<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______
Commission File Number 0-25400
DAISYTEK INTERNATIONAL CORPORATION
------------------------------------------------------
(exact name of registrant as specified in its charter)
DELAWARE 75-2421746
- ------------------------ --------------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
500 NORTH CENTRAL EXPRESSWAY, PLANO, TEXAS 75074
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 881-4700
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
At July 31, 1996 there were 6,453,651 shares of registrant's common stock
outstanding.
<PAGE> 2
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and March 31, 1996 . . . . . . . . . . . . . . . . 3
Unaudited Interim Consolidated Statements of
Operations for the Three
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . 5
Unaudited Interim Consolidated Statements of
Cash Flows for the Three
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . 6
Notes to Interim Consolidated Financial Statements . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
-------- ---------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 483 $ 204
Trade accounts receivable, net of allowance for doubtful
accounts of $1,409 at June 30, 1996 and $1,283 at March 31, 1996 69,032 69,169
Receivables from employees and related parties, net of allowance
for doubtful accounts of $475 at June 30, 1996 and March 31, 1996 629 571
Inventories, net 47,254 44,358
Prepaid expenses and other current assets 1,814 2,120
Deferred income tax asset 675 762
-------- --------
Total current assets 119,887 117,184
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment 16,778 15,325
Leasehold improvements 313 306
-------- --------
17,091 15,631
Less - Accumulated depreciation and
amortization (6,875) (6,136)
-------- --------
Net property and equipment 10,216 9,495
-------- --------
EMPLOYEE RECEIVABLES 402 395
EXCESS OF COST OVER NET ASSETS ACQUIRED,
net of accumulated amortization of $480 at June 30, 1996
and $468 at March 31, 1996 1,515 1,527
-------- --------
Total assets $132,020 $128,601
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE> 4
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 670 $ 650
Trade accounts payable 39,641 44,736
Accrued expenses 4,656 4,230
Income taxes payable 879 419
Other current liabilities 8,720 10,486
-------- --------
Total current liabilities 54,566 60,521
-------- --------
LONG-TERM DEBT, less current portion 21,706 16,419
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized
at June 30, 1996 and March 31, 1996; none issued and outstanding -- --
Common stock, $.01 par value; 10,000,000 shares authorized
at June 30, 1996 and March 31, 1996; 6,437,849 and
6,342,753 shares issued and outstanding at June 30, 1996
and March 31, 1996, respectively 64 63
Additional paid-in capital 31,915 30,874
Retained earnings 24,777 21,736
Cumulative foreign currency translation adjustment (1,008) (1,012)
-------- --------
Total shareholders' equity 55,748 51,661
-------- --------
Total liabilities and shareholders' equity $132,020 $128,601
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
4
<PAGE> 5
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------
1996 1995
--------- ---------
<S> <C> <C>
NET SALES $ 136,894 $ 104,966
COST OF SALES 123,224 94,332
--------- ---------
Gross Profit 13,670 10,634
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 8,306 6,595
--------- ---------
Income from operations 5,364 4,039
INTEREST EXPENSE 432 349
--------- ---------
Income before income taxes 4,932 3,690
PROVISION FOR INCOME TAXES 1,891 1,422
--------- ---------
NET INCOME $ 3,041 $ 2,268
========= =========
NET INCOME PER COMMON SHARE $ 0.44 $ 0.34
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,907 6,729
========= =========
</TABLE>
The accompanying notes are an integral part of these
interim consolidated statements.
5
<PAGE> 6
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,041 $ 2,268
Adjustments to reconcile net income to net cash
used in operating activities --
Depreciation and amortization 773 407
Provision for doubtful accounts 324 291
Deferred income tax provision (benefit) 87 (170)
Changes in operating assets and liabilities --
Trade accounts receivable (193) (90)
Receivables from related parties 2 (30)
Inventories, net (2,895) (5,350)
Trade accounts payable and accrued expenses (4,653) 1,345
Income taxes payable 456 887
Prepaid expenses and other current assets 304 (472)
-------- --------
Net cash used in operating activities (2,754) (914)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,475) (535)
Advances to employees, net (66) (23)
-------- --------
Net cash used in investing activities (1,541) (558)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net 5,460 6,891
Payments of other current liabilities, net (1,766) (5,371)
Payments on capital leases and notes payable (153) (133)
Net proceeds from exercise of stock options 1,042 60
-------- --------
Net cash provided by financing activities 4,583 1,447
-------- --------
EFFECT OF EXCHANGE RATES ON CASH (9) (13)
-------- --------
NET INCREASE (DECREASE) IN CASH 279 (38)
CASH, beginning of period 204 448
-------- --------
CASH, end of period $ 483 $ 410
======== ========
</TABLE>
The accompanying notes are an integral part of these
interim consolidated statements.
6
<PAGE> 7
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE MONTH PERIODS ENDED
JUNE 30, 1996 AND 1995 IS UNAUDITED.)
1. ORGANIZATION AND NATURE OF BUSINESS:
Daisytek International Corporation (a Delaware corporation) and
subsidiaries (the "Company") is a wholesale distributor of non-paper computer
and office automation supplies and accessories, whose primary products are
laser toner, copier toner, inkjet cartridges, optical storage products, printer
ribbons, diskettes, computer tape cartridges and accessories such as cleaning
kits and media storage files. The Company, through its wholly owned
subsidiaries in the U.S., Canada, and Mexico, sells products primarily in North
America, as well as in Latin America, Europe, the Far East, Africa and
Australia. The Company's customers include value added resellers, computer
supplies dealers, office product dealers, computer and office product
superstores and other retailers who resell the products to end-users.
2. INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
In the opinion of management, the Interim Unaudited Consolidated Financial
Statements of the Company include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position as of June 30, 1996, and its results of operations and its
cash flows for the three months ended June 30, 1996 and 1995. Results of the
Company's operations for interim periods may not be indicative of results for
the full fiscal year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations promulgated by the Securities and Exchange Commission (the "SEC").
The Interim Unaudited Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements and accompanying
notes of the Company for the fiscal years ended March 31, 1996 and 1995, and
the three years ended March 31, 1996, included in the Company's Form 10-K (File
Number 0-25400) as filed with the SEC on June 26, 1996 (the "Company's Form
10-K"). Accounting policies used in the preparation of the Interim Unaudited
Consolidated Financial Statements are consistent in all material respects with
the accounting policies described in the Notes to Consolidated Financial
Statements in the Company's Form 10-K.
3. INVENTORIES:
Inventories (merchandise held for resale, all of which is finished goods)
are stated at the lower of weighted average cost or market.
7
<PAGE> 8
4. DEBT:
Debt as of June 30, 1996 and March 31, 1996, is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
-------- --------
<S> <C> <C>
Revolving line of credit with commercial banks,
interest (weighted average rate of 6.33% at June 30,
1996) at the Company's option at the prime rate
of a bank (8.25% at June 30, 1996) or the
eurodollar rate plus 0.625% to 1.125% (6.138% at
June 30, 1996), due May 22, 1998 $ 20,900 $ 15,440
Notes payable and obligations under capital leases
for warehouse equipment, computer equipment,
office furniture and fixtures, interest at varying
rates ranging from 8% to 17%, with lease terms
varying from five to seven years 1,476 1,629
-------- --------
22,376 17,069
Less: Current portion of long-term debt (670) (650)
-------- --------
$ 21,706 $ 16,419
======== ========
</TABLE>
In May 1995, the Company entered into an agreement with certain banks for a
three-year unsecured revolving line of credit facility (the "facility"). Under
the facility, the Company may borrow initially up to $25.0 million through
April 1996 and up to $30.0 million thereafter until maturity. Availability
under the facility is based upon amounts of eligible accounts receivable, as
defined. The facility accrues interest, at the Company's option, at the prime
rate of a bank or the eurodollar rate plus an adjustment ranging from 0.625% to
1.125% depending on the Company's financial performance. A commitment fee of
0.20% to 0.25% is charged on the unused portion of the facility. The facility
contains various covenants including, among other things, the maintenance of
certain financial ratios (minimum fixed charge ratio and minimum level of
tangible net worth) and restrictions on certain activities of the Company,
including loans and payments to related parties, incurring additional debt,
acquisitions, investments and asset sales. As of June 30, 1996, $9.1 million
was available under the facility for additional borrowings. This facility is
part of the Company's integrated cash management system in which accounts
receivable collections are used to pay down the facility and disbursements are
paid from the facility. This system allows the Company to optimize its cash
flow. At June 30, 1996 and March 31, 1996, the Company had checks and other
items outstanding in excess of its cash balance of approximately $8.7 million
and $10.5 million, respectively, which are included in other current
liabilities.
8
<PAGE> 9
5. SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS):
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $ 369 $ 303
Income taxes $ 591 $ 695
</TABLE>
6. STOCK OPTIONS:
During the three month period ended June 30, 1996, the Company granted
options to certain employees under its employee stock option plans (the
"Plans"). These options were granted at the fair market value at the date of
the grant. In addition to the options under the Plans, in May 1996 the Company
granted options to a key executive to purchase 15,000 shares of common stock.
These options were granted at the fair market value at the date of the grant.
Such options become exercisable over a three year period starting with the date
of grant, based on vesting percentages. The following table summarizes stock
option activity for the three months ended June 30, 1996.
<TABLE>
<CAPTION>
Shares Price per Share
------ ---------------
<S> <C> <C>
Outstanding, March 31, 1996 718,994 $ 1.28 - $19.50
Granted 296,114 32.50
Exercised (95,096) 1.28 - 19.50
Canceled (3,564) 19.50 - 32.50
-------
Outstanding, June 30, 1996 916,448 $ 1.28 - $32.50
=======
</TABLE>
As of June 30, 1996, 405,481 options outstanding were exercisable. The
remaining options will become exercisable over the next three years based on
vesting percentages. In addition, 220,829 options remain available to be
granted in the future under the Plans.
7. RECENTLY ISSUED ACCOUNTING STANDARD:
The Company must adopt Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of " in fiscal year 1997. SFAS No. 121 requires
companies to periodically evaluate long-lived assets and to record an
impairment loss if the expected undiscounted future cash flows is less than the
carrying value of those assets. Impairment losses resulting from the initial
application of this statement shall be reported in the period in which the
recognition criteria are first applied. The Company is currently evaluating
the implementation of SFAS No. 121, the effects of which are unknown at this
time.
9
<PAGE> 10
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 1996 AND 1995
Net Sales. Net sales for the three months ended June 30, 1996 were $136.9
million as compared to $105.0 million for the three months ended June 30, 1995,
an increase of $31.9 million, or 30.4%, as the result of an increase in U.S.
net sales of $27.8 million, or 32.1%, and an increase in international net
sales of $4.1 million, or 22.3%. The growth in U.S. and international net
sales was primarily due to increased sales volume to large national accounts,
computer and office product superstores, new customers and the Company's
continued introduction of new products. Net sales to new customers for the
three months ended June 30, 1996 were $5.6 million, while net sales to existing
customers increased by $26.3 million during this period.
