-----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, C4byw+yPyd8Tzpx/+e2MDQI7f/E+YpN3J67jYQ8iwSx0JZ8H0rahiwxQ8kaoITdT JwvnXTofvUhJ5qmaVdV7mA== 0001035704-98-000077.txt : 19980209 0001035704-98-000077.hdr.sgml : 19980209 ACCESSION NUMBER: 0001035704-98-000077 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19980206 SROS: NASD SUBJECT COMPANY: 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: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-44931 FILM NUMBER: 98524347 BUSINESS ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 BUSINESS PHONE: 3033732800 MAIL ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 FILED BY: 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: SC 13E4 BUSINESS ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 BUSINESS PHONE: 3033732800 MAIL ADDRESS: STREET 1: 325 INTERLOCKEN PKWY CITY: BROOMFIELD STATE: CO ZIP: 80021 SC 13E4 1 SCHEDULE 13E4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1998 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) CORPORATE EXPRESS, INC. (Name of Issuer) CORPORATE EXPRESS, INC. (Name of Person(s) Filing Statement) COMMON STOCK (Title of Class of Securities) 219888-10-4 (CUSIP Number of Class of Securities) RICHARD L. MILLETT, JR. VICE PRESIDENT AND GENERAL COUNSEL CORPORATE EXPRESS, INC. 1 ENVIRONMENTAL WAY BROOMFIELD, COLORADO 80021 (303) 664-2000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) Copies To: JUSTIN P. KLEIN, ESQ. GERALD J. GUARCINI, ESQ. BALLARD SPAHR ANDREWS & INGERSOLL, LLP 1735 MARKET STREET, 51ST FLOOR PHILADELPHIA, PENNSYLVANIA 19103 February 6, 1998 (Date Tender Offer First Published, Sent or Given to Security Holders) CALCULATION OF FILING FEE
======================================================================================================= TRANSACTION AMOUNT OF VALUATION* FILING FEE - ------------------------------------------------------------------------------------------------------- $402,500,000 $80,500 =======================================================================================================
* Calculated solely for the purpose of determining the filing fee, based upon the purchase of 35,000,000 shares of Common Stock at the maximum tender offer price per share of $11.50. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A
================================================================================ 2 ITEM 1. SECURITY AND ISSUER. (a) The issuer of the securities to which this Schedule 13E-4 relates is Corporate Express, Inc., a Colorado corporation (the "Company"), and the address of its principal executive office is 1 Environmental Way, Broomfield, Colorado 80021. (b) This Schedule 13E-4 relates to the offer by the Company to purchase up to 35,000,000 shares (or the maximum of any lesser number of shares in excess of 15,000,000 shares as are validly tendered and not withdrawn) of its Common Stock, par value $.0002 per share (such shares, together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, are hereinafter referred to as the "Shares"), at prices not greater than $11.50 nor less than $10.00 net per Share in cash upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal, which, as they may be amended from time to time, together constitute the "Offer," copies of which are attached as Exhibit (a)(1) and (a)(2), respectively, to this Schedule 13E-4. The Offer is conditioned upon, among other things, a minimum of 15,000,000 Shares being validly tendered and not withdrawn at prices not greater than $11.50 nor less than $10.00 per Share. Executive officers and directors of the Company may participate in the Offer on the same basis as the Company's other shareholders, although the Company has been advised that none of its directors or executive officers intend to tender any Shares pursuant to the Offer. As of January 30, 1998, the Company had issued and outstanding 142,676,852 Shares. The information set forth in "Introduction," "The Offer -- Section 1. Number of Shares; Proration" and "The Offer -- Section 10. Interests of Directors and Executive Officers; Transactions and Arrangements Concerning Shares" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Introduction" and the "The Offer -- Section 7. Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in "The Offer -- Section 8. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a)-(j) The information set forth in "Introduction," "The Offer -- Section 2. Purpose of the Offer; Certain Effects of the Offer," "The Offer -- Section 8. Source and Amount of Funds," "The Offer -- Section 10. Interests of Directors and Officers; Transactions and Arrangements Concerning Shares" and "The Offer -- Section 11. Effects of the Offer on the Market for Shares; Registration under the Exchange Act" of the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth in "The Offer -- Section 10. Interests of Directors and Officers; Transactions and Arrangements Concerning Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth in "Introduction," "The Offer -- Section 2. Purpose of the Offer; Certain Effects of the Offer," "The Offer -- Section 8. Source and Amount of Funds" and "The Offer -- Section 10. Interests of Directors and Officers; Transactions and Arrangements Concerning Shares" of the Offer to Purchase is incorporated herein by reference. 2 3 ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Introduction" and "The Offer -- Section 15. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a)-(b) The information set forth in "The Offer -- Section 9. Certain Information Concerning the Company" of the Offer to Purchase is incorporated herein by reference and the information set forth on (i) pages 19 through 49 of the Company's Annual Report on Form 10-K/A for the fiscal year ended March 1, 1997, filed as Exhibit (g)(1) hereto, and (ii) pages 2 through 11 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 29, 1997, filed as Exhibit (g)(2), in each case, is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. (a) Not applicable. (b) The information set forth in "The Offer -- Section 12. Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "The Offer -- Section 11. Effects of the Offer on the Market for Shares; Registration under the Exchange Act" of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) The information set forth in the Offer to Purchase and Letter of Transmittal, copies of which are attached hereto as Exhibit (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a) (1) Form of Offer to Purchase dated February 6, 1998. (2) Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Substitute Form W-9). (3) Form of Notice of Guaranteed Delivery. (4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) Form of Press Release issued by the Company dated February 5, 1998. (7) Form of Summary Advertisement dated February 6, 1998. (8) Form of Letter to Shareholders of the Company dated February 6, 1998, from Gary M. Jacobs, Executive Vice President and Secretary of the Company. (9) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) Not applicable. 3 4 (g) (1) Pages 19 through 49 of the Company's Annual Report on Form 10-K/A for the fiscal year ended March 1, 1997. (2) Pages 2 through 11 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 29, 1997. 4 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule 13E-4 is true, complete and correct. CORPORATE EXPRESS, INC. By: /s/ RICHARD L. MILLETT, JR. ---------------------------------- Name: Richard L. Millett, Jr. Title: Vice President and General Counsel Dated: February 6, 1998 6 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ------- ----------- (a) (1) -- Form of Offer to Purchase dated February 6, 1998. (2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Substitute Form W-9). (3) -- Form of Notice of Guaranteed Delivery. (4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) -- Form of Press Release issued by the Company dated February 5, 1998. (7) -- Form of Summary Advertisement dated February 6, 1998. (8) -- Form of Letter to Shareholders of the Company dated February 6, 1998, from Gary M. Jacobs, Executive Vice President and Secretary of the Company. (9) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g) (1) -- Pages 19 through 49 of the Company's Annual Report on Form 10-K/A for the fiscal year ended March 1, 1997. (2) -- Pages 2 through 11 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 29, 1997.
EX-99.A.1 2 OFFER TO PURCHASE 1 EXHIBIT (a)(1) [CORPORATE EXPRESS LOGO] CORPORATE EXPRESS, INC. OFFER TO PURCHASE FOR CASH UP TO 35,000,000 SHARES OF ITS COMMON STOCK, PAR VALUE $.0002 PER SHARE, AT A PURCHASE PRICE NOT GREATER THAN $11.50 NOR LESS THAN $10.00 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED. --------------------- Corporate Express, Inc., a Colorado corporation (the "Company"), hereby invites its shareholders to tender up to 35,000,000 shares of its Common Stock, par value $.0002 per share (such shares, together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, are hereinafter referred to as the "Shares"), to the Company at prices not greater than $11.50 nor less than $10.00 per Share in cash, as specified by tendering shareholders, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share), net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition referred to below, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. Certificates representing Shares tendered at prices in excess of the Purchase Price and not withdrawn and Shares not purchased because of proration will be returned at the Company's expense. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. See Section 14. THE OFFER IS CONDITIONED UPON A MINIMUM OF 15,000,000 SHARES BEING VALIDLY TENDERED AND NOT WITHDRAWN (WHICH CONDITION MAY BE WAIVED BY THE COMPANY IN ITS SOLE DISCRETION). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. The Shares are listed and traded on the Nasdaq National Market ("Nasdaq") under the symbol "CEXP". On February 5, 1998, the last full trading day on Nasdaq prior to the commencement of the Offer, the closing per Share sales price as reported by the Nasdaq Stock Market, Inc. was $9.28 per Share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 10. --------------------- The Dealer Managers for the Offer are: DONALDSON, LUFKIN & JENRETTE BT ALEX. BROWN SECURITIES CORPORATION INCORPORATED --------------------- The Date of this Offer to Purchase is February 6, 1998 2 IMPORTANT Any shareholder wishing to tender all or any part of his or her Shares should either (a) complete and sign a Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and either mail or deliver it with any required signature guarantee or an Agent's Message (as defined below) and any other required documents to ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), and either mail or deliver the stock certificates for such tendered Shares to the Depositary (with all such other documents) or tender such Shares pursuant to the procedure for book-entry delivery set forth in Section 3, or (b) request a broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Shareholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if they desire to tender their Shares. Any shareholder who desires to tender Shares and whose certificates for such Shares cannot be delivered to the Depositary or who cannot comply with the procedure for book-entry transfer or whose other required documents cannot be delivered to the Depositary, in any case, by the expiration of the Offer must tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 3. TO EFFECT A VALID TENDER OF SHARES, SHAREHOLDERS MUST COMPLETE THE LETTER OF TRANSMITTAL, INCLUDING THE BOX RELATING TO THE PRICE AT WHICH THEY ARE TENDERING SHARES. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent and will be furnished at the Company's expense. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers at their addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Shareholders may also contact their local broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. ii 3 SUMMARY This general summary is solely for the convenience of the Company's shareholders and is qualified in its entirety by reference to the full text and more specific details in this Offer to Purchase and the related Letter of Transmittal. Number of Shares to be Purchased; Minimum Condition................ 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered pursuant to the Offer and not withdrawn). The Offer is conditioned upon, among other things, a minimum of 15,000,000 Shares being validly tendered and not withdrawn at prices not greater than $11.50 nor less than $10.00 per Share. Purchase Price............. The Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share) net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer. Each shareholder desiring to tender Shares must specify in the Letter of Transmittal the minimum price (not greater than $11.50 nor less than $10.00 per Share) at which such shareholder is willing to have his or her Shares purchased by the Company. How to Tender Shares....... See Section 3. Call the Information Agent or consult your broker for assistance. Brokerage Commissions...... None. Stock Transfer Tax......... None, if payment is made to the registered holder. Expiration and Proration Dates...................... Monday, March 9, 1998, at 5:00 P.M., New York City time, unless the Offer is extended by the Company. Proration.................. In the event that proration of tendered Shares is required, proration for each shareholder tendering Shares, other than Odd Lot Holders, shall be based on the ratio of the number of Shares tendered by such shareholder at or below the Purchase Price (and not withdrawn prior to the Expiration Date) to the total number of Shares tendered by all shareholders, other than Odd Lot Holders, at or below the Purchase Price (and not withdrawn prior to the Expiration Date). Odd Lots................... There will be no proration of Shares tendered by any shareholder owning beneficially fewer than 100 Shares in the aggregate as of the close of business on February 5, 1998 and as of the Expiration Date, who tenders all such Shares at or below the Purchase Price prior to the Expiration Date and who checks the "Odd Lots" box in the Letter of Transmittal. See Section 1. Payment Date............... As soon as practicable after the expiration of the Offer. Position of the Company and its Directors.............. Neither the Company nor its Board of Directors makes any recommendation to any shareholder as to whether to tender or refrain from tendering Shares. The Company has been advised that none of its iii 4 directors or executive officers intend to tender any Shares pursuant to the Offer. Withdrawal Rights.......... Tendered Shares may be withdrawn at any time prior to the expiration of the Offer (5:00 P.M., New York City time, on Monday, March 9, 1998, or such later date to which the Offer is extended by the Company) and, unless previously purchased, may also be withdrawn at any time after 12:00 Midnight, New York City time, on Friday, April 3, 1998. See Section 4. For Further Developments Regarding the Offer...... Call the Information Agent or consult your broker. iv 5 THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY THE COMPANY. TABLE OF CONTENTS
PAGE SUMMARY........................................................... iii INTRODUCTION...................................................... 1 THE OFFER......................................................... 3 1. NUMBER OF SHARES; PRORATION................................. 3 2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.......... 5 3. PROCEDURES FOR TENDERING SHARES............................. 6 4. WITHDRAWAL RIGHTS........................................... 9 5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE............ 10 6. CERTAIN CONDITIONS OF THE OFFER............................. 11 7. PRICE RANGE OF SHARES; DIVIDENDS............................ 13 8. SOURCE AND AMOUNT OF FUNDS.................................. 13 9. CERTAIN INFORMATION CONCERNING THE COMPANY.................. 14 10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING SHARES.............................. 18 11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT......................... 19 12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS................. 19 13. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 19 14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.................. 21 15. FEES AND EXPENSES........................................... 22 16. MISCELLANEOUS............................................... 23
v 6 To the Holders of Common Stock of Corporate Express, Inc.: INTRODUCTION Corporate Express, Inc., a Colorado corporation (the "Company"), hereby invites its shareholders to tender up to 35,000,000 shares of its common stock, par value $.0002 per share (such shares, together with the associated Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, are hereinafter referred to as the "Shares"), to the Company at prices not greater than $11.50 nor less than $10.00 per Share, as specified by tendering shareholders, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share), net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition referred to below, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. Certificates representing Shares tendered at prices in excess of the Purchase Price and not withdrawn and Shares not purchased because of proration will be returned at the Company's expense. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. See Section 14. THIS OFFER IS CONDITIONED UPON A MINIMUM OF 15,000,000 SHARES BEING VALIDLY TENDERED AND NOT WITHDRAWN (WHICH CONDITION MAY BE WAIVED BY THE COMPANY IN ITS SOLE DISCRETION). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 10. The Company's Board of Directors believes that the Offer is in the best interests of the Company and its shareholders. While the Offer, the related financing and certain potential accounting reclassifications of the Company's recent business combinations from the pooling of interests to the purchase method of accounting will have a negative impact on the Company's earnings per share in the current fiscal year ending January 30, 1999, the Company expects the Offer and the related financing to be accretive to earnings in subsequent fiscal years, although there can be no assurance to that effect. The Offer also affords to those shareholders who desire liquidity an opportunity to sell all or a portion of their Shares without the usual transaction costs associated with open market sales. The Offer provides shareholders who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not greater than $11.50 nor less than $10.00 per Share) at which they are willing to sell their Shares and, if any such Shares are purchased pursuant to the Offer, to sell those Shares for cash to the Company. Shareholders who determine not to accept the Offer will increase their proportionate interest in the Company's equity, and thus in the Company's future earnings and assets, subject to the Company's right to issue additional Shares and other equity securities in the future. Upon the terms and subject to the conditions of the Offer, if at the expiration of the Offer more than 35,000,000 Shares (or such greater number of Shares as the Company may elect to purchase) are validly 1 7 tendered at prices at or below the Purchase Price and not withdrawn, the Company will purchase validly tendered and not withdrawn Shares first from all Odd Lot Holders (as defined in Section 1) who validly tendered all their Shares at or below the Purchase Price and who so certify in the appropriate place on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, and then, after the purchase of all of the foregoing Shares, all Shares tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchase of fractional Shares). See Section 1. All certificates representing Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and not withdrawn and Shares not purchased because of proration, will be returned at the Company's expense to the shareholders who tendered such Shares. The Purchase Price will be paid net to the tendering shareholder in cash for all Shares purchased. Tendering shareholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company. HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. The Company will pay all fees and expenses incurred in connection with the Offer by Donaldson, Lufkin & Jenrette Securities Corporation and BT Alex. Brown Incorporated, who will act as dealer managers for the Offer (collectively, the "Dealer Managers"), and ChaseMellon Shareholder Services, L.L.C., who will act as the depositary and the information agent for the Offer (the "Depositary" and the "Information Agent"). See Section 15. As of January 30, 1998, the Company had issued and outstanding 142,676,852 Shares and had reserved 24,380,174 Shares for issuance upon exercise of outstanding stock options and warrants. The 35,000,000 Shares that the Company is offering to purchase pursuant to the Offer represent approximately 25% of the outstanding Shares. The Shares are listed and traded on the Nasdaq National Market ("Nasdaq") under the symbol "CEXP". On February 5, 1998, the last full trading day on Nasdaq prior to the commencement of the Offer, the closing per Share sales price as reported by the Nasdaq Stock Market, Inc. was $9.28 per share. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7. 2 8 THE OFFER 1. NUMBER OF SHARES; PRORATION. Upon the terms and subject to the conditions of the Offer, the Company will purchase 35,000,000 Shares or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered (and not withdrawn in accordance with Section 4) prior to the Expiration Date (as defined below) at prices not greater than $11.50 nor less than $10.00 per Share. The Offer is conditioned upon a minimum of 15,000,000 Shares being validly tendered and not withdrawn (which condition may be waived by the Company in its sole discretion). The term "Expiration Date" means 5:00 P.M., New York City time, on Monday, March 9, 1998, unless and until the Company, in its sole discretion, shall have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. See Section 14 for a description of the Company's right to extend, delay, terminate or amend the Offer. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. In accordance with applicable regulations of the Securities and Exchange Commission (the "Commission"), the Company may purchase pursuant to the Offer an additional amount of Shares not to exceed 2% of the outstanding Shares without amending or extending the Offer. See Section 14. In the event of an over-subscription of the Offer as described below, Shares tendered at or below the Purchase Price prior to the Expiration Date will be eligible for proration, except for Odd Lots as explained below. The proration period also expires on the Expiration Date. THE OFFER IS CONDITIONED UPON A MINIMUM OF 15,000,000 SHARES BEING VALIDLY TENDERED AND NOT WITHDRAWN (WHICH CONDITION MAY BE WAIVED BY THE COMPANY IN ITS SOLE DISCRETION). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. In accordance with Instruction 5 of the Letter of Transmittal, shareholders desiring to tender Shares must specify the price or prices (not greater than $11.50 nor less than $10.00 per Share) at which they are willing to sell their Shares to the Company. As promptly as practicable following the Expiration Date, the Company will, in its sole discretion, determine the Purchase Price that allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price, even if such Shares were tendered below the Purchase Price, for all Shares validly tendered prior to the Expiration Date at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition referred to below, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. All Shares tendered and not purchased pursuant to the Offer, including Shares tendered at prices in excess of the Purchase Price and not withdrawn and Shares not purchased because of proration, will be returned to the tendering shareholders at the Company's expense as promptly as practicable following the Expiration Date. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. See Section 14. Priority of Purchases. Upon the terms and subject to the conditions of the Offer, if more than 35,000,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) have been validly tendered at prices at or below the Purchase Price and not withdrawn, the Company will purchase validly tendered and not withdrawn Shares on the basis set forth below: (a) first, all Shares tendered and not withdrawn prior to the Expiration Date by any Odd Lot Holder (as defined below) who: (1) tenders all Shares beneficially owned by such Odd Lot Holder at a price at or below the Purchase Price (tenders of fewer than all Shares owned by such shareholder will not qualify for this preference); and 3 9 (2) completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) second, after purchase of all of the foregoing Shares, all Shares tendered at prices at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchases of fractional Shares) as described below. Odd Lots. For purposes of the Offer, the term "Odd Lots" shall mean all Shares validly tendered prior to the Expiration Date at prices at or below the Purchase Price and not withdrawn by any person who owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares (and so certified in the appropriate place on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery) (an "Odd Lot Holder"). As set forth above, Odd Lots will be accepted for payment before proration, if any, of the purchase of other tendered Shares. In order to qualify for this preference, an Odd Lot Holder must tender all such Shares in accordance with the procedures described in Section 3. This preference is not available to partial tenders or to beneficial holders of an aggregate of 100 or more Shares, even if such holders have separate accounts or certificates representing fewer than 100 Shares. By accepting the Offer, an Odd Lot Holder would not only avoid the payment of brokerage commissions but also would avoid any applicable odd lot discounts in a sale of such holder's Shares. Any Odd Lot Holder wishing to tender all of such shareholder's Shares should complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery. The Company also reserves the right, but will not be obligated, to purchase all Shares duly tendered by any shareholder who tendered all Shares owned beneficially at or below the Purchase Price and who, as a result of proration, would then own, beneficially an aggregate of fewer than 100 Shares. If the Company exercises this right, it will increase the number of Shares that it is offering to purchase by the number of Shares purchased through the exercise of such right. Proration. In the event that proration of tendered Shares is required, the Company will determine the proration factor as soon as practicable following the Expiration Date. Proration for each shareholder tendering Shares, other than Odd Lot Holders, shall be based on the ratio of the number of Shares tendered by such shareholder at or below the Purchase Price (and not withdrawn) to the total number of Shares tendered by all shareholders, other than Odd Lot Holders, at or below the Purchase Price (and not withdrawn). Because of the difficulty in determining the number of Shares properly tendered (including Shares tendered by guaranteed delivery procedures, as described in Section 3) and not withdrawn, and because of the odd lot procedure, the Company does not expect that it will be able to announce the final proration factor or commence payment for any Shares purchased pursuant to the Offer until approximately five Nasdaq trading days after the Expiration Date. The preliminary results of any proration will be announced by press release as promptly as practicable after the Expiration Date. Shareholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. As described in Section 13, the number of Shares that the Company will purchase from a shareholder may affect the United States Federal income tax consequences to the shareholder of such purchase and therefore may be relevant to a shareholder's decision whether to tender Shares. The Letter of Transmittal affords each tendering shareholder the opportunity to designate the order of priority in which Shares tendered are to be purchased in the event of proration. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 4 10 2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER. The following discussion contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the matters discussed below as well as the factors described in the Company's filings with the Commission. The Offer provides shareholders who are considering a sale of all or a portion of their Shares with the opportunity to determine the price or prices (not greater than $11.50 nor less than $10.00 per Share) at which they are willing to sell their Shares and, subject to the terms and conditions of the Offer, to sell those Shares for cash without the usual transaction costs associated with market sales. In addition, shareholders owning fewer than 100 Shares whose Shares are purchased pursuant to the Offer not only will avoid the payment of brokerage commissions but also will avoid any applicable odd lot discounts payable on a sale of their Shares. The Offer also allows shareholders to sell a portion of their Shares while retaining a continuing equity interest in the Company. The Company's Board of Directors believes that the Offer is in the best interests of the Company and its shareholders. While the Offer, the related financing and certain potential accounting reclassifications of the Company's recent business combinations from the pooling of interests to the purchase method of accounting will have a negative impact on the Company's earnings per share in the current fiscal year ending January 30, 1999, the Company expects the Offer and the related financing to be accretive to earnings in subsequent fiscal years, although there can be no assurance to that effect. The Offer also affords to those shareholders who desire liquidity an opportunity to sell all or a portion of their Shares without the usual transaction costs associated with open market sales. The Offer provides shareholders who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not greater than $11.50 nor less than $10.00 per Share) at which they are willing to sell their Shares and, if any such Shares are purchased pursuant to the Offer, to sell those Shares for cash to the Company. Shareholders who determine not to accept the Offer will increase their proportionate interest in the Company's equity, and thus in the Company's future earnings and assets, subject to the Company's right to issue additional Shares and other equity securities in the future. Shares that the Company acquires pursuant to the Offer will become authorized but unissued Shares and will be available for issuance by the Company without further shareholder action (except as may be required by applicable law or the rules of any securities exchange on which the Shares are listed). Such Shares could be issued without shareholder approval for, among other things, acquisitions, the raising of additional capital for use in the Company's business, share dividends or in connection with stock option plans and other plans, or a combination thereof. The Company may in the future purchase additional Shares on the open market, in private transactions, through tender offers or otherwise. Any such purchases may be on the same terms as, or on terms that are more or less favorable to shareholders than, the terms of the Offer. However, Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), generally prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the expiration or termination of the Offer. Any possible future purchases by the Company will depend on several factors including, without limitation, the ability of the Company to make such purchases under its financing agreements in effect at the time, the market price of the shares, the results of the Offer, the Company's business and financial position and general economic and market conditions. On January 12, 1998, the Company announced that, after a review of the Company's product depth, technological capabilities, distribution infrastructure, and geographic coverage, its management and Board of Directors have determined that the Company has completed the foundation and reached the critical size required to transform itself into a true "Corporate Supplier." As a result, the Company intends to focus its acquisition activity on transactions of strategic importance with increased focus on internal growth and improving its return on equity. In conjunction with this more narrow focus, the Company intends to invest significantly in developing a strong brand identity to enhance its Corporate Supplier business. The Company 5 11 expects to have sufficient cash flow and access to capital to fund the Offer and its growth initiatives. See Section 8 and Section 9. On January 16, 1998, the Company announced that its Board of Directors had authorized the adoption of a shareholder rights plan designed to protect the Company's shareholders in the event of an attempt to acquire control of the Company on terms which do not deal fairly with all of the Company's shareholders. In accordance therewith, on January 29, 1998, the Company entered into a rights agreement with ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"). The terms of the Rights Agreement provide for a dividend distribution of one right for each share of common stock to holders of record at the close of business on January 30, 1998. The rights will become exercisable only in the event, with certain exceptions which include a permitted waiver by the Board of Directors, that any party accumulates 15% or more of the Company's common stock, or if a party announces an offer to acquire 15% or more of such stock. The rights will expire 10 years from the issuance date. Each right will entitle the holder to buy one one-hundredth of a share of a new series of preferred stock. In addition, upon the occurrence of certain events, holders of the rights will be entitled to purchase either the Company's common stock or stock in an "acquiring entity" at half of the market value. The Company is entitled to redeem the rights at $0.01 per right at any time until a certain time following the acquisition of a 15% position in its voting stock. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 10. 3. PROCEDURES FOR TENDERING SHARES. Proper Tender of Shares. For Shares to be validly tendered pursuant to the Offer, (a) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedures for book-entry transfer set forth below), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) including any required signature guarantees or an Agent's Message (as defined below) and any other documents required by the Letter of Transmittal, must be received prior to 5:00 P.M., New York City time, on the Expiration Date by the Depositary at its address set forth on the back cover of this Offer to Purchase or (b) the tendering shareholder must comply with the guaranteed delivery procedure set forth below. IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, SHAREHOLDERS DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON THE LETTER OF TRANSMITTAL THE PRICE (IN INCREMENTS OF $.125) AT WHICH THEIR SHARES ARE BEING TENDERED. Shareholders who desire to tender Shares at more than one price must complete a separate Letter of Transmittal for each price at which Shares are tendered, provided that the same Shares cannot be tendered (unless properly withdrawn previously in accordance with the terms of the Offer) at more than one price. IN ORDER TO VALIDLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL. In addition, Odd Lot Holders who tender all such Shares must complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, in order to qualify for the preferential treatment available to Odd Lot Holders as set forth in Section 1. Signature Guarantees and Method of Delivery. No signature guarantee is required if (i) the Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this Section 3, shall include any participant in The Depository Trust Company or the Philadelphia Depositary Trust Company (the "Book-Entry Transfer Facilities") whose name appears on a security position listing as the 6 12 owner of the Shares) tendered therewith and such holder(s) have not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal; or (ii) Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or a savings and loan association) having an office, branch or agency in the United States (each such entity being hereinafter referred to as an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. If a certificate for Shares is registered in the name of a person other than the person executing a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued, to a person other than the registered holder, then the certificate must be endorsed or accompanied by an appropriate stock power, in either case, signed exactly as the name of the registered holder appears on the certificate, or stock power guaranteed by an Eligible Institution. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility as described above), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares for purposes of the Offer at each of the Book-Entry Transfer Facilities within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in a Book-Entry Transfer Facility's system may make book-entry delivery of the Shares by causing such facility to transfer Shares into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedures for transfer. Although delivery of Shares may be effected through a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities, either (i) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees or an Agent's Message, and any other required documents must, in any case, be transmitted to and received by the Depositary at its address set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or (ii) the guaranteed delivery procedure described below must be followed. The confirmation of a book-entry transfer of Shares into the Depositary's account at either Book-Entry Transfer Facility as described above is referred to herein as "confirmation of a book-entry transfer." DELIVERY OF DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a confirmation of a book-entry transfer which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against the participant. Guaranteed Delivery. Shareholders whose Share certificates are not immediately available, who cannot deliver their Shares and all other required documents to the Depositary or who cannot complete the procedure for delivery by book-entry transfer prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedure set forth in this Section 3. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) must be received by the Depositary prior to the Expiration Date, and (iii) the certificates for all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's 7 13 account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, in each case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq trading days after the date the Depositary receives such Notice of Guaranteed Delivery. United States Federal Income Tax Backup Withholding. Under the United States federal income tax backup withholding rules, unless an exemption applies under the applicable law and regulations, 31% of the gross proceeds payable to a shareholder or other payee pursuant to the Offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides its taxpayer identification number (employer identification number or social security number) to the Depositary and certifies that such number is correct. Therefore, each tendering shareholder must complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding, unless such shareholder otherwise establishes to the satisfaction of the Depositary that it is not subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign shareholders) are not subject to these backup withholding requirements. To prevent possible erroneous backup withholding, an exempt holder must enter its correct taxpayer identification number in Part 1 of Substitute Form W-9, write "Exempt" in Part 2 of such form, and sign and date the form. See the Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 enclosed with Letter of Transmittal for additional instructions. In order for a foreign shareholder to qualify as an exempt recipient, a foreign shareholder must submit an Internal Revenue Service ("IRS") Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to that shareholder's exempt status. Such statements may be obtained from the Depositary. See Instruction 10 of the Letter of Transmittal. Shareholders are urged to consult their own tax advisors regarding the application of United States federal income tax withholding. TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL. For a discussion of certain United States federal income tax consequences to tendering shareholders, see Section 13. Withholding For Foreign Shareholders. Even if a foreign shareholder has provided the required certification to avoid backup withholding, the Depositary will withhold United States federal income taxes equal to 30% of the gross payments payable to a foreign shareholder or its agent unless (A) the Depositary determines that a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business within the United States or (B) the foreign shareholder establishes to the satisfaction of the Company and the Depositary that the sale of Shares by such foreign shareholder pursuant to the Offer will qualify as a "sale or exchange," rather than as a distribution taxable as a dividend, for United States federal income tax purposes (see Section 13 below). For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership, or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of the source of such income, or (iv) a trust the administration of which a court within the United States is able to exercise primary supervision and all substantial decisions of which one or more United States persons have the authority to control. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary before the payment a properly completed and executed IRS Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly completed and executed IRS Form 4224. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or exemption 8 14 from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate that such reliance is not warranted. A foreign shareholder may be eligible to obtain a refund of all or a portion of any tax withheld if such shareholder meets the "complete redemption", "substantially disproportionate" or "not essentially equivalent to a dividend" test described in Section 13 or is otherwise able to establish that no tax or a reduced amount of tax is due. Each foreign shareholder is urged to consult its tax advisor regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption, and the refund procedure. See Instruction 11 of the Letter of Transmittal. Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the number of Shares to be accepted, the price to be paid for Shares to be accepted and the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Company, in its sole discretion, and its determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of any Shares that it determines are not in appropriate form or the acceptance for payment of or payments for which may be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares or any particular shareholder. No tender of Shares will be deemed to have been properly made until all defects or irregularities have been cured by the tendering shareholder or waived by the Company. None of the Company, the Dealer Managers, the Depositary, the Information Agent or any other person shall be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notice. Tendering Shareholder's Representation and Warranty; Company's Acceptance Constitutes an Agreement. A tender of Shares pursuant to any of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the Offer, as well as the tendering shareholder's representation and warranty to the Company that (a) such shareholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated by the Commission under the Exchange Act and (b) the tender of such Shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person, directly or indirectly, to tender Shares for such person's own account unless, at the time of tender and at the end of the proration period or period during which Shares are accepted by lot (including any extensions thereof), the person so tendering (i) has a net long position equal to or greater than the amount of (x) Shares tendered or (y) other securities convertible into or exchangeable or exercisable for the Shares tendered and will acquire such Shares for tender by conversion, exchange or exercise and (ii) will deliver or cause to be delivered such Shares in accordance with the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Company upon the terms and conditions of the Offer. CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY OR THE DEALER MANAGERS. ANY SUCH DOCUMENTS DELIVERED TO THE COMPANY OR THE DEALER MANAGERS WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT BE DEEMED TO BE VALIDLY TENDERED. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company pursuant to the Offer, may also be withdrawn at any time after 12:00 Midnight, New York City time, on Friday, April 3, 1998. For a withdrawal to be effective, a notice of withdrawal must be in written, telegraphic or facsimile transmission form and must be received in a timely manner by the Depositary at its address set forth on the 9 15 back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the tendering shareholder, the name of the registered holder (if different from that of the person who tendered such Shares), the number of Shares tendered and the number of Shares to be withdrawn. If the certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates for Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry tender set forth in Section 3, the notice of withdrawal also must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding. None of the Company, the Dealer Managers, the Depositary, the Information Agent or any other person shall be obligated to give notice of any defects or irregularities in any notice of withdrawal nor shall any of them incur liability for failure to give any such notice. Withdrawals may not be rescinded and any Shares withdrawn will thereafter be deemed not tendered for purposes of the Offer unless such withdrawn Shares are validly retendered prior to the Expiration Date by again following one of the procedures described in Section 3. If the Company extends the Offer, is delayed in its purchase of Shares or is unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain tendered Shares on behalf of the Company, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in this Section 4. 5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the conditions of the Offer, as promptly as practicable following the Expiration Date, the Company (i) will determine the lowest single Purchase Price that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 as are validly tendered and not withdrawn prior to the Expiration Date), taking into account the number of Shares so tendered and the prices specified by tendering shareholders, and (ii) will accept for payment and pay for (and thereby purchase) Shares validly tendered at prices at or below the Purchase Price and not withdrawn prior to the Expiration Date. For purposes of the Offer, the Company will be deemed to have accepted for payment (and therefore purchased) Shares that are tendered at or below the Purchase Price and not withdrawn (subject to the proration provisions of the Offer) only when, as and if it gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. In accordance with applicable regulations of the Commission, the Company may purchase pursuant to the Offer an additional amount of Shares not to exceed 2% of the outstanding Shares without amending or extending the Offer. If (i) the Company increases or decreases the price to be paid for the Shares, the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought and (ii) the Offering is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in Section 14, the Offer will be extended until the expiration of such period of ten business days. Upon the terms and subject to the conditions of the Offer, the Company will purchase and pay a single per Share Purchase Price for all of the Shares accepted for payment pursuant to the Offer as soon as practicable after the Expiration Date. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration) but only after timely receipt by the Depositary of certificates for Shares (or of a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents. 10 16 The Company will pay for Shares purchased pursuant to the Offer by depositing the aggregate Purchase Price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Company and transmitting payment to the tendering shareholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date; however, the Company does not expect to be able to announce the final results of any proration and commence payment for Shares purchased until approximately five Nasdaq trading days after the Expiration Date. Certificates for all Shares tendered and not purchased, including all Shares tendered at prices in excess of the Purchase Price and Shares not purchased due to proration will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to the account maintained with the Book-Entry Transfer Facility by the participant therein who so delivered such Shares) to the tendering shareholder as promptly as practicable after the Expiration Date without expense to the tendering shareholders. Under no circumstances will interest on the Purchase Price be paid by the Company by reason of any delay in making payment. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 6. The Company will pay or cause to be paid all stock transfer taxes, if any, payable on the transfer to it of Shares purchased pursuant to the Offer. If, however, payment of the Purchase Price is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Shares are to be registered in the name of, any person other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing the Letter of Transmittal, the amount of all stock transfer taxes, if any (whether imposed on the registered holder(s) or such other person or otherwise) payable on account of the transfer to such person will be deducted from the Purchase Price unless satisfactory evidence of the payment of the stock transfer taxes, or exemption therefrom, is submitted. See Instruction 7 of the Letter of Transmittal. ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. SEE SECTION 13 REGARDING UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR FOREIGN SHAREHOLDERS. 6. CERTAIN CONDITIONS OF THE OFFER. The Offer is conditioned upon a minimum of 15,000,000 Shares being validly tendered and not withdrawn at prices not greater than $11.50 nor less than $10.00, which condition may be waived by the Company in its sole discretion. In addition, notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f) under the Exchange Act, if at any time on or after February 6, 1998 and prior to the time of payment for any such Shares (whether any Shares have theretofore been accepted for payment, purchased or paid for pursuant to the Offer) any of the following events shall have occurred (or shall have been determined by the Company to have occurred) that, in the Company's judgment (regardless of the circumstances giving rise thereto, including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly (i) challenges the making of the Offer, the acquisition of some or all of the Shares pursuant to the Offer or otherwise relates in any manner to the Offer, or (ii) in the Company's sole judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, or otherwise materially impair in any way the contemplated future conduct 11 17 of the business of the Company or any of its subsidiaries or materially impair the contemplated benefits of the Offer to the Company; (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or the Company or any of its subsidiaries, by any court or any authority, agency or tribunal that, in the Company's sole judgment, would or might directly or indirectly: (i) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation of the Offer; (ii) delay or restrict the ability of the Company, or render the Company unable, to accept for payment or pay for some or all of the Shares; (iii) materially impair the contemplated benefits of the Offer to the Company; or (iv) materially and adversely affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries; (c) there shall have occurred: (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States; (iv) any limitation (whether or not mandatory) by any governmental, regulatory or administrative agency or authority on, or any event that, in the Company's sole judgment, might affect, the extension of credit by banks or other lending institutions in the United States; (v) any significant decrease in the market price of the Shares or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in the sole judgment of the Company, have a material adverse effect on the business, condition (financial or otherwise), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or on the trading in the Shares or on the proposed financing for the Offer; (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (vii) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Industrial Companies by an amount in excess of 10% measured from the close of business on February 5, 1998; (d) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger or acquisition proposal for the Company, shall have been proposed, announced or made by another person or shall have been publicly disclosed, or the Company shall have learned that any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding Shares, or any new group shall have been formed that beneficially owns more than 5% of the outstanding Shares; or (e) any change or changes shall have occurred, be pending or threatened or be proposed, which have affected or could affect the business, scope, condition (financial or otherwise), assets, income, level of indebtedness, operations, prospects, stock ownership or capital structure of the Company or its subsidiaries which, in the Company's sole judgment, is or may be material to the Company or its subsidiaries. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances (including any action or inaction by the Company) giving rise to any such condition, and may be waived by the Company, in whole or in part, at any time and from time to time in its sole discretion. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. 12 18 7. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on Nasdaq. The following table sets forth, for the periods indicated, the high and low closing per Share sales prices as reported by the Nasdaq Stock Market, Inc.:
HIGH LOW ------ ------ Fiscal 1996: 1st Quarter............................................... $28.17 $19.25 2nd Quarter............................................... 30.54 21.83 3rd Quarter............................................... 26.08 18.67 4th Quarter............................................... 23.75 16.63 Fiscal 1997: 1st Quarter............................................... 18.38 8.38 2nd Quarter............................................... 17.88 12.63 3rd Quarter............................................... 22.06 14.06 4th Quarter (through January 30, 1998).................... 16.75 8.00
On January 15, 1998, the last full trading day on Nasdaq prior to the announcement of the Offer, the closing per Share sales price was $8.00. On February 5, 1998, the last full trading day on Nasdaq prior to the commencement of the Offer, the closing per Share sales price was $9.28. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. The Company has never paid a cash dividend on the Shares. The Company does not anticipate paying any cash dividends on the Shares in the foreseeable future because it intends to retain its earnings to finance the expansion of its business and for general corporate purposes. Any payment of future dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends and other relevant factors. The Company's current bank credit facility prohibits the distribution of dividends without the prior written consent of the lenders and the Indenture governing the Company's 9 1/8% Senior Subordinated Notes due 2004 prohibits the Company from paying a dividend which would cause a default under such Indenture or which would cause the Company to fail to comply with certain financial covenants. 8. SOURCE AND AMOUNT OF FUNDS. Assuming that the Company purchases 35,000,000 Shares pursuant to the Offer at a purchase price of $11.50 per Share, the Company expects the maximum aggregate cost of the Offer, including all fees and expenses applicable to the Offer but excluding any financing or refinancing costs, to be approximately $405 million. The Company has received a number of financing proposals from the investment community with respect to the Offer. In addition, the Company has received, but has not accepted, financing commitments with respect to certain of such proposals. The Company is evaluating each of the financing proposals and the associated impact they would have on the Company's capital structure. The Company expects that the funds necessary to fund the Offer will come from one or more of the following: (i) borrowings under the Company's existing bank credit facility, which will be required to be amended and increased in amount with the agreement of the lenders, (ii) proceeds from the sales of debt securities, or (iii) borrowings under a new bank credit facility with a new group of lenders. Any financing arrangements in connection with the Offer will be at rates and on terms commercially available at the time the funds are borrowed or the securities are issued, as applicable. Although the Company has not at this time committed to any specific financing arrangements, it is possible that, in the event the Offer is financed with borrowings under a bank credit facility, such borrowings may, depending on business and market conditions, be subsequently refinanced with proceeds from the sales of debt securities. 13 19 9. CERTAIN INFORMATION CONCERNING THE COMPANY. GENERAL The Company is a leading global provider of non-production goods and services to large corporations. Since 1991, the Company has grown internally and through acquisitions from a regional operation in Colorado to a global operation with locations throughout the United States and certain other countries. The Company believes it has developed a unique model of service based non-store retailing, defining itself as a "Corporate Supplier" which provides a broad array of non-production goods and services to its customers while reducing their overall procurement costs and providing a high level of customer service. The Company's current product and service offerings include office supplies, paper, computer and imaging supplies, computer desktop software, office furniture, document technologies, advertising specialties, cleaning and service supplies, printing, same-day local delivery service and distribution logistics management. The Company presents its merchandise in its catalogs and markets to existing and prospective customers through its direct sales force and supplies its products and services utilizing a fleet of more than 10,000 owned or leased vehicles, operating from over 500 locations including 80 distribution centers. The Company's target customers are large corporations with over 100 employees. The Company believes that these large corporations increasingly seek to reduce the cost of procuring non-production goods and services while decreasing the time and effort spent managing functions that are not considered core competencies. To that end, corporations seek to reduce the number of their suppliers in order to eliminate the internal costs associated with multiple invoices, deliveries, complex ordering procedures, uneven service levels and inconsistent product availability. Many large corporations operate from multiple locations and can benefit from selecting suppliers who can service them nationally or internationally. The Company believes that its broad range of non-production goods and services, as well as its broad geographical service and delivery capabilities, allow the Company to respond effectively to the needs of its customers. The Company also believes that its customers value the high level of service the Company provides, through its account relationship managers, same-day delivery, customized pricing, electronic interfaces, customized reporting and product catalogs. The Company seeks to continually reduce its merchandise and operating costs which permits it to offer its customers competitive prices. By purchasing most of its products directly from manufacturers in large volumes and limiting the number of manufacturers represented in its In-Stock Catalog and other specialty catalogs, the Company is able to obtain increasing volume discounts and advertising allowances from its vendors. The Company believes its computer systems represent a key strategic advantage which differentiates the Company from its competitors and permit it to achieve cost savings, provide superior customer service and centrally manage its operations. The Company expects to continue making substantial investments to upgrade and enhance the capabilities of its computer systems. The Company historically has grown and intends to continue to grow in the future through a combination of internal growth and acquisitions. On January 12, 1998, the Company announced that, after a review of the Company's product depth, technological capabilities, distribution infrastructure and geographic coverage, its management and Board of Directors have determined that the Company has completed the foundation and reached the critical size required to transform itself into a true "Corporate Supplier." As a result, the Company intends to focus its acquisition activity on transactions of strategic importance with increased focus on internal growth and improving its return on equity. In conjunction with this more narrow focus, the Company intends to invest significantly in developing a strong brand identity to enhance its Corporate Supplier business. The Company plans to increase sales to existing customers by cross-selling its expanded product and service offerings and developing existing customers into multi-regional, national or international accounts. The Company seeks to attract new customers, including national and international accounts, through the marketing efforts of its direct sales force. Further, the Company has expanded its delivery capabilities and geographic coverage in the United States, and the Company intends to increase development of sales efforts in new geographic areas. In addition, the Company may open additional satellite sales offices and distribution breakpoints to serve new accounts. The Company expects to have sufficient cash flow and access to capital to fund the Offer and its growth initiatives. 14 20 The Company was incorporated under the laws of Colorado in 1985. The Company operates its business through various subsidiaries. The Company's executive offices are located at 1 Environmental Way, Broomfield, Colorado 80021, and its telephone number is (303) 664-2000. CERTAIN FINANCIAL INFORMATION SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION Set forth below is certain summary historical consolidated financial information of the Company and its subsidiaries. The historical financial information has been derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K/A for the year ended March 1, 1997 (the "Annual Report"), restated for the acquisition of Data Documents Incorporated ("DDI"), which acquisition was accounted for as a pooling of interests, and from the unaudited consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the period ended November 29, 1997 (the "Quarterly Report"), each of which is hereby incorporated herein by reference, and other information and data contained in the Annual Report and the Quarterly Report. More comprehensive financial information is included in such reports and the financial information which follows is qualified in its entirety by reference to such reports and all of the financial statements and related notes contained therein, copies of which may be obtained as set forth below under the caption "-- Additional Information."
NINE MONTHS ENDED TWELVE MONTHS ENDED --------------------------- ----------------------- NOVEMBER 29, NOVEMBER 30, MARCH 1, MARCH 2, 1997 1996 1997 1996 ------------ ------------ ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA) (UNAUDITED) Statement of Operations Data: Net sales.................................. $3,048,125 $2,481,518 $3,444,675 $2,132,877 Before merger charges & extraordinary items: Net income.............................. $ 57,314 $ 50,884 $ 66,534 $ 35,448 Net income per share.................... $ 0.39 $ 0.36 $ 0.47 $ 0.30 Ratio of earnings to fixed charges...... 2.6x 3.2x 2.9x 2.3x Including merger charges & extraordinary items: Net income.............................. $ 37,255 $ 40,100 $ 48,657 $ 3,958 Net income per share.................... $ 0.25 $ 0.29 $ 0.35 $ 0.03 Ratio of earnings to fixed charges...... 2.2x 2.9x 2.6x 1.5x Average number of common shares outstanding............................. 146,789 140,321 140,962 118,475 Balance Sheet Data: Total assets............................... $2,151,053 $1,877,766 $1,973,258 $1,146,555 Working capital............................ 514,307 393,211 442,965 294,174 Notes payable and long-term debt........... 782,056 657,867 727,891 254,169 Stockholders' equity....................... 788,958 695,523 727,150 546,664 Book value per common share................ $ 5.37 $ 4.96 $ 5.16 $ 4.61
See the accompanying notes to summary financial information. 15 21 SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION The following summary unaudited consolidated pro forma financial information gives effect to the purchase of Shares pursuant to the Offer, based on certain assumptions described in Note (11) to the Notes to Summary Financial Information below, as if such purchase had occurred on the first day of each of the periods presented, with respect to income statement data, and on March 1, 1997 and November 29, 1997, with respect to balance sheet data. The summary unaudited consolidated pro forma financial information should be read in conjunction with the consolidated historical financial information incorporated herein by reference and does not purport to be indicative of the results that would actually have been obtained had the purchase of the Shares pursuant to the Offer been completed at the dates indicated or that may be obtained in the future.
