<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 27, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------- -------------------
Commission File Number 0-25372
U.S. OFFICE PRODUCTS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 52-1906050
(State of other jurisdiction (I.R.S. Employer
incorporation or organization.) Identification No.)
1440 New York Avenue, N.W.
Suite 310
Washington, D.C. 20005
(Address of principal executive offices) (Zip Code)
(202) 628-9500
(Registrant's telephone number, including area code)
The Registrant's former fiscal year ended on April 30, 1996
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
As of September 10, 1996, there were 40,348,543 shares of common stock
outstanding.
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<PAGE>
U.S. OFFICE PRODUCTS COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
July 27, 1996 (unaudited) and April 30, 1996
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . .4
For the three months ended July 27, 1996 (unaudited) and July 31, 1995 (unaudited)
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . .5
For the three months ended July 27, 1996 (unaudited) and July 31, 1995 (unaudited)
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
PART II - OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
July 27, April 30,
ASSETS 1996 1996
------ ---- ----
(Unaudited)
Current assets:
Cash and cash equivalents $ 98,947 $ 170,592
Accounts receivable, less allowance for doubtful
accounts of $4,284 and $3,179, respectively 230,385 147,907
Inventory 190,665 103,312
Lease receivables 29,561 24,808
Prepaid expenses and other current assets 28,407 24,317
---------- ---------
Total current assets 577,965 470,936
Property and equipment, net 145,687 65,736
Intangible assets, net 396,835 141,364
Lease receivables 46,232 47,005
Other assets 25,117 16,614
---------- ---------
Total assets $1,191,836 $ 741,655
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term debt $ 155,838 $ 114,065
Accounts payable 142,493 83,221
Accrued compensation 16,983 14,758
Other accrued liabilities 49,029 22,164
---------- ---------
Total current liabilities 364,343 234,208
Long-term debt 427,138 178,529
Deferred income taxes 6,427 6,910
Other long-term liabilities 3,199 1,686
---------- ---------
Total liabilities 801,107 421,333
---------- ---------
Minority Interest 2,557 6,023
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 500,000 shares
authorized, none outstanding
Common stock, $.001 par value, 100,000,000 shares
authorized, 38,614,209 and 35,874,355 shares issued
and outstanding, respectively 39 36
Additional paid-in capital 356,423 291,109
Cumulative translation adjustment 2,626 482
Retained earnings 29,084 22,672
---------- ---------
Total stockholders' equity 388,172 314,299
---------- ---------
Total liabilities and stockholders' equity $1,191,836 $ 741,655
---------- ---------
---------- ---------
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
July 27, July 31,
1996 1995
---- ----
<S> <C> <C>
Revenues $352,638 $166,742
Cost of revenues 253,017 124,785
-------- --------
Gross profit 99,621 41,957
Selling, general and administrative expenses 82,561 41,033
Nonrecurring acquisition costs 1,656 4,671
-------- --------
Operating income (loss) 15,404 (3,747)
Other (income) expense:
Interest expense 6,949 2,082
Interest income (4,185) (142)
Minority interest in net income of subsidiary 206
Other (222) (99)
-------- --------
Income (loss) before provision (benefit) for income taxes 12,656 (5,588)
Provision (benefit) for income taxes 5,152 (1,469)
-------- --------
Net income (loss) $ 7,504 $ (4,119)
-------- --------
-------- --------
Net income (loss) per share $ .20 $ (.18)
-------- --------
-------- --------
Pro forma net income (loss) (see Note 3) $ 7,107 $ (3,072)
-------- --------
-------- --------
Pro forma net income (loss) per share $ .18 $ (.14)
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
July 27, July 31,
1996 1995
---- -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,504 $ (4,119)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,782 1,794
Deferred income taxes 888 (55)
Deferred revenue 2,958
Write-off of deferred compensation (1,501)
Minority interest in net income of subsidiary 221
Changes in assets and liabilities (net of assets
acquired and liabilities assumed in business
combinations):
Accounts receivable (24,066) 12,032
Lease receivables (3,087)
Inventory (1,879) (5,338)
Prepaid expenses and other current assets 1,547 (2,528)
Accounts payable 3,900 4,399
Accrued liabilities 4,974 (354)
--------- --------
Net cash provided by (used in) operating activities (3,759) 5,831
--------- --------
Cash flows from investing activities:
Additions to property and equipment, net of disposals (9,683) (1,277)
Cash used in acquisitions (205,458) (5,389)
Other (1,139) (1,519)
--------- --------
Net cash used in investing activities (216,280) (8,185)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 225,000 2,519
Payments of long-term debt (54,384) (2,137)
Increases (decreases) in short-term debt (25,638) 1,153
Proceeds from exercise of stock options and warrants 1,980
Proceeds from issuance of common stock in Employee
Stock Purchase Plan and exercise of stock options 1,602
Contribution of capital by stockholder of Pooled Company 729
Adjustment to conform fiscal year-ends of certain Pooled Companies (78) (370)
Payment of dividends (978) (573)
