-----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, L1xzvrScXt6lwez2tjnilrzbb27QeNLdbMTcwCEZkRV9rBtEUbSnMpImwn0UhEZt y2qx6DjFfE4n1s2BnCtnHA== 0000927356-96-000558.txt : 19960717 0000927356-96-000558.hdr.sgml : 19960717 ACCESSION NUMBER: 0000927356-96-000558 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960601 FILED AS OF DATE: 19960716 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-24642 FILM NUMBER: 96595383 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 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 1, 1996 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 July 8, 1996 was 69,201,496. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS June 1, March 2, 1996 1996 ------------ ------------- (Unaudited) Current assets: Cash and cash equivalents $ 30,079 $ 28,664 Trade accounts receivable, net of allowance of $6,492 and $5,380, respectively 292,062 266,360 Notes and other receivables 29,807 27,060 Inventories 119,408 101,995 Deferred income taxes 20,729 18,157 Other current assets 17,635 17,234 --------- ---------- Total current assets 509,720 459,470 Property and equipment: Land 9,614 8,384 Buildings and leasehold improvements 48,753 32,935 Furniture and equipment 138,530 117,655 ---------- ----------- 196,897 158,974 Less accumulated depreciation (55,145) (49,475) ---------- ----------- 141,752 109,499 Goodwill, net of $18,891 and $16,046 of accumulated amortization, respectively 445,108 324,603 Other assets, net 18,072 16,951 ---------- ----------- Total assets $1,114,652 $ 910,523 ========== ===========
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 June 1, March 2, 1996 1996 ------------ ------------- (Unaudited) Current liabilities: Accounts payable - trade $ 167,244 $ 135,069 Payable for acquisitions 46,102 2,063 Accrued payroll and benefits 27,514 23,019 Accrued purchase costs 4,169 3,049 Accrued merger and related costs 19,431 24,880 Other accrued liabilities 34,320 33,777 Current portion of long-term debt and capital leases 9,461 20,151 Other 126 219 ----------- ----------- Total current liabilities 308,367 242,227 Capital lease obligations 10,694 9,568 Long-term debt 241,684 127,900 Deferred income taxes 12,390 7,374 Minority interest in subsidiaries 26,302 24,843 Other non-current liabilities 2,918 2,097 ----------- ----------- Total liabilities 602,355 414,009 Contingencies (Note 7) Shareholders' equity: Common stock, $.0002 par value, 100,000,000 shares authorized, 69,378,000 and 69,088,000 shares issued and outstanding, respectively 14 14 Additional paid-in capital 506,914 502,559 Retained earnings (accumulated deficit) 3,065 (6,712) Foreign currency translation adjustments 2,304 653 ----------- ----------- Total shareholders' equity 512,297 496,514 ----------- ---------- Total liabilities and shareholders' equity $ 1,114,652 $ 910,523 =========== ===========
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 --------------------------- June 1, May 27, 1996 1995 ------------ ------------ (Unaudited) Net sales $ 500,624 $ 330,394 Cost of sales 369,178 243,586 ---------- ---------- Gross profit 131,446 86,808 Warehouse operating and selling expense 95,309 62,611 Corporate general and administrative expenses 15,933 9,243 ---------- ---------- Operating profit 20,204 14,954 Interest expense, net 3,279 4,203 Other income - 167 ---------- ---------- Income before income taxes 16,925 10,918 Income tax expense 7,079 4,297 ---------- ---------- Income before minority interest 9,846 6,621 Minority interest 230 115 ---------- ---------- Net income $ 9,616 $ 6,506 ========== ========== Net income per share $ .13 $ .10 ========== ========== Weighted average common shares outstanding 75,139 62,971 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -4- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended --------------------------- June 1, May 27, 1996 1995 ------------ ------------ (Unaudited) Cash flows from operating activities: $ 9,616 $ 6,506 Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 5,131 3,133 Amortization 3,155 1,951 Minority interest 230 115 Other 187 853 Changes in assets and liabilities, excluding acquisitions: Decrease (increase) in accounts receivable 11,013 (2,806) Increase in inventory (5,384) (6,583) Increase in other current assets (872) (969) Decrease (increase) in other assets 2,664 (522) (Decrease) in accounts payable (13,661) (13,101) (Decrease) in accrued liabilities (10,508) (1,701) ----------- ----------- Net cash provided by (used in) operating