-----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, GbgAesV5N0wi7UrupNOrps8Gt8TWT9zRVYbsw+tkOSq3cv3n47ewgg3qX3uC9E7Z bgZOIrBiILb4AUD1jpd9ig== 0000927356-98-001678.txt : 19981026 0000927356-98-001678.hdr.sgml : 19981026 ACCESSION NUMBER: 0000927356-98-001678 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981019 ITEM INFORMATION: FILED AS OF DATE: 19981023 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: 0131 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24642 FILM NUMBER: 98729976 BUSINESS ADDRESS: STREET 1: 1 ENVIRONMENTAL WAY CITY: BROOMFIELD STATE: CO ZIP: 80021 BUSINESS PHONE: 3033732800 MAIL ADDRESS: STREET 1: 1 ENVIRONMENTAL WAY CITY: BROOMFIELD STATE: CO ZIP: 80021 8-K/A 1 FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 Date of Report (Date of earliest event report): October 19, 1998 ----------------- CORPORATE EXPRESS, INC. ----------------------------- (Exact name of registrant as specified in its charter) Colorado 0-24642 84-0978360 - ------------------ ------------- ------------- (State or other (Commission (IRS Employer jurisdiction File Number) Identification No.) of incorporation) 1 Environmental Way Broomfield, CO 80021 ---------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (303) 664-2000 -------------- Item 5 - Other Events - --------------------- On May 29, 1998, CEX Holdings, Inc. ("CEX Holdings"), a wholly owned subsidiary of the Registrant, completed a private placement of $350 million principal amount of 9.625% Senior Subordinated Notes due 2008 (the "Notes"). The Notes are fully and unconditionally guaranteed on a joint and several basis by the Registrant (the "Parent Guarantor") and certain of the Registrant's subsidiaries. In connection with a proposed exchange offer involving the Notes and the filing of a Registration Statement on Form S-4 (the "Form S-4") with respect to such exchange offer, and pursuant to the requirements of Staff Accounting Bulletin Paragraph G and H of Topic 1 (SAB No. 53), the Registrant has added a footnote to its previously filed consolidated financial statements for the quarterly period ended August 1, 1998 (see (A) below) which includes condensed consolidating financial statement information for the Parent Guarantor, CEX Holdings, the Subsidiary Guarantors and the Subsidiary Non-Guarantors. There has been no change to the previously filed consolidated financial statements contained in the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended August 1, 1998 other than the addition of Note 9 - Supplemental Guarantor Information. Also in connection with the proposed exchange offer involving the Notes and the Form S-4, the Registrant has included in this report, for the purpose of incorporating by reference into the Form S-4, the previously filed (i) audited financial statements of Data Documents Incorporated ("DDI") for the year ended December 31, 1996 (see (B) below) and (ii) unaudited financial statements of DDI for the quarter ended September 30, 1997 (see (C) below). DDI was acquired by the Registrant on November 26, 1997. -2- (A) CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED AUGUST 1, 1998 - ADDITIONAL FOOTNOTE In connection with a proposed exchange offer involving the Notes and the filing of a Registration Statement on Form S-4 with respect to such exchange offer, and pursuant to the requirements of Staff Accounting Bulletin Paragraph G and H of Topic 1 (SAB No. 53), the Registrant has added a footnote to its previously filed consolidated financial statements for the quarterly period ended August 1, 1998 which includes condensed consolidating financial statement information for the Parent Guarantor, CEX Holdings, the Subsidiary Guarantors and the Subsidiary Non-Guarantors. There has been no change to the previously filed consolidated financial statements contained in the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended August 1, 1998 other than the addition of Note 9- Supplemental Guarantor Information. -3- PART I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS
August 1, January 31, 1998 1998 --------------- --------------- (Unaudited) Current assets: Cash and cash equivalents $ 30,327 $ 44,362 Trade accounts receivable, net of allowance of $14,687 and $14,523, respectively 653,190 616,574 Notes and other receivables 91,286 86,687 Inventories 269,535 251,108 Deferred income taxes 34,922 40,729 Other current assets 46,607 41,713 ----------- ----------- Total current assets 1,125,867 1,081,173 Property and equipment: Land 17,424 17,540 Buildings and leasehold improvements 133,872 126,006 Furniture and equipment 370,756 339,577 ----------- ----------- 522,052 483,123 Less accumulated depreciation (150,266) (131,756) ----------- ----------- 371,786 351,367 Goodwill, net of $70,130 and $57,558 of accumulated amortization, respectively 856,680 847,544 Other assets, net 100,609 69,575 ----------- ----------- Total assets $ 2,454,942 $ 2,349,659 =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -4- CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS, Continued (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) LIABILITIES AND SHAREHOLDERS' EQUITY
August 1, January 31, 1998 1998 ------------- -------------- (Unaudited) Current liabilities: Accounts payable - trade $ 360,745 $ 354,915 Accounts payable - acquisitions 985 6,106 Accrued payroll and benefits 58,504 61,308 Accrued purchase costs 8,968 9,378 Accrued merger and related costs 10,323 15,512 Other accrued liabilities 88,170 80,214 Current portion of long-term debt and capital leases 64,433 36,264 ------------- -------------- Total current liabilities 592,128 563,697 Capital lease obligations 7,556 9,414 Long-term debt 1,183,289 753,829 Deferred income taxes 61,175 52,515 Minority interest in subsidiaries 19,147 20,791 Other non-current liabilities 16,591 16,980 ------------- -------------- Total liabilities 1,879,886 1,417,226 Contingencies (Note 7) Shareholders' equity: Preferred stock, $.0001 par value, 25,000,000 shares authorized, none issued or outstanding - - Common stock, $.0002 par value, 300,000,000 shares authorized, 143,172,963 and 142,392,845 shares issued and outstanding, respectively 29 28 Common stock, non-voting, $.0002 par value, 3,000,000 shares authorized, none issued or outstanding - - Additional paid-in capital 858,498 852,507 Retained earnings 114,392 91,887 Accumulated other comprehensive expense (13,883) (11,989) ------------- -------------- 959,036 932,433 Less: Treasury stock, at cost, 35,430,000 shares at August 1, 1998 (383,980) - ------------- -------------- Total shareholders' equity 575,056 932,433 Total liabilities and shareholders' equity $ 2,454,942 $ 2,349,659 ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -5- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended ------------------------------ ------------------------------ August 1, August 2, August 1, August 2, 1998 1997 1998 1997 ----------- --------- ----------- ----------- Net sales $ 1,118,162 $ 925,084 $ 2,226,222 $ 1,846,538 Cost of sales 858,683 708,560 1,708,973 1,412,210 ----------- --------- ----------- ----------- Gross profit 259,479 216,524 517,249 434,328 Warehouse operating and selling expenses 180,262 160,426 363,087 321,183 Corporate general and administrative expenses 33,771 26,618 66,873 55,712 ----------- --------- ----------- ----------- Operating profit 45,446 29,480 87,289 57,433 Interest expense and other, net 21,787 9,530 34,578 18,483 ----------- --------- ----------- ----------- Income before income taxes 23,659 19,950 52,711 38,950 Income tax expense 10,623 8,298 23,667 15,798 ----------- --------- ----------- ----------- Income before minority interest 13,036 11,652 29,044 23,152 Minority interest expense (income) 761 (612) 957 (1,522) ----------- --------- ----------- ----------- Income before extraordinary item 12,275 12,264 28,087 24,674 Extraordinary item, net of tax: Loss on early extinguishment of debt 4,477 - 5,581 - ----------- --------- ----------- ----------- Net income $ 7,798 $ 12,264 $ 22,506 $ 24,674 =========== ========= =========== =========== Net income per share - Basic: Net income before extraordinary item $ 0.11 $ 0.10 $ 0.23 $ 0.19 Extraordinary item (0.04) - (0.04) - ----------- --------- ----------- ----------- Net income $ 0.07 $ 0.10 $ 0.19 $ 0.19 =========== ========= =========== =========== Net income per share - Diluted: Net income before extraordinary item $ 0.11 $ 0.09 $ 0.22 $ 0.19 Extraordinary item (0.04) - (0.04) - ----------- --------- ----------- ----------- Net income $ 0.07 $ 0.09 $ 0.18 $ 0.19 =========== ========= =========== =========== Weighted average common shares outstanding: Basic 107,869 128,389 121,142 127,268 Diluted 112,863 134,700 125,156 133,015
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -6- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands, except share amounts) (Unaudited)
Accumulated Common Stock Additional Other Treasury ------------------------ Paid-In Comprehensive Retained Stock Shares Amount Capital Income (Expense) Earnings Amount ------ ------ ------- ---------------- -------- ------ Balance, January 31, 1998 142,392,845 $ 28 $ 852,507 $ (11,989) $ 91,887 Issuance of common stock 780,118 1 5,706 Repurchase of 35,430,000 shares common stock (383,980) Tax benefit on non-qualified stock options exercised 285 Net income 22,505 Other comprehensive income (1,894) ----------------------- ----------- ----------------- ---------- ------------- Balance, August 1, 1998 143,172,963 $ 29 $ 858,498 $ (13,883) $114,392 $ (383,980) ======================= =========== ================= ========== =============
The accompanying notes are an integral part of the consolidated financial statements. -7- CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended ----------------------------- August 1, August 2, 1998 1997 ----------- ----------- Cash flows from operating activities: Net income $ 22,506 $ 24,674 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 25,860 19,734 Amortization 13,751 10,973 Loss on early extinguishment of debt 5,581 - Minority interest (income) expense 957 (1,522) Other 2,632 2,098 Changes in assets and liabilities, excluding acquisitions: (Increase) decrease in accounts receivable (13,190) 10,768 (Increase) decrease in inventory (11,798) (9,778) (Increase) decrease in other current assets (7,905) 3,250 (Increase) decrease in other assets (1,880) (541) Increase (decrease) in accounts payable (17,704) (10,307) Increase (decrease) in accrued liabilities 8,642 (26,147) --------- --------- Net cash provided by operating activities 27,452 23,202 --------- --------- Cash flows from investing activities: Proceeds from sale of assets 1,146 1,837 Capital expenditures (46,878) (53,609) Payment for acquisitions, net of cash acquired (25,664) (20,484) Investment in marketable securities (270) (3,870) Other, net (606) (43) --------- --------- Net cash used in investing activities (72,272) (76,169) --------- --------- Cash flows from financing activities: Issuance of common stock 2,412 10,907 Repurchase of common stock (383,980) - Debt issuance costs (32,188) (273) Proceeds from long-term borrowings 616,012 20,929 Repayments of long-term borrowings (20,470) (33,402) Proceeds from short-term borrowings 5,392 4,011 Repayments of short-term borrowings (1,218) (6,749) Net proceeds from (payments on) line of credit (61,497) 26,802 Cash paid to retire bonds (93,747) - Other (9) 163 --------- --------- Net cash provided by financing activities 30,707 22,388 --------- --------- Effect of foreign currency exchange rate changes on cash 78 (572) --------- --------- (Decrease) increase in cash and cash equivalents (14,035) (31,151) Cash and cash equivalents, beginning of period 44,362 58,993 --------- --------- Cash and cash equivalents, end of period $ 30,327 $ 27,842 ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -8- Corporate Express, Inc. Notes to Consolidated Financial 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. Acquisitions accounted for as purchases are included in the accounts and operations as of the effective date of the acquisition and immaterial acquisitions accounted for as poolings of interests are included in the accounts and operations as of the beginning of the fiscal quarter in which the acquisition is effective. 