TWELVE NINE MONTHS MONTHS ENDED ENDED NOVEMBER 29, MARCH 1, 1997 1997 -------------- ------------ (IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA) (UNAUDITED) Statement of Operations Data: Net sales................................................. $3,048,125 $3,444,675 Before merger charges & extraordinary items: Net income............................................. $ 42,305 $ 47,062 Net income per share................................... $ 0.38 $ 0.44 Ratio of earnings to fixed charges..................... 1.7x 1.7x Including merger charges & extraordinary items: Net income............................................. $ 22,246 $ 29,185 Net income per share................................... $ 0.20 $ 0.28 Ratio of earnings to fixed charges..................... 1.5x 1.5x Average number of common shares outstanding............... 111,789 105,962 Balance Sheet Data: Total assets.............................................. $2,173,527 $1,994,723 Working capital........................................... 524,798 448,993 Notes payable and long-term debt.......................... 1,213,056 1,158,891 Stockholders' equity...................................... 368,449 302,178 Book value per common share............................... $ 3.30 $ 2.85
See the accompanying notes to summary financial information. 16 22 NOTES TO SUMMARY FINANCIAL INFORMATION (1) All financial information reflects DDI as a pooling of interests transaction. However, potential accounting reclassifications from the pooling of interests to the purchase method of accounting will have a negative impact on the Company's historical and pro forma earnings per share. These reclassifications, if they occur, while not expected to have an effect on the Company's future cash flow or operations, will reduce historical and pro forma earnings per share by approximately $0.04 and $0.03 for the twelve months ended March 1, 1997 and the nine months ended November 29, 1997, respectively. (2) Notes payable and long-term debt include the current maturities of long-term debt. (3) Net income reflects the pro forma adjustment of additional taxes that would be incurred to treat a subchapter S acquisition as if the acquired company was a C corporation. (4) All earnings per share data are based on the weighted average number of common shares outstanding during the applicable period. (5) Book value per share is calculated as the total shareholders' equity divided by the weighted average number of common shares outstanding at the end of the period. (6) The ratios of earnings to fixed charges are calculated by dividing the sum of pre-tax income and fixed charges by fixed charges. Fixed charges consist of interest expense, that portion of rent expense which the Company believes to be representative of interest, and amortization of debt expense. (7) Financial information for the nine months ended November 29, 1997: (a) The Company recorded a net merger charge of $17,685,000 primarily in conjunction with the acquisition and integration of DDI, and certain provisions for reductions in work force and facility closures at other locations, offset by revisions to prior periods' merger charges reflecting the final transaction and exit costs incurred. (b) The Company repurchased approximately $54,068,000 of the outstanding $60,500,000 of DDI 13.5% notes at a premium, resulting in an extraordinary loss of $7,108,000, net of taxes. (8) Financial information for the nine months ended November 30, 1996: (a) The Company recorded a net merger charge of $12,366,000 primarily in conjunction with the acquisition and integration of United TransNet, Inc. ("UT") and Nimsa S.A. ("Nimsa"), offset by revisions to the merger charge established in the fourth quarter of fiscal 1995, largely caused by changes in the integration plan of U.S. Delivery Systems, Inc. ("Delivery"). The fiscal 1995 plan included the integration of the newly acquired delivery business into the Company's core product distribution business. In conjunction with the UT acquisition, the Company adopted a plan to integrate the delivery services business separate from the core product distribution business. (9) Financial information for the year ended March 1, 1997: (a) The Company recorded a net merger charge of $19,840,000 (which includes the $12,366,000 merger charge described in Note (8)(a) above) primarily in conjunction with the acquisition and integration of UT, Nimsa, Hermann Marketing, Inc. and Sofco-Mead, Inc., offset by the revisions to the merger charge established in the fourth quarter of fiscal 1995. (10) Financial information for the year ended March 2, 1996: (a) The Company recorded a net merger charge of $36,838,000 and a merger-related inventory provision of $5,952,000, primarily in conjunction with the acquisition and integration of Delivery and Richard Young Journal, Inc. (11) Pro Forma Financial Information: (a) The information assumes that 35,000,000 Shares will be repurchased at $11.50 per Share. Expenses directly related to the Offer (excluding financing and refinancing costs) are estimated to be $3.0 million, and are included as part of the cost of the Shares to be acquired. (b) The purchase of the Shares is assumed to be financed with approximately $430 million of additional debt utilizing a combination of a subordinated term loan and a bank credit facility with an aggregate average interest rate of 8.0% and related fees and expenses, including the costs estimated to be incurred in a recent interest rate hedging transaction. 17 23 ADDITIONAL INFORMATION The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 2120, Washington, D.C. 20549; at its regional offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, New York, New York 10048. Copies of such material may also be obtained by mail, upon payment of the Commission's customary charges, from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site on the World Wide Web at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. 10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING SHARES. As of January 30, 1998, the Company had issued and outstanding 142,676,852 Shares and had reserved for issuance upon exercise of outstanding stock options and warrants of 24,380,174 Shares. The 35,000,000 Shares that the Company is offering to purchase represent approximately 25% of the Shares then outstanding. As of January 30, 1998, the Company's directors and executive officers as a group (9 persons) beneficially owned an aggregate of 9,582,060 Shares representing approximately 6.5% of the outstanding Shares, including shares issuable upon exercise of options and warrants exercisable within 60 days. Each of the Company's executive officers and directors has advised the Company that he or she does not intend to tender any Shares pursuant to the Offer. If the Company purchases 35,000,000 Shares pursuant to the Offer, the Company's executive officers and directors as a group would own beneficially approximately 8.5% of the outstanding Shares immediately after the Offer, assuming exercise of options exercisable within 60 days. Except as set forth below, neither the Company, nor any subsidiary of the Company nor, to the best of the Company's knowledge, any of the Company's directors or executive officers, nor any affiliates of any of the foregoing, had any transactions involving the Shares during the 40 business days prior to the date hereof: (a) On December 22, 1997, the Company issued 668,442 Shares under a Share Purchase Agreement pursuant to which its wholly owned subsidiary, CEX Holdings, Inc., acquired all of the issued and outstanding capital stock of Panatronic AG, a company located in Zurich, Switzerland. The closing per Share sales price of the Shares on the date of this acquisition was $11.50. (b) James Argyropoulos, a director of the Company, purchased 110,000 Shares in the open market during the month of January: 50,000 Shares on January 20, 1998 at $9.125 per Share, 50,000 Shares on January 23, 1998 at $9.375 per Share in the name of the James P. Argyropoulos Trust and 10,000 Shares in the name of the James Argyropoulos IRA Account on January 22, 1998 at $9.125 per Share. Except for outstanding options to purchase Shares granted from time to time to certain employees (including executive officers) of the Company pursuant to the Company's stock option plans and except as otherwise described herein, neither the Company nor, to the best of the Company's knowledge, any of its affiliates, directors or executive officers, is a party to any contract, arrangement, understanding or relationship with any other person relating, directly or indirectly, to the Offer with respect to any securities of the Company including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations. 18 24 11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT. The Company's purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise be traded publicly and may reduce the number of shareholders. However, there will be a sufficient number of Shares outstanding and publicly traded following consummation of the Offer to ensure a continued trading market for the Shares and the continued listing of the Company's securities on Nasdaq. The Shares are currently "margin securities" under the rules of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit to their customers using such Shares as collateral. The Company believes that, following the purchase of Shares pursuant to the Offer, the Shares will continue to be "margin securities" for purposes of the Federal Reserve Board's margin regulations. Shares the Company acquires pursuant to the Offer will be retained as treasury stock by the Company (unless and until the Company determines to retire such Shares) and will be available for the Company to issue without further shareholder action (except as required by applicable law or, if retired, the rules of any securities exchange on which Shares are listed) for purposes including, but not limited to, the acquisition of other businesses, the raising of additional capital for use in the Company's business and the satisfaction of obligations under existing or future stock option and employee benefit plans. The Company has no current plans for issuance of the Shares repurchased pursuant to the Offer. The Shares are registered under the Exchange Act, which requires, among other things, that the Company furnish certain information to its shareholders and the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's shareholders. The Company believes that its purchase of Shares pursuant to the Offer will not result in the Shares becoming eligible for deregistration under the Exchange Act. 12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. The Company is not aware of any license or regulatory permit that appears to be material to the Company's business that might be adversely affected by the Company's acquisition of Shares as contemplated herein or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Company as contemplated herein. Should any such approval or other action be required, the Company presently contemplates that such approval or other action will be sought. The Company is unable to predict whether it may determine that it is required to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offering pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. The Company's obligations under the Offer to accept for payment and pay for Shares is subject to certain conditions. See Section 6. 13. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following summary describes certain United States federal income tax consequences relevant to the Offer. The discussion contained in this summary is based upon the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and proposed United States Treasury regulations promulgated thereunder, administrative pronouncements and judicial decisions, changes to which could materially affect the tax consequences described herein and could be made on a retroactive basis. This summary discusses only Shares held as capital assets, within the meaning of Section 1221 of the Code, and does not address all of the tax consequences that may be relevant to particular shareholders in light of their personal circumstances, or to certain types of shareholders (such as certain financial institutions, dealers in securities or commodities, insurance companies, tax-exempt organizations or persons who hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" or "constructive sale" transaction for United States federal income tax purposes). In particular, the discussion of the consequences of an 19 25 exchange of Shares for cash pursuant to the Offer applies only to a United States shareholder (herein, a "Holder"). For purposes of this summary, a "United States shareholder" is a beneficial owner of the Shares who is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of source, or (iv) a trust the administration of which a court within the United States is able to exercise primary supervision and all substantial decisions of which one or more United States persons have the authority to control. This discussion does not address the tax consequences to foreign shareholders who will be subject to United States federal income tax on a net basis on the proceeds of their exchange of Shares pursuant to the Offer because such income is effectively connected with the conduct of a trade or business within the United States. Such shareholders are generally subject to tax in a manner similar to United States shareholders; however, certain special rules apply. Foreign shareholders who are not subject to United States federal income tax on a net basis should see Section 3 for a discussion of the applicable United States withholding tax rules and the potential for obtaining a refund of all or a portion of the tax withheld. This summary may not be applicable with respect to Shares acquired as compensation (including Shares acquired upon the exercise of options or which were or are subject to forfeiture restrictions). This summary also does not address the state, local or foreign tax consequences of participating in the Offer. Each Holder of Shares should consult such Holder's tax advisor as to the particular consequences to it of participation in the Offer. Consequences to Tendering Holders of Exchange of Shares for Cash Pursuant to the Offer. An exchange of Shares for cash pursuant to the Offer by a Holder will be a taxable transaction for United States federal income tax purposes. As a consequence of the exchange, the Holder will, depending on such Holder's particular circumstances, be treated either as recognizing gain or loss from the disposition of the Shares or as receiving a dividend distribution from the Company. In general, if a Holder does not exercise control over the affairs of the Company and all Shares actually or constructively owned by such Holder under the applicable attribution rules are tendered and exchanged for cash in the Offer, the Holder should be treated as recognizing gain or loss from the disposition of Shares. Under Section 302 of the Code, a Holder will recognize gain or loss on an exchange of Shares for cash if the exchange (i) results in a "complete termination" of all such Holder's equity interest in the Company, (ii) results in a "substantially disproportionate" redemption with respect to such Holder or (iii) is "not essentially equivalent to a dividend" with respect to the Holder. In applying each of the Section 302 tests, a Holder is in general deemed to own constructively the Shares actually owned by certain related individuals and entitles. A Holder that exchanges all Shares actually or constructively owned by such Holder for cash pursuant to the Offer will be regarded as having completely terminated such Holder's equity interest in the Company. An exchange of Shares for cash will be a "substantially disproportionate" redemption with respect to a Holder if the percentage of the then outstanding Shares owned by such Holder immediately after the exchange is less than 80% of the percentage of the Shares owned by such Holder immediately before the exchange. If an exchange of Shares for cash fails to satisfy the "substantially disproportionate" test, the Holder may nonetheless satisfy the "not essentially equivalent to a dividend" test. A Holder who wishes to satisfy (or avoid) the "not essentially equivalent to a dividend" test is urged to consult such Holder's tax advisor because this test will be met only if the reduction in such Holder's proportionate interest in the Company constitutes a "meaningful reduction" given such Holder's particular facts and circumstances. The IRS has indicated in published rulings that any reduction in the percentage interest of a shareholder whose relative stock interest in a publicly held corporation is minimal (an interest of less than 1% should satisfy this requirement) and who exercises no control over corporate affairs should constitute such a "meaningful reduction." If a Holder sells Shares to persons other than the Company at or about the time such Holder also sells shares to the Company pursuant to the Offer, and the various sales effected by the Holder are part of an overall plan to reduce or terminate such Holder's proportionate interest in the Company, then the sales to persons other than the Company may, for United States federal income tax purposes, be integrated with the Holder's sale of Shares pursuant to the Offer and, if integrated, may be taken into account in determining whether the Holder satisfies any of the three tests described above. A Holder should consult his tax advisor regarding the treatment of 20 26 other exchanges of Shares for cash which may be integrated with such Holder's sale of Shares to the Company pursuant to the Offer. If a Holder is treated as recognizing gain or loss from the disposition of Shares for cash, such gain or loss will be equal to the difference between the amount of cash received and such Holder's tax basis in the Shares exchanged therefor. Any such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the holding period of the Shares exceeds one year as of the date of the exchange. Any long-term capital gain recognized by Holders that are individuals, estates or trusts will be taxable at a maximum rate of 20% if the holding period of the Shares exceeds 18 months and otherwise will be taxable to such Holders at a maximum rate of 28%. However, any short-term capital gain recognized by Holders that are individuals, estates or trusts and any long-term or short-term capital gain recognized by Holders that are corporations will be taxable at regular income tax rates. If a Holder is not treated under the Section 302 tests as recognizing gain or loss on an exchange of Shares for cash, the entire amount of cash received by such Holder in such exchange will be treated as a dividend to the extent of the Company's current and accumulated earnings and profits as determined for United States federal income tax purposes. Such a dividend will be includible in the Holder's gross income as ordinary income in its entirety, without reduction for the tax basis of the Shares exchanged, and no loss will be recognized. The Holder's tax basis in the Shares exchanged, however, will be added to such Holder's tax basis in the remaining Shares that it owns. To the extent that cash received in exchange for Shares is treated as a dividend to a corporate Holder, (i) it will be eligible for a dividends-received deduction (subject to applicable limitations) and (ii) it will be subject to the "extraordinary dividend" provisions of the Code. A corporate Holder should consult its tax advisor concerning the availability of the dividends-received deduction and the application of the "extraordinary dividend" provisions of the Code. The Company cannot predict whether or the extent to which the Offer will be oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant to the Offer will cause the Company to accept fewer shares than are tendered. Therefore, a Holder can be given no assurance that a sufficient number of such Holder's Shares will be purchased pursuant to the Offer to ensure that such purchase will be treated as a sale or exchange, rather than as a dividend, for United States federal income tax purposes pursuant to the rules discussed above. Consequences to Shareholders who do not Tender Pursuant to the Offer. Shareholders who do not accept the Company's Offer to tender their Shares will not incur any tax liability as a result of the consummation of the Offer. See Section 3 with respect to the application of United States federal income tax withholding to payments made to foreign shareholders and backup withholding. THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO IT OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS. 14. EXTENSION OF OFFER; TERMINATION; AMENDMENT. The Company expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 6 shall have occurred or shall be deemed by the Company to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any Shares by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. The Company also expressly reserves the right, in its sole discretion, to terminate the Offer and not accept for payment or pay for any Shares not theretofore accepted for payment or paid for or, subject to applicable law, to postpone payment for Shares upon the occurrence of any of the conditions specified in Section 6 hereof by giving oral or written notice of such termination or postponement to the Depositary and making a public announcement thereof. The Company's 21 27 reservation of the right to delay payment for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that the Company must pay the consideration offered or return the Shares tendered promptly after termination or withdrawal of a tender offer. Subject to compliance with applicable law, the Company further reserves the right, in its sole discretion, and regardless of whether any of the events set forth in Section 6 shall have occurred or shall be deemed by the Company to have occurred, to amend the Offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the Offer to holders of Shares or by decreasing or increasing the number of Shares being sought in the Offer). Amendments to the Offer may be made at any time and from time to time effected by public announcement thereof, such announcement, in the case of an extension, to be issued no later than 9:00 a.m., New York City time, on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to shareholders in a manner reasonably designated to inform shareholders of such change. Without limiting the manner in which the Company may choose to make a public announcement, except as required by applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Company materially changes the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. These rules require that the minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price or a change in percentage of securities sought) will depend on the facts and circumstances, including the relative materiality of such terms or information. If (i) the Company increases or decreases the price to be paid for Shares, the number of Shares being sought in the Offer or the Dealer Managers' soliciting fees and, in the event of an increase in the number of Shares being sought, such increase exceeds 2% of the outstanding Shares, and (ii) the Offer ends on the tenth business day from, and including, the date that such notice of an increase or decrease is first published, sent or given in the manner specified in this Section 14, the Offer will then be extended until the expiration of such period of ten business days. 15. FEES AND EXPENSES. The Company has retained the Dealer Managers to act as its financial advisors, as well as the dealer managers, in connection with the Offer. The Dealer Managers will receive a fee for their services in connection with the Offer of an aggregate of approximately $1,250,000. The Company also has agreed to reimburse the Dealer Managers for certain reasonable out-of-pocket expenses incurred in connection with the Offer, including the reasonable fees and expenses of counsel, and to indemnify the Dealer Managers against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. The Dealer Managers have rendered various investment banking and other advisory services to the Company in the past, for which each has received customary compensation, and may render similar services to the Company in the future. The Company has retained ChaseMellon Shareholder Securities, L.L.C. to act as Information Agent and as Depositary in connection with the Offer. The Information Agent may contact shareholders by mail, telephone, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary will receive reasonable and customary compensation for their respective services, will be reimbursed by the Company for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. No fees or commissions will be payable to brokers, dealers or other persons (other than to the Dealer Managers) for soliciting tenders of Shares pursuant to the Offer. The Company, however, upon request, will reimburse brokers, dealers and commercial banks for customary mailing and handling expenses incurred by such persons in forwarding the Offer and related materials to the beneficial owners of Shares held by any such person as a nominee or in a fiduciary capacity. No broker, dealer, commercial bank or trust company has been authorized to act as the agent of the Company for purposes of the Offer (except for the Dealer Managers). 22 28 The Company will pay or cause to be paid all stock transfer taxes, if any, on its purchase of Shares except as otherwise provided in Instruction 7 in the Letter of Transmittal. 16. MISCELLANEOUS. The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction the securities or blue sky laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on the Company's behalf by the Dealer Managers or one or more registered brokers or dealers licenses under the laws of such jurisdiction. Pursuant to Rule 13e-4 of the General Rules and Regulations under the Exchange Act, the Company has filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4 which contains additional information with respect to the Offer. Such Schedule 13E-4, including the exhibits and any amendments thereto, may be examined, and copies may be obtained, at the same places and in the same manner as is set forth in Section 9 with respect to information concerning the Company. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE COMPANY OR THE DEALER MANAGERS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER MANAGERS. CORPORATE EXPRESS, INC. February 6, 1998 23 29 Facsimile copies of the Letter of Transmittal will be accepted from Eligible Institutions. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each shareholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Overnight Delivery: By Hand: Post Office Box 3301 85 Challenger Road 120 Broadway, 13th Floor South Hackensack, NJ 07606 Mail Drop -- Reorg New York, NY 10271 Attn: Reorganization Ridgefield Park, NJ 07660 Attn: Reorganization Department Attn: Reorganization Department Department By Facsimile Transmission: (for Eligible Institutions only) (201) 329-8936 Confirm by Telephone: (201) 296-4860
Additional copies of the Offer to Purchase, the Letter of Transmittal or other tender offer materials may be obtained from the Information Agent and will be furnished at the Company's expense. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers as set forth below. Shareholders may also contact their local broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. 450 WEST 33RD STREET, 14TH FLOOR NEW YORK, NEW YORK 10001 BANKS AND BROKERS CALL COLLECT: (212) 273-8080 ALL OTHERS CALL TOLL-FREE: (800) 851-9671 The Dealer Managers for the Offer are: DONALDSON, LUFKIN & JENRETTE BT ALEX. BROWN SECURITIES CORPORATION INCORPORATED 2121 AVENUE OF THE STARS 1 SOUTH STREET LOS ANGELES, CALIFORNIA 90067 BALTIMORE, MARYLAND 21202 CALL COLLECT: (310) 282-5005 OR (310) 282-5087 CALL TOLL-FREE: (800) 638-2596
February 6, 1998 EX-99.A.2 3 LETTER OF TRANSMITTAL 1 EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF CORPORATE EXPRESS, INC. PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 6, 1998 THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Overnight Delivery: By Hand: 85 Challenger Road Post Office Box 3301 Mail Drop -- Reorg 120 Broadway, 13th Floor South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271 Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission: (for Eligible Institutions only) (201) 329-8936 Confirm by Telephone: (201) 296-4860 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX BELOW. 2 - ------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) - ------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)(1) CERTIFICATE(S) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES - ------------------------------------------------------------------------------------------------------------------ Indicate in this box the order (by certificate number) in which Shares are to be purchased in the event of proration.(3) (Attach additional signed list if necessary.) See Instruction 14. 1st: 2nd: 3rd: 4th: 5th: - ------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by shareholders tendering Shares by book-entry transfer. (2) Unless otherwise indicated, it will be assumed that all Shares represented by each Share certificate delivered to the Depositary are being tendered hereby. See Instruction 4. (3) If you do not designate an order, then in the event less than all Shares tendered are purchased due to proration, Shares will be selected for purchase by the Depositary. See Instruction 14. - ------------------------------------------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY OR THE DEALER MANAGERS WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY. DELIVERIES TO BOOK-ENTRY TRANSFER FACILITIES WILL NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY. This Letter of Transmittal is to be used only if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or Philadelphia Depository Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Shareholders whose Share certificates are not immediately available, who cannot deliver certificates and any other documents required to the Depositary by the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedure for book-entry transfer prior to the Expiration Date must tender their Shares using the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. 3 (BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY) [ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ---------------------------------------------- Check Applicable Box: [ ] DTC [ ] PDTC Account No. ----------------------------------------------------------------- Transaction Code No. -------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) --------------------------------------------- Date of Execution of Notice of Guaranteed Delivery -------------------------- Name of Institution that Guaranteed Delivery -------------------------------- If delivery is by book-entry transfer: Name of Tendering Institution ----------------------------------------------- Check Applicable Box: [ ] DTC [ ] PDTC Account No. ----------------------------------------------------------------- Transaction Code No. -------------------------------------------------------- 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to Corporate Express, Inc., a Colorado corporation (the "Company"), the above-described shares of its common stock, par value $.0002 per share (such shares, together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), at the price per Share indicated in this Letter of Transmittal, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 6, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to all the Shares that are being tendered hereby or orders the registration of such Shares tendered by book-entry transfer that are purchased pursuant to the Offer to or upon the order of the Company and hereby irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to: (i) deliver certificates for such Shares, or transfer ownership of such Shares on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Company upon receipt by the Depositary, as the undersigned's agent, of the Purchase Price (as defined below) with respect to such Shares; (ii) present certificates for such Shares for cancellation and transfer on the books of the Company; and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants to the Company that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that, when and to the extent the same are accepted for payment by the Company, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. The undersigned represents and warrants to the Company that the undersigned has read and agrees to all of the terms of the Offer. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions will constitute the undersigned's acceptance of the terms and conditions of the Offer, as well as the undersigned's representation and warranty to the Company that (i) the undersigned has a net long position in the Shares or equivalent securities being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the tender of such Shares complies with Rule 14e-4 of the Exchange Act. The Company's 5 acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates, the number of Shares that the undersigned wishes to tender and the purchase price at which such Shares are being tendered should be indicated in the appropriate boxes on this Letter of Transmittal. The undersigned understands that the Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share), net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The undersigned understands that the Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. Certificates representing Shares tendered at prices greater than the Purchase Price and not withdrawn and Shares not purchased because of proration will be returned at the Company's expense. See Section 1 of the Offer to Purchase. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered or may not be required to purchase any of the Shares tendered hereby or may accept for payment fewer than all of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the Purchase Price of any Shares purchased, and/or return any Shares not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares tendered by book-entry transfer, by credit to the account at the applicable Book-Entry Transfer Facility). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the Purchase Price of any Shares purchased and/or any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the Purchase Price of any Shares purchased and/or return any Shares not tendered or not purchased in the name(s) of, and mail such check and/or any certificates to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof if the Company does not accept for payment any of the Shares so tendered. The undersigned understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. 6 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED MUST BE USED. (SEE INSTRUCTION 5.) CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. [ ] $10.000 [ ] $10.625 [ ] $11.125 [ ] $10.125 [ ] $10.750 [ ] $11.250 [ ] $10.250 [ ] $10.875 [ ] $11.375 [ ] $10.375 [ ] $11.000 [ ] $11.500 [ ] $10.500