--------- --------
Net cash provided by financing activities 148,233 592
--------- --------
Effect of exchange rates on cash and cash equivalents 161
Net decrease in cash and cash equivalents (71,645) (1,762)
Cash and cash equivalents at beginning of period 170,592 2,625
--------- --------
Cash and cash equivalents at end of period $ 98,947 $ 863
--------- --------
--------- --------
</TABLE>
(Continued)
Page 5
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
Three Months Ended
------------------
July 27, July 31,
1996 1995
---- ----
Supplemental disclosures of cash flow information:
Interest paid $ 1,646 $ 809
Income taxes paid $ 1,297 $ 987
The Company issued common stock and cash in connection with certain business
combinations for the three months ended July 27, 1996 and July 31,1995. The
fair values of the assets acquired and liabilities assumed at the dates of
consummation of the acquisitions are presented as follows:
Three Months Ended
------------------
July 27, July 31,
1996 1995
---- ----
Accounts receivable $ 51,941 $ 1,812
Inventory 84,987 1,667
Prepaid expenses and other current assets 5,706 408
Property and equipment 74,144 4,536
Intangible assets 252,250 3,268
Other assets 2,027 156
Short-term debt (65,695) (3,781)
Accounts payable (56,886) (274)
Accrued liabilities (12,389) (225)
Long-term debt (73,622) (2,178)
-------- -------
Net assets acquired $262,463 $ 5,389
-------- -------
-------- -------
The acquisitions were funded as follows:
Common stock $ 57,005
Cash 205,458 $ 5,389
-------- -------
$262,463 $ 5,389
-------- -------
-------- -------
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
U. S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 27, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of U.S. Office Products
Company (the "Company" or "U.S. Office Products"), the companies acquired in
business combinations accounted for under the purchase method (the "Purchased
Companies") from their respective acquisition dates and give retroactive effect
to the results of the companies acquired in business combinations accounted for
under the pooling-of-interests method (the "Pooled Companies") for all periods
presented.
In the opinion of management, the information contained herein reflects all
adjustments necessary to make the results of operations for the interim periods
a fair statement of such operations. All such adjustments are of a normal
recurring nature. Operating results for interim periods are not necessarily
indicative of results which may be expected for the year as a whole. It is
suggested that these consolidated financial statements be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended April 30, 1996.
On August 20, 1996, the Company's Board of Directors approved a change in the
Company's fiscal year-end, effective for the 1997 fiscal year, from April 30 to
the last Saturday of April.
NOTE 2 - STOCKHOLDERS' EQUITY
Changes in stockholders' equity during the three months ended July 27, 1996 were
as follows:
Stockholders' equity balance at April 30, 1996 $314,299
Issuance of common stock in connection
with business combinations 57,005
Issuance of common stock for employee
stock purchase plan, net of expenses 1,149
Issuance of common stock for stock options
exercised, including tax benefits 841
Issuance of common stock for stock options and
warrants at Pooled Companies prior to closing 1,980
Cumulative translation adjustment 2,144
Net income 7,504
Adjustments to conform fiscal year-ends
of certain Pooled Companies (78)
Contributions of capital at Pooled Companies
prior to closing 4,306
Dividends at Pooled Companies prior to closing (978)
--------
Stockholders' equity balance at July 27, 1996 $388,172
--------
--------
Page 7
<PAGE>
NOTE 3 - UNAUDITED PRO FORMA INCOME TAX INFORMATION
The following unaudited pro forma income tax information is presented in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," as if certain Pooled Companies, which were subchapter S
corporations prior to their business combinations with the Company, had been
subject to federal income taxes throughout the periods presented:
Three Months Ended
--------------------
July 27, July 31,
1996 1995
-------- --------
Net income (loss) before pro forma adjustment,
per the consolidated statement of operations $7,504 $(4,119)
Provision (benefit) for income taxes 397 (1,047)
------ -------
Pro forma net income (loss) $7,107 $(3,072)
------ -------
------ -------
NOTE 4 - BUSINESS COMBINATIONS
In fiscal 1996, the Company completed a total of 40 business combinations, 14
accounted for under the pooling-of-interests method and 26 accounted for under
the purchase method. During the first quarter of fiscal 1997, the Company
completed a total of 28 business combinations, 10 accounted for under the
pooling-of-interests method and 18 accounted for under the purchase
method. Included in the business combinations completed during the
first quarter of fiscal 1997 was the purchase acquisition of Whitcoulls Group
Limited ("Whitcoulls"), the largest contract stationer/office products company
in the Australia-New Zealand market. As the acquisition of Whitcoulls was
completed on the last day of the quarter, the consolidated results of
operations for the three months ended July 27, 1996 do not reflect any impact
from Whitcoulls, however, the balance sheet of Whitcoulls is included in the
Company's July 27, 1996 consolidated balance sheet.