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 eleven months ended January 31, 1998. In January 1998, the Company changed its fiscal year end from the end of February to January 31, 1998. The consolidated financial statements for the previously reported prior year second quarter have been restated to conform to the new fiscal year and, accordingly, reflect the three-month and six-month periods ended August 2, 1997. Certain reclassifications have been made to the consolidated financial statements for the three-month and six-month periods ended August 2, 1997 to conform to the three-month and six-month periods ended August 1, 1998 presentation. These reclassifications had no impact on net income. The Company capitalizes certain internal and external software acquisition and development costs that benefit future years. The amortization commencement is dependent on when the software is placed in service (for purchased software) or when the software is ready for its intended use (for internally developed software). All software is amortized over its economic useful life, which is three to seven years, using the straight-line method. Capitalized costs include, primarily, payments to outside firms for purchased software and for direct services related to the development of proprietary software (external costs), salaries and wages of individuals dedicated to the development of software (internal costs), and capitalized interest. The following table summarizes the periodic changes to capitalized software costs:
External Internal Interest Gross Amortization Net -------- -------- -------- -------- ------------- -------- (In thousands) Balance, January 31, 1998 $62,469 $27,143 $6,070 $ 95,682 $(10,330) $ 85,352 Additions 9,629 8,676 2,393 20,698 (4,886) 15,812 ------- ------- ------ -------- -------- -------- Balance, August 1, 1998 $72,098 $35,819 $8,463 $116,380 $(15,216) $101,164
New Accounting Standards: In the first quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income:" Comprehensive income consists of net income, the change in the foreign currency translation adjustment and an unrealized holding gain or loss on marketable securities. Total comprehensive income for the three-month and six month-periods ended August 1, 1998 and August 2, 1997 were as follows:
Three Months Ended Six Months Ended ---------------------- ---------------------- August 1, August 2, August 1, August 2, 1998 1997 1998 1997 ---------------------- ---------------------- Net income $7,798 $12,264 $22,506 $24,674 Other comprehensive income: Unrealized foreign currency translation loss (5,944) (4,252) (3,202) (6,192) Unrealized gain (loss) on securities (254) 2,973 2,144 (1,066) Income tax expense related to items of other comprehensive income 99 (1,159) (836) 416 ------ ------ ------- ------- Total comprehensive income (SFAS No. 130) $1,699 $9,826 $20,612 $17,832 ====== ====== ======= =======
The Company is required to adopt SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," in the fourth quarter of fiscal 1998. SFAS No. 131 will supercede the business segment disclosure requirements currently in effect under SFAS No. 14. SFAS No. 131, among other things, establishes standards regarding the information a company is required to disclose about its operating segments and provides -9- Corporate Express, Inc. Notes to Consolidated Financial Statements guidance regarding what constitutes a reportable operating segment. The Company is currently evaluating disclosures under SFAS No. 131 compared to current disclosures. The Company is required to adopt the disclosure requirements of SFAS No. 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits," in the fourth quarter of fiscal 1998. SFAS No. 132 revises disclosure requirements for such pension and postretirement benefit plans to, among other things, standardize certain disclosures and eliminate certain other disclosures no longer deemed useful. SFAS No. 132 does not change the measurement or recognition criteria for such plans. On March 4, 1998, the Accounting Standards Executive Committee (AcSEC) issued Statement of Position ("SOP") 98-1 providing guidance on accounting for the costs of computer software developed or obtained for internal use. The effective date of this pronouncement is for fiscal years beginning after December 15, 1998. The Company is in the process of reviewing its current policies for accounting for costs associated with internal software development projects and how they may be affected by SOP 98-1. The Company believes its current policies are materially consistent with the SOP; however, the ultimate impact on the Company's future results of operations has not yet been determined. 2. ACCRUED PURCHASE COSTS In conjunction with acquisitions accounted for as purchases, the Company accrues certain of the direct external costs associated with closing redundant facilities of acquired companies, and severance and relocation payments for the acquired companies' employees. All consolidation projects are planned to be completed within two years of the acquisition date. Remaining balances primarily represent international and Data Documents Incorporated ("DDI") consolidation plans. The following table sets forth activity in the Company's accrued purchase costs liability account for the six months ended August 1, 1998:
Disposition Facility Redundant of Assets Total Exit Costs Facilities Severance & Other ------------ ----------- ----------- ---------- -------- (In thousands) Balance, January 31, 1998 $ 9,378 $ 464 $3,128 $ 4,400 $1,386 Additions 1,840 217 494 1,095 34 Payments/Utilization (2,250) (179) (719) (1,035) (317) -------- ----- ------ ------- ------ Balance, August 1, 1998 $ 8,968 $ 502 $2,903 $ 4,460 $1,103 ======== ===== ====== ======= ======
3. MERGER AND OTHER NONRECURRING CHARGES The Company accrues, among other things, costs to complete pooling of interests transactions, costs of merging and closing redundant facilities, and costs associated with personnel reductions and centralizing certain administrative functions. -10- Corporate Express, Inc. Notes to Consolidated Financial Statements The following table sets forth activity in the Company's accrued merger and other non-recurring charges liability account for the six months ended August 1, 1998:
Balance Cash Non- Balance 1/31/98 Payments Cash Usage 8/1/98 -------- -------- ---------- ------- (In thousands) Merger transaction costs (1) $ 611 $ (322) $ 289 Employee severance and termination costs (2) 9,696 (3,431) 6,265 Facility closure and consolidation costs (3) 5,205 (1,436) 3,769 -------- ------- ------- Accrued merger and related costs, balance 15,512 (5,189) 10,323 Other asset write-downs and costs (4) 2,759 --- $(265) 2,494 -------- ------- ----- ------- Total $ 18,271 $(5,189) $(265) $12,817 ======== ======= ----- =======
There were no reversals of accrued merger and other non-recurring charges during the six months ended August 1, 1998. (1) Merger transaction costs are the direct costs from the pooling of interests transactions and those direct costs incurred by DDI, and include legal, accounting, investment banking, printing, contract buy-outs and other related costs. (2) Employee severance and termination costs are related to the elimination of duplicate management positions, facility closures and consolidations, and centralization of certain shared services. Of the 1,716 employees planned to be terminated, 830 have been terminated as of August 1, 1998. The Company expects to complete the facility closures and related terminations for the fiscal 1995 charge, which balance totals $1,396,000, and the fiscal 1996 charge, which balance totals $649,000, by the end of fiscal 1998. The centralization of certain shared services began in the second quarter of fiscal 1997 and will continue through fiscal 1998. The Company expects to complete the facility closures and related terminations for the fiscal year 1997 charge, which balance totals $4,220,000, by the end of fiscal 1998. (3) Facility closure and consolidation costs are the estimated costs to close redundant facilities, lease costs and other costs associated with closed facilities. Of the 215 facilities planned to be closed or consolidated, 152 have been closed or consolidated as of August 1, 1998. The remaining facilities included in the fiscal 1995 and 1996 charges, and the facilities identified in the fiscal 1997 charge are expected to be closed by the end of fiscal 1998. (4) Other asset write-downs and costs are recorded as contra assets, and include the expected loss on sale of assets and leasehold improvements and equipment being abandoned or written off as a result of the exit plans. The remaining balance primarily represents assets that will be disposed of in conjunction with facility closures, which are expected to be completed by the end of fiscal 1998. 4. PRO FORMA ACQUISITION RESULTS Effective November 26, 1997 the Company issued approximately 10,740,000 shares of common stock in exchange for all of the outstanding stock of DDI, a provider of forms management services and systems, custom business forms and pressure-sensitive labels. The operating results of DDI 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 DDI acquisition occurred at the beginning of the three-month and six-month periods ended August 2, 1997 and is further adjusted to reflect goodwill amortization, revaluation of debt and the issuance of shares. These results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the transaction occurred at the beginning of the period, or of results which may occur in the future. -11- Corporate Express, Inc. Notes to Consolidated Financial Statements Three Months Ended Six Months Ended August 2, 1997 August 2, 1997 -------------------- ------------------ (In thousands, except per share amounts) (Unaudited) Net sales $989,152 $1,974,455 Net income 14,494 28,884 Net income per share - Basic 0.10 0.21 Net income per share Diluted 0.10 0.20 5. REPURCHASE OF COMMON STOCK On April 10, 1998 the Company closed the Dutch Auction tender offer and purchased 35,000,000 shares tendered at a price of $10.75 per share. The 35,000,000 treasury shares resulting from this transaction are reflected on the balance sheet at cost of $376,250,000 plus applicable fees and expenses of approximately $3,000,000. The Company's Board of Directors recently authorized the repurchase of shares of common stock from time to time in open market transactions, block purchases, privately negotiated transactions and otherwise, at prevailing prices. Financing for such purchases is available through the Senior Secured Credit Facility (see Note 6), as well as from cash flow from operations. Accordingly, as of August 31, 1998, the Company purchased approximately 2,473,000 shares of its issued and outstanding common stock, par value $.0002 per share, of which 430,000 shares were purchased in the second fiscal quarter of 1998, and the balance was purchased in August 1998. These treasury shares are reflected on the balance sheet at cost. The Company intends to periodically purchase additional shares in open market transactions. 