activities 1,571 (13,124) ----------- ----------- Cash flows from investing activities: Proceeds from sale of assets 298 252 Capital expenditures (28,214) (7,404) Payment for acquisitions, net of cash acquired (68,902) (29,965) Other, net (301) (1,179) ----------- ----------- Net cash used in investing activities (97,119) (38,296) ----------- ----------- Cash flows from financing activities: Issuance of common stock 3,594 52,349 Debt issuance costs (375) (2,420) Proceeds from long-term borrowings 7,230 6,817 Repayments of long-term borrowings (5,809) (2,431) Proceeds from short-term borrowings 340 -- Repayment of short-term borrowings (5) (5,893) Net proceeds from line of credit 92,031 19,400 Other (116) (234) ----------- ----------- Net cash provided by financing activities 96,890 67,588 Net cash (used) provided by discontinued operations (92) 217 Effect of foreign currency exchange rate changes on cash 165 (595) ----------- ----------- Increase in cash and cash equivalents 1,415 15,790 Cash and cash equivalents, beginning of period 28,664 15,392 ----------- ----------- Cash and cash equivalents, end of period $ 30,079 $ 31,182 =========== ===========
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 $2,004,000 and $435,000 were incurred during the three months ended June 1, 1996 and May 27, 1995, respectively, for equipment and software. During the three months ended June 1, 1996, the Company acquired 14 contract stationers, one software distributor, and one delivery operation for a net cash purchase price of $65,949,000, a note payable of $45,111,000 and 24,000 shares of common stock. During the three months ended May 27, 1995, the Company purchased substantially all of the assets and assumed certain liabilities of eight contract stationers and one delivery operation for a net cash outlay of $23,849,000 and repurchased one computer product franchise for $108,000. In conjunction with these acquisitions, liabilities were assumed as follows:
Three Months Ended ---------------------------- June 1, May 27, 1996 1995 ------------ ------------- (In thousands) (Unaudited) Fair value of assets acquired $173,324 $ 62,482 Cash paid, net of cash acquired 65,949 23,957 Issuance of notes payable 45,111 1,000 Issuance of stock 750 -- Minority interest in subsidiary -- 11,138 Purchase price payable, included in current liabilities 1,973 54 -------- -------- Liabilities assumed $ 59,541 $ 26,333 ======== ========
In addition to the amounts set forth above, during the three months ended June 1, 1996 and May 27, 1995, the Company paid $2,953,000 and $6,008,000, respectively, for prior period acquisitions. Of the amounts paid for prior period acquisitions in the first three months of fiscal 1995, $5,000,000 was related to the acquisition of certain assets of the office products division of Joyce International, Inc. The accompanying notes are an integral part of the consolidated financial statements. -6- CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS 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 its majority owned subsidiaries. U.S. Delivery Systems, Inc. ("Delivery") was merged into DSU Acquisition Corp., a wholly-owned subsidiary of the Company, on March 1, 1996, and Richard Young Journal, Inc. ("Young") was merged into CEX Acquisition Corp., a wholly-owned subsidiary of the Company, on February 27, 1996. The mergers were accounted for as poolings of interests and, accordingly, the accompanying financial statements have been restated to include the accounts and operations of Delivery and Young for all periods prior to the mergers. Acquisitions accounted for as purchases are included in the accounts and operations as of the effective date of the transaction. 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 Annual Report on Form 10-K for the year ended March 2, 1996. 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. 2. Accrued Purchase Costs In conjunction with purchase acquisitions, the Company accrues the direct external costs incurred to consummate the acquisition, external costs associated with closing duplicate facilities of acquired companies, and severance and relocation payments to the acquired company's employees. Prior to the adoption of EITF 95-3 in May 1995, the Company also accrued the external incremental costs of converting acquired company computer systems to the Company's systems. The following tables set forth activity in the Company's accrued purchase liabilities for the period ended June 1, 1996.
