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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
Commission File Number 0-25400
DAISYTEK INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 75-2421746
(State or other jurisdiction of (I.R.S. Employer Number)
incorporation or organization)
500 North Central Expressway, Plano, Texas 75074
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: 214-881-4700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 31, 1996 (based on the closing price as reported by
the National Association of Securities Dealers Automated Quotation System) was
$197,835,619.
As of May 31, 1996, there were 6,437,774 shares outstanding of the
registrant's Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
None
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Unless the context otherwise requires, references to Daisytek
International Corporation include its direct and indirect subsidiaries,
including Daisytek, Incorporated, the Company's primary operating subsidiary.
References in this Report to the Company's fiscal year means the 12 month
period ending on March 31 of such year.
INDEX
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Page
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . 39
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . 46
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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PART I
ITEM 1. BUSINESS
GENERAL
Daisytek International Corporation (the "Company") is a leading
wholesale distributor of non-paper computer and office automation supplies and
accessories. The Company distributes over 6,000 products to approximately
20,000 customer locations, including value added resellers ("VARs"), computer
supplies dealers, office product dealers, computer and office product
superstores and other retailers who resell the products to end-users. The
Company believes that it is the largest wholesale distributor of non-paper
computer and office automation supplies and accessories in the world.
The Company sells primarily nationally known, name-brand products
manufactured by over 145 original equipment manufacturers, including
Hewlett-Packard, Canon, Lexmark, IBM, Okidata, Digital Equipment Corporation,
Apple, Panasonic, Kodak, 3M, Epson, Sony and Xerox. The Company's products
include consumable supplies such as laser toner, copier toner, inkjet
cartridges, printer ribbons, diskettes, optical storage products, computer tape
cartridges and accessories. The Company's products are used in a broad range
of computer and office automation products, such as mainframe, mini, personal,
laptop and notebook computers, laser and inkjet printers, photocopiers, fax
machines and data storage products. The Company sells its products throughout
the United States, Canada and Latin America, as well as overseas, by utilizing
sophisticated telemarketing technology and innovative marketing programs. The
Company presently operates one centralized "superhub" distribution center in
Memphis, Tennessee, to service the U.S. and overseas markets and smaller
regional sales and distribution centers in Miami, Florida, Mexico and Canada to
service the Latin American and Canadian markets. Most of the Company's U.S.
shipments are shipped via Federal Express under a contractual arrangement (the
"Federal Express Agreement") which, together with the Company's centralized
distribution center, enables the Company to offer to its customers next
business day delivery. The Company charges its customers local ground delivery
rates for this service.
PRODUCTS
The Company distributes over 6,000 different non-paper computer and
office automation supplies and related products and regularly updates its
product line to reflect advances in technology and avoid product obsolescence.
The Company's major product categories can generally be classified as follows:
Non-Impact Printer Supplies. Non-impact printer supplies include
toner cartridges, inkjet cartridges, optical photo conductor kits, copier
supplies and fax supplies. Non-impact printers, such as laser printers,
personal copiers and fax machines, are rapidly growing in popularity and have a
wide range of applications. Sales of non-impact printer supplies accounted for
approximately 51.8% of the Company's total net sales in fiscal year 1996. The
Company also sells specialized all-in-one toner cartridges for laser printers
produced by manufacturers such as Canon, Hewlett-Packard, Digital, Brother and
Apple. Sales of these supplies accounted for approximately 20.2% of the
Company's total net sales in fiscal year 1996.
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Impact Printer Supplies. Impact printer supplies include printwheels,
ribbons, elements, fonts and other consumable supplies used in impact printers
ranging from electronic typewriters to high speed dot matrix printers. While
new technology is moving toward non-impact printing, the Company believes that
a substantial installed base of impact printers, such as dot matrix printers,
are still in use and require a continuing amount of consumable computer
supplies. Sales of impact printer supplies accounted for approximately 11.4%
of the Company's total net sales in fiscal year 1996.
Magnetic Media Products. Magnetic media products include computer
tapes, data cartridges, diskettes, optical disks and other products which store
or record computer information and are used in a variety of computers ranging
from notebook and personal computers to large mainframe computer systems.
Sales of magnetic media products accounted for approximately 9.7% of the
Company's total net sales in fiscal year 1996.
Accessories and Other Products. Accessories sold by the Company
include cleaning supplies, disk storage boxes, data cartridge storage, racks,
surge protection devices, workstation accessories and anti-glare screens. The
Company also sells a number of other products such as transparencies, banking
supplies and selected business machines. Sales of accessories and other
products accounted for approximately 6.9% of the Company's total net sales in
fiscal year 1996.
SUPPLIERS
The Company's products are manufactured by over 145 original equipment
manufacturers, including Hewlett- Packard, Canon, Lexmark, IBM, Okidata,
Digital Equipment Corporation, Panasonic, Epson, 3M, Sony, Xerox, Apple, Kodak
and Maxell. During fiscal year 1996, approximately 72% of the Company's total
net sales were derived from products supplied by the Company's ten largest
suppliers, with the sale of products supplied by Hewlett-Packard and Canon
accounting for approximately 30% and 11% of total net sales, respectively, and
the sale of products supplied by Lexmark, Okidata and Digital Equipment
Corporation each accounting for approximately 5% of total net sales.
Many of the Company's suppliers offer rebate programs under which,
subject to the Company purchasing certain predetermined amounts of inventory,
the Company receives rebates based on a percentage of the dollar volume of
total rebate program purchases. The Company also takes advantage of several
other programs offered by substantially all of its suppliers. These include
price protection plans under which the Company receives credits against future
purchases if the supplier lowers prices on previously purchased inventory and
stock rotation or stock balancing privileges under which the Company can return
slow moving inventory in exchange for other products. In addition, in order to
introduce new products, many suppliers will permit the Company to return all
unsold inventory after an introductory trial period. Material changes by one
or more of the Company's key suppliers of their pricing arrangements or other
marketing programs may adversely effect the Company's business.
The Company's purchases of inventory are closely tied to sales and are
generally based upon the sales volume of the most recent six to ten week
periods. Many of the Company's suppliers require minimum annual purchases
which, for fiscal year 1997, will aggregate approximately $40.0 million.
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The Company has entered into written distribution agreements with
Hewlett-Packard, Canon, Lexmark, IBM, Okidata and Digital Equipment Corporation
and many of the other major suppliers of the products it distributes. As is
customary in the industry, these agreements generally provide non-exclusive
distribution rights, have one year renewable terms and are terminable by either
party at any time, with or without cause. The Company considers its
relationships with its major suppliers, including Hewlett-Packard, Canon,
Lexmark, IBM, Okidata and Digital Equipment Corporation to be good;
nevertheless, there can be no assurance that a material change in the Company's
relationship with one or more of its major suppliers will not have a material
adverse effect on the Company's business.
Although the Company purchases most of its products directly from
authorized U.S. manufacturers, the Company also imports products from foreign
sources, particularly when fluctuations in foreign exchange rates or product
prices make it attractive to do so. Similarly, depending upon product pricing
and availability, the Company also purchases products from secondary sources,
such as other wholesalers and selected dealers, rather than from the direct
manufacturer. The Company utilizes its ability to purchase imported and
secondary source products in order to provide its customers with competitive
prices and a wide range of product lines. In order to ensure that such
imported and secondary source products are not produced by unauthorized
manufacturers, the Company has established various procedures which it believes
enable it to identify unauthorized products and, to the extent possible, return
such unauthorized products to the foreign or secondary source. Nevertheless,
there can be no assurance that the Company will be completely successful in
such efforts or that such imported and secondary source products will continue
to be available or that any unavailability will not have a material adverse
effect on the Company's business.
SALES AND MARKETING
The Company's customer and prospect list includes U.S., Canadian,
Mexican and foreign computer supplies dealers, office product dealers, VARs,
buying groups, computer stores, stationers, computer and office product
superstores, warehouse clubs, catalog merchandisers, college bookstores and
other resellers. The Company currently ships its products to approximately
20,000 customer locations. The Company's typical customer is a small to medium
sized reseller who does not have the resources to establish direct purchasing
relationships with multiple manufacturers and, instead, must rely on wholesale
distributors like the Company. The Company also sells its products to computer
and office product superstores, which the Company believes will become an
increasingly important group of customers as the Company demonstrates its
ability to serve the superstores' need for timely delivery of fast-moving
products and efficient distribution of a variety of product lines to multiple
store locations in a more cost-effective manner than presently provided by many
product manufacturers. No single customer accounts for more than 10% of the
Company's sales for each of the fiscal years ended March 31, 1996, 1995 and
1994. At March 31, 1996, five computer and office product superstores
represent approximately 29.0% of the Company's trade accounts receivable, with
the largest being approximately 16.0% of trade accounts receivable, and
reflects the increasing significance of this market segment.
The Company's international sales accounted for approximately 16% of
the Company's total net sales in fiscal year 1996, and the Company believes
that international markets represent further opportunities for growth. In
particular, to service the growing Latin American market, the Company opened a
sales office and distribution center in Mexico City, Mexico during fiscal year
1995 and opened a similar facility in Miami, Florida, during fiscal year 1996.
There can be no assurance,
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however, that the Company will be successful in these or other international
efforts or that the risks inherent in international operations, such as
currency fluctuations or the political or economic instability of certain
foreign countries, such as Mexico, will not have a material adverse effect on
the Company's results of operations. See Note 8 of the Notes to Consolidated
Financial Statements for certain financial information regarding the Company's
domestic and international sales during the last three fiscal years.
The Company's sales force, as of March 31, 1996, consisted of
approximately 91 full-time and 72 part-time telemarketing sales representatives
located in the Company's headquarters in Plano, Texas, 13 full-time and 13
part-time telemarketing sales representatives located in the Company's office
in Canada, 8 full-time telemarketing sales representatives located in the
Company's office in Mexico and 3 full-time telemarketing sales representatives
located in the Company's office in Miami, Florida. The Company relies on
sophisticated telemarketing, direct mail programs and frequent innovative sales
promotions and other marketing efforts. The Company's senior sales staff also
often visits certain of the Company's customers in connection with the
negotiation of large orders or customized programs.
The Company's sales and telemarketing department is divided into
several groups or teams, each having its own particular sales objective. For
example, the Retail Department focuses specifically on large computer retailers
and office product superstores and highlights the Company's ability to more
efficiently distribute a wide variety of small shipments to a larger number of
store locations than presently provided by product manufacturers. Similarly, a
separate group of sales representatives are responsible for a select group of
national accounts, such as contract stationers and buying groups, while others
focus on new accounts, existing business or international and export sales. By
utilizing sophisticated telemarketing software, including caller
identification, sales representatives are able to verify customer account
numbers and contact persons and quickly identify a customer's buying patterns,
recent purchases, credit availability and other sales and marketing
information. The telecommunications software also enables sales and marketing
management to better identify, control and monitor sales representatives'
prospecting activity with the Company's new and existing customers.
The Company provides extensive training for new sales personnel with
special emphasis on the need for regular customer contact, response to
customers' demands for product information and the need to inform customers of
technological advancements by the Company's suppliers. The Company, together
with its major suppliers, provide the Company's sales personnel with ongoing
product-specific training and education emphasizing computer supplies as well
as new technologies, new products and new product applications.
In order to maintain its position as a low cost wholesale distributor,
the Company regularly monitors the efficiency of its sales staff. By utilizing
sophisticated AT&T telecommunications equipment, the Company is able to measure
the number of calls being fielded by a sales representative, their success rate
in terms of orders obtained compared to calls taken and customer service
statistics, such as abandoned call rates and average response times. The
Company's sales force receives a base salary as well as varying sales
incentives based on gross profit margin achievements. In addition, a number of
suppliers periodically offer sales bonus programs in connection with specific
product sales campaigns which can further augment a sales representative's
compensation.
One of the Company's primary marketing tools is its quarterly catalog,
known as the "Book of Deals." In order to promote its image as a low cost
wholesaler and provider of value-added services,
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the Book of Deals will usually highlight a theme related to specific products,
customer services or a combination of the two. The Company presently
distributes a total of approximately 35,000 catalogs and contract price books
to its active U.S. customers each quarter. The Company also distributes a
Canadian Book of Deals and a Mexican Book of Deals. Other catalog-type
marketing tools used by the Company include the "Disk of Deals", a disk-based
version of the Book of Deals, special target catalogs such as an accessory
catalog, and customized catalogs produced by the Company for the reseller to
distribute to its end user customers. The Company also distributes "flyers"
which announce new product line additions or special promotions and are usually
inserted in the Book of Deals or mailed directly to customers.
The Company recently introduced its newest marketing tool, an
electronic catalog and on-line ordering tool, known as "SOLO", the System for
Online Ordering. SOLO is a CD-ROM based marketing tool which provides
customers with on-line ordering capabilities; fingertip access to up-to-date
pricing, product and order information; search and retrieval capabilities based
on part numbers, manufacturers, product description, retail price, machine
compatibility and other factors; and convenient access to manufacturers'
product literature and training videos.
Certain of the Company's suppliers provide the Company with
cooperative advertising programs, marketing development funds and other types
of incentives and discounts which offset the production costs of the Company's
quarterly Book of Deals, other published marketing tools and other related
costs.
The Company permits its customers to return defective products (most
of which are then returned by the Company to the manufacturer) and incorrect
shipments for credit against other purchases. During the last three fiscal
years, the Company's net expense for returns of the Company's consumable supply
products has not been material.
MANAGEMENT INFORMATION SYSTEMS
The Company maintains advanced management information systems and has
automated virtually all key business functions using on-line, real time
systems. These on-line systems provide management with information concerning
sales, inventory levels, customer payments and other operations which is
essential for the Company to operate as a low cost, high efficiency wholesale
distributor.
The implementation of these systems has allowed the Company to offer
an advanced EDI program to its customers so that the Company can communicate
with their computer systems and automatically process, send and receive
purchase orders, invoices and acknowledgments. The Company offers "customer
links" to provide customers with direct access to a proprietary Company
database to examine pricing, credit information, product description and
availability and promotional information. This link also allows customers to
place orders directly into the Company's order processing system.
The Company has also invested in advanced telecommunications, voice
response equipment, electronic mail and messaging, automated fax technology,
scanning, radio frequency technology, bar-coding, fiber optic network
communications and automated inventory management. The Company also utilizes
telecommunications technology which provide for automatic customer call
recognition and
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customer profile recall for inbound telemarketing representatives and computer
generated outbound call objectives for outbound telemarketing representatives.
DISTRIBUTION
During fiscal year 1993, the Company consolidated its five U.S.
regional distribution centers into a new "superhub" distribution center located
in Memphis, Tennessee. This 176,000 square foot facility is located
approximately four miles from the Federal Express hub facility and contains
automated conveyors, in-line scales for automatic accuracy checking,
computerized sorting equipment, powered material handling equipment and
scanning and bar- coding systems.
Since the consolidation of its regional distribution centers and the
opening of the Memphis distribution center, the Company has (i) reduced the
amount of "safety stock" inventory previously carried in different distribution
centers, which, in turn, has reduced the Company's working capital borrowings,
(ii) increased its inventory turnover rate from approximately nine turns to
approximately 11 turns in fiscal year 1996, (iii) improved its order fill rate
to a level of approximately 95%, (iv) improved personnel productivity and
reduced shipping errors and their associated costs, (v) improved delivery time
to most geographic areas through later order acceptance times (currently 9:00
p.m. eastern standard time) and, with the implementation of the Federal
Express Agreement, next business day delivery and (vi) reduced real estate
expenses.
The Company believes that consumable supplies and other products sold
by the Company are particularly suited to cost effective overnight delivery
because of their unique value to weight characteristics. Accordingly, all of
the Company's U.S. package orders are shipped via Federal Express, except for
certain "heavyweight" packages or as otherwise requested by the customer. The
Company's centralized distribution center, together with the implementation of
the Federal Express Agreement, enables the Company to offer to its customers
next business day delivery to most U.S. geographic areas. The Company charges
its customers local ground delivery rates for this service. The Company ships
virtually 100% of orders for product in stock on the same day.
In September 1995, the Company successfully completed an approximately
$2.5 million upgrade of the material handling system at its Memphis
distribution center. The upgrade includes several high technology
enhancements, including an automated package routing system and a paperless
order picking system. The upgrade is designed to substantially increase the
package movement capacity within the existing facility, further improve package
shipment accuracy and enhance the Company's ability to perform value-added
services for its customers, including custom labeling and price stickering.
The upgrade should also improve personnel productivity and reduce shipping
costs at the Memphis distribution center. The Company recently signed an
agreement which will expand the Memphis distribution center by an additional
193,617 square feet.
EMPLOYEES
As of March 31, 1996, the Company had 348 full-time employees and 172
part-time employees, of which 142 were in executive and administrative
positions, including accounting, purchasing, credit and management information
systems, 200 were in sales and marketing and 178 were in warehousing and
related functions. None of the Company's employees are represented by a labor
union, and the Company has never suffered an interruption of business as a
result of a labor
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dispute. The Company considers its relations with its employees to be
excellent, and the Company believes it will be able to continue this
relationship by various employee incentive and participation programs,
including employee stock options.
The Company actively recruits college graduates through on-campus
recruiting programs. Each newly-hired employee from this program is placed into
the Company's training program for approximately four months which introduces
them to most aspects of the Company's business. Management believes that this
program is an important tool in recruiting and developing high quality
management individuals to support the Company's future growth.
COMPETITION
The Company believes that most, if not all, of its customers maintain
several sources of supply for their product requirements. Accordingly, the
Company competes with product manufacturers, general office supply wholesalers,
other national and regional wholesale computer supplies distributors, computer
hardware and software distributors and, to a lesser extent, non-specialized
wholesaler distributors. Many of these competitors such as product
manufacturers and general office supply wholesalers are larger and have
substantially greater financial and other resources than the Company.
Competition in the Company's industry is generally based on price, breadth of
product lines, product and credit availability, delivery time and the level and
quality of customer services. The Company competes primarily on the basis of
its ability to offer low prices and quality service while maintaining a high
level of operating efficiency. The Company believes its competitive advantages
over product manufacturers and other wholesale distributors include its ability
to efficiently maintain a wide selection of name brand products in stock ready
to be shipped on a same day basis and delivered overnight, to efficiently
distribute its products, to provide innovative and high quality value-added
customer service programs and to respond to changing customer demands and
product development.
BACKLOG
The Company does not have a significant backlog of orders and does not
consider backlog to be material to an understanding of its business.
