I'd also like to remind you that certain information discussed on this call 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 various important factors, including those discussed or referenced under the heading Risk Factors and elsewhere in Staples' 10-Q filed this morning.Here to discuss Staples' Q1 performance and business outlook are Ron Sargent, Chairman and Chief Executive Officer; Mike Miles, President and Chief Operating Officer; and Christine Komola, Chief Financial Officer. Also joining us are Demos Parneros, President of U.S. Stores; and Joe Doody, President of North American Delivery. Ron? Ronald L. Sargent Thanks, Chris, and good morning, everybody. Thanks for joining us today. Our first quarter results came in about how we expected, with stable top line performance in North America and international sales remaining weak. When you look at the headlines for the quarter, total company sales were $6.1 billion, that's flat in local currency, but a decrease of 1% in U.S. dollars versus last year. And earnings per share on a GAAP basis were down about 4% to $0.27. During the quarter we incurred severance expenses, as well as payment of a legal settlement associated with the acquisition of Corporate Express in 2008. These items negatively impacted our first quarter earnings per share by about $0.03 combined. Excluding these items, earnings per share increased by about 7% versus last year's first quarter. On our fourth quarter earnings call, we talked about our key objectives for 2012, and I'd like to give you some brief updates on some of the progress we've made during Q1. One of our top priorities this year is to continue building momentum and product categories adjacent to core office supplies. During the quarter, we drove strong growth in products and services like facilities and breakroom supplies, copy and print, mobile phones and accessories, and new technology products like tablets and eReaders. Together, these adjacent categories grew by over $100 million year-over-year during Q1. Another top priority is to improve profitability. In late February, we announced plans to reduce international headcount. And during the first quarter, we eliminated approximately 300 positions in Europe and Australia combined. While these actions are an important step to improve international profitability, these alone are not sufficient. And I want to make it clear that we're holding ourselves accountable for poor performance outside of North America. We're extremely focused on getting this business back on track, and we're working hard to better meet the needs of our customers.
During the first quarter, we also took a look at our North American cost structure, and despite our strong profitability North America, we also recognized the need to become even more nimble and efficient here. So to that end, we eliminated about 200 salary positions in the U.S. and Canada during Q1, which has allowed us to speed up decisions, simplify the way we do business and reduce overhead cost. Additionally, we continue to be extremely selective with incremental spending. This year, we expect to generate solid returns on the investments we've made over the past few years in several new products, services and growth initiatives. We also remain committed to returning cash to our shareholders. And during Q1, we spent about $93 million on share repurchases and we increased our quarterly dividend by 10% to $0.11 per share, which puts our current dividend yield in the 3% range.Going forward, our outlook for 2012 has not changed. We continue to see modest improvement in the U.S. economy and ongoing weakness in Europe, we're maintaining our full year guidance of low-single digit sales growth and high-single digit EPS growth. Now let's take a look at our Q1 results for each of our business units in a little more detail, and I'm going to start with North American Delivery. During the first quarter, we made good progress against our 2012 objectives. We continued to gain share. We drove solid sales growth in adjacent categories, and we accelerated our top line momentum in Staples.com. Sales for the first quarter were $2.6 billion and that's up 2%. The top line increased in each of our 3 delivery businesses with particular strength in Staples.com, which was up in the mid-single digits. In Contracts, our customer acquisition and retention remained strong, and we continue to be very disciplined in managing account profitability. Late last year, we lost a couple of large legacy Corporate Express accounts that didn't achieve the right returns. While this will be a headwind to our top line throughout most of 2012, it has helped our operating metrics by improving average order size and reducing the number of small orders.
Taking a closer look at our core categories. Sales of ink and toner were up slightly during the first quarter, and sales of paper and core office supplies were down in the low-single digits compared to the prior year. Our expanded assortment and sharper pricing in facilities and breakroom supplies continue to resonate with our customers. Sales in this category increased by more than 20% in Q1 and came in ahead of our expectations. Facilities and breakroom supplies accounted for more than half of our growth in North American Delivery during the first quarter, and we're well on our way to growing this business by more than $100 million in 2012.Read the rest of this transcript for free on seekingalpha.com