As the Company's consolidated financial statements give retroactive effect to
the acquisitions of the Pooled Companies for all periods presented, the
following presents the separate results of U.S. Office Products and the Pooled
Companies for periods prior to the completion of each of the business
combinations accounted for under the pooling-of-interests method:
U.S. Office
Products Pooled
Company Companies Combined
----------- --------- --------
THREE MONTHS ENDED
JULY 27, 1996:
Revenues $ 316,351 $ 36,287 $352,638
Net income $ 6,034 $ 1,470 $ 7,504
THREE MONTHS ENDED
JULY 31, 1995:
Revenues $ 64,560 $102,182 $166,742
Net income (loss) $ (3,849) $ (270) $ (4,119)
The following presents the unaudited pro forma results of operations of the
Company for the three months ended July 27, 1996 and July 31, 1995 as if all 44
of the companies acquired in business combinations accounted for under the
purchase method, completed since the beginning of fiscal 1996, had been
consummated at the beginning of fiscal year 1996. The pro forma results of
operations include certain pro forma adjustments including the amortization of
intangible assets and reductions in executive compensation:
Page 8
<PAGE>
Three Months Ended
-------------------
July 27, July 31,
1996 1995
-------- --------
Revenues $463,790 $436,506
Net income 8,421 (5,342)
Net income per share 0.21 (0.14)
The pro forma results of operations are prepared for comparative purposes only
and do not necessarily reflect the results that would have occurred had the
acquisitions occurred at the beginning of fiscal year 1996 or the results which
may occur in the future.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to July 27, 1996, the Company has completed 11 business combinations
for an aggregate purchase price of $65.4 million, consisting of approximately
$16.1 million of cash and 1,709,778 shares of the Company's common stock with a
market value of approximately $49.3 million.
In August 1996, the Company entered into an agreement with Bankers Trust Company
(the "Bank"), whereby the Bank, or a syndicate of financial institutions
including the Bank, will provide a $500 million revolving credit facility ( the
"Credit Facility") bearing interest, at the Company's option, at the Bank's
base rate plus an applicable margin of up to 1.25%, or a eurodollar rate
plus an applicable margin of up to 2.5%. The availability under the Credit
Facility is subject to certain sublimits including $100 million for working
capital loans and $400 million for acquisition loans, with $180 million of
the acquisition loan sublimit available and expected to be used to refinance
certain outstanding indebtedness of the Company in Australia and New Zealand.
The Credit Facility is secured by a majority of the assets of the Company and
contains customary covenants, including financial covenants with respect to
the Company's leverage and interest coverage ratios, capital expenditures,
payment of dividends and purchases and sales of assets, and customary default
provisions, including provisions related to non-payment of principal and
interest, default under other debt agreements and bankruptcy.
In August 1996, at the Company's Annual Meeting of Stockholders, the
stockholders approved, among other things, a proposal by the Board of Directors
of the Company to adopt an amendment to Article Four of the Company's Restated
Certificate of Incorporation to increase the number of shares of the Company's
Common Stock, par value $.001 per share, authorized for issuance from
100,000,000 shares to 500,000,000 shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 27, 1996 COMPARED TO THREE MONTHS ENDED JULY 31, 1995
Historical revenues increased 111.5%, from $166.7 million for the three months
ended July 31, 1995 to $352.6 million for the three months ended July 27, 1996.
