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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
For the fiscal year ended April 26, 1997 Commission File Number: 0-25372
U.S. OFFICE PRODUCTS COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 52-1906050
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification of No.)
1025 Thomas Jefferson St., N.W., Suite 600E
Washington, D.C. 20007
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 339-6700
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.001
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
the filing requirements for at least 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. [___]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of
filing. (See the definition of affiliate in Rule 405.)
$2,058,582,077 (as of August 15, 1997)
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Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Common Stock, Par Value $0.001 Per Share (72,870,162 shares outstanding as of
August 15, 1997)
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Documents incorporated by reference: List the following documents if
incorporated by reference and the part of the Form 10-K into which the document
is incorporated: (1) any annual report to security holders, (2) any proxy or
information statement, and (3) any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933. (The listed documents should be
clearly described for identification purposes.)
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U.S. OFFICE PRODUCTS COMPANY
U.S. Office Products Co., the registrant, hereby amends Item 7, Item 8,
Item 11 and Item 14 of its Annual Report on Form 10-K for 1997 as set forth
in the pages attached hereto.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes thereto appearing elsewhere
in this Annual Report.
The Company's financial condition and results of operations have changed
dramatically from its inception in October 1994 to April 26, 1997 as a result of
its acquisition program. See "Business-- Business Strategies--Growth Through
Acquisitions." During fiscal 1997, the Company completed 117 business
combinations, 77 of which were accounted for under the purchase method (the
"Fiscal 1997 Purchased Companies") and 40 of which were accounted for under the
pooling-of-interests method. During fiscal 1996, the Company completed 48
business combinations, 34 of which were accounted for under the purchase method
(the "Fiscal 1996 Purchased Companies") and 14 of which were accounted for under
the pooling-of-interests method. The Company's consolidated financial statements
give retroactive effect to the business combinations accounted for under the
pooling-of-interests method and include the results of companies acquired in
business combinations accounted for under the purchase method from their
respective acquisition dates.
CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth various items as a percentage of revenues for
the three fiscal years ended April 26, 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
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<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
------------- ------------- -------------
Revenues............................................................ 100.0% 100.0% 100.0%
Cost of revenues.................................................... 71.6 73.9 73.3
------------- ------------- -------------
Gross profit...................................................... 28.4 26.1 26.7
Selling, general and administrative expenses........................ 23.1 22.1 22.8
Non-recurring acquisition costs..................................... .6 .5
Restructuring costs................................................. .2 .2
------------- ------------- -------------
Operating income.................................................. 4.5 3.3 3.9
Interest expense, net............................................... 1.3 .9 .7
Other (income)...................................................... (.1) (.1) (.2)
------------- ------------- -------------
Income before provision for income taxes and extraordinary items.... 3.3 2.5 3.4
Provision for income taxes.......................................... 1.2 .4 .4
------------- ------------- -------------
Income before extraordinary items................................... 2.1 2.1 3.0
Extraordinary items--losses on early terminations of credit
facilities, net of income taxes................................... .1 .1
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Net income.......................................................... 2.0% 2.0% 3.0%
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------------- ------------- -------------
</TABLE>
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YEAR ENDED APRIL 26, 1997 COMPARED TO THE YEAR ENDED APRIL 30, 1996
Consolidated revenues increased 68.2%, from $1,686.4 million in fiscal 1996,
to $2,835.9 million in fiscal 1997. This increase was primarily due to the
inclusion in fiscal 1997 revenues of revenues from the Fiscal 1997 Purchased
Companies from their respective dates of acquisition and revenues from the
Fiscal 1996 Purchased Companies for the entire year. Revenues in fiscal 1996
include revenues from the Fiscal 1996 Purchased Companies from their respective
dates of acquisition. The revenues were generated primarily in the office
products and print management industry segments, which represented 72.0% and
13.0%, respectively, of consolidated revenues for fiscal 1997, and 62.4% and
18.8%, respectively, of consolidated revenues for fiscal 1996. The change in the
mix of revenues by industry segment is the direct result of the mix of the
acquisitions in the different industry segments completed in fiscal 1997 and
1996.
International revenues increased from $197.3 million, or 11.7% of
consolidated revenues, in fiscal 1996, to $829.9 million, or 29.3% of
consolidated revenues in fiscal 1997. International revenues consisted primarily
of revenues from New Zealand and Australia, with the balance from Canada. The
increase in international revenues was primarily due to the inclusion, in the
revenues for fiscal 1997, of revenues from 16 companies that were acquired in
business combinations accounted for under the purchase method during fiscal
1997. Fiscal 1996 international revenues include the results of two companies
for the entire year and the results of three companies acquired in fiscal 1996
in business combinations accounted for under the purchase method.
Gross profit increased 82.9%, from $439.8 million, or 26.1% of revenues, in
fiscal 1996, to $804.2 million, or 28.4% of revenues, in fiscal 1997. 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 and services, primarily as a result of
products sold in New Zealand and Australia and as a result of improved
purchasing and rebate programs negotiated with vendors.
Selling, general and administrative expenses increased 76.0%, from $372.2
million, or 22.1% of revenues, in fiscal 1996, to $655.1 million, or 23.1% of
revenues, in fiscal 1997. The increase in selling, general and administrative
expenses as a percentage of revenues was due primarily to a shift in revenue mix
resulting in a higher proportion of revenues from products and services with
traditionally higher selling, general and administrative expenses, such as
products sold in New Zealand and Australia.
The Company incurred one-time, non-recurring acquisition costs of $16.2
million and $8.1 million during fiscal 1997 and 1996, respectively, in
conjunction with business combinations accounted for under the
pooling-of-interests method. These non-recurring acquisition costs included
accounting and legal fees, investment banking fees, recognition of transaction
related obligations and various other acquisition related costs. Generally
accepted accounting principles ("GAAP") require the Company to expense all
acquisition costs (both those paid by the Company and those paid by the sellers
of the acquired companies) related to business combinations accounted for under
the pooling-of-interests method. The increase in such non-recurring acquisition
costs reflects the increase in the number of business combinations accounted for
under the pooling-of-interests method, from 14 during fiscal 1996 to 40 during
fiscal 1997. The Company expects to incur similar costs in the future, as the
Company anticipates completing additional acquisitions accounted for under the
pooling-of-interests method. See "Business--Business Strategies--Growth Through
Acquisitions" and "Business--Factors Affecting the Company's Future
Prospects--Rapid Expansion and Dependence on Acquisitions for Future Growth."
The Company also incurred restructuring costs of approximately $4.4 million
and $3.2 million during fiscal 1997 and 1996, respectively. These costs
represent the external costs and liabilities to close redundant Company
facilities, severance costs related to the Company's employees and other costs
associated with the Company's restructuring plans. The Company expects to incur
similar costs in the future as the Company continues to review its operations.
See "Business--Factors Affecting the Company's Future Prospects--Integration of
Acquisitions and Limited Combined Operating History." On a regional level, the
Company is implementing regional consolidation and integration plans for its
office
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supply, office coffee and beverage services and office furniture divisions
through which the Company has established and expects to continue to establish
DFCs. The DFCs are intended to enable certain operational activities, such as
inventory management, purchasing, accounting and human resources, to be shared
among hubs and spokes located within the same geographic area. This regional
approach is intended to permit the elimination of duplicative facilities and
costs and promote integration of the operations within each region. See
"Business -- Business Strategies -- Achieving Operating Efficiencies."
Interest expense, net of interest income, increased 143.8%, from $15.7
million in fiscal 1996, to $38.3 million in fiscal 1997. 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 and an increase in the outstanding balance under the Company's
credit facility. The proceeds from the issuance of the Notes and the additional
borrowings under the credit facility were used primarily to fund the cash
portion of the consideration in certain business combinations accounted for
under the purchase method and to refinance indebtedness assumed in business
combinations.