6. DEBT On April 22, 1998, the Company executed a new $1 billion Senior Secured Credit Facility ("Senior Secured Credit Facility") consisting of a $250,000,000, seven-year term loan and a $750,000,000 five-year revolving credit facility and terminated the existing $500,000,000 Credit Facility ("Senior Credit Facility"). The Company has utilized borrowings under the new credit facility to fund the purchase of 35,000,000 shares of its common stock pursuant to its Dutch Auction tender offer, to repay and terminate the previously existing Senior Credit Facility and for general corporate and working capital requirements. The Senior Secured Credit Facility is guaranteed by substantially all domestic subsidiaries of the Company and is collateralized by all tangible and -12- Corporate Express, Inc. Notes to Consolidated Financial Statements intangible property of the guarantors, including inventory and receivables. At the borrower's option interest rates are at a base rate or a Eurodollar rate plus an applicable margin determined by a leverage ratio as defined in the loan agreements. The term loan's interest rate ranges from 0.25% to 0.75% above the revolving loan. The Company is subject to usual convenants customary for this type of facility including restrictions on dividends, additional borrowings and certain financial covenants. Approximately $1,810,000 of deferred financing costs related to the terminated Senior Credit Facility were expensed in the first quarter of fiscal 1998 and are reflected as an extraordinary item of $1,104,000, net of tax of $706,000. The Company settled an interest rate hedging contract based on $300,000,000 of U.S. Treasury notes related to the completed offering of the 9 5/8% Notes. The cost of the settlement of the contract was $7,271,000 and will be amortized over the ten-year term of the 9 5/8% Notes, bringing the effective interest rate of the debt instrument to 9.83%. On May 29, 1998 the Company issued at par $350,000,000 principal amount of unsecured 9 5/8% Senior Subordinated Notes due 2008 (the "9 5/8% Notes"). The 9 5/8% Notes are guaranteed by all material domestic subsidiaries of the Company and are subordinated in right of payment to all senior debt, which totals approximately $540,000,000 on August 1, 1998. On or after June 1, 2003 through maturity, the 9 5/8% Notes may be redeemed at the option of the Company, in whole or in part, at redemption rates ranging from 104.813% to 100%. At any time on or before June 1, 2001, the Company may redeem up to 35% of the 9 5/8% Notes with the net cash proceeds of one or more public equity offerings at a redemption price equal to 109.625% of the principal amount thereof, subject to certain restrictions. Semi-annual interest payments are due on June 1 and December 1 commencing on December 1, 1998. A portion of the proceeds from the sale of the 9 5/8% Notes was used to repay prior to maturity substantially all of the $90,000,000 9 1/8% Senior Subordinated Notes Series B due 2004 ("the 9 1/8% Notes") and to repay $245,000,000 on the Senior Secured Credit Facility. As a result of the early extinguishment of the 9 1/8% Notes, the Company recorded an extraordinary loss of $4,477,000, net of tax of $2,862,000, in the second quarter of fiscal 1998. 7. CONTINGENCIES In the normal course of business, the Company is subject to certain legal proceedings. 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. The Company has a dispute with a former shareholder of a company acquired by the Company in fiscal 1996. No legal proceedings have been commenced by the shareholder, and the Company cannot determine if any legal action will be initiated, or the results or materiality of any such action. 8. EARNINGS PER SHARE Basic and diluted earnings per share are calculated as follows:
(unaudited) ----------------------------------------------- Three Months Ended Six Months Ended ----------------------- ---------------------- August 1, August 2, August 1, August 2, 1998 1997 1998 1997 ----------------------- ---------------------- (In thousands, except per share data) Numerator for basic and diluted EPS: Income before extraordinary item $ 12,275 $ 12,264 $ 28,087 $ 24,674 Extraordinary item 4,477 --- 5,581 -- ----------- -------- ---------- -------- Net income $ 7,798 $ 12,264 $ 22,506 $ 24,674 =========== ======== ========== ======== Basic EPS Calculation: Denominator: Average common shares outstanding 107,869 (1) 128,389 121,142(1) 127,268 =========== ======== ========== ======== Earnings per common share: Income before extraordinary item $ 0.11 $ 0.10 $ 0.23 $ 0.19 Extraordinary item (0.04) -- (0.04) -- ----------- -------- ---------- -------- Net income $ 0.07 $ 0.10 $ 0.19 $ 0.19 =========== ======== ========== ======== Diluted EPS Calculation: Denominator (2): Basic shares 107,869 128,389 121,142 127,268 Dilutive stock options and warrants 4,994 6,311 4,014 5,747 ----------- -------- ---------- -------- Diluted shares 112,863 134,700 125,156 133,015 =========== ======== ========== ======== Earnings per common share: Income before extraordinary item $ 0.11 $ 0.09 $ 0.22 $ 0.19 Extraordinary item (0.04) --- (0.04) -- ----------- -------- ---------- --------
Corporate Express, Inc. Notes to Consolidated Financial Statements Net income $ 0.07 $ 0.09 $ 0.18 $ 0.19 =========== ======== ========== ========
(1) Reflects the shares repurchased on the April 10, 1998 and June 16, 1998 purchase dates. (2) The number of antidilutive stock options omitted from the denominator was approximately 5,278,000 and 6,714,000 for the three-month periods ended August 1, 1998 and August 2, 1997, respectively, and approximately 5,964,000 and 7,221,000 for the corresponding six-month periods. Also excluded from the calculation are the Convertible Notes with an exercise price of $33.33 per share which is greater than the average market price of the common shares. -13- CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. SUPPLEMENTAL GUARANTOR INFORMATION On May 29, 1998, CEX Holdings, Inc. ("CEX Holdings" or the "Issuer"), a wholly owned subsidiary of the Registrant, completed a private placement of $350 million principal amount of 9.625% Senior Subordinated Notes due 2008 (the "Notes"). The Notes are fully and unconditionally guaranteed on a joint and several basis by the Registrant (the "Parent Guarantor") and certain of the Registrant's subsidiaries. Substantially all of the Issuer's income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet the Issuer's debt service obligations are provided in large part by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as the financial condition and operating requirements of the Issuer's subsidiaries, could limit the Issuer's ability to obtain cash from its subsidiaries for the purpose of meeting its debt service obligations, including the payment of principal and interest on the Notes. The following information sets forth the condensed consolidating balance sheet of the Registrant as of August 1, 1998 and condensed consolidating statements of operations and cash flows for the three and six months ended August 1, 1998 and August 2, 1997. Investments in subsidiaries are accounted for on the equity method; accordingly entries necessary to consolidate the Parent Guarantor, CEX Holdings, Inc., and all of its subsidiaries are reflected in the eliminations column. Separate complete financial statements of the Issuer (CEX Holdings) and the Subsidiary Guarantors would not provide additional material information that would be useful in assessing the financial composition of the Guarantors. -14- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING BALANCE SHEET August 1, 1998
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Eliminations Consolidated --------- ---------- ------------ ------------ -------------- ------------- ASSETS Current assets: Cash and cash equivalents $ - $ 2,196 $ 22,914 $ 5,217 - $ 30,327 Trade accounts receivable, net - - 484,837 168,353 - 653,190 Notes and other receivables - - 76,196 15,090 - 91,286 Inventories - - 209,923 59,612 - 269,535 Deferred income taxes - - 28,689 6,233 - 34,922 Other current assets 3,431 - 35,378 7,798 - 46,607 -------- ---------- ------------ ------------ -------------- ------------- Total current assets 3,431 2,196 857,937 262,303 - 1,125,867 Property and Equipment: Land - - 16,082 1,342 - 17,424 Buildings and leasehold improvements - - 120,592 13,280 - 133,872 Property and equipment - - 331,209 39,547 - 370,756 -------- ---------- ------------ ------------ -------------- ------------- - - 467,883 54,169 - 522,052 Less accumulated depreciation - - (134,849) (15,417) - (150,266) -------- ---------- ------------ ------------ -------------- ------------- Net property and equipment - - 333,034 38,752 - 371,786 Goodwill, net - - 663,155 193,525 - 856,680 Net investment in and advances to subsidiaries 894,260 1,635,996 130,627 (130,627) (2,530,256) - Other assets, net 3,648 60,454 24,381 12,126 - 100,609 -------- ---------- ------------ ------------ -------------- ------------- Total assets $901,339 $1,698,646 $ 2,009,134 $ 376,079 $ (2,530,256) $ 2,454,942 ======== ========== ============ ============ ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable - trade - - 257,452 103,293 - 360,745 Accounts payable - acquisition - - 133 852 - 985 Accrued payroll and benefits - - 50,031 8,473 - 58,504 Accrued purchase costs - - 3,055 5,913 - 8,968 Accrued merger and related costs - - 9,849 474 - 10,323 Other accrued liabilities 1,283 6,415 55,507 24,965 - 88,170 Current portion of long-term debt and capital leases - 2,500 10,288 51,645 - 64,433 -------- ---------- ------------ ------------ -------------- ------------- Total current liabilities 1,283 8,915 386,315 195,615 - 592,128 Capital lease obligations - - 4,822 2,734 - 7,556 Long-term debt 325,000 794,786 32,277 31,226 - 1,183,289 Deferred tax liability - 685 60,138 352 - 61,175 Minority interest - - 116 19,031 - 19,147 Other non-current liabilities - - 7,915 8,676 - 16,591 -------- ---------- ------------ ------------ -------------- ------------- Total liabilities 326,283 804,386 491,583 257,634 - 1,879,886 Total shareholders' equity 575,056 894,260 1,517,551 118,445 (2,530,256) 575,056 -------- ---------- ------------ ------------ -------------- ------------- Total liabilities and shareholders' equity $901,339 $1,698,646 $ 2,009,134 $ 376,079 $ (2,530,256) $ 2,454,942 ======== ========== ============ ============ ============== =============
-15- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Three Months Ended August 1, 1998
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Eliminations Consolidated --------- -------- ---------- ---------- ------------ ------------ Net sales $ - $ - $ 896,438 $ 221,724 $ - $ 1,118,162 Cost of sales - - 683,837 174,846 - 858,683 Equity in subsidiary earnings 10,084 22,472 - - (32,556) - --------- -------- ---------- ---------- ------------ ------------ Gross profit 10,084 22,472 212,601 46,878 (32,556) 259,479 Warehouse operating and selling expenses - - 144,136 36,126 - 180,262 Corporate general and administrative expenses - - 28,427 5,344 - 33,771 --------- -------- ---------- ---------- ------------ ------------ Operating profit 10,084 22,472 40,038 5,408 (32,556) 45,446 Interest expense and other, net 4,114 14,201 387 3,085 - 21,787 --------- -------- ---------- ---------- ------------ ------------ Income before income taxes 5,970 8,271 39,651 2,323 (32,556) 23,659 Income tax expense (benefit) (1,828) (6,290) 17,596 1,145 - 10,623 --------- -------- ---------- ---------- ------------ ------------ Income before minority interest 7,798 14,561 22,055 1,178 (32,556) 13,036 Minority interest expense - - - 761 - 761 --------- -------- ---------- ---------- ------------ ------------ Income before extraordinary items 7,798 14,561 22,055 417 (32,556) 12,275 Extraordinary item: Loss on early extinguishment of debt - 4,477 - - - 4,477 --------- -------- ---------- ---------- ------------ ------------ Net income $ 7,798 $ 10,084 $ 22,055 $ 417 $(32,556) $ 7,798 ========= ======== ========== ========== ============ ============