ODD LOTS (SEE INSTRUCTION 9) This section is to be completed ONLY if Shares are being tendered by or on behalf of a person who owns beneficially as of the close of business on February 5, 1998, and who continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares. The undersigned either (check one box): [ ] owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares, all of which are being tendered, or [ ] is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and is tendering all of such Shares. If you do not wish to specify a purchase price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares are Being Tendered" in this Letter of Transmittal). [ ] 7 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the check for the aggregate Purchase Price of Shares purchased and/or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue [ ] check and/or [ ] certificate(s) to: Name: --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Tax Identification or Social Security No.) Book-Entry Facility Account No. ________ [ ] DTC [ ] PDTC SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 8) To be completed ONLY if the check for the Purchase Price of Shares purchased and/or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Issue [ ] check and/or [ ] certificate(s) to: Name: --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) Book-Entry Facility Account No. ________ [ ] DTC [ ] PDTC 8 PLEASE SIGN HERE (TO BE COMPLETED BY ALL SHAREHOLDERS) - -------------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) Dated: , 1998 --------------------------- Name(s): ------------------------------------------------------------------------ (Please Print) Capacity: ----------------------------------------------------------------------- (Full Title) Address: ------------------------------------------------------------------------ (Include Zip Code) Area Code and Telephone Number: ------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 6.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 6) Firm Name: ---------------------------------------------------------------------- (Please Print) Authorized Signature: ----------------------------------------------------------- Title: -------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ (Include Zip Code) Area Code and Telephone Number: ------------------------------------------------- Dated: , 1998 ------------------ 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm that is a recognized member of an Eligible Institution (as defined below), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal, or (ii) such Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or savings and loan association) having an office, branch or agency in the United States (each such entity, an "Eligible Institution"). See Instruction 6. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be used either if Share certificates are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal prior to the Expiration Date. If certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share certificates are not immediately available, who cannot deliver their Shares and all other required documents to the Depositary or who cannot complete the procedure for delivery by book-entry transfer prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) must be received by the Depositary prior to the Expiration Date; and (iii) the certificates for all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, in each case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq Stock Market, Inc. trading days after the date the Depositary receives such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative or contingent tenders will be accepted. By executing this Letter of Transmittal (or facsimile thereof), the tendering shareholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 10 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the "Special Payment Instructions" or "Special Delivery Instructions" boxes on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be validly tendered, the shareholder must check the box indicating the price per Share at which such shareholder is tendering Shares under "Price (In Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal, except that Odd Lot Owners (as defined in Section 1 of the Offer to Purchase) may check the box above in the section entitled "Odd Lots" indicating that such shareholder is tendering all Shares at the Purchase Price determined by the Company. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR (OTHER THAN AS DESCRIBED ABOVE FOR ODD LOT OWNERS) IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. A shareholder wishing to tender portions of such shareholder's Share holdings at different prices must complete a separate Letter of Transmittal for each price at which such shareholder wishes to tender each such portion of such shareholder's Shares. The same Shares cannot be tendered (unless previously validly withdrawn as provided in Section 4 of the Offer to Purchase) at more than one price. 6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signatures(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), in which case the certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such certificates. Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on such certificate(s). Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted. 7. STOCK TRANSFER TAXES. The Company will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the aggregate Purchase Price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Shares are registered in the name 11 of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Section 5 of the Offer to Purchase. Except as provided in this Instruction 7, it will not be necessary to affix transfer tax stamps to the certificates representing Shares tendered hereby. 8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares tendered hereby is to be issued in the name of, and/or any Shares not tendered or not purchased are to be returned to, a person other than the person(s) signing this Letter of Transmittal, or if the check and/or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to an address other than that shown above in the box captioned "Description of Shares Tendered," then the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed. Shareholders tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such shareholder at the Book-Entry Transfer Facility from which such transfer was made. 9. ODD LOTS. As described in Section 1 of the Offer to Purchase, if fewer than all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date are to be purchased, the Shares purchased first will consist of all Shares tendered by any shareholder who owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and who validly tendered all such Shares at or below the Purchase Price (including by not designating a purchase price as described above). Partial tenders of Shares will not qualify for this preference and this preference will not be available unless the box captioned "Odd Lots" in this Letter of Transmittal and the Notice of Guaranteed Delivery, if any, is completed. 10. SUBSTITUTE FORM W-9 AND FORM W-8. Under the United States federal income tax backup withholding rules, unless an exemption applies under the applicable law and regulations, 31% of the gross proceeds payable to a shareholder or other payee pursuant to the Offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides such person's taxpayer identification number (employer identification number or social security number) to the Depositary and certifies that such number is correct. Therefore, each tendering shareholder should complete and sign the Substitute Form W-9 included as part of this Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding, unless such shareholder otherwise establishes to the satisfaction of the Depositary that it is not subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign shareholders) are not subject to these backup withholding requirements. To prevent possible erroneous backup withholding, an exempt holder must enter its correct taxpayer identification number in Part 1 of Substitute Form W-9, write "Exempt" in Part 2 of such form, and sign and date the form. See the enclosed Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 for additional instructions. In order for a foreign shareholder to qualify as an exempt recipient, a foreign shareholder must submit an Internal Revenue Service ("IRS") Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to that shareholder's exempt status. Such statements may be obtained from the Depositary. 11. WITHHOLDING ON FOREIGN SHAREHOLDERS. Even if a foreign shareholder has provided the required certification to avoid backup withholding, the Depositary will withhold United States federal income taxes equal to 30% of the gross payments payable to a foreign shareholder or its agent unless (A) the Depositary determines that a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States or (B) the foreign shareholder establishes to the satisfaction of the Company and the Depositary that the sale of Shares by such foreign shareholder pursuant to the Offer will qualify as a "sale or exchange," rather than as a distribution taxable as a dividend, for United States federal income tax purposes (see Section 13 of the Offer to Purchase). For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any 12 political subdivision thereof, (iii) an estate, the income of which is subject to United States federal income taxation regardless of the source of such income or (iv) a trust the administration of which a court within the United States is able to exercise primary supervision and all substantial decisions of which one or more United States persons have the authority to control. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign shareholder must deliver to the Depositary a properly completed IRS Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly completed IRS Form 4224. The Depositary will determine a shareholder's status as a foreign shareholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate that such reliance is not warranted. A foreign shareholder may be eligible to obtain a refund of all or a portion of any tax withheld if such shareholder meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" test described in Section 13 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax is due. Each foreign shareholder is urged to consult its tax advisor regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption and refund procedures. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance may be directed to the Information Agent or to the Dealer Managers at their respective addresses and telephone numbers below. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal or other tender offer materials may be directed to the Information Agent, and such copies will be furnished promptly at the Company's expense. Shareholders may also contact their local broker, dealer, commercial bank or trust company for documents relating to, or assistance concerning, the Offer. 13. IRREGULARITIES. All questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders it determines not to be in proper form or the acceptance of or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares or any particular shareholder. No tender of Shares will be deemed to be validly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Managers, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders, and none of them will incur any liability for failure to give any such notice. 14. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of the Offer to Purchase, shareholders may designate the order in which their Shares are to be purchased in the event of proration. The order of purchase may have an effect on the United States federal income tax classification of any gain or loss on the Shares purchased. See Sections 1 and 13 of the Offer to Purchase. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. SHAREHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL. 13 TO BE COMPLETED BY ALL TENDERING REGISTERED HOLDERS OF SECURITIES - ------------------------------------------------------------------------------------------------------------------ PAYOR'S NAME: - ------------------------------------------------------------------------------------------------------------------ TIN SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE ---------------------------------- BOX AT RIGHT AND CERTIFY BY SIGNING AND SOCIAL SECURITY NUMBER OR DATING BELOW EMPLOYER IDENTIFICATION NUMBER ------------------------------------- PART 2 -- For Payees exempt from FORM W-9 backup withholding, see the Important -------------------------------------------- Tax Information above and Guidelines DEPARTMENT OF THE TREASURY NAME (PLEASE PRINT) for Certification of Taxpayer INTERNAL REVENUE SERVICE Identification Number on Substitute ------------------------------------------- Form W-9 enclosed herewith and complete as instructed herein. ------------------------------------------- Awaiting TIN [ ] ADDRESS ------------------------------------------- CITY STATE ZIP CODE ------------------------------------------------------------------------------------ PART 3 -- Certification -- Under the Penalties of Perjury, I certify that PAYOR'S REQUEST FOR (i) the number shown on this form is my correct Taxpayer Identification Number (or TAXPAYER IDENTIFICATION I am waiting for a number to be issued to me) and either (a) I have mailed or NUMBER (TIN) AND delivered an application to receive a PAYOR'S REQUEST FOR taxpayer CERTIFICATION identification number to the appropriate IRS center or Social Security TAXPAYER IDENTIFICATION Administration office or (b) I intend to mail or deliver an application in the near NUMBER (TIN) future) and (ii) I am not subject to backup withholding because: (a) I am exempt from backup withholding; or (b) I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends; or (c) the IRS has notified me that I am no longer subject to backup withholding. SIGNATURE_____________________________________DATE______________________________ ------------------------------------------------------------------------------------ CERTIFICATION INSTRUCTIONS -- You must cross out Item (ii) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. - ------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9 - ------------------------------------------------------------------------------------------------------------------ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and that I mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office (or I intend to mail or deliver an application in the near future). I understand that if I do not provide a taxpayer identification number to the payor within 60 days, the payor is required to withhold 31% of all cash payments made to me thereafter until I provide a number. ------------------------------------------------------------------- ---------------------------------------- Signature Date - ------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 14 The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. 450 WEST 33RD STREET, 14TH FLOOR NEW YORK, NEW YORK 10001 BANKS AND BROKERS CALL COLLECT: (212) 273-8080 ALL OTHERS CALL TOLL-FREE: (800) 851-9671 The Dealer Managers for the Offer are: DONALDSON, LUFKIN & JENRETTE BT ALEX. BROWN INCORPORATED SECURITIES CORPORATION 1 SOUTH STREET 2121 AVENUE OF THE STARS BALTIMORE, MARYLAND 21202 LOS ANGELES, CALIFORNIA 90067 CALL TOLL-FREE: (800) 638-2596 CALL COLLECT: (310) 282-5005 OR (310) 282-5087
EX-99.A.3 4 NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT (a)(3) CORPORATE EXPRESS, INC. NOTICE OF GUARANTEED DELIVERY OF SHARES OF COMMON STOCK This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates for the shares of common stock of Corporate Express, Inc. are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all other documents required by the Letter of Transmittal to be delivered to the Depositary (as defined below) prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase defined below). Such form may be delivered by hand or transmitted by mail or overnight courier, or (for Eligible Institutions only) by facsimile transmission, to the Depositary. See Section 3 of the Offer to Purchase. THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Overnight Delivery: By Hand: 85 Challenger Road Post Office Box 3301 Mail Drop -- Reorg 120 Broadway, 13th Floor South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271 Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission: (for Eligible Institutions only) (201) 329-8936 Confirm by Telephone: (201) 296-4860 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 2 Ladies and Gentlemen: The undersigned hereby tenders to Corporate Express, Inc., a Colorado corporation (the "Company"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 6, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $.0002 per share (together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), of the Company listed below, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. - ------------------------------------------------------------------------------------------------------------------ --------------------------------------------------- --------------------------------------------------- Number of Shares Name(s) --------------------------------------------------- --------------------------------------------------- Certificate Nos.: (if available) (Address) If shares will be tendered by book entry transfer: --------------------------------------------------- Area Code/Telephone Number --------------------------------------------------- --------------------------------------------------- Name of Tendering Institution Signature(s) --------------------------------------------------- Account No. at (check one) Dated:______________________________________, 1998 [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company - ------------------------------------------------------------------------------------------------------------------
2 3 PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR EACH PRICE SPECIFIED MUST BE USED. CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. [ ] $10.000 [ ] $10.625 [ ] $11.125 [ ] $10.125 [ ] $10.750 [ ] $11.250 [ ] $10.250 [ ] $10.875 [ ] $11.375 [ ] $10.375 [ ] $11.000 [ ] $11.500 [ ] $10.500
ODD LOTS This section is to be completed ONLY if Shares are being tendered by or on behalf of a person who owned beneficially as of the close of business on February 5, 1998, and who continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares. The undersigned either (check one box): [ ] owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares, all of which are being tendered, or [ ] is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned beneficially as of the close of business on February 5, 1998, and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and is tendering all of such Shares. If you do not wish to specify a purchase price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares are Being Tendered" above). [ ] 3 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or savings and loan association) having an office, branch or agency in the United States hereby guarantees: (i) that the above-named person(s) has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended; (ii) that such tender of Shares complies with Rule 14e-4; and (iii) to deliver to the Depositary at one of its addresses set forth above certificate(s) for the Shares tendered hereby, in proper form for transfer, or a confirmation of the book-entry transfer of the Shares tendered hereby into the Depositary's account at The Depository Trust Company or Philadelphia Depository Trust Company, in each case together with a properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) thereof), with any required signature guarantee(s) and any other required documents, all within three Nasdaq Stock Market, Inc. trading days after the Depositary receives this Notice. - ------------------------------------------------------------------------------------------------------------------ --------------------------------------------------- --------------------------------------------------- Number of Firm Authorized Signature --------------------------------------------------- --------------------------------------------------- Address Name (Please Print) --------------------------------------------------- --------------------------------------------------- City, State, Zip Code Title --------------------------------------------------- Area Code and Telephone Number Dated: ____________________________________________ - ------------------------------------------------------------------------------------------------------------------
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. YOUR SHARE CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL. 4 EX-99.A.4 5 LETTER TO BROKERS, DEALERS 1 EXHIBIT (a)(4) CORPORATE EXPRESS, INC. OFFER TO PURCHASE FOR CASH UP TO 35,000,000 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT GREATER THAN $11.50 NOR LESS THAN $10.00 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED. February 6, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: In our capacity as Dealer Managers, we are enclosing the material listed below relating to the offer of Corporate Express, Inc., a Colorado corporation (the "Company"), to purchase up to 35,000,000 shares of its common stock, par value $.0002 per share (such shares together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), at prices not greater than $11.50 nor less than $10.00 per Share, net to the seller in cash, specified by tendering shareholders, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share), net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition referred to below, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. Certificates representing Shares tendered at prices in excess of the Purchase Price and not withdrawn and Shares not purchased because of proration will be returned at the Company's expense. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. THE OFFER IS CONDITIONED UPON A MINIMUM OF 15,000,000 SHARES BEING VALIDLY TENDERED AND NOT WITHDRAWN, WHICH CONDITION MAY BE WAIVED BY THE COMPANY IN ITS SOLE DISCRETION. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO PURCHASE. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. The Company will, upon request, reimburse you for reasonable and customary handling and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. The Offer to Purchase. 2. The Letter of Transmittal for your use and for the information of your clients. 2 3. A letter to shareholders of the Company from Gary M. Jacobs, Executive Vice President and Secretary of the Company. 4. The Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the Expiration Date (each as defined in the Offer to Purchase). 5. A letter that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space for obtaining such clients' instructions with regard to the Offer. 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to United States federal income tax backup withholding. 7. A return envelope addressed to the Depositary, ChaseMellon Shareholder Services, L.L.C. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED. The Company will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than fees paid to the Dealer Managers). The Company will, upon request, reimburse you for reasonable and customary handling and mailing expenses incurred by you in forwarding materials relating to the Offer to your customers. The Company will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 7 of the Letter of Transmittal. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal and any other required documents should be sent to the Depositary with either certificate(s) representing the tendered Shares or confirmation of their book-entry transfer, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. As described in the Offer to Purchase, if more than 35,000,000 Shares have been validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) the Company will accept Shares for purchase in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any shareholder who owned beneficially as of the close of business on February 5, 1998, and who continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and who validly tenders all of such Shares (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing Shares, all other Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date on a pro rata basis. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. 2 3 ANY QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION AGENT OR THE DEALER MANAGERS AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THE ENCLOSED OFFER TO PURCHASE. ADDITIONAL COPIES OF THE ENCLOSED MATERIALS MAY BE REQUESTED FROM THE INFORMATION AGENT. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BT ALEX. BROWN INCORPORATED NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF THE COMPANY, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A.5 6 LETTER TO CLIENTS 1 EXHIBIT (a)(5) CORPORATE EXPRESS, INC. OFFER TO PURCHASE FOR CASH UP TO 35,000,000 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT GREATER THAN $11.50 NOR LESS THAN $10.00 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED February 6, 1998 To Our Clients: Enclosed for your consideration are the Offer to Purchase dated February 6, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") setting forth an offer by Corporate Express, Inc., a Colorado corporation (the "Company"), to purchase up to 35,000,000 shares of its common stock, par value $.0002 per share (such shares, together with the associated purchase rights issued pursuant to the Rights Agreement dated as of January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), at prices not greater than $11.50 nor less than $10.00 per Share, net to the seller in cash, specified by tendering shareholders, upon the terms and subject to the conditions of the Offer. Also enclosed herewith is certain other material related to the Offer. The Company will, upon the terms and subject to the conditions of the Offer, determine the lowest single per Share price (not greater than $11.50 nor less than $10.00 per Share), net to the seller in cash (the "Purchase Price"), that will allow it to purchase 35,000,000 Shares (or the maximum of any lesser number of Shares in excess of 15,000,000 Shares as are validly tendered and not withdrawn) pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the minimum tender condition referred to below, the procedure pursuant to which Shares will be accepted for payment and the proration provisions. Certificates representing Shares tendered at prices in excess of the Purchase Price and not withdrawn and Shares not purchased because of proration will be returned at the Company's expense. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. See Section 1 of the Offer to Purchase. THE OFFER IS CONDITIONED UPON A MINIMUM OF 15,000,000 SHARES BEING VALIDLY TENDERED AND NOT WITHDRAWN, WHICH CONDITION MAY BE WAIVED BY THE COMPANY IN ITS SOLE DISCRETION. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO PURCHASE. WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. 2 Your attention is invited to the following: 1. You may tender Shares at prices (in increments of $.125), which cannot be greater than $11.50 nor less than $10.00 per Share, as indicated in the attached Instruction Form, net to you in cash. 2. The Offer is for a maximum of 35,000,000 Shares, constituting approximately 25% of the total Shares outstanding as of January 30, 1998. The Offer is conditioned on a minimum of 15,000,000 Shares being validly tendered and not withdrawn at prices not greater than $11.50 nor less than $10.00 per Share. The Offer is subject to certain other conditions set forth in Section 6 of the Offer to Purchase. 3. The Offer, proration period and withdrawal rights will expire at 5:00 P.M., New York City time, on Monday, March 9, 1998, unless the Offer is extended. Your instructions to us should be forwarded to us in ample time to permit us to submit a tender on your behalf. 4. As described in the Offer to Purchase, if at the expiration of the Offer, more than 35,000,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) have been validly tendered at prices at or below the Purchase Price and not withdrawn, the Company will purchase Shares in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any shareholder who owned beneficially as of the close of business on February 5, 1998, and who continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and who validly tenders all of such Shares (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (ii) after purchase of all the foregoing Shares, all other Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchase of fractional shares). See Section 1 of the Offer to Purchase for a discussion of proration. 5. Tendering shareholders will not be obligated to pay any brokerage commissions or solicitation fees on the Company's purchase of Shares in the Offer if payment is made to the registered holder. Any stock transfer taxes applicable to the purchase of Shares by the Company pursuant to the Offer will be paid by the Company, except as otherwise provided in Instruction 7 of the Letter of Transmittal. 6. If you wish to tender portions of your Shares at different prices, you must complete a separate Instruction Form for each price at which you wish to tender each portion of your Shares. We must submit separate Letters of Transmittal on your behalf for each price you will accept. 7. If you owned beneficially as of the close of business on February 5, 1998, and continue to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and you instruct us to tender at or below the Purchase Price on your behalf all such Shares prior to the Expiration Date and check the box captioned "Odd Lots" in the Instruction Form, all such Shares will be accepted for purchase before proration, if any, of the other tendered Shares. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. If you wish to have us tender any or all of your Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer to Purchase, please so instruct us by completing, executing and returning to us the attached Instruction Form. An envelope to return your instructions to us is enclosed. If you 2 3 authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the Instruction Form. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION DATE OF THE OFFER. The Offer is being made to all holders of Shares. The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction the securities or blue sky laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on the Company's behalf by the Dealer Managers or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 3 4 INSTRUCTION FORM WITH RESPECT TO OFFER TO PURCHASE FOR CASH UP TO 35,000,000 SHARES OF COMMON STOCK OF CORPORATE EXPRESS, INC. AT A PURCHASE PRICE NOT GREATER THAN $11.50 NOR LESS THAN $10.00 PER SHARE The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated February 6, 1998, and the related Letter of Transmittal (which together constitute the "Offer"), in connection with the Offer by Corporate Express, Inc. (the "Company") to purchase up to 35,000,000 shares of its common stock, par value $.0002 per share (together with the associated purchase rights issued pursuant to the Rights Agreement dated January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), at prices not greater than $11.50 nor less than $10.00 per Share, net to the undersigned in cash, specified by the undersigned, upon the terms and subject to the terms and conditions of the Offer. This will instruct you to tender to the Company the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, at the price per Share indicated below, upon the terms and subject to the conditions of the Offer. [ ] By checking this box, all Shares held by us for your account will be tendered. If fewer than all Shares held by us for your account are to be tendered, please check the following box and indicate below the aggregate number of Shares to be tendered by us. [ ]* __________________ SHARES * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 4 5 PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED. IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE INSTRUCTION FORM FOR EACH PRICE SPECIFIED MUST BE USED. CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. [ ] $10.000 [ ] $10.625 [ ] $11.125 [ ] $10.125 [ ] $10.750 [ ] $11.250 [ ] $10.250 [ ] $10.875 [ ] $11.375 [ ] $10.375 [ ] $11.000 [ ] $11.500 [ ] $10.500