Other income increased 113.0%, from $1.7 million in fiscal 1996, to $3.7
million in fiscal 1997. Fiscal 1997 other income consists primarily of foreign
currency gains and equity in the net income of the Company's 49% investment in
Dudley, the largest independent office products dealer in the United Kingdom.
The Company anticipates that foreign currency transaction gains and losses will
be immaterial in the future and that the income from its equity investment will
increase as the fiscal 1997 amount represented earnings from November 14, 1996,
the date of the Company's investment, through April 26, 1997.
Provision for income taxes increased from $7.5 million in fiscal 1996 to
$35.1 million in fiscal 1997, reflecting effective income tax rates of 17.7% and
37.4%, respectively. The low effective income tax rate in fiscal 1996, compared
to the federal statutory rate of 35.0%, was primarily due to the fact that
several of the companies included in the results for such year, which were
acquired in business combinations accounted for under the pooling-of-interests
method, were not subject to federal income taxes on a corporate level as they
had elected to be treated as subchapter S corporations prior to being acquired
by the Company. In fiscal 1997, this effect was offset by the increase in
nondeductible expenses, including amortization of goodwill and non-recurring
acquisition costs. The Company also reversed a deferred tax asset valuation
allowance of approximately $5.3 million, during fiscal 1997, as it was
considered more likely than not that the related deferred tax benefits would be
realized.
During fiscal 1997, the Company incurred extraordinary items totaling $1.5
million, which represent the aggregate expenses, net of the expected tax
benefit, associated with the early termination of the Company's $50 million
credit facility with First Bank National Association and the early termination
of credit facilities at two companies acquired in transactions accounted for
under the pooling-of-interests method during fiscal 1997.
Net income per share increased from $.75 in fiscal 1996 to $.94 in fiscal
1997 as a result of the $23.1 million increase in net income, partially offset
by the increase in the weighted average number of common shares outstanding. The
Company anticipates that, as a result of shares of common stock issued during
fiscal 1997 related to business combinations and the public offering of
8,682,331 shares of common stock in February and March 1997 and the expectation
that the consideration for future acquisitions will include the issuance of
shares of common stock, the weighted average number of common shares outstanding
will continue to increase.
YEAR ENDED APRIL 30, 1996 COMPARED TO THE YEAR ENDED APRIL 30, 1995
Consolidated revenues increased 62.0%, from $1,041.3 million in fiscal 1995,
to $1,686.4 million in fiscal 1996. This increase was primarily due to the
inclusion in the revenues for fiscal 1996 of revenues
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from the Fiscal 1996 Purchased Companies from their respective dates of
acquisition and revenues from six companies that were acquired in business
combinations accounted for under the purchase method during fiscal 1995 (the
"Fiscal 1995 Purchased Companies") for the entire year. Revenues in fiscal 1995
include revenues from the Fiscal 1995 Purchased Companies from their respective
dates of acquisition. The revenues were generated primarily in the office
products and print management industry segments, which represented 62.4% and
18.8%, respectively, of consolidated revenues for fiscal 1996, and 62.8% and
13.4%, respectively, of consolidated revenues for fiscal 1995. The change in the
mix of revenues by industry segment is the direct result of the mix of the
acquisitions in the different industry segments completed in fiscal 1996 and
1995.
International revenues increased from $35.7 million, or 3.4% of consolidated
revenues, in fiscal 1995, to $197.3 million, or 11.7% of consolidated revenues,
in fiscal 1996. This increase was primarily due to the inclusion in the revenues
for fiscal 1996 of revenues from two companies for the entire year and three
companies that were acquired in business combinations accounted for under the
purchase method during fiscal 1996.
Gross profit increased 57.9%, from $278.6 million, or 26.7% of revenues, in
fiscal 1995, to $439.8 million, or 26.1% of revenues, in fiscal 1996. The
decrease in gross profit as a percentage of revenues was due primarily to a
shift in revenue mix, primarily resulting from acquisitions, to revenues in
traditionally lower gross margin products and services such as print management
and business machines.
Selling, general and administrative expenses increased 56.5%, from $237.9
million, or 22.8% of revenues, in fiscal 1995, to $372.2 million, or 22.1% of
revenues, in fiscal 1996. The decrease in selling, general and administrative
expenses as a percentage of revenues was due primarily to a shift in revenue
mix, primarily resulting from acquisitions, to revenues in products and services
traditionally lower in selling, general and administrative expenses such as
print management and business machines.
The Company incurred one-time, non-recurring acquisition costs of
approximately $8.1 million in fiscal 1996, in conjunction with 14 business
combinations accounted for under the pooling-of-interests method. The
non-recurring acquisition costs in fiscal 1996 included a charge of
approximately $4.7 million related to one business combination which included
the payment of significant transaction-related compensation obligations. During
fiscal 1996, the Company also recorded restructuring charges of $3.2 million
related to the consolidation of two facilities at one subsidiary and the
discontinuation of the printing division at another subsidiary.
Interest expense, net of interest income, increased 118.5% from $7.2
million, in fiscal 1995, to $15.7 million in fiscal 1996. This increase was due
primarily to the increase in the Company's borrowings through the issuance of
$143.75 million of Notes during the fourth quarter of fiscal 1996 and an
increase in the outstanding balance on the Company's credit facility. The
proceeds from the issuance of the Notes and the additional borrowings from the
credit facility were used to fund the cash portion of the consideration in
business combinations and to refinance indebtedness assumed in such business
combinations.
Provision for income taxes increased from $3.8 million in fiscal 1995 to
$7.5 million in fiscal 1996 reflecting effective income tax rates of 10.7% and
17.7%, respectively. The low effective income tax rates in fiscal 1995 and 1996,
compared to the federal statutory rate of 35.0%, are primarily due to the fact
that several companies included in the results for fiscal 1995 and 1996, which
were acquired in business combinations accounted for under the
pooling-of-interests method, were not subject to federal income taxes on a
corporate level as they had elected to be treated as subchapter S corporations
prior to being acquired by the Company.
5
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During fiscal 1996, the Company incurred an extraordinary item of $701,000,
which represented the aggregate expenses, net of the expected tax benefit,
associated with the early termination of a credit facility at a company acquired
in a business combination accounted for under the pooling-of-interests method.
LIQUIDITY AND CAPITAL RESOURCES
At April 26, 1997, the Company had cash of $44.0 million and working capital
of $323.7 million. The Company's capitalization, defined as the sum of long-term
debt and stockholders' equity, at April 26, 1997 was approximately $1.3 billion.
During fiscal 1997, net cash provided by operating activities was $46.1
million. Net cash provided by operating activities was impacted by the Company's
aggressive cash payment policies related to bringing current the accounts
payable balances at all acquired companies and earning all available cash
discounts offered by vendors for paying balances on reduced payment terms. Net
cash used in investing activities was $463.5 million, including $354.8 million
for acquisitions, $51.9 million for additions to property and equipment and
$41.3 million to make an equity investment in Dudley. Net cash provided by
financing activities was $278.4 million. The Company received net proceeds from
the sale of shares of its common stock of $320.5 million and approximately
$222.7 million from the issuance of the Notes. These net proceeds were used
primarily to fund acquisitions and repay higher interest rate debt assumed in
acquisitions.
During fiscal 1996, net cash provided by operating activities was $43.0
million. Net cash used in investing activities was $168.9 million, including
$130.2 million used for acquisitions and $26.8 million used for additions to
property and equipment. Net cash provided by financing activities was $284.2
million. The Company received net proceeds from the sale of shares of its common
stock of $181.5 million and net proceeds from the issuance of the Notes of
approximately $138.4 million. These net proceeds were used primarily to fund
acquisitions, including the repayment of higher interest rate debt assumed in
business combinations.