-16- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Three Months Ended August 2, 1997
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Eliminations Consolidated --------- -------- ---------- ---------- ------------ ------------ Net sales $ - $ - 751,841 173,243 - 925,084 Cost of sales - - 574,847 133,713 - 708,560 Equity in subsidiary earnings 14,851 16,374 - - (31,225) - --------- -------- ---------- ---------- ------------ ------------ Gross profit 14,851 16,374 176,994 39,530 (31,225) 216,524 Warehouse operating and selling expenses - - 127,511 32,915 - 160,426 Corporate general and administrative expenses - - 22,043 4,575 - 26,618 --------- -------- ---------- ---------- ------------ ------------ Operating profit 14,851 16,374 27,440 2,040 (31,225) 29,480 Interest expense and other, net 4,285 2,525 664 2,056 - 9,530 --------- -------- ---------- ---------- ------------ ------------ Income before income taxes 10,566 13,849 26,776 (16) (31,225) 19,950 Income tax expense (benefit) (1,698) (1,002) 10,626 372 - 8,298 --------- -------- ---------- ---------- ------------ ------------ Income before minority interest 12,264 14,851 16,150 (388) (31,225) 11,652 Minority interest expense (income) - - - (612) - (612) --------- -------- ---------- ---------- ------------ ------------ Net income $ 12,264 $14,851 $ 16,150 $ 224 $ (31,225) $ 12,264 ========= ======== ========== ========== ============ ============
-17- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Six Months Ended August 1, 1998
Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Eliminations Consolidated --------- -------- ----------- ---------- ------------ ------------ Net sales $ - $ - $ 1,782,571 $ 443,651 $ - $ 2,226,222 Cost of sales - - 1,358,869 350,104 1,708,973 Equity in subsidiary earnings 27,109 43,493 - - (70,602) - --------- -------- ----------- --------- ------------ ------------ Gross profit 27,109 43,493 423,702 93,547 (70,602) 517,249 Warehouse operating and selling expenses - - 291,317 71,770 - 363,087 Corporate general and administrative expenses - - 56,201 10,672 - 66,873 --------- -------- ----------- --------- ------------ ------------ Operating profit 27,109 43,493 76,184 11,105 (70,602) 87,289 Interest expense and other, net 8,248 19,361 1,217 5,752 - 34,578 --------- -------- ----------- --------- ------------ ------------ Income before income taxes 18,861 24,132 74,967 5,353 (70,602) 52,711 Income tax expense (benefit) (3,645) (8,558) 33,116 2,754 - 23,667 --------- -------- ----------- --------- ------------ ------------ Income before minority interest 22,506 32,690 41,851 2,599 (70,602) 29,044 Minority interest expense - - - 957 - 957 --------- -------- ----------- --------- ------------ ------------ Income before extraordinary items 22,506 32,690 41,851 1,642 (70,602) 28,087 Extraordinary item, net of tax: Loss on early extinguishment of debt - 5,581 - - - 5,581 --------- -------- ----------- --------- ------------ ------------ Net income $ 22,506 $ 27,109 $ 41,851 $ 1,642 $ (70,602) $ 22,506 ========= ======== =========== ========= ============ ============
-18- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS Six Months Ended August 2, 1997
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Eliminations Consolidated ----------- ---------- ------------ ------------ -------------- -------------- Net sales $ - $ - $ 1,498,605 $ 347,933 $ - $ 1,846,538 Cost of sales - - 1,144,683 267,527 - 1,412,210 Equity in subsidiary earnings 29,651 32,726 - - (62,377) - ----------- ---------- ------------ ------------ -------------- -------------- Gross profit 29,651 32,726 353,922 80,406 (62,377) 434,328 Warehouse operating and selling expenses - - 254,088 67,095 - 321,183 Corporate general and administrative expenses - - 46,029 9,683 - 55,712 ----------- ---------- ------------ ------------ -------------- -------------- Operating profit 29,651 32,726 53,805 3,628 (62,377) 57,433 Interest expense and other, net 8,188 5,059 367 4,869 - 18,483 ----------- ---------- ------------ ------------ -------------- -------------- Income before income taxes 21,463 27,667 53,438 (1,241) (62,377) 38,950 Income tax expense (benefit) (3,211) (1,984) 20,958 35 - 15,798 ----------- ---------- ------------ ------------ -------------- -------------- Income before minority interest 24,674 29,651 32,480 (1,276) (62,377) 23,152 Minority interest income - - - 1,522 - 1,522 ----------- ---------- ------------ ------------ -------------- -------------- Net income $ 24,674 $ 29,651 $ 32,480 $ 246 $ (62,377) $ 24,674 =========== ========== ============ ============ ============== ==============
-19- CORPORATE EXPRESS, INC. CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended August 1, 1998
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Consolidated --------- -------- ---------- ---------- ------------ Net cash provided by (used in) operating activities $ (11,385) $ (7,351) $ 25,011 $ 21,177 $ 27,452 --------- -------- ---------- ---------- ---------- Cash flows from investing activities: Proceeds from sale of assets - - 944 202 1,146 Capital expenditures - - (42,583) (4,295) (46,878) Payment for acquisitions, net of cash acquired - - (3,207) (22,457) (25,664) Investment in marketable securities - (270) - (270) Other, net - - (734) 128 (606) --------- -------- ---------- ---------- ----------- Net cash used in investing activities - (270) (45,580) (26,422) (72,272) --------- -------- ---------- ---------- ----------- Cash flows from financing activities: Issuance of common stock 2,412 - - 2,412 Repurchase of common stock (383,980) - - (383,980) Debt issuance costs - (32,171) (17) (32,188) Proceeds from long-term borrowings - 600,000 797 15,215 616,012 Repayments of long-term borrowings - (625) (10,714) (9,131) (20,470) Proceeds from short-term borrowings - - - 5,392 5,392 Repayments of short-term borrowings - - 809 (2,027) (1,218) Net proceeds from (payments on) line of credit - (57,331) 11,224 (15,390) (61,497) Cash paid to retire bonds - (93,747) - - (93,747) Net activity in investment in and advances - - - - to (from) subsidiaries 392,953 (406,682) 8,018 5,711 - Other - - (9) - (9) --------- -------- ---------- --------- ----------- Net cash provided by (used in) financing activities 11,385 9,444 10,108 (230) 30,707 --------- -------- ---------- --------- ----------- Effect of foreign currency exchange rates changes on cash - - (467) 545 78 --------- -------- ---------- --------- ----------- Increase (decrease) in cash and cash equivalents - 1,823 (10,928) (4,930) (14,035) Cash and cash equivalents, beginning of period - 372 33,843 10,147 44,362 --------- -------- ---------- --------- ------------ Cash and cash equivalents, end of period $ - $ 2,195 $ 22,915 $ 5,217 $ 30,327 ========= ========= ========== ========= ============
-20- CORPORATE EXPRESS, INC CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended August 2, 1997
Subsidiary Parent Issuer Subsidiary Non Guarantor of Notes Guarantors Guarantors Consolidated --------- -------- ---------- ---------- ------------ Net cash provided by (used in) operating activities $ (4,102) $ (2,765) $ 8,602 $ 21,467 $ 23,202 --------- -------- ---------- ---------- ------------ Cash flows from investing activities: Proceeds from sale of assets - - 1,627 210 1,837 Capital expenditures - - (43,202) (10,407) (53,609) Payment for acquisitions, net of cash acquired - - (4,398) (16,086) (20,484) Investment in marketable securities - - (2,965) (905) (3,870) Investment in foreign subsidiaries - - 2,561 (2,561) - Other, net - - 737 (780) (43) --------- -------- ---------- ---------- ------------ Net cash used in investing activities - - (45,640) (30,529) (76,169) Cash flows from financing activities: - - - - - Issuance of common stock 10,907 - - - 10,907 Purchase of treasury stock - - - - - Debt issuance costs (246) (32) 5 - (273) Proceeds from long-term borrowings - - 2,898 18,031 20,929 Repayments of long-term borrowings - - (7,983) (25,419) (33,402) Proceeds from short-term borrowings - - 272 3,739 4,011 Repayments of short-term borrowings - - (5,307) (1,442) (6,749) Net proceeds from (payments on) line of credit - 10,020 4,734 12,048 26,802 Other - - 133 30 163 Intercompany (6,559) (5,028) 11,587 - - --------- -------- ---------- ---------- ------------ Net cash provided by financing activities 4,102 4,960 6,339 6,987 22,388 Effect of foreign currency exchange rates changes on cash - - (303) (269) (572) --------- -------- ---------- ---------- ------------ Increase (decrease) in cash and cash equivalents - 2,195 (31,002) (2,344) (31,151) Cash and cash equivalents, beginning of period - - 52,617 6,376 58,993 --------- -------- ---------- ---------- ------------ Cash and cash equivalents, end of period $ - $ 2,195 $ 21,615 $ 4,032 $ 27,842 ========= ======== ========== ========== ============
-21- (B) DDI CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 There has been no change to the previously filed consolidated financial statements contained in DDI's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997. -22- PART I - FINANCIAL INFORMATION ITEM I. - FINANCIAL STATEMENTS DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, --------------------------- 1997 1996 --------- --------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,371 $ 11,151 Accounts receivable, net of allowance of $506,000 and $311,000 36,817 31,459 Inventories (Note B) 39,480 37,979 Other current assets 1,474 898 --------- --------- Total Current Assets 79,142 81,487 PROPERTY, PLANT AND EQUIPMENT 43,632 37,328 GOODWILL, net of accumulated amortization of $3,039,000 and $2,689,000 18,437 9,837 DEFERRED FINANCING COSTS AND OTHER ASSETS 5,441 5,325 --------- --------- $ 146,652 $ 133,977 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 20,165 $ 18,566 Accrued compensation 3,584 3,453 Accrued interest payable 2,071 4,072 Current maturities of long-term obligations 3,892 934 Current and deferred income taxes 243 1,017 --------- --------- Total Current Liabilities 29,955 28,042 POST-RETIREMENT BENEFITS 1,905 1,881 LONG-TERM OBLIGATIONS, net of current maturities 65,578 63,965 DEFERRED INCOME TAXES 3,040 2,413 COMMITMENTS AND CONTINGENCIES (Note C) COMMON STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- -- Common stock, $0.001 par value; 15,000,000 shares authorized; 9,979,833 and 9,564,831 shares issued; 9,710,226 and 9,295,224 shares outstanding, respectively 10 10 Additional paid-in capital 32,024 32,020 Retained earnings 14,328 5,881 Stockholder notes receivable (188) (235) Treasury stock, 269,607 shares acquired at no cost -- -- --------- --------- Total Common Stockholders' Equity 46,174 37,676 --------- --------- $ 146,652 $ 133,977 ========= =========