Gross Profit. Gross profit for the three months ended June 30, 1996 was
$13.7 million as compared to $10.6 million in the same period in 1995, an
increase of $3.1 million, or 28.5%, primarily as the result of increased sales
volume in fiscal year 1996. The Company's gross profit margin was 10.0% for
the three months ended June 30, 1996 as compared to 10.1% for the corresponding
period of the prior year. The decrease in gross profit margin percentage was
primarily the result of increased sales at lower gross profit margins to large
national accounts and computer and office product superstores. The Company
believes that the trend in sales to large national accounts and computer and
office product superstores and the corresponding decline in gross profit margin
percentage will continue during fiscal year 1997.
SG&A Expenses. SG&A expenses for the three months ended June 30, 1996 were
$8.3 million, or 6.1% of net sales, as compared to $6.6 million, or 6.3% of net
sales, for the three months ended June 30, 1995. The increase in SG&A expenses
was primarily a result of the increase in costs associated with the Company's
increased sales volume. The decrease in SG&A expenses as a percentage of net
sales was primarily due to improved operating efficiencies and staff
productivity as a result of increased sales volume and continued technological
enhancements implemented by the Company.
Income from Operations. Income from operations for the three months ended
June 30, 1996 was $5.4 million as compared to $4.0 million for the same period
during 1995, an increase of $1.4 million, or 32.8%. This increase was primarily
due to increased sales volume, increased gross profit and improved operating
efficiencies. Income from operations as a percentage of net sales was 3.9% for
the three months ended June 30, 1996 as compared to 3.8% for the same period in
fiscal year 1995, primarily as the result of a decline in SG&A expenses as a
percentage of net sales which were somewhat offset by a decrease in gross profit
margin as a percentage of net sales.
Interest Expense. Interest expense for the three months ended June 30, 1996
was $0.4 million as compared to $0.3 million for the three months ended June
30, 1995. The increase was primarily the result of an increase in the
outstanding balance in the Company's line of credit attributable to increased
working capital and capital expenditure needs, which was partially offset by
lower interest rates during the current period. The weighted average interest
rate was 6.8% during the three months ended June 30, 1996 as compared to 8.4%
for the corresponding period of 1995.
Income Taxes. The Company's provision for income taxes was $1.9 million for
the three months ended June 30, 1996 as compared to $1.4 million for the three
months ended June 30, 1995. The increase was primarily due to increased pretax
profits. The effective tax rate for the first three months of this fiscal year
was 38.3% as compared to the effective tax rate of 38.5% for the corresponding
period of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary source of cash has been from financing
activities. Net cash provided by financing activities was $4.6 million and
$1.4 million for the three months ended June 30, 1996 and 1995, respectively.
Proceeds from bank borrowings and lease financings, and from the exercise of
common stock options have been used to finance the Company's operations and
expansion.
10
<PAGE> 11
Net cash used in operating activities was $2.8 million and $0.9 million for
the three months ended June 30, 1996 and 1995, respectively. The Company's net
cash used in operations primarily related to increases in working capital
requirements to support growth in the Company's business during these periods.
These increased working capital requirements were partially funded by cash
generated by the Company's operations.
The Company's principal use of funds for investing activities was capital
expenditures of $1.5 million and $0.5 million for the three months ended June
30, 1996 and 1995, respectively. These expenditures have consisted primarily
of additions to upgrade the Company's management information systems, the
Company's CD-ROM based catalog (SOLO), and its Memphis distribution facility.
The Company anticipates that its total investment in upgrades and additions to
facilities for fiscal 1997 will be approximately $4 to $5 million.
Working capital increased to $65.3 million at June 30, 1996 from $56.7
million at March 31, 1996, an increase of $8.6 million which was primarily
attributable to decreases in accounts payable and other current liabilities and
an increase in inventory. During the three month periods ended June 30, 1996
and 1995, the Company generally maintained an accounts receivable balance of
approximately 45 days of sales and an inventory turnover rate of approximately
11 turns.
In May 1995, the Company entered into an agreement with certain banks for a
three-year unsecured revolving line of credit facility (the "facility"). Under
the facility, the Company may borrow initially up to $25.0 million until April
1996, and up to $30.0 million thereafter until maturity. Availability under the
facility is based upon amounts of eligible accounts receivable, as defined. As
of June 30, 1996, the Company had borrowed $20.9 million, leaving $9.1 million
available under the facility for additional borrowings. The facility matures in
May 1998 and accrues interest, at the Company's option, at the prime rate of a
bank or a eurodollar rate plus an adjustment ranging from 0.625% to 1.125%
depending on the Company's financial performance. A commitment fee of 0.20% to
0.25% is charged on the unused portion of the facility. The facility contains
various covenants including, among other things, the maintenance of certain
financial ratios including the achievement of a minimum fixed charge ratio and
minimum level of tangible net worth, and restrictions on certain activities of
the Company, including loans and payments to related parties, incurring
additional debt, acquisitions, investments and asset sales.
During the three months ended June 30, 1996, approximately $22.4 million,
or 16.4%, of the Company's net sales were sold through the Company's Canadian,
Mexican and U.S. export operations, including Latin America. The Company
believes that international markets represent further opportunities for growth.
The Company attempts to protect itself from foreign currency fluctuations by
denominating substantially all of its non-Canadian international sales in U.S.
dollars. In addition, in May 1995, the Company entered into a $4.3 million
(U.S.) one-year forward exchange contract, which expired in May 1996. As of
March 31, 1996, the Company had incurred a loss of approximately $59,000, net
of income taxes, related to this contract. In May 1996, the Company entered
into a new $6.6 million (U.S.) one-year forward exchange contract to replace
the contract which expired in May 1996. As of June 30, 1996, the Company had
incurred a loss of approximately $21,000, net of income taxes, related to this
contract. The Company may consider entering into other forward exchange
contracts in order to hedge the Company's net investment in its Mexican and
Canadian subsidiaries, although no assurance can be given that the Company will
be able to do so on acceptable terms.
