-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RgFsFuPRjvBLbo6C4+mL5sPAgH/EMXryxAQZ5AWlNw27krEx/pNA0cVL7JNzdzqe IryFd1Cmof6NBcxDeIXbWw== 0000927356-96-000441.txt : 19960617 0000927356-96-000441.hdr.sgml : 19960617 ACCESSION NUMBER: 0000927356-96-000441 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951125 FILED AS OF DATE: 19960614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORPORATE EXPRESS INC CENTRAL INDEX KEY: 0000878130 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 840978360 STATE OF INCORPORATION: CO FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24642 FILM NUMBER: 96580811 BUSINESS ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 BUSINESS PHONE: 3033732800 MAIL ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 25, 1995 OR ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO _______ Commission File No. 0-24642 -------------- CORPORATE EXPRESS, INC. ----------------------------------- (Exact name of registrant as specified in its charter) Colorado 84-0978360 ------------------------ ------------- (State of incorporation or (I.R.S. Employer organization) Identification No.) 325 Interlocken Parkway Broomfield, Colorado 80021 ------------------------- ------------ (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 373-2800 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 X No __________ ---------- The number of shares of the registrant's common stock, par value $.0002 per share, outstanding as of January 3, 1996 was 50,430,465. PART I -- FINANCIAL INFORMATION Item 1 -- Financial Statements CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ASSETS
November 25, February 25, 1995 1995 ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 92,100 $ 11,546 Trade accounts receivable, net of allowance of $3,065 and $3,323, respectively 189,265 119,861 Notes and other receivables 25,555 4,627 Inventories 94,394 54,581 Deferred income taxes 10,225 13,434 Other current assets 10,223 13,189 ---------- ---------- Total current assets 421,762 217,238 ---------- ---------- Property and equipment: Land 6,878 2,104 Buildings and leasehold improvements 19,568 16,393 Furniture and equipment 56,864 28,147 ---------- ---------- 83,310 46,644 Less accumulated depreciation (19,401) (9,286) ---------- ---------- 63,909 37,358 ---------- ---------- Goodwill, net of $9,829 and $5,459 of accumulated amortization, respectively 232,226 179,142 Other assets, net 15,541 11,940 ---------- ---------- 247,767 191,082 ---------- ---------- Total assets $ 733,438 $ 445,678 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -2- CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS, CONTINUED (IN THOUSANDS) LIABILITIES AND SHAREHOLDERS' EQUITY
November 25, February 25, 1995 1995 ------------ ------------ (Unaudited) Current liabilities: Accounts payable - trade $ 114,988 $ 70,186 Accounts payable - other 2,708 6,454 Accrued payroll and benefits 17,968 10,892 Accrued purchase costs 11,158 11,253 Other accrued liabilities 15,305 14,147 Current portion of long-term debt and capital leases 5,009 3,679 Net liabilities of discontinued operations 227 441 ----------- ----------- Total current liabilities 167,363 117,052 Capital lease obligations 7,335 6,433 Long-term debt 104,339 120,923 Deferred income taxes 5,658 4,333 Minority interest in subsidiaries 12,189 - Other non-current liabilities 841 160 ----------- ----------- Total liabilities 297,725 248,901 ----------- ----------- Contingencies (Note 6) Shareholders' equity: Common stock, $.0002 par value, 100,000,000 shares authorized, 50,399,000 and 38,841,000 shares issued and outstanding, respectively (Note 3) 10 8 Additional paid-in capital 443,597 216,317 Accumulated deficit (8,162) (19,601) Foreign currency translation adjustments 268 53 ----------- ----------- Total shareholders' equity 435,713 196,777 ----------- ----------- Total liabilities and shareholders' equity $ 733,438 $445,678 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -3- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended ---------------------------- ----------------------------- November 25, November 30, November 25, November 30, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) Net sales $ 301,008 $ 161,421 $ 789,083 $ 446,345 Cost of sales 220,655 118,381 584,784 331,086 ------------ ----------- ------------ ------------ Gross profit 80,353 43,040 204,299 115,259 Warehouse operating and selling expense 55,473 30,911 144,555 87,834 New warehouse assimilation expenses 4,752 1,403 10,476 3,050 Corporate general and administrative expenses 8,575 5,596 21,036 12,649 ------------ ----------- ------------ ------------ Operating profit 11,553 5,130 28,232 11,726 Interest expense, net 1,764 2,805 7,867 