<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 1, 1996
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission File No. 0-24642
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CORPORATE EXPRESS, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0978360
- ------------------------------- --------------------
(State of incorporation or (I.R.S. Employer
organization) Identification No.)
325 Interlocken Parkway
Broomfield, Colorado 80021
- ------------------------ -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 373-2800
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ---------
The number of shares of the registrant's common stock, par value
$.0002 per share, outstanding as of July 8, 1996 was 69,201,496.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
June 1, March 2,
1996 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 30,079 $ 28,664
Trade accounts receivable, net of allowance
of $6,492 and $5,380, respectively 292,062 266,360
Notes and other receivables 29,807 27,060
Inventories 119,408 101,995
Deferred income taxes 20,729 18,157
Other current assets 17,635 17,234
--------- ----------
Total current assets 509,720 459,470
Property and equipment:
Land 9,614 8,384
Buildings and leasehold improvements 48,753 32,935
Furniture and equipment 138,530 117,655
---------- -----------
196,897 158,974
Less accumulated depreciation (55,145) (49,475)
---------- -----------
141,752 109,499
Goodwill, net of $18,891 and $16,046 of
accumulated amortization, respectively 445,108 324,603
Other assets, net 18,072 16,951
---------- -----------
Total assets $1,114,652 $ 910,523
========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-2-
<PAGE>
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS, Continued
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 1, March 2,
1996 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 167,244 $ 135,069
Payable for acquisitions 46,102 2,063
Accrued payroll and benefits 27,514 23,019
Accrued purchase costs 4,169 3,049
Accrued merger and related costs 19,431 24,880
Other accrued liabilities 34,320 33,777
Current portion of long-term debt and
capital leases 9,461 20,151
Other 126 219
----------- -----------
Total current liabilities 308,367 242,227
Capital lease obligations 10,694 9,568
Long-term debt 241,684 127,900
Deferred income taxes 12,390 7,374
Minority interest in subsidiaries 26,302 24,843
Other non-current liabilities 2,918 2,097
----------- -----------
Total liabilities 602,355 414,009
Contingencies (Note 7)
Shareholders' equity:
Common stock, $.0002 par value, 100,000,000
shares authorized, 69,378,000 and 69,088,000
shares issued and outstanding, respectively 14 14
Additional paid-in capital 506,914 502,559
Retained earnings (accumulated deficit) 3,065 (6,712)
Foreign currency translation adjustments 2,304 653
----------- -----------
Total shareholders' equity 512,297 496,514
----------- ----------
Total liabilities and shareholders'
equity $ 1,114,652 $ 910,523
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-3-
<PAGE>
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
June 1, May 27,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales $ 500,624 $ 330,394
Cost of sales 369,178 243,586
---------- ----------
Gross profit 131,446 86,808
Warehouse operating and selling expense 95,309 62,611
Corporate general and administrative expenses 15,933 9,243
---------- ----------
Operating profit 20,204 14,954
Interest expense, net 3,279 4,203
Other income - 167
---------- ----------
Income before income taxes 16,925 10,918
Income tax expense 7,079 4,297
---------- ----------
Income before minority interest 9,846 6,621
Minority interest 230 115
---------- ----------
Net income $ 9,616 $ 6,506
========== ==========
Net income per share $ .13 $ .10
========== ==========
Weighted average common shares outstanding 75,139 62,971
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-4-
<PAGE>
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
June 1, May 27,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities: $ 9,616 $ 6,506
Net income
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 5,131 3,133
Amortization 3,155 1,951
Minority interest 230 115
Other 187 853
Changes in assets and liabilities, excluding
acquisitions:
Decrease (increase) in accounts receivable 11,013 (2,806)
Increase in inventory (5,384) (6,583)
Increase in other current assets (872) (969)
Decrease (increase) in other assets 2,664 (522)
(Decrease) in accounts payable (13,661) (13,101)
(Decrease) in accrued liabilities (10,508) (1,701)