The Company was recently appointed by a major manufacturer as the master
distributor for a certain product line of consumable supplies throughout the
United States, Canada, Mexico, the Caribbean and Latin America. The Company
expects that this arrangement will result in incremental revenue growth, and
similar to the Company's other business and revenue growth, will impose
additional working capital needs upon the Company. The Company believes it
will be able to satisfy its working capital needs for fiscal year 1997,
including such additional working capital required by this arrangement as well
as planned capital expenditures, through funds available under the facility,
trade credit, lease financing, internally generated funds and by increasing the
amount available under the facility (although the Company has not received any
commitment to do so). In addition, although the Company has no plans to do so,
and depending on market conditions and the terms thereof, the Company may also
consider obtaining additional funds through an additional line of credit, other
debt financing or the sale of capital stock; however, no assurance can be given
in such regard.
11
<PAGE> 12
INVENTORY MANAGEMENT
The Company manages its inventories by maintaining sufficient quantities of
product to achieve high order fill rates while at the same time maximizing
inventory turnover rates. Inventory balances will fluctuate as the Company
adds new product lines and makes large purchases from suppliers to take
advantage of attractive terms. To reduce the risk of loss to the Company due
to supplier price reductions and slow moving inventory, the Company's
purchasing agreements with many of its suppliers, including most of its major
suppliers, contain price protection and stock return privileges under which the
Company receives credits against future purchases if the supplier lowers prices
on previously purchased inventory or the Company can return slow moving
inventory in exchange for other products.
SEASONALITY
Although the Company historically has experienced its greatest growth in
revenues in its fourth fiscal quarter, management has not been able to
determine the specific event, if any, of seasonal factors that may cause
quarterly variability in operating results. Management believes, however, that
factors that may influence quarterly variability include the overall growth in
the non-paper computer supplies industry and shifts in demand for the Company's
products due to a variety of factors, including sales increases resulting from
the introduction of new computer supplies products. The Company generally
experiences a relative slowness in sales during the summer months, which may
adversely affect the Company's first and second fiscal quarter results in
relation to sequential quarter performance. The Company believes that results
of operations for a quarterly period may not be indicative of the results for
any other quarter or for the full year.
INFLATION
Management believes that inflation has not had a material effect on the
Company's operations.
FORWARD-LOOKING INFORMATION
The matters discussed in this Form 10-Q, other than historical information,
and, in particular, information regarding future revenue, earnings and business
plans and goals, consist of forward-looking information under the Private
Securities Litigation Reform Act of 1995, and are subject to and involve risks
and uncertainties which could cause actual results to differ materially from
the forward-looking information. These risks and uncertainties include, but
are not limited to, the "Risk Factors" set forth in the Company's prospectus
dated January 25, 1996, which are incorporated by reference herein, as well as
general economic conditions, industry trends, the loss of key suppliers or
customers, the loss of strategic product shipping relationships, customer
demand, product availability, competition (including pricing and availability),
concentrations of credit risk, distribution efficiencies, capacity constraints,
technological difficulties, exchange rate fluctuations, and the regulatory and
trade environment (both domestic and foreign).
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
The Company must adopt Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" in fiscal year 1997. SFAS No. 121 requires companies
to periodically evaluate long-lived assets and to record an impairment loss if
the expected undiscounted future cash flows is less than the carrying value of
those assets. Impairment losses resulting from the initial application of this
statement shall be reported in the period in which the recognition criteria are
first applied. The Company is currently evaluating the implementation of SFAS
No. 121, the effects of which are unknown at this time.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- -------- -----------------------
<S> <C>
3.1.1(*) Certificate of Amendment of Amended and Restated Certificate of
Incorporation
10.1(*) Non-Employee Director Stock Option and Retainer Plan
10.2 First Amendment to Credit Agreement dated April 15, 1996 between
Daisytek, Incorporated, as Borrower, Daisytek International
Corporation and Borrower's Subsidiaries, as Guarantors, and
Texas Commerce Bank National Association and State Street Bank
and Trust Company, as Lenders
11 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
b) Reports on Form 8-K:
Form 8-K filed on April 23, 1996 reporting Item 5. the Company's press
release dated April 23, 1996
- ---------------------
(*) Incorporated by reference from the Annual Report on Form 10-K for the
Fiscal Year Ended March 31, 1996 dated June 26, 1996.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1996
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ Mark C. Layton
-------------------------------------------
Mark C. Layton
President, Chief Operating Officer,
Chief Financial Officer
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBITS PAGE
- -------- ----------------------- -----------
<S> <C> <C>
3.1.1(*) Certificate of Amendment of Amended and Restated Certificate of
Incorporation -
10.1(*) Non-Employee Director Stock Option and Retainer Plan -
10.2 First Amendment to Credit Agreement dated April 15, 1996 between
Daisytek, Incorporated, as Borrower, Daisytek International
Corporation and Borrower's Subsidiaries, as Guarantors, and
Texas Commerce Bank National Association and State Street Bank 16
and Trust Company, as Lenders
11 Statement re: Computation of Earnings Per Share 31
27 Financial Data Schedule 32
</TABLE>
- -----------------------
(*) Incorporated by reference from the Annual Report on Form 10-K for the
Fiscal Year Ended March 31, 1996 dated June 26, 1996.
