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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: November 2, 2002

Commission File Number: 0-17586

STAPLES, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of Identification No.)

04-2896127 (I.R.S. Employer Identification No.)

Five Hundred Staples Drive, Framingham, MA 01702
(Address of principal executive office and zip code)

508-253-5000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý    No o

        The registrant had 470,589,193 shares of Staples common stock outstanding as of November 15, 2002.

STAPLES, INC. AND SUBSIDIARIES
FORM 10-Q
November 2, 2002
TABLE OF CONTENTS

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STAPLES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)

See notes to consolidated financial statements.

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

See notes to consolidated financial statements.

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

See notes to consolidated financial statements.

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STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note A—Basis of Presentation

        The accompanying interim unaudited consolidated financial statements include the accounts of Staples, Inc. and subsidiaries ("Staples," "the Company," "we" or "us"). These financial statements are for the period covering the thirteen and thirty-nine weeks ending November 2, 2002 (also referred to as the "third quarter of 2002" and "year-to-date 2002") and the period covering the thirteen and thirty-nine weeks ending November 3, 2001 (also referred to as the "third quarter of 2001" and "year-to-date 2001"). All intercompany accounts and transactions are eliminated in consolidation.

        These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such interim statements reflect all adjustments (consisting only of normal recurring accruals) considered necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended February 2, 2002.

        Certain previously reported amounts have been reclassified to conform with the current period presentation.

Note B—Comprehensive Income

        Comprehensive income includes net income, foreign currency translation adjustments and unrealized gains and losses on investments, which are reported separately in stockholders' equity. During the third quarter of 2002 and year-to-date 2002, total comprehensive income amounted to $139.1 million and $306.2 million, respectively, compared to approximately $88.4 million and $162.9 million for the corresponding periods in 2001. The change in comprehensive income is primarily due to a fluctuation in income as well as a fluctuation in currency translation adjustments.

Note C—Goodwill and Intangible Assets

        Effective February 3, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS No. 142"). Staples has complied with all of the adoption provisions of SFAS No. 142 and no impairment of goodwill was identified as a result of the testing required. Staples has selected the fourth quarter to complete its annual impairment test.

        A reconciliation of reported net earnings to the amounts adjusted for the exclusion of goodwill amortization follows (in thousands):

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        Excluding goodwill amortization, proforma earnings per share would not have changed for the thirteen weeks ended November 3, 2001 and would have increased by less than $0.01 per share for the thirty-nine weeks then ended.

Note D—Acquisition

        In accordance with SFAS No. 141 "Business Combinations," Staples records acquisitions under the purchase method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as goodwill. Under SFAS No. 142, goodwill and purchased intangibles with indefinite lives acquired after June 30, 2001 are not amortized but will be reviewed for impairment annually, or more frequently, if impairment indicators arise. Purchased intangibles with definite lives will be amortized over their respective useful lives.

European Mail Order Acquisition:

        On October 18, 2002, Staples, Inc. acquired the European mail order business of Guilbert SA, a subsidiary of Pinault Printemps Redoute SA (the "European Mail Order Acquisition"). The aggregate cash purchase price of 806 million Euros (approximately $788 million), net of cash acquired of $5 million and net of capital leases assumed of $13 million, was funded by the proceeds from the September 2002 offering of senior notes, the October 2002 364-Day Term Loan Agreement (see Note G) and cash from operations. The results of the businesses acquired have been included in the consolidated financial statements since that date. The acquired companies are reported as part of the European Operations segment for segment reporting. The European Mail Order Acquisition allows Staples to enter the fast-growing office supplies mail order market in France, Italy, Spain and Belgium and strengthens its mail order presence in the United Kingdom. The acquired European mail order businesses consist of leading direct mail office products sellers to small businesses in Europe operating under different brands in each of the five countries: JPG and Bernard in France and Belgium, Kalamazoo in Spain, Neat Ideas in the United Kingdom and MondOffice in Italy.