ITEM 2. PROPERTIES
The Company's U.S. sales and executive and administrative offices are
located in a 43,020 square foot central office facility located in Plano,
Texas, a Dallas suburb. The Company also operates sales offices in Toronto,
Ontario, and in Mexico City, Mexico, and regional sales and distribution
centers in Toronto, Mexico City, Vancouver, British Columbia and Miami,
Florida. The Company's central distribution center is located in Memphis,
Tennessee. See "Item 1. Business - Distribution."
All of the Company's facilities are leased under leases which contain
one or more multiple year renewal options.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain litigation arising in the ordinary
course of business. Management believes that such litigation will be resolved
without material effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed and trades on the Nasdaq National
Market tier of the Nasdaq Stock Market under the symbol "DZTK." Prior to
January 27, 1995, there was no public trading market for the Common Stock. The
following table sets forth for the period indicated the high and low sale price
for the Common Stock as reported by the Nasdaq National Market:
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PRICE
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Fiscal year 1995
Fourth Quarter (from January 27)................................... $22 $15
Fiscal year 1996
First Quarter...................................................... $25 $19-1/8
Second Quarter..................................................... $32-7/8 $21
Third Quarter...................................................... $33 $26-1/4
Fourth Quarter..................................................... $35-3/4 $27-3/4
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As of May 31, 1996, there were approximately 1,000 shareholders of
which 65 were record holders of the Common Stock.
The Company has never paid cash dividends on its Common Stock and does
not anticipate the payment of cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain all earnings to
finance the further development of its business. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and
will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and general
business conditions. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
ITEM 6. SELECTED FINANCIAL DATA
The selected historical consolidated statement of operations data
presented below for each of the fiscal years ended March 31, 1996, 1995 and
1994, and the selected consolidated balance
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sheet data as of March 31, 1996 and 1995 have been derived from the
consolidated financial statements of Daisytek International Corporation and
subsidiaries (the "Company"), which statements have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
included elsewhere in this Form 10-K. The selected consolidated statement of
operations data for the fiscal years ended March 31, 1993 and 1992, and the
selected balance sheet data as of March 31, 1994, 1993 and 1992 have been
derived from the Company's (or its predecessor's) consolidated financial
statements, which statements have been audited by Arthur Andersen LLP as
indicated in their reports not included herein. The selected consolidated
financial data should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Item 8. Financial Statements and Supplementary Data."
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FISCAL YEAR ENDED MARCH 31,
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1996 1995 1994 1993 1992
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(in thousands, except per share data)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales $ 464,169 $ 352,953 $ 276,699 $ 233,458 $ 182,751
Cost of sales 416,199 316,982 247,480 208,972 160,448
Provision for losses from disposal of
software and hardware inventory -- -- 402 1,223 --
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Gross profit 47,970 35,971 28,817 23,263 22,303
Selling, general and administrative expenses 29,024 23,260 20,338 21,822 17,098
Other operating expenses -- -- -- 3,701 --
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Income (loss) from operations 18,946 12,711 8,479 (2,260) (1) 5,205
Interest expense 1,482 2,050 1,726 1,723 1,943
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Income (loss) before income taxes 17,464 10,661 6,753 (3,983) 3,262
Provision (benefit) for income taxes 6,697 4,165 2,496 (1,062) 1,199
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Net income (loss) $ 10,767 $ 6,496 $ 4,257 $ (2,921) $ 2,063
========== ========== ========== =========== ==========
PER SHARE DATA (2):
Net income (loss) per common share $ 1.59 $ 1.17 $ 0.81 $ (0.68) $ 0.56
Weighted average common shares
outstanding 6,757 5,542 5,288 4,310 3,701
Supplemental net income per common
share (3) $ -- $ 1.09 $ 0.75 $ -- $ --
Supplemental weighted average common
shares outstanding (3) -- 6,683 6,668 -- --
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AS OF MARCH 31,
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1996 1995 1994 1993 1992
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(in thousands)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 56,663 $ 43,427 $ 28,167 $ 22,290 $ 24,367
Total assets 128,601 94,421 67,385 57,213 49,794
Long-term debt, net of current maturities 16,419 11,334 19,640 16,815 13,101
Shareholders' equity 51,661 40,817 15,937 11,844 15,080
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(1) The Company's income from operations for fiscal year 1993 would have
been approximately $6.4 million without giving effect to the following
events: (i) a $4.3 million loss from operations related to the Company's
PC software and hardware division which was eliminated in fiscal year 1993,
including a $1.2 million provision for losses from disposal of software and
hardware inventory, (ii) a $3.7 million loss from operations related to
the following other operating expenses: (1) the Company's write-off of
trade receivables and advances owing from a related party in the aggregate
amount of $1.2 million and establishment of a reserve of $0.5 million for
trade receivables owing from another related party, (2) costs aggregating
$1.6 million incurred by the Company in connection with the consolidation
of its five U.S. regional distribution centers into one "superhub"
distribution center in Memphis, Tennessee, and (3) costs aggregating $0.5
million incurred by the Company in connection with a withdrawn initial
public offering and (iii) a $0.7 million loss from operations related to
the Company's temporary reduction of outbound shipping rates as part of a
promotional marketing program in connection with the opening of the Memphis
distribution center.
(2) Share data is based on the weighted average common shares and share
equivalents outstanding for each period.
(3) Adjusted for the events described in Note 11 of the Notes to
Consolidated Financial Statements.
-11-
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain financial information from the
audited Consolidated Statements of Operations of Daisytek International
Corporation and subsidiaries expressed as a percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 89.7 89.8 89.5
Provision for losses from disposal of software
and hardware inventory -- -- 0.1
---- ---- ----
Gross profit 10.3 10.2 10.4
Selling, general and administrative expenses 6.2 6.6 7.3
---- ---- ----
Income from operations 4.1 3.6 3.1
Interest expense 0.3 0.6 0.7
---- ---- ----
Income before income taxes 3.8 3.0 2.4
Provision for income taxes 1.5 1.2 0.9
---- ---- ----
Net income 2.3% 1.8% 1.5%
==== ==== ====
</TABLE>
The following table sets forth certain unaudited quarterly financial
data and certain data expressed as a percentage of net sales for fiscal years
1996 and 1995. The unaudited quarterly information includes all adjustments,
consisting of only normal recurring adjustments, which management considers
necessary for a fair presentation of the information shown. The financial data
and ratios for any quarter are not necessarily indicative of results of any
future period.
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Fiscal Year 1996
----------------------------------------------------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
----------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 137,237 $ 116,545 $ 105,421 $ 104,966
Gross profit $ 13,768 $ 12,233 $ 11,335 $ 10,634
Gross profit margin 10.0% 10.5% 10.8% 10.1%
SG&A expenses $ 8,432 $ 7,312 $ 6,685 $ 6,595
Percent of net sales 6.1% 6.3% 6.3% 6.3%
Income from operations $ 5,336 $ 4,921 $ 4,650 $ 4,039
Operating margin 3.9% 4.2% 4.4% 3.8%
Net income $ 3,091 $ 2,792 $ 2,616 $ 2,268
Net margin 2.3% 2.4% 2.5% 2.2%
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1995
----------------------------------------------------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
----------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ 104,179 $ 88,069 $ 80,851 $ 79,854
Gross profit $ 10,583 $ 9,136 $ 8,396 $ 7,856
Gross profit margin 10.2% 10.4% 10.4% 9.9%
SG&A expenses $ 6,575 $ 5,858 $ 5,544 $ 5,283
Percent of net sales 6.3% 6.7% 6.9% 6.7%
Income from operations $ 4,008 $ 3,278 $ 2,852 $ 2,573
Operating margin 3.8% 3.7% 3.5% 3.2%
Net income $ 2,181 $ 1,611 $ 1,436 $ 1,268
Net margin 2.1% 1.8% 1.8% 1.6%
</TABLE>
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March 31, 1995
Net Sales. Net sales for fiscal year 1996 were $464.2 million as compared to
$353.0 million for fiscal year 1995, an increase of $111.2 million, or 31.5%,
as the result of an increase in U.S. net sales of $94.8 million, or 32.3%, and
an increase in international net sales of $16.4 million, or 27.6%. 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 fiscal year 1996 were $34.7 million, while net sales to existing
customers increased by $76.5 million during this period.
Gross Profit. Gross profit for fiscal year 1996 was $48.0 million as compared
to $36.0 million in fiscal year 1995, an increase of $12.0 million, or 33.4%,
primarily as the result of increased sales volume in fiscal year 1996, as well
as incremental gross profit earned on the sale of certain inventory purchased by
the Company prior to manufacturer price increases. The Company's gross profit
margin was 10.3% for fiscal year 1996 as compared to 10.2% for the prior year.
The increase in gross profit margin percentage was primarily the result of
incremental margins earned on the sale of certain inventory purchased by the
Company prior to manufacturer price increases. Without the benefit gained from
such incremental gross profit, gross profit margin percentage for fiscal year
1996 decreased slightly compared to the previous year. This gross
profit margin percentage decline occurred primarily as 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 fiscal year 1996 were $29.0 million, or
6.2% of net sales, as compared to $23.3 million, or 6.6% of net sales, for
fiscal year 1995. The increase in SG&A expenses was primarily a result of the
increase in costs associated with the Company's
-13-
<PAGE> 14
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 fiscal year 1996 was
$18.9 million as compared to $12.7 million for fiscal year 1995, an increase of
$6.2 million, or 49.1%. 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 4.1% for fiscal year 1996 as
compared to 3.6% for fiscal year 1995, primarily as the result of an increase
in gross profit margin and a decline in SG&A expenses as a percentage of net
sales.
Interest Expense. Interest expense for fiscal year 1996 was $1.5 million as
compared to $2.1 million in fiscal year 1995. The decrease was primarily the
result of a reduction in the outstanding balance in the Company's line of
credit attributable to the proceeds received from the Company's initial public
offering (the "IPO") in January 1995. The weighted average interest rate was
7.5% during fiscal year 1996 as compared to 7.9% for fiscal year 1995.
Interest expense for fiscal year 1996 was also impacted by the incremental
borrowings required to finance the Company's additional inventory purchases
discussed above.
Income Taxes. The Company's provision for income taxes was $6.7 million for
fiscal year 1996 as compared to $4.2 million in fiscal year 1995. The increase
was primarily due to increased pretax profits. The effective tax rate for
fiscal year 1996 was 38.3% as compared to the effective tax rate of 39.1% for
fiscal year 1995. For an analysis of the Company's provision for income taxes,
see Note 6 of the Notes to Consolidated Financial Statements.
Fiscal Year Ended March 31, 1995 Compared to Fiscal Year Ended March 31, 1994
Net Sales. Net sales for fiscal year 1995 were $353.0 million as compared
to $276.7 million for fiscal year 1994, an increase of $76.3 million, or 27.6%,
as the result of an increase in U.S. net sales of $61.0 million, or 26.3%, and
an increase in international net sales of $15.3 million, or 33.9%. The increase
in U.S. and international net sales was primarily due to increased sales volume
to large national accounts, computer and office products superstores, new
customers and the Company's continued introduction of new products. Net sales
to new customers for fiscal year 1995 were $14.7 million, while net sales to
existing customers increased by $61.6 million during this period.
Gross Profit. Gross profit for fiscal year 1995 was $36.0 million as
compared to $28.8 million in fiscal year 1994, an increase of $7.2 million, or
24.8%, primarily as the result of increased sales volume in fiscal year 1995 as
well as the provision for losses from disposal of software and hardware
inventory of $0.4 million in fiscal year 1994. The Company's gross profit
margin for fiscal year 1995 was 10.2% as compared to 10.4% for fiscal year
1994. The decrease in gross profit margin was primarily the result of
increased sales at lower gross profit margins to large national accounts and
computer and office product superstores. Gross profit margin for the prior
period was negatively impacted by the provision for losses from disposal of
software and hardware inventory which accounted for 0.1% of net sales.
-14-
<PAGE> 15
SG&A Expenses. SG&A expenses for fiscal year 1995 were $23.3 million, or
6.6% of net sales, as compared to $20.3 million, or 7.3% of net sales, for
fiscal year 1994. The increase in SG&A expenses was primarily a result of the
increase in costs associated with the Company's increased sales volume. SG&A
expenses for fiscal year 1994 include $0.2 million of costs related to the
Company's disposal of its software and hardware inventory. The decrease in
SG&A 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 fiscal year 1995 was
$12.7 million as compared to $8.5 million for fiscal year 1994, an increase of
$4.2 million or 49.9%. This increase was primarily due to increased sales
volume and improved operating efficiencies. Income from operations as a
percentage of net sales was 3.6% as compared to 3.1% for fiscal year 1994,
primarily as the result of the decline in SG&A expenses as a percentage of net
sales, which more than offset a slight decline in gross margin.
Interest Expense. Interest expense for fiscal year 1995 was $2.1 million
as compared to $1.7 million in fiscal year 1994. This increase was primarily
the result of increased borrowings associated with higher sales levels as well
as an increase in the average interest rate under the Company's line of credit
due to increases in the prime rate. The increase was partially offset by a
reduction in the outstanding balance in the Company's line of credit in
February 1995 attributable to the proceeds received by the Company from the
IPO. The weighted average interest rate of the Company's line of credit for
fiscal year 1995 was 7.9% as compared to 6.7% for fiscal year 1994.
Income Taxes. The Company's provision for income taxes was $4.2 million
in fiscal year 1995 as compared to $2.5 million in fiscal year 1994. The
Company's effective tax rate was 39.1% for fiscal year 1995 as compared to
37.0% in fiscal year 1994. For an analysis of the Company's provision for
income taxes, see Note 6 of the Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary source of cash has been from financing
activities. Net cash provided by financing activities was $6.2 million, $9.1
million and $7.7 million for fiscal years 1996, 1995 and 1994, respectively.
Proceeds from the issuance of common stock, bank borrowings and lease
financings have been used to finance the Company's operations and expansion.
In January 1995, the Company sold 1,380,000 shares of common stock in the IPO
and received net proceeds of approximately $18.6 million. The Company used
such net proceeds (and an aggregate of $2.3 million received by the Company
concurrent with the IPO from an officer of the Company and a selling
stockholder in repayment of indebtedness owing by such officer and selling
stockholder to the Company) to reduce its outstanding indebtedness under the
line of credit.
Net cash used in operating activities was $1.3 million, $6.4 million and
$7.0 million for fiscal years 1996, 1995 and 1994, 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
-15-
<PAGE> 16
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 $5.0 million, $3.7 million and $0.7 million for fiscal years
1996, 1995 and 1994, respectively. These expenditures have consisted primarily
of additions to upgrade the Company's management information systems 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 $56.7 million at March 31, 1996 from $43.4
million at March 31, 1995, an increase of $13.3 million which was primarily
attributable to increases in accounts receivable and inventory which were
partially offset by an increase in accounts payable. During fiscal years 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.
As of March 31, 1995, the Company had a secured line of credit with an
institutional lender which, subject to the satisfaction of certain conditions,
allowed the Company to borrow up to $35 million. As of March 31, 1995, there
was $9.7 million outstanding under the line of credit and $25.3 million was
available for additional borrowings. The line of credit was to mature in April
1996. In fiscal year 1995, the Company applied the net proceeds of the IPO
(together with certain other amounts received concurrently therewith) to reduce
outstanding debt under the line of credit. As a result of this reduction in the
indebtedness and the Company's reduced borrowing needs, in May 1995, the
Company entered into a new agreement with certain banks for a new three-year
unsecured revolving line of credit facility (the "new facility"). Under the
new 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
new facility is based upon amounts of eligible accounts receivable, as defined.
As of March 31, 1996, the Company had borrowed $15.4 million under the new
facility. Also, as of March 31, 1996, $0.2 million of the available new
facility was allocated to outstanding letters of credit, and $9.4 million was
available for additional borrowings. The new 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 new facility. The new 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 fiscal year 1996, approximately $75.9 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 April 1994 the Company entered into a one-year forward exchange
contract, which expired in April 1995, in order to hedge the Company's net
investment in, and its intercompany payable applicable to, its Canadian
subsidiary. For fiscal year 1995, the Company incurred a loss of
-16-
<PAGE> 17
approximately $31,000 net of income taxes, related to this contract. In May
1995, the Company entered into a $4.3 million (U.S.) one-year forward exchange
contract, which expired in May 1996, to replace the contract which expired in
May 1995. As of March 31, 1996, the Company 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. 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. See Note 1 of the Notes to Consolidated Financial Statements.
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 new
facility, trade credit, lease financing, internally generated funds and by
increasing the amount available under the new facility (although the Company
has presently neither requested nor 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.
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 effect, 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 the
results of
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<PAGE> 18
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 Report on Form 10-K, 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 STANDARDS
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.