15
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of April 15, 1996, is among DAISYTEK, INCORPORATED, a Delaware corporation
(hereinafter referred to as "Borrower"), DAISYTEK INTERNATIONAL INCORPORATED, a
Delaware corporation ("Guarantor"), each of Borrower's Subsidiaries identified
under the caption "SUBSIDIARY GUARANTORS" on the signature pages of this
Amendment or that, pursuant to Section 8.1(n) of the Credit Agreement (as
hereinafter defined), become a "Subsidiary Guarantor" (individually, a
"Subsidiary Guarantor," and, collectively, the "Subsidiary Guarantors"), STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust ("State Street"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
("TCB"), as a lender and as administrative agent for itself and State Street
(State Street and TCB being collectively referred to herein as "Lenders"). All
capitalized terms used herein and not otherwise defined shall have the meaning
ascribed to such terms in the Credit Agreement.
RECITALS
WHEREAS, Borrower, Guarantor, Subsidiary Guarantors and Lenders
entered into that certain Credit Agreement dated as of May 22, 1995 (the
"Credit Agreement"); and
WHEREAS, Borrower, Guarantor, Subsidiary Guarantors and Lenders desire
to amend the Credit Agreement as described herein;
NOW, THEREFORE, in consideration of the recitals set forth above, the
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower, Guarantor,
Subsidiary Guarantors and Lenders hereby agree as follows:
1. Amended Definitions. The following definitions in Section 1.1
of the Credit Agreement are amended to read in their entireties as follows:
""Committed Sum" means, with respect to the Loan Commitment,
for each of Lenders, (a) Twelve Million Five Hundred Thousand Dollars
($12,500,000) during the period commencing as of the Closing Date and
ending on and including April 14, 1996, and (b) Fifteen Million
Dollars ($15,000,000) during the period commencing as of April 15,
1996 and ending on and including the Loan Maturity Date."
""Loan Commitment" means (a) Twenty Five Million Dollars
($25,000,000) during the period commencing as of the Closing Date and
ending on and including April 14, 1996, and (b) Thirty Million Dollars
($30,000,000) during the period commencing as of April 15, 1996 and
ending on but not including the Loan Maturity Date."
<PAGE> 2
2. Amendment of Section 2.7. Section 2.7 of the Credit Agreement
is amended to read in its entirety as follows:
"Section 2.7 Voluntary Prepayment. At its option on any
Business Day, Borrower may prepay the principal balance of the Loan in
whole or in part; provided, however, that unless such prepayment
constitutes the entire outstanding principal balance of the Loan, any
such prepayment of principal shall be $100,000 or greater.
Any such prepayment of Advances accruing interest at the Base
Rate shall not require prior notice to Lenders. Any such prepayment
of Advances accruing interest at an Adjusted Eurodollar Rate shall
require four (4) Business Days' prior notice to Lenders. To the
extent possible, any prepayment made hereunder shall be deemed to be a
prepayment of Advances accruing interest at the Base Rate. Prepayment
of any Advance accruing interest at an Adjusted Eurodollar Rate shall
also be subject to Section 4.4(d)."
3. New Section 11.4A. There is hereby added a new Section 11.4A
of the Credit Agreement, to read in its entirety as follows:
"Section 11.4A Assignments and Participations.
(a) Each Lender may assign, in whole or in part, its
Note and its Loan Commitment with the consent of Agent and
Borrower (which consent shall not be unreasonably withheld or
delayed); provided, however, that
(i) no such consent shall be required in the
case of any assignment to another Lender;
(ii) except to the extent Borrower and Agent
shall otherwise consent, any such partial assignment
(other than to another Lender) shall be in an amount
equal to at least $5,000,000;
(iii) each such assignment by a Lender of its
interest in its Note, or its Loan Commitment, shall
be made in such manner so that the same portion of
such interest in the Loan and its Loan Commitment is
assigned to the respective assignee; and
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE> 3
(iv) upon each such assignment, the assignor
and assignee shall execute and deliver to each other
an Assignment and Acceptance in the form of Exhibit
G, and deliver copies thereof to the Agent and
Borrower.
Upon any assignment in conformity with the foregoing, the
assignee shall have, as and to the extent provided in such
assignment (unless otherwise consented to by Borrower and
Agent), the obligations, rights and benefits of a Lender
hereunder holding the Loan Commitment and the Loan or portions
thereof assigned to it (in addition to the Loan Commitment and
interest in the Loan, if any, theretofore held by such
assignee) and the assignor shall, as and to the extent
provided in such assignment, be released from its Loan
Commitment (or portions thereof) so assigned. Upon each such
assignment the Agent shall receive an assignment fee of
$2,000, payable by the assignor or the assignee, or both of
them, as the assignor and the assignee shall agree between
them.
(b) A Lender may sell or agree to sell to one or
more other Persons (a "Participant") a participation in all or
any part of the Loan held by it, or in its Loan Commitment,
provided that any such sale by a Lender which would result in
such Lender beneficially owning less than fifty percent (50%)
of its Loan or Loan Commitment shall require the consent of
Agent and Borrower (which consent shall not be unreasonably
withheld or delayed), and provided further that such
Participant shall not have any rights or benefits under this
Agreement or any Note or any other Loan Document (the
Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed
by such Lender in favor of the Participant). All amounts
payable by Borrower to any Lender in respect of the Loan and
such Lender's Loan Commitment shall be determined as if such
Lender had not sold or agreed to sell any participations in
the Loan and such Lender's Loan Commitment, and as if such
Lender were funding each of the Loan and such Lender's Loan
Commitment in the same way that it is funding the portion of
the Loan and such Lender's Loan Commitment in which no
participations have been sold. In no event shall a Lender
that sells a participation agree with the Participant to take
or refrain from taking any action hereunder or under any other
Loan Document except that such Lender may agree with the
Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such
Lender's Loan Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the Loan or any portion
of any fee hereunder payable to the Participant, (iii) reduce
the amount of any such payment of principal, (iv) reduce the
rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such
interest or fee, or (v) consent to any
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE> 4
modification, supplement or waiver hereof or of any of the
other Loan Documents to the extent that the same requires the
consent of each Lender.