        In connection with the European Mail Order Acquisition, Staples recorded $780.4 million of goodwill and intangible assets, which were assigned to our European Operations segment. Staples also recorded a provision for merger-related and integration costs of approximately $11.8 million, which consisted primarily of transaction related costs.

        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

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        Of the $211.8 million of acquired intangible assets, $138.2 million was assigned to registered trademarks and trade names which have indefinite lives and are not subject to amortization and $73.7 million was assigned to customer-related intangible assets and noncompetition agreements that will be amortized over their useful lives (ranging from 3 to 13 years).

        The determination of fair value of the customer-related intangible assets was completed in accordance with the provisions of the October 25, 2002 Emerging Issues Task Force consensus on Issue No. 02-17, "Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination". The consensus on Issue No. 02-17 clarifies the definition of a contractual relationship necessary for the recognition of an intangible asset and requires that the fair value of customer-related intangible assets acquired in a business combination be determined considering all aspects of the customer relationship (including those not specifically evidenced by a contract).

        Pro forma results of operations assuming the European Mail Order Acquisition occurred as of the beginning of fiscal 2002 have not been presented, as the inclusion of the results of operations for the acquired mail order business would not have produced a material impact on the reported sales, net income or earnings per share of the Company.

Medical Arts Press:

        On July 17, 2002, Staples acquired 100 percent of the outstanding shares of Medical Arts Press, Inc. ("MAP") for an aggregate purchase price of $383.2 million, net of cash acquired. The purchase price consisted entirely of cash and cash equivalents. The results of MAP have been included in the consolidated financial statements since that date. MAP reports to Quill and is included in North American Delivery for segment reporting. MAP is a leading direct marketer of specialized printed office products and practice-related supplies to medical offices. The acquisition of MAP provides an opportunity to expand Staples' product offering, as well as an opportunity to sell traditional office products to MAP's customer base.

        In connection with this acquisition, Staples recorded $343.5 million of goodwill, which was assigned to our North American Delivery segment. Staples also recorded a provision for merger-related and integration costs of approximately $7.0 million, of which $457,000 has been utilized year-to-date.

NOTE E—Asset Impairment and Other Charges

        During the fourth quarter of 2001, Staples committed to a plan related to workforce reductions and fulfillment and call center closures. As a result, the Company recognized a charge totaling $10.7 million for severance related to the elimination of positions in Staples' corporate offices and certain call centers and distribution centers, and for net lease obligations and asset write-offs related to the closure of a fulfillment center, two call centers and a delivery office in our North American Delivery segment. The following is a rollforward of the charges utilized during the year-to-date 2002 (in thousands):

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Note F—Store Closure Charge

Fiscal Year 2001 Store Closure Charge:

        In January 2002, Staples committed to a plan to close 31 underperforming stores and recorded a charge of $50.1 million related to these closings. This charge includes an accrual for net lease obligations, asset write-offs, fees and other expenses and severance related to the store closures. All of the store closures were completed during the first quarter of fiscal 2002. Management believes that the remaining accruals will be entirely utilized by 2009, however, some payments may be made over the remaining lease terms. The following is a rollforward of the 2001 store closure charges utilized year-to-date 2002 (in thousands):

Fiscal Year 1998 Store Closure Charge:

        In December 1998, Staples committed to a plan to close and relocate stores which could not be expanded and upgraded to the Company's current store model and recorded a charge of $49.7 million. During the first quarter of fiscal year 2000, management decided not to close several stores that were included in the original store closure plan due to changes in market conditions. Accordingly, the Company reversed a portion of the charge in the amount of $7.3 million relating to the stores that the Company did not close. Year-to-date 2002, the Company charged $5.1 million of costs to accruals established at the time of the charge. At November 2, 2002, Staples had $10.1 million in accrued expenses and other current liabilities related to the net future lease obligations, fees and other expenses related to the store closures. Management believes that the remaining accruals will be entirely utilized by 2004, however, some payments may be made over the remaining lease terms.