See Notes to Consolidated Financial Statements. -23- DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) NET SALES $ 65,687 $ 59,794 $ 192,081 $ 184,472 COST OF GOODS SOLD 48,677 43,638 142,015 135,880 ----------- ----------- ----------- ----------- Gross Profit 17,010 16,156 50,066 48,592 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,927 9,484 28,936 28,286 ----------- ----------- ----------- ----------- Operating Income 7,083 6,672 21,130 20,306 DEBT EXPENSE, including amortization of $203,000, $206,000, $602,000 and $621,000 2,326 2,416 6,933 7,376 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 4,757 4,256 14,197 12,930 INCOME TAX EXPENSE 1,932 1,726 5,750 5,246 ----------- ----------- ----------- ----------- INCOME BEFORE EXTRAORDINARY ITEM 2,825 2,530 8,447 7,684 EXTRAORDINARY ITEM, net of tax (Note D) -- -- -- (54) ----------- ----------- ----------- ----------- NET INCOME $ 2,825 $ 2,530 $ 8,447 $ 7,630 =========== =========== =========== =========== EARNINGS PER COMMON SHARE: Primary: Income before extraordinary item $ 0.28 $ 0.25 $ 0.85 $ 0.77 Extraordinary item -- -- -- -- ----------- ----------- ----------- ----------- Net Income $ 0.28 $ 0.25 $ 0.85 $ 0.77 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 10,050,942 9,955,759 9,987,460 9,940,141 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. -24- DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1997 1996 -------- -------- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,447 $ 7,630 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 3,080 3,123 Amortization of intangibles 1,236 1,091 Extraordinary item -- 37 Provision for deferred income taxes (482) (309) Gain on sale of property, plant and equipment (16) (65) Changes in operating assets and liabilities (net of effects from purchase of Moore Labels, Inc.): Accounts receivable (3,954) 2,710 Inventories (787) 994 Other current assets (177) (370) Accounts payable and accrued liabilities 1,272 1,297 Accrued interest (2,001) (1,884) Current taxes on income and other (337) 402 Other assets (283) 380 -------- -------- Net cash flows from operating activities 5,998 15,036 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,819) (3,222) Proceeds from the sale of property, plant and equipment 28 117 Investment in Moore Labels, Inc. - net of cash acquired (13,972) -- -------- -------- Net cash flows from investing activities (17,763) (3,105) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt 2,790 -- Payment of debt (724) (1,239) Change in liability for outstanding checks (132) (3,034) Payments for stock registration costs -- (142) Proceeds from exchange of stock options and warrants 4 -- Principal receipts on stockholder notes receivable 47 23 -------- -------- Net cash flows from financing activities 1,985 (4,392) -------- -------- NET CHANGE IN CASH (9,780) 7,539 CASH AND CASH EQUIVALENTS, Beginning of period 11,151 2,024 -------- -------- CASH AND CASH EQUIVALENTS, End of period $ 1,371 $ 9,563 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,719 $ 8,822 ======== ======== Income taxes $ 6,573 $ 4,986 ======== ========
See Notes to Consolidated Financial Statements. -25- DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) - -------------------------------------------------------------------------------- A. MANAGEMENT STATEMENTS The consolidated financial statements of DATA DOCUMENTS INCORPORATED (Data Documents) include the accounts of its wholly-owned subsidiaries Data Documents, Inc. (DDI), PBF Washington, Inc. (PBF), Cal Emblem Labels, Inc. (Cal Emblem) and Moore Labels, Inc. (Moore Labels). The summarized financial information of DDI (see Note E) include the accounts of its wholly-owned subsidiaries PBF, Cal Emblem and Moore Labels. All significant intercompany transactions and accounts have been eliminated during consolidation. The consolidated financial statements of the Company contained herein should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations and cash flows for the nine months ended September 30, 1997 are not necessarily indicative of the results for the year ending December 31, 1997. Certain reclassifications have been made to the 1996 financial statements to conform to those classifications used in 1997. B. INVENTORIES Inventories consisted of (in thousands):
SEPTEMBER 30, DECEMBER 31, ---------------------------------------- 1997 1996 (UNAUDITED) Finished goods $ 29,832 $ 28,739 Work in process 1,397 1,264 Raw materials 7,243 7,032 Supplies and spare parts 1,008 944 --------- -------- $ 39,480 $ 37,979 ========= ========
Substantially all inventories were valued using the LIFO method. If the FIFO method of inventory accounting had been used, inventories would have been lower than reported by $4,676,000 and $3,500,000 at September 30, 1997 and December 31, 1996, respectively. On a FIFO basis, operating income would have been lower by $890,000 and $710,000, respectively, for the three months ended September 30, 1997 and September 30, 1996, and $1,176,000 and $1,852,000 for the nine months ended September 30, 1997 and September 30, 1996. The FIFO cost of inventories approximates replacement cost. C. COMMITMENTS AND CONTINGENCIES The Company is subject to lawsuits and claims which arise out of the normal course of its business. In the opinion of management, the disposition of such claims will not have a material adverse effect on the Company's financial position or results of operations. -26- D. EXTRAORDINARY ITEM In June 1996, the Company incurred an extraordinary charge of $54,000, net of income tax benefit of $34,000, for the write-off of unamortized deferred financing costs, unamortized original issue discount, and certain premium on reacquisition associated with the repurchase of $500,000 of Senior Notes. E. SUMMARIZED FINANCIAL INFORMATION Following is the summarized financial information of DDI and its subsidiaries (in thousands):
SEPTEMBER 30, DECEMBER 31, ----------------------------------- 1997 1996 (UNAUDITED) Current assets $ 79,142 $ 81,487 Noncurrent assets $ 67,510 $ 52,490 Current liabilities $ 29,955 $ 28,042 Noncurrent liabilities $ 70,523 $ 68,259
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1997 1996 1997 1996 (UNAUDITED) (UNAUDITED) Net sales $ 65,687 $ 59,794 $ 192,081 $ 184,472 Gross profit $ 17,010 $ 16,156 $ 50,066 $ 48,592 Net income $ 2,825 $ 2,530 $ 8,447 $ 7,630
Following is the summarized financial information of PBF and Cal Emblem (wholly-owned subsidiaries of DDI), which are guarantors of the Senior Notes.
SEPTEMBER 30, DECEMBER 31, ---------------------------------- 1997 1996 (UNAUDITED) Current assets $ 6,977 $ 6,849 Noncurrent assets $ 9,312 $ 8,813 Current liabilities $ 7,523 $ 7,474 Noncurrent liabilities $ 629 $ 883
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- ------------------------------- 1997 1996 1997 1996 (UNAUDITED) (UNAUDITED) Net sales $ 8,069 $ 8,489 $ 24,814 $ 25,169 Gross profit $ 1,577 $ 1,866 $ 4,950 $ 5,114 Net income $ 229 $ 368 $ 832 $ 755
-27- F. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which established accounting and reporting standards for such transfers. The Company has adopted SFAS No. 125 effective January 1, 1997 as required. The impact on the Company's financial position and results of operations was not material. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share, which specifies the computation, presentation and disclosure requirements for earnings per share. SFAS No. 128 is applicable for fiscal years ending after December 15, 1997. The objective of the statement is to simplify the computation of earnings per share and replaces primary and fully diluted earnings per share, as disclosed under certain pronouncements, with basic and diluted earnings per share. Pro forma basic earnings per share for the three months and nine months ended September 30, 1997 and 1996 are $0.29, $0.26, $0.85 and $0.77, respectively. Pro forma diluted earnings per share for the three months and nine months ended September 30, 1997 and 1996 are $0.28, $0.25, $0.85 and $0.77, respectively. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, which established presentation of financial data based on the "management approach". SFAS No. 131 is applicable for fiscal years beginning after December 15, 1997. The Company is currently in the process of reviewing this new presentation requirement. G. ACQUISITION In July 1997, the Company acquired Moore Labels, Inc. (Moore Labels) of Wichita, Kansas, a privately held supplier of pressure-sensitive labels used in the pharmaceutical, food, plastics and miscellaneous manufacturing industries. The aggregate consideration for the transfer of the capital stock of Moore Labels was approximately $14.4 million paid in cash. The consideration paid was supplied by excess cash and the use of approximately $5.0 million of the Revolving Credit Facility. This acquisition was not material to the Company. H. MERGER AGREEMENT In September 1997, the Company entered a Merger Agreement with Corporate Express, Inc. (Corporate Express), a multi-national corporation headquartered in Broomfield, Colorado. Corporate Express is a publicly traded company traded on the Nasdaq National Market (Nasdaq) and is a provider of non-production goods and services to large corporations. The exchange ratio for the merger has been fixed so that each outstanding share of Data Documents' common stock will be converted into 1.1 shares of Corporate Express common stock. The merger has been approved by the respective Boards of Directors of the companies and is subject to Data Documents stockholders' approval. Data Documents would become a wholly owned subsidiary of Corporate Express upon completion of the merger. I. SUBSEQUENT EVENT A special meeting of stockholders of Data Documents will be held on November 25, 1997 at 10:00 a.m., at which time the stockholders will be asked to approve and accept the Merger Agreement discussed in Note H. -28- (C) DDI CONSOLIDATED FINANCIAL STATEMENTS FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1996. There has been no change to the previously filed consolidated financial statements contained in DDI's Annual Report on Form 10-K for the twelve months ended December 31, 1996. -29- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Data Documents Incorporated Omaha, Nebraska We have audited the accompanying consolidated balance sheets of Data Documents Incorporated and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Data Documents Incorporated and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP February 6, 1997 Omaha, Nebraska F-1 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and cash equivalents (Note G) $ 11,151 $ 2,024 Accounts receivable, net of allowances of $311,000 and $458,000 (Note H) 31,459 31,569 Inventories (Note D) 37,979 36,048 Other current assets 898 1,788 ------------ ------------ Total Current Assets 81,487 71,429 PROPERTY, PLANT AND EQUIPMENT, net (Notes E and H) 37,328 37,502 GOODWILL, net of accumulated amortization of $2,689,000 and $2,273,000 9,837 10,248 DEFERRED FINANCING COSTS AND OTHER ASSETS 5,325 6,546 ------------ ------------ $ 133,977 $ 125,725 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities (Note G) $ 18,566 $ 19,326 Accrued compensation 3,453 3,579 Accrued interest payable 4,072 3,877 Current maturities of long-term obligations (Note H) 934 1,169 Current and deferred income taxes (Note F) 1,017 462 ------------ ------------ Total Current Liabilities 28,042 28,413 POST-RETIREMENT BENEFITS (Note M) 1,881 1,805 LONG-TERM OBLIGATIONS (Note H) 63,965 65,212 DEFERRED INCOME TAXES (Note F) 2,413 2,871 CONTINGENCIES (Notes H, K and L) STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- -- Common stock, $0.001 par value; 15,000,000 shares authorized; 9,564,831 and 8,873,016 shares issued; 9,295,224 and 8,603,409 shares outstanding 10 9 Additional paid-in capital 32,020 32,162 Retained earnings (deficit) 5,881 (4,489) Stockholder notes receivable (235) (258) Treasury stock, acquired at no cost, 269,607 shares -- -- ------------ ------------ Total Stockholders' Equity 37,676 27,424 ------------ ------------ $ 133,977 $ 125,725 ============ ============