(c) In addition to the assignments and
participations permitted under the foregoing provisions of
this Section 11.4A, any Lender may (without the consent of
Borrower, Agent or any other Lender and without payment of any
fee) (i) assign and pledge all or any portion of the Loan held
by it and its Note to any Federal Reserve Bank as collateral
security and (ii) assign all or any portion of its rights
under this Agreement, the Loan and its Note to an Affiliate.
Upon any assignment in accordance with the foregoing clause
(ii), the assignor shall, as and to the extent provided in the
related Assignment and Acceptance in the form of Exhibit G, be
released from its Loan Commitment (or portions thereof) so
assigned.
(d) A Lender may furnish any information concerning
Borrower or any of its Subsidiaries or other Affiliates in the
possession of such Lender from time to time to assignees and
participants (including prospective assignees and
participants).
(e) Anything in this Section 11.4A to the contrary
notwithstanding, no Lender may assign or participate any
interest in the Loan to Borrower, or any of Borrower's
Affiliates or Subsidiaries, without the prior consent of each
Lender."
4. New Exhibit G. There is hereby added a new Exhibit G to the
Credit Agreement, to provide in its entirety as provided in the Exhibit G
attached hereto.
5. Other Documents. Borrower shall provide such other documents
incidental and appropriate to this Amendment as Lenders or Lenders' counsel may
reasonably request, and all such documents being in form and substance
reasonably satisfactory to Lenders.
6. Guaranty. Guarantor and each Subsidiary Guarantor hereby
acknowledges and consents to this Amendment. Further, Guarantor and each
Subsidiary Guarantor, except Subsidiary Guarantors Supplies Express, Inc., a
Delaware corporation, and Daisytek Latin America, Inc., a Florida corporation,
(a) acknowledges that its respective obligations under that certain Guaranty
dated as of May 22, 1995 executed by each such Guarantor or Subsidiary
Guarantor, as the case may be, in favor of TCB and that certain Guaranty dated
as of May 22, 1995 executed by each such Guarantor or Subsidiary Guarantor, as
the case may be, in favor of State Street includes a guaranty of all of the
obligations, indebtedness and liabilities of Borrower under (i) the Credit
Agreement, as amended by this Amendment, and (ii) the Notes executed in
connection with the Credit Agreement, (b) represents to Lenders that each such
respective Guaranty remains in full force and effect, and (c) agrees that this
Amendment and all documents executed in connection herewith do not operate to
reduce or discharge its respective obligations under such Guaranty.
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 4
<PAGE> 5
Likewise, each of Subsidiary Guarantors Supplies Express, Inc., a
Delaware corporation, and Daisytek Latin America, Inc., a Florida corporation,
(a) acknowledges that its respective obligations under that certain Guaranty
dated as of December 20, 1995 executed by each such Subsidiary Guarantor in
favor of TCB and that certain Guaranty dated as of December 20, 1995 executed
by each such Subsidiary Guarantor in favor of State Street includes a guaranty
of all of the obligations, indebtedness and liabilities of Borrower under (i)
the Credit Agreement, as amended by this Amendment, and (ii) the Notes executed
in connection with the Credit Agreement, (b) represents to Lenders that each
such respective Guaranty remains in full force and effect, and (c) agrees that
this Amendment and all documents executed in connection herewith do not operate
to reduce or discharge its respective obligations under such Guaranty.
7. Terms of Agreement. Except as expressly amended by this
Amendment, the Credit Agreement is and shall be unchanged.
8. Effect of Amendment. The Credit Agreement and any and all
other documents heretofore, now or hereafter executed and delivered pursuant to
the terms of the Credit Agreement are hereby amended so that any reference to
the Credit Agreement in the Credit Agreement or the other documents shall mean
a reference to the Credit Agreement as amended hereby.
9. Reaffirmation; No Default. Each Daisytek Corporation hereby
represents and warrants to Lenders that (a) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed and
delivered in connection herewith have been authorized by all requisite
corporate action on the part of such Daisytek Corporation and will not violate
the articles of incorporation (or other charter documents) or bylaws of any
Daisytek Corporation, (b) neither the articles of incorporation (or other
charter documents) nor bylaws of any Daisytek Corporation have been amended or
revoked since May 22, 1995, (c) the representations and warranties contained in
the Credit Agreement, as amended by this Amendment, and any other Loan Document
are true and correct on and as of the date hereof as though made on and as of
the date hereof, (d) no Event of Default has occurred and is continuing and no
event or condition has occurred that with the giving of notice or lapse of time
or both would be an Event of Default, and (e) each Daisytek Corporation is in
full compliance with all covenants and agreements contained in the Credit
Agreement, as amended hereby.
10. Enforceability. Each Daisytek Corporation hereby represents
and warrants that, as of the date of this Amendment, the Credit Agreement and
all documents and instruments executed in connection therewith are in full
force and effect and that there are no claims, counterclaims, offsets or
defenses to any of such documents or instruments.
11. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF
TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 5
<PAGE> 6
THE LAWS OF THE UNITED STATES OF AMERICA. CHAPTER 15 OF TEXAS REVISED CIVIL
STATUTES ARTICLE 5069 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS
AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THE CREDIT AGREEMENT, AS
AMENDED BY THIS AMENDMENT, OR THE NOTES.