During fiscal 1995, net cash provided by operating activities was $23.7
million. Net cash used in investing activities was $30.8 million, including
$18.1 million used for acquisitions and $13.1 million used for additions to
property and equipment. Net cash provided by financing activities was $14.4
million, representing net proceeds from the initial public offering, partially
offset by the payment of $11.3 million to the stockholders of four of the
companies acquired simultaneously with the completion of the Company's initial
public offering and the payment of dividends to certain of the companies
acquired in business combinations accounted for under the pooling-of-interests
method of $16.3 million.
In February and March 1997, the Company completed the public sale, at a
gross price of $33.00 per share, of 8,682,331 shares of its common stock. The
net proceeds to the Company, after deducting underwriting discounts and
commissions and offering expenses, were approximately $275.7 million and were
used to repay a portion of the then outstanding balance under the Company's
credit facility.
In October 1996, the Company refinanced $180 million in high interest rate
debt outstanding in New Zealand and Australia with $180 million that was
available to the Company under the its credit facility solely for purposes of
such refinancing. The average annual interest rate on such debt prior to such
refinancing was approximately 11.0%.
In September 1996, the Company sold 1,250,000 shares of common stock to
Quantum Partners LDC in a private placement. The Company received net proceeds
of approximately $38.1 million as a result of the sale. The proceeds were used
to repay a portion of the then outstanding balance under the Company's credit
facility.
In August 1996, the Company entered into an agreement under which a
syndicate of financial institutions, led by Bankers Trust Company, as agent (the
"Bank"), is providing the Company with a $500 million credit facility (the
"Credit Facility"), bearing interest, at the Company's option, at the Bank's
base
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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 two sublimits: $100 million for working capital loans and $400
million for acquisition loans. The Credit Facility is secured by a majority of
the assets of the Company and its subsidiaries and contains customary covenants,
including financial covenants with respect to the Company's consolidated
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. At July 1, 1997, the Company had
approximately $217.8 million outstanding under the Credit Facility at an annual
interest rate of approximately 7.6% and had $186.0 million and $96.2 million
available under the Credit Facility for acquisition and working capital
purposes, respectively.
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 managers' discounts
and commissions and offering expenses, were approximately $222.7 million and
were used for working capital and acquisition purposes, including the repayment
of higher interest rate debt assumed in business combinations.
Subsequent to April 26, 1997 and through July 1, 1997, the Company completed
13 business combinations for an aggregate purchase price of $165.4 million,
consisting of approximately $101.4 million of cash and 2,405,039 shares of the
Company's common stock with an aggregate market value on the dates of
acquisition of approximately $64.0 million. On May 22, 1997, the Company signed
a definitive agreement to acquire MBE. See "Business--Overview."
The Company plans to continue to consolidate and modernize its distribution
facilities and systems, including through creation of DFCs and the consolidation
of existing facilities into DFCs. See "Business--Business Strategies--Achieving
Operating Efficiencies." The Company expects to incur capital expenditures of
approximately $60 million over the next fiscal year for this and other purposes.
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 remainder of the calendar year. However, the Company is currently,
and intends to continue, pursuing additional acquisitions, which are expected to
be funded through a combination of cash and common stock. There can be no
assurances that additional sources of financing will not be required during the
next twelve months or thereafter to fund the Company's acquisition program.
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 the Company's other operations, which have
expanded 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.
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.
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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, general economic conditions and the retroactive restatement in
accordance with generally accepted accounting principles of the Company's
consolidated financial statements for acquisitions accounted for under the
pooling-of-interests method. Moreover, the operating margins of companies
acquired by the Company may differ substantially from those of the Company,
which could contribute to the further fluctuation in its quarterly operating
results. 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.
The following tables set forth certain unaudited consolidated quarterly
financial data for the fiscal years ended April 26, 1997 and April 30, 1996 (in
thousands, except for per share amounts). The information has been derived from
unaudited consolidated financial statements that in the opinion of management
reflect all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of such quarterly information.
FISCAL 1997
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ 552,489 $ 736,686 $ 756,707 $ 789,993 $ 2,835,875
Gross profit...................................... 153,745 209,509 214,253 226,655 804,162
Operating income.................................. 27,877 39,063 31,253 30,228 128,421
Net income........................................ 16,330 18,092 10,770 12,096 57,288
Net income per share.............................. .29 .31 .18 .18 .94
</TABLE>
FISCAL 1996
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ 330,612 $ 406,538 $ 458,222 $ 491,058 $ 1,686,430
Gross profit...................................... 84,339 104,745 118,107 132,592 439,783
Operating income.................................. 6,330 15,979 22,272 11,751 56,332
Net income........................................ 4,847 10,179 13,516 5,634 34,176
Net income per share.............................. .12 .23 .30 .11 .75
</TABLE>
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations during fiscal 1997, 1996 or 1995.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued a new
opinion which establishes standards for computing and presenting earnings per
share ("EPS"). This opinion is intended to simplify the EPS computation and
enhance the comparability of EPS information internationally. The new standard
requires the presentation of both basic and diluted EPS on the face of the
income statement. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. This statement is required to be
adopted by the Company during the third quarter of fiscal 1998. The Company
anticipates that the adoption of this opinion will not have a material effect on
EPS.
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Item 8. Financial Statements and Supplementary Data
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Index to Financial Statements
<TABLE>
<CAPTION>
Page
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<S> <C>
Reports of Independent Accountants......................................... F-1
Consolidated Balance Sheet as of April 26, 1997 and April 30, 1996......... F-13
Consolidated Statement of Income for the years ended April 26, 1997
and April 30, 1996 and 1995........................................... F-14
Consolidated Statement of Stockholders' Equity for the years ended
April 26, 1997 and April 30, 1996 and 1995............................ F-15
Consolidated Statement of Cash Flows for the years ended April 26, 1997
and April 30, 1996 and 1995............................................... F-17
Notes to Consolidated Financial Statements................................. F-19
</TABLE>
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Report of Independent Accountants
To the Board of Directors and Stockholders of
U.S. Office Products Company
In our opinion, based upon our audits and the reports of other auditors,
the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of U.S.
Office Products Company and its subsidiaries at April 26, 1997 and April 30,
1996, and the results of their operations and their cash flows for each of
the three fiscal years in the period ended April 26, 1997, in conformity with
generally accepted accounting principles. 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 did not
audit the financial statements of certain wholly-owned subsidiaries, which
statements reflect total revenues of $616.9 million and $323.1 million
included in the Company's fiscal years ended April 30, 1996 and 1995,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for those wholly-owned subsidiaries, is
based solely on the reports of the other auditors. We conducted our audits
of these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits and the reports of other auditors provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
Minneapolis, Minnesota
June 6, 1997
F-1
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Report of Independent Auditors
Board of Directors
School Specialty, Inc.
We have audited the balance sheets of School Specialty, Inc. (formerly
known as EDA Corporation) (the Company) as of December 31, 1995 and 1994, and
the related statements of operations, changes in shareholders' deficit and
cash flows for the years then ended (not presented separately herein). 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 the Company at
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Milwaukee, WI
February 2, 1996
F-2
<PAGE>
Report of Independent Auditors
Board of Directors
The Re-Print Corporation
Birmingham, Alabama
We have audited the accompanying balance sheets of the Re-Print
Corporation as of December 31, 1995 and 1994, and the related statements of
income, stockholders' equity, and cash flows for three years ended December
31, 1995, 1994, and 1993 (not presented separately herein). 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 audits 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 The Re-Print
Corporation at December 31, 1995 and 1994, and the results of its operations
and its cash flows for three years ended December 31, 1995, 1994, and 1993 in
conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Atlanta, Georgia
February 8, 1996
F-3
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
SFI Corp.
