Staples, Inc. Announces Third Quarter 2012 Performance

  Staples, Inc. Announces Third Quarter 2012 Performance

Business Wire

FRAMINGHAM, Mass. -- November 14, 2012

Staples, Inc. (Nasdaq: SPLS) announced today 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.

Third Quarter 2012 Financial Summary
                                                        
(dollar amounts in millions, except     Q3 2012   Q3 2011   Year over Year
per share data)                                             Change
Total company sales                     $6,353    $6,481    -2.0%
Total company sales growth on a local                       -1.4%
currency basis*
                                                            
GAAP operating (loss) income            ($357)    $529      ($886)
Non-GAAP operating income*              $500      $529      ($29)
                                                            
GAAP operating (loss) income rate       (5.62%)   8.17%     (1,379 basis
                                                            points)
Non-GAAP operating income rate*         7.87%     8.17%     (30 basis points)
                                                            
GAAP (loss) income per share from
continuing operations attributable to   ($0.85)   $0.46     ($1.31)
Staples, Inc.
Non-GAAP earnings per diluted share
from continuing operations             $0.46    $0.46    $0.00
attributable to Staples, Inc.*

*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information”
and the accompanying reconciliations for more detailed information about these
non-GAAP measures. Non-GAAP operating income, non-GAAP operating income rate,
and non-GAAP earnings per diluted share from continuing operations
attributable to Staples, Inc. exclude the impact of Q3 2012 charges related to
the impairment of goodwill and other assets, restructuring charges and
accelerated tradename amortization. Non-GAAP earnings per diluted share from
continuing operations attributable to Staples, Inc. also excludes Q3 2012 tax
charges. In total, these charges negatively impacted Q3 2012 GAAP earnings per
share from continuing operations attributable to Staples, Inc. by $1.31.

“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.

North American Delivery

North American Delivery sales for the third quarter of 2012 were $2.6 billion,
an increase of one percent compared to the third quarter of 2011. This
primarily reflects growth of facilities and breakroom supplies and copy and
print services, partially offset by the previously announced loss of two large
contract customers during the third quarter of 2011. Operating income rate
decreased 76 basis points to 8.73 percent compared to the third quarter of
2011. This decline reflects lower product margins and investments to drive
growth in Staples.com, partially offset by reduced marketing expense.

North American Retail

North American Retail sales of $2.6 billion were flat compared to the third
quarter of 2011. Comparable store sales for the third quarter of 2012
decreased one percent, as traffic declined two percent and average order size
increased one percent versus the prior year. Lower sales of computers and
software were somewhat offset by growth of copy and print services and core
office supplies. Operating income rate increased 9 basis points to 10.79
percent compared to the third quarter of 2011. This increase primarily
reflects lower operating expenses and distribution efficiencies, somewhat
offset by investments in promotional activity.

International Operations

Sales in International Operations for the third quarter were $1.1 billion, a
decrease of 12 percent in U.S. dollars and a decrease of eight percent on a
local currency basis compared to the third quarter of 2011. These results
reflect weak sales in Europe and Australia. Economic weakness drove declines
in the company’s European delivery businesses, as well as a six percent
decline in comparable store sales in Europe. Operating income rate decreased
302 basis points to an operating loss of 0.15 percent compared to the third
quarter of 2011. Excluding $16 million of accelerated Australia tradename
amortization during the third quarter, operating income rate decreased 160
basis points to 1.27 percent compared to the prior year. This decrease
primarily reflects deleverage of fixed expenses in Europe and Australia, as
well as lower product margins in Europe, partially offset by savings related
to headcount reductions in Europe and Australia.

Discontinued Operations

During the third quarter of 2012, the company recorded an after-tax loss from
discontinued operations of $28 million related to its European Printing
Systems business, which includes $23 million of charges related to
restructuring and incremental tax expense. This compares to net income of $3
million from discontinued operations achieved in the third quarter of 2011.

Outlook

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.