Prior to EITF 95-3: Warehouse Disposition & System Redundant of Assets Total Integrations Facilities Severance & Other -------------- ------------- ----------- ---------- ----------- (In thousands) Balance, March 2, 1996 $1,264 $ 750 $ 403 $ 41 $ 70 Payments (230) (136) (53) (41) -- ------ ------ ------ ------ ------ Balance, June 1, 1996 (1) $1,034 $ 614 $ 350 $ 0 $ 70 ====== ====== ====== ====== ======
-7- (1) Remaining balances relate primarily to current consolidation projects in Florida and Canada and reflect the estimated remaining costs to be incurred in conjunction with these projects.
After adoption of EITF 95-3: Disposition Facility Redundant of Assets Total Exit Costs Facilities Severance & Other ----- ---------- ---------- --------- ------------ (In thousands) Balance, March 2, 1996 $1,785 $514 $198 $ 772 $ 301 Additions 2,244 -- 447 732 1,065 Payments (894) -- (80) (204) (610) ------ ------ ------ ------ ------ Balance, June 1, 1996 $3,135 $514 $565 $1,300 $ 756 ====== ====== ====== ====== ======
Accrued purchase costs, after adoption of EITF 95-3, primarily represent the liabilities incurred to consolidate acquired operations into existing Company facilities. 3. Merger and Other Nonrecurring Charges During the fourth quarter of fiscal 1995, the Company recorded $36,838,000 in merger and other nonrecurring charges primarily in conjunction with the acquisitions of Delivery and Young, of which $24,880,000 was unpaid at the end of the fiscal year. The first quarter expenditures of $5,449,000 included $5,240,000 of actual merger transaction costs. The remaining merger transaction costs of $3,921,000 are expected to be paid by the end of the second quarter. The additional costs associated with a plan to integrate the combined companies' operations is expected to be completed within the next two years. The charge includes the closure of 88 facilities and the reduction of approximately 760 employees. As of June 1, 1996, nine facilities were closed and 24 employees have been terminated.
Accrued Merger and Related Costs ------------------------------------------ Balance Cash Balance March 2, 1996 Payments June 1, 1996 ----------------- --------- ------------ Merger transactions costs $ 9,161 $(5,240) $ 3,921 Severance and terminations 7,165 (155) 7,010 Facility closure and consolidation 7,909 (54) 7,855 Other costs 645 -- 645 ------- ------- ------- $24,880 $(5,449) $19,431 ======= ======= =======
4. Acquisitions Accounted For as Purchases On May 15, 1996, the Company acquired all of the outstanding capital stock of ASAP Software Express, Inc. ("ASAP"), a leading distributor of software to large corporations for a purchase price of approximately $98,000,000, subject to certain adjustments. The excess of the purchase price over the fair market value of the net tangible assets acquired was allocated to goodwill and is being amortized over 40 years. The operating results of ASAP are included in the Company's consolidated statement of operations from the effective date of the acquisition. The following pro forma financial information assumes the ASAP acquisition occurred at the beginning of the period. These results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the period, or of results which may occur in the future. -8- The pro forma results listed below are unaudited and reflect purchase price adjustments.
Three Months Ended -------------------------------- June 1, 1996 May 27, 1995 ------------ ------------ (In thousands, except per share amounts) Net sales $526,383 $361,571 Net income 10,615 6,371 Net income per share 0.14 0.10
In addition to the ASAP acquisition, the Company acquired 14 contract stationers and one delivery operation for a net cash purchase price of $27,241,000 and 24,000 shares of common stock. 5. 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. The weighted average shares outstanding for the three months ended May 27, 1995 have been restated to reflect the 50% stock dividend distributed in June 1995. 6. Subsequent Events On June 19, 1996, the Company issued $325 million principal amount of 4 1/2% Convertible Notes due July 1, 2000 (the "Notes"). The Notes will be convertible into shares of Common Stock of the Company at a conversion price of $50 per share, subject to certain conditions. The Company intends to use the proceeds from the sale of the Notes to repay debt and for expansion of the Company's business, including acquisitions, and other general corporate purposes. Subsequent to June 1, 1996, the Company purchased eleven companies of which four were in Australia, three in the United States, one in Scotland, one in New Zealand, one in Canada and one in Germany for a combined purchase price of approximately $26,653,000. 7. 