This increase was primarily due to the inclusion of revenues from 43 companies
acquired in business combinations accounted for under the purchase method (the
"Purchased Companies") during the last three quarters of fiscal 1996 and the
first quarter of fiscal 1997 in the revenues for the three months ended July 27,
1996 and the exclusion of those revenues for the three months ended July 31,
1995.
Page 9
<PAGE>
Gross profit increased 137.4%, from $42.0 million, or 25.2% of revenues, for
the three months ended July 31, 1995 to $99.6 million, or 28.3% of revenues
for the three months ended July 27, 1996. The increase in gross profit as a
percentage of revenues was due primarily to a shift in revenue mix resulting
in a higher proportion of revenues in traditionally higher margin products,
such as office coffee services, school supplies and school furniture and the
Company's products sold in Australia and New Zealand.
Selling, general and administrative expenses increased 101.2%, from $41.0
million, or 24.6% of revenues, for the three months ended July 31, 1995 to
$82.6 million, or 23.4% of revenues for the three months ended July 27, 1996.
The increase in selling, general and administrative expenses is due
primarily to the inclusion of the Purchased Companies. The decrease in
selling, general and administrative expenses as a percentage of revenues is
due primarily to the inclusion of the Purchased Companies, which had lower
selling, general and administrative expenses as a percentage of revenues.
The Company incurred nonrecurring acquisition costs of approximately $1.7
million and $4.7 million during the three months ended July 27, 1996 and July
31, 1995, respectively, in conjunction with business combinations that were
accounted for under the pooling-of-interests method. Generally accepted
accounting principles require the Company to expense all acquisition costs
related to the business combinations accounted for under the
pooling-of-interests method. The Company expects to continue to consummate
addtional acquisitions accounted for under the pooling-of-interests method.
Interest expense increased 233.9% from $2.1 million for the three months
ended July 31, 1995 to $6.9 million for the three months ended July 27, 1996.
This increase was due primarily to the increase in the Company's borrowings
through the issuance of an aggregate of $373.75 million of 5 1/2% Convertible
Subordinated Notes (the "Notes") during the fourth quarter of fiscal 1996 and
the first quarter of fiscal 1997. The increase in interest expense was
partially offset by an increase in interest income of $4.0 million for the
three months ended July 27, 1996 compared to the three months ended July 31,
1995. The increase in interest income was primarily the result of the
investment by the Company of a portion of the proceeds from the issuance of
the Notes at a time when it did not need the cash for working capital or
acquisition purposes.
Minority interest in net income of subsidiary represents the 49% minority
interest in the net income of Blue Star Group Limited ("Blue Star"), as the
Company owned 51% of Blue Star until June 1996, when it acquired the
remaining 49%.
Provision for income taxes increased from a benefit of $1.5 million for the
three months ended July 31, 1995 to a provision of $5.2 million for the three
months ended July 27, 1996, reflecting an effective tax benefit of 26.3% for
the three months ended July 31, 1995 and an effective tax rate of 40.7% for
the three months ended July 27, 1996. The high effective rate for the three
months ended July 27, 1996, compared to the federal statutory rate of 34.0%
plus state, local and foreign taxes is primarily the result of non-deductible
expenses, primarily non-deductible goodwill, resulting from stock
acquisitions accounted for under the purchase method.
LIQUIDITY AND CAPITAL RESOURCES
At July 27, 1996, the Company had cash of $98.9 million and working capital
of $213.6 million. The Company's capitalization at July 27, 1996 was $815.3
million.
Page 10
<PAGE>
In May and June 1996, the Company completed the sales, in an offshore
offering and in a concurrent private placement in the United States, of
5 1/2% Convertible Subordinated Notes due 2003 (the "May Notes") in the
principal amount of $230 million, including the manager's over-allotment
option of $30 million principal amount of May Notes (the "May Notes
Offering"). The net proceeds from the May Notes Offering, after deducting
the manager's discounts and commissions and offering expenses, were
approximately $223.1 million and were used for working capital and
acquisition purposes, including the repayment of higher interest rate debt
assumed in business combinations.
In August 1996, the Company entered into an agreement, whereby the Bank, or a
syndicate of financial institutions including the Bank, will provide a
$500 million Credit Facility bearing interest, at the Company's option, at the
Bank's base rate plus an applicable margin of up to 1.25%, or a eurodollar rate
plus an applicable margin of up to 2.5%. The availability under the Credit
Facility is subject to certain sublimits including $100 million for working
capital loans and $400 million for acquisition loans, with $180 million of the
acquisition loan sublimit available and expected to be used to refinance
certain outstanding indebtedness of the Company in Australia and New Zealand.