We have audited the accompanying balance sheet of SFI Corp. as of
December 31, 1995 and the related statements of income, stockholders' equity,
and cash flows for the year then ended, which are not included herein. 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 audit.
We conducted our audit 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 audit provides 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 SFI Corp. as of
December 31, 1995 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Norfolk, Virginia
August 28, 1996
F-4
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Hano Document Printers, Inc.
We have audited the accompanying balance sheet of Hano Document Printers,
Inc. as of December 31, 1995 and the related statements of income,
stockholders' equity, and cash flows for the year then ended, which are not
included herein. 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 audit.
We conducted our audit 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 audit provides 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 Hano Document
Printers, Inc. as of December 31, 1995 and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Norfolk, Virginia
August 28, 1996
F-5
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
SFI Corp. and Hano Document Printers, Inc.
We have audited the combined balance sheet of SFI Corp. and Hano Document
Printers, Inc. (collectively referred to as the "Companies") as of December
31, 1994, and the related statements of income, stockholders' equity, and
cash flows for each of the years in the two-year period ended December 31,
1994, which are not included herein. These combined financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of SFI Corp.
and Hano Document Printers, Inc., as of December 31, 1994 and the results of
their operations and cash flows for each of the years in the two-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Norfolk, Virginia
August 28, 1996
F-6
<PAGE>
Report of Independent Auditors
Bay State Computer Group, Inc.
Boston, Massachusetts
We have audited the accompanying balance sheets of Bay State Computer
Group, Inc. as of March 31, 1996 and 1995, and the related statements of
earnings and retained earnings, and cash flows for the three years ended
March 31, 1996, 1995 and 1994 (none of which are presented herein
separately). 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 Bay State
Computer Group, Inc. as of March 31, 1996 and 1995, and the results of its
operations and its cash flows for the three years ended March 31, 1996, 1995,
and 1994 in conformity with generally accepted accounting principles.
/s/ Parent, McLaughlin and Nangle
Certified Public Accountants
Boston, MA
May 23, 1996, except for Note N
as to which the date is
October 14, 1996
F-7
<PAGE>
Report of Independent Auditors
To the Shareholders of
Data Business Forms Limited
We have audited the balance sheet of Data Business Forms Limited ("DBF")
as of December 31, 1995 and the statements of income and retained earnings
and changes in financial position for the period from amalgamation to
December 31, 1995 These financial statements are the responsibility of DBF's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of DBF as at December 31, 1995 and
the results of its operations and the changes in its financial position for
the period from amalgamation to December 31, 1995 in accordance with
generally accepted accounting principles.
/s/ Ernst & Young
Chartered Accountants
Toronto, Canada,
February 6, 1996
F-8
<PAGE>
Report of Independent Auditors
To the Stockholders and Board of Directors
Fortran Corp.
Newington, Virginia
We have audited the accompanying balance sheet of Fortran Corp. as of
March 31, 1996, and 1995 and the related statements of earnings, changes in
stockholders' equity, and cash flows for the years ended March 31, 1996,
1995, and 1994 (not presented separately herein). 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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to and above present
fairly, in all material respects, the financial position of Fortran Corp. as
of March 31, 1996, and 1995 and the results of its operations and its cash
flows for three years ended march 31, 1996, 1995 and 1994 in conformity with
generally accepted accounting principles.
As described in Note 9 to the financial statements, on August 21, 1996,
the Company entered into a letter of intent to exchange all of its issued and
outstanding shares of common stock for shares of U.S. Office Products Company
common stock.
/s/ RUBIN, KOEHMSTEDT AND NADLER
Newington, VA
June 7, 1996, except for Note 9,
as to which the date is
October 24, 1996
F-9
<PAGE>
Report of Independent Auditors
The Board of Directors
MTA, Inc.
Seattle, Washington
We have audited the accompanying consolidated balance sheet of MTA, Inc.
(the Company) as of December 31, 1995 and the related statements of income
and retained earnings and of cash flows for the period from January 25, 1995
(date of incorporation) to December 31, 1995. These financial statements are
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MTA, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the period from January 25, 1995, and the results of its operations and
its cash flows for the period from January 25, 1995 (date of incorporation)
to December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Seattle, WA
September 23, 1996
F-10
<PAGE>
Report of Independent Auditors
To the Shareholders of
United Envelope Co., Inc.
We have audited the combined balance sheets of United Envelope Co., Inc.
and its affiliate, Rex Envelope Co., Inc., as at December 31, 1995 and 1994,
and the related combined statements of income and retained earnings and cash
flows for the years then ended (not presented separately herein). 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.
As referred to in Note A on "Principles of Combination," the companies,
whose financial statements are combined, are related through common ownership
and control. In addition, each has pledged certain assets and guaranteed
long-term indebtedness of the other as described in the notes to financial
statements. In view of their close operating and financial relationship, the
preparation of combined financial statements was considered appropriate. The
combined statements, however, do not refer to a legal entity of the companies
guarantees trade obligations of the other.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
United Envelope Co., Inc. and its affiliates as at December 31, 1995 and
1994, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ HERTZ, HERSON & COMPANY, LLP
New York, New York
March 6, 1996
F-11
<PAGE>
Report of Independent Auditors
To the Shareholders of
Huxley Envelope Corporation
Industrial Park Blvd.
