Staples, Inc. Announces Fourth Quarter and Full Year 2009 Performance

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Algemeen advies 02/03/2010 13:33
FRAMINGHAM, Mass., March 2, 2010 – Staples, Inc. (Nasdaq: SPLS) announced today the results for its fourth quarter and fiscal year ended January 30, 2010. Total company sales for the fourth quarter 2009 increased four percent to $6.4 billion compared to the fourth quarter of 2008. Net income for the fourth quarter 2009 declined 18 percent year over year to $234 million, and diluted earnings per share, on a GAAP basis, decreased 20 percent to $0.32 from
the $0.40 achieved in the fourth quarter of last year.
During the fourth quarter of 2009, the company recorded a previously announced pre-tax charge of $42 million related to a settlement of several retail wage and hour class action lawsuits, and also recorded a pre-tax integration and restructuring expense of $20 million related to Corporate Express. Excluding the impact of these special items, as well as pre-tax integration and restructuring expense of $41 million and a tax gain of $57 million during the
fourth quarter of 2008, adjusted earnings per share, on a diluted basis, increased six percent to $0.38 from the $0.36 achieved in the fourth quarter of last year.
“With a strong finish in the fourth quarter, our team delivered a solid 2009,” said Ron Sargent, Staples’ chairman and chief executive officer. “We made great progress on the integration of Corporate Express, took big steps toward building a global Staples brand, laid a solid foundation for growth in our technology services and copy and print businesses, and strengthened our international leadership team.”
For the full year 2009, total company sales increased five percent to $24.3 billion compared to the full year 2008. Net income decreased eight percent year over year to $739 million, and diluted earnings per share, on a GAAP basis, decreased 10 percent to $1.02 from the $1.13 achieved last year.
Total company sales for the full year 2009 decreased eight percent after adjusting sales for 2008 to include Corporate Express’ sales of $3.4 billion for February 2008 to June 2008, prior to the acquisition.

For the full year 2009, the company recorded $84 million of pre-tax integration and restructuring expense, as well as the previously announced pre-tax charge of $42 million related to a settlement of several retail wage and hour class action lawsuits. Excluding these special items, as well as $174 million of pre-tax integration and restructuring expense for the full year 2008, adjusted earnings per share, on a diluted basis, decreased 12 percent to $1.14 from the $1.29 achieved last year.

Q4 2009 and Full Year 2009 Highlights
Total Company
�� On a GAAP basis, fourth quarter 2009 operating income rate declined 13 basis points to 6.59 percent compared to the fourth quarter 2008. Excluding the impact of the 2008 and 2009 special items discussed above, fourth quarter 2009 operating income rate improved 17 basis points to 7.55 percent. This improvement primarily reflects Corporate Express integration synergies and leverage of distribution, rent and marketing expense, offset by increased incentive compensation.
�� On a GAAP basis, full year 2009 operating income rate declined 25 basis points to 5.69 percent compared to the full year 2008. Excluding the impact of the 2008 and 2009 special items discussed above, full year 2009 operating income rate declined 48 basis points to 6.21 percent compared to the full year 2008. This decline primarily reflects the inclusion of the less profitable Corporate Express business for the full year 2009 compared to only seven months in the prior year, subsequent to the July 2008 acquisition. Results also reflect increased incentive compensation, offset by Corporate
Express integration synergies and increased marketing efficiencies.
�� Generated record free cash flow of $1.8 billion after $313 million in capital
expenditures during 2009.
�� Utilized strong free cash flow to reduce debt by $875 million during 2009.
�� Returned $237 million in cash dividends to shareholders during 2009.
�� Ended the year with approximately $2.6 billion in liquidity, including $1.4 billion in cash and cash equivalents and $1.2 billion of available lines of credit.

North American Delivery
�� Achieved sales for the fourth quarter of 2009 of $2.4 billion, a decrease of one percent in US dollars, and a decrease of two percent in local currency compared to the fourth quarter of 2008.
�� Achieved full year 2009 sales of $9.6 billion, an increase of eight percent both in US dollars and local currency, compared to the full year 2008. After adjusting sales for 2008 to include Corporate Express’ sales of $1.8 billion prior to the acquisition, for February 2008 to June 2008, full year 2009 North American Delivery sales decreased 10 percent in both US dollars and local currency.
�� Fourth quarter 2009 operating income rate increased 24 basis points to 9.16 percent compared to the fourth quarter 2008. This improvement primarily reflects Corporate Express integration synergies and reduced marketing expense, offset by increased incentive compensation.
�� Full year 2009 operating income rate declined 83 basis points to 8.16 percent compared to the full year 2008. This decline primarily reflects the inclusion of the less profitable Corporate Express business for the full year 2009 compared to only seven months in the prior year, subsequent to the July 2008 acquisition. Results also reflect increased incentive compensation, offset by Corporate Express integration synergies and increased marketing efficiencies.
�� Corporate Express integration on track: achieved our goals for direct and indirect buying synergies, rationalized product assortment, distributed 2010 catalog with one common product assortment, consolidated Corporate Express and Staples brands, combined sales forces, and rationalized transportation network during 2009.