-18-
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Balance Sheets as of March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . 21
Consolidated Statements of Operations for the Fiscal Years Ended March 31, 1996,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended March 31,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 1996,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
-19-
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Daisytek International Corporation:
We have audited the accompanying consolidated balance sheets of Daisytek
International Corporation (a Delaware corporation) and subsidiaries as of March
31, 1996 and 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended March 31, 1996. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Daisytek International
Corporation and subsidiaries as of March 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
April 23, 1996
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<PAGE> 21
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
------
<TABLE>
<CAPTION>
March 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 204 $ 448
Trade accounts receivable, net of allowance for
doubtful accounts of $1,283 in 1996 and $1,060 in 1995 69,169 51,099
Receivables from employees and related parties, net of allowance
for doubtful accounts of $475 in 1996 and 1995 571 559
Inventories, net 44,358 32,249
Prepaid expenses and other current assets 2,120 343
Deferred income tax asset 762 999
--------- ---------
Total current assets 117,184 85,697
--------- ---------
PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment 15,325 10,562
Leasehold improvements 306 124
--------- ---------
15,631 10,686
Less - Accumulated depreciation and
amortization (6,136) (3,906)
--------- ---------
Net property and equipment 9,495 6,780
--------- ---------
EMPLOYEE RECEIVABLES 395 367
EXCESS OF COST OVER NET ASSETS ACQUIRED,
net of accumulated amortization of $468 in 1996
and $418 in 1995 1,527 1,577
--------- ---------
Total assets $ 128,601 $ 94,421
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-21-
<PAGE> 22
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 650 $ 571
Trade accounts payable 44,736 28,187
Accrued expenses 4,230 3,052
Income taxes payable 419 908
Other current liabilities 10,486 9,552
--------- ---------
Total current liabilities 60,521 42,270
--------- ---------
LONG-TERM DEBT, less current portion 16,419 11,334
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized
at March 31, 1996 and 1995; none issued and outstanding -- --
Common stock, $.01 par value; 10,000,000 shares authorized
at March 31, 1996 and 1995; 6,342,753 and 6,244,682
shares issued and outstanding at March 31, 1996 and 1995,
respectively 63 62
Additional paid-in capital 30,874 30,796
Retained earnings 21,736 10,969
Cumulative foreign currency translation adjustment (1,012) (1,010)
--------- ---------
Total shareholders' equity 51,661 40,817
--------- ---------
Total liabilities and shareholders' equity $ 128,601 $ 94,421
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-22-
<PAGE> 23
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
NET SALES $ 464,169 $ 352,953 $ 276,699
COST OF SALES 416,199 316,982 247,480
PROVISION FOR LOSSES FROM
DISPOSAL OF SOFTWARE AND
HARDWARE INVENTORY (Note 1) -- -- 402
--------- --------- ---------
Gross profit 47,970 35,971 28,817
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 29,024 23,260 20,338
--------- --------- ---------
Income from operations 18,946 12,711 8,479
INTEREST EXPENSE 1,482 2,050 1,726
--------- --------- ---------
Income before income taxes 17,464 10,661 6,753
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 6,460 4,470 2,357
Deferred 237 (305) 139
--------- --------- ---------
6,697 4,165 2,496
--------- --------- ---------
NET INCOME $ 10,767 $ 6,496 $ 4,257
========= ========= =========
NET INCOME PER COMMON SHARE $ 1.59 $ 1.17 $ 0.81
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,757 5,542 5,288
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-23-
<PAGE> 24
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share and Warrant Amounts)
<TABLE>
<CAPTION>
COMMON STOCK
COMMON STOCK WARRANTS ADDITIONAL CUMULATIVE
-------------------- ------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT WARRANTS AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
--------- ------- ------- ------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
March 31, 1993 4,310,071 $ 43 869,349 $ 1,600 $10,456 $ 216 $ (471) $ 11,844
Net income -- -- -- -- -- 4,257 -- 4,257
Issuance and net proceeds
from sale of common
stock 155,933 2 -- -- 196 -- -- 198
Foreign currency
translation
adjustment -- -- -- -- -- -- (362) (362)
--------- ------ ------- ------- ------- -------- --------- ---------
BALANCE,
March 31, 1994 4,466,004 45 869,349 1,600 10,652 4,473 (833) 15,937
Net income -- -- -- -- -- 6,496 -- 6,496
Exercise and termination
of common stock
warrants 398,678 4 (869,349) (1,600) 1,600 -- -- 4
Issuance and net
proceeds from sale
of common stock 1,380,000 13 -- -- 18,544 -- -- 18,557
Foreign currency
translation
adjustment -- -- -- -- -- -- (177) (177)
--------- ------ ------- ------- ------- -------- --------- ---------
BALANCE,
March 31, 1995 6,244,682 62 -- -- 30,796 10,969 (1,010) 40,817
Net income -- -- -- -- -- 10,767 -- 10,767
Net proceeds from
exercise of common
stock options 98,071 1 -- -- 562 -- -- 563
Costs associated
with secondary
offering of stock -- -- -- -- (484) -- -- (484)
Foreign currency
translation
adjustment -- -- -- -- -- -- (2) (2)
--------- ------ ------- ------- ------- -------- --------- ---------
BALANCE,
March 31, 1996 6,342,753 $ 63 -- $ -- $30,874 $ 21,736 $ (1,012) $ 51,661
========= ====== ======= ======= ======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-24-
<PAGE> 25
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------------------------------
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,767 $ 6,496 $ 4,257
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,296 1,393 1,223
Provision for doubtful accounts 999 750 899
Deferred income tax provision (benefit) 237 (305) 139
Provision for losses on disposal of software and
hardware inventory -- -- 402
Loss on retirement of property and equipment -- -- 15
Changes in operating assets and liabilities -
Trade accounts receivable (18,929) (16,364) (7,884)
Receivables from related parties 41 (4) 237
Income taxes receivable 8 24 1,180
Inventories, net (12,017) (9,863) (4,849)
Trade accounts payable and accrued expenses 17,561 10,884 (2,999)
Income taxes payable (478) 575 367
Prepaid expenses and other current assets (1,784) 8 29
----------- ------------ ------------
Net cash used in operating activities (1,299) (6,406) (6,984)
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,959) (3,740) (691)
Proceeds from sale of property and equipment -- -- 523
Collections (advances) of employee receivables, net (80) 1,575 (902)
----------- ------------ ------------
Net cash used in investing activities (5,039) (2,165) (1,070)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments of) revolving line of credit, net 5,735 (7,918) 2,124
Increase (decrease) in other current liabilities 934 (1,045) 5,911
Payments on capital leases and notes payable (571) (541) (565)
Net proceeds from sale of stock and exercise
of stock options and warrants 79 18,561 198
----------- ------------ ------------
Net cash provided by financing activities 6,177 9,057 7,668
----------- ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH (83) (82) (23)
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH (244) 404 (409)
CASH, beginning of period 448 44 453
----------- ------------ ------------
CASH, end of period $ 204 $ 448 $ 44
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-25-
<PAGE> 26
1. SIGNIFICANT ACCOUNTING POLICIES:
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, 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. No single customer accounted for more
than 10% of the Company's annual net sales for the fiscal years ended March 31,
1996, 1995 and 1994. At March 31, 1996, five computer and office product
superstores represent approximately 29% of trade accounts receivable, with the
largest being approximately 16% of trade accounts receivable, and reflects the
increasing significance of this market segment. The Company recognizes revenue
upon shipment of product to customers and provides for estimated returns and
allowances. The Company permits its customers to return defective products
(many of which are then returned by the Company to the manufacturer) and
incorrect shipments for credit against other purchases. The Company offers
terms to its customers that it believes are standard for its industry.
Basis of Presentation
The consolidated financial statements include the accounts of Daisytek
International Corporation and its subsidiaries. All significant intercompany
transactions are eliminated. The preparation of consolidated 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, disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses. Actual results could differ
from those estimates.
Reclassifications
Certain prior year data has been reclassified to conform to current
year presentation. These reclassifications had no effect on previously
reported net income, shareholders' equity or cash flows.
Inventories
Inventories (merchandise held for resale, all of which is finished
goods) are stated at the lower of weighted average cost or market. In fiscal
years 1994 and 1993, the Company elected to discontinue the distribution of
software and hardware products, including, among others, business, educational
and entertainment software programs, monitors, modems and memory
-26-
<PAGE> 27
boards. The Company recorded a provision related to the disposal of these
software and hardware products of approximately $402,000 for fiscal year 1994.
Property and Equipment
Property and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the respective
assets which range from three to seven years.
Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is amortized on a
straight-line basis over 40 years. The related amortization expense for each of
the fiscal years 1996, 1995 and 1994, was approximately $50,000.
Foreign Currency Translation and Transactions
For the Company's Canadian subsidiary, the local currency is the
functional currency. Assets and liabilities are translated at exchange rates in
effect at the end of the period, and income and expense items are translated at
the average exchange rates for the period. Translation adjustments are
reported in a separate component of shareholders' equity. In addition, the
Company periodically enters into foreign exchange contracts in order to hedge
the Company's net investment in, and its intercompany payable balance (of a
long-term investment nature) applicable to its Canadian subsidiary. In May
1995, the Company entered into a one-year, $4.3 million (U.S.) forward exchange
contract. As of March 31, 1996, the Company had incurred a loss of
approximately $59,000, net of applicable income taxes, on this contract. For
fiscal year ended March 31, 1995, the Company incurred a loss of approximately
$31,000, net of income taxes, related to a one-year $3.0 million (U.S.) forward
exchange contract that expired on April 7, 1995. These losses are included as a
component of shareholders' equity.
For the Company's Mexican subsidiary, the U.S. dollar is the
functional currency. Monetary assets and liabilities are translated at the
rates of exchange on the balance sheet date and certain assets (notably
accounts receivable, inventory, and property and equipment) are translated at
historical rates. Income and expense items are translated at average rates of
exchange for the period except for those items of expense which relate to
assets which are translated at historical rates. The gains and losses from
foreign currency transactions and translation related to the Mexican subsidiary
are included in net income.
Income Per Common Share
Income per common share is calculated by dividing net income by the
weighted average common shares and share equivalents outstanding for each
period. The stock split discussed in Note 3 has been reflected in the income
per common share calculation.
-27-
<PAGE> 28
Recently Issued Accounting Standards
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.
2. DEBT:
Debt at March 31, 1996 and 1995, is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
March 31,
----------------------------------------
1996 1995
---------------- ------------------
<S> <C> <C>
Revolving line of credit facility with commercial
banks, interest (weighted average rate of 6.79% at
March 31, 1996) at the Company's option at a prime
rate of a bank (8.25% at March 31, 1996) or a Eurodollar
rate plus 0.625% to 1.125% (6.38% at March 31, 1996),
due May 22, 1998 $ 15,440 $ -
Revolving line of credit facility with commercial banks,
interest at the prime rate of a bank (9.0% at
March 31, 1995) plus 0.50%, due April 15, 1996;
secured by all assets of the Company 9,705
-
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 1,629 2,200
---------------- ------------------
Long-term debt 17,069 11,905
Less - current portion of long-term debt (650) (571)
---------------- ------------------
Long-term debt, less current portion $ 16,419 $ 11,334
================ ==================
</TABLE>
On May 22, 1995, the Company entered into an agreement with certain
banks for a new three-year unsecured revolving line of credit facility (the
"facility") to replace the Company's previous revolving line of credit
facility. Under the facility, the Company may borrow 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 a 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 (minimum fixed charge ratio
and minimum level of tangible net worth), and restrictions on
-28-
<PAGE> 29
certain activities of the Company, including loans and payments to related
parties, incurring additional debt, acquisitions, investments and asset sales.
As of March 31, 1996, $0.2 million of the available new facility was allocated
to outstanding letters of credit, and $9.4 million was available 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 March 31, 1996 and 1995, the Company had
checks and other items outstanding in excess of its cash balance of
approximately $10.5 million and $9.6 million, respectively, which are included
in other current liabilities.
The Company is a party to a number of noncancelable capital lease
agreements involving warehouse equipment, computer equipment, and office
furniture and fixtures. The Company's property held under capital leases,
included in furniture, fixtures and equipment in the balance sheet, amounted to
approximately $1,112,000, net of accumulated amortization of approximately
$1,560,000 at March 31, 1996, and approximately $1,609,000, net of accumulated
amortization of approximately $1,063,000 at March 31, 1995.
Annual maturities of long-term debt and capital leases are as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Fiscal year ending March 31,
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 650
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,667
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,069
===========
</TABLE>
3. STOCK OPTIONS AND SHAREHOLDERS' EQUITY:
Public Offerings
In January 1995, the Company completed an initial public offering (the
"IPO") of 1,380,000 shares of common stock (see Note 11). In January 1996, the
Company completed a secondary offering of 1,207,500 shares of common stock,
sold by certain principal and selling shareholders. The Company did not
receive any of the proceeds from the sale of shares by these principal and
selling shareholders. The Company incurred approximately $484,000 in costs
related to the offering, which is reflected as a reduction in Shareholders'
Equity.
Preferred Stock
In connection with the IPO, the Company authorized the issuance of up
to 1,000,000 shares of preferred stock, par value $1.00 per share, none of
which is issued or outstanding at March 31, 1996 and 1995.
-29-
<PAGE> 30
Stock Splits
In conjunction with the IPO (see Note 11), the Company's Board of
Directors approved the conversion of each share of common stock into 1.45
shares upon consummation of the IPO. The consolidated financial statements and
the notes thereto have been adjusted to reflect the stock split on a
retroactive basis.
Stock Purchase Agreement
Pursuant to a stock purchase agreement dated December 13, 1991, as
amended on December 23, 1991 (the "Stock Purchase Agreement"), the Company
issued to a private investor 1,666,830 shares of common stock, warrants to
purchase 398,678 shares of common stock (the "A Warrants"), and warrants to
purchase 470,671 shares of common stock (the "B Warrants") for an aggregate
consideration of $10,000,000.
The A Warrants contained an exercise price of $0.01 per share, were
only exercisable upon the occurrence of certain specified events, and, subject
to certain conditions, granted the Company the right to repurchase all or a
portion of the A Warrants at prices ranging from $4.63 per share to $4.81 per
share. Such warrants were exercised simultaneous with the IPO. The B Warrants
contained an exercise price of $0.01 per share and, pursuant to their terms,
terminated in January 1995 in conjunction with the IPO.
Stock Options
In January 1989, the Company established an employee stock option plan
(the "Plan") in which shares of common stock are reserved for the granting of
options at an amount not less than market price, as determined by the Board of
Directors, at the date of grant. In fiscal year 1991, the Company granted
options to purchase 16,426 shares of common stock to one individual who was
then a nonemployee consultant of the Company. These options were granted at
$1.28 per share which management believes was the fair market value at the date
of the grant. These options were exercised in fiscal year 1994. As of March
31, 1996 and 1995, 6,379 options remain available to be granted under the Plan.
In 1994, the Company adopted the 1994 Stock Option Plan for Key
Employees of Daisytek International Corporation (the "1994 Plan"). The 1994
Plan authorizes the Company to grant options to selected officers and other key
employees of the Company and to nonemployee directors. The 1994 Plan provides
for the granting to employees of both incentive stock options and nonqualified
stock options. The maximum number of shares of common stock for which options
may be granted is 725,000, subject to adjustments for certain changes in the
shares issued and outstanding as described in the 1994 Plan.
The exercise price of incentive stock options granted under the 1994
Plan may not be less than the fair market value at the date of the grant. The
exercise price of nonqualified stock options granted under the 1994 Plan is
determined by the option committee of the Board of Directors. As of March 31,
1996 and 1995, 492,000 and 725,000 options, respectively, remain to be granted
in the future under the 1994 plan.
-30-
<PAGE> 31
During fiscal years 1996, 1995 and 1994, the Company granted options
to certain employees pursuant to its employee stock option plans. In addition
to the options under such plans, in May 1995, at its discretion, the Company
granted options to certain key executives to purchase 22,500 shares of common
stock. These options were granted at the fair market value at the date of the
grant and become exercisable over the next three years based on vesting
percentages. The following table summarizes stock option activity for the
three years in the period ended March 31, 1996.
<TABLE>
<CAPTION>
Price Per
Shares Share
-------- ------------
<S> <C> <C>
Outstanding, March 31, 1993 654,772 $1.28 - $5.30
Granted 114,256 5.30
Exercised (156,043) 1.28
Canceled (49,391) 5.30
--------
Outstanding, March 31, 1994 563,594 1.28 - 5.30
Granted 4,350 7.59
Exercised -- --
Canceled (6,379) 5.30
--------
Outstanding, March 31, 1995 561,565 1.28 - 7.59
Granted 260,000 19.50
Exercised (98,071) 1.28 - 7.59
Canceled (4,500) 19.50
--------
Outstanding, March 31, 1996 718,994 $1.28 - $19.50
========
</TABLE>
As of March 31, 1996 and 1995, 403,403 and 450,388, respectively, of
options outstanding were exercisable. The remaining options will become
exercisable over the next three years based on vesting percentages.
4. SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------------------------
1996 1995 1994
------------- ------------- --------------
<S> <C> <C> <C>
Cash paid during the period for:
Interest $ 1,445 $ 2,119 $ 1,704
Income taxes $ 6,953 $ 3,896 $ 1,763
Fixed assets acquired under capital leases $ -- $ 212 $ 1,429
</TABLE>
5. RELATED PARTY TRANSACTIONS:
The Company has various transactions with shareholders and employees.
As of March 31, 1994, the Company had a note receivable for $1,468,170,
excluding accrued interest of $144,229, from its principal shareholder, bearing
interest at 1.0% over the Company's effective borrowing rate. This note was
repaid to the Company in fiscal year 1995. The Company has also made various
loans to its President and to its past President. These loans accrue interest
at the Company's effective borrowing rate (7.06% at March 31, 1996). The
Company had notes receivable (including accrued interest) from its current
President of $395,052 and $367,257 as of
-31-
<PAGE> 32
March 31, 1996 and 1995, respectively. The Company had a note receivable
(including accrued interest) from its past President of $178,760 as of March
31, 1994. This note was repaid to the Company in fiscal year 1995.
The Company does not intend to provide any further loans to any of its
executive officers or to enter into any further transactions, including loans,
with officers, directors, five percent shareholders or their affiliates unless
the terms of such transactions are no less favorable to the Company than those
that could be obtained from unaffiliated third parties and the transactions are
approved by a majority of the Company's nonemployee directors having no
interest in such transaction.
The Company also had trade accounts receivable due from companies in
which either the Company or its principal shareholder owns a minority interest.
Such sales were made in accordance with the Company's usual terms, except that
such companies were provided with extended payment terms. In fiscal year 1993,
the principal shareholder transferred his minority interest in all but one of
these companies to a subsidiary of the Company for a nominal amount, which
approximated the fair market value of these minority interests. Trade accounts
receivable and advances from all these related party companies totaled
approximately $282,000 and $322,000 at March 31, 1996 and 1995, respectively,
net of a reserve of $475,000 as of each date. Sales to all these related
parties totaled approximately $2,707,000, $2,285,000 and $1,539,000 for the
fiscal years ended March 31, 1996, 1995 and 1994, respectively.
6. INCOME TAXES:
Deferred taxes reflect the impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These differences relate
primarily to provisions for doubtful accounts, capitalization of inventory
costs, reserves for inventory, book versus tax depreciation differences, and
certain accrued expenses deducted for book purposes but not yet deductible for
tax purposes.