Mt. Pocono Industrial Park
Mt. Pocono, PA 18344
We have audited the accompanying balance sheets of Huxley Envelope
Corporation as at December 31, 1995 and 1994, and the related statements of
income and retained earnings (accumulated deficit) and cash flows for the
years then ended (not presented separately herein). 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 Huxley Envelope Corporation
as at December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/HERTZ, HERSON & COMPANY LLP
New York, New York
March 4, 1996
F-12
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 44,026 $ 183,483
Accounts receivable, less allowance for doubtful accounts of $10,066 and $6,000....... 380,402 248,934
Inventories........................................................................... 281,605 152,429
Prepaid expenses and other current assets............................................. 98,644 56,644
------------ ----------
Total current assets.............................................................. 804,677 641,490
Property and equipment, net............................................................. 241,402 127,581
Intangible assets, net.................................................................. 643,629 152,312
Other assets............................................................................ 120,644 69,467
------------ ----------
Total assets...................................................................... $ 1,810,352 $ 990,850
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt....................................................................... $ 150,458 $ 151,731
Accounts payable...................................................................... 204,814 134,832
Accrued compensation.................................................................. 40,285 25,677
Other accrued liabilities............................................................. 85,373 37,277
------------ ----------
Total current liabilities......................................................... 480,930 349,517
Long-term debt.......................................................................... 389,150 227,736
Deferred income taxes................................................................... 8,656 10,052
Other long-term liabilities and minority interests...................................... 10,468 8,799
------------ ----------
Total liabilities................................................................. 889,204 596,104
------------ ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 500,000 shares authorized, none outstanding
Common stock, $.001 par value, 500,000,000 shares authorized,69,652,669 and 52,976,280
shares issued and outstanding, respectively......................................... 70 53
Additional paid-in capital............................................................ 809,433 313,304
Cumulative translation adjustment..................................................... (5,583) 770
Retained earnings..................................................................... 117,228 80,619
------------ ----------
Total stockholders' equity........................................................ 921,148 394,746
------------ ----------
Total liabilities and stockholders' equity........................................ $ 1,810,352 $ 990,850
------------ ----------
------------ ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
----------------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
------------ ------------ ------------
Revenues................................................................ $ 2,835,875 $ 1,686,430 $ 1,041,304
Cost of revenues........................................................ 2,031,713 1,246,647 762,724
------------ ------------ ------------
Gross profit........................................................ 804,162 439,783 278,580
Selling, general and administrative expenses............................ 655,101 372,180 237,864
Non-recurring acquisition costs......................................... 16,245 8,057
Restructuring costs..................................................... 4,395 3,214
------------ ------------ ------------
Operating income.................................................... 128,421 56,332 40,716
Interest expense........................................................ 45,901 20,123 8,319
Interest income......................................................... (7,632) (4,425) (1,135)
Other income............................................................ (3,689) (1,730) (1,389)
------------ ------------ ------------
Income before provision for income taxes and
extraordinary items................................................... 93,841 42,364 34,921
Provision for income taxes.............................................. 35,103 7,487 3,754
------------ ------------ ------------
Income before extraordinary items....................................... 58,738 34,877 31,167
Extraordinary items--losses on early terminations of credit
facilities, net of income taxes....................................... 1,450 701
------------ ------------ ------------
Net income.............................................................. $ 57,288 $ 34,176 $ 31,167
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares outstanding.............................. 61,174 45,583
Income per share before extraordinary items............................. $ 0.96 $ 0.77
Extraordinary items..................................................... 0.02 0.02
------------ ------------
Net income per share.................................................... $ 0.94 $ 0.75
------------ ------------
------------ ------------
Unaudited pro forma income before extraordinary
items (see Note 10)................................................... $ 51,143 $ 21,945 $ 20,359
------------ ------------ ------------
------------ ------------ ------------
Unaudited pro forma income per share before
extraordinary items................................................... $ 0.84 $ 0.48
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE FISCAL YEARS ENDED APRIL 26, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------------- PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS STOCK EQUITY
------------ ----------- ----------- ----------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1994.............. 25,628,841 $ 25 $ 26,496 $ (340) $ 58,733 $ (7,562) $ 77,352
Transactions of Combined Companies
upon formation of Company:
Issuance of common stock........... 3,878,000 4 (3) 1
Capital contribution............... 1,500 1,500
Distributions to stockholders...... (11,300) (11,300)
Adjustments to stockholders'
equity........................... (12,597) 5,035 7,562
Cash dividends..................... (222) (222)
Issuance of common stock, net of
associated expenses, in conjunction
with:
Initial public offering............ 3,737,500 4 32,686 32,690
Acquisition........................ 875,000 1 8,749 8,750
Transactions of Pooled Companies:
Exercise of warrants and stock
options.......................... 13,563 201 201
Cash dividends..................... (16,086) (16,086)
Adjustment to conform the year-ends
of Pooled Companies................ 2,235 2,235
Cumulative translation adjustments... 207 207
Net income........................... 31,167 31,167
------------ ----- ----------- ----------- --------- --------- ------------
Balance at April 30, 1995.............. 34,132,904 34 57,032 (133) 69,562 126,495
Issuances of common stock, net of
associated expenses, in conjunction
with:
Public offerings................... 9,568,045 10 174,727 174,737
Acquisitions....................... 7,413,442 8 68,610 68,618
Exercise of stock options,
including tax benefits........... 63,350 1,023 1,023
Transactions of Pooled Companies:
Issuances of common stock for cash
and repayment of debt............ 581,499 8,298 8,298
Capital contributions.............. 500 500
Exercise of warrants and stock
options.......................... 652,615 1 1,752 1,753
Cash and stock dividends........... 564,425 1,362 (32,017) (30,655)
Adjustment to conform the year-ends
of Pooled Companies................ 8,898 8,898
Cumulative translation adjustments... 903 903
Net income........................... 34,176 34,176
------------ ----- ----------- ----------- --------- --------- ------------
Balance at April 30, 1996.............. 52,976,280 53 313,304 770 80,619 394,746
</TABLE>
F-15
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE FISCAL YEARS ENDED APRIL 26, 1997 (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------------- PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS STOCK EQUITY
------------ ----------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1996............. 52,976,280 $ 53 $ 313,304 $ 770 $ 80,619 $ 394,746
Issuances of common stock, net of
associated expenses, in conjunction
with:
Public offering................... 8,682,331 9 275,703 275,712
Direct equity investment.......... 1,250,000 1 38,112 38,113
Acquisitions...................... 5,790,300 6 166,074 166,080
Exercise of stock options,
including tax benefits.......... 131,828 2,843 2,843
Employee stock purchase plan...... 153,332 3,145 3,145
Transactions of Pooled Companies:
Issuances of common stock for
repayment of debt and payment of
acquisition expenses............ 273,087 6,859 6,859
Capital contributions............. 8,228 1,857 1,857
Exercise of warrants and stock
options......................... 319,077 1 1,979 1,980
Retirement of common stock........ 68,206 (443) (34) (477)
Cash dividends paid and
declared........................ (20,931) (20,931)
Adjustment to conform the year-ends
of Pooled Companies............... 286 286
Cumulative translation
adjustments....................... (6,353) (6,353)
Net income.......................... 57,288 57,288
------------ --- ---------- ----------- ---------- --- ------------
Balance at April 26, 1997............. 69,652,669 $ 70 $ 809,433 $ (5,583) $ 117,228 $ $ 921,148
------------ --- ---------- ----------- ---------- --- ------------
------------ --- ---------- ----------- ---------- --- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
----------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
---------- ----------- ---------
Cash flows from operating activities:
Net income.................................................................. $ 57,288 $ 34,176 $ 31,167
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 48,364 20,389 13,270
Non-recurring acquisition costs........................................... 16,245 8,057
Unrealized foreign currency gain.......................................... (3,420)
Deferred income taxes..................................................... (3,260) 32 (133)
Extraordinary losses...................................................... 1,450 701
Equity in net income of affiliate......................................... (782)
Stock issued to pay certain acquisition expenses.......................... 500
Changes in current assets and liabilities (net of assets acquired and
liabilities assumed in business combinations accounted for under the
purchase method):
Accounts receivable..................................................... (27,417) (8,166) (32,479)
Inventories............................................................. (3,291) 1,817 (3,557)
Prepaid expenses and other current assets............................... (11,155) (24,405) (2,733)
Accounts payable........................................................ (31,467) 6,531 11,858
Accrued liabilities..................................................... 3,084 3,879 6,337
---------- ----------- ---------
Net cash provided by operating activities............................. 46,139 43,011 23,730
---------- ----------- ---------
Cash flows from investing activities:
Cash paid in acquisitions, net of cash received............................. (354,811) (130,178) (18,099)