----------- -----------
Net cash provided by (used in) operating activities 1,571 (13,124)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 298 252
Capital expenditures (28,214) (7,404)
Payment for acquisitions, net of cash acquired (68,902) (29,965)
Other, net (301) (1,179)
----------- -----------
Net cash used in investing activities (97,119) (38,296)
----------- -----------
Cash flows from financing activities:
Issuance of common stock 3,594 52,349
Debt issuance costs (375) (2,420)
Proceeds from long-term borrowings 7,230 6,817
Repayments of long-term borrowings (5,809) (2,431)
Proceeds from short-term borrowings 340 --
Repayment of short-term borrowings (5) (5,893)
Net proceeds from line of credit 92,031 19,400
Other (116) (234)
----------- -----------
Net cash provided by financing activities 96,890 67,588
Net cash (used) provided by discontinued operations (92) 217
Effect of foreign currency exchange rate changes on
cash 165 (595)
----------- -----------
Increase in cash and cash equivalents 1,415 15,790
Cash and cash equivalents, beginning of period 28,664 15,392
----------- -----------
Cash and cash equivalents, end of period $ 30,079 $ 31,182
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-5-
<PAGE>
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations in the amount of $2,004,000 and $435,000 were
incurred during the three months ended June 1, 1996 and May 27, 1995,
respectively, for equipment and software.
During the three months ended June 1, 1996, the Company acquired 14
contract stationers, one software distributor, and one delivery operation for a
net cash purchase price of $65,949,000, a note payable of $45,111,000 and 24,000
shares of common stock. During the three months ended May 27, 1995, the Company
purchased substantially all of the assets and assumed certain liabilities of
eight contract stationers and one delivery operation for a net cash outlay of
$23,849,000 and repurchased one computer product franchise for $108,000. In
conjunction with these acquisitions, liabilities were assumed as follows:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
June 1, May 27,
1996 1995
------------ -------------
(In thousands)
(Unaudited)
<S> <C> <C>
Fair value of assets acquired $173,324 $ 62,482
Cash paid, net of cash acquired 65,949 23,957
Issuance of notes payable 45,111 1,000
Issuance of stock 750 --
Minority interest in subsidiary -- 11,138
Purchase price payable, included
in current liabilities 1,973 54
-------- --------
Liabilities assumed $ 59,541 $ 26,333
======== ========
</TABLE>
In addition to the amounts set forth above, during the three months ended
June 1, 1996 and May 27, 1995, the Company paid $2,953,000 and $6,008,000,
respectively, for prior period acquisitions. Of the amounts paid for prior
period acquisitions in the first three months of fiscal 1995, $5,000,000 was
related to the acquisition of certain assets of the office products division of
Joyce International, Inc.
The accompanying notes are an integral part of the
consolidated financial statements.
-6-
<PAGE>
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
The consolidated financial statements include the accounts of Corporate
Express, Inc. ("Corporate Express" or the "Company") and its majority owned
subsidiaries. U.S. Delivery Systems, Inc. ("Delivery") was merged into DSU
Acquisition Corp., a wholly-owned subsidiary of the Company, on March 1, 1996,
and Richard Young Journal, Inc. ("Young") was merged into CEX Acquisition Corp.,
a wholly-owned subsidiary of the Company, on February 27, 1996. The mergers
were accounted for as poolings of interests and, accordingly, the accompanying
financial statements have been restated to include the accounts and operations
of Delivery and Young for all periods prior to the mergers. Acquisitions
accounted for as purchases are included in the accounts and operations as of the
effective date of the transaction. The Company accounts for its investments in
less than 50% owned entities using the equity or cost methods. All intercompany
balances and transactions have been eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods presented. The results of operations for these interim periods are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended March 2, 1996.
Certain of the Company's locations calculate cost of sales using an
estimated gross profit method for interim periods. Cost of sales at these
locations are adjusted based on physical inventories which are performed no less
than once a year.
