<PAGE>
Rule 424(b)(3)
File No. 333-35559
CORPORATE EXPRESS, INC.
DATA DOCUMENTS INCORPORATED
SUPPLEMENT TO PROXY STATEMENT AND PROSPECTUS DATED OCTOBER 24, 1997
DATA DOCUMENTS INCORPORATED
4205 SOUTH 96TH STREET
OMAHA, NEBRASKA 68127
November 14, 1997
Dear Stockholder:
The purpose of this letter is to inform you that (i) the Special Meeting of
Stockholders of Data Documents Incorporated ("Data Documents") originally
scheduled for November 14, 1997 will be adjourned and will re-convene on
November 25, 1997, at 10:00 a.m. local time, at Data Documents' principal
offices, (ii) the parties to the Agreement and Plan of Merger, dated as of
September 10, 1997 (the "Merger Agreement"), by and among Corporate Express,
Inc. ("Corporate Express"), IDD Acquisition Corp., a wholly owned subsidiary
of Corporate Express ("Acquisition Sub"), and Data Documents, have executed an
amendment dated as of November 7, 1997 to the Merger Agreement (the
"Amendment") to fix the exchange ratio for the merger so that each outstanding
share of Data Documents' common stock will be converted into 1.1 shares of
Corporate Express' common stock, a copy of which is enclosed herewith, and
(iii) Data Documents has filed a Quarterly Report on Form 10-Q/A for the
quarter ended September 30, 1997 with the Securities and Exchange Commission,
a copy of which is enclosed herewith.
The Board of Directors of Data Documents approved the Amendment in light of
the current circumstances, including declines in the price of Corporate
Express' common stock since the date on which the Proxy Statement and
Prospectus was initially distributed, because it believes that the merger is
fair to and in the best interests of Data Documents' stockholders for the
reasons set forth in the Proxy Statement and Prospectus. Fixing the exchange
ratio resulted in the elimination of a breakup fee payable to Data Documents
in the event that Corporate Express elected not to increase the merger
consideration if the Corporate Express stock value (computed pursuant to the
formula set forth in the Merger Agreement) was less than $15 per share. The
Board noted, however, that certain applications of the formula if it applied
to the meeting of November 14, 1997 could have resulted in an exchange value
of less than 1.1 to 1. Jefferies & Company, Inc. ("Jefferies") orally
confirmed its opinion on October 24, 1997 to the effect that the merger
consideration is fair from a financial point of view to the stockholders of
Data Documents but Jefferies has not reconfirmed its opinion subsequent to the
amendment of the Merger Agreement on November 7, 1997. The Merger Agreement,
however, continues to provide that a condition to Data Documents' obligation
to close the merger is that Jefferies shall not have withdrawn its opinion,
which it gave as of October 24, 1997. Under these circumstances, and for the
other reasons set forth in the Proxy Statement and Prospectus, THE DATA
DOCUMENTS BOARD OF DIRECTORS REAFFIRMS ITS VIEW THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF DATA DOCUMENTS AND ITS STOCKHOLDERS AND RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER.
The vote of every stockholder is important. If you have already mailed or
faxed your completed proxy, you need not re-execute a proxy. However, if you
have not yet mailed or faxed your proxy, or if you wish to change your
previously submitted proxy, a proxy card has been enclosed for your
convenience (please note that although the proxy card reflects the original
meeting date of November 14, 1997, the Special Meeting of Stockholders will be
adjourned and will re-convene on November 25, 1997 as described above). You
may mail your proxy using the envelope provided, or you may fax your proxy to
(402) 339-9270. Your cooperation is greatly appreciated.
Your Board of Directors and management look forward to greeting those
stockholders who are able to attend.
Sincerely,
(Sig Cut)
A. Robert Thomas
Secretary
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS SUPPLEMENT IS NOVEMBER 14,
1997 AND IT IS FIRST BEING MAILED TO THE STOCKHOLDERS OF DATA DOCUMENTS ON
NOVEMBER 14, 1997.
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF MERGER
This Amendment No. 1. dated as of November 7, 1997 ("Amendment No. 1") to
the Agreement and Plan of Merger, dated as of September 10, 1997 (the
"Agreement"), is by and among Corporate Express, Inc., a Colorado corporation
("Parent"), IDD Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Subsidiary"), and Data Documents Incorporated, a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Parent, Subsidiary and the Company executed and delivered the
Agreement; and
WHEREAS, Parent, Subsidiary and the Company wish to amend certain terms of
the Agreement so as to fix the Exchange Ratio (as defined therein).
