FRAMINGHAM, Mass., August 25, 2009 – Staples, Inc. (Nasdaq: SPLS) announced today the results for its second quarter ended August 1, 2009. Total company sales increased nine percent to $5.5 billion compared to second quarter 2008 sales of $5.1 billion, which included $673 million of Corporate Express sales for the month of July 2008. For the second quarter of 2009, on a GAAP basis, net income attributed to Staples, Inc. declined 38 percent year over
year to $92 million, and diluted earnings per share decreased 38 percent to $0.13, from the $0.21 achieved in the second quarter of last year.
The company recorded pre-tax integration and restructuring expense of $30 million during the second quarter. Excluding the impact of this expense, adjusted earnings per share on a diluted basis were $0.16, a decrease of 24 percent from the second quarter of 2008.
“Staples generated record cash flow, as our team did an outstanding job managing expenses and working capital during the second quarter,” said Ron Sargent, Staples’ chairman and chief executive officer. “We’re winning in each of our businesses by providing excellent customer service and continuing to invest in growth initiatives.”
Highlights for the second quarter of 2009 include:
Total Company
�� Sales for the second quarter of 2009 decreased 14 percent in US dollars, or 10 percent in local currency, after adjusting sales for the second quarter of 2008 to include Corporate Express’ sales of $1.3 billion for May 2008 to June 2008, prior to the acquisition.
�� On a GAAP basis, second quarter 2009 operating income rate declined 111 basis
points to 3.73 percent compared to the second quarter of 2008.
�� Excluding the impact of pre-tax integration and restructuring expense of $30 million during the second quarter 2009, and pre-tax integration and restructuring expense of $163,000 during the second quarter 2008, operating income rate declined 57 basis points to 4.27 percent compared to the second quarter of 2008. This decline primarily reflects the inclusion of the lower margin Corporate Express business in North American Delivery, deleverage of rent and labor expense in North American Retail, and weaker results in International.
�� Generated year to date free cash flow of $568 million after $130 million in capital expenditures, compared to free cash flow of $19 million for the same period during 2008.
�� Used strong free cash flow to reduce debt by $256 million during the second quarter, and have reduced debt by approximately $1.5 billion since the acquisition of Corporate Express in July 2008.
�� Ended the second quarter with approximately $1.4 billion in liquidity, including $633 million in cash and cash equivalents and $765 million of available credit.

North American Delivery
�� Achieved sales for the second quarter of 2009 of $2.3 billion, an increase of 18 percent compared to the second quarter of 2008.
�� Sales for the second quarter of 2009 decreased 13 percent in US dollars, or 12 percent in local currency, after adjusting sales for the second quarter of 2008 to include Corporate Express’ sales of $703 million for May 2008 to June 2008, prior to the acquisition.
�� Strong customer acquisition was more than offset by lower spend per existing
customer, resulting in a low double-digit top line decline in Contract, after adjusting sales for May 2008 to June 2008 to include the results of Corporate Express, and high single-digit top line declines in Staples Business Delivery and Quill.
�� Second quarter 2009 operating income rate declined 87 basis points to 7.96 percent compared to the second quarter of 2008, primarily reflecting the inclusion of the lower margin Corporate Express business, deleverage of labor expense, as well as increased amortization expense, somewhat offset by lower marketing and delivery expense.
�� Corporate Express integration on track: successfully transitioned all US associates to the same payroll system, implemented one compensation plan for all Staples Business Advantage and Staples National Advantage sales associates, began developing 2010 full line catalog with one common product assortment, and rationalized transportation networks in several US markets.

North American Retail
�� Achieved sales for the second quarter of 2009 of $2.0 billion, a decrease of five percent in US dollars, or three percent in local currency, compared to the second quarter of 2008.
�� Comparable store sales decreased five percent versus the second quarter of 2008, reflecting declines in average order size and weakness in durable categories such as business machines and furniture, somewhat offset by growth in computers, ink, and paper.
�� Second quarter 2009 operating income rate declined nine basis points to 5.21 percent compared to the second quarter of 2008, reflecting deleverage of rent and labor expense largely offset by improvements in product margin, general and administrative and distribution expense.
�� Achieved all-time high customer satisfaction scores.
�� Opened 10 stores and closed two stores, ending the second quarter with 1,872 stores in North America.

International
�� Achieved sales for the second quarter of 2009 of $1.2 billion, an increase of 21 percent in US dollars, or 32 percent in local currency, compared to the second quarter of 2008.
The stronger US dollar negatively impacted sales for the company’s International operations by $109 million during the second quarter of 2009, compared to the second quarter of 2008.
�� Sales for the second quarter of 2009 decreased 26 percent in US dollars, or 14 percent in local currency, after adjusting sales for the second quarter of 2008 to include Corporate Express’ sales of $645 million for May 2008 to June 2008, prior to the acquisition.
�� Comparable store sales in Europe decreased three percent versus the same period in 2008, with the UK and Germany achieving positive comps.
�� Second quarter 2009 operating income rate decreased 116 basis points to 0.30 percent compared to the second quarter of 2008, reflecting primarily weak results in China and printing systems business, and increased amortization expense.
�� Opened two stores in Portugal, ending the second quarter with 334 stores in Europe, 27 stores in China and 2 stores in Argentina.
�� Corporate Express integration on track: making good progress on European
restructuring efforts, achieving merchandising and indirect procurement synergies, and consolidating Contract and Catalog back offices and warehouses in Italy.

Outlook
The company reaffirms its expectations for synergies related to the Corporate Express acquisition, building to $300 million annually over the three year integration period. The company is not providing sales or earnings guidance; however, it expects to incur the following expenses during Q3 2009 and FY 2009.

Q3 2009 FY 2009
Depreciation Expense $105 - 110 $430 - 440
Amortization of Intangibles 25 - 30 100 - 110
Integration and Restructuring Expense 20 - 30 90 - 110
Net Interest Expense 60 - 65 235 - 245
Total $210 - 235 $855 - 905
Approximate Dollar Amounts in Millions
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