North American Retail
�� Achieved sales for the fourth quarter of 2009 of $2.6 billion, an increase of eight percent in US dollars and an increase of four percent in local currency compared to the fourth quarter of 2008.
�� Fourth quarter 2009 comparable store sales increased three percent versus the fourth quarter of 2008, reflecting positive customer traffic and strength in computers, ink and toner, offset by weakness in durable categories such as business machines and furniture.
�� Achieved sales for the full year 2009 of $9.4 billion, a decrease of one percent in both US dollars and local currency compared to the full year 2008.
�� Full year 2009 comparable store sales decreased two percent versus the full year 2008.
�� Fourth quarter 2009 operating income rate increased 21 basis points to 9.54 percent compared to the fourth quarter of 2008. This improvement primarily reflects purchasing synergies related to the integration of Corporate Express, as well as improved rent and distribution expense, offset by an increased mix of lower margin technology products and increased incentive compensation.
�� Full year 2009 operating income rate increased 16 basis points to 8.27 percent compared to the full year 2008.
�� Opened four stores and closed five stores during the fourth quarter, and opened 48 stores and closed 12 stores during the full year, ending 2009 with 1,871 stores in North America.

International
�� Achieved sales for the fourth quarter of 2009 of $1.4 billion, an increase of seven percent in US dollars and a decrease of six percent in local currency compared to the fourth quarter 2008.
�� Achieved full year 2009 sales of $5.3 billion, an increase of 13 percent in US dollars, and an increase of 14 percent in local currency compared to the full year 2008. After adjusting sales for 2008 to include Corporate Express’ sales of $1.6 billion for February 2008 to June 2008, prior to the acquisition, full year 2009 International sales decreased 16 percent in US dollars and decreased 11 percent in local currency.
�� Fourth quarter 2009 operating income rate decreased 38 basis points to 4.13 percent compared to the fourth quarter 2008. This decline primarily reflects losses in China and the European Printing Systems business, offset by improved profitability in the European Contract, Catalog and Retail businesses.
�� Full year 2009 operating income rate declined 98 basis points to 2.32 percent compared to the full year 2008. This decline primarily reflects deleverage of fixed expenses on lower sales, as well as increased loses in China and the European printing systems business. This decline was offset by Corporate Express integration synergies and the inclusion of the more profitable Corporate Express business for the full year 2009
compared to only seven months in the prior year, subsequent to the July 2008
acquisition.
�� Corporate Express integration on track: implemented new regional management
structure, made good progress with Europe restructuring efforts, completed direct and indirect purchasing negotiations, made progress with warehouse rationalization across Europe, and launched brand consolidation strategy during 2009.
�� Closed three stores in Germany and two stores in Sweden during the fourth quarter 2009, ending the year with 328 stores in Europe, 22 stores in China, 20 stores in Australia and two stores in Argentina.

Outlook
The company’s outlook assumes a modest economic recovery in 2010. For the first quarter 2010, the company expects sales to increase in the mid single-digits compared to the same period of 2009. The company expects to achieve diluted earnings per share, on a GAAP basis, in the range of $0.22 to $0.24 for the first quarter 2010. Excluding approximately $25 million to $30 million of pre-tax integration and restructuring expense, or approximately $0.03 per
share, the company expects to achieve adjusted diluted earnings per share for the first quarter 2010 in the range of $0.25 to $0.27.
For the full year 2010, the company expects total company sales to increase in the low singledigits compared to the full year 2009. The company expects to achieve diluted earnings per share, on a GAAP basis, in the range of $1.18 to $1.28 for the full year 2010. Excluding approximately $50 million to $60 million of pre-tax integration and restructuring expense, or approximately $0.05 per share, the company expects to achieve adjusted diluted earnings per
share for the full year 2010 in the range of $1.23 to $1.33.

The company expects to incur the following expenses during the first quarter and full year 2010.
Approximate Dollar Amounts in Millions
Q1 2010 FY 2010
Depreciation Expense $115 - 125 $470 - 490
Amortization of Intangibles 15 - 20 65 - 75
Integration and Restructuring Expense 25 - 30 50 - 60
Net Interest Expense 55 - 60 225 - 235



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