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and in the Agreement, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. AMENDMENT TO SUBSECTIONS 3.1(A) AND (B). Subsections 3.1(a) and
(b) of the Agreement are hereby amended and restated as follows:
(a) each share of the Company's Common Stock, par value
$.001 per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time, except any
Non-Converting Shares (as defined in Section 3.1(c)), shall be
converted into the right to receive consideration (the "Merger
Consideration") equal to that number of shares of common stock,
par value $.0002 per share, of Parent ("Parent Common Stock"),
which is determined by multiplying the Exchange Ratio (as defined
below) by the number of shares of Company Common Stock held by
such Company stockholder on the Closing Date (as defined in
Section 3.5). The "Exchange Ratio" shall equal 1.1 shares of
Parent Common Stock for each share of Company Common Stock
outstanding at the time of the Merger.
(b) The Parent Common Stock is listed on the Nasdaq
National Market ("Nasdaq").
<PAGE>
SECTION 2. AMENDMENT TO SUBSECTION 7.6(B). Subsection 7.6(b) of the
Agreement is hereby amended by deleting the last sentence of that subsection
since it relates to prior Section 3.1(b)(i) of the Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
2
<PAGE>
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Amendment No. 1 to the Agreement to be signed by their respective officers as of
the date first written above.
CORPORATE EXPRESS, INC.
By: /s/Richard L. Millett, Jr.
-----------------------------------
Richard L. Millett, Jr.
Vice President, General Counsel
IDD ACQUISITION CORP.
By: /s/Richard L. Millett, Jr.
-----------------------------------
Richard L. Millett, Jr.
Vice President, General Counsel
DATA DOCUMENTS INCORPORATED
By: /s/Walter J. Kearns
-----------------------------------
Walter J. Kearns
Chief Executive Officer
3
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-26674
DATA DOCUMENTS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 47-0714942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4205 SOUTH 96TH STREET, OMAHA, NEBRASKA
(Address of principal executive offices)
68127
(Zip Code)
(402) 339-0900
(Registrant's telephone number, including area code)
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 outstanding of the Registrant's Common Stock, as of
September 30, 1997 was 9,710,226 (excluding 269,607 treasury shares).
<PAGE>
DATA DOCUMENTS INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
ITEM 1: FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS -
At September 30, 1997 and December 31, 1996 3
CONSOLIDATED STATEMENTS OF OPERATIONS -
For the Three and Nine Months Ended September 30, 1997 and 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
For the Nine Months Ended September 30, 1997 and 1996 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 -11
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C> <C>
ITEM 2: CHANGES IN SECURITIES 12
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 12-13
SIGNATURES 14
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:'
Cash and cash equivalents $ 1,371 $ 11,151
Accounts receivable, net of allowance of $ 506,000 and $311,000 36,817 31,459
Inventories (Note B) 39,480 37,979
Other current assets 1,474 898
--------- ---------
Total Current Assets 79,142 81,487
PROPERTY, PLANT AND EQUIPMENT 43,632 37,328
GOODWILL, net of accumulated amortization of $3,039,000 and $2,689,000 18,437 9,837
DEFERRED FINANCING COSTS AND OTHER ASSETS 5,441 5,325
--------- ---------
$ 146,652 $ 133,977
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 20,165 $ 18,566
Accrued compensation 3,584 3,453
Accrued interest payable 2,071 4,072
Current maturities of long-term obligations 3,892 934
Current and deferred income taxes 243 1,017
--------- ---------
Total Current Liabilities 29,955 28,042
POST-RETIREMENT BENEFITS 1,905 1,881
LONG-TERM OBLIGATIONS, net of current maturities 65,578 63,965
DEFERRED INCOME TAXES 3,040 2,413
COMMITMENTS AND CONTINGENCIES (Note C)
COMMON STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- --
Common stock, $0.001 par value; 15,000,000 shares authorized; 9,979,833 and
9,564,831 shares issued; 9,710,226 and 9,295,224 shares outstanding, respectively 10 10
