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Staples Inc. Announces Third Quarter 2012 Results

November 20, 2012

Staples Inc., parent company of Staples Advantages and Staples Promotional Products located in Framingham, Mass., announced last week the results for its third quarter ended October 27, 2012. Total company sales for the third quarter of 2012 were $6.4 billion, a decrease of two percent in U.S. dollars and one percent on a local currency basis compared to the third quarter of 2011. As a result of previously announced charges, on a GAAP basis, the company reported a net loss of $569 million, or $0.85 per share, from continuing operations attributable to Staples, Inc., compared to net income of $324 million, or $0.46 per diluted share, achieved in the third quarter of 2011.

Excluding the impairment of goodwill and other assets, as well as restructuring, accelerated amortization, and related tax charges incurred during the third quarter of 2012, the company reported non-GAAP net income from continuing operations attributable to Staples, Inc. of $310 million, or $0.46 per diluted share.

“During the third quarter we launched a new strategic plan to become the product authority for businesses, restructured our organization, and generated solid earnings excluding charges,” said Ron Sargent, Staples’ chairman and chief executive officer. “Going forward, we are in a much stronger position to pursue our best growth opportunities.”

Total company non-GAAP operating income rate declined 30 basis points to 7.87 percent from an operating income rate of 8.17 percent achieved during the third quarter of 2011. This decline primarily reflects lower product margins in North American Delivery and International and investments to drive growth in Staples.com. The decline was partially offset by reduced compensation and marketing expense.

The company generated operating cash flow of $895 million and invested $204 million in capital expenditures year to date, resulting in year-to-date free cash flow of $691 million. The company repurchased 9.4 million shares for $111 million during the third quarter of 2012, and has repurchased 27.4 million shares for $362 million year to date. The company also paid off a $325 million bond that matured on October 1, 2012. At the end of the third quarter, the company had $2.2 billion in liquidity, including $1.0 billion in cash and cash equivalents.

The company’s financial guidance includes the impact of the 53rd week in fiscal year 2012 as well as the impact of foreign currency exchange rates. The company expects full-year sales to be flat compared to the prior year. The company expects full year non-GAAP diluted earnings per share from continuing operations to increase in the low single-digits versus non-GAAP diluted earnings per share from continuing operations of $1.37 achieved in 2011. The company’s full year non-GAAP diluted earnings per share estimate excludes the charges incurred during the third quarter of 2012, as well as approximately $160 million to $200 million of previously announced pre-tax charges related to European restructuring, U.S. store closures and accelerated Australian tradename amortization that the company plans to record during the fourth quarter of 2012.

The company expects to generate more than $1 billion of free cash flow and plans to continue to repurchase its common stock through open-market purchases, which are expected to total approximately $450 million during 2012.

For more information or to see the full report, visit Staples' investor relations website.


 

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