 ) $ 1.40
Diluted earnings per common share $ (0.24 ) $ 1.39
 
Weighted average common shares outstanding 669,479 669,479
Effect of dilutive securities   6,526  
Weighted average common shares outstanding assuming dilution 669,479   676,005  
 

 
52 Weeks Ended
January 28, 2012
Net income   Per Diluted Share
Income from continuing operations attributed to Staples, Inc. $ 988,220 $ 1.40
Tax refund (7) (20,800 ) (0.03 )
Non-GAAP income from continuing operations attributed to Staples, Inc. $ 967,420   $ 1.37  
 

(1) Consists of goodwill impairment charges of $468.1 million and $303.3 million related to the Company's Europe Catalog and Europe Retail reporting units, respectively, and $39.5 million for the write-down of fixed assets primarily related to the closure and consolidation of certain operations.(2) Restructuring charges include $106.4 million for ongoing lease obligations related to facility closures, $75.6 million for severance and benefit costs, and $24.9 million for other associated costs related to the closure of 46 retail stores and the consolidation of certain sub-scale delivery businesses in Europe and the accelerated closure of 15 retail stores in the United States.(3) Relates to a strategic decision to transition from using the legacy Corporate Express tradename in the Company's Australian business to the exclusive use of the Staples tradename.(4) Relates to the pre-tax debt tender premiums and fees incurred as a result of the repurchase of approximately $632.8 million of the January 2014 Notes pursuant to a cash tender offer.(5) Relates to a charge incurred as a result of the Company's termination of its joint venture arrangement in India.(6) The $24.4 million adjustment to income tax expense in 2012 relates to tax benefits related to the charges recorded in 2012, partially offset by the establishment of valuation allowances as a result of the planned closure and consolidation of certain operations in the Company's Europe Retail and Europe Catalog reporting units.(7) Relates to a tax benefit related to a refund due to Corporate Express N.V. from the Italian government that was previously deemed uncollectible.

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