A reconciliation of the difference between the expected income tax
provision at the U.S. Federal statutory corporate tax rate (34.85% in fiscal
year 1996 and 34.0% in fiscal years 1995 and 1994) and the Company's effective
tax rate is as follows (in thousands):
-32-
<PAGE> 33
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Provision computed at statutory rate $ 6,086 $ 3,625 $ 2,296
Foreign income (loss):
Impact of taxation at different rates 141 137 236
Impact of foreign losses 88 (181) --
State income taxes, net of federal benefit 297 174 106
Expenses not deductible for tax purposes 56 49 49
Change in valuation reserve 8 378 (218)
Other 21 (17) 27
----------- ----------- ----------
Provision for income taxes $ 6,697 $ 4,165 $ 2,496
=========== =========== ==========
</TABLE>
The consolidated income before income tax, by domestic and foreign
entities is as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Domestic $ 16,355 $ 9,991 $ 6,241
Foreign 1,109 670 512
----------- ----------- ----------
Total $ 17,464 $ 10,661 $ 6,753
=========== =========== ==========
</TABLE>
The provision (benefit) for income taxes is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Current
Domestic $ 5,349 $ 3,576 $ 2,041
State 456 263 160
Foreign 655 631 156
----------- ----------- ----------
Total current 6,460 4,470 2,357
----------- ----------- ----------
Deferred
Domestic 265 (237) 102
State -- -- --
Foreign (28) (68) 37
----------- ----------- ----------
Total deferred 237 (305) 139
----------- ----------- ----------
Total $ 6,697 $ 4,165 $ 2,496
=========== =========== ==========
</TABLE>
-33-
<PAGE> 34
The components of the deferred tax asset as of March 31, 1996 and 1995, are as
follows (in thousands):
<TABLE>
<CAPTION>
March 31,
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Deferred Tax Asset:
Allowance for doubtful accounts $ 504 $ 462
Capitalized inventory costs 84 66
Inventory obsolescence reserve 288 332
Accrued straight-line rent 81 84
Accrued vacation 58 58
Foreign net operating loss carryforwards 687 605
Other 432 378
------------ ------------
2,134 1,985
Less - Valuation reserve (386) (378)
------------ ------------
Total deferred tax asset 1,748 1,607
------------ ------------
Deferred Tax Liability:
Tax versus book depreciation (487) (270)
Foreign inventory purchases (404) (249)
Other (95) (89)
------------ ------------
Total deferred tax liability (986) (608)
------------ ------------
Deferred tax asset, net $ 762 $ 999
============ ============
</TABLE>
For financial reporting purposes, the tax benefit of cumulative
temporary differences is recorded as an asset to the extent that management
assesses the utilization of such temporary differences to be "more likely than
not." As of March 31, 1996 and 1995, a valuation allowance was recorded due to
uncertainties regarding the Company's utilization of its Mexico subsidiary's
net tax asset.
As of March 31, 1993, a valuation allowance of $218,000 was recorded
due to uncertainties regarding the Company's utilization of its Canadian
subsidiaries' net operating loss carryforwards ("NOL"). Due to increased
earnings by its Canadian subsidiaries during fiscal year 1994, and the
Company's future earnings projections for its Canadian subsidiaries, at March
31, 1994, management determined that it was more likely than not that the
Canadian NOLs would be utilized. As a result, the valuation allowance related
to the Company's Canadian subsidiaries was reversed during fiscal year 1994.
The Canadian NOL was fully utilized during the fiscal year ended March 31,
1995.
7. COMMITMENTS AND CONTINGENCIES:
The Company and its subsidiaries lease equipment and facilities under
operating leases expiring in various years through fiscal year 2002. In most
cases, management expects that, in the normal course of business, leases will
be renewed or replaced by other leases. Minimum future annual rental payments
under noncancelable operating leases having original terms in excess of one
year are as follows (in thousands):
-34-
<PAGE> 35
<TABLE>
<Captaion>
<S> <C>
Fiscal year ending March 31,
1997 $ 2,713
1998 2,831
1999 2,381
2000 2,332
2001 1,720
Thereafter 943
--------
Total $ 12,920
========
</TABLE>
Total rental expense under operating leases approximated $2,255,000,
$1,900,000 and $1,618,000 for the fiscal years ended March 31, 1996, 1995 and
1994, respectively.
Although the Company carries products and accessories supplied by
numerous vendors, the Company's net sales from products manufactured by its ten
largest suppliers were approximately 72%, 66% and 64% of total net sales during
fiscal years 1996, 1995 and 1994, respectively. The Company has entered into
written distribution agreements with nearly all of its major suppliers. As is
customary in the industry, these agreements generally provide non-exclusive
distribution rights, have one-year renewable terms and are terminable by either
party at any time, with or without cause. Certain of these agreements require
minimum annual purchases. Total minimum purchase requirements for fiscal year
1997 approximate $40 million. Additionally, many of the Company's suppliers
offer rebate programs under which, subject to the Company purchasing certain
predetermined amounts of inventory, the Company receives rebates based on a
percentage of the dollar volume of total rebate program purchases. The Company
also takes advantage of several other programs offered by substantially all of
its suppliers. These include price protection plans under which the Company
receives credits against future purchases if the supplier lowers prices on
previously purchased inventory and stock rotation or stock balancing privileges
under which the Company can return slow moving inventory in exchange for other
products. Certain of the Company's suppliers also provide the Company with
cooperative advertising programs, marketing development funds and other types
of incentives and discounts which offset the production costs of the Company's
published marketing tools and other related costs.
The Company is involved in certain litigation arising in the ordinary
course of business. Management believes that such litigation will be resolved
without material effect on the Company's financial position or results of
operations.
8. FOREIGN OPERATIONS AND EXPORTS:
The Company, through its wholly owned subsidiaries, Daisytek (Canada)
Inc. and Daisytek de Mexico, S.A. de C.V., sells products in Canada and,
beginning in November 1994, in Mexico. All intercompany activity is eliminated
in computing net sales and net income. Net sales of the Company's Mexico
subsidiary are included in Domestic sales in the following table. Financial
information, summarized by geographical area, is as follows (in thousands):
-35-
<PAGE> 36
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-------------------------------------------------------------
1996 1995 1994
------------ ---------------- ----------------
<S> <C> <C> <C>
Net Sales:
Domestic $ 433,599 $ 324,830 $ 254,392
Canada 44,459 38,487 28,047
Intercompany eliminations (13,889) (10,364) (5,740)
------------ ---------------- ----------------
Consolidated $ 464,169 $ 352,953 $ 276,699
============ ================ ================
Net Income:
Domestic $ 10,008 $ 5,856 $ 3,937
Canada 759 640 320
------------ ---------------- ----------------
Consolidated $ 10,767 $ 6,496 $ 4,257
============ ================ ================
Identifiable Assets:
Domestic $ 118,241 $ 85,366 $ 61,046
Canada 10,360 9,055 6,339
------------ ---------------- ----------------
Consolidated $ 128,601 $ 94,421 $ 67,385
============ ================ ================
</TABLE>
The Company also exports its products for sale throughout Latin America
(through its wholly owned subsidiary, Daisytek Latin America, Inc., beginning
in January 1996), Europe, the Far East, Africa and Australia. Total export
sales to these geographic regions for fiscal years 1996, 1995 and 1994,
included in Domestic sales in the preceding table, were approximately $31.8
million, $28.0 million and $20.3 million, respectively.
9. EMPLOYEE SAVINGS PLAN:
In fiscal year 1994, the Company implemented a defined contribution
employee savings plan under Section 401(k) of the Internal Revenue Code.
Substantially all full-time and part-time U.S. employees are eligible to
participate in the plan. The Company, at its discretion, may match employee
contributions to the plan and also make an additional matching contribution in
the form of profit sharing in recognition of Company performance. For fiscal
years 1996 and 1995 the Company matched 25% of the employee contributions
resulting in charges against income of approximately $95,000 and $81,000,
respectively. For fiscal year 1994, the Company matched 20% of the employee
contributions resulting in a charge against income of approximately $62,000.
10. FAIR VALUES OF FINANCIAL INSTRUMENTS:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value of certain financial instruments for which it
is practicable to estimate that value. Fair value is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. The Company estimates fair value
based on market information and appropriate valuation methodologies. The fair
values of all non-derivative financial instruments approximate their carrying
amounts in the accompanying consolidated balance sheets.
The Company has only limited involvement with derivative financial
instruments, and does not use them for trading purposes. The Company's
derivative financial instruments outstanding as of March 31, 1996 and 1995
consisted of forward foreign currency exchange contracts used to hedge the
Company's net investment in, and its intercompany payable balance applicable to
its Canadian subsidiary (See Note 1). The fair value of these contracts at
March 31, 1996 and 1995,
-36-
<PAGE> 37
based on fiscal year-end exchange rates, were net loss amounts, excluding
related income tax benefits, of approximately $90,000 and $50,000,
respectively.
11. SUPPLEMENTAL INCOME PER SHARE DATA (UNAUDITED):
In December 1994, the Company filed a Form S-1 registration statement
with the Securities and Exchange Commission which became effective in January
1995. The Company reduced outstanding indebtedness under the Company's line of
credit through the application of the net proceeds from the sale of 1,380,000
shares of common stock plus that portion of the net proceeds received by
certain shareholders which were applied towards the full repayment of certain
indebtedness owed by such shareholders to the Company. In addition, 398,678
common stock warrants were exercised concurrently with the consummation of the
IPO at an exercise price of $0.01 per warrant. The supplemental income per
share data has been calculated assuming the IPO occurred as of the beginning of
the respective period.
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
March 31, 1995 March 31, 1994
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Supplemental net income per common share $1.09 $0.75
===== =====
Supplemental weighted average common shares
outstanding (in thousands) 6,683 6,668
===== =====
</TABLE>
-37-
<PAGE> 38
12. QUARTERLY DATA (UNAUDITED):
Summarized quarterly financial data for fiscal years 1996 and 1995 are
as follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Fiscal Year 1996
----------------------------------------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
-------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 137,237 $ 116,545 $ 105,421 $ 104,966
Gross profit $ 13,768 $ 12,233 $ 11,335 $ 10,634
Gross profit margin 10.0% 10.5% 10.8% 10.1%
SG&A expenses $ 8,432 $ 7,312 $ 6,685 $ 6,595
Percent of net sales 6.1% 6.3% 6.3% 6.3%
Income from operations $ 5,336 $ 4,921 $ 4,650 $ 4,039
Operating margin 3.9% 4.2% 4.4% 3.8%
Net income $ 3,091 $ 2,792 $ 2,616 $ 2,268
Net margin 2.3% 2.4% 2.5% 2.2%
Net income per common share $ 0.46 $ 0.41 $ 0.39 $ 0.34
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1995
----------------------------------------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
-------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 104,179 $ 88,069 $ 80,851 $ 79,854
Gross profit $ 10,583 $ 9,136 $ 8,396 $ 7,856
Gross profit margin 10.2% 10.4% 10.4% 9.9%
SG&A expenses $ 6,575 $ 5,858 $ 5,544 $ 5,283
Percent of net sales 6.3% 6.7% 6.9% 6.7%
Income from operations $ 4,008 $ 3,278 $ 2,852 $ 2,573
Operating margin 3.8% 3.7% 3.5% 3.2%
Net income $ 2,181 $ 1,611 $ 1,436 $ 1,268
Net margin 2.1% 1.8% 1.8% 1.6%
Net income per common share $ 0.35 $ 0.30 $ 0.27 $ 0.24
</TABLE>
-38-
<PAGE> 39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages and positions of the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David A. Heap 52 Chairman of the Board and Chief Executive Officer
Mark C. Layton 36 President, Chief Operating Officer, Chief Financial
Officer and Director
Christopher Yates 41 Senior Vice President - Business Development and
Director
James R. Powell 35 Senior Vice President - Sales and Marketing
Harvey H. Achatz 55 Vice President - Administration and Secretary
Randy L. Stancill 36 Vice President - Logistics
Thomas J. Madden 34 Vice President - Finance, Chief Accounting Officer and
Treasurer
Peter D. Wharf 37 Vice President - International Markets
Michael P. Krasny 42 Director
Peter P. J. Vikanis 45 Director
Timothy M. Murray 43 Director
Edgar D. Jannotta, Jr. 35 Director
</TABLE>
DAVID A. HEAP has served as Chairman of the Board and Chief Executive
Officer since 1982 and as President from 1982 to 1990. From 1970 to 1985, Mr.
Heap served as Chairman of ISA International plc (and its predecessors)
("ISA"), a now publicly traded company he founded in England in 1970. ISA is a
distributor of computer supplies in Western Europe. Mr. Heap is primarily
responsible for the Company's general business strategy and long-term planning.
MARK C. LAYTON has served as President, Chief Operating Officer and
Chief Financial Officer since 1993, as a Director since 1988, as Executive Vice
President from 1990 to 1993 and as Vice President - Operations from 1988 to
1990. Mr. Layton served as a management consultant with Arthur Andersen & Co.,
S.C. for six years through 1988 specializing in wholesale and retail
distribution and technology. Mr. Layton is primarily responsible for the
Company's day-to-day operations and general business and financial activity.
-39-
<PAGE> 40
CHRISTOPHER YATES was appointed Senior Vice President - Business
Development in February 1996 and has served as Vice President - Business
Development from November 1995 to February 1996, as a Director of the Company
since February 1995, as Vice President-Marketing from January 1994 to November
1995, as Vice President-Sales from 1988 to 1994 and in various other sales
capacities for the Company since 1982. Prior to joining the Company, Mr. Yates
served in various sales capacities for ISA. Mr. Yates is primarily responsible
for business development, special projects and other sales related functions.
JAMES R. POWELL serves as Senior Vice President - Sales and Marketing,
a position he has held since February 1996. Mr. Powell has served as Vice
President - Sales from 1992 to 1996, and in various other sales capacities from
1988 to 1992. Prior to joining the Company, Mr. Powell was engaged in various
sales and marketing activities. Mr. Powell is responsible for U.S. sales and
marketing activities including Daisytek's Customer Care Center and the Annual
Computer Supplies Expo.
HARVEY H. ACHATZ serves as Vice President - Administration and
Secretary, positions he has held since 1993 and 1984, respectively. Mr. Achatz
has served as Vice President - Finance from 1985 to 1993, as Controller from
1981 to 1985 and as a Director from 1984 to 1990. Mr. Achatz is responsible
for various administrative functions, including human resources.
RANDY L. STANCILL serves as Vice President - Logistics, a position he
has held since February 1996. Mr. Stancill has served as Vice President -
Management Information Systems from 1992 to 1996 and in various other
information systems capacities from 1988 to 1992. Prior to joining the
Company, Mr. Stancill was employed by J.D. Edwards & Company, a computer
software and systems firm. Mr. Stancill is responsible for all operations of
the Company's Memphis distribution center including inventory control,
warehousing and distribution.
THOMAS J. MADDEN has served as Vice President - Finance since November
1994, as Treasurer since March 1994 and as Chief Accounting Officer since 1992.
From 1992 to 1994 he also served as Controller. From 1983 to 1992, Mr. Madden
served in various capacities with Arthur Andersen & Co., S.C., including
financial consulting and audit manager. Mr. Madden is a certified public
accountant. Mr. Madden is responsible for the Company's treasury and
accounting functions.
PETER D. WHARF serves as Vice President - International Markets, a
position he has held since February 1996. Mr. Wharf joined the Company in 1992
and has served in various export and international sales capacities since such
time. Prior to joining the Company, Mr. Wharf served in various sales
capacities for ISA. Mr. Wharf is responsible for all international sales and
customer service for the Company's Canada, Mexico and Latin America locations
in addition to the Company's export sales.
TIMOTHY M. MURRAY has served as a Director of the Company since 1991.
Mr. Murray is a Principal of William Blair & Company, L.L.C., an investment
banking firm he joined in 1979. Mr. Murray is also a director of several
privately held corporations.
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<PAGE> 41
EDGAR D. JANNOTTA, JR. has served as a Director of the Company since
1991. Mr. Jannotta is a Principal of William Blair & Company, L.L.C., an
investment banking firm he joined in 1988. Mr. Jannotta is also a director of
Gibraltar Packaging Group, Inc., a diversified packaging company.
MICHAEL P. KRASNY was recently appointed a Director of the Company.
Mr. Krasny is the founder of CDW Computer Centers, Inc. ("CDW"), a direct
discount marketer of microcomputer hardware and peripherals, software,
networking products and accessories. Mr. Krasny currently serves as Chairman
of the Board, Chief Executive Officer, Secretary and Treasurer of CDW and has
had similar positions and responsibilities with CDW since its inception in
1984.
PETER P. J. VIKANIS was recently appointed a Director of the Company.
Mr. Vikanis served as Chief Operating Officer of ISA from 1991 to 1995, as a
director of ISA from 1979 to 1995, and also served in various management
capacities at ISA from 1971 to 1991.
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is divided into three classes. Each class serves three years, with
the terms of office of the respective classes expiring in successive years.
Class I consists of Messrs. Krasny and Yates whose term will expire at the
annual meeting of stockholders in 1998; Class II consists of Messrs. Murray and
Layton whose terms will expire at the annual meeting of stockholders in 1996;
and Class III consists of Messrs. Heap, Jannotta and Vikanis whose terms will
expire at the annual meeting of stockholders in 1997. Messrs. Murray and
Layton have been nominated by the Board for election at the 1996 annual
meeting.
Under the terms of a Stockholders Agreement (the "Stockholders
Agreement") between the Company, Mr. Heap (and certain family trusts) and
William Blair Leveraged Capital Fund, Limited Partnership ("WBLCF"), Mr. Heap
(and such trusts) and WBLCF agreed to vote their respective shares of Common
Stock, at each annual or special meeting of stockholders at which directors are
to be elected, for two representatives designated by WBLCF and for five
representatives designated by David Heap. In addition, under the Stockholders
Agreement, WBLCF had the right to designate one representative to each
committee of the Company's Board of Directors, to the Board of Directors of
each subsidiary of the Company (a "Sub Board") and to each Sub Board committee.
In February 1996, following the consummation of a secondary offering of Common
Stock by Mr. Heap and WBLCF, the Stockholders Agreement was terminated. See
"Item 13. Certain Relationships and Related Transactions."
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and controlling stockholders to file
initial reports of ownership and reports of changes of ownership of the
Company's Common Stock with the Securities and Exchange Commission and the
Company. To the Company's knowledge, all reports required to be so filed were
filed in accordance with the provisions of said Section 16(a).
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to its Chief Executive Officer and to each of the four most highly
compensated executive officers for services rendered during the fiscal years
ended March 31, 1996, 1995 and 1994.
-41-
<PAGE> 42
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
------------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS COMPENSATION(2)
--------------------------- ------ -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
David A. Heap 1996 $385,000 $280,676 37,833 $ 8,636
Chairman and Chief 1995 350,000 171,000 -- 24,701
Executive Officer . . . . . . . . . 1994 325,000 75,760 -- 20,154
Mark C. Layton 1996 $276,386 $280,676 28,020 $ 6,008
President, Chief Operating 1995 250,971 171,000 -- 3,967
and Financial Officer. . . . . . . . 1994 213,621 75,760 32,078 3,874
Christopher Yates 1996 $215,000 $92,623 20,138 $ 2,430
Senior Vice President - 1995 195,000 -- -- 3,321
Business Development . . . . . . . . 1994 150,000 -- 12,688 3,488
James R. Powell 1996 $150,359 $70,169 14,004 $ 3,707
Senior Vice President - Sales 1995 123,551 -- -- 3,414
and Marketing . . . . . . . . . . . 1994 108,852 -- 9,788 1,822
Thomas J. Madden
Vice President - Finance, 1996 $112,649 -- 14,703 $ 4,005
Chief Accounting Officer and 1995 94,294 -- -- --
Treasurer . . . . . . . . . . . . . 1994 81,904 -- 11,600 --
</TABLE>
_________________
(1) Such amounts are pursuant to an agreement between the Company and
Messrs. Heap and Layton pursuant to which, subject to the Company's
pre-tax net income (excluding such extraordinary, unusual or
non-recurring items as the Board of Directors deems appropriate, in
accordance with generally accepted accounting principles) ("EBT") for
each fiscal year (as set forth in the Company's audited Consolidated
Financial Statements) being equal to or greater than the EBT projected
in the Company's approved budget for such fiscal year, Messrs. Heap
and Layton are each entitled to receive a cash bonus equal to (i) 1%
of EBT, to the extent EBT is 100% to 105% of the projected EBT and
(ii) 5% of that portion of EBT which exceeds 105% of the projected
EBT. For fiscal year 1996, Messrs. Powell and Yates received a cash
bonus equal to (i) .25% and .33%, respectively, of EBT, to the extent
EBT was 100% to 105% of projected EBT and (ii) 1.25% and 1.65%,
respectively, of that portion of EBT which exceeds 105% of projected
EBT.