See notes to consolidated financial statements. F-2 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) - --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, -------------------------------------------- 1996 1995 1994 NET SALES $ 246,496 $ 242,238 $ 193,626 COST OF GOODS SOLD 181,058 186,011 148,797 ------------ ------------ ------------ Gross Profit 65,438 56,227 44,829 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 38,177 35,334 32,729 STOCK COMPENSATION CHARGE (Note N) -- 156 -- ------------ ------------ ------------ Operating Income 27,261 20,737 12,100 DEBT EXPENSE, Including amortization of $828,000, $1,312,000 and $1,072,000 9,751 13,335 8,735 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 17,510 7,402 3,365 INCOME TAX EXPENSE (Note F) 7,086 3,127 1,533 ------------ ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM 10,424 4,275 1,832 EXTRAORDINARY ITEM, net of tax (Note P) (54) (2,921) (2,795) ------------ ------------ ------------ NET INCOME (LOSS) 10,370 1,354 (963) LESS PREFERRED DIVIDENDS -- -- 620 ------------ ------------ ------------ NET INCOME (LOSS) AVAILABLE FOR COMMON STOCK $ 10,370 $ 1,354 $ (1,583) ============ ============ ============ EARNINGS (LOSS) PER COMMON SHARE: Primary: Income before extraordinary item $ 1.05 $ 0.61 $ 0.13 Extraordinary item $ (0.01) $ (0.40) $ (0.30) ------------ ------------ ------------ Net Income (Loss) $ 1.04 $ 0.21 $ (0.17) ============ ============ ============ Fully diluted: Income before extraordinary item $ 1.05 $ 0.61 $ 0.11 Extraordinary item (0.01) (0.40) (0.17) ------------ ------------ ------------ Net Income (Loss) $ 1.04 $ 0.21 $ (0.06) ============ ============ ============ WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 9,939,454 7,333,864 9,453,494 ============ ============ ============ Fully Diluted 9,943,754 7,333,864 16,911,580 ============ ============ ============
See notes to consolidated financial statements. F-3 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
ADDITIONAL RETAINED STOCKHOLDER COMMON PAID-IN EARNINGS NOTES STOCK CAPITAL (DEFICIT) RECEIVABLE TOTAL ----------- ----------- ----------- ----------- ----------- BALANCE, January 1, 1994 $ 5 $ 1,276 $ (4,260) $ -- $ (2,979) Acquisition of 710,190 shares of treasury stock in exchange at no cost -- -- -- -- -- Preferred dividends -- -- (620) -- (620) 407,947 shares issued from treasury stock in exchange for notes receivable -- 226 -- (226) -- Redemption of warrants (Note J) -- (581) -- -- (581) Net loss -- -- (963) -- (963) ----------- ----------- ----------- ----------- ----------- BALANCE, December 31, 1994 5 921 (5,843) (226) (5,143) 48,954 shares issued for cash (Note N) -- 142 -- -- 142 32,636 shares issued from treasury stock in exchange for note receivable (Note N) -- 95 -- (55) 40 Warrant reclassification (Note J) -- 3,087 -- -- 3,087 Payment on stockholders' notes -- -- -- 23 23 Issuance of 3,400,000 common shares (Note C) 4 27,917 -- -- 27,921 Net income -- -- 1,354 -- 1,354 ----------- ----------- ----------- ----------- ----------- BALANCE, December 31, 1995 9 32,162 (4,489) (258) 27,424 691,815 shares issued on 61,233 warrants exercised (Note J) 1 -- -- -- 1 Warrant registration costs -- (142) -- -- (142) Payment on stockholders' notes -- -- -- 23 23 Net income -- -- 10,370 -- 10,370 ----------- ----------- ----------- ----------- ----------- BALANCE, December 31, 1996 $ 10 $ 32,020 $ 5,881 $ (235) $ 37,676 =========== =========== =========== =========== ===========
See notes to consolidated financial statements. F-4 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 10,370 $ 1,354 $ (963) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation 4,062 7,552 6,992 Amortization of intangibles 1,490 1,804 1,504 Stock compensation charge -- 156 -- Extraordinary item 37 1,975 2,941 Provision for deferred income taxes (296) (1,375) (1,743) (Gain) loss on sale of property, plant and equipment (65) (4) 46 Changes in operating assets and liabilities: Accounts receivable 110 (2,181) (3,695) Inventories (1,931) (3,468) (1,545) Other current assets 168 144 (265) Accounts payable and accrued liabilities 2,579 (3,513) 3,291 Accrued interest 195 2,744 141 Current taxes on income and other 1,176 131 (445) Other assets 259 (438) 96 ----------- ----------- ----------- Net cash flows from operating activities 18,154 4,881 6,355 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,940) (3,955) (6,972) Proceeds from the sale of property, plant and equipment 117 58 193 Investment in Cal Emblem -- (2,403) -- ----------- ----------- ----------- Net cash flows from investing activities (3,823) (6,300) (6,779) ----------- ----------- -----------
See notes to consolidated financial statements. F-5 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt -- -- $ 85,000 Payment of debt $ (1,697) $ (30,227) (56,673) Principal payments of lease finance obligation -- -- (12,608) Change in liability for outstanding checks (3,389) 1,347 512 Dividends paid -- -- (620) Preferred stock redemptions -- -- (6,829) Debt issuance and related costs -- -- (4,651) Payment for stock registration costs - net (141) -- -- Proceeds from sale of common stock -- 27,947 -- Principal receipts on stockholder notes receivable 23 23 -- ----------- ----------- ----------- Net cash flows from financing activities (5,204) (910) 4,131 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH 9,127 (2,329) 3,707 CASH AND CASH EQUIVALENTS, Beginning of period 2,024 4,353 646 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, End of period $ 11,151 $ 2,024 $ 4,353 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 9,031 $ 9,639 $ 7,522 =========== =========== =========== Income taxes $ 6,084 $ 2,759 $ 1,941 =========== =========== =========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Termination agreement (Note H) $ 1,349 =========== Exchange of common stock purchase warrants with exchangeable warrants (Note J) $ 581 =========== Issuance of 32,636 and 407,947 shares of common stock for stockholder notes receivable $ 55 $ 226 =========== =========== Acquisition of treasury stock at no cost in 1994 -- =========== Issuance of promissory notes to the former stockholders of Cal Emblem Labels, Inc. (Note B) $ 2,245 ==========
See notes to consolidated financial statements. F-6 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (COLUMNAR DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) - -------------------------------------------------------------------------------- A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS - Data Documents Incorporated (the "Company") was formed for the purpose of acquiring Data Documents, Inc. The Company designs, manufactures, and markets business forms, pressure-sensitive label products and supplies, specialized direct mail products and software-based services. A substantial portion of the Company's forms sales are made in connection with its proprietary forms management system. The principal markets for the business forms are primarily located in the geographic markets of mid-America, the southwest and the northwest. The principal markets for the labels and direct mail business are nationwide. CONSOLIDATION - The consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated during consolidation. All operating activities, assets and liabilities are those of the Company's subsidiaries. CASH AND CASH EQUIVALENTS - All highly liquid investments, purchased with a maturity of three months or less are considered cash equivalents. INVENTORIES - Inventories are valued at the lower of cost, determined by the last-in, first-out (LIFO) method, or market. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful life of the asset, which are as follows: buildings, 30 years; leased facilities and leasehold improvements, life of the lease; machinery and equipment, 3 to 12 years; and furniture and fixtures, 4 to 10 years. GOODWILL - Goodwill represents the excess of costs over the value of net tangible assets acquired in the acquisition of Data Documents, Inc., PBF Washington, Inc., and Cal Emblem Labels, Inc. This cost is being amortized on a straight-line basis over 30 years. Recoverability of this asset is evaluated periodically based on management's estimate of future undiscounted operating income of the businesses acquired. DEFERRED FINANCING COSTS - Deferred financing costs represents the cost of securing debt financing. The cost is being amortized over the estimated periods of outstanding principal amounts of the related obligations. OTHER ASSETS - Subscriber installation costs for the Company's software-based Odyssey Integrated Services program are capitalized and amortized over the initial period of the subscriber agreement, generally 3 years. REVENUE RECOGNITION - Sales and related cost of goods sold are recognized upon shipment of products. F-7 INCOME TAXES - The Company and its wholly-owned subsidiaries file a consolidated income tax return. The Company uses an asset and liability approach for the financial reporting of income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109 - Accounting for Income Taxes. Deferred income taxes arise from temporary differences between financial and tax reporting. OTHER POSTRETIREMENT BENEFITS - The Company accounts for postretirement benefits in accordance with SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions. The Company has elected to recognize the transition obligation relating to prior service cost in its statement of operations over a 20-year period beginning in 1993. STOCK SPLIT - The Company's Board of Directors declared a 6.52715097-to-1 stock split in August 1995 and the financial statements presented herein reflect the split for all periods presented. EARNINGS PER SHARE - The earnings per share calculation is based upon net income less preferred dividends and the weighted average number of shares of common stock outstanding and warrants and options when dilutive. The calculation on a fully-diluted basis assumes conversion of the convertible preferred stock at the beginning of the period. NEW ACCOUNTING PRONOUNCEMENTS - In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which established accounting and reporting standards for such transfers. The Company will adopt SFAS No. 125 effective January 1, 1997 as required. The impact on the Company's financial position and results of operations is not expected to be material. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS - Certain reclassifications have been made to the prior year financial statements to conform to the 1996 presentation. B. ACQUISITION On August 25, 1995, the Company acquired all of the outstanding stock of Cal Emblem Labels, Inc. ("Cal Emblem") for $4.5 million, plus replacement of Cal Emblem's bank debt, which was funded through borrowings of approximately $5.9 million under the Company's existing revolving credit facility and the issuance of five-year term promissory notes in the aggregate principal amount of $2.2 million to the former owners. The acquisition was accounted for using the purchase method of accounting. Accordingly, the assets and liabilities and results of operations of Cal Emblem are included in the Company's consolidated financial statements subsequent to the acquisition date. The purchase price has been allocated to the underlying assets and liabilities of Cal Emblem based on their respective fair values at the date of acquisition. The excess cost over the fair market value of net assets acquired of $4,122,000 is being amortized over a 30-year period on a straight-line basis. F-8 The following unaudited pro forma financial information shows the results of operations of the Company as though the acquisition occurred as of January 1, 1994.