9,466 ------------ ----------- ------------ ------------ Income before income taxes 9,789 2,325 20,365 2,260 Income tax expense 3,819 404 7,894 349 ------------ ----------- ------------ ------------ Income before minority interest and extraordinary item 5,970 1,921 12,471 1,911 Minority interest 467 64 1,031 104 ------------ ----------- ------------ ------------ Income before extraordinary item 5,503 1,857 11,440 1,807 Extraordinary item: Gain on early extinguishment of debt (net of tax) - - - 586 ------------ ----------- ------------ ------------ Net income $ 5,503 $ 1,857 $ 11,440 $ 2,393 ============ =========== ============ ============ Net income per share: Before extraordinary item $ .10 $ .05 $ .24 $ .06 Extraordinary item - - - .02 ------------ ----------- ------------ ------------ Net income per share $ .10 $ .05 $ .24 $ .08 ============ =========== ============ ============ Weighted average common shares outstanding 52,713 38,474 47,552 31,556 ============ =========== ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -4- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Nine Months Ended --------------------------------- November 25, November 30, 1995 1994 -------------- ------------ (Unaudited) Cash flows from operating activities: Net income $ 11,440 $ 2,393 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 5,901 3,447 Amortization 5,290 3,960 Minority interest 1,031 104 Gain on early extinguishment of debt - (700) Changes in assets and liabilities, excluding acquisitions: (Increase) decrease in accounts receivable (41,899) 1,937 (Increase) in inventory (21,471) (2,364) (Increase) in other current assets (5,468) (3,677) (Increase) in other assets (1,051) (945) Increase (decrease) in accounts payable 11,993 (14,572) (Decrease) increase in accrued liabilities 641 112 ------------- ------------- Net cash used in operating activities (33,593) (10,305) ------------- ------------- Cash flows from investing activities: Proceeds from sale of assets 4,362 - Capital expenditures (21,265) (4,044) Payment for acquisitions, net of cash acquired (63,611) (15,492) Other, net (5,040) (200) -------------- ------------- Net cash used in investing activities (85,554) (19,736) -------------- ------------- Cash flows from financing activities: Issuance of preferred and common stock 443,352 123,775 Stock offering costs (19,057) (9,388) Purchase of Company common stock held by OfficeMax (195,831) - Proceeds from long-term borrowings 8,398 2,775 Repayments of long-term borrowings (3,743) (22,386) Repayments of short-term borrowings (8,194) (3,558) Cash paid to retire bonds - (9,300) Net payments on line of credit (24,600) (20,450) ------------- ------------- Net cash provided by financing activities 200,325 61,468 ------------- ------------- Net cash used in discontinued operations (214) (509) ------------- ------------- Effect of foreign currency exchange rate changes on cash (410) - ------------- ------------- Increase in cash and cash equivalents 80,554 30,918 Cash and cash equivalents, beginning of period 11,546 11,400 ------------- ------------- Cash and cash equivalents, end of period $ 92,100 $ 42,318 ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -5- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED Supplemental schedule of noncash investing and financing activities: Capital lease obligations in the amount of $3,173,000 and $2,776,000 were incurred during the nine months ended November 25, 1995 and November 30, 1994, respectively, for equipment and software. During the nine months ended November 25, 1995, the Company acquired, for a net cash purchase price of $57,149,000, 20 office products distributors --including three distributors purchased by Corporate Express Australia (formerly Macquarie Office Limited), an Australian contract stationer in which the Company acquired a 52.7% interest through the purchase, in May 1995, of newly issued securities of Corporate Express Australia. During the nine months ended November 30, 1994, the Company purchased substantially all of the assets and assumed certain liabilities of six contract stationers for a net cash outlay of $14,960,000. In conjunction with these acquisitions, liabilities were assumed as follows:
Nine Months Ended ---------------------------- November 25, November 30, 1995 1994 ------------ ------------ (In thousands) (Unaudited) Fair value of assets required $125,436 $28,291 Cash paid, net of cash acquired 57,149 14,960 Issuance of notes payable - - Issuance of stock - 245 Minority interest in subsidiary 11,138 - Purchase price payable, included in current liabilities 2,708 3,877 ------- ------- Liabilities assumed $54,441 $ 9,209 ======= =======