ODD LOTS [ ] By checking this box, the undersigned represents that the undersigned owned beneficially, as of the close of business on February 5, 1998 and continues to own beneficially as of the Expiration Date, an aggregate of fewer than 100 Shares and is tendering all of such Shares. If you do not wish to specify a purchase price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" above). [ ] THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. SIGN HERE: Date: ______________________, 1998 Signature(s): ------------------------------------------------------ Name(s): ----------------------------------------------------------- Address: ----------------------------------------------------------- Telephone Number: -------------------------------------------------- Social Security or Taxpayer ID No.: ---------------------------------------------------
5 EX-99.A.6 7 PRESS RELEASE 1 NEWS RELEASE EXHIBIT (a)(6) CORPORATE EXPRESS, INC. TO COMMENCE TENDER OFFER FOR UP TO 35,000,000 SHARES OF ITS COMMON STOCK BROOMFIELD, COLORADO (February 5, 1998) - Corporate Express, Inc. (Nasdaq: CEXP), a leading supplier of non-production goods and services to large corporations, announced today that it will commence a Dutch Auction issuer tender offer to purchase for cash up to 35,000,000 shares of its issued and outstanding common stock, par value $.0002 per share. The tender offer will begin tomorrow, February 6, 1998, and will expire, unless extended, at 5:00 p.m., New York City time, on Monday, March 9, 1998. Terms of the tender offer, which are described more fully in the Offer to Purchase and Letter of Transmittal, invite the Company's shareholders to tender up to 35,000,000 shares of the Company's common stock to the Company at prices not greater than $11.50 nor less than $10.00 per share, as specified by the tendering shareholders. The offer is conditioned upon a minimum of 15,000,000 shares being validly tendered and not withdrawn (which condition may be waived by the Company in its sole discretion) and certain other conditions. The Company will, subject to the terms and conditions of the offer, determine the lowest single per share price (not greater than $11.50 nor less than $10.00 per share) net to the seller in cash that will allow it to purchase 35,000,000 shares pursuant to the offer (or the maximum of any lesser number of shares in excess of 15,000,000 shares). Such lowest single per share price will be the purchase price the Company will pay for all shares validly tendered at prices at or below such purchase price and not withdrawn, subject to the terms and conditions of the offer. Shares tendered at prices in excess of the purchase price and shares not purchased because of proration will be returned at the Company's expense. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 shares or fewer than 15,000,000 shares pursuant to the offer. The Offer to Purchase, Letter of Transmittal and related documents will be mailed to shareholders of record of the Company's common stock and will also be made available for distribution to beneficial owners of such common stock. On February 5, 1998, the closing price of the Company's common stock was $9.28 per share. The dealer managers for the tender offer are Donaldson, Lufkin & Jenrette Securities Corporation (call collect: 310-282-5005/5087) and BT Alex. Brown Incorporated (call toll free: 800-638-2596) and the information agent is ChaseMellon Shareholder Services, L.L.C. (call toll free: 800-851-9671). CONTACT: Rick Roth, VP Corporate Communications (303) 664-3970 To obtain a copy of the news release, call PR Newswire Company News On Call: (800) 758-5804, Corporate Express Extension Number 103352 or visit our web sites at www.corporate-express.com # EX-99.A.7 8 SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal. Capitalized terms not defined in this announcement have the respective meanings ascribed to such terms in the Offer to Purchase. The Offer is not being made to, nor will the Company accept tenders from, holders of Shares in any jurisdiction in which the Offer or its acceptance would violate that jurisdiction's laws. The Company is not aware of any jurisdiction in which the making of the Offer or the tender of Shares would not be in compliance with the laws of such jurisdiction. In jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on the Company's behalf by Donaldson, Lufkin & Jenrette Securities Corporation, BT Alex. Brown or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH BY [CEXP LOGO] CORPORATE EXPRESS, INC. Up to 35,000,000 Shares Of Its Common Stock At A Purchase Price Not Greater Than $11.50 Nor Less Than $10.00 Per Share Corporate Express, Inc., a Colorado corporation (the "Company"), invites its shareholders to tender up to 35,000,000 shares of its common stock, par value $.0002 per share (such shares, together with the associated purchase rights issued pursuant to the Rights Agreement dated January 29, 1998 between the Company and the Rights Agent named therein, the "Shares"), to the Company at prices not greater than $11.50 nor less than $10.00 per Share in cash, as specified by tendering shareholders, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 6, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). - -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is conditioned upon a minimum of 15,000,000 Shares being validly tendered and not withdrawn, which condition may be waived by the Company in its sole discretion. The Offer is also subject to certain other conditions. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTEND TO TENDER ANY SHARES PURSUANT TO THE OFFER. THE COMPANY WILL, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER, DETERMINE THE LOWEST SINGLE PER SHARE PRICE (NOT GREATER THAN $11.50 NOR LESS THAN $10.00 PER SHARE), NET TO THE SELLER IN CASH (THE "PURCHASE PRICE"), THAT WILL ALLOW IT TO PURCHASE 35,000,000 SHARES (OR THE MAXIMUM OF ANY 2 LESSER NUMBER OF SHARES IN EXCESS OF 15,000,000 SHARES AS ARE VALIDLY TENDERED AND NOT WITHDRAWN) PURSUANT TO THE OFFER. ALL SHARES VALIDLY TENDERED AT PRICES AT OR BELOW THE PURCHASE PRICE AND NOT WITHDRAWN WILL BE PURCHASED AT THE PURCHASE PRICE, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER, INCLUDING THE MINIMUM TENDER CONDITION, THE PROCEDURE PURSUANT TO WHICH SHARES WILL BE ACCEPTED FOR PAYMENT AND THE PRORATION PROVISIONS. CERTIFICATES REPRESENTING SHARES TENDERED AT PRICES IN EXCESS OF THE PURCHASE PRICE AND NOT WITHDRAWN AND SHARES NOT PURCHASED BECAUSE OF PRORATION WILL BE RETURNED AT THE COMPANY'S EXPENSE. The term "Expiration Date" means 5:00 p.m., New York City time, on Monday, March 9, 1998, unless and until the Company in its sole discretion shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. The Company reserves the right, in its sole discretion, to purchase more than 35,000,000 Shares or fewer than 15,000,000 Shares pursuant to the Offer. For purposes of the Offer, the Company will be deemed to have accepted for payment (and therefore purchased), subject to proration, Shares that are validly tendered at or below the Purchase Price and not withdrawn only when, as and if it gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of its acceptance of such Shares for payment pursuant to the Offer. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration) but only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents. Upon the terms and subject to the conditions of the Offer, if at the expiration of the Offer, more than 35,000,000 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer) are validly tendered at prices at or below the Purchase Price and not withdrawn, the Company will purchase validly tendered and not withdrawn Shares first from all Odd Lot Holders who validly tendered all their Shares at or below the Purchase Price and who so certify in the appropriate place on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, and then, after the purchase of all of the foregoing Shares, all Shares tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate adjustments to avoid purchase of fractional Shares). The Company's Board of Directors believes that the Offer is in the best interests of the Company and its shareholders. While the Offer, the related financing and certain potential accounting reclassifications of the Company's recent business combinations from the pooling of interests to the purchase method of accounting will have a negative impact on the Company's earnings per share in the current fiscal year, the Company expects the Offer and the related financing to be accretive to earnings thereafter, although no assurance can be given to that effect. The Offer also affords to those shareholders who desire liquidity an opportunity to sell all or a portion of their Shares without the usual transaction costs associated with open market sales. The Company expressly reserves the right at any time or from time to time, in its sole discretion, to extend the period of time during which the Offer is open by giving notice of such extension to the Depositary and making a public announcement thereof. Subject to certain conditions set forth in the Offer to Purchase, the Company also expressly reserves the right to terminate the Offer and not accept for payment any Shares not theretofore accepted for payment. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for payment by the Company as provided in the Offer to Purchase, may also be withdrawn after 12:00 Midnight, New York City time, on Friday, April 3, 1998. For a withdrawal to be effective, the Depositary must receive a notice of withdrawal in written, telegraphic or facsimile transmission form in a timely 2 3 manner at its address set forth below. Such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the name of the registered holder (if different from that of the person who tendered the Shares), the number of Shares tendered and the number of Shares to be withdrawn. If the certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering shareholder must also submit the serial numbers shown on the particular certificates evidencing the Shares and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer, the notice of withdrawal must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE SHAREHOLDERS DECIDE WHETHER TO ACCEPT OR REJECT THE OFFER AND, IF ACCEPTED, AT WHICH PRICE OR PRICES TO TENDER THEIR SHARES. These materials are being mailed to record holders of Shares and are being furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 13e-4(d)(1) under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated by reference herein. Additional copies of the Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent and will be furnished at the Company's expense. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers as set forth below. Shareholders may also contact their local broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: CHASEMELLON SHAREHOLDER SERVICES 450 West 33rd Street, 14th Floor New York, New York 10001 Banks and Brokers call collect: (212) 273-8080 All others call toll-free: (800) 851-9671 The Dealer Managers for the Offer are: DONALDSON, LUFKIN & JENRETTE BT ALEX. BROWN SECURITIES CORPORATION INCORPORATED 2121 Avenue of the Stars 1 South Street Los Angeles, California 90067 Baltimore, Maryland 21202 Call collect: (310) 282-5005 or (310) 282-5087 Call toll-free: (800) 638-2596
February 6, 1998 3 EX-99.A.8 9 LETTER TO SHAREHOLDERS 1 EXHIBIT (a)(8) 1 Environmental Way [Corporate Express Logo] Broomfield, CO 80021-3416 (303) 664-2000 February 6, 1998 Dear Shareholder: Corporate Express, Inc. is offering to purchase up to 35,000,000 shares of its common stock at a price not greater than $11.50 nor less than $10.00 per share. The Company is conducting the Offer through a procedure commonly referred to as a "Dutch Auction." This procedure allows you to select the price within the specified price range at which you are willing to sell all or a portion of your shares to the Company. The Offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. If you wish to tender your shares, instructions on how to tender shares are provided in the enclosed materials. I encourage you to read these materials carefully before making any decision with respect to the Offer. Neither the Company nor its Board of Directors makes any recommendation to any shareholder whether to tender any or all shares. Please note that the Offer is scheduled to expire at 5:00 P.M., New York City time, on Monday, March 9, 1998, unless extended by the Company. Questions regarding the Offer should be directed to ChaseMellon Shareholder Services, L.L.C., the Information Agent for the Offer, or Donaldson, Lufkin & Jenrette Securities Corporation or BT Alex. Brown Incorporated, the Dealer Managers for the Offer, at the telephone numbers set forth in the enclosed materials. Sincerely, /s/ Gary M. Jacobs Gary M. Jacobs Executive Vice President and Secretary EX-99.A.9 10 SUBSTITUTE FORM W-9 1 EXHIBIT (a)(9) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR. - -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- --------------------------------------------------------------------------------------------------------------------------------- GIVE THE GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- NUMBER OF -- - --------------------------------------------------------------------------------------------------------------------------------- 1. An individual's account The individual 9. A valid trust, estate, The legal entity (Do not 2. Two or more individuals The actual owner of the or pension trust furnish the identifying (joint account) account or, if combined number of the personal funds, the first individual representatives or trustee on the account(1) unless the legal entity 3. Husband and wife (joint The actual owner of the itself is not designated in account) account or, if joint funds, the account title.)(5) either person(1) 10. Corporate account The corporation 4. Custodian account of a The minor(2) 11. Religious, charitable, The organization minor (Uniform Gift to or educational Minors Act) organization 5. Adult and minor (joint The adult or, if the minor 12. Partnership account held The partnership account) is the only contributor, the in the name of the minor(1) business 6. Account in the name of The ward, minor, or 13. Association, club, or The organization guardian or committee for incompetent person(3) other tax-exempt a designated ward, minor, organization or incompetent person 14. A broker or registered The broker or nominee 7. a. The usual revocable The grantor-trustee(1) nominee savings trust account 15. Account with the The public entity (grantor is also Department of Agriculture trustee) in the name of a public b. So-called trust The actual owner(1) entity (such as a State account that is not a or local government, legal or valid trust school district, or under State law prison) that receives 8. Sole proprietorship The owner(4) agricultural program account payments
==================================================================== (1) List first and circle the name of the person whose number you furnish. If only one person on the account has a social security number, that person's number must be listed. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payors must be given the numbers whether or not recipients are required to file tax returns. Payors must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payor. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payor, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - A trust exempt from tax under section 664 or described in section 4947. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. However, if you pay $600 or more in interest in the course of your trade or business to a payee, you must report the payment. Backup withholding applies to the reportable payment if the payee has not provided a TIN or has provided an incorrect TIN. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Other types of payments that generally are exempt from backup withholding include: - Wages. - Distributions from a pension, annuity, profit-sharing or stock bonus plan, or an IRA. - Certain surrenders of life insurance contracts. - Gambling winnings, if withholding is required under section 3402(q). However, if withholding is not required under section 3402(q), backup withholding applies if the payee fails to furnish a TIN. - Real estate transactions reportable under section 6045. EX-99.G.1 11 FINANCIALS ON FORM 10-K/A 1 EXHIBIT (g)(1) ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders ofCorporate Express, Inc.: We have audited the accompanying consolidated financial statements and the consolidated financial statement schedule of Corporate Express, Inc. as of March 1, 1997 and March 2, 1996 and for the years ended March 1, 1997, March 2, 1996 and February 25, 1995 listed in the index in Item 14. 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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Corporate Express, Inc. as of March 1, 1997 and March 2, 1996 and the consolidated results of their operations and their cash flows for the years ended March 1, 1997, March 2, 1996, and February 25, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. Denver, Colorado April 18, 1997 19 2 CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 1, MARCH 2, 1997 1996 ---------- ---------- ASSETS Current assets: Cash and cash equivalents............................ $ 54,499 $ 29,813 Trade accounts receivable, net of allowance of $13,004 and $6,964, respectively.................... 494,199 320,483 Notes and other receivables.......................... 55,530 30,046 Inventories.......................................... 187,558 128,803 Deferred income taxes................................ 29,076 18,470 Other current assets................................. 28,548 27,357 ---------- ---------- Total current assets............................... 849,410 554,972 Property and equipment: Land................................................. 14,105 8,715 Buildings and leasehold improvements................. 106,824 38,663 Furniture and equipment.............................. 249,693 130,497 ---------- ---------- 370,622 177,875 Less accumulated depreciation........................ (106,891) (60,744) ---------- ---------- 263,731 117,131 Goodwill, net of accumulated amortization of $36,471 and $16,292, respectively............................. 671,967 333,161 Other assets, net...................................... 58,869 18,101 ---------- ---------- Total assets....................................... $1,843,977 $1,023,365 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 20 3 CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS, CONTINUED (IN THOUSANDS)
MARCH 1, MARCH 2, 1997 1996 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable--trade............................... $ 292,041 $ 177,295 Accounts payable--acquisitions........................ 5,078 2,063 Accrued payroll and benefits.......................... 45,512 26,648 Accrued purchase costs................................ 12,888 3,049 Accrued merger and related costs...................... 18,484 24,880 Other accrued liabilities............................. 52,012 42,955 Current portion of long-term debt and capital leases.. 29,742 24,389 ---------- ---------- Total current liabilities........................... 455,757 301,279 Capital lease obligations............................... 11,545 9,568 Long-term debt.......................................... 621,705 153,831 Deferred income taxes................................... 26,819 7,374 Minority interest in subsidiaries....................... 22,015 24,843 Other non-current liabilities........................... 12,529 4,694 ---------- ---------- Total liabilities................................... 1,150,370 501,589 Commitments and contingencies (Note 8) 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, 126,171,467 and 111,954,350 shares issued and outstanding, respectively........................ 25 22 Common stock, non-voting, $.0002 par value, 3,000,000 shares authorized, none issued or outstanding........ -- -- Additional paid-in capital............................ 646,536 513,358 Retained earnings..................................... 48,222 8,200 Foreign currency translation adjustments.............. (1,176) 196 ---------- ---------- Total shareholders' equity.......................... 693,607 521,776 ---------- ---------- Total liabilities and shareholders' equity........ $1,843,977 $1,023,365 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 21 4 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED ------------------------------------ MARCH 1, MARCH 2, FEBRUARY 25, 1997 1996 1995 ---------- ---------- ------------ Net sales................................ $3,196,056 $1,890,639 $1,145,151 Cost of sales............................ 2,417,746 1,417,366 855,361 Merger related inventory provisions...... -- 5,952 -- ---------- ---------- ---------- Gross profit........................... 778,310 467,321 289,790 Warehouse operating and selling expenses................................ 562,879 342,581 219,213 Corporate general and administrative expenses................................ 95,101 49,742 29,624 Merger and other nonrecurring charges.... 19,840 36,838 -- ---------- ---------- ---------- Operating profit....................... 100,490 38,160 40,953 Interest expense, net.................... 26,949 17,968 16,915 Other income............................. 244 1,786 562 ---------- ---------- ---------- Income before income taxes............. 73,785 21,978 24,600 Income tax expense....................... 33,649 13,766 8,294 ---------- ---------- ---------- Income before minority interest........ 40,136 8,212 16,306 Minority interest (income) expense....... (1,860) 1,436 69 ---------- ---------- ---------- Income from continuing operations...... 41,996 6,776 16,237 Discontinued operations: Loss from discontinued operations...... -- -- 327 Loss on disposals...................... -- 1,225 -- ---------- ---------- ---------- Income before extraordinary item....... 41,996 5,551 15,910 Extraordinary item: Gain on early extinguishment of debt... -- -- 586 Net income............................. $ 41,996 $ 5,551 $ 16,496 ========== ========== ========== Pro forma net income (Note 13)........... $ 40,281 $ 5,140 $ 15,769 ========== ========== ========== Weighted average common shares outstanding............................. 130,029 110,408 80,993 ========== ========== ========== Pro forma per common share: Continuing operations.................. $ .31 $ .06 $ .19 Discontinued operations................ -- (.01) (.01) Extraordinary item..................... -- -- .01 ---------- ---------- ---------- Net income............................. $ .31 $ .05 $ .19 ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 22 5 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED FEBRUARY 25, 1995, MARCH 2, 1996 AND MARCH 1, 1997 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FOREIGN PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY -------------------- ------------------- PAID-IN TRANSLATION RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS ----------- ------- ----------- ------ ---------- ----------- -------- Balance, February 28, 1994................... 26,980,000 $ 7,502 38,378,246 $ 8 $115,805 $ 9 $(6,963) Issuance of common stock.................. 31,602,150 6 138,300 Conversion of common stock.................. 100,000 (112,500) -- Conversion of preferred stock.................. (19,580,000) (2) 22,027,500 4 (2) Redemption of preferred stock.................. (7,500,000) (7,500) Preferred stock dividend............... (432) S Corporation dividends and other equity transactions of pooled companies.............. 117 (4,076) Net income.............. 16,496 Foreign currency translation adjustment............. 50 ----------- ------- ----------- --- -------- ------- ------- Balance, February 25, 1995................... -- -- 91,895,396 18 254,220 59 5,025 Issuance of common stock.................. 20,058,954 4 245,573 Young capital contribution........... 12,182 Adjustment to conform fiscal year ends of certain pooled companies.............. 1,876 S Corporation dividends and other equity transactions of pooled companies.............. 1,383 (4,252) Net income.............. 5,551 Foreign currency translation adjustment............. 137 ----------- ------- ----------- --- -------- ------- ------- Balance, March 2, 1996.. -- -- 111,954,350 22 513,358 196 8,200 Issuance of common stock.................. 14,217,117 3 119,274 Tax benefit on non- qualified stock options exercised.............. 11,161 Adjustment to conform fiscal year ends of certain pooled companies.............. (430) S Corporation dividends and other equity transactions of pooled companies.............. 2,743 (1,544) Net income.............. 41,996 Foreign currency translation adjustment............. (1,372) ----------- ------- ----------- --- -------- ------- ------- Balance, March 1, 1997.. -- $ -- 126,171,467 $25 $646,536 $(1,176) $48,222 =========== ======= =========== === ======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 23 6 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED ---------------------------------- MARCH 1, MARCH 2, FEBRUARY 25, 1997 1996 1995 --------- --------- ------------ Cash flows from operating activities: Net income................................. $ 41,996 $ 5,551 $ 16,496 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation............................... 30,319 18,765 10,705 Amortization............................... 18,417 9,733 6,373 Non-cash portion of merger and restructuring charge...................... 3,761 10,268 -- Adjustment to conform fiscal years......... (430) 1,876 -- Gain on early extinguishment of debt....... -- -- (700) Minority interest (income)/expense......... (1,860) 1,436 69 Other...................................... 1,496 (1,263) 492 Changes in assets and liabilities, excluding acquisitions: Increase in accounts receivable............ (45,552) (43,173) (29,672) Increase in inventory...................... (12,015) (11,538) (5,934) Increase in other current assets........... (1,984) (12,494) (3,338) (Increase) decrease in other assets........ 3,694 (2,194) (1,260) Increase (decrease) in accounts payable.... (667) (8,798) 16,167 Increase (decrease) in accrued liabilities............................... (11,422) 15,398 2,638 --------- --------- --------- Net cash provided by (used in) operating activities................................. 25,753 (16,433) 12,036 --------- --------- --------- Cash flows from investing activities: Proceeds from sale of assets............... 3,026 5,899 463 Capital expenditures....................... (119,639) (53,124) (18,670) Payment for acquisitions, net of cash acquired.................................. (255,830) (124,300) (87,886) Purchase of marketable securities.......... (15,602) -- -- Other, net................................. (1,978) 72 (612) --------- --------- --------- Net cash used in investing activities....... (390,023) (171,453) (106,705) --------- --------- --------- Cash flows from financing activities: Issuance of preferred and common stock..... 12,643 449,288 134,993 Stock offering costs....................... 0 (20,313) (9,388) Issuance of subsidiary common stock........ 2,258 7,733 -- Young capital contribution................. -- 12,182 -- Purchase of common stock held by OfficeMax................................. -- (195,831) -- Preferred stock redemption................. -- -- (7,500) Debt issuance costs........................ (8,818) -- (869) Proceeds from long-term borrowings......... 347,829 44,208 35,189 Repayments of long-term borrowings......... (37,948) (71,813) (35,422) Proceeds from short-term borrowings........ 772 12,835 -- Repayments of short-term borrowings........ (26,945) (11,592) (11,095) Cash paid to retire bonds.................. -- -- (9,300) Net proceeds from (payments on) line of credit.................................... 104,382 (18,871) 1,778 Other...................................... (4,833) (4,245) (1,647) --------- --------- --------- Net cash provided by financing activities... 389,340 203,581 96,739 --------- --------- --------- Net cash provided by (used in) discontinued operations................................. 61 (222) (600) --------- --------- --------- Effect of foreign currency exchange rate changes on cash............................ (445) (1,159) 25 --------- --------- --------- Increase in cash and cash equivalents....... 24,686 14,314 1,495 Cash and cash equivalents, beginning of period..................................... 29,813 15,499 14,004 --------- --------- --------- Cash and cash equivalents, end of period.... $ 54,499 $ 29,813 $ 15,499 --------- --------- --------- Supplemental disclosure of cash flow information: Cash paid during the period for interest... $ 35,526 $ 20,469 $ 13,829 --------- --------- --------- Cash paid during the period for taxes...... $ 25,413 $ 16,046 $ 6,082 --------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. 24 7 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations in the amount of $7,198,000, $4,305,000 and $3,103,000 were incurred during fiscal 1996, 1995 and 1994, respectively, for equipment. During fiscal 1996, the Company acquired, for a net cash purchase price of $241,846,000 and 5,542,000 shares of common stock, 77 office products distributors and 23 service companies. Of these 100 acquisitions, 86 were accounted for as purchases and 14 were accounted for as immaterial poolings of interest. In addition, the Company merged with UT, which was accounted for as a pooling of interests with financial results included from March 3, 1996 for 6,332,000 shares of common stock and Nimsa, which was accounted for as a pooling of interests with financial results included beginning in fiscal 1995 for 1,125,000 shares of common stock. The Company completed 52 acquisitions for a net cash outlay in fiscal 1995 of $118,256,000. During fiscal 1994, the Company completed 24 acquisitions for a net cash outlay of $74,707,000. In conjunction with the acquisitions, liabilities were assumed as follows:
YEARS ENDED ------------------------------ MARCH 1, MARCH 2, FEBRUARY 25, 1997 1996 1995 -------- -------- ------------ (IN THOUSANDS) Fair value of assets acquired............... $620,252 $271,264 $135,248 Cash paid, net of cash acquired............. 241,846 118,256 74,707 Issuance of notes payable................... 4,650 11,111 -- Issuance of stock........................... 86,922 9,562 4,614 Forgiveness of debt......................... -- 11,138 150 Purchase price payable, included in current liabilities................................ 4,057 2,750 5,325 -------- -------- -------- Liabilities assumed......................... $282,777 $118,447 $ 50,452 ======== ======== ========