YEARS ENDED DECEMBER 31, ------------------------- 1995 1994 (UNAUDITED) Net sales $ 256,030 $ 216,244 Income from continuing operations 4,174 2,026 Net income (loss) available for common stock 1,253 (1,389) Earnings per common share before extraordinary item: Primary $ 0.60 $ 0.15 Fully diluted 0.60 0.12
C. INITIAL PUBLIC OFFERING In October 1995, the Company completed an initial public offering (the "Offering") of 3,400,000 shares of common stock of the Company at an offering price of $9.00 per share. The net proceeds of the offering were used to redeem approximately $24,000,000 in aggregate principal amount of Data Documents, Inc.'s 13 1/2% Senior Notes. D. INVENTORIES Inventories consisted of:
DECEMBER 31, -------------------------- 1996 1995 Finished goods $ 28,739 $ 26,888 Work in process 1,264 1,287 Raw materials 7,032 6,860 Supplies and spare parts 944 1,013 ----------- ----------- $ 37,979 $ 36,048 =========== ===========
Substantially all inventories were valued using the LIFO method. If the FIFO method of inventory accounting had been used, inventories at December 31, 1996 and 1995 would have been lower than reported by $3,500,000, and $712,000, respectively. On a FIFO basis, operating income would have been higher (lower) by $(2,788,000), $2,057,000, and $390,000, respectively, for fiscal years 1996, 1995, 1994. The FIFO cost of inventories approximates replacement cost. F-9 E. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of:
DECEMBER 31, ----------------------- 1996 1995 Land $ 5,336 $ 5,336 Buildings 18,835 18,517 Leasehold improvements 1,205 1,146 Machinery and equipment 57,790 57,531 Furniture and fixtures 1,608 1,572 ----------- ----------- 84,774 84,102 Less accumulated depreciation and amortization 47,446 46,600 ----------- ----------- $ 37,328 $ 37,502 =========== ===========
F. INCOME TAXES The provision for income taxes on income from continuing operations consists of:
YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 Current provision: Federal $ 6,330 $ 3,792 $ 2,265 State 1,052 710 399 Deferred (296) (1,375) (1,131) ----------- ----------- ----------- $ 7,086 $ 3,127 $ 1,533 =========== =========== ===========
The following represents a reconciliation between the actual income tax expense and income taxes computed by applying the statutory Federal income tax rate to income before income taxes from continuing operations:
YEARS ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 Statutory rate 35.0% 34.0% 34.0% State income tax effect 3.8 4.0 5.0 Amortization of excess of purchase price over net assets acquired 0.9 1.6 3.2 Other 0.8 1.5 3.3 Expense of change in estimate of deferred income tax liabilities - 1.1 - ---- ---- ---- 40.5% 42.2% 45.5% ==== ==== ====
F-10 Deferred income tax assets (liabilities) are comprised of the following at:
DECEMBER 31, ---------------------- 1996 1995 Deferred income tax assets: Acquired net operating loss of Cal Emblem $ 506 $ 653 Non-deductible accrued liabilities 747 498 Non-deductible bad debt reserve 121 179 Other -- 167 --------- --------- 1,374 1,497 --------- --------- Valuation allowance (506) (653) --------- --------- Deferred income tax liabilities: Basis of property and equipment (2,534) (2,647) Basis of inventory (1,108) (1,143) Accrual for pension costs (129) (387) Other (73) -- --------- --------- (3,844) (4,177) --------- --------- Net deferred income tax liability ($ 2,976) ($ 3,333) ========= =========
In connection with the Company's acquisition of Cal Emblem, the Company acquired a net operating loss carryforward. At December 31, 1996, the loss carryforward was $1,307,000 and expires through the year 2009. A valuation allowance has been established for the deferred tax asset related to the loss carryforward. If realized, the loss carryforward will result in a decrease in goodwill. G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES A cash management system is utilized under which deposits are made to cover only those checks presented to the bank for payment. Checks not yet presented to the bank for payment in the amounts of $3,946,000, and $7,336,000 at December 31, 1996 and 1995, respectively, are included in accounts payable and accrued liabilities. F-11 H. LONG-TERM OBLIGATIONS Long-term obligations consisted of:
DECEMBER 31, ---------- ---------- 1996 1995 Senior Secured Notes, 13 1/2%, due 2002, less unamortized discount of $1,128,000 and $1,343,000 $ 59,372 $ 59,657 Mortgage note, 10.5%, (due in monthly installments with balloon payment in 2002) 2,414 2,469 Promissory notes, 10%, to former Cal Emblem stockholders due in annual installments through August 2000 1,684 2,245 Obligation under termination agreement payable in monthly installments through December 1, 2002, less unamortized discount of $661,000 and $848,000 1,205 1,288 Note payable, 10.125%, Pierce County, Washington (due in varying amounts through 1997) 170 570 Other 54 152 ---------- ---------- 64,899 66,381 Less current maturities of debt 934 1,169 ---------- ---------- $ 63,965 $ 65,212 ========== ==========
In November 1994, the Company issued 85,000 units, each consisting of $1,000 aggregate principal amount of 13 1/2% senior secured notes of Data Documents, Inc. due 2002 (the "Senior Notes") and common stock purchase warrants to purchase common stock of Data Documents Incorporated. Interest is due semi-annually on January 15 and July 15. The Senior Notes are guaranteed by the Company and its subsidiaries. On or after July 15, 1999, the Senior Notes are redeemable, at the option of the Company, in whole or in part at the redemption prices of 104.2% in 1999 decreasing to 100% in 2001. Upon the change of control, the Company is required to offer to repurchase all outstanding Senior Notes at 101% of the principal amount plus accrued interest to the date of redemption. The restrictions on redemption do not limit the ability of the Company to purchase Senior Notes on the open market. In November 1995, the net proceeds of the Offering were used to redeem $24 million of the Company's Senior Notes at a redemption price of 111.4%. In June 1996, the Company repurchased from the open market $500,000 of the Senior Notes at a price of 110%. The Senior Notes are collateralized by a first priority security interest in substantially all assets other than accounts receivable. The Senior Notes contain certain restrictive covenants which limit, subject to certain exceptions; the incurrence of additional debt, the payment of dividends on and redemption of stock of the Company, asset sales, consolidations, mergers or transfers of all or substantially all of the Company's assets, certain transactions with affiliates including intercompany dividends, and liens, among other things. F-12 A surety agreement for the benefit of the holders of the Pierce County, Washington debt obligation was allowed to expire in 1995 and payment of $2,030,000 principal was made. The remaining principal of $170,000 will be paid under scheduled maturities without the benefit of a surety agreement. In November 1994, the Company terminated an agreement for management, advisory and consulting services. The termination agreement is payable in monthly installments of $21,667 (increasing each January 1 by 4%) to December 1, 2002. The obligation has been recorded at its present value using a 15% discount rate over the seven year term. The Company has a revolving credit facility with a maximum credit line of the lesser of $20,000,000 or 80% of eligible accounts receivables, which are pledged as collateral. No amounts under this credit facility were outstanding at December 31, 1996 or 1995. On February 5, 1997, the Company replaced the previous revolving credit facility with a new revolving facility which expires in July, 1999. Debt covenants under this revolving credit facility require maintenance of minimum amounts of net worth. Interest under the revolving facility is paid monthly at .75% above prime and .25% per annum on the unused line available. At December 31, 1996, a contingent liability to a financial institution exists for outstanding letters of credit in the amount of $358,000. FAIR VALUE - The fair value of the Company's long-term debt is based on quoted market prices or on the current rates offered to the Company for debt of similar maturities. At December 31, 1996, the carrying amount of the Company's debt was $64,899,000 and the estimated fair value was $73,590,000. At December 31, 1995, the carrying value was $66,381,000 and estimated fair value was $71,871,000. Aggregate maturities of long-term obligations in each of the next five years are as follows: 1997 $ 934 1998 786 1999 808 2000 296 2001 352
I. PREFERRED STOCK On September 7, 1995, the Company amended its articles of incorporation to authorize issuance of 5,000,000 shares of preferred stock having a par value of $0.01 per share. None of the shares of the authorized preferred stock have been issued. The Board of Directors, without further action by the holders of common stock, may issue shares of preferred stock and may fix or alter the voting rights, redemption provisions, dividend rights, dividend rates, liquidation preferences, conversion rights and the designation of and number of shares constituting any wholly-unissued series of preferred stock. F-13 Prior to November 23, 1994, the two classes of preferred stock of the Company were entitled to quarterly dividends at the rate of $10 per annum. Dividends were cumulative, if not declared. In November 1994, all of the outstanding preferred stock was repurchased at face value. J. WARRANTS In connection with the 1994 issuance of the Senior Notes, the Company issued warrants to purchase its common stock (the "Warrants"). Each Warrant, when exercised, entitles the holder thereof to receive the number of shares of common stock as set forth on the Warrant at $.002 per share. Prior to the completion of the Offering, the Warrants were exercisable at any time on or after November 28, 1995 and unless exercised, automatically expire on July 15, 2002. The Warrants entitle the holders to purchase in the aggregate 960,344 shares of common stock, or approximately 10% of the outstanding common stock on a fully-diluted basis. During 1996, 61,233 Warrants were exercised for 691,815 shares of common stock. Also in 1994, upon the issuance of the Senior Notes, the Company canceled all previously existing common stock purchase warrants outstanding at that date and replaced them with additional Warrants to purchase in the aggregate 320,111 shares of common stock or approximately 3% of the outstanding common stock on a fully-diluted basis and which are exchangeable under the same terms as described above. All these warrants remain outstanding at December 31, 1996. Under specified conditions the warrants were redeemable for cash or Senior Notes. In 1995, the warrants became solely exchangeable for shares of common stock, and the warrants were reclassified to additional paid in capital. K. CONTINGENCIES The Company is subject to lawsuits and claims which arise out of the normal course of its business. In the opinion of management, the disposition of such claims will not have a material adverse effect on the Company's financial position or results of operations. L. LEASES Sales offices, certain manufacturing facilities, certain transportation and other equipment are leased under long-term noncancellable leases. Substantially all of the leases are net leases which require payment of property taxes, insurance and maintenance costs in addition to rental payments. At December 31, 1996, the future minimum lease payments under noncancellable operating leases with rental terms of more than one year amount to: 1997 $ 2,223 1998 1,790 1999 877 2000 380 2001 218 Later Years 812 ------- Total minimum obligation $ 6,300 =======