In addition to the accounts set forth above, during the nine-month periods ended November 25, 1995 and November 30, 1994, the Company paid $6,462,000 and $182,000, respectively, for prior period acquisitions and, in August 1994, purchased for $350,000 in cash and $100,000 in notes payable a 45% interest in an office product distributor. Of the amounts paid for prior period acquisitions in the first nine months of fiscal 1995, $5,000,000 was related to the acquisition of certain assets of the office products division of Joyce International. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -6- CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------------------------ The consolidated financial statements include the accounts of Corporate Express, Inc. ("Corporate Express" or the "Company") and majority owned subsidiaries. The Company accounts for its investments in less than 50% owned entities using the equity or cost methods. All intercompany balances and transactions have been eliminated. 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 of normal recurring accruals) 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 these interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Form 10-K for the year ended February 25, 1995. Certain of the Company's locations calculate cost of sales using an estimated gross profit method for interim periods. Cost of sales at these locations are adjusted based on physical inventories which are performed no less than once a year. Certain reclassifications from warehouse operating and selling expense to corporate general and administrative expense have been made to the November 30, 1994 statement of operations to conform to the November 25, 1995 presentation with respect to goodwill amortization. Certain reclassifications have been made to the February 25, 1995 balance sheet to conform to the November 25, 1995 balance sheet presentation. NOTE 2 - CHANGES IN REPORTED AMOUNTS - ------------------------------------ The Company has revised its previously issued financial statements for the three and nine-month periods ended November 25, 1995. The Company reviewed its treatment of certain costs in accordance with its established policies for acquisition accounting. As a result of this review, the Company has reclassified certain costs to warehouse assimilation expenses from purchase accounting accruals. Such classification of these costs is consistent with recently issued interpretations of accounting literature applicable to accounting for business combinations.
Three Months Nine Months Ended Ended November 25, 1995 November 25, 1995 ----------------- ----------------- Income before income taxes: As previously reported $11,850 $23,856 As revised 9,789 20,365 Net income: As previously reported 6,760 13,569 As revised 5,503 11,440 Net income per common share: As previously reported $ .13 $ .29 As Revised .10 .24
-7- CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS NOTE 3 - COMMON STOCK - --------------------- On March 30, 1995, a public offering of 6,770,625 shares of common stock was consummated at a price to the public of $16.68 per share. Of the shares offered, 3,000,000 shares were sold by the Company and 3,770,625 shares were sold by selling security holders, including 264,938 shares issued upon exercise of warrants purchased by the underwriters. On June 21, 1995, a 50% share dividend was distributed to shareholders of record as of June 15, 1995. All information in these financial statements has been restated to reflect the distribution of this share dividend. On September 15, 1995, the Company sold 16,324,528 primary shares in a public offering of its common stock, and certain selling shareholders sold 2,075,472 shares at a price of $24.00 per share. Of the $375,200,000 of net proceeds to the Company, $195,831,000 was used to pay for the purchase of the Company shares held by OfficeMax, Inc., the Company's largest shareholder, and $61,000,000 was used to repay existing indebtedness. The remaining proceeds are being used to finance the Company's acquisitions and for general corporate purposes. NOTE 4 - COMPUTATION OF NET INCOME PER SHARE AND RESTATEMENT OF COMMON SHARES - ----------------------------------------------------------------------------- OUTSTANDING - ----------- Net income per share is calculated by dividing net income by the weighted average shares of common stock and common stock equivalents outstanding. For the nine months ended November 30, 1994, and pursuant to the rules of the Securities and Exchange Commission, common stock equivalents related to common stock, preferred stock and stock options and warrants issued within the last year have been included as if they were outstanding for the entire period. Preferred stock has