Additional paid-in capital 32,024 32,020
Retained earnings 14,328 5,881
Stockholder notes receivable (188) (235)
Treasury stock, 269,607 shares acquired at no cost -- --
--------- ---------
Total Common Stockholders' Equity 46,174 37,676
--------- ---------
$ 146,652 $ 133,977
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES $ 65,687 $ 59,794 $ 192,081 $ 184,472
COST OF GOODS SOLD 48,677 43,638 142,015 135,880
----------- ----------- ----------- -----------
Gross Profit 17,010 16,156 50,066 48,592
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,927 9,484 28,936 28,286
----------- ----------- ----------- -----------
Operating Income 7,083 6,672 21,130 20,306
DEBT EXPENSE, including amortization of
$203,000, $206,000, $602,000 and $621,000 2,326 2,416 6,933 7,376
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 4,757 4,256 14,197 12,930
INCOME TAX EXPENSE 1,932 1,726 5,750 5,246
----------- ----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 2,825 2,530 8,447 7,684
EXTRAORDINARY ITEM, net of tax (Note D) -- -- -- (54)
----------- ----------- ----------- -----------
NET INCOME $ 2,825 $ 2,530 $ 8,447 $ 7,630
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE:
Primary:
Income before extraordinary item $ 0.28 $ 0.25 $ 0.85 $ 0.77
Extraordinary item -- -- -- --
----------- ----------- ----------- -----------
Net Income $ 0.28 $ 0.25 $ 0.85 $ 0.77
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary 10,050,942 9,955,759 9,987,460 9,940,141
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,447 $ 7,630
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation 3,080 3,123
Amortization of intangibles 1,236 1,091
Extraordinary item -- 37
Provision for deferred income taxes (482) (309)
Gain on sale of property, plant and equipment (16) (65)
Changes in operating assets and liabilities (net of effects from purchase
of Moore Labels, Inc.):
Accounts receivable (3,954) 2,710
Inventories (787) 994
Other current assets (177) (370)
Accounts payable and accrued liabilities 1,272 1,297
Accrued interest (2,001) (1,884)
Current taxes on income and other (337) 402
Other assets (283) 380
-------- --------
Net cash flows from operating activities 5,998 15,036
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,819) (3,222)
Proceeds from the sale of property, plant and equipment 28 117
Investment in Moore Labels, Inc. - net of cash acquired (13,972) --
-------- --------
Net cash flows from investing activities (17,763) (3,105)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 2,790 --
Payment of debt (724) (1,239)
Change in liability for outstanding checks (132) (3,034)
Payments for stock registration costs -- (142)
Proceeds from exchange of stock options and warrants 4 --
Principal receipts on stockholder notes receivable 47 23
-------- --------
Net cash flows from financing activities 1,985 (4,392)
-------- --------
NET CHANGE IN CASH (9,780) 7,539
CASH AND CASH EQUIVALENTS, Beginning of period 11,151 2,024
-------- --------
CASH AND CASH EQUIVALENTS, End of period $ 1,371 $ 9,563
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 8,719 $ 8,822
======== ========
Income taxes $ 6,573 $ 4,986
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
A. MANAGEMENT STATEMENTS
The consolidated financial statements of DATA DOCUMENTS INCORPORATED (Data
Documents) include the accounts of its wholly-owned subsidiaries Data
Documents, Inc. (DDI), PBF Washington, Inc. (PBF), Cal Emblem Labels, Inc.
(Cal Emblem) and Moore Labels, Inc. (Moore Labels). The summarized
financial information of DDI (see Note E) include the accounts of its
wholly-owned subsidiaries PBF, Cal Emblem and Moore Labels. All significant
intercompany transactions and accounts have been eliminated during
consolidation.
The consolidated financial statements of the Company contained herein
should be read in conjunction with the financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal and recurring adjustments) that are,
in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods. The results of operations and cash flows for the nine months ended
September 30, 1997 are not necessarily indicative of the results for the
year ending December 31, 1997.
Certain reclassifications have been made to the 1996 financial statements
to conform to those classifications used in 1997.
B. INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------------------------
1997 1996
(UNAUDITED)
<S> <C> <C>
Finished goods $ 29,832 $ 28,739
Work in process 1,397 1,264
Raw materials 7,243 7,032
Supplies and spare parts 1,008 944
--------- --------
$ 39,480 $ 37,979
========= ========
</TABLE>
Substantially all inventories were valued using the LIFO method. If the
FIFO method of inventory accounting had been used, inventories would have
been lower than reported by $4,676,000 and $3,500,000 at September 30, 1997
and December 31, 1996, respectively. On a FIFO basis, operating income
would have been lower by $890,000 and $710,000, respectively, for the three
months ended September 30, 1997 and September 30, 1996, and $1,176,000 and
$1,852,000 for the nine months ended September 30, 1997 and September 30,
1996. The FIFO cost of inventories approximates replacement cost.
C. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits and claims which arise out of the normal
course of its business. In the opinion of management, the disposition of
such claims will not have a material adverse effect on the Company's
financial position or results of operations.
6
<PAGE>
D. EXTRAORDINARY ITEM
In June 1996, the Company incurred an extraordinary charge of $54,000, net
of income tax benefit of $34,000, for the write-off of unamortized deferred
financing costs, unamortized original issue discount, and certain premium
on reacquisition associated with the repurchase of $500,000 of Senior
Notes.
E. SUMMARIZED FINANCIAL INFORMATION
Following is the summarized financial information of DDI and its
subsidiaries (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-----------------------------------
1997 1996
(UNAUDITED)
<S> <C> <C>
Current assets $ 79,142 $ 81,487
Noncurrent assets $ 67,510 $ 52,490
Current liabilities $ 29,955 $ 28,042
Noncurrent liabilities $ 70,523 $ 68,259
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 65,687 $ 59,794 $ 192,081 $ 184,472
Gross profit $ 17,010 $ 16,156 $ 50,066 $ 48,592
Net income $ 2,825 $ 2,530 $ 8,447 $ 7,630
</TABLE>
Following is the summarized financial information of PBF and Cal Emblem
(wholly-owned subsidiaries of DDI), which are guarantors of the Senior
Notes.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------------------
1997 1996
(UNAUDITED)
<S> <C> <C>
Current assets $ 6,977 $ 6,849
Noncurrent assets $ 9,312 $ 8,813
Current liabilities $ 7,523 $ 7,474
Noncurrent liabilities $ 629 $ 883
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -------------------------------
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 8,069 $ 8,489 $ 24,814 $ 25,169
Gross profit $ 1,577 $ 1,866 $ 4,950 $ 5,114
Net income $ 229 $ 368 $ 832 $ 755
</TABLE>
7
<PAGE>
F. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which
established accounting and reporting standards for such transfers. The
Company has adopted SFAS No. 125 effective January 1, 1997 as required. The
impact on the Company's financial position and results of operations was
not material.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share, which specifies the computation, presentation and
disclosure requirements for earnings per share. SFAS No. 128 is applicable
for fiscal years ending after December 15, 1997. The objective of the
statement is to simplify the computation of earnings per share and replaces
primary and fully diluted earnings per share, as disclosed under certain
pronouncements, with basic and diluted earnings per share. Pro forma basic
earnings per share for the three months and nine months ended September 30,
1997 and 1996 are $0.29, $0.26, $0.85 and $0.77, respectively. Pro forma
diluted earnings per share for the three months and nine months ended
September 30, 1997 and 1996 are $0.28, $0.25, $0.85 and $0.77,
respectively.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which
established presentation of financial data based on the "management
approach". SFAS No. 131 is applicable for fiscal years beginning after
December 15, 1997. The Company is currently in the process of reviewing
this new presentation requirement.
G. ACQUISITION
In July 1997, the Company acquired Moore Labels, Inc. (Moore Labels) of
Wichita, Kansas, a privately held supplier of pressure-sensitive labels
used in the pharmaceutical, food, plastics and miscellaneous manufacturing
industries. The aggregate consideration for the transfer of the capital
stock of Moore Labels was approximately $14.4 million paid in cash. The
consideration paid was supplied by excess cash and the use of approximately
$5.0 million of the Revolving Credit Facility. This acquisition was not
material to the Company.
H. MERGER AGREEMENT
In September 1997, the Company entered a Merger Agreement with Corporate
Express, Inc. (Corporate Express), a multi-national corporation
headquartered in Broomfield, Colorado. Corporate Express is a publicly
traded company traded on the Nasdaq National Market (Nasdaq) and is a
provider of non-production goods and services to large corporations. The
exchange ratio for the merger has been fixed so that each outstanding share
of Data Documents' common stock will be converted into 1.1 shares of
Corporate Express common stock. The merger has been approved by the
respective Boards of Directors of the companies and is subject to Data
Documents stockholders' approval. Data Documents would become a wholly
owned subsidiary of Corporate Express upon completion of the merger.