(2) Represents compensation in respect of one or more of the following:
personal use of Company automobiles; life insurance premiums paid by
the Company for the benefit of the named executive officer; tax return
preparation services paid by the Company; and personal travel
expenses.
COMPENSATION OF DIRECTORS
Commencing with the Company's 1997 fiscal year, each non-employee Director
will receive an annual director's fee of $20,000 for each year in which he or
she serves as a director. Non-employee directors will not receive additional
Board or Committee meeting fees. If approved by stockholders at the 1996
Annual Meeting, the Company will adopt a Non- Employee Director Stock Option
and Retainer Plan pursuant to which each non-employee director (i) may elect to
receive payment of the director's fees in shares of Common Stock in lieu of
cash, (ii) will receive an option to purchase 1,000 shares of Common Stock as
of the date of the 1996 Annual Meeting at an exercise price equal to the fair
market value of the Common Stock as of such date (as determined in accordance
with the provisions of said Plan) and (iii) is entitled to receive future
grants of options in accordance with the formula, and subject to the conditions
precedent, set forth in said Plan.
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<PAGE> 43
Directors who are employees of the Company or any of its subsidiaries do
not receive additional compensation for service on the Board of Directors.
The following table sets forth information with respect to grants of stock
options during the year ended March 31, 1996 to the named executive officers
reflected in the Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERMS(2)
------------------------------------------------------------- ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR PER SHARE DATE(1) 5% 10%
---- -------------- ----------- --------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap . . . 37,833 14.6 $ 19.50 5-9-05 $463,833 $1,175,850
Mark C. Layton . . . 28,020 10.8 19.50 5-9-05 343,525 870,862
Christopher Yates . . 20,138 7.7 19.50 5-9-05 246,892 625,889
James R. Powell . . . 14,004 5.4 19.50 5-9-05 171,689 435,244
Thomas J. Madden . . 14,703 5.7 19.50 5-9-05 180,259 456,969
</TABLE>
_________________________________
(1) All of such options are subject to a three year cumulative
vesting schedule under which 15% vested on May 9, 1996, 50%
will vest on May 9, 1997 and 100% will vest on May 9, 1998.
(2) These are hypothetical values using assumed annual rates of
stock price appreciation as prescribed by the rules of the
Securities and Exchange Commission.
The following table sets forth information concerning the
aggregate stock option exercises during the fiscal year ended March 31, 1996
and stock option values as of the end of fiscal year 1996 for unexercised stock
options held by each of the named executive officers:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED ON VALUE ------------------------ --------------------------------
NAME EXERCISE REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David A. Heap . . . - - - 37,833 - $510,746
Mark C. Layton . . - - 29,727 44,059 $ 823,438 822,550
Christopher Yates . - - 54,456 26,482 1,668,825 447,592
James R. Powell . . 12,738 $279,803 19,532 18,898 541,036 324,618
Thomas J. Madden . 1,150 29,555 12,863 20,503 356,305 359,151
</TABLE>
___________________________
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<PAGE> 44
(1) Calculated by determining the difference between $ 33 (the
last sale price of the Common Stock on March 31, 1996 as
reported by the Nasdaq National Market) and the exercise price
of the shares of Common Stock underlying the options.
(2) Calculated by determining the difference between the last sale
price of the Common Stock on the date of exercise as reported
by the Nasdaq National Market and the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Company's Board of
Directors are David Heap, Chairman of the Board and Chief Executive Officer of
the Company, Timothy M. Murray and Edgar D. Jannotta, Jr. Prior to February
1996, Mr. Jannotta served on the Compensation Committee pursuant to the
Stockholders Agreement. Under the terms of the Stockholders Agreement, Mr. Heap
(and certain family trusts) and WBLCF agreed to vote their respective shares of
Common Stock, at each annual or special meeting of stockholders at which
directors are to be elected, for two representatives designated by WBLCF and
for five representatives designated by David Heap. In addition, under the
Stockholders Agreement, WBLCF had the right to designate one representative to
each committee of the Company's Board of Directors, to the Board of Directors
of each subsidiary of the Company (a "Sub Board") and to each Sub Board
committee. In February 1996, following the consummation of a secondary
offering of Common Stock by Mr. Heap and WBLCF, the Stockholders Agreement was
terminated. See "Item 13. Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 31, 1996, certain information
regarding the beneficial ownership of the Common Stock by (i) each person who
is known to the Company to beneficially own more than 5% of the Common Stock,
(ii) each of the Directors and executive officers of the Company individually
and (iii) the Directors and executive officers of the Company as a group. The
information contained in this table reflects "beneficial ownership" as defined
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Unless otherwise indicated, the stockholders identified in this table
have sole voting and investment power with respect to the shares owned of
record by them.
-44-
<PAGE> 45
<TABLE>
<CAPTION>
Number
Name and Address of Beneficial Owner of shares Percent (1)
------------------------------------ --------- -----------
<S> <C> <C>
David A. Heap (2) . . . . . . . . . . . . . . . . . . . . . . . . 1,068,974 16.6%
500 North Central Expressway
Plano, Texas 75074
Royal Bank of Canada Trust Company
(Jersey) Limited, Brian Gerald Balleine,
Kenneth Edward Rayner, Trustees,
of the David Anthony Heap 1996
Interest in Possession Settlement (3) . . . . . . . . . . . . . . 565,173 8.8%
19-21 Broad Street
St. Helier, Jersey, Channel Islands
Royal Bank of Canada Trust Company
(Jersey) Limited, Brian Gerald Balleine
and Kenneth Edward Rayner, Trustees,
of the David Heap Life Interest
Settlement (No. 10) (4) . . . . . . . . . . . . . . . . . . . . . 584,673 9.1%
19-21 Broad Street
St. Helier, Jersey, Channel Islands
William Blair Leveraged Capital Fund
Limited Partnership . . . . . . . . . . . . . . . . . . . . . . 516,006 8.0%
222 West Adams Street
Chicago, Illinois 60606
Mark C. Layton (5) . . . . . . . . . . . . . . . . . . . . . . . 211,087 3.3%
Christopher Yates (6) . . . . . . . . . . . . . . . . . . . . . . 124,048 1.9%
Harvey H. Achatz (7) . . . . . . . . . . . . . . . . . . . . . . 61,909 *
James R. Powell (8) . . . . . . . . . . . . . . . . . . . . . . . 39,265 *
Randy L. Stancill (9) . . . . . . . . . . . . . . . . . . . . . . 28,381 *
Thomas J. Madden (10) . . . . . . . . . . . . . . . . . . . . . . 25,343 *
Peter D. Wharf (11) . . . . . . . . . . . . . . . . . . . . . . . 7,902 *
Edgar D. Jannotta, Jr. (12) . . . . . . . . . . . . . . . . . . . 10,327 *
Timothy M. Murray (12) . . . . . . . . . . . . . . . . . . . . . 20,000 *
Michael P. Krasny . . . . . . . . . . . . . . . . . . . . . . . . 5,000 *
Peter P.J. Vikanis. . . . . . . . . . . . . . . . . . . . . . . . -- --
All directors and executive officers
as a group (12 persons) (13) . . . . . . . . . . . . . . . . . . 1,602,236 24.9%
</TABLE>
____________________________
*Represents less than 1%
(1) This table is based on 6,437,774 shares of Common Stock outstanding as
of May 31, 1996.
(2) Includes outstanding options to purchase 5,675 shares of Common Stock
which are fully vested and exercisable. Does not include (i) 900
shares held by Mr. Heap's spouse as custodian for minor children as to
which beneficial ownership is disclaimed, (ii) options to purchase
75,022 shares of Common Stock which are not vested or exercisable and
(iii) an aggregate of 1,149,846 shares of Common Stock held of record
by the trusts set forth above (the "Heap Trusts"). Although Mr. Heap
and members of his family are the primary beneficiaries of the Heap
Trusts, neither Mr. Heap nor such beneficiaries have voting or
-45-
<PAGE> 46
investment power with respect to such shares. Of the shares owned of
record by Mr. Heap, 76,500 are pledged to a financial institution to
secure indebtedness owing by Mr. Heap to such institution.
(3) Shares are held of record by a Trust established by Mr. Heap for which
he and members of his family are the primary beneficiaries, although
neither Mr. Heap nor such beneficiaries may exercise voting or
investment power with respect to such shares.
(4) Shares are held of record by a Trust established by Mr. Heap for which
he and members of his family are the primary beneficiaries, although
neither Mr. Heap nor such beneficiaries may exercise voting or
investment power with respect to such shares. All of such shares are
pledged to a financial institution to secure indebtedness owing by
such Trust and Mr. Heap to such institution.
(5) Includes outstanding options to purchase 49,969 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 58,733 shares of Common Stock which are not vested
or exercisable.
(6) Includes outstanding options to purchase 63,821 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 37,677 shares of Common Stock which are not vested
or exercisable.
(7) Includes outstanding options to purchase 27,658 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 3,360 shares of Common Stock which are not vested
or exercisable.
(8) Includes outstanding options to purchase 24,527 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 33,233 shares of Common Stock which are not vested
or exercisable.
(9) Includes outstanding options to purchase 2,005 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 7,541 shares of Common Stock which are not vested
or exercisable.
(10) Includes outstanding options to purchase 20,868 shares of Common Stock
which are fully vested and exercisable. Does not include outstanding
options to purchase 29,085 shares of Common Stock which are not vested
or exercisable.
(11) Includes outstanding options to purchase 7,902 shares of Common Stock
which are fully vested and exercisable. Does not including
outstanding options to purchase 21,505 shares of Common Stock which
are not vested or exercisable.
(12) Does not include shares of Common Stock held by WBLCF as to which
beneficial ownership is disclaimed.
(13) Includes outstanding options to purchase 202,425 shares of Common
Stock which are fully vested and exercisable. Does not include (i)
outstanding options to purchase 266,156 shares of Common Stock which
are not vested or exercisable or (ii) shares of Common Stock held by
WBLCF or the Heap Trusts.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRIVATE PLACEMENT
In December 1991, the Company and WBLCF entered into a Stock Purchase
Agreement (as amended, the "Stock Purchase Agreement"), pursuant to which the
Company issued to WBLCF an aggregate of 1,666,830 shares of Common Stock,
warrants to purchase 398,678 shares of Common
-46-
<PAGE> 47
Stock (the "A Warrants") and warrants to purchase 470,671 shares of Common
Stock (the "B Warrants") for an aggregate consideration of $10.0 million (the
"Private Placement").
The A Warrants and the B Warrants contained an exercise price of
$0.01 per share. The A Warrants were exercised by the holders thereof in
January 1995 in connection with the consummation of the Company's initial
public offering, and the B Warrants were terminated, pursuant to their terms,
on the effective date of the registration statement filed by the Company under
the Securities Act with respect to such offering and are no longer outstanding.
Under the terms of the Stock Purchase Agreement, the Company was
prohibited from taking certain actions, including any merger, consolidation or
acquisition (with certain exceptions for smaller transactions), sale of
substantially all of its assets, liquidation, dissolution or certain charter
amendments, without the consent of WBLCF. In addition, as part of the Private
Placement, WBLCF was granted certain registration rights and the Company,
WBLCF, Mr. Heap and the Heap Trusts entered into the Stockholders Agreement.
See "Compensation Committee Interlocks and Insider Participation."
In February 1996, following the consummation of a secondary
offering of Common Stock by Mr. Heap and WBLCF, all of the provisions of the
Stock Purchase Agreement and the Stockholders Agreement were terminated.
CERTAIN TRANSACTIONS
During the past several years, the Company made loans in varying
amounts to David Heap, the Company's Chairman of the Board and Chief Executive
Officer, and Mark Layton, the Company's President, Chief Operating and
Financial Officer and a member of its Board of Directors, in order to provide
such persons with the funds necessary to satisfy various personal obligations
and for other purposes. In February 1995, Mr. Heap repaid his loan in full
concurrent with the consummation of the Company's initial public offering.
During fiscal year 1996, the largest amount owing by Mr. Layton was $395,052
and as of May 31, 1996, Mr. Layton was indebted to the Company in the amount of
$395,652. The indebtedness owing by Mr. Layton accrues interest at the rate
charged to the Company for working capital borrowings and is due and payable in
one installment on December 31, 1996.
David Heap, the Company's Chairman of the Board and Chief
Executive Officer, owns approximately a one- third equity interest in a small
computer supplies dealer, Business Software Centers, Inc. ("BSC"). In December
1991, Mr. Heap agreed to remit to the Company any dividends, distributions or
other amounts which he may receive in respect of such interest. Mr. Heap has
not received any dividends, distributions or other amounts in respect of his
equity interest and it is unlikely that he will receive any in the future.
During fiscal year 1996, the Company's sales to BSC aggregated
approximately $1,520,000, and constituted less than 1% of the Company's total
sales in such fiscal year. Such sales were made in accordance with the
Company's usual terms, except that BSC received extended payment terms in
return for which BSC agreed, among other things, to provide the Company with
quarterly financial information. In December 1993, the Company and BSC agreed
that (i) $500,000 of the past due trade receivable then owing by BSC would be
evidenced by a promissory note, payable in
-47-
<PAGE> 48
48 monthly installments and accruing interest at the rate of 7% per annum, (ii)
the Company would provide BSC with 60 day credit terms up to a maximum amount
of $350,000 (subject to BSC continuing to meet its obligations under the note),
(iii) BSC would provide the Company with quarterly financial information and
(iv) at such time as the note is paid in full, Mr. Heap will transfer to BSC,
for a nominal consideration, the one-third equity interest held in BSC. As of
May 31, 1996, there was approximately $152,000 outstanding under the note and
there were no past due trade amounts payable by BSC to the Company. See Note 5
of the Notes to Consolidated Financial Statements.
-48-
<PAGE> 49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of March 31, 1996 and 1995
Consolidated Statements of Operations for the Fiscal Years Ended March 31,
1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
March 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Report of Independent Public Accountants on Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts
All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
3.1(*) - Amended and Restated Certificate of Incorporation of Daisytek International Corporation.
3.1.1(*) - Certificate of Amendment of Amended and Restated Certificate of Incorporation of Daisytek
International Corporation.
3.2(1) - Amended and Restated By-laws of Daisytek International Corporation.
10.1(2) - Employee Stock Option Plan of Daisytek International Corporation.
10.2(2) - 1994 Stock Option Plan of Daisytek International Corporation.
10.3(*) - Non-Employee Director Stock Option and Retainer Plan.
</TABLE>
-49-
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C> <C>
10.4(3) - Credit Agreement dated May 22, 1995 between Daisytek, Incorporated, as Borrower, Daisytek
International Corporation and Borrower's Subsidiaries, as Guarantors, Texas Commerce Bank
National Association, as Agent, and Texas Commerce Bank National Association and State Street
Bank and Trust Company, as Lenders.
10.5(2) - Industrial Lease Agreement between Industrial Developments International, Inc. and Daisytek,
Incorporated, as amended.
10.6(2) - Lease Agreement dated September 30, 1991 between AmWest Savings Association and Daisytek,
Incorporated, as amended.
10.7(2) - Lease dated October 28, 1994 between Robco Enterprises, Ltd., Yen Hoy Enterprises Ltd., George
Yen and Daisytek (Canada) Inc.
10.8(4) - Lease dated June 1, 1995 between GPM Real Property (6) Ltd. and Endow (6) Inc. and Daisytek
(Canada) Inc.
10.9(2) - Lease Agreement dated December 30, 1988 between Daisytek, Incorporated and State Street Bank
and Trust Company.
10.10(2) - Term Lease Master Agreement dated November 29, 1990 between IBM Credit Corporation and
Daisytek, Incorporated.
10.11(5) - U.S. Reseller Agreement dated March 1, 1995 between Hewlett-Packard Company and Daisytek,
Incorporated, with Addendum.
10.11.1(*) - Amendment dated March 1, 1996 to U.S. Reseller Agreement dated March 1, 1995 between Hewlett-
Packard Company and Daisytek, Incorporated.
10.12(2) - Lease dated July 4, 1994 between Fraccionadora Industrial Del Norte, S.A. De C.V. and Daisytek
De Mexico, S.A. De C.V.
10.13(2) - Agreement dated March 31, 1993 between Daisytek International Corporation and William Blair
Leveraged Capital Fund, Limited Partnership ("WBLCF").
10.14(2) - Agreement dated December 23, 1991 between David Heap and Bradford Holdings Group, Ltd.
10.15(2) - Stock Purchase Agreement dated as of December 13, 1991 between Daisytek, Incorporated and
WBLCF.
10.16(2) - First Amendment Agreement dated as of December 23, 1991 between Bradford Holdings Group, Ltd.
("Bradford"), Daisytek, Incorporated and WBLCF.
10.17(2) - Registration Agreement dated December 23, 1991 between Bradford and WBLCF.
10.18(2) - Amendment and Waiver of Registration Agreement dated as of December 2, 1994.
10.19(2) - Stockholders Agreement dated December 23, 1991 between Bradford, WBLCF and certain stockholders
and optionholders.
10.20(2) - Amendment and Waiver of Stockholders Agreement dated December 2, 1994.
10.21(2) - Marketing Advantage Program Enrollment Agreement dated November 11, 1994 between Federal
Express Corporation and Daisytek, Incorporated.
10.22(2) - Bonus Agreement dated December 16, 1993 between Daisytek International Corporation, David Heap
and Mark Layton.
10.23(2) - Memorandum of Understanding dated October 22, 1993, between Business Software Centers, Inc. and
Daisytek, Incorporated.
10.24(6) - Lease Agreement dated May 22, 1995 between New World Partners Joint Number Three and Daisytek
Latin America, Inc.
</TABLE>
-50-
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C> <C>
10.25(7) - Forward Exchange Contract dated May 25, 1995 between Daisytek and Texas Commerce Bank.