Presentation of Non-GAAP Information

This press release presents certain results with and without the impact of
charges incurred during the third quarter of 2012 related to the impairment of
goodwill and other assets, restructuring charges, accelerated tradename
amortization, and the establishment of valuation allowances, net of tax
benefits. This press release also presents certain results for 2011 and 2012
both with and without the impact of fluctuations in foreign currency exchange
rates, and the impact of a tax refund in 2011. The presentation of results
that excludes these items, as well as the presentation of free cash flow, are
non-GAAP financial measures that should be considered in addition to, and
should not be considered superior to, or as a substitute for, the presentation
of results determined in accordance with GAAP. Reconciliations of the non-GAAP
financial measures to the most directly comparable GAAP financial measures are
provided in the accompanying tables of financial information. Management
believes that the non-GAAP financial measures enable management and investors
to understand and analyze the company’s performance by providing meaningful
information relevant to certain events and foreign currency fluctuations that
impact the comparability of underlying business results from period to period.
Management has adjusted for impairment of goodwill and other assets, which
relates to the company’s European retail and catalog businesses, and
accelerated tradename amortization, which relates to rebranding of the
company’s Australian business, because such charges are non-cash and because
the timing and amount of such charges are inconsistent and cannot be predicted
or planned for. Management has adjusted for restructuring charges, which
relate to severance and other costs associated with European restructuring and
the planned closure of retail stores in the U.S., and the establishment of
valuation allowances, which relates to previously recorded deferred tax assets
in the company’s European retail and catalog businesses, because the exclusion
of such amounts facilitates the comparison of the company’s financial results
to its historical operating results. Management uses these non-GAAP financial
measures to evaluate the operating results of the company’s business against
prior year results and its operating plan, and to forecast and analyze future
periods. Management recognizes there are limitations associated with the use
of non-GAAP financial measures as they may reduce comparability with other
companies that use different methods to calculate similar non-GAAP measures.
Management generally compensates for the limitations resulting from the
exclusion of these items by considering the impact of these items separately
in GAAP as well as non-GAAP results. In addition, management presents the most
comparable GAAP measures ahead of non-GAAP measures and provides a
reconciliation that indicates and describes the adjustments made.

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 a trusted source
for office solutions. The company provides products, services and expertise in
office supplies, copy & print, technology, facilities and breakroom, and
furniture. Staples invented the office superstore concept in 1986 and now has
annual sales of $25 billion, ranking second in the world in eCommerce sales.
With 88,000 associates worldwide, Staples operates in 26 countries throughout
North and South America, Europe, Asia and Australia, making it easy for
businesses of all sizes and consumers. 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 these 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. 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 period 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
quarterly report on Form 10-Q 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)

                                          October 27, 2012  January 28, 2012
ASSETS
Current assets:
Cash and cash equivalents                  $  1,020,043       $  1,264,149
Receivables, net                           1,892,390          2,033,680
Merchandise inventories, net               2,417,366          2,431,845
Deferred income tax assets                 281,481            305,611
Prepaid expenses and other current         286,119            255,535
assets
Current assets of discontinued             185,949           —              
operations
Total current assets                       6,083,348          6,290,820
                                                              
Property and equipment:
Land and buildings                         1,009,754          1,034,983
Leasehold improvements                     1,332,450          1,330,373
Equipment                                  2,526,041          2,462,351
Furniture and fixtures                     1,100,325         1,084,358      
Total property and equipment               5,968,570          5,912,065
Less: Accumulated depreciation             4,052,158         3,831,704      
Net property and equipment                 1,916,412          2,080,361
                                                              
Intangible assets, net of accumulated      395,504            449,781
amortization
Goodwill                                   3,169,260          3,982,130
Other assets                               587,461           627,530        
Total assets                               $  12,151,985     $  13,430,622  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                           $  2,170,422       $  2,220,414
Accrued expenses and other current         1,326,441          1,414,721
liabilities
Debt maturing within one year              119,046            439,143
Current liabilities of discontinued        143,911           —              
operations
Total current liabilities                  3,759,820          4,074,278
                                                              