I. SUBSEQUENT EVENT
A special meeting of stockholders of Data Documents will be held on
November 25, 1997 at 10:00 a.m., at which time the stockholders will be
asked to approve and accept the Merger Agreement discussed in Note H.
8
<PAGE>
ITEM 2.
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
NET SALES
Net sales were $65.7 million for the quarter ended September 30, 1997, an
increase of 9.9% from $59.8 million in 1996. Net sales of business forms,
supplies and services increased 4.0% with an increase of 10.3% in custom forms
sales and a decrease of 14.4% in stock forms sales. Pressure-sensitive label
sales increased 15.7%, partially due to the Moore Labels acquisition and
InteliMail(R) sales increased 31.4% due to the addition of new customers and
growth from existing customers.
GROSS PROFIT
Gross profit was $17.0 million for the quarter ended September 30, 1997, an
increase of $0.8 million, or 5.0% from $16.2 million in 1996. As a percentage of
sales, gross profit was 25.9% compared with 27.0% in 1996. Gross profit margin
dollars of business forms, supplies and services increased 0.5% for the third
quarter of 1997, primarily as a result of higher sales. Pressure-sensitive label
gross profit margin dollars increased 3.9% in the third quarter of 1997,
primarily as a result of higher sales. InteliMail gross profit margin dollars
increased 10.2%, primarily as a result of increased sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $9.9 million for the quarter
ended September 30, 1997, an increase of $0.4 million over 1996. The increase in
expenses resulted from the increased sales activity. These expenses decreased as
a percentage of sales to 15.1% compared to 15.9% in 1996, as a result of the
increased sales on slightly higher operating expenses.
DEBT EXPENSE
The decrease in debt expense of $0.1 million is due to the combination of lower
debt in 1997 and interest income generated from the Company's cash balance,
prior to the Moore Labels acquisition.
9
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
NET SALES
Net sales were $192.1 million for the nine months ended September 30, 1997, an
increase of 4.1% from $184.5 million in 1996. Paper price decreases in 1997 over
1996 are estimated to have negatively impacted total sales by approximately
3.6%, most of which related to business forms and supplies. Net sales of
business forms, supplies and services decreased 2.6% with an increase of 4.5% in
custom forms sales and a decrease of 22.6% in stock forms sales.
Pressure-sensitive label sales increased 12.4% partially due to the Moore Labels
acquisition and InteliMail sales increased 20.0% due to the addition of new
customers and growth from existing customers.
GROSS PROFIT
Gross profit was $50.1 million for the nine months ended September 30, 1997, an
increase of $1.5 million, or 3.1% from $48.6 million in 1996. As a percentage of
sales, gross profit was 26.1% compared with 26.3% in 1996. Gross profit margin
dollars of business forms, supplies and services was maintained at the same
dollar level for the first nine months of 1997. Pressure-sensitive label gross
profit increased 6.6% in the first nine months of 1997 on more sales volume.
InteliMail gross profit margin dollars increased 15.4%, primarily as a result of
increased sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $28.9 million for the nine
months ended September 30, 1997, an increase of $0.6 million over 1996. These
expenses as a percentage of sales were 15.1% compared to 15.3% in 1996, as a
result of slightly higher operating expenses on increased sales.
DEBT EXPENSE
The decrease in debt expense of $0.4 million is due to the combination of lower
debt in 1997 and interest income generated from the Company's cash balance prior
to the Moore Labels acquisition purchase.
EXTRAORDINARY EXPENSE
In June 1996, the Company repurchased $500,000 of the Senior Notes at a price of
$110. The premium along with the related unamortized debt issuance cost and
issuance discount resulted in a charge of $54,000, net of income tax benefit of
$34,000.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon operating cash flow and borrowings under its
revolving credit facilities to finance capital expenditures, increases in
working capital and debt service. At September 30, 1997, working capital was
$49.2 million, a decrease of $4.2 million from the working capital balance as
of December 31, 1996. Operating activities generated cash of approximately $6.0
million during the nine months ended September 30, 1997. The Company had a net
cash outflow of approximately $17.8 million from its investing activities during
the nine months ended September 30, 1997, primarily as a result of the
acquisition of Moore Labels and capital expenditures. The Company estimates that
its capital expenditures for fiscal 1997 will be between $6.0 million and $7.0
million.