In addition to the amounts set forth above, Corporate Express paid $11,695,000 and $6,044,000 for prior period acquisitions during fiscal 1996 and fiscal 1995, respectively. During fiscal 1996, the Company paid $2,289,000 to dissenting shareholders of a pooled company; purchased a warehouse facility for 202,500 shares of common stock; issued 107,207 shares of common stock to retire convertible debt of $1,449,400 previously issued by one of the Company's acquired subsidiaries; and acquired the remaining 49% interest in Corporate Express United Kingdom. In January 1995, the Company purchased for $1,186,000 in cash, $1,000,000 in accounts payable, and $650,000 in notes payable the remaining interest of a company for which a majority interest was acquired in fiscal 1993. In December 1994, the Company recorded a liability of $1,855,000 for subsequent payments due to the sellers of a company acquired by Lucas in fiscal 1993. On September 30, 1994, the Company issued 14,610,000 shares of Common Stock upon conversion of its Series A, B and C preferred on a two for one basis. In August 1994, the Company purchased for $350,000 in cash and $100,000 in notes payable a 45% interest in an office products distributor. During fiscal 1994, the Company paid $234,000 for additional expenses for prior period acquisitions. In addition, the Company made a final payment of $11,409,000 for the Hanson acquisition and Delivery distributed non-cash dividends of $493,000 to certain Delivery stockholders in fiscal 1994. During January 1994, accrued dividends of $2,044,007 on Young's preferred stock were converted to a subordinated promissory note. This note and accrued interest of $138,712 was contributed as additional paid-in capital in December 1994. The accompanying notes are an integral part of the consolidated financial statements. 25 8 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. As more fully described in Note 2, the following acquisitions have been consummated by the Company: . CEX Acquisition Corp., a wholly-owned subsidiary of the Company, was merged with and into Young on February 27, 1996. . DSU Acquisition Corp., a wholly-owned subsidiary of the Company, was merged with and into Delivery on March 1, 1996. . Nimsa was acquired by the Company on October 31, 1996. . Bevo Acquisition Corp., Inc. a wholly-owned subsidiary of the Company, was merged with and into UT on November 8, 1996. . IMS Acquisition, Inc., a wholly-owned subsidiary of the Company, was merged with and into Sofco on January 24, 1997. . H.M. Acquisition Corp., Inc. a wholly-owned subsidiary of the Company, was merged with and into HMI on January 30, 1997. These acquisitions were accounted for as poolings of interests and, accordingly, the accompanying financial statements have been restated to include the accounts and operations of Delivery, Young, Nimsa, HMI and Sofco for all applicable periods. The accompanying financial statements have been restated to include the operations of UT effective March 3, 1996 and Nimsa effective for fiscal 1995; prior UT results were immaterial. Acquisitions accounted for as purchases are included in the accounts and operations as of the effective date of the transaction 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 transaction 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. Definition of Fiscal Year: As used in these consolidated financial statements and notes to consolidated financial statements, "fiscal 1996," "fiscal 1995," and "fiscal 1994" refer to the Company's fiscal years ended March 1, 1997, March 2, 1996 and February 25, 1995, respectively. In connection with the mergers, Nimsa, UT and HMI changed their 1996 fiscal year ends, Sofco changed its 1996 and 1995 fiscal year ends, and Delivery and Young changed their 1995 fiscal year ends to conform to the fiscal year ends of the Company. References to fiscal 1995 for Nimsa refers to Nimsa's June 1996 year end; references to fiscal 1995 and prior fiscal years for HMI refers to HMI's December year end; and references to fiscal 1994 and prior fiscal years for Sofco, Delivery and Young refer to Sofco's May year end, Delivery's December year end and Young's September year end. Cash and Cash Equivalents: Cash and cash equivalents include short-term investments with original maturities of three months or less. Inventories: Inventories primarily consist of finished goods which are valued at the lower of first-in, first-out (FIFO) cost or market. The Company periodically assesses its inventory to determine market value based upon such 26 9 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) factors as historical sales and purchases, inclusion in the Company's proprietary In-Stock Catalog and other factors. Included in cost of sales for fiscal 1995 is a merger related inventory provision of $5,952,000. This provision reflects the write-down to fair market value of certain inventory which the Company decided to eliminate from its product line. Property and Equipment: Property and equipment are carried at cost. Depreciation is computed using the straight-line method over estimated useful lives which range from three to seven years for furniture and equipment; up to 40 years for buildings; and over the life of the lease for leasehold improvements. Ordinary maintenance and repairs are charged to operations while expenditures which extend the physical or economic life of property and equipment are capitalized. Gains and losses on disposition of property and equipment are recognized in operations in the year of disposition. The Company capitalizes certain internal and external software costs that benefit future years. The amortization commencement and useful life is dependent upon whether the software is non-interactive or interactive. Non- interactive software has functionality that is not directly tied into and/or dependent upon future development or software at other company sites. Interactive software has significant functionality that is dependent upon future development or that is directly tied into and/or dependent upon the installation of the same software at other Company sites. All software is amortized over its economic useful life, which is three to ten years using the straight-line method. Capitalized software costs totaled $47,695,000 and $16,790,000 at March 1, 1997 and March 2, 1996, respectively. Software amortization expense was $476,000 for fiscal year 1996. There was no software amortization expense for fiscal years 1995 and 1994. Concentration of Credit Risk: The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with high quality credit institutions. At times, such investments may be in excess of the FDIC insurance limit. Concentration of credit risk with respect to trade receivables is limited due to the wide variety of customers and markets into which the Company's products are sold, as well as their dispersion across many geographic areas. As a result, as of March 1, 1997, the Company did not consider itself to have any significant concentrations of credit risk. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains allowances for potential credit losses and historical losses have been within management's expectations. Intangible Assets: Goodwill is amortized on a straight-line basis over periods of 25 and 40 years. Noncompete agreements, which are included in other assets, are amortized on a straight-line basis over periods of 2-10 years. The Company evaluates intangible assets periodically in accordance with Statement of Financial Accounting Standards No. 121 to determine whether they are properly reflected in the financial statements based upon future undiscounted operating cash flows. If an impairment is determined to exist, the impaired asset is written down to fair market value. The balance of $671,967,000 at March 1, 1997 reflects additions from acquisitions and changes in foreign exchange rates of $357,125,000. 27 10 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Accrued Purchase Costs: The Company accrues direct external costs incurred to consummate an acquisition, other external costs and liabilities to close the acquired entity's facilities, and severance and relocation payments to the acquired entity's employees. Prior to the adoption of EITF 95-3 effective with the consensus, the Company also accrued the external incremental costs of converting certain computer systems to the Company's systems. Accrued Merger and Related Costs: Accrued merger and related costs include the actual costs of completing acquisitions accounted for as poolings of interests transactions and additional costs associated with integrating the combined companies' operations, including liabilities for severance benefits for employees expected to be terminated. Revenue Recognition: Revenue is recognized upon the shipment of products and completion of service to customers. Cost of Sales: Vendor rebates and similar payments are recognized on an accrual basis in the period earned and are recorded as a reduction to cost of sales. Delivery and occupancy costs are included as an increase to cost of sales. Warehouse Operating and Selling Expenses: Warehouse operating and selling expenses include all costs associated with operating regional warehouses and sales offices, including warehouse labor, related warehouse general and administrative expenses (excluding occupancy), selling expenses and commissions related to the Company's direct sales force and warehouse assimilation costs. Foreign Currency Translation: Balance sheet accounts of foreign operations are translated using the year- end exchange rate, and income statement accounts are translated on a monthly basis using the average exchange rate for the period. Translation gains and losses are recorded in shareholders' equity, and realized gains and losses from transactions are reflected in income. An aggregate transaction gain of $116,000 and a loss of $37,000 were included in the determination of net income in fiscal 1996 and 1995, respectively. No transaction gains or losses were included in the determination of net income in fiscal 1994. The Company does not currently hedge foreign currency risk exposure. Income Taxes: For all periods presented, income taxes are calculated using the liability method in accordance with the provisions set forth in Statement of Financial Accounting Standards (SFAS) No. 109. Pro Forma Income Taxes: In fiscal 1996, the Company acquired an entity in a pooling of interests transaction, which was previously an S Corporation for income tax purposes prior to its acquisition by Corporate Express and, accordingly, any income tax liabilities for the periods prior to the acquisition are the responsibility of the previous owner. For 28 11 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) purposes of these consolidated financial statements, federal and state income taxes have been provided as a pro forma adjustment as if the acquired entity had filed C Corporation tax returns for the pre-acquisition periods (See Note 13). Pro Forma Net Income Per Share: Pro forma net income per share is calculated by dividing pro forma net income (net income after giving effect to the pro forma tax adjustment), after preferred stock dividend requirements of Young of $432,000 for the year ended February 25, 1995 by the weighted average shares of common stock and common stock equivalents outstanding. Pursuant to the rules of the Securities and Exchange Commission, common stock equivalents related to common stock, preferred stock, stock options and warrants issued within one year prior to the Company's initial public offering have been included as if they were outstanding for all periods presented. Fully diluted earnings per share differ from primary earnings per share by less than 3%. Stock Split and Stock Dividends: In connection with its initial public offering, the Company effected a one- for-two reverse stock split in August 1994 and converted all of its outstanding preferred stock to common stock on a three for two share basis in September 1994. The Company distributed a 50% share dividend in June 1995 and January 1997. All share numbers and prices have been adjusted to reflect the reverse stock split, the conversion of preferred to common and the 50% share dividends. Use of Estimates in the Preparation of Financial Statements: 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 fiscal 1995 and fiscal 1994 consolidated financial statements to conform to the fiscal 1996 presentation. These reclassifications had no impact on net income. New Accounting Standards: In the fourth quarter of fiscal 1997, the Company will adopt SFAS No. 128, "Earnings per Share." This statement simplifies the standards for computing earnings per share found in APB Opinion No. 15, "Earnings per Share" and makes them comparable to international EPS standards. Had SFAS No. 128 been effective during fiscal 1996, 1995 and 1994, (i) "Basic earnings per share" under SFAS No. 128 would have been $0.33, $0.05 and $0.22, respectively, and (ii) "Dilutive earnings per share" under SFAS No. 128 would have been $0.31, $0.05 and $0.19, respectively. The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" during fiscal 1996 (See Note 11). 2. POOLING OF INTERESTS: Effective January 30, 1997, the Company issued approximately 4,650,000 shares of common stock in exchange for all of the outstanding stock of HMI, the largest privately-held supplier of promotional products to large corporations. 29 12 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Effective January 24, 1997, the Company issued approximately 2,550,000 shares of common stock in exchange for all of the outstanding stock of Sofco, one of the largest suppliers of janitorial and cleaning supplies in the United States. Effective November 8, 1996, the Company issued approximately 6,332,000 shares of common stock in exchange for all of the outstanding stock of UT, the second largest same-day delivery service provider in the United States. Effective October 31, 1996, the Company issued approximately 1,125,000 shares of common stock and paid approximately $2,289,000 to the consenting and dissenting sharesholders, respectively, of Nimsa, a computer software reseller located in Paris, France, in exchange for all of Nimsa's outstanding stock. Effective March 1, 1996, the Company issued approximately 23,409,000 shares of common stock in exchange for all of the outstanding stock of Delivery, a provider of same-day local delivery services. Effective February 27, 1996, the Company issued approximately 4,398,000 shares of common stock in exchange for all of the outstanding stock of Young, a distributor of computer and imaging supplies and accessories. In addition to the above acquisitions, the Company completed 14 other acquisitions which were accounted for as immaterial poolings of interests for approximately 1,942,000 shares of common stock during fiscal 1996. The financial statements for these immaterial acquisitions for periods prior to the acquisition have not been restated. During fiscal 1995, prior to merging with the Company, Delivery acquired the outstanding stock of 14 companies in exchange for approximately 3,951,000 shares of Delivery common stock. During fiscal 1994, Delivery acquired the stock of six companies in exchange for approximately 1,722,000 shares of Delivery common stock. 30 13 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Separate results of operations for Corporate Express and the pooled operations for the periods prior to the mergers are as follows:
YEAR ENDED ------------------------------------ MARCH 1, MARCH 2, FEBRUARY 25, 1997 1996 1995 ---------- ---------- ------------ (IN THOUSANDS) Net sales: Corporate Express................... $2,715,785 $1,132,012 $ 621,469 HMI................................. 92,080 84,013 83,752 Sofco............................... 139,734 144,621 133,481 UT.................................. 196,199 -- -- Nimsa............................... 52,258 71,901 -- Young............................... -- 115,628 86,184 Delivery............................ -- 306,364 109,865 Delivery poolings prior to merger with Delivery...................... -- 36,100 110,400 ---------- ---------- ---------- Combined............................ $3,196,056 $1,890,639 $1,145,151 ========== ========== ========== Net income (loss): Corporate Express................... $ 31,710 $ 3,702 $ 5,248 HMI................................. 4,182 990 1,772 Sofco............................... 3,529 319 1,989 UT.................................. 1,369 -- -- Nimsa............................... 1,206 1,762 -- Young............................... -- (3,073) 1,264 Delivery............................ -- 815 4,223 Delivery poolings prior to merger with Delivery...................... -- 1,036 2,000 ---------- ---------- ---------- Combined............................ $ 41,996 $ 5,551 $ 16,496 ========== ========== ========== Other changes in shareholders' equity: Corporate Express................... $ 106,299 $ 229,356 $ 115,024 HMI................................. (3,761) (2,193) (1,917) Sofco............................... 1,538 (230) 692 UT.................................. 26,135 -- -- Nimsa............................... (376) 6,026 -- Young............................... -- 13,028 (7,932) Delivery............................ -- 12,032 23,211 Delivery poolings prior to merger with Delivery...................... -- (1,116) (2,613) ---------- ---------- ---------- Combined............................ $ 129,835 $ 256,903 $ 126,467 ========== ========== ==========
Certain reclassifications and adjustments have been made to the prior financial statements of the pooled companies to conform to the Corporate Express financial presentation and policies which adjustments had an immaterial effect on net income. All intercompany transactions have been eliminated. The consolidated statement of operations for fiscal 1996 includes the income and expenses of Corporate Express (including Young and Delivery), HMI, Sofco, UT and Nimsa for the twelve months ended March 1, 1997. 31 14 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The consolidated statement of operations for fiscal 1995 includes the income and expenses of Corporate Express, Sofco, Young and Delivery for the twelve months ended March 2, 1996, of HMI for the twelve months ended December 31, 1995, and of Nimsa for the twelve months ended June 30, 1996. In order to conform the HMI and Nimsa year ends to Corporate Express' fiscal year end, Nimsa net income for the March 1996 to June 1996 period was included in both fiscal 1995 and 1996, and HMI net income for the January 1996 to February 1996 period was excluded from fiscal 1995. Accordingly, an adjustment has been made in fiscal 1996 to debit retained earnings directly for the March 1996 to June 1996 Nimsa net income of $630,000 and to credit retained earnings directly for the January 1996 to February 1996 HMI net income of $200,000. The consolidated statement of operations for fiscal 1994 includes the income and expenses of Corporate Express for the twelve months ended February 25, 1995, of Sofco for the twelve months ended May 26, 1995, of HMI for the twelve months ended December 31, 1994, of Young for the twelve months ended September 30, 1994, and of Delivery for the twelve months ended December 31, 1994. In order to conform the Sofco, Young and Delivery year ends to Corporate Express' fiscal year end, Sofco net income for the March 1995 to May 1995 period was included in both fiscal 1994 and 1995, Young net income for the October 1994 to February 1995 period was excluded from fiscal 1994, and Delivery net income for the January 1995 to February 1995 period was excluded from fiscal 1994. Accordingly, an adjustment has been made in fiscal 1995 to debit retained earnings directly for the March 1995 to May 1995 Sofco net income of $747,000, and to credit retained earnings for the October 1994 to February 1995 Young net income of $846,000 and the January 1995 to February 1995 Delivery net income of $1,777,000. The results of operations for the adjustment periods are as follows:
PERIOD NET SALES NET INCOME ---------- --------- ---------- Nimsa........................................ 3/96-6/96 $25,986 $ 630 HMI.......................................... 1/96-2/96 15,415 200 Sofco........................................ 3/95-5/95 33,085 747 Young........................................ 10/94-2/95 39,683 846 Delivery..................................... 1/95-2/95 50,382 1,777
3. MERGER AND OTHER NONRECURRING COSTS: During fiscal year 1996, the Company recorded an estimated net merger and other nonrecurring charge of $19,840,000. This charge is comprised of $27,411,000 in merger and other nonrecurring charges primarily in conjunction with the acquisitions of UT, Nimsa, HMI and Sofco, offset by $7,571,000 in revisions to the merger and other nonrecurring charge established in the fourth quarter of fiscal 1995. The fiscal 1995 charge included an exit plan for the integration of the newly acquired delivery business into the Company's core product distribution business. In the third quarter of fiscal 1996, nine months after the creation of the original exit plan, the Company acquired UT, approximately doubling its delivery services capacity. At that time, the Company adopted a new plan to integrate the delivery services business separate from the core product distribution business. In connection with the new exit plan, the Company evaluated its facility and personnel requirements and identified duplicate facilities consistent with the new plan. As a result of this new plan, the closure of thirteen delivery facilities and five distribution facilities, incorporated in the original fiscal 1995 plan, was superseded. Included in the distribution facilities that were to be retained, was the South Carolina facility which was expected to be merged into the Atlanta and planned North Carolina facilities. Due to significant new business in the Atlanta area and several unexpected acquisitions, the Atlanta facility is at full capacity and this closure plan was terminated. Additionally, several subsequent acquisitions in fiscal 1996, which were not contemplated at the end of fiscal 1995, were completed in the Carolinas and surrounding markets, which eliminated the opportunity to close the South Carolina facility and maintain a high level of customer service. The fiscal year 1996 charges include the actual costs of completing the acquisitions, the anticipated costs for integrating the delivery business, closing other redundant facilities, and severance for employee terminations. The charge includes the closure of 115 facilities and the reduction of approximately 485 employees.
BALANCE CASH NON-CASH TOTAL USAGE 3/1/97 ------- -------- ------- -------- ------- Merger transaction costs(1)..... $15,274 $15,274 $(12,706) $ 2,568 Severance and terminations(2)... 5,333 5,333 (760) 4,573 Facility closure and consolidation(3)............... 3,575 3,575 (102) 3,473 ------- ------- -------- ------- Accrued merger and related costs, balance................. 24,182 24,182 (13,568) 10,614 Other asset write-downs and costs(4)....................... -- $3,229 3,229 (1,180) 2,049 ------- ------ ------- -------- ------- Total......................... $24,182 $3,229 $27,411 $(14,748) $12,663 ======= ====== ======= ======== =======
32 15 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) - - -------- (1) Merger transaction costs are the direct costs from the pooling transactions and include legal, investment banking, printing and other related costs, such as contract buy-outs for certain terminated employees. These costs are expected to be paid by the end of fiscal 1997. (2) Severance and employee termination costs are related to the elimination of duplicate management positions and facility closures and consolidations. Approximately 34 of the 485 employees estimated to be terminated have been terminated as of March 1, 1997. The remaining terminations will occur in conjunction with the facility closures and be concluded 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. Eight of the 115 facilities estimated to be closed or consolidated have been closed or consolidated as of March 1, 1997. The remaining facilities 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 software, leasehold improvements and equipment being abandoned or written off as a result of the UT acquisition. 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. The fiscal 1995 merger and other nonrecurring charge of $36,838,000 consisted of merger transaction related costs of $13,273,000; severance and employee termination costs of $7,457,000 (representing approximately 760 employees); facility closure and consolidation costs of $9,693,000; and other asset write- downs and costs of $6,415,000. Of the $36,838,000 charges, $7,724,000 are non- cash charges. This liability was adjusted in fiscal 1996 to reflect the actual merger transaction costs incurred and to eliminate the original liability established for specific facilities which will not be closed as a result of the significant change in circumstances due to the acquisition of UT.
BALANCE CASH NON-CASH BALANCE 3/2/96 PAYMENTS USAGE ADJUSTMENTS 3/1/97 ------- -------- -------- ----------- ------- Merger transaction costs(1).................. $ 9,161 $ (7,388) $ (259) $1,514 Severance and terminations(2)........... 7,165 (1,523) (2,550) 3,092 Facility closure and consolidation(3).......... 8,554 (1,169) (4,121) 3,264 ------- -------- ------- ------ Accrued merger and related costs, balance............ 24,880 (10,080) (6,930) 7,870 Other asset write-downs and costs(4).................. 3,789 -- $(1,045) (641) 2,103 ------- -------- ------- ------- ------ Total.................... $28,669 $(10,080) $(1,045) $(7,571) $9,973 ======= ======== ======= ======= ======
- - -------- (1) Remaining merger transactions costs represent the estimated contract buy- outs for certain former Delivery employees and other transaction costs, both of which are being negotiated and are expected to be resolved by the end of fiscal 1997. (2) Severance and termination costs are the severance payments related to facility closures and centralization of certain shared services. Approximately 58 of the 760 employees estimated to be terminated have been terminated as of March 1, 1997, and 278 positions will no longer be eliminated as a result of the revised exit plan. The Company expects to complete the facility closures and related terminations by the end of the first quarter in fiscal 1998. The centralization of certain shared services will begin in the second quarter of fiscal 1997 and will continue through fiscal 1998. (3) Of the 88 facilities estimated to be closed or consolidated, 31 have been closed or consolidated as of March 1, 1997, and 18 facilities will no longer be eliminated as a result of the revised exit plan. The remaining facilities are expected to be closed by the end of the first quarter in fiscal 1998. (4) Other asset write downs and costs are recorded as contra assets and include software, leasehold improvements and equipment being abandoned or written off as a result of the acquisition. 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 the first quarter in fiscal 1998. 4. PURCHASES: Fiscal 1996 The Company purchased for a net cash purchase price of $241,846,000 and approximately 3,600,000 shares of common stock, 46 domestic office product distributors, 29 international office product distributors and 11 delivery service companies. The excess of the purchase price over the fair market value of the net tangible assets 33 16 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) acquired was allocated to goodwill and is being amortized over 40 years for office product distributors and 25 years for delivery service companies. Included in the 46 domestic product acquisitions are three purchases and one immaterial pooling consummated by UT prior to its acquisition by Corporate Express, and ASAP Software Express, Inc. ("ASAP"), a distributor of software to large corporations. The ASAP purchase price was $97,611,000 offset by cash acquired of $13,792,000. Included in the 29 international product acquisitions is Boulevard Produits De Bureau, Inc. ("Boulevard"), a seller of office supplies, furniture and equipment, for a net cash purchase price of $16,102,000. The Company also repaid $9,498,000 of Boulevard promissory notes with cash of $731,900 and 356,832 shares of the Company's common stock. In January 1997, Corporate Express Australia ("CEA") shareholders approved a one for five non-renounceable common stock rights offer at a price of A$.85 (US$.65) per share. Pursuant to the rights offer, on February 27, 1997, CEA issued 8,216,721 shares to Corporate Express and 3,553,370 shares to institutional investors. As of March 1, 1997, Corporate Express interest in CEA was 54.6%. On March 10, 1997, an additional 3,750,000 shares were issued to institutional investors which changed the Corporate Express interest in CEA to 52.4%. In November 1996, Corporate Express purchased the remaining 49% interest in the Chisholm Group by issuance of shares of Corporate Express common stock. The Company has earn-out agreements with former shareholders that may require additional payments by the Company of up to $3,259,000. Any additional payments will be accounted for as increases to the purchase price. Fiscal 1995 Corporate Express purchased for a net cash purchase price of $79,111,000, 27 office product distributors including five distributors purchased by CEA and a software distributor purchased by Nimsa. Also included in the above purchases is one office product distributor purchased by the Chisholm Group, a United Kingdom contract stationer, in which Corporate Express acquired a 51% interest in February 1996. Young repurchased its remaining seven franchises for approximately $20,512,000, terminated four franchises for consideration of $233,000 and purchased substantially all of the business, properties and assets of a computer supplies distributor for a purchase price of $675,000. The excess of the purchase price over the fair value of the net tangible assets acquired was allocated to goodwill and is being amortized over 40 years. Delivery completed 16 acquisitions accounted for as purchases. The net cash purchase price paid in these transactions was $15,208,000 in cash, 378,000 shares of Delivery common stock and $5,565,000 in convertible notes. The excess of the purchase price over the fair value of the net tangible assets acquired has been allocated to goodwill and is being amortized over 25 years. All of the companies acquired provide same-day delivery service. In December 1994, Young purchased all of the issued and outstanding shares of a computer supplies distributor for a purchase price of $2,750,000 and the assumption of other liabilities. Young may be required to pay additional consideration to the former shareholders should the acquired company reach certain earnings thresholds. No such additional amounts were paid in 1995. The excess purchase price over the fair value of net tangible assets acquired was allocated to goodwill and is being amortized over 40 years. In February 1996, CEA shareholders approved the issue of an additional 12,939,000 shares and 50,000 shares of its common stock at a price of A$1.30 (US$.96) per share and A$1.00 (US$.74) per share, respectively. Of the shares issued, 5,789,000 were purchased by Corporate Express, 4,600,000 were purchased by institutional investors and 2,600,000 shares were approved for issue to CEA officers and employees as employee incentive shares (of which 1,710,000 were issued as of March 2, 1996). As a result, at March 2, 1996, Corporate Express' interest in CEA was 51.8%. 34 17 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) On December 21, 1995 CEA issued an additional 6,110,000 shares of its common stock at a price of A$1.30 (US$.96) per share. Of the shares offered, 3,110,000 were purchased by Corporate Express and 3,000,000 were purchased by institutional investors for cash. As a result, Corporate Express' interest in CEA changed from 52.7% to 52.5%. The operating results of all of the above acquisitions, which were accounted for as purchases, are included in the Company's consolidated statements of operations from the dates of acquisition. The following pro forma financial information assumes the acquisitions occurred at the beginning of the period. These results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made at the beginning of the year, or of results which may occur in the future. The pro forma results listed below are unaudited and reflect purchase price adjustments.