2. Accrued Purchase Costs
In conjunction with purchase acquisitions, the Company accrues the direct
external costs incurred to consummate the acquisition, external costs associated
with closing duplicate facilities of acquired companies, and severance and
relocation payments to the acquired company's employees. Prior to the adoption
of EITF 95-3 in May 1995, the Company also accrued the external incremental
costs of converting acquired company computer systems to the Company's systems.
The following tables set forth activity in the Company's accrued purchase
liabilities for the period ended June 1, 1996.
<TABLE>
<CAPTION>
Prior to EITF 95-3:
Warehouse Disposition
& System Redundant of Assets
Total Integrations Facilities Severance & Other
-------------- ------------- ----------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance, March 2, 1996 $1,264 $ 750 $ 403 $ 41 $ 70
Payments (230) (136) (53) (41) --
------ ------ ------ ------ ------
Balance, June 1, 1996 (1) $1,034 $ 614 $ 350 $ 0 $ 70
====== ====== ====== ====== ======
</TABLE>
-7-
<PAGE>
(1) Remaining balances relate primarily to current consolidation projects in
Florida and Canada and reflect the estimated remaining costs to be incurred
in conjunction with these projects.
<TABLE>
<CAPTION>
After adoption of EITF 95-3:
Disposition
Facility Redundant of Assets
Total Exit Costs Facilities Severance & Other
----- ---------- ---------- --------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance, March 2, 1996 $1,785 $514 $198 $ 772 $ 301
Additions 2,244 -- 447 732 1,065
Payments (894) -- (80) (204) (610)
------ ------ ------ ------ ------
Balance, June 1, 1996 $3,135 $514 $565 $1,300 $ 756
====== ====== ====== ====== ======
</TABLE>
Accrued purchase costs, after adoption of EITF 95-3, primarily
represent the liabilities incurred to consolidate acquired operations into
existing Company facilities.
3. Merger and Other Nonrecurring Charges
During the fourth quarter of fiscal 1995, the Company recorded $36,838,000
in merger and other nonrecurring charges primarily in conjunction with the
acquisitions of Delivery and Young, of which $24,880,000 was unpaid at the end
of the fiscal year. The first quarter expenditures of $5,449,000 included
$5,240,000 of actual merger transaction costs. The remaining merger transaction
costs of $3,921,000 are expected to be paid by the end of the second quarter.
The additional costs associated with a plan to integrate the combined companies'
operations is expected to be completed within the next two years. The charge
includes the closure of 88 facilities and the reduction of approximately 760
employees. As of June 1, 1996, nine facilities were closed and 24 employees have
been terminated.
<TABLE>
<CAPTION>
Accrued Merger and Related Costs
------------------------------------------
Balance Cash Balance
March 2, 1996 Payments June 1, 1996
----------------- --------- ------------
<S> <C> <C> <C>
Merger transactions costs $ 9,161 $(5,240) $ 3,921
Severance and terminations 7,165 (155) 7,010
Facility closure and consolidation 7,909 (54) 7,855
Other costs 645 -- 645
------- ------- -------
$24,880 $(5,449) $19,431
======= ======= =======
</TABLE>
4. Acquisitions Accounted For as Purchases
On May 15, 1996, the Company acquired all of the outstanding capital stock
of ASAP Software Express, Inc. ("ASAP"), a leading distributor of software to
large corporations for a purchase price of approximately $98,000,000, subject to
certain adjustments. The excess of the purchase price over the fair market value
of the net tangible assets acquired was allocated to goodwill and is being
amortized over 40 years.
The operating results of ASAP are included in the Company's consolidated
statement of operations from the effective date of the acquisition. The
following pro forma financial information assumes the ASAP acquisition occurred
at the beginning of the period. These results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisition been made at the beginning of the period, or of results
which may occur in the future.
-8-
<PAGE>
The pro forma results listed below are unaudited and reflect purchase price
adjustments.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
June 1, 1996 May 27, 1995
------------ ------------
<S> <C> <C>
(In thousands, except per share amounts)
Net sales $526,383 $361,571
Net income 10,615 6,371
Net income per share 0.14 0.10
</TABLE>
In addition to the ASAP acquisition, the Company acquired 14 contract
stationers and one delivery operation for a net cash purchase price of
$27,241,000 and 24,000 shares of common stock.