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. Consolidated net sales increased 51.5% to $500,624,000 in the three months ended June 1, 1996 from $330,394,000 in the three months ended May 27, 1995. Net sales for the Company's product distribution business increased 62.0% from $250,152,000 in the three months ended May 27, 1995 to $405,247,000 in the three months ended June 1, 1996 while the service business increased 18.9% from $80,242,000 to $95,377,000 in the same periods. These increases were primarily attributable to 53 acquisitions since May 27, 1995. Also contributing to the sales increase was strong internal growth reflecting increased market penetration in office products distribution and higher demand for the Company's local delivery services. International operations accounted for 15.2% of total sales or $76,125,000 in the three months ended June 1, 1996 and 3.8% of total sales or $12,492,000 in the three months ended May 27, 1995. The first quarter of fiscal 1995 results reflect three Canadian office product distributors (of which two were acquired in February 1995 and one was acquired in May 1995) and Corporate Express Australia (formerly Macquarie Office Limited), of which the Company acquired a 52.7% interest through the purchase of newly issued securities in May 1995. The Company has expanded its international operations since May 27, 1995 by acquiring 14 international office product distributors, including eight distributors purchased by Corporate Express Australia (six in Australia and two in New Zealand), four in the United Kingdom, two additional distributors in Canada and one delivery and distribution service business in Canada. Gross Profit. Cost of sales includes merchandise, occupancy and delivery costs (including fees paid to drivers and transportation and delivery agents). Gross profit as a percentage of sales was 26.3% for the three months ended June 1, 1996 and for the three months ended May 27, 1995. The merchandise margin component of gross profit increased slightly from the fiscal 1995 period compared to the fiscal 1996 period. Additionally, vendor rebates increased as a percentage of revenue, reflectiing the benefits of the Company's merchandising strategy to reduce the number of vendors included in the Company's proprietary In-Stock Catalog, thereby increasing the sales dollars per vendor. These increases were offset by increased costs of delivery services as well as higher cost structures associated with recent acquisitions. Warehouse Operating and Selling Expenses. Warehouse operating and selling expenses as a percentage of sales were 19.0% for the three months ended June 1, 1996 and the three months ended May 27, 1995. Warehouse operating and selling expenses primarily include labor and administrative costs associated with operating regional warehouses and sales offices, selling expenses and commissions related to the Company's direct sales force and warehouse assimilation costs. Warehouse operating and selling expenses increased by $32,698,000, or 52.2%, to $95,309,000 in the three months ended June 1, 1996 from $62,611,000 in the three months ended May 27, 1995. This increase is primarily attributable to the 53 acquisitions completed since May 27, 1995. -10- CORPORATE EXPRESS, INC. Corporate General and Administrative Expenses. Corporate general and administrative expenses include central expenses incurred to provide corporate oversight and support for regional operations and goodwill amortization. Corporate general and administrative expenses increased to $15,933,000 in the three months ended June 1, 1996 from $9,243,000 in the three months ended May 27, 1995, reflecting the Company's expanded operations. As a percentage of net sales, corporate general and administrative expenses increased to 3.2% in the three months ended June 1, 1996 from 2.8% in the three months ended May 27, 1995. This increase reflects the costs associated with developing a larger corporate staff to support acquisition efforts and expanded operations, including an expanded information systems staff, and increased goodwill amortization resulting from purchase acquisitions since May 1995. Operating Profit. Consolidated operating profit of $20,204,000 for the three months ended June 1, 1996 increased 35.1% compared to operating profit of $14,954,000 for the three months ended May 27, 1995, reflecting increased acquisitions and internal growth. Operating profit decreased as a percentage of net sales due to increased corporate general and administrative expenses and expanded international operations. Operating profit as a percentage of sales for international operations was 1.8% and accounted for 9.7% of total product distribution operating profit in the three months ended June 1, 1996. Operating profit for the product segment increased by 49.9% to $13,842,000 in the three months ended June 1, 1996 compared to the three months ended May 27, 1995 operating profit of $9,233,000. Operating profit for the delivery segment increased to $6,362,000 in the three months ended June 1, 1996 from $5,721,000 in the three months ended May 27, 1995. Interest Expense. Net