YEAR ENDED YEAR ENDED MARCH 1, MARCH 2, 1997 1996 ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales............................................. $3,550,205 $2,995,708 Net income before extraordinary items................. 41,302 29,769 Net income............................................ 41,302 29,010 Net income per common share........................... 0.31 0.25
5. ACCRUED PURCHASE COSTS: In conjunction with purchase acquisitions, the Company accrues the direct external costs associated with closing redundant facilities of acquired companies, and severance and relocation payments to the acquired company's employees. Prior to the adoption of EITF 95-3 in May 1995, the Company also accrued the external incremental costs of converting acquired company computer systems to the Company's systems. The following tables set forth activity in the Company's accrued purchase liabilities: Prior to EITF 95-3:
WAREHOUSE DISPOSITION & SYSTEM REDUNDANT OF ASSETS TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER ------- ------------ ---------- --------- ----------- (IN THOUSANDS) Balance, February 25, 1995................... $11,252 $ 8,109 $1,005 $ 1,596 $ 542 Additions............... 1,731 659 223 734 115 Payments................ (6,469) (3,630) (784) (1,766) (289) Reversals............... (5,250) (4,388) (41) (523) (298) ------- ------- ------ ------- ----- Balance, March 2, 1996.. 1,264 750 403 41 70 Payments................ (675) (452) (182) (41) -- Reversals to goodwill... (589) (298) (221) -- (70) ------- ------- ------ ------- ----- Balance, March 1, 1997(1)................ $ 0 $ 0 $ 0 $ 0 $ 0 ======= ======= ====== ======= =====
- - -------- (1) All consolidation projects relating to companies acquired prior to the adoption of EITF 95-3 have been successfully completed. 35 18 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) After adoption of EITF 95-3:
WAREHOUSE DISPOSITION & SYSTEM REDUNDANT OF ASSETS TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER ------- ------------ ---------- --------- ----------- (IN THOUSANDS) Balance, February 25, 1995................... $ -- $ -- $ -- $ -- $ -- Additions............... 2,414 691 202 1,065 456 Payments................ (629) (177) (4) (293) (155) ------- ------ ------- ------- ------- Balance, March 2, 1996.. 1,785 514 198 772 301 Additions............... 21,429 2,037 4,912 9,727 4,753 Payments................ (8,503) (699) (557) (4,066) (3,181) Reversals to goodwill... (1,823) (7) (1,284) (284) (248) ------- ------ ------- ------- ------- Balance, March 1, 1997(1)................ $12,888 $1,845 $ 3,269 $ 6,149 $ 1,625 ======= ====== ======= ======= =======
- - -------- (1) Accrued purchase costs, after adoption of EITF 95-3, primarily represent the liabilities incurred to consolidate acquired operations into existing Company facilities. 6. DISCONTINUED OPERATIONS: During fiscal 1995, Sofco adopted a plan to discontinue the operations of Sofco-Eastern, Inc. ("Eastern"). Accordingly, the consolidated financial statements have been reclassified to report separately the net assets, liabilities and operating results of the Eastern operations. As of March 1, 1997, all Eastern operations have been disposed of and actual losses recorded on the disposal of the assets. The loss from discontinued operations in fiscal 1995 and fiscal 1994 were $1,225,000 (net of tax benefits of $851,000), representing the loss on disposal and $327,000 (net of tax benefits of $225,000), representing the net loss on operations. The Eastern revenues were not material to total consolidated revenues for fiscal years 1996, 1995 and 1994. 36 19 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. DEBT: Debt consisted of the following:
MARCH 1, MARCH 2, 1997 1996 -------- -------- (IN THOUSANDS) 4 1/2% Convertible Notes (the "Notes"), due July 1, 2000, interest payable on January 1 and July 1 of each year commencing on January 1, 1997, convertible into shares of the Company's common stock at a conversion price of $33.33 per share.................................................. 325,000 -- $350,000,000 unsecured multi-currency revolving line of credit. Interest rates are equal to either (i) the Corporate Base Rate or (ii) LIBOR plus .5%, each of which is based upon a performance grid (6.0% at March 1, 1997), with principal due on March 31, 2000. Commitment fees on the unused balance are based on the ratio of debt to cash flow (as defined) and was 0.18% at March 1, 1997........... 136,000 8,000 9 1/8% Series B Senior Subordinated Notes, unsecured, subordinated to existing debt up to an aggregate of $155 million, guaranteed by the operating subsidiaries of the Company. Due March 15, 2004, semi-annual interest payments beginning September 15, 1994. Redeemable by the Company from March 1999 to March 2001 at premiums ranging from 3.422% to 1.141%........................................... 90,000 90,000 Various revolving lines of credit, variable interest rates ranging from 4.0% to 9.5% at March 1, 1997................. 23,959 -- HMI revolving bank line of credit agreement collateralized by accounts receivable, inventory and other assets. Interest payable monthly at the lesser of the lender's prime rate or the applicable average federal funds rate plus 1.5%. This agreement was repaid in full on January 31, 1997....................................................... -- 15,873 $55,000,000 Delivery unsecured revolving credit facility. Interest rates are equal to i) LIBOR plus 1.25% or ii) the prime rate, at the Company's option (weighted average rate of 6.56% for fiscal 1995). This loan was repaid in full on May 31, 1996............... -- 11,900 Term loan facility collateralized by CEA's assets. Fixed interest rates ranging from 8.9% to 10.95%. $4,409,000 repaid in March 1997. Principal payments of $389,000 per quarter plus interest commencing October 1998. Final payment of $156,000 plus interest due in July 1999......... 5,682 6,094 CEA revolving loans, interest at floating rates, 7.7% at March 1, 1997. Interest payable monthly. Maturity dates range from December 1998 to July 1999...................... 13,396 -- Bank term loans, collateralized by equipment, with interest floating at LIBOR plus 1.75% to 2.0%, principal and interest payable monthly, maturities range from 48 months to 60 months through March 2002............................ 9,341 5,620 Convertible subordinated notes due between March 31, 1997 and January 31, 1998, bearing interest of 5.0% to 6.0%, payable quarterly or semi-annually, and convertible prior to maturity at the holder's option at prices ranging from $19.97 to $32.70, into 222,000 shares of common stock...... 4,864 5,565 City of Aurora, Colorado Industrial Development Bonds, Series 1984, collateralized by land and building, interest at a floating rate, as defined, ranging from 4.8% in 1995 to 5.0% at March 1, 1997, payable semi-annually and principal installments of varying amounts ($100,000 in 1995 and $200,000 in 1996) payable annually through November 2009....................................................... 4,380 4,480 Various notes payable due December 2006, variable interest rates (4.75% on March 1, 1997 and 5.34% on March 2, 1996), collateralized by cash deposits............................ 4,015 4,641 Other, interest from 2.9% to 17.4%.......................... 28,870 21,810 -------- -------- Total debt.................................................. 645,507 173,983 Less current portion of debt................................ 23,802 20,152 -------- -------- Long-term portion of debt................................... $621,705 $153,831 ======== ========
37 20 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The annual maturities of debt for succeeding years are as follows:
FISCAL YEAR (IN THOUSANDS) ----------- -------------- 1997............................... $ 23,802 1998............................... 10,909 1999............................... 19,506 2000............................... 465,627 2001............................... 2,244 Thereafter......................... 123,419 -------- Total............................ $645,507 ========
Certain of the debt agreements contain provisions which require maintenance of the Company's minimum net worth, certain financial ratios, including debt to cash flow and fixed charge coverage, and limit the Company's ability to pay dividends. Delivery's credit facility became due upon the acquisition by the Company but was extended until May 31, 1996, when it was repaid using the Company's line of credit. The Company's revolving credit facility (the "Senior Credit Facility") was amended and restated on November 26, 1996 to increase the borrowing capacity from $90,000,000 to $350,000,000, extend the facility termination date to March 31, 2000, lower the cost of its borrowings to LIBOR plus .50%, unsecure the assets of the Company (the previous facility was secured by substantially all of the assets, including accounts receivable and inventory of the Company and its United States subsidiaries), and to make certain other changes. The Senior Credit Facility was previously amended on May 10, 1996 to increase the Company's borrowing capacity from $90,000,000 to $250,000,000, subject to borrowing base and other restrictions and to lower the cost of its borrowings to LIBOR plus 1.25%. On May 31, 1996, the Company borrowed on its Senior Credit Facility and repaid in full the $33,270,000 outstanding revolving credit facility previously established by Delivery. On June 24, 1996, the outstanding amounts under the Senior Credit Facility were paid in full from funds generated from the issuance of the Convertible Notes. Upon this repayment, the borrowing capacity of the Senior Credit Facility was reduced from the amended capacity of $250,000,000 to $90,000,000, subject to borrowing base and other restrictions. On June 24, 1996, the Company issued $325,000,000 principal amount of Convertible Notes. The Convertible Notes are convertible into the Company's common stock at a conversion price of $33.33 per share, subject to adjustments under certain conditions. A portion of the proceeds from the sale of the Notes was used to repay the Company's revolving credit facility and an acquisition note payable with the remaining proceeds being used to fund acquisitions and for other general corporate purposes. On March 17, 1995, the Company exchanged its 9 1/8% Series A Senior Subordinated Notes due 2004 (the "Series A Notes") for 9 1/8% Series B Senior Subordinated Notes due 2004 (the "Series B Notes"). The terms of the Series B Notes are substantially the same as the Series A Notes, except that the Series B Notes are registered under the Securities Act of 1933. The illiquidity payment of approximately .5% per annum previously payable on the Series A Notes ceased when they were exchanged for the Series B Notes on March 17, 1995, reducing the annual interest rate from 9 5/8% to 9 1/8%. In fiscal 1994, the Company repurchased $10,000,000 principal amount of the Series A Notes. The Company's Senior Credit Facility prohibits the distribution of dividends without the prior written consent of the lenders and the Indenture governing the Series B Notes prohibits the Company from paying a dividend which would cause a default under such indenture or which would cause the Company to fail to comply with certain financial covenants. 38 21 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company capitalized $3,887,000 and $882,000 of interest expense in fiscal 1996 and 1995, respectively, primarily related to software developed for internal use and the construction of corporate facilities. No interest was capitalized in fiscal 1994. 8. COMMITMENTS AND CONTINGENCIES: Operating Leases: The Company has various noncancellable operating leases, primarily for warehouse buildings and delivery trucks. Lease expense, net of sublease rentals of $992,000, $30,000, and $127,000 for the years ended March 1, 1997, March 2, 1996, and February 25, 1995 was $54,567,000, $19,195,000, and $13,906,000, respectively. Future minimum lease payments are as follows:
FISCAL YEAR (IN THOUSANDS) ----------- -------------- 1997............................... $ 42,191 1998............................... 33,135 1999............................... 26,340 2000............................... 18,908 2001............................... 13,295 Thereafter......................... 46,950 -------- Total.............................. 180,819 Less subleases..................... 1,361 -------- Net obligation..................... $179,458 ========
The leases generally are for periods of three to ten years and provide for renewals of one month to five years at the Company's option. Capital Leases: The Company is the lessee of certain property and equipment under capital leases expiring in various years through 2009. Included in furniture and equipment at March 1, 1997 is $24,511,000 of assets under capital leases and related accumulated depreciation of $9,677,000. Future minimum lease payments required under these capital leases are as follows:
FISCAL YEAR (IN THOUSANDS) ----------- -------------- 1997............................... $ 7,187 1998............................... 5,397 1999............................... 3,753 2000............................... 2,242 2001............................... 1,070 Thereafter......................... 2,250 ------- Total minimum lease payments....... 21,899 Less amount representing interest.. 4,414 ------- Present value of minimum lease payments.......................... 17,485 Less current portion of capital lease obligations................. 5,940 ------- Non-current portion of capital lease obligations................. $11,545 =======
39 22 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 certain of the former shareholders of a company acquired by the Company in fiscal 1996. No legal proceedings have been commenced by these shareholders and the Company cannot determine if any legal action will be initiated, or the results or materiality of any such action. 9. INCOME TAXES: Federal, state and foreign income taxes for the fiscal years ended March 1, 1997, March 2, 1996, and February 25, 1995 consisted of the following:
1996 1995 1994 ------- ------- ------- (IN THOUSANDS) Current Federal......................................... $ 202 $10,604 $ 7,707 State........................................... 615 1,089 1,218 Foreign......................................... 1,943 3,205 -- Deferred Federal......................................... 17,149 (429) (2,499) State........................................... 5,401 1,544 (251) Foreign......................................... (793) -- -- Utilization of net operating loss................. -- (2,247) (1,051) Change in tax status.............................. (2,029) -- -- Allocated to goodwill............................. -- -- 4,374 Allocated to contributed capital.................. 11,161 -- -- Adjustment of beginning valuation allowance....... -- -- (1,204) ------- ------- ------- Total income tax expense.......................... $33,649 $13,766 $ 8,294 ======= ======= =======
The benefit recognized in fiscal 1996 for change in tax status relates to establishing deferred tax assets for an acquired S corporation. The $11,161,000 contribution to capital relates to deductions recognizable only for tax purposes of non-qualified stock options exercised during fiscal 1996. At March 1, 1997 the Company had, for United States federal and foreign tax purposes, net operating loss carryforwards of $33,650,000 and alternative minimum tax net operating loss carryforwards of $11,908,000 expiring beginning in 2003. Included in the net operating loss carryforwards are losses from acquired subsidiaries. The utilization of these carryforwards may be affected by limitations under the Internal Revenue Code and, therefore, the benefit of these pre-acquisition net operating loss carryforwards may be limited. 40 23 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The components of the net deferred tax assets and liabilities as of March 1, 1997 and March 2, 1996 are as follows:
MARCH 1, MARCH 2, 1997 1996 -------- -------- (IN THOUSANDS) Deferred tax assets: Inventory.............................................. $ 5,999 $ 3,712 Allowance accounts..................................... 4,532 1,615 Accrued purchase costs................................. 3,734 1,053 Insurance reserves..................................... 3,980 271 Accrued merger and other costs......................... 8,760 6,767 Vacation and benefits accrual.......................... 5,407 396 Accounting methods..................................... -- 4,066 Other current.......................................... 949 2,240 Net operating loss carryforwards....................... 13,275 4,879 Valuation allowance.................................... (6,049) (2,433) Other non-current...................................... 784 1,092 ------- ------- Total deferred tax assets................................ 41,371 23,658 ------- ------- Deferred tax liabilities: Accounting methods..................................... 4,943 1,650 Other current.......................................... 281 -- Property, plant and equipment.......................... 28,807 4,731 Intangible assets...................................... 3,926 5,886 Other non-current...................................... 1,157 295 ------- ------- Total deferred tax liability............................. 39,114 12,562 ------- ------- Net deferred tax asset................................... $ 2,257 $11,096 ======= ======= Financial Statements Current deferred tax assets............................ 29,076 18,470 Non-current deferred tax liabilities................... 26,819 7,374 ------- ------- Net deferred tax asset................................... $ 2,257 $11,096 ======= =======
The net change in the valuation allowance for deferred taxes in the year ended March 1, 1997 is an increase of $3,616,000, primarily related to net operating losses acquired in the current year. The Company reviewed the need for a valuation allowance and determined that it was more likely than not that certain deferred tax assets of acquired foreign subsidiaries may go unrealized. This increase was partially offset by the lapsing of restrictions placed on the usage of certain net operating losses. 41 24 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A reconciliation of the differences between the Company's expense (benefit) for income taxes and taxes at the statutory rate for the fiscal years ended March 1, 1997, March 2, 1996 and February 25, 1995 is as follows:
1996 1995 1994 ------- ------- ------- (IN THOUSANDS) Statutory federal income tax expense............ $25,825 $ 7,692 $ 8,610 Adjustments: State income taxes, net of federal effect..... 3,910 1,521 886 Foreign income taxes.......................... (123) 461 -- Merger costs.................................. 4,924 4,952 -- Amortization of goodwill...................... 3,693 1,404 1,784 Untaxed S Corporation earnings and change in tax status................................... (3,514) (347) (620) Other non-deductible items.................... 739 366 Valuation allowance on tax loss carryforward.. (47) (2,247) (2,636) Other......................................... (1,758) (36) 270 ------- ------- ------- Income tax expense............................ $33,649 $13,766 $ 8,294 ======= ======= =======
10. EMPLOYEE BENEFIT PLANS: Effective September 1, 1992, the Company implemented a retirement plan which allows employee contributions in accordance with Section 401(k) of the Internal Revenue Code. The Company matches a portion of the employee's salary and all full-time employees are eligible to participate in the plan after six months of service. For the years ended March 1, 1997, March 2, 1996, and February 25, 1995, the Company's matching contribution expense was $2,204,000, $1,807,000, and $1,704,000, respectively. CEA, the Company's majority-owned Australian subsidiary since May 1995, sponsors superannuation funds for its employees (similar to 401(k) plans in the United States). Total matching contributions by the Company for the year ended March 1, 1997 and March 2, 1996 were approximately $1,912,000 and $980,000, respectively. Certain of the Delivery pooled companies have qualified defined contribution plans, which allow for voluntary pretax contributions by employees. Expenses related to these plans totaled $316,000, $96,000, and $192,000 during fiscal 1996, 1995, and 1994, respectively. Young had a retirement plan which allowed employee contributions in accordance with Section 401(k). Young's matching contribution expenses were $106,000 and $52,000 in fiscal 1995 and 1994, respectively. On August 29, 1994, the Company's shareholders approved the adoption of the 1994 Employee Stock Purchase Plan. A maximum of 1,125,000 shares of Common Stock may be purchased by eligible employees under the 1994 Employee Stock Purchase Plan. All full-time employees with six months service at the start of the annual offering period are eligible to participate at contribution levels ranging from 1% to 15% of compensation. Contributions are applied to purchase common stock at a price equal to the lower of the beginning of the year or end of the year market price, less a discount of up to 15%. Contributions to this plan during fiscal 1996 and fiscal 1995 totaled approximately $2,066,000 and $679,000, respectively and purchases under the plan totaled 115,488 and 49,200 shares. There were no contributions to or stock purchases under the 1994 Employee Stock Purchase Plan during fiscal 1994. Sofco has an Employee Stock Ownership Plan ("the ESOP") covering substantially all full-time employees. The ESOP invested in the common stock of Sofco which was converted to Corporate Express common stock upon consummation of the acquisition. As of March 1, 1997 and March 2, 1996, the ESOP owned 42 25 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1,512,164 shares and 1,303,512 shares, respectively, of Corporate Express common stock or equivalents. Of the shares owned, 329,034 were in escrow as of March 2, 1996. Employer contributions were $436,000 for fiscal 1996, $1,925,000 for fiscal 1995, and $805,000 for fiscal 1994. In December 1990, Sofco guaranteed a $4,000,000 loan to the ESOP which is collateralized by the stock held in escrow and a security interest in accounts receivable and inventory. The loan had an approximate interest rate of 85% of prime and was repaid in full in August 1996. The loan balance at March 2, 1996 was $1,047,619 and is included in liabilities on the Company's consolidated balance sheets with a corresponding reduction in additional paid-in capital. 11. COMMON STOCK: As of March 1, 1997 and March 2, 1996 there were 126,171,467 and 111,954,350 common shares outstanding, respectively (after giving effect to the three-for- two stock split effected in the form of a stock dividend in January 1997). On January 31, 1997, a 50% share dividend of approximately 39,979,000 shares of common stock was distributed to shareholders of record as of January 24, 1997. On September 15, 1995, the Company sold 24,486,792 shares in a follow-on public offering of its common stock, and selling shareholders sold 3,113,208 shares at a price of $16.00 per share. Of the $375,200,000 of net proceeds to the Company from the offering, $195,800,000 was used to pay for the prior purchase of the Company shares held by OfficeMax, Inc., the Company's largest shareholder, and $61,000,000 was used to repay existing indebtedness. The remaining proceeds were used to finance the Company's acquisitions and for general corporate purposes. On June 21, 1995, a 50% share dividend of approximately 21,075,000 shares of common stock was distributed to shareholders of record as of June 15, 1995. On March 30, 1995, a follow-on public offering of 10,155,938 shares of common stock was consummated at a price to the public of $11.12 per share. Of the shares offered, 4,500,000 shares were sold by the Company and 5,655,938 shares were sold by selling security holders, including 397,407 shares issued upon exercise of warrants purchased by the underwriters. On September 30, 1994, the Company consummated its initial public offering of 15,750,000 shares of common stock at a price of $7.11 per share. Selling shareholders sold an additional 3,656,250 shares of common stock in the initial public offering. In connection with this offering, the Company effected a one-for-two reverse stock split in August 1994 and converted all of its outstanding preferred stock to common stock on a three-for-two basis in September 1994. The Company has authorized 3,000,000 shares of Non-Voting Common Stock, par value $.0002 per share. No shares of the Non-Voting Common Stock are issued or outstanding at March 1, 1997 or March 2, 1996. In addition, the Company has authorized 25,000,000 shares of Preferred Stock, par value $.0001 per share. No shares of Preferred Stock are issued or outstanding at March 1, 1997 or March 2, 1996. STOCK-BASED COMPENSATION PLANS: Options: 1992 Stock Option Plan. In February 1992, the Company adopted the Corporate Express, Inc. 1992 Stock Option Plan (the "1992 Stock Option Plan"). The 1992 Stock Option Plan was approved by the Company's shareholders in May 1992 and amended in January 1994. Options were granted under the 1992 Stock Option Plan at the fair market value at the time of grant as determined by the Board of Directors or the Compensation 43 26 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Committee, based on recent stock transactions. Options granted under the 1992 Stock Option Plan typically vest in equal monthly installments over a five- year period, beginning on the month after the first anniversary of the grant date. The options generally expire on the seventh anniversary of the grant date. Executive Plan. In June 1994, the Board of Directors adopted the 1994 Executive Stock Option Plan (the "Executive Plan") which permits the grant of stock options to the Company's executive officers. The Compensation Committee administers the plan and establishes the terms of the options granted, including the number of shares, the exercise price, vesting schedule and termination provisions. The particular terms of each grant are set forth in separate stock option agreements entered into between the Company and the executive officer. The maximum aggregate number of shares of common stock for which options may be granted under this plan originally was 3,375,000 and was increased to 5,625,000 in August 1995, which increase was approved by shareholders in August 1996, and no single executive officer may be granted options covering more than 750,000 shares of common stock in any calendar year. Vesting accelerates upon occurrence of certain conditions, including increases in the Company's stock price and changes in control of the Company. The options expire ten years from the date of grant. 1994 Stock Option Plan. The 1994 Stock Option and Incentive Plan (the "1994 Stock Option Plan") was adopted by the Board of Directors and approved by shareholders in August 1994. This plan replaced, for future grants, the 1992 Stock Option Plan. The 1994 Stock Option Plan permits the Company to grant incentive stock options and nonqualified stock options. The maximum aggregate number of shares of common stock which may be issued under the 1994 Stock Option Plan was 2,812,500 and was increased to 9,562,500 in March 1996 and approved by the shareholders in August 1996. Options granted under the 1994 Stock Option Plan typically vest in equal monthly installments over a period of five years, beginning in the month after the first anniversary of the grant date. The options generally expire on the seventh anniversary of the grant date. Options and awards that expire, terminate or are cancelled or forfeited will again be available for grant or award under the plan. Delivery Plan. Delivery had a stock option plan which was approved by its shareholders in January 1994. On March 1, 1996, effective with the merger with Corporate Express, all Delivery options became vested and were exercisable into shares of common stock, as adjusted to reflect the exchange ratio as defined in the merger agreement. UT Plan. UT had stock option plans which, effective with the merger with Corporate Express on November 8, 1996, became vested and were exercisable into shares of common stock, as adjusted to reflect the exchange ratio as defined in the merger agreement. Directors Plan. The 1996 Stock Option Plan for Outside Directors (the "Directors Plan") was adopted by the Board of Directors and approved by shareholders in August 1996. The maximum aggregate number of shares of common stock for which options may be granted under this plan is 375,000. Initial options granted under the Directors Plan vest at 40% on the first anniversary of the date of grant, 40% on the second anniversary and the remaining 20% on the third anniversary. All other stock options shall become exercisable at 50% on the first anniversary of the date of grant and the remaining 50% on the second anniversary of the date of grant. Each eligible director who first becomes a member of the Board shall automatically be granted stock options to purchase 37,500 shares on the date of his or her selection or election to the Board. Each eligible director shall also automatically be granted stock options to purchase 15,000 shares on each anniversary of the date of such initial grant (beginning on the second such anniversary). Supplemental Plan. The 1996 Supplemental Stock Option Plan (the "Supplemental Plan") was adopted by the Board of Directors in December 1996. The maximum aggregate number of shares of common stock for which options may be granted under this plan is 6,000,000. Option grants under the Supplemental Plan and the terms of the grants are identical to the 1994 Stock Option Plan. 44 27 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The summary of the status of the Company's seven fixed stock option plans as of March 1, 1997, March 2, 1996 and February 25, 1995, and changes during the years ending on those dates is presented below:
MARCH 1, 1997 MARCH 2, 1996 FEBRUARY 25, 1995 ------------------ ------------------ ----------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (000'S) PRICE (000'S) PRICE (000'S) PRICE ------- --------- ------- --------- ------- --------- Outstanding at beginning of year................ 15,216 $10.90 6,465 $4.57 2,914 $2.88 Granted................. 4,405 21.15 9,872 14.21 4,076 5.74 Exercised............... (1,686) 5.98 (819) 2.03 (240) 3.83 Forfeited............... (1,102) 18.46 (302) 7.67 (285) 4.62 ------ ------ ----- Outstanding at end of year................... 16,833 13.59 15,216 10.90 6,465 4.57 ====== ====== ===== Options exercisable at year end............... 5,407 3,324 716 Weighted-average fair value of options granted during the year................... $ 7.61 $ 6.26