5. Computation of Net Income Per Share and Restatement of Common Shares
Outstanding
Net income per share is calculated by dividing net income by the weighted
average shares of common stock and common stock equivalents outstanding. The
weighted average shares outstanding for the three months ended May 27, 1995 have
been restated to reflect the 50% stock dividend distributed in June 1995.
6. Subsequent Events
On June 19, 1996, the Company issued $325 million principal amount of 4 1/2%
Convertible Notes due July 1, 2000 (the "Notes"). The Notes will be convertible
into shares of Common Stock of the Company at a conversion price of $50 per
share, subject to certain conditions. The Company intends to use the proceeds
from the sale of the Notes to repay debt and for expansion of the Company's
business, including acquisitions, and other general corporate purposes.
Subsequent to June 1, 1996, the Company purchased eleven companies of which
four were in Australia, three in the United States, one in Scotland, one in New
Zealand, one in Canada and one in Germany for a combined purchase price of
approximately $26,653,000.
7. Contingencies
The Company is a party to certain legal proceedings in the normal course of
business. In the opinion of management, the outcome of such litigation will not
have a material adverse effect on the Company's financial position or operating
results.
-9-
<PAGE>
CORPORATE EXPRESS, INC.
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net Sales. Consolidated net sales increased 51.5% to $500,624,000 in the
three months ended June 1, 1996 from $330,394,000 in the three months ended May
27, 1995. Net sales for the Company's product distribution business increased
62.0% from $250,152,000 in the three months ended May 27, 1995 to $405,247,000
in the three months ended June 1, 1996 while the service business increased
18.9% from $80,242,000 to $95,377,000 in the same periods. These increases were
primarily attributable to 53 acquisitions since May 27, 1995. Also contributing
to the sales increase was strong internal growth reflecting increased market
penetration in office products distribution and higher demand for the Company's
local delivery services.
International operations accounted for 15.2% of total sales or $76,125,000
in the three months ended June 1, 1996 and 3.8% of total sales or $12,492,000 in
the three months ended May 27, 1995. The first quarter of fiscal 1995 results
reflect three Canadian office product distributors (of which two were acquired
in February 1995 and one was acquired in May 1995) and Corporate Express
Australia (formerly Macquarie Office Limited), of which the Company acquired a
52.7% interest through the purchase of newly issued securities in May 1995. The
Company has expanded its international operations since May 27, 1995 by
acquiring 14 international office product distributors, including eight
distributors purchased by Corporate Express Australia (six in Australia and two
in New Zealand), four in the United Kingdom, two additional distributors in
Canada and one delivery and distribution service business in Canada.
Gross Profit. Cost of sales includes merchandise, occupancy and delivery
costs (including fees paid to drivers and transportation and delivery agents).
Gross profit as a percentage of sales was 26.3% for the three months ended June
1, 1996 and for the three months ended May 27, 1995.
The merchandise margin component of gross profit increased slightly from the
fiscal 1995 period compared to the fiscal 1996 period. Additionally, vendor
rebates increased as a percentage of revenue, reflectiing the benefits of the
Company's merchandising strategy to reduce the number of vendors included in the
Company's proprietary In-Stock Catalog, thereby increasing the sales dollars per
vendor. These increases were offset by increased costs of delivery services as
well as higher cost structures associated with recent acquisitions.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses as a percentage of sales were 19.0% for the three months ended June 1,
1996 and the three months ended May 27, 1995. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating regional warehouses and sales offices, selling expenses and
commissions related to the Company's direct sales force and warehouse
assimilation costs. Warehouse operating and selling expenses increased by
$32,698,000, or 52.2%, to $95,309,000 in the three months ended June 1, 1996
from $62,611,000 in the three months ended May 27, 1995. This increase is
primarily attributable to the 53 acquisitions completed since May 27, 1995.