Long-term debt                             1,541,786          1,599,037
Other long-term obligations                671,650            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 929,838,181 and            558                553
674,178,263 shares at October 27, 2012
and 922,126,579 shares and 695,743,547
shares at January 28, 2012, respectfully
Additional paid-in capital                 4,661,932          4,551,299
Accumulated other comprehensive loss       (380,313       )   (319,743       )
Retained earnings                          6,688,614          7,199,060
Less: Treasury stock at cost,
255,659,918 shares at October 27, 2012     (4,799,238     )   (4,416,018     )
and 226,383,032 shares at January 28,
2012
Total Staples, Inc. stockholders’ equity   6,171,553          7,015,151
Noncontrolling interests                   7,176             7,062          
Total stockholders’ equity                 6,178,729         7,022,213      
Total liabilities and stockholders’        $  12,151,985     $  13,430,622  
equity
                                                                             


STAPLES,INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Amounts in Thousands, Except Per Share Data)
(Unaudited)

                13 Weeks Ended                 39 Weeks Ended
                 October 27,    October 29,     October 27,     October 29,
                 2012            2011            2012             2011
Sales            $ 6,353,140     $ 6,481,023     $ 17,812,530     $ 18,290,446
Cost of goods
sold and         4,601,286      4,660,041      13,040,678      13,319,460   
occupancy
costs
Gross profit     1,751,854       1,820,982       4,771,852        4,970,986
Operating
expenses:
Selling,
general and      1,237,196       1,275,785       3,673,598        3,756,593
administrative
Impairment of
goodwill and     810,996         —               810,996          —
long-lived
assets
Restructuring    30,396          —               30,396           —
charges
Amortization     30,413         15,957         60,466          49,443       
of intangibles
Total
operating        2,109,001      1,291,742      4,575,456       3,806,036    
expenses
                                                                  
Operating        (357,147    )   529,240         196,396          1,164,950
(loss) income
                                                                  
Other
(expense)
income:
Interest         1,249           1,774           4,251            5,662
income
Interest         (40,343     )   (40,906     )   (124,195     )   (131,422     )
expense
Other expense    (1,788      )   (3,676      )   (3,469       )   (4,228       )
(Loss) income
from
continuing       (398,029    )   486,432         72,983           1,034,962
operations
before income
taxes
Income tax       170,703        162,712        323,780         331,155      
expense
(Loss) income
from
continuing
operations,
including the    (568,732    )   323,720         (250,797     )   703,807
portion
attributable
to the
noncontrolling
interests
Discontinued
Operations:
(Loss) income
from
discontinued     (27,559     )   2,610          (38,084      )   (3,495       )
operations,
net of income
taxes
Consolidated
net (loss)       (596,291    )   326,330         (288,881     )   700,312
income
Loss
attributed to
the              (39         )   (50         )   (119         )   (751         )
noncontrolling
interests
(Loss) income
attributed to    $ (596,252  )   $ 326,380      $ (288,762   )   $ 701,063    
Staples, Inc.
                                                                  
Amounts
attributable
to Staples,
Inc.
(Loss) income
from             $ (568,693  )   $ 323,770       $ (250,678   )   $ 704,558
continuing
operations
(Loss) income
from             (27,559     )   2,610          (38,084      )   (3,495       )
discontinued
operations
(Loss) income
attributed to    $ (596,252  )   $ 326,380      $ (288,762   )   $ 701,063    
Staples, Inc.
                                                                  
Basic Earnings
Per Common
Share:
Continuing
operations       $ (0.85     )   $ 0.47          $ (0.37      )   $ 1.01
attributed to
Staples, Inc.
Discontinued
operations       (0.04       )   —              (0.06        )   (0.01        )
attributed to
Staples, Inc.
Net (loss)
income           $ (0.89     )   $ 0.47         $ (0.43      )   $ 1.00       
attributed to
Staples, Inc.
Diluted
Earnings Per
Common Share:
Continuing
operations       $ (0.85     )   $ 0.46          $ (0.37      )   $ 1.00
attributed to
Staples, Inc.
Discontinued
operations       (0.04       )   0.01           (0.06        )   (0.01        )
attributed to
Staples, Inc.
Net (loss)
income           $ (0.89     )   $ 0.47         $ (0.43      )   $ 0.99       
attributed to
Staples, Inc.
                                                                  