Note G—Debt and Credit Agreements

        On October 4, 2002, the Company entered into a $325 million 364-Day Term Loan Agreement (the "Term Loan") with a group of commercial banks, with Fleet National Bank as agent. The Company used the Term Loan to finance a portion of the purchase price of the European Mail Order Acquisition. Borrowings under the Term Loan bear interest, at the Company's option, at either (a) the higher of the lead bank's prime rate or the federal funds rate plus 0.50%, or (b) the Eurodollar rate plus a percentage spread based upon certain defined ratios. The Term Loan's financial covenants are the same as the financial covenants of the Company's existing $600 million revolving credit facility. The Term Loan matures on October 3, 2003.

        On September 30, 2002, Staples completed an offering of $325 million principal amount of 7.375% senior notes due October 2012 (the "Notes"). The Notes were sold in a private placement to qualified institutional investors pursuant to Rule 144A and Regulation S of the Securities Act of 1933, as amended. Net proceeds to the Company were approximately $319.7 million. The Company used the net proceeds to finance a portion of the European Mail Order Acquisition.

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        On June 21, 2002, Staples entered into a revolving credit facility (the "New Credit Facility") with a syndicate of banks, which provides for a maximum borrowing of $600 million. The New Credit Facility terminates in June 2005 and replaced two existing revolving credit facilities, which provided an aggregate of $550 million in available borrowings and were to expire in 2002. Borrowings made pursuant to the New Credit Facility bear interest at the lower of (a) the higher of the lead bank's prime rate or the federal funds rate plus 0.50%, (b) the Eurodollar rate plus a percentage spread based upon certain defined ratios, or (c) a competitive bid rate. The New Credit Facility contains financial covenants which require Staples to maintain a minimum fixed charge coverage ratio of 1.5 and a maximum adjusted debt to total capital ratio of 0.75. As of November 2, 2002, no borrowings were outstanding under the New Credit Facility, but $45.8 million of letters of credit were issued against the facility.

Note H—Income Taxes

        In the fourth quarter of fiscal 2000, Staples recognized impairment losses related to the goodwill and fixed assets of Staples Communications. Due to the uncertainty concerning the ultimate deductibility of those losses, no corresponding tax benefit was recognized in fiscal year 2000. During fiscal 2001, Staples sold its Staples Communications business and applied for a pre-filing agreement with the Internal Revenue Service regarding deductibility of Staples' investment in, and advances to, Staples Communications. In the first quarter of fiscal 2002, the Internal Revenue Service agreed to allow as an ordinary deduction Staples' investment in, and advances to, Staples Communications. Accordingly, the provision for income taxes for year-to-date 2002 includes a $29 million tax benefit attributable to the Staples Communications losses.

Note I—Computation of Earnings Per Common Share

        From November 1999 through August 2001, the Company's Certificate of Incorporation included two series of common stock, one designated as Staples.com common stock ("Staples.com Stock") intended to track the performance of Staples.com, the Company's e-commerce business, and the other designated as Staples Retail and Delivery common stock ("Staples RD Stock") intended to track the performance of Staples Retail and Delivery, which consisted of all of the Company's non e-commerce businesses and a retained interest in Staples.com. On August 27, 2001, the Company's stockholders approved a proposal to amend the Company's Certificate of Incorporation to effect a recapitalization by reclassifying each share of Staples.com Stock into 0.4396 shares of Staples common stock ("Staples, Inc. Stock") and by reclassifying each share of Staples RD Stock into one share of Staples, Inc. Stock (the "Recapitalization").

        Subsequent to the Recapitalization and prior to November 1999, the Company calculates earnings per share for a single class of stock, Staples, Inc. Stock. Accordingly, earnings per share has been presented for Staples, Inc. Stock for the thirteen and thirty-nine weeks ended November 2, 2002 and the thirteen weeks ended November 3, 2001. Prior to the Recapitalization and subsequent to October 1999, the Company had calculated earnings per share under the two class method for Staples RD Stock and Staples.com Stock. Therefore, earnings per share has been presented for Staples RD

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Stock and Staples.com Stock for the twenty-six weeks ended August 4, 2001. (Amounts in thousands, except per share data):