been shown as if converted to common stock on a two-for-one and one-half basis for all periods presented because all shares of preferred stock were automatically converted upon completion of the Company's initial public offering in September 1994. The weighted average shares outstanding for the three and nine months ended November 25, 1995 and November 30, 1994 and the common shares issued and outstanding at February 25, 1995 have been restated to reflect the one-for-two reverse stock split in August 1994 and the 50% share dividend distributed in June 1995. NOTE 5 - SUBSEQUENT EVENT - ------------------------- In December 1995, the Company entered into an agreement to acquire a 51% interest in a United Kingdom contract stationer, The Chisholm Group, with distribution centers located in London and Surrey, for a purchase price of approximately $2,900,000. The agreement includes an option for the Company to purchase the remaining interest in The Chisholm Group. In December 1995, Macquarie Office Limited changed its legal name to Corporate Express Australia. On December 21, 1995, Corporate Express Australia issued an additional 6,110,000 of its common stock at a price of A$1.30 (US$.96) per share. Of the shares offered, 3,110,000 were purchased by Corporate Express and 3,000,000 were purchased by institutional investors for cash. As a result, Corporate Express' interest in Corporate Express Australia has decreased from 52.7% to 52.5%. In December 1995, Corporate Express Australia acquired Revson Australia Pty Ltd, headquartered in Sydney, and Arnell Pty Ltd, headquartered in Canberra, for a combined purchase price of approximately A$10,700,000 (US$7,900,000). -8- CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS On January 6, 1996, the Company entered into an Agreement and Plan of Merger with U.S. Delivery Systems, Inc. ("U.S. Delivery"). Pursuant to the Merger, U.S. Delivery will become a wholly-owned subsidiary of the Company and each outstanding share of U.S. Delivery common stock will be converted into 1.2 shares of the Company's common stock. The exchange ratio for shares of the Company's common stock to be received by U.S. Delivery stockholders is subject to adjustment under certain circumstances based upon a range of prices during a specified period prior to the closing date of the Merger. The shares of the Company's common stock to be issued to the U.S. Delivery stockholders will be registered on a Registration Statement on Form S-4 filed under the Securities Act of 1933. The consummation of the Merger is subject to the terms and conditions set forth in the Merger Agreement, including the approval of the shareholders of both the Company and U.S. Delivery, receipt of all necessary regulatory approvals, satisfactory confirmation that the Merger will be treated as a tax-free reorganization and accounted for as a pooling of interests, and other customary conditions. The Merger Agreement may be terminated by the parties if the Merger is not consummated by May 31, 1996. NOTE 6 - CONTINGENCIES - ---------------------- The Company is a party to certain legal proceedings in the normal course of business. In the opinion of management, the outcome of such litigation will not have a material adverse effect on the Company's financial position or operating results. -9- CORPORATE EXPRESS, INC. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Sales. Net sales increased to $301,008,000 in the three months ended November 25, 1995 from $161,421,000 in the three months ended November 30, 1994 and increased to $789,083,000 for the nine months ended November 25, 1995 from $446,345,000 for the nine months ended November 30, 1994. This increase was primarily attributable to 24 acquisitions since November 30, 1994. Of the 24 acquisitions, four closed in the fourth quarter of fiscal 1994 (two in the U.S. and two in Canada), eight closed in the first quarter of fiscal 1995 (one in Australia, one in Canada, and six in the U.S.), three closed in the second quarter (two in Australia and one in the U.S.) and nine closed in the current quarter (one in Australia, one in Canada and seven in the U.S.) The largest of these was the acquisition in February 1995 of certain assets and the assumption of certain liabilities of the office products division of Joyce International, which included operations in six states. Acquisitions since November 1994 provided entry into Canada, Australia, Wisconsin, Missouri, Ohio, Idaho, Montana, Utah, Wyoming, Alabama and Louisiana, and added to operations in several existing regions in the United States. Internal growth in existing regions also contributed to the sales increase. Gross Profit. Cost of sales includes merchandise, occupancy and