interest expense of $3,279,000 in the three months ended June 1, 1996 decreased by 22.0% from $4,203,000 in the three months ended May 27, 1995. The decrease in interest expense is a result of the repayment of higher yield Young debt with borrowings from the lower yield Senior credit facility, lower borrowings on the line of credit to fund operations and increased borrowings to invest in capital projects. Minority Interest. Minority interest increased to $230,000 from $115,000 reflecting a 47.5% minority interest in Corporate Express Australia and a 49.0% minority interest in Corporate Express United Kingdom. The Company acquired a 52.7% ownership interest in Corporate Express Australia in May 1995 (subsequently reduced to 52.5% through Corporate Express Australia public stock offerings) and a 51.0% ownership interest in Corporate Express United Kingdom in December 1995. Net Income. Net income of $9,616,000 in the three months ended June 1, 1996 compared to net income of $6,506,000 in the three months ended May 27, 1995. The after-tax profitability is reduced by an increase in the effective tax rate to 41.8% in the three months ended June 1, 1996 from 39.4% in the three months ended May 27, 1995 due to the utilization of net operating losses in the fiscal 1995 quarter. Other. The accounts receivable balance at June 1, 1996 of $292,062,000 increased $25,702,000 from $266,360,000 at March 2, 1996, primarily as a result of acquired receivables. The allowance for doubtful accounts as a percentage of consolidated accounts receivable was 2.2% and 2.0% at June 1, 1996 and March 2, 1996, respectively, remaining relatively unchanged. -11- CORPORATE EXPRESS, INC. The inventory balance at June 1, 1996 of $119,408,000 increased $17,413,000 from $101,995,000 at March 2, 1996 primarily as a result of acquired inventories. Goodwill at June 1, 1996 of $445,108,000 increased $120,505,000 from $324,603,000 at March 2, 1996, reflecting net additions from acquisitions of $123,350,000, offset by current year amortization of $2,845,000. The trade accounts payable balance at June 1, 1996 of $167,244,000 increased $32,175,000 from $135,069,000 at March 2, 1996, primarily as a result of acquired trade payables of $45,043,000, offset by payments to bring acquired payables current. The payable for acquisitions balance of $46,102,000 at June 1, 1996 primarily represents the second installment on the ASAP acquisition, which was paid in full on June 25, 1996. Accrued purchase costs at June 1, 1996 of $4,169,000 increased by $1,120,000 from the March 2, 1996 balance of $3,049,000. This increase reflects acquisition additions of $2,244,000 and usage of $1,124,000. The remaining balance represents the current estimate for costs to be incurred in conjunction with current consolidation projects in South Florida, Canada, and certain newly acquired operations. (See Note 2 in the Consolidated Financial Statements.). The accrued merger and related costs balance at June 1, 1996 of $19,431,000 decreased by $5,449,000 from the March 2, 1996 balance of $24,880,000, primarily as a result of payments of the Delivery and Young merger transaction costs. (See Note 3 in the Consolidated Financial Statements.) Liquidity and Capital Resources Historically, the Company has 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 and, in certain instances, promissory notes. In February 1994, the Company completed a private placement of $100,000,000 of 9 1/8% Senior Subordinated Notes (the "Notes"). In July 1994, $10,000,000 principal amount of the Notes was 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. On June 19, 1996, the Company issued $325 million principal amount of 4 1/2% Convertible Notes due July 1, 2000 (the "Convertible Notes"). The Convertible Notes will be convertible into shares of Common Stock of the Company at a conversion price of $50 per share, subject to certain conditions. The Company intends to use the proceeds from the sale of the Convertible Notes to repay debt and for expansion of the Company's business, including acquisitions, and for other general corporate purposes. The Company's revolving credit facility (the "Senior Credit Facility") was amended on May 10, 1996 to increase the Company's borrowing capacity from $90,000,000 to $250,000,000, subject to borrowing base and other restrictions and lower the cost of its borrowings to LIBOR plus 1.25%. The indebtedness under the Senior Credit Facility is secured by substantially all of the assets of the Company and its United States subsidiaries, including accounts receivable and inventory. On May 31, 1996, the Company borrowed on its Senior Credit Facility and repaid in full the $33,270,000 outstanding Delivery revolving credit facility. -12- CORPORATE EXPRESS, INC. On June 24, 1996, the outstanding amounts under the Senior Credit Facility were paid in full from funds generated from the issuance of the Convertible Notes. Upon this