The Credit Facility is secured by a majority of the assets of the Company
and contains customary covenants, including financial covenants with respect
to the Company's leverage and interest coverage ratios, capital expenditures,
payment of dividends and purchases and sales of assets, and customary default
provisions, including provisions related to non-payment of principal and
interest, default under other debt agreements and bankruptcy.
During the three months ended July 27, 1996, net cash used in operating
activities was $3.8 million. Net cash used in investing activities was
$216.3 million, including $205.5 million used for acquisitions and $9.7
million used for additions to property and equipment. Net borrowings
increased $145.0 million during the three months ended July 27, 1996.
During the three months ended July 31, 1995, net cash provided by operating
activities was $5.8 million. Net cash used in investing activities was $8.2
million, including $5.4 million used for acquisitions and $1.3 used for
additions to property and equipment. Net borrowings increased $1.5 million
during the three months ended July 31, 1995.
Subsequent to July 27, 1996, the Company has completed 11 business
combinations for an aggregate purchase price of $65.4 million, consisting of
$16.1 million of cash and 1,709,778 shares of common stock with a market
value of $49.3 million.
The Company anticipates that its current cash on hand, cash flow from
operations and additional financing available under the Credit Facility will
be sufficient to meet the Company's liquidity requirements for its operations
through the end of fiscal 1997. However, the Company intends to continue
pursuing acquisitions, some of which are probable to occur, which are
expected to be funded through a combination of cash and common stock. The
timing and size and the associated capital commitments of such acquisitions
are not known. There can be no assurances that additional sources of
financing will not be required during the next twelve months or thereafter.
Page 11
<PAGE>
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's business is subject to seasonal influences. The Company's
historical revenues and profitability in its core office products business
have been lower in the first two quarters of its fiscal year, primarily due
to the lower level of business activity in North America during the summer
months. The seasonality of the core office products business, however, is
expected to be impacted by the seasonality of its other operations, which
have been expanding through acquisitions. For example, the revenues and
profitability of the Company's school supplies and school furniture business
have been higher during the Company's first and second quarters and
significantly lower in its third and fourth quarters, and the revenues and
profitability of the Company's operations in New Zealand and Australia have
generally been higher in the Company's third quarter. As the Company's mix
of businesses evolves through future acquisitions, these seasonal
fluctuations may continue to change. In addition, quarterly results also may
be materially affected by the timing of acquisitions, the timing and
magnitude of costs related to such acquisitions, variations in the prices
paid by the Company for the products it sells, the mix of products sold and
general economic conditions. Therefore, results for any quarter are not
necessarily indicative of the results that the Company may achieve for any
subsequent fiscal quarter or for a full fiscal year.
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations during fiscal 1996 or the first quarter of fiscal 1997.
FACTORS AFFECTING THE COMPANY'S BUSINESS
The future operating results of the Company may be affected by a number of
factors, including the matters discussed below:
The Company has an aggressive acquisitions strategy that has involved, and is
expected to continue to involve, the acquisition of a significant number of
additional companies in related lines of businesses. There can be no
assurance, however, that acquisitions will occur at the same pace or be
available to the Company on favorable terms, if at all. For example, if the
price of a share of common stock declines, the owners of potential
acquisition targets may not be willing to receive shares of common stock in
exchange for their businesses, thereby adversely affecting the pace of the
Company's acquisition program. Such an effect on the pace of the Company's
acquisition program could further reduce the price of a share of common
stock, to the further detriment of the Company's acquisition strategy. In
addition, the consolidation of the contract stationer industry has reduced
the number of larger companies available for sale, which could lead to higher
prices being paid to acquire such companies. The failure to acquire
additional businesses and to acquire such businesses on favorable terms in
accordance with the Company's growth strategy could have a material adverse
impact on future sales and profitability.
The Company's acquisition strategy has resulted in a significant increase in
sales, employees, facilities and distribution systems. While the Company's
decentralized management strategy, together with operating efficiencies
resulting from the elimination of duplicative functions and economies of
scale, may present opportunities to reduce costs, such strategies may
initially necessitate costs and expenditures to expand operational and
financial systems and corporate management and administration. These various
costs and possible cost-savings strategies may make historical operating
results not indicative of future performance. In addition, there can be no
assurance that the pace of the Company's acquisitions will not adversely
affect the Company's efforts to implement its cost-savings strategies and to
manage its acquisitions profitability.