12. Maximum Interest Rate. Regardless of any provisions contained
in this Amendment or in any other Loan Documents, Lenders shall never be deemed
to have contracted for or be entitled to receive, collect or apply as interest
on the Notes or otherwise any amount in excess of the maximum rate of interest
permitted to be charged by applicable law, and if Lenders ever receive, collect
or apply as interest any such excess, or if acceleration of the maturity of the
Notes or if any prepayment by Borrower results in Borrower having paid any
interest in excess of the maximum rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Notes for which such excess was received, collected or applied, and, if the
principal balances of Notes are paid in full, any remaining excess shall
forthwith be paid to Borrower. All sums paid or agreed to be paid to Lenders
for the use, forbearance or detention of the indebtedness evidenced by the
Notes and/or the Credit Agreement, as amended by this Amendment, shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment in full so
that the rate or amount of interest on account of such indebtedness does not
exceed the maximum lawful rate permitted under applicable law. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the maximum rate of interest permitted by law, Borrower and Lenders
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as an expense, fee or premium, rather than as
interest; and (ii) exclude voluntary prepayments and the effect thereof; and
(iii) compare the total amount of interest contracted for, charged or received
with the total amount of interest which could be contracted for, charged or
received throughout the entire contemplated term of the Notes at the maximum
lawful rate under applicable law.
13. Counterparts. This Amendment may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Amendment.
14. WAIVER OF TRIAL BY JURY. EACH DAISYTEK CORPORATION WAIVES ANY
AND ALL RIGHTS THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM
OR OTHER ACTION, OF ANY NATURE WHATSOEVER, RELATING TO OR ARISING OUT OF THIS
AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. EACH DAISYTEK
CORPORATION ACKNOWLEDGES THAT THE FOREGOING JURY TRIAL WAIVER IS A MATERIAL
INDUCEMENT TO EACH LENDER'S ENTERING INTO THIS AMENDMENT AND THE OTHER LOAN
DOCUMENTS AND THAT EACH LENDER IS RELYING ON SUCH WAIVER IN ITS FUTURE DEALINGS
WITH SUCH CORPORATION. EACH SUCH CORPORATION WARRANTS AND REPRESENTS TO EACH
LENDER THAT SUCH CORPORATION HAS REVIEWED THE FOREGOING JURY TRIAL WAIVER WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 6
<PAGE> 7
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL.
IN THE EVENT OF LITIGATION, THE FOREGOING JURY TRIAL WAIVER MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
15. DTPA WAIVER. EACH DAISYTEK CORPORATION HEREBY WAIVES ALL
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT (TEX.
BUS. & COM. CODE Section 17.01 ET SEQ.), OTHER THAN Section 17.555 THEREOF,
AND REPRESENTS AND WARRANTS TO EACH LENDER THAT SUCH CORPORATION (A) HAS ASSETS
OF $5,000,000 OR MORE (EXCEPT THAT ONLY BORROWER, GUARANTOR AND DAISYTEK
(CANADA) INC. MAKE THE REPRESENTATION IN THIS CLAUSE (A)), (B) HAS KNOWLEDGE
AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE SUCH CORPORATION
TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED BY THIS
AMENDMENT, (C) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE
TO LENDERS, AND (D) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH
SUCH TRANSACTIONS.
16. OTHER AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE
PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF. THE WRITTEN CREDIT AGREEMENT, AS
AMENDED BY THIS AMENDMENT, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES.
THIS AMENDMENT is executed and effective as of the date first written
above.
BORROWER:
DAISYTEK, INCORPORATED
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 7
<PAGE> 8
GUARANTOR:
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
SUBSIDIARY GUARANTORS:
WORKING CAPITAL OF AMERICA, INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
HOME TECH DEPOT, INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
DAISYTEK (CANADA) INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
WORKING CAPITAL CANADA INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 8
<PAGE> 9
DAISYTEK DE MEXICO, S.A. DE C.V.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
SUPPLIES EXPRESS, INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
DAISYTEK LATIN AMERICA, INC.
By: /s/ THOMAS J. MADDEN
------------------------------------
Name: Thomas J. Madden
------------------------------------
Title: VP Finance
------------------------------------
Agent:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association
By: /s/ SEAN F. OBRANSKI
---------------------------------------
Sean F. Obranski,
Vice President
Lenders:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association
By: /s/ SEAN F. OBRANSKI
--------------------------------------
Sean F. Obranski,
Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 9
<PAGE> 10
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL ST. JEAN
------------------------------------
Name: Michael St. Jean
------------------------------------
Title: V.P.
------------------------------------
FIRST AMENDMENT TO CREDIT AGREEMENT - Page 10
<PAGE> 11
EXHIBIT G
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to that certain Credit Agreement dated as of May 22,
1995 (as amended, supplemented or otherwise modified from time to time,
including by that certain First Amendment to Credit Agreement dated as of April
15, 1996, the "Credit Agreement"), among DAISYTEK, INCORPORATED, a Delaware
corporation (hereinafter referred to as "Borrower"), DAISYTEK INTERNATIONAL
INCORPORATED, a Delaware corporation, each of Borrower's Subsidiaries
identified under caption "SUBSIDIARY GUARANTORS" on the signature pages of the
Credit Agreement or that, pursuant to Section 8.1(n) thereof, become a
"Subsidiary Guarantor," STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association, as a lender and as administrative agent (in such agency capacity,
the "Agent"). Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein are so used as so defined and the meanings assigned to
terms defined herein or in the Credit Agreement shall be equally applicable to
both the singular and plural forms of such terms.
This Assignment and Acceptance, between the Assignor (as set forth on
Schedule 1 hereto and made a part hereof) and the Assignee (as set forth on
Schedule 1 hereto and made a part hereof) and for the benefit of Borrower and
the Agent, is dated as of the Transfer Effective Date (as set forth on Schedule
1 hereto and made a part hereof, the "Transfer Effective Date").
