<PAGE> 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
<TABLE>
<CAPTION>
=======================================================================================================
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
- -------------------------------------------------------------------------------------------------------
<S> <C>
$402,500,000 $80,500
=======================================================================================================
</TABLE>
* 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.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
</TABLE>
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<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C> <C>
(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.
</TABLE>
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
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
</TABLE>
v
<PAGE> 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
<PAGE> 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
<PAGE> 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
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<PAGE> 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.
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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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
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<PAGE> 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
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<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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."
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
</TABLE>
See the accompanying notes to summary financial information.
15
<PAGE> 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.
<TABLE>
<CAPTION>
TWELVE
NINE MONTHS MONTHS
ENDED ENDED
NOVEMBER 29, MARCH 1,
1997 1997
-------------- ------------
(IN THOUSANDS EXCEPT PER SHARE
AND RATIO DATA)
(UNAUDITED)
<S> <C> <C>
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
</TABLE>
See the accompanying notes to summary financial information.
16
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<C> <C> <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
</TABLE>
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:
<TABLE>
<C> <C>
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
</TABLE>
February 6, 1998
<PAGE> 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.
<TABLE>
<C> <C> <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
</TABLE>
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.
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 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.
--------------------------------------------------------
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<TABLE>
<S> <C> <C>
[ ] $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
</TABLE>
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). [ ]
<PAGE> 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
<PAGE> 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
------------------
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING REGISTERED HOLDERS OF SECURITIES
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 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:
<TABLE>
<C> <C>
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
</TABLE>
<PAGE> 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.
<TABLE>
<C> <C> <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
</TABLE>
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.
<PAGE> 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.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
--------------------------------------------------- ---------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 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.
<TABLE>
<S> <C> <C>
[ ] $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
</TABLE>
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
<PAGE> 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.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
--------------------------------------------------- ---------------------------------------------------
Number of Firm Authorized Signature
--------------------------------------------------- ---------------------------------------------------
Address Name (Please Print)
--------------------------------------------------- ---------------------------------------------------
City, State, Zip Code Title
---------------------------------------------------
Area Code and Telephone Number
Dated: ____________________________________________
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM.
YOUR SHARE CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
4
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<S> <C> <C>
[ ] $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
</TABLE>
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:
<TABLE>
<S> <C>
Date: ______________________, 1998 Signature(s):
------------------------------------------------------
Name(s):
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Telephone Number:
--------------------------------------------------
Social Security or
Taxpayer ID No.:
---------------------------------------------------
</TABLE>
5
<PAGE> 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
#
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<S> <C>
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
</TABLE>
February 6, 1998
3
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF -- NUMBER OF --
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
====================================================================
(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.
<PAGE> 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.
<PAGE> 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
<PAGE> 2
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 1, MARCH 2,
1997 1996
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 3
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 1, MARCH 2,
1997 1996
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 4
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
---------- ---------- ------------
<S> <C> <C> <C>
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
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 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)
<TABLE>
<CAPTION>
FOREIGN
PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY
-------------------- ------------------- PAID-IN TRANSLATION RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS
----------- ------- ----------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
=========== ======= =========== === ======== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE> 6
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
--------- --------- ------------
<S> <C> <C> <C>
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
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 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:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
========== ========== ==========
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
PERIOD NET SALES NET INCOME
---------- --------- ----------
<S> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
BALANCE
CASH NON-CASH TOTAL USAGE 3/1/97
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
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
======= ====== ======= ======== =======
</TABLE>
32
<PAGE> 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.
<TABLE>
<CAPTION>
BALANCE CASH NON-CASH BALANCE
3/2/96 PAYMENTS USAGE ADJUSTMENTS 3/1/97
------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C>
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
======= ======== ======= ======= ======
</TABLE>
- - --------
(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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MARCH 1, MARCH 2,
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
WAREHOUSE DISPOSITION
& SYSTEM REDUNDANT OF ASSETS
TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER
------- ------------ ---------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
======= ======= ====== ======= =====
</TABLE>
- - --------
(1) All consolidation projects relating to companies acquired prior to the
adoption of EITF 95-3 have been successfully completed.
35
<PAGE> 18
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
After adoption of EITF 95-3:
<TABLE>
<CAPTION>
WAREHOUSE DISPOSITION
& SYSTEM REDUNDANT OF ASSETS
TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER
------- ------------ ---------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
======= ====== ======= ======= =======
</TABLE>
- - --------
(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
<PAGE> 19
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT:
Debt consisted of the following:
<TABLE>
<CAPTION>
MARCH 1, MARCH 2,
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
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
======== ========
</TABLE>
37
<PAGE> 20
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The annual maturities of debt for succeeding years are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
----------- --------------
<S> <C>
1997............................... $ 23,802
1998............................... 10,909
1999............................... 19,506
2000............................... 465,627
2001............................... 2,244
Thereafter......................... 123,419
--------
Total............................ $645,507
========
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
----------- --------------
<S> <C>
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
========
</TABLE>
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:
<TABLE>
<CAPTION>
FISCAL YEAR (IN THOUSANDS)
----------- --------------
<S> <C>
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
=======
</TABLE>
39
<PAGE> 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:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
MARCH 1, MARCH 2,
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
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
======= =======
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
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
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
The following table summarizes information about fixed stock options
outstanding as of March 1, 1997:
<TABLE>
<CAPTION>
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
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ .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
====== =====
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------
MARCH 1, MARCH 2,
1997 1996
-------- --------
<S> <C> <C> <C>
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
</TABLE>
- - --------
(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
<PAGE> 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:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1996 1995 1994
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
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
======= ====== =======
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
CORPORATE
EXPRESS PRODUCT
CONSOLIDATED DISTRIBUTION SERVICES
------------ ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
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
</TABLE>
47
<PAGE> 30
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
GEOGRAPHICAL SEGMENTS:
<TABLE>
<CAPTION>
CORPORATE
EXPRESS DOMESTIC INTERNATIONAL
CONSOLIDATED OPERATIONS OPERATIONS
------------ ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
</TABLE>
48
<PAGE> 31
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED):(A)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
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)
</TABLE>
- - --------
(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
<PAGE> 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-
<PAGE> 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-
<PAGE> 3
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
November 29, November 30, November 29, November 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
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
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-4-
<PAGE> 4
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
November 29, November 30,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
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
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-5-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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:
<TABLE>
<CAPTION>
Disposition
Facility Redundant of Assets
Total Exit Costs Facilities Severance & Other
----- ---------- ---------- ----------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
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
====== ====== ====== ====== ======
</TABLE>
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-
<PAGE> 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:
<TABLE>
<CAPTION>
Balance FY 97 Cash Non-Cash Balance
3/1/97 Net Charge Payments Usage 11/29/97
------- ---------- -------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= ========
</TABLE>
(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-
<PAGE> 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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, 1996 November 30, 1996
------------------ ------------------
<S> <C> <C>
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
====== ======
</TABLE>
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-
<PAGE> 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-