The Company operates in a highly competitive environment. Some of the
Company's current and potential competitors are larger than the Company and
have greater financial resources. No assurances can be given that
competition will not have an adverse effect on the Company's business.
Page 12
<PAGE>
The Company also expects to focus significant attention and resources on
future international expansion. In addition to the factors described above
that may impact the Company's domestic operations, the Company's operations
in foreign markets are subject to a number of inherent risks, including
currency exchange rates, new and different legal and regulatory requirements,
difficulties in staffing and managing foreign operations, risks specific to
different business lines that the Company may enter, and other factors.
Page 13
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On September 5, 1996, the Company filed an Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of capital stock from
100,500,000 shares to 500,500,000 shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation
11.1 Statement regarding computation of net income (loss) per share
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
During the period covered by this report, the Company filed the following
Current Reports on Form 8-K:
i. Form 8-K dated May 2, 1996 and filed with the Commision on May 17, 1996
reporting information under Items 2, 5, and 7.
FINANCIAL STATEMENTS FILED:
(a) Unaudited pro forma financial information as of January 31, 1996
and for the years ended April 30, 1995, 1994 and 1993 and the
nine months ended January 31, 1996 and 1995.
ii. Form 8-KA dated May 2, 1996 and filed with the Commission on May 23,
1996 amending and restateing Item 7 of the Form 8-K listed above
under "I.", including
FINANCIAL STATEMENTS FILED:
(a) Unaudited pro forma financial information as of January 31, 1996
and for the years ended April 30, 1995, 1994 and 1993 and the
nine months ended January 31, 1996 and 1995.
iii. Form 8-K dated July 16, 1996 and filed with the Commission on July 17,
1996 reporting information under Items 5 and 7.
FINANCIAL STATEMENTS FILED:
(a) Unaudited pro forma financial information as of April 30, 1996
and for the years ended April 30, 1996, 1995 and 1994.
(b) The audited financial statements of Americal Looseleaf/Business
Products, Inc. as of September 30, 1995 and for the year then
ended and unaudited financial statements as of March 31, 1996 and
for the six months ended March 31, 1996 and 1995;
(c) The audited financial statements of Mile High Office Supply, Inc.
as of December
Page 14
<PAGE>
31, 1995 and 1994 and for the years then ended and the unaudited
financial statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995;
(d) The audited financial statements of Pear Commercial Interiors as
of December 31, 1995 and for the year then ended and the
unaudited financial statements as of March 31, 1996 and for the
three months ended March 31, 1996 and 1995;
(e) The audited financial statements of New Office Plus as of
December 31, 1995 and for the year then ended and the unaudited
financial statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995;
(f) The audited financial statements of Prudential of Florida, Inc.
as of December 31, 1995 and for the year then ended and the
unaudited financial statements as of March 31, 1996 and for the
three months ended March 31, 1996 and 1995;
(g) The audited financial statements of David's Office Supply and
Furniture Company, Inc. as of May 31, 1996 and for the year then
ended;
(h) The audited financial statements of Carolina Office Equipment
Company as of March 31, 1996 and for the year then ended;
(i) The audited financial statements of WBT Holdings, Inc. (d.b.a.
Office Furniture Distributors) as of December 31, 1995 and for
the year then ended and the unaudited financial statements as of
March 31, 1996 and for the three months ended March 31, 1996 and
1995;
(j) The audited financial statements of Mark's Office Furniture as of
March 31, 1996 and for the year then ended;
(k) The audited financial statements of International Interiors, Inc.
as of September 30, 1995 and 1994 and for the years then ended;
(l) The audited financial statements of Arbuckle Foods Inc. as of
August 31, 1995 and for the year then ended and the unaudited
financial statements as of May 31, 1996 and for the nine months
ended May 31, 1996 and 1995;
(m) The audited financial statements of McWhorter Stationery Co. as
of March 31, 1996 and for the year then ended;
(n) The audited financial statements of Wang of New Zealand as of
June 30, 1995 and for the year then ended and the unaudited
financial statements as of December 31, 1995 and for the six
months ended December 31, 1995 and 1994;
(o) The audited financial statements of Re-Print Corporation as of
December 31, 1995 and for the year then ended and the unaudited
financial statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995; and
(p) The balance sheet of Thompson Book and Supply Company as of
December 31, 1995 and as of March 31, 1996.