delivery costs. Gross profit as a percentage of sales was 26.7% and 25.9% for the three and nine-month periods ended November 25, 1995, as compared to 26.7% and 25.8% for the same periods in the previous year. Improvements in the merchandise component of gross profit are primarily a result of increased purchasing efficiencies and benefits associated with the introduction of the Company's proprietary In-Stock Catalog and increased vendor rebates. Additionally, one- time adjustments related to the final accounting for catalog revenues and additional vendor funds resulting from higher than expected volume due to acquisitions were recognized in the third quarter. Continued improvements in merchandise gross profit are expected to offset these unusual adjustments in future periods. These improvements in the merchandise component of gross profit were offset by the impact of lower gross profit from newly acquired operations which initially have lower merchandise margins and higher delivery and occupancy costs and by supplier price increases on certain of the Company's product offerings, particularly paper products, on which price increases were effective before corresponding price increases were passed on to customers. The Company expects that, over the near term, gross profit will be somewhat negatively impacted by these factors. Warehouse Operating and Selling Expenses. Warehouse operating and selling expenses primarily include labor and administrative costs associated with operating a regional warehouse and selling expenses and commissions related to the Company's direct sales force. Warehouse operating and selling expenses decreased as a percentage of sales to 18.4% in the three months ended November 25, 1995 from 19.1% for the same period in the prior year, and also decreased to 18.3% of sales for the nine months ended November 25, 1995 compared to 19.7% for the same period in the prior year. The decrease reflects the implementation of the Corporate Express business model at certain regional warehouses, which includes centralizing certain administrative functions. Management expects that these operating expenses, as a percentage of net sales, will decrease gradually over time as the Corporate Express business model is implemented in a greater percentage of the Company's operations. Consistent with industry practices, certain reclassifications were made from warehouse operating and selling expenses to corporate general and administrative expenses on the November 30, 1994 statement of operations to conform to the November 25, 1995 presentation with respect to goodwill amortization. New Warehouse Assimilation Expenses. New warehouse assimilation expenses represent the readily identifiable incremental costs of acquiring, restructuring and assimilating an acquisition into the Company's operations. Costs which are not readily identifiable are included in warehouse operating and selling expenses rather than in new warehouse assimilation expenses. New warehouse assimilation expenses were $4,752,000 in the three months ended -10- CORPORATE EXPRESS, INC. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS November 25, 1995 compared to $1,403,000 in the fiscal 1994 period and $10,476,000 in the nine months ended November 25, 1995 compared to $3,050,000 in the same period in the prior year. This increase is due largely to utilization of contract labor of $1,024,000 related to the consolidation of the San Jose and Hayward facilities in Northern California. This consolidation project has taken longer than expected due to a variety of factors including a search for a suitable larger facility, timing of former tenants vacating the expansion space, delays in obtaining building permits, labor negotiations, and the need to integrate these facilities cautiously to ensure uninterrupted service to customers. In addition, this integration and computer conversion was more costly than anticipated because it took more hours to complete related tasks including all aspects of data conversion to comply with Corporate Express standards. The Company expects that, in fiscal 1995, new warehouse assimilation expenses will continue to increase compared to fiscal 1994 as more of the Company's acquisitions are integrated. Corporate General and Administrative Expenses. Corporate general and administrative expenses include those central expenses that are incurred to support the Company's regional operations and goodwill amortization. Corporate general and administrative expenses increased $2,979,000 to $8,575,000 in the third quarter of fiscal 1995 from $5,596,000 in the third quarter of fiscal 1994 and increased $8,387,000 to $21,036,000 in the nine months ended November 25, 1995 from $12,649,000 