Payments of non-recurring acquisition costs................................. (13,588) (7,283)
Additions to property and equipment, net of disposals....................... (51,908) (26,834) (13,054)
Investment in affiliate..................................................... (41,270)
Other....................................................................... (1,877) (4,653) 364
---------- ----------- ---------
Net cash used in investing activities................................. (463,454) (168,948) (30,789)
---------- ----------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock...................................... 320,543 181,530 32,891
Proceeds from issuance of long-term debt.................................... 227,982 207,241 11,798
Payments of long-term debt.................................................. (218,861) (22,099) (10,670)
Proceeds from (payments of) short-term debt, net............................ (32,563) (58,999) 5,914
Payments to terminate credit facilities..................................... (1,235) (579)
Payments of dividends at Pooled Companies................................... (19,611) (22,166) (16,305)
Capital contributed by stockholders of Pooled Companies..................... 1,857 500
Net change in cash due to conforming fiscal year-ends of certain Pooled
Companies................................................................. 286 (1,221) 601
Capital contributed by Combined Company stockholder......................... 1,500
Payments to stockholders of Combined Companies.............................. (11,300)
---------- ----------- ---------
Net cash provided by financing activities............................. 278,398 284,207 14,429
---------- ----------- ---------
Effect of exchange rates on cash and cash equivalents......................... (540) 267 (180)
---------- ----------- ---------
Net (decrease) increase in cash and cash equivalents.......................... (139,457) 158,537 7,190
Cash and cash equivalents at beginning of period.............................. 183,483 24,946 17,756
---------- ----------- ---------
Cash and cash equivalents at end of period.................................... $ 44,026 $ 183,483 $ 24,946
---------- ----------- ---------
---------- ----------- ---------
Supplemental disclosure of cash flow information:
Interest paid............................................................. $ 39,916 $ 12,255 $ 13,091
Income taxes paid......................................................... 28,905 8,744 7,726
</TABLE>
F-17
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
The Company issued common stock, notes payable and cash in connection with
certain business combinations accounted for under the purchase method during
fiscal 1997, 1996 and 1995. The fair values of the assets and liabilities of the
acquired companies at the dates of the acquisitions are presented as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
----------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
---------- ----------- ---------
Accounts receivable........................................................... $ 105,538 $ 93,741 $ 23,462
Inventories................................................................... 122,917 68,861 20,074
Prepaid expenses and other current assets..................................... 23,344 9,740 1,779
Property and equipment........................................................ 95,615 57,372 5,459
Intangible assets............................................................. 506,386 127,870 21,079
Other assets.................................................................. 7,847 56,529 339
Short-term debt............................................................... (24,895) (106,672) (15,038)
Accounts payable.............................................................. (103,851) (48,825) (15,627)
Accrued liabilities........................................................... (55,477) (21,554) (4,958)
Long-term debt................................................................ (155,237) (17,950) (6,283)
Other long-term liabilities and minority interest............................. (1,296) (12,175) (437)
---------- ----------- ---------
Net assets acquired................................................... $ 520,891 $ 206,937 $ 29,849
---------- ----------- ---------
---------- ----------- ---------
The acquisitions were funded as follows:
Common stock.................................................................. $ 166,080 $ 68,618 $ 8,750
Debt.......................................................................... 8,141 3,000
Cash.......................................................................... 354,811 130,178 18,099
---------- ----------- ---------
Total................................................................. $ 520,891 $ 206,937 $ 29,849
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
Noncash transactions:
- - During fiscal 1997 and 1996, the Company issued 256,420 and 194,447 shares of
common stock, respectively, to repay $6,359 and $2,470 of indebtedness,
respectively.
- - During fiscal 1997 and 1996, the Company recorded additional paid-in capital
of approximately $1,250 and $426, respectively, related to the tax benefit
on stock options exercised.
- - During fiscal 1996, one Pooled Company converted $1,385 of debt to common
stock.
- - During fiscal 1996, one Pooled Company paid a dividend of $9,851 through the
issuance of 564,425 shares of common stock
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1--BUSINESS ORGANIZATION
U.S. Office Products Company ("U.S. Office Products" and the "Company") was
founded in October 1994. The Company is a supplier of a broad range of office
and educational products and business services to corporate, commercial,
industrial and educational customers. The Company operates throughout the United
States, as well as in New Zealand, Australia and Canada and, through a 49% owned
affiliate, in the United Kingdom.
NOTE 2--FORMATION OF COMPANY
Concurrent with the closing of its initial public offering in February 1995,
the Company acquired four companies (the "Combined Companies") for a combination
of its common stock and cash and acquired two companies in business combinations
accounted for under the purchase method. Because of the substantial ongoing
interest of the stockholders of the Combined Companies in U.S. Office Products,
the assets and liabilities of the Combined Companies were combined on a
historical cost basis. The capital stock of the Combined Companies is included
in additional paid-in capital.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of U.S. Office Products,
the Combined Companies and 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DEFINITION OF FISCAL YEAR
As used in these consolidated financial statements and related notes to
consolidated financial statements, "fiscal 1997," "fiscal 1996" and "fiscal
1995" refer to the Company's fiscal years ended April 26, 1997 and April 30,
1996 and 1995, respectively. 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 in April.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Investments in less than 50% owned entities
are accounted for under the equity method. All significant intercompany
transactions and accounts are eliminated in consolidation.
F-19
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
Receivables arising from sales to customers are not collateralized and, as a
result, management continually monitors the financial condition of its customers
to reduce the risk of loss.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out (FIFO) basis and consist primarily of products held for
sale.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation of
property and equipment is calculated using the straight-line method over the
estimated useful lives of the respective assets. The estimated useful lives
range from 25 to 40 years for buildings and its components and 3 to 15 years for
furniture, fixtures and equipment. Property and equipment leased under capital
leases is being amortized over the lesser of its useful life or its lease terms.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, which represents the excess
of cost over the fair value of assets acquired in business combinations
accounted for under the purchase method. Substantially all goodwill is amortized
on a straight line basis over an estimated useful life of 40 years. Management
periodically evaluates the recoverability of goodwill, which would be adjusted
for a permanent decline in value, if any, by comparing anticipated undiscounted
future cash flows from operations to net book value.
TRANSLATION OF FOREIGN CURRENCIES
Balance sheet accounts of foreign subsidiaries are translated using the
year-end exchange rate, and statement of income accounts are translated using
the average exchange rate for the year. Translation adjustments are recorded as
a separate component of stockholders' equity.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's wholly-owned foreign subsidiary has entered into forward
foreign currency exchange contracts (the "Exchange Contracts") with
counterparties to hedge the exposure of foreign currency fluctuations to the
extent permissible by hedge accounting requirements. At April 26, 1997, the
Exchange Contracts, in the notional amount of $3,319, hedge certain foreign
currency denominated assets. The
F-20
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Exchange Contracts generally have maturity dates of 60 days or less. Discounts
or premiums on the Exchange Contracts are amortized over the life of the
contracts.
The Company's wholly-owned foreign subsidiary also entered into interest
rate swap agreements (the "Swap Agreements") with counterparties to convert the
interest rates associated with certain outstanding debt from variable rates to
fixed rates. The notional amount of the Swap Agreements was $43,000 at April 30,
1996. During fiscal 1997, the Swap Agreements were terminated resulting in a
loss of $117.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments has been
determined using the following methods and assumptions:
- - The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value;
- - The fair values of the 5 1/2% Convertible Subordinated Notes due 2001 and the
5 1/2% Convertible Subordinated Notes due 2003 are based on quoted market
prices;
- - The carrying amounts of the Company's debt, other than the 5 1/2% Convertible
Subordinated Notes due 2001 and the 5 1/2% Convertible Subordinated Notes
due 2003, approximate fair value, estimated by discounted cash flow analyses
based on the Company's current incremental borrowing rates for similar types
of borrowing arrangements.
INCOME TAXES
Income taxes have been computed utilizing the asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. Certain
companies acquired in pooling-of-interests transactions elected to be taxed as
subchapter S corporations, and accordingly, no federal income taxes were
recorded by those companies for periods prior to their acquisition by U.S.
Office Products.
TAXES ON UNDISTRIBUTED EARNINGS
No provision is made for U.S. income taxes on earnings of subsidiary
companies which the Company controls but does not include in the consolidated
federal income tax return since it is management's practice and intent to
permanently reinvest the earnings of these subsidiaries.
REVENUE RECOGNITION
Revenue is recognized upon the delivery of products or upon the
completion of services provided to customers as no additional obligations to
the customer exist. Returns of the Company's products are considered
immaterial. The Company also leases equipment to customers under both
short-term and long-term lease agreements. Revenue related to short-term
leases is recognized on a monthly basis over the life of the lease. Certain
long-term leases qualify as sales-type leases and, accordingly, the present
value of the future lease payments is recognized as income upon delivery of
the equipment to the customer.