Dividends
declared per     $ 0.11         $ 0.10         $ 0.33          $ 0.30       
common share
                                                                               


Condensed Consolidated Statements of Comprehensive Income
                      13 Weeks Ended              39 Weeks Ended
                       October 27,   October 29,   October 27,   October 29,
                       2012           2011          2012           2011
Comprehensive (loss)
income from            $ (437,206 )   $ 241,953     $ (310,544 )   $ 804,720
continuing
operations
Comprehensive (loss)
income from            (24,438    )   1,553        (38,674    )   (37       )
discontinued
operations
Comprehensive (loss)
income from            $ (461,644 )   $ 243,506     $ (349,218 )   $ 804,683
consolidated
operations
Comprehensive income
(loss) attributed to   128           96           114           (399      )
noncontrolling
interests
Comprehensive (loss)
income attributed to   $ (461,772 )   $ 243,410    $ (349,332 )   $ 805,082 
Staples, Inc.
                                                                   
Weighted Average
Shares Outstanding:
Basis                  $ 666,989      $ 691,205     $ 673,366      $ 698,813
Diluted                $ 666,989      $ 698,009     $ 673,366      $ 708,028
                                                                             


STAPLES,INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
(Unaudited)

                                                39 Weeks Ended
                                                 October 27,    October 29,
                                                 2012            2011
Operating Activities:
Consolidated net (loss) income, including loss   $ (288,881  )   $ 700,312
from the noncontrolling interests
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation                                     301,840         311,190
Amortization of intangible assets                60,466          49,443
Impairment of goodwill and long-lived assets     810,996         —
Stock-based compensation                         90,406          117,072
Excess tax benefits from stock-based             (179        )   (1,023      )
compensation arrangements
Deferred income tax expense                      68,915          127,328
Other                                            (932        )   19,828
Changes in assets and liabilities:
Decrease (increase) in receivables               10,622          (118,920    )
Increase in merchandise inventories              (40,094     )   (146,023    )
(Increase) decrease in prepaid expenses and      (65,109     )   58,692
other assets
Increase in accounts payable                     31,188          103,474
Decrease in accrued expenses and other           (40,855     )   (133,249    )
liabilities
(Decrease) increase in other long-term           (42,997     )   7,508       
obligations
Net cash provided by operating activities        895,386         1,095,632
                                                                 
Investing Activities:
Acquisition of property and equipment            (204,163    )   (243,740    )
Proceeds from the sale of property and           9,500           —
equipment
Acquisition of businesses, net of cash           (1,941      )   —           
acquired
Net cash used in investing activities            (196,604    )   (243,740    )
                                                                 
Financing Activities:
Proceeds from the exercise of stock options      26,039          32,989
Proceeds from borrowings                         70,031          214,669
Payments on borrowings                           (423,303    )   (789,931    )
Purchase of noncontrolling interest              (5,651      )   (3,591      )
Cash dividends paid                              (221,682    )   (209,604    )
Excess tax benefits from stock-based             179             1,023
compensation arrangements
Purchase of treasury stock, net                  (383,220    )   (512,496    )
Net cash used in financing activities            (937,607    )   (1,266,941  )
Effect of exchange rate changes on cash and      (4,640      )   14,156      
cash equivalents
Net decrease in cash and cash equivalents        (243,465    )   (400,893    )
Cash and cash equivalents at beginning of        1,264,149      1,461,257   
period
Cash and cash equivalents at end of period       $ 1,020,684     $ 1,060,364
Less: Cash and cash equivalents attributed to    (641        )   —           
discontinued operations
Cash and cash equivalents at the end of the      $ 1,020,043    $ 1,060,364 
period attributed to continuing operations
                                                                             