in the same period in the previous year, reflecting the Company's expanded operations. As a percentage of net sales, corporate general and administrative expenses decreased to 2.8% in the third quarter of fiscal 1995 from 3.5% in the third quarter of fiscal 1994 and was 2.7% in the nine months ended November 25, 1995 compared to 2.8% in the same period of the previous year. The decrease, as a percentage of net sales, in the fiscal 1995 quarter compared to the 1994 quarter reflects the leverage of a higher revenue base and the inclusion of some non-recurring costs in the information systems area in the fiscal 1994 quarter. As the Company integrates acquisitions into its operations and centralizes administrative functions, the resulting increase in corporate, general and administrative expenses is expected, over time, to be more than offset by a decrease in regional warehouse operating and selling expenses. Operating Profit. Operating profit of $11,553,000 and $28,232,000 for the three and nine-month periods ended November 25, 1995, respectively, compares to $5,130,000 and $11,726,000 for the same periods in the previous year. This increase reflects the contribution of acquired companies and increased regional operating profits at the Company's other regional operations. As a percentage of net sales, operating profit increased to 3.8% and 3.6% for the three and nine-month periods ending November 25, 1995 from 3.2% and 2.6% in the same periods of the previous year. Interest Expense. Net interest expense decreased to $1,764,000 and $7,867,000 in the three and nine-month periods ended November 25, 1995 from $2,805,000 and $9,466,000 in the three and nine-month periods ended November 30, 1994. This decrease was due to the repurchase of $10,000,000 of 9 1/8% Senior Subordinated Notes (the "Notes") in July 1994, the elimination of the approximately 0.5% per annum additional illiquidity payment on the Notes effective upon completion of a registered exchange offer in March 1995, and payments on the line of credit using funds from the public offerings of the Company's common stock completed in March 1995 and September 1995. Minority Interest. Minority interest increased to $467,000 and $1,031,000 for the three and nine-month periods ended November 25, 1995 from $64,000 and $104,000 for the same periods in the previous year, reflecting the 47.3% minority interest in Corporate Express Australia, the Company's 52.7% owned Australian subsidiary. The Company acquired its interest in Corporate Express Australia in May 1995. Net Income. As described in Note 2 to the financial statements, the Company has revised its previously issued financial statements to reflect adjustments to charge certain warehouse and computer conversion costs to expense in the current period rather than as charges against accrued purchase costs. These adjustments decreased net income -11- CORPORATE EXPRESS, INC. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS by $1,257,000 and $2,129,000 for the three and nine months ended November 25, 1995, respectively. The adjustments had no impact on previously reported cash flows from operations. The Company will reverse $4,699,000 of unused accrued purchase costs against goodwill in the fourth quarter of fiscal 1995, which will reduce the related goodwill amortization expenses in future periods. Net income of $5,503,000 and $11,440,000 in the three and nine-month periods ended November 25, 1995, compared to net income of $1,857,000 and $2,393,000 for the same periods in the prior year. This increase reflects contributions from acquisitions and increased profits from the Company's more mature operations. The increased pre-tax profitability is partially offset by an increase in the effective tax rate to 39% for fiscal 1995 from approximately 16% for fiscal 1994. The fiscal 1994 tax rate was significantly lower due to utilization of net operating loss carryforwards ("NOLs"). The fiscal 1995 tax rate reflects international tax rates and changes in estimates regarding the utilization of certain NOLs, offset by the impact of the inclusion of certain non-deductible goodwill. The nine-month period ended November 30, 1994 includes an extraordinary gain of $586,000, net of tax, related to the repurchase of $10,000,000 principal amount of Notes. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations through internally generated funds and borrowings from commercial banks, and has financed its acquisitions through the use of such funds and the issuance of equity and debt securities. In February 1994, the Company completed a private placement of $100,000,000 of Notes. In July 1994, $10,000,000 principal amount of the Notes were repurchased by the Company for $9,300,000 plus accrued interest. Interest on the $90,000,000 of outstanding Notes is payable semi-annually on March 15 and September 15 of each year. The Notes will mature on March 15, 2004 and will not be redeemable prior to March 15, 1999. Thereafter, the Notes will be redeemable at the option of the Company, in whole or in part. On March 17, 1995, the Company completed an offer to exchange the privately placed Notes for registered Notes. The additional illiquidity payment of approximately 0.5% per annum ceased on completion of the exchange offer, reducing the Company's interest rate with respect to the Notes from approximately 9 5/8% to 9 1/8% per annum. The Company has a revolving credit facility of $90,000,000, subject to borrowing base and other restrictions (the "Senior Credit Facility"). At January 4, 1996, the Company had no debt outstanding under its Senior Credit Facility, and an unused remaining borrowing line of $90,000,000. Borrowings under the Senior Credit Facility bear interest, at the Company's option, at (i) the applicable 30-, 60-, 90-, or 180-day adjusted Eurodollar rate, plus 2.25% (plus or minus 0.25%), subject, with respect to the plus or minus 0.25% adjustment, to a performance-based grid based on the Company's financial results and availability under the Senior Credit Facility or (ii) the applicable prime rate plus .50% (plus or minus 0.25%). The indebtedness under the Senior Credit Facility is secured by substantially all the assets of the Company and its United States subsidiaries, including accounts receivable and inventory. On March 30, 1995, a public offering of 6,770,625 shares of common stock was consummated at a price to the public of $16.68 per share. Of the shares offered, 3,000,000 shares were sold by the Company and 3,770,625 shares were sold by selling security holders, including 264,938 shares issued upon exercise of warrants purchased by the underwriters. On September 15, 1995, the Company sold 16,324,528 primary shares in a follow- on public offering of its common stock, and selling shareholders sold 2,075,472 shares at a price of $24.00 per share. Of the $375,200,000 of net proceeds to the Company from the offering, $195,831,000 was used to pay for the purchase of the Company shares held by OfficeMax, Inc., the Company's largest shareholder, and $61,000,000 was used to repay existing indebtedness. The remaining proceeds will be used to finance the Company's acquisitions and for general corporate purposes. -12- CORPORATE EXPRESS, INC. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES, CONTINUED During the first nine months of fiscal 1995, the Company acquired 20 contract stationers for a net cash purchase price of $57,149,000 (including three contract stationers purchased by Corporate Express Australia), and including the purchase of newly issued securities representing a 52.7% interest in Corporate Express Australia, for a net cash outlay of $98,000 ($16,785,000 purchase price less cash acquired of $16,687,000). Total liabilities assumed in connection with these acquisitions were $54,441,000 (including accounts payable and assumed debt). In addition, Corporate Express made payments of approximately $6,462,000 related to acquisitions completed in fiscal 1994. During the first nine months of fiscal 1995, the Company sold its high-end furniture business which was acquired as part of the Joyce Acquisition for $4,362,000. The sale was contemplated at the time of the Joyce Acquisition and was reflected in the financial statements accordingly. In addition, the Company expended approximately $21,265,000 in the first nine months of fiscal 1995 for capital expenditures, primarily for warehouse reconfiguration, computer systems and trucks. During the nine months ended November 25, 1995, cash and cash equivalents increased $80,554,000. This increase reflects net proceeds from the sale of common stock in March and September 1995 of $424,295,000 offset by the purchase of Company common stock held by OfficeMax for $195,831,000, net payments on the Senior Credit Facility of $24,600,000, payments for acquisitions and capital expenditures during the nine months ended November 25, 1995 of $84,876,000, as well as cash used for operations and repayment of debt of $45,530,000. Net cash used for operating activities reflects cash generated by net income plus non- cash expenses offset by an increased investment in accounts receivable and inventories reflecting increased sales and the introduction of the In-Stock Catalog into acquired operations. The repayment of debt includes debt of acquired companies. In December 1995, the Company acquired or entered into agreements to acquire two contract stationers in Australia and a 51% interest