-10-
<PAGE>
CORPORATE EXPRESS, INC.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses include central expenses incurred to provide corporate
oversight and support for regional operations and goodwill amortization.
Corporate general and administrative expenses increased to $15,933,000 in the
three months ended June 1, 1996 from $9,243,000 in the three months ended May
27, 1995, reflecting the Company's expanded operations. As a percentage of net
sales, corporate general and administrative expenses increased to 3.2% in the
three months ended June 1, 1996 from 2.8% in the three months ended May 27,
1995. This increase reflects the costs associated with developing a larger
corporate staff to support acquisition efforts and expanded operations,
including an expanded information systems staff, and increased goodwill
amortization resulting from purchase acquisitions since May 1995.
Operating Profit. Consolidated operating profit of $20,204,000 for the three
months ended June 1, 1996 increased 35.1% compared to operating profit of
$14,954,000 for the three months ended May 27, 1995, reflecting increased
acquisitions and internal growth. Operating profit decreased as a percentage of
net sales due to increased corporate general and administrative expenses and
expanded international operations. Operating profit as a percentage of sales for
international operations was 1.8% and accounted for 9.7% of total product
distribution operating profit in the three months ended June 1, 1996. Operating
profit for the product segment increased by 49.9% to $13,842,000 in the three
months ended June 1, 1996 compared to the three months ended May 27, 1995
operating profit of $9,233,000. Operating profit for the delivery segment
increased to $6,362,000 in the three months ended June 1, 1996 from $5,721,000
in the three months ended May 27, 1995.
Interest Expense. Net interest expense of $3,279,000 in the three months
ended June 1, 1996 decreased by 22.0% from $4,203,000 in the three months ended
May 27, 1995. The decrease in interest expense is a result of the repayment of
higher yield Young debt with borrowings from the lower yield Senior credit
facility, lower borrowings on the line of credit to fund operations and
increased borrowings to invest in capital projects.
Minority Interest. Minority interest increased to $230,000 from $115,000
reflecting a 47.5% minority interest in Corporate Express Australia and a 49.0%
minority interest in Corporate Express United Kingdom. The Company acquired a
52.7% ownership interest in Corporate Express Australia in May 1995
(subsequently reduced to 52.5% through Corporate Express Australia public stock
offerings) and a 51.0% ownership interest in Corporate Express United Kingdom in
December 1995.
Net Income. Net income of $9,616,000 in the three months ended June 1, 1996
compared to net income of $6,506,000 in the three months ended May 27, 1995. The
after-tax profitability is reduced by an increase in the effective tax rate to
41.8% in the three months ended June 1, 1996 from 39.4% in the three months
ended May 27, 1995 due to the utilization of net operating losses in the fiscal
1995 quarter.
Other. The accounts receivable balance at June 1, 1996 of $292,062,000
increased $25,702,000 from $266,360,000 at March 2, 1996, primarily as a result
of acquired receivables. The allowance for doubtful accounts as a percentage of
consolidated accounts receivable was 2.2% and 2.0% at June 1, 1996 and March 2,
1996, respectively, remaining relatively unchanged.
-11-
<PAGE>
CORPORATE EXPRESS, INC.
The inventory balance at June 1, 1996 of $119,408,000 increased $17,413,000
from $101,995,000 at March 2, 1996 primarily as a result of acquired
inventories.
Goodwill at June 1, 1996 of $445,108,000 increased $120,505,000 from
$324,603,000 at March 2, 1996, reflecting net additions from acquisitions of
$123,350,000, offset by current year amortization of $2,845,000.
The trade accounts payable balance at June 1, 1996 of $167,244,000 increased
$32,175,000 from $135,069,000 at March 2, 1996, primarily as a result of
acquired trade payables of $45,043,000, offset by payments to bring acquired
payables current. The payable for acquisitions balance of $46,102,000 at June 1,
1996 primarily represents the second installment on the ASAP acquisition, which
was paid in full on June 25, 1996.