10.26(7) - Letter Agreement dated November, 1995 between Daisytek International Corporation, WBLCF and
David Heap.
10.27(7) - Option to Purchase Shares of Common Stock dated May 9, 1995 between Daisytek International
Corporation and David A. Heap.
10.28(7) - Option to Purchase Shares of Common Stock dated May 9, 1995 between Daisytek International
Corporation and Mark C. Layton.
10.29(7) - Second Amendment to Industrial Lease Agreement between New York Life Insurance Company and
Daisytek, Incorporated.
10.30(7) - Agreement dated December 19, 1995 between Diesel Recon Company and Daisytek, Incorporated.
10.31(7) - Sixth Modification to Lease Agreement dated November 30, 1995 between Atrium Associates, L.P.
and Daisytek Incorporated.
10.32(*) - Option to Purchase Shares of Common Stock dated April 11, 1996 between Daisytek International
Corporation and David Heap.
11(*) - Statement re computation of per share earnings.
21(*) - Subsidiaries of the Registrant.
23(*) - Consents.
27(*) - Financial Data Schedule.
</TABLE>
- ------------------------
(*) Filed herewith.
(1) Incorporated by reference from Quarterly Report on Form 10-Q
for the Quarterly Period Ended December 31, 1994 dated
March 10, 1995.
(2) Incorporated by reference from Registration Statement on
Form S-1 No. 33-86926.
(3) Incorporated by reference from Current Report on Form 8-K
dated May 22, 1995.
(4) Incorporated by reference from Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 1995 dated June 23, 1995.
(5) Incorporated by reference from Quarterly Report on Form 10-Q
for the Quarterly Period Ended September 30, 1995 dated
November 13, 1995.
(6) Incorporated by reference from Current Report on Form 8-K
dated August 22, 1995.
(7) Incorporated by reference from Registration Statement on
Form S-1 No. 33-99796.
(b) Reports on Form 8-K
1. On January 9, 1996, the Company filed a Current Report on
Form 8-K to report under Item 5 the Company's press release dated January 8,
1996 announcing third quarter results.
2. On February 22, 1996, the Company filed a Current Report
on Form 8-K to report under Item 5 the Company's press release dated February
22, 1996 announcing the appointment of Michael Krasny to the Board of
Directors.
-51-
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Daisytek International Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of Daisytek International
Corporation (a Delaware corporation) and subsidiaries included in this Form
10-K and have issued our report thereon dated April 23, 1996. Our audits were
made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. Schedule VIII of this Form 10-K is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
April 23, 1996
-52-
<PAGE> 53
SCHEDULE VIII
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended March 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COST AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended March 31, 1994:
Allowance for doubtful accounts $ 502 899 -- (740) $ 661
Allowance for related party
receivables $ 475 -- -- -- $ 475
Income tax valuation allowance $ 218 (218) -- -- --
Fiscal Year Ended March 31, 1995:
Allowance for doubtful accounts $ 661 750 -- (351) $ 1,060
Allowance for related party
receivables $ 475 -- -- -- $ 475
Income tax valuation allowance -- 378 -- -- $ 378
Fiscal Year Ended March 31, 1996:
Allowance for doubtful accounts $ 1,060 999 -- (776) $ 1,283
Allowance for related party
receivables $ 475 -- -- -- $ 475
Income tax valuation allowance $ 378 8 -- -- $ 386
</TABLE>
-53-
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ MARK C. LAYTON
---------------------------------
Mark C. Layton, President
June 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DAVID A. HEAP Chairman of the Board and June 26, 1996
- ----------------------------------- Chief Executive Officer
David A. Heap (principal executive officer)
/s/ MARK C. LAYTON President and Director June 26, 1996
- ------------------------------------- (principal financial officer)
Mark C. Layton
/s/ THOMAS J. MADDEN Vice President - Finance June 26, 1996
- ------------------------------------- (principal accounting officer)
Thomas J. Madden
/s/ CHRISTOPHER YATES Director June 26, 1996
- ----------------------------------
Christopher Yates
/s/ TIMOTHY M. MURRAY Director June 26, 1996
- ----------------------------------
Timothy M. Murray
/s/ EDGAR D. JANNOTTA, JR. Director June 26, 1996
- ----------------------------------
Edgar D. Jannotta, Jr.
/s/ MICHAEL P. KRASNY Director June 26, 1996
- ----------------------------------
Michael P. Krasny
/s/ PETER P.J. VIKANIS Director June 26, 1996
- ----------------------------------
Peter P.J. Vikanis
</TABLE>
-54-
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
3.1(*) - Amended and Restated Certificate of Incorporation of Daisytek International Corporation.
3.1.1(*) - Certificate of Amendment of Amended and Restated Certificate of Incorporation of Daisytek
International Corporation.
3.2(1) - Amended and Restated By-laws of Daisytek International Corporation.
10.1(2) - Employee Stock Option Plan of Daisytek International Corporation.
10.2(2) - 1994 Stock Option Plan of Daisytek International Corporation.
10.3(*) - Non-Employee Director Stock Option and Retainer Plan.
10.4(3) - Credit Agreement dated May 22, 1995 between Daisytek, Incorporated, as Borrower, Daisytek
International Corporation and Borrower's Subsidiaries, as Guarantors, Texas Commerce Bank
National Association, as Agent, and Texas Commerce Bank National Association and State Street
Bank and Trust Company, as Lenders.
10.5(2) - Industrial Lease Agreement between Industrial Developments International, Inc. and Daisytek,
Incorporated, as amended.
10.6(2) - Lease Agreement dated September 30, 1991 between AmWest Savings Association and Daisytek,
Incorporated, as amended.
10.7(2) - Lease dated October 28, 1994 between Robco Enterprises, Ltd., Yen Hoy Enterprises Ltd., George
Yen and Daisytek (Canada) Inc.
10.8(4) - Lease dated June 1, 1995 between GPM Real Property (6) Ltd. and Endow (6) Inc. and Daisytek
(Canada) Inc.
10.9(2) - Lease Agreement dated December 30, 1988 between Daisytek, Incorporated and State Street Bank
and Trust Company.
10.10(2) - Term Lease Master Agreement dated November 29, 1990 between IBM Credit Corporation and
Daisytek, Incorporated.
10.11(5) - U.S. Reseller Agreement dated March 1, 1995 between Hewlett-Packard Company and Daisytek,
Incorporated, with Addendum.
10.11.1(*) - Amendment dated March 1, 1996 to U.S. Reseller Agreement dated March 1, 1995 between Hewlett-
Packard Company and Daisytek, Incorporated.
10.12(2) - Lease dated July 4, 1994 between Fraccionadora Industrial Del Norte, S.A. De C.V. and Daisytek
De Mexico, S.A. De C.V.
10.13(2) - Agreement dated March 31, 1993 between Daisytek International Corporation and William Blair
Leveraged Capital Fund, Limited Partnership ("WBLCF").
10.14(2) - Agreement dated December 23, 1991 between David Heap and Bradford Holdings Group, Ltd.
10.15(2) - Stock Purchase Agreement dated as of December 13, 1991 between Daisytek, Incorporated and
WBLCF.
10.16(2) - First Amendment Agreement dated as of December 23, 1991 between Bradford Holdings Group, Ltd.
("Bradford"), Daisytek, Incorporated and WBLCF.
10.17(2) - Registration Agreement dated December 23, 1991 between Bradford and WBLCF.
10.18(2) - Amendment and Waiver of Registration Agreement dated as of December 2, 1994.
10.19(2) - Stockholders Agreement dated December 23, 1991 between Bradford, WBLCF and certain stockholders
and optionholders.
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
10.20(2) - Amendment and Waiver of Stockholders Agreement dated December 2, 1994.
10.21(2) - Marketing Advantage Program Enrollment Agreement dated November 11, 1994 between Federal
Express Corporation and Daisytek, Incorporated.
10.22(2) - Bonus Agreement dated December 16, 1993 between Daisytek International Corporation, David Heap
and Mark Layton.
10.23(2) - Memorandum of Understanding dated October 22, 1993, between Business Software Centers, Inc. and
Daisytek, Incorporated.
10.24(6) - Lease Agreement dated May 22, 1995 between New World Partners Joint Number Three and Daisytek
Latin America, Inc.
10.25(7) - Forward Exchange Contract dated May 25, 1995 between Daisytek and Texas Commerce Bank.
10.26(7) - Letter Agreement dated November, 1995 between Daisytek International Corporation, WBLCF and
David Heap.
10.27(7) - Option to Purchase Shares of Common Stock dated May 9, 1995 between Daisytek International
Corporation and David A. Heap.
10.28(7) - Option to Purchase Shares of Common Stock dated May 9, 1995 between Daisytek International
Corporation and Mark C. Layton.
10.29(7) - Second Amendment to Industrial Lease Agreement between New York Life Insurance Company and
Daisytek, Incorporated.
10.30(7) - Agreement dated December 19, 1995 between Diesel Recon Company and Daisytek, Incorporated.
10.31(7) - Sixth Modification to Lease Agreement dated November 30, 1995 between Atrium Associates, L.P.
and Daisytek Incorporated.
10.32(*) - Option to Purchase Shares of Common Stock dated April 11, 1996 between Daisytek International
Corporation and David Heap.
11(*) - Statement re computation of per share earnings.
21(*) - Subsidiaries of the Registrant.
23(*) - Consents.
27(*) - Financial Data Schedule.
</TABLE>
___________________________________
(*) Filed herewith.
(1) Incorporated by reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended December 31, 1994 dated March 10, 1995.
(2) Incorporated by reference from Registration Statement on Form S-1
No. 33-86926.
(3) Incorporated by reference from Current Report on Form 8-K dated May 22,
1995.
(4) Incorporated by reference from Annual Report on Form 10-K for the Fiscal
Year Ended March 31, 1995 dated June 23, 1995.
(5) Incorporated by reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1995 dated November 13, 1995.
(6) Incorporated by reference from Current Report on Form 8-K dated August 22,
1995.
(7) Incorporated by reference from Registration Statement on Form S-1
No. 33-99796.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DAISYTEK INTERNATIONAL CORPORATION
(Pursuant to Section 245 of the General
Corporation Law of the State of Delaware)
DAISYTEK INTERNATIONAL CORPORATION, a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify as follows:
1. The name of the corporation is DAISYTEK INTERNATIONAL
CORPORATION (the "Corporation").
2. The name under which the Corporation was originally
incorporated is Bradford Holdings Group, Ltd. and the date of filing the
original Certificate of Incorporation of the Corporation with the Secretary of
State of the State of Delaware was December 17, 1991, as amended on January 26,
1993 and Certificate of Correction filed on January 25, 1995.
3. This Amended and Restated Certificate of
Incorporation amends and restates the provisions of the Certificate of
Incorporation of the Corporation, as amended, and was duly adopted by the
written consent of the stockholders of the Corporation entitled to vote thereon
in accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware (the "GCL").
4. The Certificate of Incorporation of the Corporation,
as amended and restated hereby, shall, upon its filing with the Secretary of
State of the State of Delaware, read in its entirety as follows:
FIRST: The name of the corporation is Daisytek
International Corporation (the "Corporation").
SECOND: The registered office of the Corporation in the
State of Delaware is located at Corporation Trust Center, 1209 Orange Street in
the City of Wilmington, County of New Castle. The name of the registered agent
of the Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation and the nature and
objects of the business to be transacted, promoted, and carried on are to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
<PAGE> 2
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 11,000,000 shares, divided into
two classes as follows: (i) 1,000,000 shares of Preferred Stock, par value
$1.00 per share ("Preferred Stock"); and (ii) 10,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock").
Upon the filing and effectiveness of this Amended and Restated
Certificate of Incorporation with the Office of the Secretary of State of the
State of Delaware, each of the previously authorized, issued and outstanding
shares of Common Stock, $.01 par value, is hereby converted and split into and
shall become 1.45 shares of Common Stock, $.01 par value, and any fractional
shares arising therefrom shall be rounded (up or down) to the nearest whole
share and any surplus created or arising out of the stock split, if any, shall
be paid-in surplus.
The designations and the powers, preferences, rights,
qualifications, limitations, and restrictions of the Preferred Stock and the
Common Stock of the Corporation are as follows:
A. Provisions Relating to the Preferred Stock.
1. The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof as are stated and expressed herein and in
the resolution or resolutions providing for the issuance of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
2. Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each such class or series of the Preferred Stock, to fix and state
by the resolution or resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not such class or series is to have voting rights,
full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a
separate class either alone or together with the holders of one or
more other classes or series of stock;
(ii) the number of shares to constitute such class or series and
the designations thereof;
(iii) the preferences, and relative, participating, optional, or
other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any such class or
series;
(iv) whether or not the shares of any such class or series shall be
redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the
-2-
<PAGE> 3
form of cash, notes, securities, or other property), and the time or
times at which, and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;
(v) whether or not the shares of such class or series shall be
subject to the operation of retirement or sinking funds to be applied
to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds are to be established, the
annual amount thereof, and the terms and provisions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, or a combination thereof,
the conditions upon which and the times when such dividends are
payable, the preference to or the relation to the payment of dividends
payable on any other class or classes or series of stock, whether such
dividends shall be cumulative or noncumulative, and if cumulative, the
date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the
holders of any such class or series shall be entitled to receive upon
the voluntary and involuntary dissolution of, or upon any distribution
of the assets of, the Corporation;
(viii) whether or not the shares of any such class or series, at the
option of the Corporation or the holder thereof or upon the happening
of any specified event, shall be convertible into or exchangeable for
the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other
property of the Corporation and the conversion price or prices or
ratio or ratios or the rate or rates at which such exchange may be
made, with such adjustments, if any, as shall be stated and expressed
or provided for in such resolution or resolutions; and
(ix) such other special rights and provisions with respect to any
such class or series as may to the board of directors of the
Corporation seem advisable.
3. The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The board of directors of the Corporation may
increase the number of shares of Preferred Stock designated for any existing
class or series by a resolution adding to such class or series authorized and
unissued shares of the Preferred Stock not designated for any other class or
series. The board of directors of the Corporation may decrease the number of
shares of the Preferred Stock designated for any existing class or series by a
resolution, subtracting from such series unissued shares of the Preferred Stock
designated for such class or series, and the shares so subtracted shall become
authorized, unissued, and undesignated shares of the Preferred Stock.
-3-
<PAGE> 4
B. Provisions Relating to the Common Stock.
1. Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock standing in such holder's name on the
records of the Corporation on each matter submitted to a vote of the
stockholders.
2. Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive when, as,
and if declared by the board of directors of the Corporation, out of funds
legally available therefor, dividends payable in cash, stock or otherwise.
3. Upon any liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock and the holders of any bonds, debentures, or other obligations
of the Corporation shall have been paid in full the amounts to which they shall
be entitled (if any), or a sum sufficient for such payment in full shall have
been set aside, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with
their respective rights and interests, to the exclusion of the holders of the
Preferred Stock and any bonds, debentures, or other obligations of the
Corporation.
C. General.
1. Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (in any form,
but not less in value than the par value thereof) as may be fixed by the board
of directors of the Corporation, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing
conditions. Shares so issued for which the consideration shall have been paid
or delivered to the Corporation shall be deemed fully paid stock and shall not
be liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments in respect of such shares.
2. The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase or otherwise
acquire shares of the Corporation's capital stock of any class or series or
other securities of the Corporation, and such rights and options shall be
evidenced by instrument(s) approved by the board of directors of the
Corporation or any committee thereof. The board of directors of the
Corporation or any committee thereof shall be empowered to set the exercise
price, duration, times for exercise, and other terms of such options or rights;
provided, however, that the consideration to be received (which may be in any
form) for any shares of capital stock subject thereto shall have a value not
less than the par value thereof.
FIFTH: No contract or transaction between the Corporation
and one or more of its directors, officers, or stockholders or between the
Corporation and any person (as
-4-
<PAGE> 5
used herein "person" means any other corporation, partnership, association,
firm, trust, joint venture, political subdivision, or instrumentality) or other
organization in which one or more of its directors, officers, or stockholders
are directors, officers, or stockholders, or have a financial interest, shall
be void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board or committee
which authorizes the contract or transaction, or solely because his, her or
their votes are counted for such purpose, if: (i) the material facts as to his
or her relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the
board of directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved, or
ratified by the board of directors, a committee thereof (to the extent
permitted by applicable law), or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the board of directors or of a committee which authorizes the contract or
transaction.
SIXTH: 1. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or
proceeding (a "Proceeding"), whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is or
was a director or officer of the Corporation, or is or was serving in any
capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(an "Other Entity"), against judgments, fines, penalties, excise taxes, amounts
paid in settlement and costs, charges and expenses (including attorneys' fees
and disbursements). Persons who are not directors or officers of the
Corporation may be similarly indemnified in respect of service to the
Corporation or to an Other Entity at the request of the Corporation to the
extent the Board of Directors at any time specifies that such persons are
entitled to the benefits of this Article.
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2. The Corporation shall, from time to time, reimburse
or advance to any director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred in connection with any
Proceeding, in advance of the final disposition of such Proceeding; provided,
however, that, if required by the GCL, such expenses incurred by or on behalf
of any director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced, if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
3. The rights to indemnification, and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Restated Certificate of
Incorporation, the By-laws of the Corporation, any agreement, any vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
4. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director or officer (or other
person indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
5. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability under the provisions of this Article, the By-laws or under
Section 145 of the GCL or any other provision of law.
6. The provisions of this Article shall be a contract
between the Corporation, on the one hand, and each director and officer who
serves in such capacity at any time while this Article is in effect and any
other person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such director, officer, or other person intend to be
legally bound. No repeal or modification of this Article shall affect any
rights or obligations with respect to any state of facts then or theretofore
existing or thereafter arising or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
7. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article shall
be enforceable by any person
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<PAGE> 7
entitled to such indemnification or reimbursement or advancement of expenses in
any court of competent jurisdiction. The burden of proving that such
indemnification or reimbursement or advancement of expenses is not appropriate
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that such
indemnification or reimbursement or advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel and its stockholders) that
such person is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Such a person shall also be
indemnified for any expenses incurred in connection with successfully
establishing his or her right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
8. Any director or officer of the Corporation serving in
any capacity for (a) another corporation of which a majority of the shares
entitled to vote in the election of its directors is held, directly or
indirectly, by the Corporation or (b) any employee benefit plan of the
Corporation or any corporation referred to in clause (a) shall be deemed to be
doing so at the request of the Corporation.