F-14 Rent expenses relating to all operating leases were $2,692,000, $2,537,000, and $2,328,000 for the years ended December 31, 1996, 1995 and 1994, respectively. M. EMPLOYEE BENEFIT PLANS Pension Plans -- The Company and its subsidiaries have defined benefit retirement plans for eligible salaried and hourly employees. Benefits are based on years of credited service and average compensation for each year of service. For 1996, 1995 and 1994, the Company's funding policy is to contribute the minimum amount deductible for federal income tax purposes. Plan assets are invested in common trust funds administered by a corporate trustee. Net periodic pension cost of the defined benefit plans includes the following components:
YEARS ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 Service cost $ 690 $ 571 $ 632 Interest cost on projected benefit obligation 1,015 881 800 Return on plan assets (1,906) (1,911) 180 Net amortization and deferral 866 892 (1,206) ------- ------- ------- Net periodic pension cost $ 665 $ 433 $ 406 ======= ======= =======
The following table sets forth the plan's funded status and the amount recognized in the Company's balance sheet:
DECEMBER 31, -------------------------- 1996 1995 Actuarial present value of benefit obligations: Vested benefit obligation $ 12,592 $ 11,494 Nonvested benefit obligation 363 360 ----------- ----------- Accumulated benefit obligation $ 12,955 $ 11,854 =========== =========== Projected benefit obligation for services rendered to date $ 15,069 $ 13,690 Plan assets at fair value 14,170 11,734 ----------- ----------- Plan assets less than projected benefit obligation (899) (1,956) Unrecognized net loss 1,276 2,191 Unrecognized prior service cost (48) (74) ----------- ----------- Prepaid pension cost $ 329 $ 161 =========== ===========
The projected benefit obligation is determined using a weighted average discount rate of 7.5% for 1996 and 1995, and a 3.5% rate of increase in future compensation levels for 1996 and 1995. The Company and its subsidiaries are also participants in multi-employer pension plans covering union employees. Costs associated with these plans aggregate approximately $68,000, $66,000 and $62,000 for 1996, 1995 and 1994, respectively. F-15 SAVINGS PLAN - The Company has a Salary Deferral Savings Plan which permits employees to make salary reduction contributions from 1% to 18%. The Plan is a defined contribution pension plan which became effective July 1, 1988. The administrative expenses related to the Plan are paid by the Company. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company accounts for postretirement benefits in accordance with SFAS No. 106. The Company accrues the estimated cost of retiree benefit payments during the years the employee provides services. The Company has elected to recognize the initial obligation of approximately $1,637,000 over a period of twenty years. Certain medical and dental benefits are provided to qualifying employees. The following table sets forth the medical and dental plans' funded status: Accumulated postretirement benefits obligation:
DECEMBER 31, -------------------------- 1996 1995 Retirees $ 605 $ 741 Fully eligible plan participants 1,011 983 ----------- ----------- Accumulated postretirement benefit obligations in excess of plan assets (1,616) (1,724) Unrecognized transition obligation (included in other assets) 1,310 1,391 Unrecognized net gain (265) (81) ----------- ----------- Accrued postretirement benefit cost $ (571) $ (414) =========== ===========
Net postretirement benefit cost consisted of the following components:
YEARS ENDED DECEMBER 31, --------------------------------- 1996 1995 1994 Service cost of benefits earned $ 127 $ 87 $ 115 Interest cost on accumulated postretirement benefit obligation 129 131 116 Amortization of transition obligation 81 82 81 --------- --------- --------- Net postretirement benefit cost $ 337 $ 300 $ 312 ========= ========= =========
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation as of January 1, 1993 was 12% for 1993, decreasing gradually to a 6% annual growth rate after 12 years and remaining at a 6% annual rate thereafter. A one-percentage point increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation by approximately $218,000 as of December 31, 1996 and would increase net postretirement health care cost by $10,000 for the year ended December 31, 1996. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.5% for the years ended December 31, 1996 and 1995. F-16 N. STOCK COMPENSATION PLANS The Company accounts for its stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, which utilizes the intrinsic value method. Compensation cost related to stock-based compensation was $0 and $156,000 for the years ended December 31, 1996 and 1995, respectively. The Board of Directors of the Company adopted the 1995 Employee Stock Incentive Plan (the "Plan") pursuant to which the Board may award options to purchase, in aggregate, 500,000 shares of common stock. Options vest and become exercisable over a one to three year period after date of grant and generally expire no later than ten years from the date of grant. The exercise price per share is no less than the fair market value on the date each option is granted. In connection with the Company's acquisition of Cal Emblem in August, 1995, the Company granted options for 195,815 shares to a former stockholder of Cal Emblem at the initial public offering price of $9.00. During the second quarter of 1995, the Company recorded a noncash expense of $156,000 relating to the sale of common shares to a director and an employee. The amount represents the excess of the estimated fair value of the common shares over consideration received. Such shares have been considered outstanding for all periods presented in the computation of earnings per share. If compensation cost for the Company's stock-based compensation plan had been determined based on the fair value at the grant dates for awards under the plan consistent with the method of SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below:
1996 1995 1994 ---- ---- ---- Net Income (loss) As reported $ 10,370 $ 1,354 $ (963) Pro forma $ 10,190 $ 833 $ (963) Primary earnings (loss) per share As reported $ 1.04 $ 0.21 $ (0.17) Pro forma $ 1.02 $ 0.14 $ (0.17) Fully Diluted earnings (loss) per share As reported $ 1.04 $ 0.21 $ (0.06) Pro forma $ 1.02 $ 0.14 $ (0.06)
The fair market value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: dividend yield of 0.0 percent, expected volatility of 39.9 percent, risk-free interest rates of 6.3 percent and expected lives of 5 years for all the years presented. F-17 A summary of the status of the Company's stock option plans as of December 31, 1996 and 1995 and changes during the years ending on those dates is presented below:
1996 1995 --------------------------------- --------------------------------- Weighted-Average Weighted-Average Fixed Options Shares Exercise Price Shares Exercise Price ------------- ------ -------------- ------ -------------- Outstanding at beginning of year 324,615 $ 9.03 0 N/A Granted 187,650 $ 10.44 324,615 $ 9.03 Exercised 0 N/A 0 N/A Forfeited (5,000) $ 10.43 0 N/A ------- ------- Outstanding at end-of-year 507,265 $ 9.54 324,615 $ 9.03 ======= ======= Options exerciseable at year-end 258,082 195,815 ======= ======= Weighted-average fair value of options granted during the year $ 4.68 $ 4.05
The following table summarizes information about stock options outstanding at December 31, 1996:
Options Outstanding Options Exerciseable -------------------------------------------------------------- --------------------------------------- Range of Number Weighted-Average Number Exercise Outstanding at Remaining Weighted-Average Exerciseable at Weighted-Average Prices 12/31/96 Contractual Life Exercise Price 12/31/96 Exercise Price ------------------- -------- ---------------- -------------- -------- -------------- $ 9.00 - $ 9.99 332,615 6.8 years $ 9.06 258,082 $ 9.01 $ 10.00 - $ 10.99 100,000 9.8 years $ 10.00 0 N/A $ 11.00 - $ 11.99 74,650 9.7 years $ 11.07 0 N/A ------- ------- $ 9.00 - $ 11.99 507,265 7.8 years $ 9.54 258,082 $ 9.01 ======= =======
F-18 O. RELATED PARTY TRANSACTIONS In February 1988, the Company entered into an agreement for management, advisory and consulting services through 1998 with Raebarn Corporation whose principals are common stockholders and/or directors of the Company. The agreement provided in the event that the Company, at any time during the term of the agreement, engaged in certain transactions, Raebarn Corporation had the right to act as the Company's financial advisors. Payments to Raebarn totaled $250,000 in 1994. In November 1994, the Company terminated its agreement with Raebarn in exchange for monthly payments to Raebarn through December 2002 the present value of which has been accrued (See Note H). P. EXTRAORDINARY ITEMS In June 1996, the Company incurred an extraordinary charge of $54,000, net of income tax benefit of $34,000, for the write-off of unamortized deferred financing costs, unamortized original issue discount, and certain premium on reacquisition associated with the purchase and retirement of $500,000 of Senior Notes. In November 1995, the Company incurred an extraordinary charge of $2,921,000 net of income tax benefit of $1,790,000, for the write-off of unamortized deferred financing costs, unamortized original issue discount and prepayment fees associated with the prepayment of $24,000,000 of Senior Notes. In November 1994, the Company incurred an extraordinary charge of $2,795,000, net of income tax benefit of $1,787,000, for the write-off of unamortized deferred financing costs, unamortized original issue discount and certain termination fees and costs associated with the early termination of debt. Q. SUMMARIZED FINANCIAL INFORMATION Following is the summarized financial information of Data Documents, Inc. and subsidiaries:
DECEMBER 31, --------------------- 1996 1995 Current assets $81,487 $71,429 Noncurrent assets $52,490 $54,296 Current liabilities $28,042 $28,413 Noncurrent liabilities $68,259 $69,888
YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 Net sales $246,496 $242,238 $193,626 Gross profit $ 65,438 $ 56,227 $ 44,829 Net income (loss) $ 10,370 $ 1,354 $ (963)
Following is the summarized combined financial information of PBF Washington, Inc. and Cal Emblem Labels, Inc. (wholly-owned subsidiaries of Data Documents, Inc.), guarantors of the Senior Notes. The information presented for Cal Emblem Labels, Inc. is as of December 31, 1996 and 1995 and for the year ended December 31, 1996 and from August 25, 1995 (date of acquisition) through December 31, 1995: F-19
December 31, ---------------------------- 1996 1995 Current assets $ 6,849 $ 7,948 Noncurrent assets $ 8,813 $ 10,581 Current liabilities $ 7,474 $ 11,301 Noncurrent liabilities $ 883 $ 1,140
Years Ended December 31, ------------------------------------ 1996 1995 1994 Net sales $ 33,438 $ 23,455 $ 14,486 Gross profit $ 6,854 $ 4,204 $ 2,394 Net income $ 1,075 $ 608 $ 217
F-20 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIGNATURES 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 hereunto duly authorized. CORPORATE EXPRESS, INC. (Registrant) Date: October 19, 1998 /s/ Sam R. Leno ----------------------------------- By: Sam R. Leno Title: Chief Financial Officer and Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----