repayment, the borrowing capacity of the Senior Credit Facility was reduced from the amended capacity of $250,000,000 to $90,000,000 subject to borrowing base and other restrictions. The Company intends to replace the existing Senior Credit Facility with a multiple currency revolving credit facility with a minimum borrowing capacity of $250,000,000 and lower interest rates. In connection with this change in facility the Company intends to write- off approximately $1,200,000 in prepaid bank fees. During the first quarter of fiscal 1996, the Company purchased 14 contract stationers, one software distributor, and one delivery operation accounted for as purchases for a net cash purchase price of $65,949,000, a note payable of $45,111,000 and 24,000 shares of common stock. Total liabilities assumed in connection with these acquisitions were $59,541,000 (including accounts payable, the note payable, and assumed debt). In addition, the Company made payments of approximately $2,953,000 related to acquisitions completed in fiscal 1995. The Company had capital expenditures of $28,214,000 in the first quarter of fiscal 1996, of which approximately $6,000,000 was for the corporate headquarters facility, approximately $7,200,000 related to the purchase and development of the Miami warehouse and the remainder was for computer systems, warehouse reconfigurations, telecommunications equipment, delivery vehicles, and leasehold improvements. Cash and cash equivalents increased by $1,415,000 in the first quarter of fiscal 1996. This increase reflects net proceeds from the line of credit of $92,031,000, cash provided by operating and other activities of $2,906,000 and issuance of common stock of $3,594,000, offset by cash paid for acquisitions of $68,902,000 and capital expenditures of $28,214,000. The Company believes the borrowing capacity under the Senior Credit Facility, together with proceeds from the Convertible Notes, coupled with its cash on hand, capital resources and cash flows, will be sufficient to fund its ongoing operations, anticipated capital expenditures and acquisition activity for the next twelve months. However, actual capital needs may change, particularly in connection with acquisitions which the Company may consummate in the future. Inflation Certain of the Company's product offerings, particularly paper products, have been and are expected to continue to be subject to significant price fluctuations due to inflationary and other market conditions. The Company generally is able to pass such increased costs on to its customers through price increases, although it may not be able to adjust its prices immediately. Significant increases in fuel costs in the future could affect the Company's profitability if these costs cannot be passed on to customers. In general, the Company does not believe that inflation has had a material effect on its results of operations in recent years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. -13- CORPORATE EXPRESS, INC. Accounting Standards In fiscal 1996, the Company will adopt SFAS No. 123, "Accounting for Stock-Based Compensation." This standard establishes a fair value method for accounting for stock-based compensation plans either through recognition or disclosure. The Company will adopt this standard through compliance with the disclosure requirements set forth in SFAS No. 123. Adoption of this standard will have no impact on the financial position or results of operations of the Company. -14- CORPORATE EXPRESS, INC. 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 May 30, 1996 -15- 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 (Principal Financial Officer and Duly Authorized Officer) Date: July 16, 1996 EX-11.1 2 STATEMENT REGARDING COMPUTATION OF NET INCOME P/S Exhibit 11.1 Corporate Express, Inc. Statement Regarding Computation of Net Income (Loss) Per Share
Primary Earnings Per Share Three Months Three Months Ended Ended June 1, 1996 May 27, 1995 ------------ ------------ Net income $ 9,616,000 $ 6,506,000 ============ ============ Net income per share $ 0.13 $ 0.10 ============ ============ Weighted average shares outstanding 69,111,690 59,086,500 Common Stock Equivalents: Stock options and warrants 6,027,034 3,884,500 ------------ ------------ Total weighted average shares outstanding 75,138,724 62,971,000 ============ ============
Fully Diluted Earnings Per Share Fully diluted earnings per share differs from primary earnings per share by less than 3%. - -------------------------------------------------------------------------------- EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 1, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-01-1997 MAR-03-1996 JUN-01-1996 30,079 0 328,361 6,492 119,408 509,720 196,897 55,145 1,114,652 308,367 241,684 0 0 14 512,283 1,114,652 500,624 500,624 369,178 111,242 0 0 3,279 16,925 7,079 9,616 0 0 0 9,616 .13 .13
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