In connection with the 1995 acquisition of Cal Emblem, the Company issued two
five-year term promissory notes in the aggregate principal amount of $2.2
million which accrue interest at the rate of 10% per annum. Principal and
interest payments are due in approximately equal installments over five years.
The tax-exempt industrial revenue bonds in the principal amount of $170 thousand
bear an annual interest rate of 10.125% and were paid on October 1, 1997.
Monthly sinking fund payments are required.
In January 1997, DDI entered into a new revolving facility (the "Revolving
Credit Facility") that provides for borrowing of up to $20 million. The
Revolving Credit Facility is secured by the Company's accounts receivable and
the proceeds thereof and, subject to the first lien of the holders of the Senior
Notes, by the Company's inventory and proceeds thereof. Outstanding indebtedness
under the Revolving Credit Facility is limited to 80% of eligible accounts
receivable (subject to reduction by the lender under certain circumstances). The
facility will expire in July 1999. Under the terms of the Indenture governing
the Senior Notes, the Company is permitted to incur additional revolving credit
indebtedness in an amount equal to 85% of its accounts receivable, and based
upon accounts receivable balances at September 30, 1997, the Company was
permitted to incur approximately $20 million of revolving credit indebtedness.
As of September 30, 1997, there was $2.8 million outstanding under the Company's
Revolving Credit Facility. The Facility restricts certain liens, the payment of
dividends on, and redemption of, any class of the capital stock of DDI (all of
which is currently owned by Data Documents Incorporated), PBF or Cal Emblem and
certain other restricted payments, among other things.
In connection with the acquisition of Moore Labels, the aggregate consideration
for the transfer of the capital stock of Moore Labels was approximately $14.4
million paid in cash. The consideration paid was supplied by excess cash and the
use of approximately $5.0 million of the Revolving Credit Facility.
The Company expects to satisfy its obligations under the Senior Notes, the
promissory notes issued in connection with the Cal Emblem acquisition and the
industrial revenue bonds, as well as future capital expenditures and working
capital requirements, with cash flow from operations, and believes that this
source will provide sufficient liquidity to enable it to meet its working
capital requirements for at least the next 12 months.
11
<PAGE>
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
(a) During the quarter ended September 30, 1997, 71,031 shares of common
stock were issued as a result of the exercise of 2,000 Warrants.
(b) During the quarter ended September 30, 1997, 98 shares of common stock
were issued as a result of the exercise of stock options.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
(b) Current Reports on Form 8-K
In connection with the acquisition of Moore Labels, a Form 8-K dated
August 14, 1997 was filed during the quarter ended September 30, 1997.
In connection with the merger transaction of Corporate Express, a Form
8-K dated September 10, 1997 was filed during the quarter ended
September 30, 1997.
12
<PAGE>
EXHIBIT 11
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Common stock outstanding 9,710,226 9,230,261 9,710,226 9,230,261
Common stock equivalents:
Common stock warrants, if dilutive 174,902 653,603 174,902 653,603
Common stock options - incremental shares 165,814 71,895 102,332 56,277
----------- ----------- ----------- -----------
Weighted average shares outstanding 10,050,942 9,955,759 9,987,460 9,940,141
=========== =========== =========== ===========
Net income, as adjusted:
Before extraordinary item $ 2,825 $ 2,530 $ 8,447 $ 7,684
Extraordinary item available for common stock - - - (54)
----------- ----------- ----------- -----------
Net income available for common stock $ 2,825 $ 2,530 $ 8,447 $ 7,630
=========== =========== =========== ===========
Primary earnings per share
Before extraordinary item $ 0.28 $ 0.25 $ 0.85 $ 0.77
Extraordinary item available for common stock
- - - -
----------- ----------- ----------- -----------
Net income available for common stock $ 0.28 $ 0.25 $ 0.85 $ 0.77
=========== =========== =========== ===========
</TABLE>
13
<PAGE>
DATA DOCUMENTS INCORPORATED
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATA DOCUMENTS INCORPORATED
/s/ A. Robert Thomas
Date: November 13, 1997 ---------------------------------
A. Robert Thomas
Chief Financial Officer
/s/ Walter J. Kearns
Date: November 13, 1997 ---------------------------------
Walter J. Kearns
President and Chief Executive Officer
14