in a United Kingdom contract stationer with an option to purchase the remainder for a combined purchase price of approximately $10,800,000. The acquired companies are Revson Australia Pty Ltd, headquartered in Sydney, with three distribution centers and eight distribution breakpoints throughout Australia; Arnell Pty Ltd, headquartered in Canberra; and the Chisholm Group with distribution centers in London and Surrey. The Australian acquisitions were acquired through Corporate Express Australia, the Company's 52.5% owned Australian subsidiary. For fiscal 1995, the Company expects capital expenditures of approximately $24,000,000 excluding capital for the new headquarters' facility (comprised of approximately $13,000,000 to be used for upgrading and enhancing the Company's information systems, approximately $4,000,000 for maintenance capital items, and $7,000,000 to be used for acquisition related initial capital costs). Actual capital expenditures for fiscal 1995 may be greater or less than budgeted amounts depending on the level of acquisition activity and other factors. The Company has purchased real estate for $4,600,000 and has begun construction of the Company's corporate headquarters, which will replace presently leased space. Construction of the new headquarters, which the Company anticipates will be funded through third party financing, is currently estimated to cost approximately $30,000,000, including the headquarters building land cost. The Company believes that its cash on hand, borrowing capacity under the Senior Credit Facility, capital resources, cash flows and the proceeds from its public offerings will be sufficient to fund its ongoing operations and anticipated capital expenditures for the next twelve months, although actual capital needs may change, particularly in connection with acquisitions which the Company may make in the future. -13- PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- 11.1 Computation of Earnings Per Share (b) Reports on Form 8-K ------------------- Report on Form 8-K filed on October 10, 1995 -14- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORPORATE EXPRESS, INC. By: /s/ SAM R. LENO ------------------------------------------------ Sam R. Leno Executive Vice President and Chief Financial Officer Date: June 13, 1996 (Principal Financial Officer and Duly Authorized Officer) -15- EX-11.1 2 STATEMENT REGARDING COMPUTATION OF NET INCOME EXHIBIT 11.1 Corporate Express, Inc. Statement Regarding Computation of Net Income (Loss) Per Share
PRIMARY EARNINGS PER SHARE Nine Months Nine Months Three Months Three Months Nov 30, 1994 Nov 25, 1995 Nov 30, 1994 Nov 25, 1995 ------------ ------------ ------------ ------------ Income (loss) before extraordinary item $ 1,807,000 $ 11,440,000 $ 1,857,000 $ 5,503,000 Extraordinary item 586,000 ------------ ------------ ------------ ------------ Net income (loss) $ 2,393,000 $ 11,440,000 $ 1,857,000 $ 5,503,000 ============ ============ ============ ============ Weighted average shares outstanding 18,615,000 44,102,000 35,351,000 48,929,000 Common Stock Equivalents: Preferred stock (A) 9,128,000 0 Stock options 1,521,000 2,890,000 2,408,000 3,270,000 Warrants 546,000 560,000 715,000 514,000 Items issued within one year of IPO: (B) Preferred stock 612,000 n/a Stock options 384,000 n/a Warrants 40,000 n/a Common Stock 710,000 n/a ------------ ------------ ------------ ------------ Total weighted average shares outstanding 31,556,000 47,552,000 38,474,000 52,713,000 ============ ============ ============ ============ Income (loss) per share before extraordinary item $ 0.06 $ 0.24 $ 0.05 $ 0.10 Extraordinary item 0.02 0.00 0.00 0.00 ------------ ------------ ------------ ------------ Net income (loss) per share $ 0.08 $ 0.24 $ 0.05 $ 0.10 ============ ============ ============ ============ FULLY DILUTED EARNINGS PER SHARE Fully diluted earnings per share differs from primary earnings per share by less than 3%.
A - Preferred stock is included even though anti-dilutive due to automatic conversion to common on a two for one basis upon completion of an initial public offering. B - Amounts represent stock issued within one year of initial filing of registration statement in connection with an initial public offering at below IPO price and are net of shares repurchased under the treasury stock method. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CORPORATE EXPRESS, INC AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-02-1996 AUG-27-1995 NOV-25-1995 92,100 0 217,885 3,065 94,394 421,762 83,310 19,401 733,438 167,363 104,339 0 0 10 435,703 733,438 301,008 301,008 220,365 68,800 0 0 1,764 9,789 3,819 5,503 0 0 0 5,503 .10 .10
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