Accrued purchase costs at June 1, 1996 of $4,169,000 increased by $1,120,000
from the March 2, 1996 balance of $3,049,000. This increase reflects acquisition
additions of $2,244,000 and usage of $1,124,000. The remaining balance
represents the current estimate for costs to be incurred in conjunction with
current consolidation projects in South Florida, Canada, and certain newly
acquired operations. (See Note 2 in the Consolidated Financial Statements.).
The accrued merger and related costs balance at June 1, 1996 of $19,431,000
decreased by $5,449,000 from the March 2, 1996 balance of $24,880,000, primarily
as a result of payments of the Delivery and Young merger transaction costs. (See
Note 3 in the Consolidated Financial Statements.)
Liquidity and Capital Resources
Historically, the Company has financed its operations through internally
generated funds and borrowings from commercial banks and has financed its
acquisitions through the use of such funds and the issuance of equity and debt
securities and, in certain instances, promissory notes.
In February 1994, the Company completed a private placement of $100,000,000
of 9 1/8% Senior Subordinated Notes (the "Notes"). In July 1994, $10,000,000
principal amount of the Notes was repurchased by the Company for $9,300,000 plus
accrued interest. Interest on the $90,000,000 of outstanding Notes is payable
semi-annually on March 15 and September 15 of each year. The Notes will mature
on March 15, 2004 and will not be redeemable prior to March 15, 1999.
Thereafter, the Notes will be redeemable at the option of the Company, in whole
or in part. On March 17, 1995, the Company completed an offer to exchange the
privately placed Notes for registered Notes. The additional illiquidity payment
of approximately 0.5% per annum ceased on completion of the exchange offer,
reducing the Company's interest rate with respect to the Notes from
approximately 9 5/8% to 9 1/8% per annum.
On June 19, 1996, the Company issued $325 million principal amount of 4 1/2%
Convertible Notes due July 1, 2000 (the "Convertible Notes"). The Convertible
Notes will be convertible into shares of Common Stock of the Company at a
conversion price of $50 per share, subject to certain conditions. The Company
intends to use the proceeds from the sale of the Convertible Notes to repay debt
and for expansion of the Company's business, including acquisitions, and for
other general corporate purposes.
The Company's revolving credit facility (the "Senior Credit Facility") was
amended on May 10, 1996 to increase the Company's borrowing capacity from
$90,000,000 to $250,000,000, subject to borrowing base and other restrictions
and lower the cost of its borrowings to LIBOR plus 1.25%. The indebtedness under
the Senior Credit Facility is secured by substantially all of the assets of the
Company and its United States subsidiaries, including accounts receivable and
inventory. On May 31, 1996, the Company borrowed on its Senior Credit Facility
and repaid in full the $33,270,000 outstanding Delivery revolving credit
facility.
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<PAGE>
CORPORATE EXPRESS, INC.
On June 24, 1996, the outstanding amounts under the Senior Credit Facility were
paid in full from funds generated from the issuance of the Convertible Notes.
Upon this repayment, the borrowing capacity of the Senior Credit Facility was
reduced from the amended capacity of $250,000,000 to $90,000,000 subject to
borrowing base and other restrictions. The Company intends to replace the
existing Senior Credit Facility with a multiple currency revolving credit
facility with a minimum borrowing capacity of $250,000,000 and lower interest
rates. In connection with this change in facility the Company intends to write-
off approximately $1,200,000 in prepaid bank fees.
During the first quarter of fiscal 1996, the Company purchased 14 contract
stationers, one software distributor, and one delivery operation accounted for
as purchases for a net cash purchase price of $65,949,000, a note payable of
$45,111,000 and 24,000 shares of common stock. Total liabilities assumed in
connection with these acquisitions were $59,541,000 (including accounts payable,
the note payable, and assumed debt). In addition, the Company made payments of
approximately $2,953,000 related to acquisitions completed in fiscal 1995.