The following table summarizes information about fixed stock options outstanding as of March 1, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------- ---------------------------- NUMBER WEIGHTED-AVERAGE NUMBER OUTSTANDING REMAINING EXERCISABLE RANGE OF AT 3/1/97 CONTRACTUAL LIFE WEIGHTED-AVERAGE AT 3/1/97 WEIGHTED-AVERAGE EXERCISE PRICES (000'S) IN YEARS EXERCISE PRICE (000'S) EXERCISE PRICE --------------- ----------- ---------------- ---------------- ----------- ---------------- $ .10 to 3.55........... 1,200 3.4 $ 2.99 731 $ 2.92 4.50 to 6.53............ 4,114 7.2 5.05 3,622 5.07 7.11 to 11.11........... 756 6.1 8.68 357 8.72 12.45 to 14.67.......... 3,323 7.5 13.37 355 12.95 15.38 to 19.83.......... 5,209 6.3 19.43 191 16.63 21.75 to 38.70.......... 2,231 6.5 23.37 151 29.83 ------ ----- 16,833 6.6 13.59 5,407 6.63 ====== =====
The Company applies APB Opinion 25 and related interpretations in accounting for the above plans. Accordingly, no compensation cost has been recognized for its fixed stock-based plans. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for fiscal 1996 and 1995: risk-free interest rates ranging from 5.38% to 6.58%; expected life of four years; volatility of 35%; dividend yield of 0%. Had compensation cost been determined based on the fair value at the grant dates for awards under those plans consistent with the method of FASB Statement 123, the Company's net income and net income per common share would have been reduced to the pro forma amounts indicated below:
YEAR ENDED ----------------- MARCH 1, MARCH 2, 1997 1996 -------- -------- Net income (loss)........................... As reported $40,281 $5,140(1) Pro forma 32,062 $2,808 Net income (loss) per common share.......... As reported $ 0.31 $ 0.05(1) Pro forma 0.25 0.03
- - -------- (1) Net income and net income per common share as reported represent pro forma net income and pro forma net income per common share as adjusted for the effects of pro forma S Corporation taxes as more fully described in Note 13. 45 28 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Warrants: As of February 25, 1995, warrants to purchase 1,489,500 shares of the Company's common stock, had been issued with exercise prices of $.02 per share for 6,750 shares, $4.89 per share for 562,500 shares and $1.78 for the remaining 920,250 shares. As of March 1 1997, warrants to purchase 675,000 of common stock were outstanding, with exercise prices of $4.89 per share for 562,500 shares and $1.78 per share for the remaining 112,500 shares. The warrants expire on various dates through January 31, 1999. Outstanding warrants to purchase Delivery common stock are vested and exercisable into shares of Corporate Express common stock, effective with the merger with Corporate Express on March 1, 1996, at an exchange ratio as defined in the merger agreement. As of March 1 1997, warrants to purchase 49,950 and 54,000 shares of Corporate Express common stock were outstanding at prices of $5.55 and $9.44 per share, respectively. 12. FAIR VALUE OF FINANCIAL INSTRUMENTS: Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial Instruments," the Company has estimated the fair value of its financial instruments using the following methods and assumptions: . The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value; . The fair value of the Convertible Notes is based on quoted market prices and was approximately $295,750,000 at March 1, 1997; . The fair value of the Series B Notes is based on quoted market prices and was approximately $92,025,000 at March 1, 1997; . The carrying amounts of the Company's debt, other than the Convertible Notes and the Series B Notes, approximates fair value, estimated by discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. 13. PRO FORMA NET INCOME: The pro forma net income and pro forma net income per share reflects the tax adjustment for a fiscal 1996 acquisition accounted for as a pooling of interests that was previously an S corporation for income tax purposes, as if the acquired company had filed a C corporation tax returns for all periods presented. The effect is as follows:
FISCAL FISCAL FISCAL 1996 1995 1994 ------- ------ ------- (IN THOUSANDS) Net income before pro forma adjustments, per consolidated statements of operations............. $41,996 $5,551 $16,496 Pro forma provision for income taxes............... 1,715 411 727 ------- ------ ------- Pro forma net income............................... $40,281 $5,140 $15,769 ======= ====== =======
14. INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION The Company's major operations consist of providing the distribution of products and services. The product distribution segment has operations in the United States, Australia, New Zealand, Canada, the United Kingdom, Germany, France and Italy. Currently, the largest operations in the international segment are in Australia. Services include same day delivery, distribution and logistics management and call center. 46 29 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net sales, merger and other nonrecurring charges, operating profit, identifiable assets, capital expenditures and depreciation and amortization pertaining to the industries and geographic areas in which the Company operates are presented below. INDUSTRY SEGMENTS:
CORPORATE EXPRESS PRODUCT CONSOLIDATED DISTRIBUTION SERVICES ------------ ------------ -------- (IN THOUSANDS) Fiscal year ended March 1, 1997: Net sales.................................. $3,196,056 $2,436,296 $759,760 Merger and other nonrecurring charges...... 19,840 8,406 11,434 Operating profit........................... 100,490 80,396 20,094 Identifiable assets........................ 1,843,977 1,685,716 158,261 Capital expenditures....................... 119,639 104,432 15,207 Depreciation and amortization.............. 48,736 33,446 15,290 Fiscal year ended March 2, 1996: Net sales.................................. $1,890,639 $1,548,175 $342,464 Merger and other nonrecurring charges...... 42,790 29,203 13,587 Operating profit........................... 38,160 29,191 8,969 Identifiable assets........................ 1,023,365 900,722 122,643 Capital expenditures....................... 53,124 41,469 11,655 Depreciation and amortization.............. 28,498 19,977 8,521 Fiscal year ended February 25, 1995: Net sales.................................. $1,145,151 $ 924,886 $220,265 Operating profit........................... 40,953 29,811 11,142 Identifiable assets........................ 645,309 568,562 76,747 Capital expenditures....................... 18,670 11,525 7,145 Depreciation and amortization.............. 17,078 12,694 4,384
47 30 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) GEOGRAPHICAL SEGMENTS:
CORPORATE EXPRESS DOMESTIC INTERNATIONAL CONSOLIDATED OPERATIONS OPERATIONS ------------ ---------- ------------- (IN THOUSANDS) Fiscal year ended March 1, 1997: Net sales............................... $3,196,056 $2,630,930 $565,126 Merger and other nonrecurring charges... 19,840 18,511 1,329 Operating profit........................ 100,490 95,788 4,702 Identifiable assets..................... 1,843,977 1,519,152 324,825 Capital expenditures.................... 119,639 108,655 10,984 Depreciation and amortization........... 48,736 41,598 7,138 Fiscal year ended March 2, 1996: Net sales............................... $1,890,639 $1,652,438 $238,201 Merger and other nonrecurring charges... 42,790 42,790 -- Operating profit........................ 38,160 28,943 9,217 Identifiable assets..................... 1,023,365 868,227 155,138 Capital expenditures.................... 53,124 50,963 2,161 Depreciation and amortization........... 28,498 26,010 2,488 Fiscal year ended February 25, 1995: Net sales............................... $1,145,151 $1,143,457 $ 1,694 Operating profit........................ 40,953 40,939 14 Identifiable assets..................... 645,309 641,898 3,411 Capital expenditures.................... 18,670 18,665 5 Depreciation and amortization........... 17,078 17,066 12
48 31 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 15. QUARTERLY FINANCIAL DATA (UNAUDITED):(A)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Fiscal year ended March 1, 1997: Net sales..................... $ 650,861 $ 755,009 $ 889,563 $ 900,623 Gross profit.................. 164,329 182,814 217,197 213,970 Net income.................... 12,082 13,417 9,290(b) 7,208(b) Pro forma net income.......... 11,752 13,090 8,918 6,521 Pro forma net income per common share................. .09 .10 .07 .05 Fiscal year ended March 2, 1996: Net sales..................... $ 394,115 $ 452,540 $ 493,725 $ 550,259 Gross profit.................. 99,211 111,075 125,670 131,365 Income(loss) from continuing operations................... 7,154 7,637 11,898 (19,913) Net income (loss)............. 6,069 7,637 11,898 (20,053)(c) Pro forma income (loss) from continuing operations........ 7,236 7,501 11,691 (20,064) Pro forma net income (loss)... 6,152 7,501 11,691 (20,204) Pro forma income (loss) from continuing operations per common share................. .07 .07 .10 (.18) Pro forma net income (loss) per common share............. .06 .07 .10 (.18)
- - -------- (a) Quarterly amounts have been restated to include the accounts and operations of HMI, Sofco, Nimsa and UT for fiscal 1996, and HMI, Sofco, Nimsa, Delivery and Young for fiscal 1995. (b) In the third and fourth quarters of fiscal 1996, the Company recognized pretax charges of $12.4 million and $7.5 million, respectively, related to merger and other nonrecurring items. (c) In the fourth quarter of fiscal 1995, the Company recognized pretax charges of $42.8 million related to merger and other nonrecurring items. 49 EX-99.G.2 12 FINANCIALS ON FORM 10-Q 1 EXHIBIT (g)(2) PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ASSETS November 29, March 1, 1997 1997 ---------- ---------- (Unaudited) Current assets: Cash and cash equivalents $ 33,779 $ 65,650 Trade accounts receivable, net of allowance of $15,353 and $13,633, respectively 619,268 524,905 Notes and other receivables 71,884 55,965 Inventories 242,414 219,080 Deferred income taxes 30,919 31,155 Other current assets 43,122 29,446 ---------- ---------- Total current assets 1,041,386 926,201 Property and equipment: Land 17,575 19,441 Buildings and leasehold improvements 129,127 127,185 Furniture and equipment 361,795 308,770 ---------- ---------- 508,497 455,396 Less accumulated depreciation (178,871) (154,337) ---------- ---------- 329,626 301,059 Goodwill, net of $53,944 and $39,160 of accumulated amortization, respectively 708,296 681,804 Other assets, net 71,745 64,194 ---------- ---------- Total assets $2,151,053 $1,973,258 ========== ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -2- 2 CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEETS, CONTINUED (IN THOUSANDS) LIABILITIES AND SHAREHOLDERS' EQUITY November 29, March 1, 1997 1997 ---------- ---------- (Unaudited) Current liabilities: Accounts payable $ 346,729 $ 312,137 Accrued payroll and benefits 58,765 48,984 Accrued purchase costs 9,843 12,888 Accrued merger and related costs 25,435 18,484 Other accrued liabilities 59,724 60,067 Current portion of long-term debt and capital leases 26,583 30,676 ---------- ---------- Total current liabilities 527,079 483,236 Capital lease obligations 11,059 11,545 Long-term debt 744,414 685,670 Deferred income taxes 43,165 29,232 Minority interest in subsidiaries 20,955 22,015 Other non-current liabilities 15,423 14,410 ---------- ---------- Total liabilities 1,362,095 1,246,108 Contingencies (Note 8) 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, 141,500,194 and 136,911,695 shares issued and outstanding, respectively 28 27 Common stock, non-voting, $.0002 par value, 3,000,000 shares authorized, none issued or outstanding -- -- Additional paid-in capital 706,353 678,329 Retained earnings 88,878 49,970 Foreign currency translation adjustments (6,301) (1,176) ---------- ---------- Total shareholders' equity 788,958 727,150 ---------- ---------- Total liabilities and shareholders' equity $2,151,053 $1,973,258 ========== ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -3- 3 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended ---------------------------- ----------------------------- November 29, November 30, November 29, November 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) Net sales $1,064,181 $ 949,918 $3,048,125 $2,481,518 Cost of sales 804,624 716,446 2,318,386 1,868,036 ------------ ------------ ------------ ------------ Gross profit 259,557 233,472 729,739 613,482 Warehouse operating and selling expenses 171,020 159,130 509,505 425,586 Corporate general and administrative expenses 29,132 26,721 87,912 74,241 Merger and other nonrecurring charges 17,804 12,366 17,684 12,366 ------------ ------------ ------------ ------------ Operating profit 41,601 35,255 114,638 101,289 Interest expense, net 12,403 9,910 36,212 25,539 ------------ ------------ ------------ ------------ Income before income taxes 29,198 25,345 78,426 75,750 Income tax expense 14,353 14,358 35,077 35,029 ------------ ------------ ------------ ------------ Income before minority interest 14,845 10,987 43,349 40,721 Minority interest loss (income) 28 (360) (1,014) (462) ------------ ------------ ------------ ------------ Income before extraordinary item 14,817 11,347 44,363 41,183 Extraordinary item, net of tax (7,108) -- (7,108) (54) ------------ ------------ ------------ ------------ Net income 7,709 11,347 37,255 41,129 ============ ============ ============ ============ Pro forma net income $ 7,709 $ 10,974 $ 37,255 $ 40,100 ============ ============ ============ ============ Pro forma net income per common share: Continuing operations $ 0.10 $ 0.08 $ 0.30 $ 0.29 Extraordinary item $ (0.05) -- $ (0.05) -- ------------ ------------ ------------ ------------ Net income $ 0.05 $ 0.08 $ 0.25 $ 0.29 ============ ============ ============ ============ Weighted average common shares outstanding 150,636 142,235 146,789 140,321 ============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -4- 4 CORPORATE EXPRESS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Nine Months Ended ----------------------------- November 29, November 30, 1997 1996 ------------ ------------ (Unaudited) Cash flows from operating activities: Net income $ 37,255 $ 41,129 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 35,029 24,718 Amortization 17,997 13,982 Loss on early extinguishment of debt 7,108 -- (Gain) loss on sale of assets 640 (95) Non-cash portion of merger and restructuring charge 1,865 2,384 Adjustment to conform fiscal years 1,752 204 Minority interest (1,014) (461) Other 2,702 (341) Changes in assets and liabilities, excluding acquisitions: (Increase) decrease in accounts receivable (96,242) (56,321) (Increase) decrease in inventory (18,667) (5,234) (Increase) decrease in other current assets (7,141) (6,940) (Increase) decrease in other assets 6,150 3,047 Increase (decrease) in accounts payable 32,585 21,704 Increase (decrease) in accrued liabilities 1,687 10,467 ---------- ---------- Net cash provided by operating activities 21,706 48,243 ---------- ---------- Cash flows from investing activities: Proceeds from sale of assets 20,232 1,946 Capital expenditures (69,029) (91,314) Payment for acquisitions, net of cash acquired (37,538) (227,026) Investment in marketable securities (10,902) (18,273) Other 2,670 (8,730) ---------- ---------- Net cash used in investing activities (94,567) (343,397) ---------- ---------- Cash flows from financing activities: Issuance of common stock 7,533 8,977 Issuance of subsidiary common stock 2,434 -- Debt issuance costs (704) (8,428) Proceeds from long-term borrowings 8,324 344,834 Repayments of long-term borrowings (30,040) (16,298) Proceeds from short-term borrowings 9,267 1,840 Repayments of short-term borrowings (6,247) (22,537) Net proceeds from line of credit 113,205 2,879 Cash paid to retire bonds (62,379) -- Other 34 (4,666) ---------- ---------- Net cash provided by financing activities 41,427 306,601 Net cash used in discontinued operations (10) (177) Effect of foreign currency exchange rate changes on cash (427) 232 ---------- ---------- (Decrease) increase in cash and cash equivalents (31,871) 11,502 Cash and cash equivalents, beginning of period 65,650 31,837 ---------- ---------- Cash and cash equivalents, end of period $ 33,779 $ 43,339 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -5- 5 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS Supplemental schedule of noncash investing and financing activities: Capital lease obligations in the amount of $3,504,000 and $5,853,000 were incurred during the nine months ended November 29, 1997 and November 30, 1996, respectively, for equipment and vehicles. During the nine months ended November 29, 1997, the Company invested $30,391,000 in net cash and 3,147,614 shares of common stock in its acquisition program. During the nine months ended November 30, 1996, the Company invested $219,917,000 in net cash and approximately 2,421,000 shares of common stock for acquisitions. In conjunction with these acquisitions, liabilities were assumed as follows: Nine Months Ended ------------------ November 29, November 30, 1997 1996 ---- ---- (In thousands) (Unaudited) Fair value of assets and goodwill acquired $ 79,801 $ 541,469 Cash paid, net of cash acquired (30,391) (219,917) Issuance of notes payable -- (4,325) Issuance of stock (8,441) (75,620) Purchase price payable, included in current liabilities (1,689) (4,724) -------- --------- Liabilities assumed $ 39,280 $ 236,883 ======== ========= In addition to the amounts set forth above, during the nine months ended November 29, 1997, the Company paid $7,147,000 and issued approximately 61,932 shares of common stock for prior period acquisitions and acquired the remaining 49% interest in Corporate Express United Kingdom for shares of common stock of the Company. During the nine months ended November 30, 1996, the Company paid $4,820,000 for prior period acquisitions, $2,289,000 to dissenting shareholders of a pooled company, purchased a warehouse facility for 135,000 shares of common stock and issued 71,471 shares of common stock to retire convertible debt of $1,449,400 previously issued by one of the Company's acquired subsidiaries. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -6- 6 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the accounts of Corporate Express, Inc. ("Corporate Express" or the "Company") and its majority-owned subsidiaries. The following acquisitions were accounted for as poolings of interests and, accordingly, the accompanying financial statements have been restated to include their accounts and operations: . Nimsa S.A. ("Nimsa") was acquired by the Company on October 31, 1996. . Bevo Acquisition Corp., Inc., a wholly-owned subsidiary of the Company, was merged with and into United TransNet, Inc. ("UT") on November 8, 1996. . IMS Acquisition, Inc., a wholly-owned subsidiary of the Company, was merged with and into Sofco Mead, Inc. ("Sofco") on January 24, 1997. . H.M. Acquisition Corp., a wholly-owned subsidiary of the Company, was merged with and into Hermann Marketing, Inc. ("HMI") on January 30, 1997. . IDD Acquisition Corp., a wholly-owned subsidiary of the Company, was merged with and into Data Documents Incorporated ("DDI") on November 26, 1997. Acquisitions accounted for as purchases are included in the accounts and operations as of the effective date of the transaction 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 transaction 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/A for the year ended March 1, 1997. Certain of the Company's locations calculate cost of sales using an estimated gross profit method for interim periods. Cost of sales at these locations are adjusted based on physical inventories which are performed no less than once a year. The Company capitalizes certain salaries and wages and payments to outside firms for direct services related to the development and implementation of its software. All software is amortized over its economic useful life of three to seven years using the straight-line method. New Accounting Standards: In the fourth quarter of fiscal 1997, the Company will adopt SFAS No. 128, "Earnings per Share." This statement simplifies the standards for computing earnings per share found in APB Opinion No. 15, "Earnings per Share" and makes them comparable to international earnings per share standards. Had SFAS No. 128 been effective during the nine months ended November 29, 1997 and November 30, 1996, (i) "Basic earnings per share" under SFAS No. 128 would have been $.27 and $.31, respectively, and (ii) "Dilutive earnings per share" under SFAS No. 128 would have been $.25 and $.29, respectively. Had SFAS No. 128 been effective during the three months ended November 29, 1997 and November 30, 1996, (i) "Basic earnings per share" under SFAS No. 128 would have been $.05. and $.08, respectively, and (ii) "Dilutive earnings per share" under SFAS No. 128 would have been $.05 and $.08, respectively. -7- 7 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS 2. POOLING OF INTERESTS TRANSACTION 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 for large corporate customers. Net sales and net income for DDI for the nine months ended November 29, 1997 were $196,991,000 and $8,133,000, respectively, and for the nine months ended September 30, 1996 were $186,085,000 and $7,630,000 respectively. Net income excludes merger charges, extraordinary loss and conforming accounting adjustments. The consolidated statement of operations for the nine months ended November 29, 1997 include the income and expenses of Corporate Express and DDI for the nine months ended November 29, 1997. The consolidated statement of operations for the nine months ended November 30, 1996 include the income and expenses of Corporate Express for the nine months ended November 30, 1996 and the income and expenses of DDI for the nine months ended September 30, 1996. An adjustment has been made in fiscal 1997 to credit retained earnings directly for DDI's January and February 1997 net income of $1,752,000. DDI sales for January and February 1997 were $42,137,000. In addition to the DDI acquisition, the Company completed six other acquisitions in fiscal 1997, which were accounted for as immaterial poolings of interests for approximately 2,256,000 shares of common stock. The financial statements for these immaterial acquisitions for periods prior to the acquisition have not been restated. 3. ACCRUED PURCHASE COSTS In conjunction with purchase acquisitions, the Company accrues certain of the direct costs associated with closing redundant facilities of acquired companies, and severance and relocation payments for the acquired company's employees. The following table sets forth activity in the Company's accrued purchase costs liability account for the nine months ended November 29, 1997:
Disposition Facility Redundant of Assets Total Exit Costs Facilities Severance & Other ----- ---------- ---------- ----------- ------- (In thousands) Balance, March 1, 1997 $12,888 $ 1,845 $ 3,269 $ 6,149 $ 1,625 Additions/Adjustments 4,493 724 864 2,894 11 Payments (7,275) (1,525) (1,065) (4,420) (265) Reversals to goodwill (263) -- (72) (166) (25) ------ ------ ------ ------ ------ Balance, November 29, 1997 $ 9,843 $ 1,044 $ 2,996 $ 4,457 $ 1,346 ====== ====== ====== ====== ======
4. MERGER AND OTHER NONRECURRING CHARGES During the third quarter of fiscal 1997, the Company recorded a net merger and other nonrecurring charge of $17,804,000. This net charge is comprised of $20,868,000 in merger and other nonrecurring charges in connection with the Company's acquisition and integration of DDI, the continued integration of delivery and certain provisions for reductions in force and facility closures at other locations, offset by $3,064,000 in revisions to the merger and other nonrecurring charges established in previous periods to reflect the final transaction and exit costs incurred. These revisions reflect the finalization of contract buyouts and delays in closing certain facilities and disposition of related assets. The current quarter charge includes the closure of 42 facilities and the reduction of approximately 720 employees. -8- 8 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS During the second quarter of fiscal 1997, the Company incurred $754,000 of merger transaction costs related to second quarter acquisitions accounted for as immaterial poolings of interests. Additionally, the Company reduced previous charges by $874,000 to reflect actual exit costs to be incurred. During the third and fourth quarters of fiscal 1996, the Company recorded an estimated net merger and other nonrecurring charge of $19,840,000 in connection with the Company's acquisition of UT, Nimsa, HMI and Sofco. During the fourth quarter of fiscal 1995, the Company recorded a merger and other nonrecurring charge primarily in conjunction with the U.S. Delivery Systems, Inc. ("Delivery") and Richard Young Journal, Inc. acquisitions. This liability was adjusted in fiscal 1996 to reflect the actual merger transaction costs incurred and revised plans primarily as a result of the integration of UT with Delivery. The Company expected to complete this plan within two years; however, due to the acquisition of UT in the third quarter of fiscal 1996, the revised exit plan is expected to be completed by the end of the first quarter of fiscal 1998. The following table summarizes the merger and other non-recurring charges and sets forth their usage for the nine months ended November 29, 1997:
Balance FY 97 Cash Non-Cash Balance 3/1/97 Net Charge Payments Usage 11/29/97 ------- ---------- -------- --------- --------- (In thousands) Merger transaction costs (1) $ 4,082 $ 6,526 $(3,597) $ 7,011 Severance and terminations (2) 7,665 8,345 (3,732) 12,278 Facility closure and consolidation (3) 6,737 948 (1,539) 6,146 ------- -------- ------- -------- Accrued merger and related costs, balance 18,484 15,819 (8,868) 25,435 Other asset write-downs and costs (4) 4,152 1,865 -- $(1,955) 4,062 ------- -------- ------- ------- -------- Total $22,636 $17,684 $(8,868) $(1,955) $ 29,497 ======= ======= ======= ======= ========
(1) Merger transaction costs are the direct costs from the pooling transactions and include legal, accounting, investment banking, printing, contract buy-outs and other related costs. Remaining merger transactions costs for the fiscal 1996 charge are primarily for the UT acquisition and include contract buy-outs for certain employees which are expected to be resolved by the end of fiscal 1997 and total $734,000. The remaining merger transaction costs for the 1997 charge total $6,277,000 and are expected to be utilized by the first quarter of fiscal 1998. (2) Severance and employee termination costs are related to the elimination of duplicate management positions, facility closures and consolidations, and centralization of certain shared services. Of the 1,717 employees currently planned to be terminated, 392 have been terminated as of November 29, 1997. The Company expects to complete the facility closures and related terminations for the fiscal 1995 charge, which totals $1,839,000, by the end of the first quarter in fiscal 1998 and the fiscal 1996 charge, which totals $2,879,000, 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 totals $7,560,000, 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. One hundred thirty four of the 223 facilities currently planned to be closed or consolidated have been closed or consolidated. The remaining facilities in the fiscal 1995 charge are expected to be closed by the end of the first quarter in fiscal 1998, the remaining facilities in the fiscal 1996 charge are expected to be closed by the end of fiscal 1998, and the facilities identified in the 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 loss on sale of assets and leasehold improvements and equipment being abandoned or written off as a result of the exit plans. The -9- 9 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. 5. PRO FORMA ACQUISITION RESULTS On May 15, 1996, the Company acquired all of the outstanding capital stock of ASAP Software Express, Inc. ("ASAP"), a leading distributor of software to large corporations for a purchase price of approximately $98,000,000. In addition, the Company purchased all of the outstanding capital stock of Boulevard Produits De Bureau, Inc. ("Boulevard"), a seller of office supplies, furniture and equipment, for a net cash purchase price of $16,102,000. The Company also repaid $9,498,000 of Boulevard promissory notes with cash of $731,900 and 356,832 shares of the Company's common stock. The excess of the purchase price over the fair market value of the net tangible assets acquired in both acquisitions was allocated to goodwill and is being amortized over 40 years. The operating results of ASAP and Boulevard are included in the Company's consolidated statement of operations from the effective date of each acquisition. The following pro forma financial information assumes the ASAP and Boulevard acquisitions occurred at the beginning of the nine-month period ended November 30, 1996. 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. The pro forma results listed below are unaudited and reflect purchase price adjustments. Nine months Ended November 30, 1996 ----------------- (In thousands, except per share amounts) Net sales $2,532,520 Net income 41,428 Net income per share 0.32 6. PRO FORMA NET INCOME: The pro forma net income and pro forma net income per share reflect the tax adjustment for a fiscal 1996 acquisition accounted for as a pooling of interests that was previously an S corporation for income tax purposes, as if the acquired company had filed a C corporation tax return for all periods presented. The effect is as follows:
Three Months Ended Nine Months Ended November 30, 1996 November 30, 1996 ------------------ ------------------ Net income before pro forma adjustments, per consolidated statements of operations $11,347 $41,129 Pro forma provision for income taxes 373 1,029 ------ ------ Pro forma net income $10,974 $40,100 ====== ======
7. EXTRAORDINARY ITEM The Company repurchased approximately $54,068,000 of the $60,500,000 of DDI 13.5% notes at a premium. The loss on the repurchase of $11,846,000 net of an estimated tax benefit of $4,738,000 is reflected as an extraordinary item. -10- 10 CORPORATE EXPRESS, INC. NOTES TO CONSOLIDATED STATEMENTS 8. 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. -11- -----END PRIVACY-ENHANCED MESSAGE-----