F-21
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COST OF REVENUES
Vendor rebates are recognized on an accrual basis in the period earned and
are recorded as a reduction to cost of revenues. Delivery and occupancy costs
are included in cost of revenues.
NON-RECURRING ACQUISITION COSTS
Non-recurring acquisition costs represent acquisition costs incurred by the
Company in business combinations accounted for under the pooling-of-interests
method. These costs include legal and accounting fees, investment banking fees,
recognition of transaction related obligations and various other acquisition
related costs.
RESTRUCTURING COSTS
The Company records the costs of consolidating existing Company facilities
into acquired operations, including the external costs and liabilities to close
redundant Company facilities and severance and relocation costs related to the
Company's employees in accordance with EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in Restructuring)."
ACCRUED ACQUISITION COSTS
The Company accrues the direct external costs incurred in conjunction with
the consummation of business combinations and the costs incurred to consolidate
acquired operations into existing Company facilities, including the external
costs and liabilities to close redundant facilities and severance and relocation
costs related to the acquired entity's employees in accordance with EITF Issue
No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination."
NET INCOME PER SHARE
Net income per share for fiscal 1997 and 1996 is calculated by dividing net
income by the weighted average number of common shares outstanding during the
year including common stock equivalents, if dilutive. Net income per share for
fiscal 1995 has not been presented as it is not considered meaningful due to the
acquisitions of the Combined Companies and the Company's initial public offering
in conjunction with the formation of the Company during fiscal 1995.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted 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." The Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. The adoption of SFAS 121 did not have
a material effect on the Company's consolidated operating results or financial
position.
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
during fiscal 1997. Under the provisions of SFAS 123, companies can elect to
account for stock-based compensation
F-22
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
plans using a fair-value based method or continue measuring compensation expense
for those plans using the intrinsic value method prescribed in APB Opinion No.
25. The Company has elected to continue using the intrinsic value method to
account for stock-based compensation plans. Pro forma disclosures of net income
and net income per share, as if the fair value-based method of accounting
defined in SFAS 123 has been applied, are presented in Note 14.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." This Statement establishes standards for computing
and presenting earnings per share ("EPS"). SFAS 128 simplifies the standards for
computing EPS and makes the presentation comparable to international EPS
standards by replacing the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. This Statement is required to be
adopted by the Company during fiscal 1998.
NOTE 4--BUSINESS COMBINATIONS
POOLING-OF-INTERESTS METHOD
In fiscal 1997 and 1996, the Company issued 22,108,776 and 8,440,852 shares
of common stock, respectively, to acquire 40 (the "1997 Poolings") and 14 (the
"1996 Poolings") companies, respectively, in business combinations accounted for
under the pooling-of-interests method. The Company's consolidated financial
statements give retroactive effect to the acquisitions of the Pooled Companies
for all periods presented. Certain of the Pooled Companies previously reported
on fiscal years ending other than April 26, 1997 and April 30, 1996.
Commencing on May 1, 1996 and 1995, the year-ends of the 1997 Poolings and
the 1996 Poolings were changed to April 26, 1997 and April 30, 1996,
respectively, resulting in adjustments to retained earnings of $286, $8,898 and
$2,235 during fiscal 1997, 1996 and 1995, respectively. Following is a summary
of the results related to the adjustments to retained earnings:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
---------- ---------- ---------
Revenues....................................................................... $ (9,907) $ 245,737 $ 55,126
Costs and expenses............................................................. (10,193) 236,839 52,891
---------- ---------- ---------
Net adjustment............................................................. $ 286 $ 8,898 $ 2,235
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
F-23
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 4--BUSINESS COMBINATIONS (CONTINUED)
The following presents the separate results, in each of the periods
presented, of U.S. Office Products (excluding the results of Pooled Companies
prior to the dates on which they were acquired), and the Pooled Companies up to
the dates on which they were acquired:
<TABLE>
<CAPTION>
U.S. OFFICE POOLED
PRODUCTS COMPANIES COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
Fiscal 1997
Revenues.............................................................. $ 2,175,170 $ 660,705 $ 2,835,875
Net income............................................................ 36,246 21,042 57,288
Fiscal 1996
Revenues.............................................................. $ 488,670 $ 1,197,760 $ 1,686,430
Net income............................................................ 7,828 26,348 34,176
Fiscal 1995
Revenues.............................................................. $ 120,479 $ 920,825 $ 1,041,304
Net income............................................................ 1,514 29,653 31,167
</TABLE>
PURCHASE METHOD
In fiscal 1997, the Company made 77 acquisitions accounted for under the
purchase method for an aggregate purchase price of $520,891 consisting of
$354,811 of cash, and 5,790,300 shares of common stock with a market value of
$166,080. The total assets related to these 77 acquisitions were $861,647,
including goodwill of $506,386. The results of these acquisitions have been
included in the Company's results from their respective dates of acquisition.
In fiscal 1996, the Company made 34 acquisitions accounted for under the
purchase method for an aggregate purchase price of $206,937, consisting of
$130,178 of cash, $8,141 of debt and 7,413,442 shares of common stock with a
market value of $68,618. The total assets related to these 34 acquisitions were
$414,113, including goodwill of $127,870. The results of these acquisitions have
been included in the Company's results from their respective dates of
acquisition.
In fiscal 1995, in addition to the acquisitions of the Combined Companies,
the Company made six acquisitions accounted for under the purchase method for an
aggregate purchase price of $29,849, consisting of $18,099 of cash, $3,000 of
notes payable and 875,000 shares of common stock with a market value of $8,750.
The total assets related to these six acquisitions were $72,192, including
goodwill of $21,079. The results of these acquisitions have been included in the
Company's results from their respective dates of acquisition.
The following presents the unaudited pro forma results of operations of the
Company for the fiscal years ended April 26, 1997 and April 30, 1996 and
includes the Company's consolidated financial statements, which give retroactive
effect to the acquisitions of the Pooled Companies for all periods presented,
and the results of the Purchased Companies as if all such purchase acquisitions
had been made at the beginning of fiscal 1996. The results presented below
include certain pro forma adjustments to
F-24
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 4--BUSINESS COMBINATIONS (CONTINUED)
reflect the amortization of intangible assets, adjustments in executive
compensation and the inclusion of a federal income tax provision on all
earnings:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------
<S> <C> <C>
APRIL 26, APRIL 30,
1997 1996
------------ ------------
Revenues.......................................................... $ 3,225,582 $ 3,094,608
Income before extraordinary items................................. 73,029 49,170
Net income........................................................ 71,579 48,469
Income per share before extraordinary items....................... 1.03 0.70
Net income per share.............................................. 1.01 0.69
</TABLE>
The unaudited 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 1996 or the
results which may occur in the future.
EQUITY INVESTMENT IN AFFILIATE
In November 1996, the Company acquired a 49% equity interest in Dudley
Stationery Limited ("Dudley"), which is being accounted for under the equity
method. Under the terms of the agreement, the Company agreed to invest
approximately $80 million for working capital into Dudley over a two-year
period. The Company has currently invested approximately $41.3 million of the
total $80 million in Dudley.
NOTE 5--ACCRUED ACQUISITION COSTS
In conjunction with the acquisitions of the fiscal 1997 Purchased Companies,
the Company accrued the direct external costs incurred in conjunction with the
consummation of the acquisitions and the costs to consolidate acquired
operations into existing Company facilities, including the external costs
associated with closing redundant facilities of acquired companies, and
severance and relocation costs related to the acquired companies' employees.