STAPLES,INC. AND SUBSIDIARIES
Segment Reporting
(Dollar Amounts in Thousands)
(Unaudited)

               13 Weeks Ended                 39 Weeks Ended
                October 27,    October 29,     October 27,     October 29,
                2012            2011            2012             2011
                Sales
North
American        $ 2,609,034     $ 2,582,729     $ 7,576,860      $ 7,527,592
Delivery
North
American        2,646,554       2,656,612       6,959,524        7,029,840
Retail
International   1,097,552      1,241,682      3,276,146       3,733,014    
Operations
Total segment   $ 6,353,140    $ 6,481,023    $ 17,812,530    $ 18,290,446 
sales
                                                                 
                Business Unit Income (Loss)
North
American        $ 227,736       $ 244,997       $ 614,462        $ 646,612
Delivery
North
American        285,477         284,204         540,846          564,425
Retail
International   (1,692      )   35,641         (27,114      )   70,985       
Operations
Business unit   511,521         564,842         1,128,194        1,282,022
income
Stock-based     (27,276     )   (35,602     )   (90,406      )   (117,072     )
compensation
Impairment of
goodwill and    (810,996    )   —               (810,996     )   —
long-lived
assets
Restructuring   (30,396     )   —               (30,396      )   —
charges
Interest and
other           (40,882     )   (42,808     )   (123,413     )   (129,988     )
expense, net
(Loss) income
from
continuing      $ (398,029  )   $ 486,432      $ 72,983        $ 1,034,962  
operations
before income
taxes
                                                                              


STAPLES,INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Income Statement Disclosures
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

                13 Weeks Ended
                 October 27, 2012
                                Adjustments                               
                                 Impairment
                                 of                           Accelerated
                 As Reported     Goodwill    Restructuring  trade-name     Non-GAAP
                                 and          Charges (2)     amortization
                                 Long-Lived                   (3)
                                 Assets (1)
Operating        $ (357,147 )    $ 810,996    $    30,396     $   15,599     $ 499,844
(loss) income
Interest and
other expense,   (40,882    )                                                (40,882   )
net
(Loss) income
from
continuing       $ (398,029 )                                                $ 458,962
operations
before income
taxes
                                                                             
Income tax       $ 170,703                                                   $ 170,703
expense
Adjustments      —                                                          (21,541   )
(4)
Adjusted         $ 170,703                                                   $ 149,162
income tax
                                                                             
(Loss) income
from             $ (568,732 )                                                $ 309,800
continuing
operations
Loss
attributed to
the              (39        )                                                (39       )
noncontrolling
interests
(Loss) income
from
continuing       $ (568,693 )                                                $ 309,839 
operations
attributed to
Staples, Inc.
                                                                             
Effective Tax    (42.9      )%                                               32.5      %
Rate
                                                                             
Per share (loss) income from continuing operations attributed to Staples, Inc:
Basic and
diluted          $ (0.85    )                                                $ 0.46
earnings per
common share
                                                                             
Weighted
average common   666,989                                                     666,989
shares
outstanding
Effect of
dilutive         —                                                          4,354     
securities
Weighted
average common
shares           666,989                                                    671,343   
outstanding
assuming
dilution

(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 planned closure and consolidation of certain
operations.
(2) Restructuring charges include $19.2 million for severance and benefits and
$11.2 million of other associated costs related to the planned closure of 46
retail stores and the consolidation of certain sub-scale delivery businesses
in Europe.
(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) The $21.5 million adjustment to income tax expense in 2012 relates to the
establishment of valuation allowances for previously recorded deferred tax
assets as a result of the planned closure and consolidation of certain
operations in the Company's Europe Retail and Europe Catalog reporting units,
net of tax benefits related to the impairment and restructuring charges and
accelerated tradename amortization.