Page 15
<PAGE>
iv. Form 8-K dated July 23, 1996 and filed with the Commission on
July 23, 1996 reporting information under Items 5 and 7.
FINANCIAL STATEMENTS FILED:
(a) Unaudited pro forma financial information as of April 30, 1996
and for the years ended April 30, 1996, 1995 and 1994.
(b) Audited consolidated financial statements of
Whitcoulls Group Limited as of June 30, 1995
and 1994 and for each of the years in the three
year period ended June 30, 1995 and the unaudited
consolidated financial statements as of December 31, 1995 and
for the six months ended December 31, 1995 and 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. OFFICE PRODUCTS COMPANY
September 10, 1996 By: /s/ Jonathan J. Ledecky
--------------------------- --------------------------------
Date Jonathan J. Ledecky
Chief Executive Officer
September 10, 1996 By: /s/ Donald H. Platt
--------------------------- --------------------------------
Date Donald H. Platt
Chief Financial Officer
Page 16
<PAGE>
EXHIBIT INDEX
NO. EXHIBIT PAGE
3.1 Amended and Restated Certificate of Incorporation
11.1 Statement regarding computation of net income (loss) per share
27 Financial Data Schedule
Page 17
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. OFFICE PRODUCTS COMPANY
I, Donald H. Platt, Senior Vice President of U.S. Office Products
Company, a corporation organized and existing under the laws of the State of
Delaware (the "Corporation"), does hereby certify that this Amended and
Restated Certificate of Incorporation of U.S. Office Products Company, which
was originally incorporated under the name "U.S. Office Supply Company" and
filed its original Certificate of Incorporation in the Office of the
Secretary of State of the State of Delaware on October 25, 1994, has been
amended and adopted in accordance with the requirements of Sections 242 and
245 of the Delaware General Corporation Law and is hereby restated, pursuant
to the provisions of Section 245 of the Delaware General Corporation Law, in
its entirety to read as follows:
ARTICLE ONE
The name of the Corporation is: U.S. OFFICE PRODUCTS COMPANY.
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Five Hundred Million Five
Hundred Thousand (500,500,000) shares, of which Five Hundred Thousand
(500,000) shares, designated as Preferred Stock, shall have a par value of
One Tenth of One Cent ($.001) per share (the "Preferred Stock"), and Five
Hundred Million
<PAGE>
(500,000,000) shares, designated as Common Stock, shall have a par value of
One Tenth of One Cent ($.001) per share (the "Common Stock").
A statement of the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of each class
of stock of the Corporation is as follows:
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the
provisions of this Restated Certificate of Incorporation and the limitations
prescribed by law, the Board of Directors is expressly authorized by adopting
resolutions to issue the shares, fix the number of shares and change the
number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, including dividend rights (and whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions), a
redemption price or prices, conversion rights and liquidation preferences of
the shares constituting any class or series of the Preferred Stock, without
any further action or vote by the stockholders.
COMMON STOCK
1. DIVIDENDS.
Subject to the preferred rights of the holders of shares of any
class or series of Preferred Stock as provided by the Board of Directors with
respect to any such class or series of Preferred Stock, the holders of the
Common Stock shall be entitled to receive, as and when declared by the Board
of Directors out of the funds of the Corporation legally available therefor,
such dividends (payable in cash, stock or otherwise) as the Board of
Directors may from time to time determine, payable to stockholders of record
on such dates, not exceeding 60 days preceding the dividend payment dates, as
shall be fixed for such purpose by the Board of Directors in advance of
payment of each particular dividend.
2. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series
of Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the
holders of Common Stock ratably in proportion to the number of shares of
Common Stock held by them respectively.
- 2 -
<PAGE>
3. VOTING RIGHTS.
Except as otherwise required by law or as provided by the Board of
Directors with respect to any class or series of Preferred Stock, the entire
voting power and all voting rights shall be vested exclusively in the Common
Stock. Each holder of shares of Common Stock shall be entitled to one vote
for each share standing in his name on the books of the Corporation.
ARTICLE FIVE
1. BOARD OF DIRECTORS
The Directors shall be elected at each annual meeting of
stockholders to hold office until their successors have been duly elected and
qualified. At each annual meeting of stockholders at which a quorum is
present, the persons receiving a plurality of the votes cast shall be
directors. No director or class of directors may be removed from office by a
vote of the stockholders at any time except for cause. Election of directors
need not be by written ballot unless the By-laws of the Corporation so
provide.