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Transfer Effective Date, a % interest (the "Assigned Interest") in
and to the Assignor's rights and obligations under the Credit Agreement,
including a like percentage interest in its Loan Commitment, such interest
being of a principal amount as set forth on Schedule 1; provided, however, it
is expressly understood and agreed that the Assignor is not assigning to the
Assignee and the Assignor shall retain (a) all of the Assignor's rights and
obligations under paragraph (a) of Section 4.4 and under paragraphs (b) and (c)
of Section 4.5 of the Credit Agreement in all cases with respect to any cost,
reduction or payment incurred or made prior to the Transfer Effective Date,
including, without limitation the rights to indemnification and to
reimbursement for taxes, costs and expenses and (b) any and all amounts paid to
the Assignor prior to the Transfer Effective Date, and both Assignor and
Assignee shall be entitled to the benefits of paragraph (j) of Section 8.1 of
the Credit Agreement.
2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability,
<PAGE> 12
genuineness, sufficiency or value of the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto, other
than that it has not created any adverse claim upon the interest being assigned
by it hereunder and that such interest is free and clear of any adverse claim;
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any of the Daisytek Corporation or any
other obligor or the performance or observance by any of the Daisytek
Corporations or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (iii) attaches the Note held
by it evidencing the Assigned Interest and requests that the Agent exchange
such Note for a new Note payable to the Assignor (if the Assignor has retained
any interest in such Note) and a new Note payable to the Assignee in the
respective amounts which reflect the assignment and acceptance being made
hereby (and after giving effect to any other assignments which have become
effective on the Transfer Effective Date).
3. The Assignee, for the benefit of the Assignor, the Agent and
Borrower, (i) represents and warrants that it is legally authorized to enter
into this Assignment and Acceptance; (ii) confirms that it has received a copy
of the Credit Agreement, together with such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (iii) agrees that it will, independently
and without reliance upon the Assignor, the Agent or any other Person which has
become a Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under the Credit Agreement; (iv) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Loan Documents as are delegated
to the Agent by the terms thereof, together with such powers as are incidental
thereto; and (v) agrees that it will be bound by the provisions of the Credit
Agreement and will perform in accordance with its terms all the obligations
which by the terms of the Credit Agreement are required to be performed by it
as a Lender.
4. Following the execution of this Assignment and Acceptance, the
same will be delivered to Borrower and the Agent, together with payment to the
Agent of an assignment fee of $2,000.
5. From and after the Transfer Effective Date, the Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignee whether such
amounts have accrued prior to the Transfer Effective Date or accrue subsequent
to the Transfer Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Agent for periods prior to the
Transfer Effective Date or with respect to the making of this assignment,
directly between themselves.
ASSIGNMENT AND ACCEPTANCE - Page 2
<PAGE> 13
6. From and after the Transfer Effective Date, (i) the Assignee
shall be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations, and release the Daisytek Corporations from their obligations to
the Assignor (other than with respect to indemnities and other obligations that
by their terms survive repayment of the Notes under the Credit Agreement).
7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE AND THE OTHER
LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF
THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF
AMERICA.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
ASSIGNMENT AND ACCEPTANCE - Page 3
<PAGE> 14
Schedule 1 to Assignment and Acceptance relating to the Credit Agreement, dated
as of May 22, 1995, among DAISYTEK, INCORPORATED, a Delaware corporation,
DAISYTEK INTERNATIONAL INCORPORATED, a Delaware corporation, each of Borrower's
Subsidiaries identified under caption "SUBSIDIARY GUARANTORS" on the signature
pages of the Credit Agreement or that, pursuant to Section 8.1(n) thereof,
become a "Subsidiary Guarantor," STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association, as a lender and as administrative agent (the "Credit
Agreement"):
Name of Assignor:
Name of Assignee:
Transfer Effective Date:
Percentage
Loan Commitment Assigned (to at least
Amount Assigned ten decimals)
--------------- --------------------
ASSIGNMENT AND ACCEPTANCE - Page 4
<PAGE> 15
[ASSIGNOR]
By:
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
[ASSIGNEE]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
Accepted:
DAISYTEK, INCORPORATED
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association (as Agent)
By:
---------------------------------
Sean F. Obranski,
Vice President
ASSIGNMENT AND ACCEPTANCE -- Page 5
<PAGE> 1
EXHIBIT 11
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
STATEMENTS RE: COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1996 1995
------- -------
<S> <C> <C>
Net income $ 3,041 $ 2,268
======= =======
Weighted average common shares
outstanding 6,907 6,729
======= =======
Net income per common
share $0.44 $0.34
======= =======
Calculation of weighted average
common shares:
Weighted average common
stock outstanding 6,413 6,270
Weighted average common
stock options, utilizing the
treasury stock method (1) 494 459
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Weighted average common shares
outstanding 6,907 6,729
======= =======
</TABLE>
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(1) Utilizing the weighted average stock price of $39.85 and $21.30 per
share for the three months ended June 30, 1996 and 1995, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS OF DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES FOR
THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 483
<SECURITIES> 0
<RECEIVABLES> 70,441
<ALLOWANCES> 1,409
<INVENTORY> 47,254
<CURRENT-ASSETS> 119,887
<PP&E> 17,091
<DEPRECIATION> 6,875
<TOTAL-ASSETS> 132,020
<CURRENT-LIABILITIES> 54,566
<BONDS> 22,376
0
0
<COMMON> 64
<OTHER-SE> 55,684
<TOTAL-LIABILITY-AND-EQUITY> 132,020
<SALES> 136,894
<TOTAL-REVENUES> 136,894
<CGS> 123,224
<TOTAL-COSTS> 123,224
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 324
<INTEREST-EXPENSE> 432
<INCOME-PRETAX> 4,932
<INCOME-TAX> 1,891
<INCOME-CONTINUING> 3,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,041
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0
</TABLE>