The Company had capital expenditures of $28,214,000 in the first quarter of
fiscal 1996, of which approximately $6,000,000 was for the corporate
headquarters facility, approximately $7,200,000 related to the purchase and
development of the Miami warehouse and the remainder was for computer systems,
warehouse reconfigurations, telecommunications equipment, delivery vehicles, and
leasehold improvements.
Cash and cash equivalents increased by $1,415,000 in the first quarter of
fiscal 1996. This increase reflects net proceeds from the line of credit of
$92,031,000, cash provided by operating and other activities of $2,906,000 and
issuance of common stock of $3,594,000, offset by cash paid for acquisitions of
$68,902,000 and capital expenditures of $28,214,000.
The Company believes the borrowing capacity under the Senior Credit
Facility, together with proceeds from the Convertible Notes, coupled with its
cash on hand, capital resources and cash flows, will be sufficient to fund its
ongoing operations, anticipated capital expenditures and acquisition activity
for the next twelve months. However, actual capital needs may change,
particularly in connection with acquisitions which the Company may consummate in
the future.
Inflation
Certain of the Company's product offerings, particularly paper products,
have been and are expected to continue to be subject to significant price
fluctuations due to inflationary and other market conditions. The Company
generally is able to pass such increased costs on to its customers through price
increases, although it may not be able to adjust its prices immediately.
Significant increases in fuel costs in the future could affect the Company's
profitability if these costs cannot be passed on to customers. In general, the
Company does not believe that inflation has had a material effect on its results
of operations in recent years. However, there can be no assurance that the
Company's business will not be affected by inflation in the future.
-13-
<PAGE>
CORPORATE EXPRESS, INC.
Accounting Standards
In fiscal 1996, the Company will adopt SFAS No. 123, "Accounting for
Stock-Based Compensation." This standard establishes a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company will adopt this standard through compliance with the
disclosure requirements set forth in SFAS No. 123. Adoption of this standard
will have no impact on the financial position or results of operations of the
Company.
-14-
<PAGE>
CORPORATE EXPRESS, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
11.1 Computation of Earnings Per Share
(b) Reports on Form 8-K
-------------------
Report on Form 8-K filed on May 30, 1996
-15-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE EXPRESS, INC.
By: /s/ SAM R. LENO
---------------------------------------
Sam R. Leno
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
Date: July 16, 1996
<PAGE>
Exhibit 11.1
Corporate Express, Inc.
Statement Regarding Computation of Net Income (Loss) Per Share
<TABLE>
<CAPTION>
Primary Earnings Per Share
Three Months Three Months
Ended Ended
June 1, 1996 May 27, 1995
------------ ------------
<S> <C> <C>
Net income $ 9,616,000 $ 6,506,000
============ ============
Net income per share $ 0.13 $ 0.10
============ ============
Weighted average shares outstanding 69,111,690 59,086,500
Common Stock Equivalents:
Stock options and warrants 6,027,034 3,884,500
------------ ------------
Total weighted average shares outstanding 75,138,724 62,971,000
============ ============
</TABLE>
Fully Diluted Earnings Per Share
Fully diluted earnings per share differs from primary earnings per share by less
than 3%.
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATE EXPRESS, INC. CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 1, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> MAR-03-1996
<PERIOD-END> JUN-01-1996
<CASH> 30,079
<SECURITIES> 0
<RECEIVABLES> 328,361
<ALLOWANCES> 6,492
<INVENTORY> 119,408
<CURRENT-ASSETS> 509,720
<PP&E> 196,897
<DEPRECIATION> 55,145
<TOTAL-ASSETS> 1,114,652
<CURRENT-LIABILITIES> 308,367
<BONDS> 241,684
0
0
<COMMON> 14
<OTHER-SE> 512,283
<TOTAL-LIABILITY-AND-EQUITY> 1,114,652
<SALES> 500,624
<TOTAL-REVENUES> 500,624
<CGS> 369,178
<TOTAL-COSTS> 111,242
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,279
<INCOME-PRETAX> 16,925
<INCOME-TAX> 7,079
<INCOME-CONTINUING> 9,616
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,616
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