2. VACANCIES.
Any vacancy on the Board of Directors resulting from death,
retirement, resignation, disqualification or removal from office or other
cause, as well as any vacancy resulting from an increase in the number of
directors which occurs between annual meetings of the stockholders at which
directors are elected, shall be filled only by a majority vote of the
remaining directors then in office, though less than a quorum, except that
those vacancies resulting from removal from office by a vote of the
stockholders may be filled by a vote of the stockholders at the same meeting
at which such removal occurs. The directors chosen to fill vacancies shall
hold office for a term expiring at the end of the next annual meeting of
stockholders. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of one or more
classes or series of Preferred Stock shall have the right, voting separately,
as a class or series, to elect directors, the election, term of office,
filling of vacancies, removal and other features of such directorships shall
be governed by the terms of the resolution or resolutions adopted by the
Board of Directors pursuant to ARTICLE FOUR applicable thereto, and each
director so elected shall not be subject to the provisions of this ARTICLE
FIVE unless otherwise provided therein.
- 3 -
<PAGE>
3. POWER TO MAKE, ALTER AND REPEAL BY-LAWS.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter and
repeal the By-laws of the Corporation.
ARTICLE SIX
The Corporation reserves the right to amend, alter, change or
repeal any provision in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute.
ARTICLE SEVEN
No director of the Corporation shall be 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 a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
ARTICLE EIGHT
The Corporation shall, to the fullest extent permitted by Section
145 of the Delaware General Corporation Law, as the same may be amended and
supplemented, indemnify each director and officer of the Corporation from and
against any and all of the expenses, liabilities or other matters referred to
in or covered by said section and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any By-law, agreement, vote of stockholders, vote of
disinterested directors or otherwise, and shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such persons and the Corporation may
purchase and maintain insurance on behalf of any director or officer to the
extent permitted by Section 145 of the Delaware General Corporation Law.
ARTICLE NINE
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of section 291 of Title
- 4 -
<PAGE>
8 of the Delaware Code or on the application of trustees in dissolution or of
any receiver or receivers appointed for the Corporation under the provisions
of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation and have
attested such execution and do verify and affirm, under penalty of perjury,
that this Amended and Restated Certificate of Incorporation is the act and
deed of the Corporation and that the facts stated herein are true as of this
4th day of September, 1996.
U.S. OFFICE PRODUCTS COMPANY
By: /s/Donald H. Platt
-----------------------------------
Donald H. Platt
Senior Vice President
Attest:
By: /s/Mark D. Director
----------------------------------
Mark D. Director
Executive Vice President, General
Counsel and Secretary
[Corporate Seal]
- 5 -
<PAGE>
EXHIBIT 11.1
U.S. OFFICE PRODUCTS COMPANY
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Primary earnings per share:
Three Months Ended
----------------------
July 27, July 31,
1996 1995
-------- --------
Net income (loss) $ 7,504 $ (4,119)
-------- --------
-------- --------
Weighted average shares outstanding 37,292 22,468
Common stock equivalents from stock options 1,166
-------- --------
Total weighted average shares outstanding 38,458 22,468
-------- --------
-------- --------
Net income (loss) per share $ .20 $ (.18)
-------- --------
-------- --------
Page 18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-26-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-27-1996
<CASH> 98,947
<SECURITIES> 0
<RECEIVABLES> 234,669
<ALLOWANCES> (4,284)
<INVENTORY> 190,665
<CURRENT-ASSETS> 577,965
<PP&E> 145,687
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,191,836
<CURRENT-LIABILITIES> 364,343
<BONDS> 427,138
0
0
<COMMON> 39
<OTHER-SE> 388,133
<TOTAL-LIABILITY-AND-EQUITY> 1,191,836
<SALES> 352,638
<TOTAL-REVENUES> 352,638
<CGS> 253,017
<TOTAL-COSTS> 333,033 <F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,949
<INCOME-PRETAX> 12,656
<INCOME-TAX> 5,152
<INCOME-CONTINUING> 7,504
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,504
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
<FN>
<F1>TOTAL COSTS INCLUDE $1,656 OF NONRECURRING ACQUISITION COSTS INCURRED
IN BUSINESS COMBINATIONS ACCOUNTED FOR UNDER THE P00LING-OF INTERESTS METHOD.
</FN>
</TABLE>