9. Any person entitled to be indemnified or to
reimbursement or advancement of expenses as a matter of right pursuant to this
Article may elect to have the right to indemnification or reimbursement or
advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; provided, however, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
SEVENTH: All the powers of the Corporation, insofar as
the same may be lawfully vested by this Certificate of Incorporation in the
board of directors, are hereby conferred upon the board of directors. In
furtherance and not in limitation of that power, the board of directors shall
have the power, upon the affirmative vote of a majority of the Classified
Directors (as hereinafter defined) at a meeting lawfully convened, to make,
adopt, alter, amend, and repeal from time to time the Bylaws of the Corporation
and to make from time to time new Bylaws of the Corporation, subject to the
right of the stockholders entitled to vote thereon to adopt, alter, amend, and
repeal Bylaws made by the board of directors or to make new Bylaws; provided,
however, that the stockholders of the Corporation shall be entitled to adopt,
alter, amend, or repeal Bylaws made by the board of directors or to make new
Bylaws solely upon the affirmative vote of the holders of at least a majority
of the outstanding shares of each class of capital stock of the Corporation
then entitled to vote thereon.
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<PAGE> 8
EIGHTH: Except for the provisions of Article SIXTH and NINTH
herein, the Corporation reserves the right to amend, alter, change, or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law and all rights conferred on officers, directors,
and stockholders herein are granted subject to this reservation.
NINTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. Any
repeal or amendment of this Article NINTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation arising
from an act or omission occurring prior to the time of such repeal or
amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions
of this Article NINTH, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the GCL.
TENTH: 1. The number of directors constituting the board
of directors shall be fixed by, or in the manner provided in, the Bylaws of
the Corporation, provided that such number shall be no fewer than three and
no more than ten (plus such number of directors as may be elected from time to
time pursuant to the terms of any series of Preferred Stock that may be issued
and outstanding from time to time). The directors of the Corporation
(exclusive of directors who are elected pursuant to the terms of, and serve as
representatives of the holders of, any series of Preferred Stock) shall be
referred to herein as "Classified Directors" and shall be divided into three
classes, with the first class referred to herein as "Class I," the second class
as "Class II," and the third class as "Class III." Each class shall consist as
nearly as possible of one-third (1/3) of the total number of directors making
up the entire board of directors. The term of office of the initial Class I
directors shall expire at the 1995 annual meeting of stockholders, the term of
office of the initial Class II directors shall expire at the 1996 annual
meeting of stockholders, and the term of office of the initial Class III
directors shall expire at the 1997 annual meeting of stockholders, with each
director to hold office until his successor shall have been duly elected and
qualified. At each annual meeting of stockholders, directors elected to
succeed those directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election, with each director to hold office until his successor shall
have been duly elected and qualified.
2. Notwithstanding the foregoing, whenever the holders
of any one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by series or by class
(excluding holders of Common Stock), to elect directors, the election, term of
office, filling of vacancies, and other features of such directorships shall be
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<PAGE> 9
governed by the terms of this Certificate of Incorporation (including any
amendment to this Certificate of Incorporation that designates a series of
Preferred Stock), and such directors so elected by the holders of Preferred
Stock shall not be divided into classes pursuant to this Article TENTH unless
expressly provided by such terms.
3. Any or all Classified Directors may be removed, with
cause, upon the affirmative vote of the holders of a majority of the
outstanding shares of each class of capital stock of the Corporation then
entitled to vote at an election of such Classified Directors.
4. Election of directors, whether Classified Directors
or otherwise, need not be by written ballot.
ELEVENTH: The Corporation expressly elects to be governed by
Section 203 of the GCL.
TWELFTH: Special meetings of stockholders of the Corporation
may be called by the board of directors pursuant to a resolution adopted by a
majority of the Classified Directors then serving, by the Chairman of the board
of directors, or by any holder or holders of at least twenty-five percent (25%)
of the outstanding shares of capital stock of the Corporation then entitled to
vote on any matter for which the respective special meeting is being called.
THIRTEENTH: Notwithstanding any other provisions of this
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, the affirmative vote of the holders of at
least a majority of the outstanding shares of each class of capital stock of
the Corporation then entitled to vote thereon shall be required to amend,
alter, or repeal any one or more of Articles of this Restated Certificate of
Incorporation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed and attested on this 26th day of
January, 1995.
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ DAVID A. HEAP
------------------------------------------
David A. Heap, Chairman and Chief
Executive Officer
ATTEST:
/s/ HARVEY H. ACHATZ
- ---------------------------------
Harvey H. Achatz, Secretary
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<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DAISYTEK INTERNATIONAL CORPORATION
(A DELAWARE CORPORATION)
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Daisytek International Corporation.
2. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by striking out Article FOURTH of Section 4
thereof and by substituting in lieu of said Article the following new Article
FOURTH:
"The total number of shares which the Corporation shall have
authority to issue is Twenty-one Million (21,000,000) shares,
consisting of One Million (1,000,000) shares of Preferred Stock, of a
par value of One Dollar ($1.00) per share (hereinafter called
"Preferred Stock"), and Twenty Million (20,000,000) shares of Common
Stock, of the par value of One Cent ($.01) per share (hereinafter
called "Common Stock")."
3. The amendment of the Amended and Restated Certificate of Incorporation
herein certified has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
Signed on August 2, 1996.
DAISYTEK INTERNATIONAL CORPORATION
By:
----------------------------------------
Mark C. Layton, President
ATTEST:
By:
-------------------------------
Harvey Achatz, Secretary
<PAGE> 1
EXHIBIT 10.3
NON-EMPLOYEE DIRECTOR STOCK OPTION AND RETAINER PLAN
OF
DAISYTEK INTERNATIONAL CORPORATION
Daisytek International Corporation, a corporation organized under
the laws of the State of Delaware, hereby adopts this Non-Employee Director
Stock Option and Retainer Plan. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of
the Company by providing incentives to its non-employee Directors by assisting
them to become owners of the Company's Common Stock and thus to benefit
directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
qualified non-employee Directors in order to contribute to the long-range
success of the Company by providing and offering them an opportunity to become
owners of the Company's Common Stock.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall
have the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and the
singular shall include the plural, where the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Committee appointed by the Board, as
provided in Section 6.1.
Section 1.4 - Company
"Company" shall mean Daisytek International Corporation, a
Delaware corporation.
Section 1.5 - Director
"Director" shall mean a member of the Board who is not an
Employee.
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Section 1.6 - Effective Date
"Effective Date" shall mean the date upon which this Plan shall
be approved by the stockholders of the Company in accordance with the Company's
bylaws.
Section 1.7 - Employee
"Employee" shall mean any employee (as defined in accordance with
the regulations and revenue rulings then applicable under Section 3401(c) of
the Code) of the Company, or of any corporation which is then a Parent
Corporation or a Subsidiary.
Section 1.8 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.9 - Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not an
incentive stock option and is not qualified under Section 422 of the Code.
Section 1.10 - Officer
"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the
future.
Section 1.11 - Option
"Option" shall mean an option to purchase Common Stock of the
Company granted under the Plan.
Section 1.12 - Optionee
"Optionee" shall mean a Director to whom an Option is granted
under the Plan.
Section 1.13 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the corporations other
than the Company then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Section 1.14 - Plan
"Plan" shall mean this Non-Employee Director Stock Option and
Retainer Plan of Daisytek International Corporation.
Section 1.15 - Retainer
"Retainer" shall mean the annual cash retainer payable to each
Director for services as a member of the Board and any committee or committees
of the Board.
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<PAGE> 3
Section 1.16 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
Section 1.17 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.18 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.19 - Shares
"Shares" shall mean shares of the Company's Common Stock, $.01
par value.
Section 1.20 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.21 - Termination
"Termination" shall mean the time when the Director no longer
serves as a member of the Board, including, but not by way of limitation, a
termination by resignation, discharge, death or retirement.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The Shares of stock subject to this Plan shall be shares of the
Company's Common Stock, $.01 par value. The aggregate number of such Shares
which may be issued pursuant to this Plan shall be 50,000.
Section 2.2 - Unexercised Options
If any Option expires or is canceled without having been fully
exercised, the number of Shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation, may again be
optioned hereunder, subject to the limitations of Section 2.1.
Section 2.3 - Changes in Company's Shares
In the event that the outstanding Shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or kind
of shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of Shares which may be issued hereunder, including adjustment to the number of
Options to be issued to Directors hereunder and adjustment to the aggregate
number of Shares subject hereto.
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<PAGE> 4
ARTICLE III
RETAINER FEES AND GRANTING OF OPTIONS
Section 3.1 - Payment of Retainer
(a) Commencing on the Effective Date, each Director may elect
under the Plan to receive payment of any Retainer (in such installments as such
Retainer shall be payable) in Shares, in lieu of cash, by submitting a written
election (the "Notice of Election") to the Company. The Notice of Election
shall become effective six months following the date of the Notice of Election
or such earlier date as may be permitted under Rule 16b-3 (the "Election
Effective Date") and, from and after the Election Effective Date, all Retainers
payable to the electing Director (whether in installments or otherwise) shall
be payable in Shares in the manner set forth herein.
(b) Each Notice of Election shall become effective on its
Election Effective Date and shall continue in effect until revoked by the
electing Director in a written notice of revocation (the "Notice of
Revocation") delivered to the Company; provided, however, that no Notice of
Revocation shall become effective until six months following the date of the
Notice of Revocation or such earlier date as may be permitted under Rule 16b-3.
(c) If no Notice of Election is submitted to the Company, all
Retainers shall be payable in cash.
Section 3.2 - Number of Shares
The number of Shares to be issued to each Director electing to
have his or her Retainer paid in Shares shall be determined by dividing the
dollar amount of the then payable Retainer by the fair market value of the
Shares as of the most recent trading day immediately prior to the date the
Retainer is otherwise payable. No fractional Shares shall be issued and any
fractional Share shall be rounded to the nearest whole Share. Subject to the
terms and provisions hereof, all Shares shall be issued in certificate form in
the name of the Director (or any designee) as promptly as practicable following
the date of payment. For purposes of this Section, fair market value shall be
determined in accordance with Section 4.2(b) below.
Section 3.3 - Eligibility
Each Director shall be granted Options in accordance with the
provisions set forth herein.
Section 3.4 - Non-Qualification of Options
Each Option shall be a Non-Qualified Option.
Section 3.5 - Granting of Options
(a) Each person who is a Director on the Effective Date shall
receive an Option to purchase 1,000 Shares as of such date.
(b) Options shall be granted to each Director under this Plan
with respect to the Company's 1997 fiscal year and each fiscal year thereafter
so long as this Plan remains in effect, provided, however, that for each such
fiscal year, the Company's consolidated income from operations before taxes
(excluding such extraordinary, unusual or non-recurring items as the Committee
shall determine to be appropriate, in accordance with generally accepted
accounting principles) ("EBT") must equal or exceed the projected EBT for such
year as set forth in the annual budget for such year approved by the Board
within 90 days of the first day of such fiscal year.
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(c) No Options shall be granted to any Director in respect of the
1997 fiscal year or any fiscal year thereafter if the Company's EBT for such
fiscal year does not equal or exceed the projected EBT for such year as
aforesaid.
(d) For each fiscal year for which Options shall be granted
hereunder, the number of Options to be granted to each Director shall equal the
sum of the "Option Amount" plus the "Adjustment Amount." As used herein, the
"Option Amount" shall mean the number of Options granted to each Director
hereunder for the immediately preceding year (which shall be 1,000 for fiscal
year 1996) and the "Adjustment Amount" shall mean the product obtained by
multiplying (1) the percentage increase, if any, in the Company's EBT for such
fiscal year over the Company's EBT for the immediately preceding fiscal year by
(2) the Option Amount.
(e) Subject to the provisions set forth above, the Options to be
granted to each Director hereunder in respect of each fiscal year shall be
granted to those persons serving as Directors on the date of the Company's
Annual Meeting of Stockholders immediately following the last day of such
fiscal year, provided that such Director shall have attended at least 75% of
the meetings of the Board (which may include committee meetings) held during
such fiscal year.
(f) For purposes of illustration, if the Company's fiscal 1997
EBT equals or exceeds the projected EBT for such year, and if the Company's
fiscal 1997 EBT is 10% greater than the Company's fiscal 1996 EBT, then each
person serving as a Director on the date of the Company's 1997 Annual Meeting
of Stockholders (to be held following the last day of the 1997 fiscal year)
shall receive 1,100 Options, calculated as follows:
Option Amount = 1,000 = Options granted for fiscal year 1996
Adjustment Amount = 100 = 1,000 x 10%
Options Granted = 1,100
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized Officer of
the Company and which shall contain such terms and conditions as are consistent
with the Plan.
Section 4.2 - Option Price
(a) The price of the Shares subject to each Option shall be equal
to 100% of the fair market value of such Shares on the date such Option is
granted.
(b) For purposes of the Plan, the fair market value of a Share of
the Company's Common Stock as of a given date shall be: (i) the closing price
of a Share of the Company's Common Stock on the principal exchange on which
Shares of the Company's Common Stock are then trading; or (ii) if such Common
Stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if the Company's Common Stock is
then listed as a National Market Issue under the NASD National Market System)
or (2) the mean between the closing representative bid and asked prices (in all
other cases) for the Company's Common Stock, in each case, on such date as
reported by NASDAQ or such successor quotation system; or (iii) if such Common
Stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the Company's Common Stock, on such date, as determined in good faith by
the Committee; or (iv) if the Company's Common Stock is not publicly traded,
the fair market value established by the Committee acting in good faith.
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Section 4.3 - Commencement of Exercisability
(a) No Option may be exercised in whole or in part during the six
months after such Option is granted.
(b) Subject to the provisions of paragraph (c) below, each Option
granted hereunder shall be subject to the following cumulative vesting
schedule:
(i) Until the date which is one year from the date of grant, the
Option shall not be vested and shall not be exercisable as to any of the
shares subject thereto;
(ii) From and after the date which is one year from the date of
grant, the Option shall vest and be exercisable as to 15% of the number
of shares subject thereto;
(iii) From and after the date which is two years from the date of
grant, the Option shall vest and be exercisable as to 50% of the original
number of shares subject thereto; and
(iv) From and after the date which is three years from the date
of grant, the Option shall be fully vested and be exercisable as to 100%
of the number of shares subject thereto.
(c) Upon the Termination of the holder of an Option, such portion
of such Option which has not then vested and become exercisable shall
automatically become fully vested and exercisable, provided, however, that such
Termination shall not be less than one year from the date of grant of such
Option.
Section 4.4 - Expiration of Options
No Option may be exercised to any extent after the first to occur
of the following events:
(i) The expiration of ten years from the date the Option was
granted; or
(ii) Except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination for any reason other
than such Optionee's death; or
(iii) With respect to an Option held by an Optionee who is
disabled (within the meaning of Section 22(e)(3) of the Code), the
expiration of one year from the date of the Optionee's Termination for
any reason other than such Optionee's death unless the Optionee dies
within said one-year period; or
(iv) The expiration of one year from the date of the Optionee's
death with respect to all Options held by such Optionee.
Section 4.5 - Adjustments in Outstanding Options
In the event that the outstanding Shares of the stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in Option
price per share. Any such adjustment made by the Committee shall be final and
binding upon all Optionees, the Company and all other interested persons.
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ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to him; provided, however,
that, unless otherwise prohibited by Rule 16b-3, an Optionee may transfer all
or any portion of an Option to his spouse or immediate family member or any
trust for the benefit thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan, be exercised by his personal
representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan, such Option or portion thereof may be exercised in whole or in part;
provided, however, that the Company shall not be required to issue fractional
shares and the Committee may, by the terms of the Option, require any partial
exercise to be with respect to a specified minimum number of shares.
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b)(i) Full payment (in cash or by check) for the Shares with
respect to which such Option or portion is thereby exercised; or
(ii)(A) Shares of the Company's Common Stock owned by the
Optionee duly endorsed for transfer to the Company or (B) subject to the
timing requirements of Section 5.4, Shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, with a
fair market value (as determined under Section 4.2(b)) on the date of
Option exercise equal to the aggregate Option price of the Shares with
respect to which such Option or portion is thereby exercised; or
(iii) Any combination of the consideration provided in the
foregoing subsections (i) and (ii); and
(c) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; provided, that any combination
of the following may be used to make all or part of such payment: (i) Shares
of the Company's Common Stock owned by the Optionee duly endorsed for transfer
or (ii) subject to the timing requirements of Section 5.4, Shares of the
Company's Common Stock issuable to the Optionee upon exercise of the Option,
valued in accordance with Section 4.2(b) at the date of Option exercise; and
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on Share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
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<PAGE> 8
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
Section 5.4 - Certain Timing Requirements
Shares of the Company's Common Stock issuable to the Optionee
upon exercise of the Option may be used to satisfy the Option price or the tax
withholding consequences of such exercise only (i) during the trading window
period following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company as may be established by the
Company for its senior executives from time to time or (ii) pursuant to an
irrevocable written election by the Optionee to use Shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes made at least six months
prior to the payment of such Option price or withholding taxes.
Section 5.5 - Conditions to Issuance of Stock Certificates
The Shares of stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued Shares or issued Shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any certificate
or certificates for Shares of stock issued in payment of any Retainer or
purchased upon the exercise of any Option or portion thereof prior to the
fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of
such Shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, if any such registration or qualification may be necessary or advisable;
and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which may be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Secretary of the Company may establish from time
to time for reasons of administrative convenience.
ARTICLE VI
ADMINISTRATION
Section 6.1 - Committee
The Plan shall be administered by the Committee which shall
consist of two or more members of the Board, as the Board may appoint from time
to time; provided, however that, in the absence of such appointment, the Plan
shall be administered by the Board (in which event the term "Committee" as used
herein shall mean the Board); provided, further, however, that, notwithstanding
the foregoing, the Plan shall be construed, interpreted, implemented and
administered in a manner sufficient to comply with the provisions of Rule
16b-3, and, in particular, in order to provide that the members of the
Committee shall at all times satisfy the requirements set forth therein.
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<PAGE> 9
Section 6.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Section 6.3 - Majority Rule
The Committee shall act by a majority of its members in office.
The Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
Section 6.4 - Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
Except as set forth in Section 5.1 hereof, no Option or interest
or right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.1 shall prevent transfers by
will or by the applicable laws of descent and distribution.
Section 7.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Committee; provided, however, that no amendment or modification which requires
shareholder approval under Rule 16b-3, if any, shall be effective in the
absence of such approval. Neither the amendment, suspension nor termination of
the Plan shall, without the consent of the holder of the Option, impair any
rights or obligations under any Option theretofore granted. No Option may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option be granted under this Plan after the first to occur
of the following events:
(a) March 31, 2006; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's shareholders under Section 7.3.