STAPLES,INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Income Statement Disclosures
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

                          52 Weeks Ended
                           January 28, 2012
                           As revised to present
                           discontinued           Adjustments  Non-GAAP
                           operations
Income from continuing
operations before income   $    1,464,644          $ —           $ 1,464,644
taxes
Income tax expense         477,247                20,800       498,047     
Income (loss) from
continuing operations,
including the portion      987,397                 (20,800   )   966,597
attributable to the
noncontrolling interests
Discontinued Operations:                                         —
Loss from discontinued
operations, net of tax     (3,564            )     —            (3,564      )
benefit
Consolidated net income    983,833                 (20,800   )   963,033
(loss)
Loss attributed to the     (823              )     —            (823        )
noncontrolling interests
Net income (loss)
attributed to Staples,     $    984,656           $ (20,800 )   $ 963,856   
Inc.
                                                                 
Amounts attributable to
Staples, Inc.
Income (loss) from         $    988,220            $ (20,800 )   $ 967,420
continuing operations
Loss from discontinued     (3,564            )                  (3,564      )
operations
Net income (loss)
attributed to Staples,     $    984,656           $ (20,800 )   $ 963,856   
Inc.
                                                                 
Diluted Earnings Per
Common Share:
Continuing operations
attributed to Staples,     $    1.40               $ (0.03   )   $ 1.37
Inc.
Discontinued operations
attributed to Staples,     —                      —            —           
Inc.
Net (loss) income
attributed to Staples,     $    1.40              $ (0.03   )   $ 1.37      
Inc.
                                                                 
Number of shares used in
computing earnings per     704,019
share
                                                                 


STAPLES,INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Sales Growth
(Dollar Amounts in Thousands)
(Unaudited)

                        13 Weeks Ended October 27, 2012
                                                               Sales Growth on
                         Sales Growth GAAP  Impact of Local  a
                                             Currency          Local Currency
                                                               Basis
Sales:
North American           1.0        %        (0.1     )%       0.9      %
Delivery
North American Retail    (0.4       )%       (0.3     )%       (0.7     )%
International            (11.6      )%       4.0      %        (7.6     )%
Operations
Total sales              (2.0       )%       0.6      %        (1.4     )%
                                                                        
                         39 Weeks Ended October 27, 2012
                                                               Sales Growth on
                         Sales Growth GAAP   Impact of Local   a
                                             Currency          Local Currency
                                                               Basis
Sales:
North American           0.7        %        0.1      %        0.8      %
Delivery
North American Retail    (1.0       )%       0.4      %        (0.6     )%
International            (12.2      )%       5.0      %        (7.2     )%
Operations
Total sales              (2.6       )%       1.2      %        (1.4     )%
                                                                        

This presentation refers to growth rates in local currency so that business
results can be viewed without the impact of fluctuations in foreign currency
exchange rates, thereby facilitating period-to-period comparisons of Staples'
business performance. To present this information, current period results for
entities reporting in currencies other than U.S. dollars are converted into
U.S. dollars at the prior year average monthly exchange rates.


STAPLES,INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Income Statement Disclosures
(Dollar Amounts in Thousands)
(Unaudited)

                                          39 Weeks Ended
                                           October 27, 2012  October 29, 2011
Net cash provided by operating             $   895,386        $  1,095,632
activities
Acquisition of property and equipment      (204,163      )    (243,740      )
Free cash flow                             $   691,223       $  851,892    
                                                                            

Free cash flow is not defined under U.S. GAAP. Therefore, it should not be
considered a substitute for income or cash flow data prepared in accordance
with GAAP and may not be comparable to similarly titled measures used by other
companies. The company defines free cash flow as net cash provided by
operating activities less capital expenditures. It should not be inferred that
the entire free cash flow amount is available for discretionary expenditures.
The company believes free cash flow is a useful measure of performance and
uses this measure as an indication of the company's ability to generate cash
and invest in its business.

Contact:

Staples, Inc.
Media Contact:
Kirk Saville/Owen Davis, 508-253-8530/8468
or
Investor Contact:
Chris Powers/Kevin Barry, 508-253-4632/1487
 
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