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<PAGE> 10
Section 7.3 - Approval of Plan by Shareholders
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. No Options shall be granted prior to such shareholder approval. The
Company shall take such actions with respect to the Plan as may be necessary to
satisfy the requirements of Rule 16b- 3(b).
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other compensation
or incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary to (a) establish any other
forms of incentives or compensation for employees and Directors of the Company,
any Parent Corporation or any Subsidiary or (b) grant or assume options
otherwise than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.
Section 7.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
Section 7.6 - Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall be
granted and may be exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
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<PAGE> 1
EXHIBIT 10.11.1
Hewlett-Packard Company
5301 Stevens Creek Boulevard
PO Box 58059
Santa Clara, California 95052-8059
January 1, 1996
1996 Agreement #: 57AIR
DAISYTEK
500 NORTH CENTRAL EXPRESSWAY
FIFTH FLOOR
PLANO TX 75074
Customer ICN: 1988
Dear DAISYTEK,
In HP's quest to simplify the contracting and negotiating process, your 1996 HP
Agreement and Addendum is based substantially on your 1995 Agreement and
Addendum.
In fact, the text of the 1995 Agreement, Addendum and Exhibit L as negotiated
between HP and you is carried forward and repeated in 1996, except for those
modifications indicated in this letter. All other terms and conditions of your
1995 Agreement remain unchanged.
Included with this letter are the new companion documents which form a part of
your 1996 Agreement, the Operations Policy Manual, Product Acquisition and
Resale Categories and Product Exhibits.
Amendments to your U.S. Reseller Agreement:
Section 2.A.3
Status Change: Modify to read as follows:
"Undergo a merger, acquisition, consolidation or other reorganization with the
result that any entity controls 50 percent or more of Reseller's capital stock
or assets after such transaction; or "
Section 10
Price Adjustments; Price Protection: Deleted and moved to the Operations Policy
Manual (OPM) as modified.
Section 16
Reseller Record Keeping: Modify to read as follows:
"HP or HP's designate will be given prompt access during normal business hours,
either on sight or through other means specified by HP to Reseller's customer
records of account specifically related to HP Products as HP believes are
reasonably necessary to verify and audit Reseller's compliance with this
Agreement".
Amendment to your U.S. Supplies Reseller Addendum:
Section 3.H
Reseller Responsibilities: Deleted and moved as modified to the HP Product
Acquisition and Resale Categories.
<PAGE> 2
Amendment to your U.S. Office Machine Distributor Addendum:
Section 3.I
Distributor Responsibilities: Deleted and moved as modified to the HP Product
Acquisition and Resale Categories.
Amendment to your U.S. Consumer Products Distributor Addendum:
Section 3.F
Distributor Responsibilities: Deleted and moved as modified to the HP Product
Acquisition and Resale Categories.
Signature Page:
Change effective date to 3/1/96 and the expiration date to 2/28/97.
AUTHORIZED SIGNATURES HEWLETT-PACKARD COMPANY
/s/ Mark C. Layton /s/ Sue Weatherman
Authorized Signature Sue Weatherman, Reseller Contracts Manager
Mark C. Layton 3/1/96
Typed Name Date
President
Title
2/12/96
Date
<PAGE> 1
EXHIBIT 10.32
OPTION TO PURCHASE SHARES OF COMMON STOCK
THIS AGREEMENT is dated as of April 11, 1996, and is made by
and between DAISYTEK INTERNATIONAL CORPORATION, a Delaware corporation
(hereinafter referred to as "COMPANY") and DAVID A. HEAP (hereinafter referred
to as "EMPLOYEE"):
BACKGROUND
1. In consideration of services rendered, and to be rendered,
by the Employee to the Company and its Subsidiaries, the Board has determined
that it is in the best interests of the Company to issue this special one-time
option to purchase shares of the Company's Common Stock.
2. This Option is granted as a separate, independent,
one-time grant and has not been issued, and shall not be deemed to have been
issued, under any "plan" (as such term is used in Rule 16b-3(c)(2)(i) of the
Exchange Act) of the Company (including the Employee Stock Option Plan of
Daisytek International Corporation or the 1994 Stock Option Plan for Key
Employees of Daisytek International Corporation); provided, however, that the
shares to be issued upon the exercise of this Option may be registered under
the Securities Act on Form S-8 pursuant to Instruction A.1(a) therein, and
solely for such purpose, this Option shall be deemed an "employee benefit plan"
as defined therein.
I. DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY" shall mean Daisytek International Corporation, a
Delaware corporation. In addition, "Company" shall mean any corporation
assuming, or issuing a new option in substitution for, the Option in a
transaction to which Section 424(a) of the Code applies.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"OPTION" shall mean the stock option to purchase Common Stock
of the Company granted under this Agreement.
"PARENT CORPORATION" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the corporations other
than the Company then owns
<PAGE> 2
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one (1) of the other corporations in such chain.
"SECRETARY" shall mean the Secretary of the Company.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SUBSIDIARY" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one (1) of the other corporations in such chain.
"TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between the Employee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding any termination where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary.
The Board, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
II. GRANT OF OPTION
2.1 GRANT OF OPTION. In consideration of services rendered by
the Employee and the Employee's agreement to remain in the employ of the
Company, its Parent Corporations or its Subsidiaries and for other good and
valuable consideration, on the date hereof the Company irrevocably grants to
the Employee the option to purchase any part or all of FIFTEEN THOUSAND
(15,000) shares of the Company's Common Stock, $.01 par value (the "COMMON
STOCK"), subject to and upon the terms and conditions set forth in this
Agreement.
2.2 PURCHASE PRICE. The purchase price of the shares of Common
Stock covered by the Option shall be Thirty-Two Dollars and Fifty Cents
($32.50) per share without commission or other charge.
2.3 CONSIDERATION TO COMPANY. In consideration of the granting
of this Option by the Company, the Employee agrees to render faithful and
efficient services to the Company, a Parent Corporation or a Subsidiary, with
such duties and responsibilities as the Company shall from time to time
prescribe, for a period of at least one (1) year from the date this Option is
granted. Nothing in this Agreement or in the Plan shall confer upon the
Employee any right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict in any way
the
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<PAGE> 3
rights of the Company, its Parent Corporation and its Subsidiaries, which are
hereby expressly reserved, to discharge the Employee at any time for any reason
whatsoever, with or without cause.
2.4 ADJUSTMENTS IN OPTION. In the event that the outstanding
shares of Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of the Company or other securities of the
Company by reason of merger, consolidation, recapitalization, reclassification,
stock split up, stock dividend or combination of shares, the Board shall make
an appropriate and equitable adjustment in the number and kind of shares as to
which the Option, or portions thereof then unexercised, shall be exercisable.
Such adjustment in the Option shall be made without change in the total price
applicable to the unexercised portion of the Option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in the Option price per share.
Any such adjustment made by the Board shall be final and binding upon the
Employee, the Company and all other interested persons.
III. PERIOD OF EXERCISABILITY
3.1 COMMENCEMENT OF EXERCISABILITY.
(a) The Option shall become exercisable in three (3)
cumulative installments as follows:
(i) The first installment shall consist of fifteen
percent (15%) of the shares covered by the Option and shall become
exercisable on the first anniversary of the date the Option is
granted.
(ii) The second installment shall consist of fifty
percent (50%) of the shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option is
granted.
(iii) The third installment shall consist of fifty
percent (50%) of the shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option is
granted.
(b) Except as may otherwise be permitted by the Board, no
portion of the Option which is unexercisable at Termination of Employment shall
thereafter become exercisable.
3.2 DURATION OF EXERCISABILITY. The installments provided for
in Section 3.1 are cumulative. Each such installment which becomes exercisable
pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable
under Section 3.3.
3.3 EXPIRATION OF OPTION. The Option may not be exercised to
any extent by anyone after the first to occur of the following events:
(i) The expiration of ten (10) years from the date the Option was granted; or
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<PAGE> 4
(ii) Except if (a) the Employee is totally disabled (within
the meaning of Section 22(e)(3) of the Code), (b) the Employee retires within
the meaning of clause (iv) below, or (c) the Employee dies, the expiration of
three months from the date of the Employee's Termination of Employment for any
reason unless the Employee dies within said three-month period; provided,
however, that the Board reserves the right to cancel and terminate this Option
immediately upon Termination of Employment for cause; or
(iii) If the Employee is totally disabled (within the meaning
of Section 22(e)(3) of the Code), the expiration of one year from the date of
the Employee's Termination of Employment by reason of his disability unless the
Employee dies within said one-year period; or
(iv) If the Employee retires after reaching the Company's
normal retirement age or takes early retirement with the consent of the Board,
the expiration of two years from the date of the Employee's Termination of
Employment by reason of such retirement; or
(v) The expiration of one year from the date of the Employee's
death unless clause (iv) above provides a longer period of exercise; or
(vi) The effective date of either the merger or consolidation
of the Company with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of the Company's assets or
eighty percent (80%) or more of the Company's then outstanding voting stock, or
the liquidation or dissolution of the Company, unless the Board waives this
provision in connection with such transaction. At least ten (10) days prior to
the effective date of such merger, consolidation, acquisition, liquidation or
dissolution, the Board shall give the Employee notice of such event if the
Option has then neither been fully exercised nor become unexercisable under
this Section 3.3.
3.4 ACCELERATION OF EXERCISABILITY. In the event of the merger
or consolidation of the Company with or into another corporation, or the
acquisition by another corporation or person of all or substantially all of the
Company's assets or eighty percent (80%) or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company, the
Board may, in its absolute discretion and upon such terms and conditions as it
deems appropriate, provide by resolution, adopted prior to such event and
incorporated in the notice referred to in Section 3.3(vii), that at some time
prior to the effective date of such event this Option shall be exercisable as
to all the shares covered hereby, notwithstanding that this Option may not yet
have become fully exercisable under Section 3.1(a); provided, however, that
this acceleration of exercisability shall not take place if:
(i) This Option becomes unexercisable under Section 3.3 prior
to said effective date; or
(ii) In connection with such an event, provision is made for
an assumption of this Option or a substitution therefor of a new option by an
employer corporation or a parent or subsidiary of such corporation.
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<PAGE> 5
The Board may make such determinations and adopt such rules
and conditions as it, in its absolute discretion, deems appropriate in
connection with such acceleration of exercisability, including, but not by way
of limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction, and determinations regarding whether provisions for
assumption or substitution have been made as defined in clause (ii) above.
IV. EXERCISE OF OPTION
4.1 PERSON ELIGIBLE TO EXERCISE. During the lifetime of the
Employee, only he may exercise the Option or any portion thereof. After the
death of the Employee, any exercisable portion of the Option may, prior to the
time when the Option becomes unexercisable under Section 3.3, be exercised by
his personal representative or by any person empowered to do so under the
Employee's will or under the then applicable laws of descent and distribution.
4.2 PARTIAL EXERCISE. Any exercisable portion of the Option or
the entire Option, if then wholly exercisable, may be exercised in whole or in
part at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3; provided, however, that each partial exercise
shall be for not less than one- hundred (100) shares (or the minimum
installment set forth in Section 3.1, if a smaller number of shares) and shall
be for whole shares only.
4.3 MANNER OF EXERCISE. The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary or his office of
all of the following (except as otherwise waived by such officer) prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:
(a) Notice in writing signed by the Employee or the other
person then entitled to exercise the Option or portion, stating that the Option
or portion is thereby exercised, such notice complying with all applicable
rules established by the Board; and
(b) (i) Full payment (in cash or by check) for the shares
with respect to which such Option or portion is exercised; or
(ii) With the consent of the Board, shares of the
Company's Common Stock owned by the Employee duly endorsed for
transfer to the Company with a fair market value (as determined by the
Board) on the date of Option exercise equal to the aggregate purchase
price of the shares with respect to which such Option or portion is
exercised; or
(iii) With the consent of the Board, any combination of the
consideration provided in the foregoing subparagraphs (i) and (ii);
and
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<PAGE> 6
(c) A bona fide written representation and agreement, in a
form satisfactory to the Board, signed by the Employee or other person then
entitled to exercise such Option or portion, stating that the shares of stock
are being acquired for his own account, for investment and without any present
intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act and then applicable rules and regulations
thereunder, and that the Employee or other person then entitled to exercise
such Option or portion will indemnify the Company against, and hold it free and
harmless from, any loss, damage, expense or liability resulting to the Company
if any sale or distribution of the shares by such person is contrary to the
representation and agreement referred to above. The Board may, in its absolute
discretion, take whatever additional actions it deems appropriate to insure the
observance and performance of such representation and agreement and to effect
compliance with the Securities Act and any other federal or state securities
laws or regulations. Without limiting the generality of the foregoing, the
Board may require an opinion of counsel acceptable to it to the effect that any
subsequent transfer of shares acquired upon exercise of an Option does not
violate the Securities Act, and may issue stop-transfer orders covering such
shares. Share certificates evidencing stock issued on exercise of this Option
shall bear an appropriate legend referring to the provisions of this subsection
(c) and the agreements herein. The written representation and agreement
referred to in the first sentence of this subsection (c) shall, however, not be
required if the shares to be issued pursuant to such exercise have been
registered under the Securities Act, and such registration is then effective in
respect of such shares; and
(d) Full payment to the Company (or other employer
corporation) of all amounts which, under federal, state or local tax law, it is
required to withhold upon exercise of the Option; provided, however, with the
consent of the Board, shares of the Company's Common Stock owned by the
Employee duly endorsed for transfer may be used to make all or part of such
payment (which shares be valued at their fair market value on the date of
Option exercise as shall be determined by the Board); and
(e) In the event the Option or portion shall be exercised
pursuant to Section 4.1 by any person or persons other than the Employee,
appropriate proof of the right of such person or persons to exercise the
Option.
4.4 CERTAIN TIMING REQUIREMENTS. Shares of the Company's
Common Stock issuable to the Employee upon exercise of the Option may be used
to satisfy the Option price or the tax withholding consequences only (i) with
the consent of the Board and (ii) during such periods of time as employees of
the Company are permitted to buy or sell shares of Common Stock.
4.5 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares
of stock deliverable upon the exercise of the Option, or any portion thereof,
may be either previously authorized but unissued shares or issued shares which
have then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following
conditions (except as otherwise waived by the Board):
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<PAGE> 7
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification
of such shares under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, which the Board shall, in its absolute discretion, deem
necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Board shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation)
of all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Board may from time to time establish for reasons
of administrative convenience.
4.6 RIGHTS AS A SHAREHOLDER. The holder of the Option shall
not be, nor have any of the rights or privileges of, a shareholder of the
Company in respect of any shares purchasable upon the exercise of any part of
the Option unless and until certificates representing such shares shall have
been issued by the Company to such holder.
V. OTHER PROVISIONS
5.1 ADMINISTRATION. The Board shall have the power to
interpret this Agreement and to adopt such rules for the administration,
interpretation and application hereof as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Board in good faith shall be final and binding
upon the Employee, the Company and all other interested persons. No member of
the Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Option.
5.2 OPTION NOT TRANSFERABLE. Neither the Option nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Employee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment of any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 5.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.
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<PAGE> 8
5.3 SHARES TO BE RESERVED. The Company shall at all times
during the term of the Option reserve and keep available such number of shares
of stock as will be sufficient to satisfy the requirements of this Agreement.
5.4 NOTICES. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Employee shall be addressed to him
or her at the address given beneath his or her signature hereto. By a notice
given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to such party. Any notice which is
required to be given to the Employee shall, if the Employee is then deceased,
be given to the Employee's personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 5.4. Any notice shall be deemed duly given upon receipt and
shall be delivered by hand, reputable overnight courier or deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
5.5 TITLES. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this
Agreement.
In Witness Whereof, the Company and the undersigned Employee
have executed and delivered this Option as of the day and year above written.
/s/ DAVID A. HEAP
-----------------------------------
David A. Heap
Daisytek International Corporation
/s/ HARVEY H. ACHATZ
-------------------------------
Name: Harvey H. Achatz
Title: Vice President Administration and Secretary
-8-
<PAGE> 1
EXHIBIT 11
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
STATEMENTS RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Supplemental
------------------
Fiscal Year Ended Fiscal Year Ended
March 31, March 31,
--------------------------- -------------------
1996 1995 1994 1995 1994
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net income $10,767 $6,496 $4,257 $7,254 $5,026
======= ====== ====== ====== ======
Weighted average common shares
outstanding 6,757 5,542 5,288 6,683 6,668
======= ====== ====== ====== ======
Net income per common
share $ 1.59 $ 1.17 $ 0.81 $ 1.09 $ 0.75
======= ====== ====== ====== ======
Calculation of weighted average
common shares:
Weighted average common
stock outstanding 6,301 4,775 4,338 6,245 6,117
Weighted average common
stock warrants, utilizing the
treasury stock method (1) -- 329 399 -- --
Weighted average common
stock options, utilizing the
treasury stock method (1) 456 438 551 438 551
------- ------ ------ ------ ------
6,757 5,542 5,288 6,683 6,668
======= ====== ====== ====== ======
</TABLE>
- --------------------
(1) Utilizing the weighted average stock price of $15.67 per share for fiscal
year 1995 and the public offering price of $15.00 per share for fiscal
year 1994.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF
NAME INCORPORATION
- ---- -------------
Daisytek, Incorporated Delaware
Subsidiaries of Daisytek, Incorporated:
Daisytek (Canada) Inc. Canada
Working Capital of America, Inc. Delaware
Working Capital Canada Inc. Canada
Home Tech Depot, Inc. Delaware
Daisytek De Mexico S.A. De C.V. Mexico
Daisytek Latin America, Inc. Florida
Supplies Express, Inc. Delaware
Priority Fulfillment Services, Inc. Delaware
Priority Fulfillment Services of Canada, Inc. Canada
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K into the Company's previously filed
Registration Statement (File No. 33-96728).
ARTHUR ANDERSEN LLP
Dallas, Texas,
June 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES FOR
THE YEAR ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 204
<SECURITIES> 0
<RECEIVABLES> 70,452
<ALLOWANCES> 1,283
<INVENTORY> 44,358
<CURRENT-ASSETS> 117,184
<PP&E> 15,631
<DEPRECIATION> 6,136
<TOTAL-ASSETS> 128,601
<CURRENT-LIABILITIES> 60,521
<BONDS> 17,069
0
0
<COMMON> 63
<OTHER-SE> 51,598
<TOTAL-LIABILITY-AND-EQUITY> 128,601
<SALES> 464,169
<TOTAL-REVENUES> 464,169
<CGS> 416,199
<TOTAL-COSTS> 416,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 999
<INTEREST-EXPENSE> 1,482
<INCOME-PRETAX> 17,464
<INCOME-TAX> 6,697
<INCOME-CONTINUING> 10,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,767
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 0
</TABLE>