As of the consummation date of the acquisition, the Company begins to assess
and formulate a plan to exit activities of the acquired companies. Typically,
this involves evaluating the facilities of the Company and the acquired
companies in the specific geographic areas, determining which of the acquired
facilities will be exited and identifying employee groups that will be
terminated or relocated. In most cases, the facilities are closed and the
employees terminated within one year of the completion of the plan.
F-25
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 5--ACCRUED ACQUISITION COSTS (CONTINUED)
The following table sets forth the Company's accrued acquisition costs for
the periods ended April 26, 1997 and April 30, 1996:
<TABLE>
<CAPTION>
EMPLOYEE DISPOSAL OF
REDUNDANT SEVERANCE & ASSETS &
FACILITIES RELOCATION OTHER TOTAL
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at April 30, 1996................... $ -- $ -- $ -- $ --
Additions................................. 1,593 2,484 6,712 10,789
----------- ------ ----------- ---------
Balance at April 26, 1997................... $ 1,593 $ 2,484 $ 6,712 $ 10,789
----------- ------ ----------- ---------
----------- ------ ----------- ---------
</TABLE>
NOTE 6--RESTRUCTURING COSTS
The Company records the costs of consolidating existing Company facilities
into acquired operations, including the external costs and liabilities to close
redundant Company facilities and severance and relocation costs related to the
Company's employees. The following table sets forth the Company's accrued
restructuring costs for the periods ended April 26, 1997 and April 30, 1996:
<TABLE>
<CAPTION>
FACILITY SEVERANCE OTHER ASSET
CLOSURE AND AND WRITE- DOWNS
CONSOLIDATION TERMINATIONS AND COSTS TOTAL
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at April 30 1995:................ $ -- $ -- $ -- $ --
Additions.............................. 641 469 2,104 3,214
Utilizations........................... (682) (682)
------ ----- ----------- ---------
Balance at April 30, 1996................ 641 469 1,422 2,532
Additions.............................. 1,337 308 2,750 4,395
Utilizations........................... (943) (698) (3,615) (5,256)
------ ----- ----------- ---------
Balance at April 26, 1997................ $ 1,035 $ 79 $ 557 $ 1,671
------ ----- ----------- ---------
------ ----- ----------- ---------
</TABLE>
F-26
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 7--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
----------- ----------
<S> <C> <C>
Land................................................................. $ 34,153 $ 6,993
Buildings............................................................ 59,470 46,305
Furniture and fixtures............................................... 181,715 86,719
Warehouse equipment.................................................. 29,174 35,987
Equipment under capital leases....................................... 14,787 8,082
Leasehold improvements............................................... 22,637 12,329
----------- ----------
341,936 196,415
Less: Accumulated depreciation....................................... (100,534) (68,834)
----------- ----------
Net property and equipment........................................... $ 241,402 $ 127,581
----------- ----------
----------- ----------
</TABLE>
Depreciation expense for fiscal years 1997, 1996 and 1995 was $31,153,
$14,798 and $10,856, respectively.
NOTE 8--INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
---------- ----------
<S> <C> <C>
Goodwill.............................................................. $ 653,600 $ 146,273
Other................................................................. 11,345 14,309
---------- ----------
664,945 160,582
Less: Accumulated amortization........................................ (21,316) (8,270)
---------- ----------
$ 643,629 $ 152,312
---------- ----------
---------- ----------
</TABLE>
Amortization expense for fiscal years 1997, 1996 and 1995 was $14,224,
$5,229 and $1,600, respectively.
F-27
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9--CREDIT FACILITIES
SHORT-TERM DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
---------- ----------
<S> <C> <C>
Credit facilities with banks, average interest rates of 7.6% at April
26, 1997 and 7.8% at April 30, 1996................................. $ 140,090 $ 26,029
Annual renewal loans provided by banks and other financial
institutions of foreign subsidiary secured by lease receivables of
foreign subsidiary. Interest rates ranging from 7.8% to 10.2% at
April 30, 1996...................................................... 89,456
Bank lines of credit of foreign subsidiary operations secured by
assets of those operations. Interest rates ranging from 9.2% to
9.8% at April 30, 1996.............................................. 12,731
Other................................................................. 2,160 7,296
Current maturities of long-term debt.................................. 8,208 16,219
---------- ----------
Total short-term debt........................................... $ 150,458 $ 151,731
---------- ----------
---------- ----------
</TABLE>
The Company currently has an agreement under which a syndicate of financial
institutions, led by Bankers Trust Company, as Agent (the "Bank"), is providing
the Company with a $500 million 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. The Credit Facility is secured by a majority of the assets
of the Company and its subsidiaries and contains customary covenants, including
financial covenants with respect to the Company's consolidated 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. The Company was in compliance with or obtained
waivers relating to these covenants at April 26, 1997. At April 26, 1997, the
balance outstanding under the Credit Facility was $140,090 and included five
eurodollar contracts, expiring within 30 days, totaling $105,000 at an average
interest rate of 7.2%.
F-28
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9--CREDIT FACILITIES (CONTINUED)
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
---------- ----------
<S> <C> <C>
Convertible Subordinated Notes due 2003, interest at 5 1/2%,
convertible into shares of common stock at any time prior to
maturity at a conversion price of $47.40 per share, subject to
adjustment in certain events........................................ $ 230,000
Convertible Subordinated Notes due 2001, interest at 5 1/2%,
convertible into shares of common stock at any time prior to
maturity at a conversion price of $28.50 per share, subject to
adjustment in certain events........................................ 143,750 $ 143,750
Notes payable, secured by certain assets of the Company, interest
rates ranging from 8.0% to 10.0%, maturities from October 1996
through 2003........................................................ 35,400
Other................................................................. 16,627 53,175
Capital lease obligations............................................. 6,981 11,630
---------- ----------
Total maturities of long-term debt.............................. 397,358 243,955
Less: Current maturities of long-term debt............................ (8,208) (16,219)
---------- ----------
Total long-term debt............................................ $ 389,150 $ 227,736
---------- ----------
---------- ----------
</TABLE>
The 5 1/2% Convertible Subordinated Notes due 2003 (the "2003 Notes") are
redeemable, in whole or in part, at the Company's option at specified redemption
prices on or after May 22, 1998, but may not be redeemed prior to May 15, 1999
unless the closing price of the common stock is at least 150% of the conversion
price for a period of time prior to the notice of redemption. Costs incurred in
connection with the issuance of the 2003 Notes are included in other assets and
are being amortized over the seven year period of maturity. The fair value of
the 2003 Notes at April 26, 1997, based upon quoted market prices, totaled
$184,000.
The 5 1/2% Convertible Subordinated Notes due 2001 (the "2001 Notes") are
redeemable, in whole or in part, at the Company's option at specified redemption
prices on or after February 3, 1998, but may not be redeemed prior to February
2, 1999 unless the closing price of the common stock is at least 150% of the
conversion price for a period of time prior to the notice of redemption. Costs
incurred in connection with the issuance of the 2001 Notes are included in other
assets and are being amortized over the five year period of maturity. The fair
value of the 2001 Notes at April 26, 1997, based upon quoted market prices,
totaled $147,344.
F-29
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9--CREDIT FACILITIES (CONTINUED)
MATURITIES OF LONG-TERM DEBT
Maturities on long-term debt, including capital lease obligations, are as
follows:
<TABLE>
<S> <C>
1998.............................................................. $ 8,208
1999.............................................................. 8,957
2000.............................................................. 1,862
2001.............................................................. 144,557
2002.............................................................. 333
Thereafter........................................................ 233,441
---------
Total maturities of long-term debt................................ $ 397,358
---------
---------
</TABLE>
NOTE 10--INCOME TAXES
Domestic and foreign income before provision for income taxes and
extraordinary items consist of the following:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
-------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
--------- --------- ---------
Domestic..................................................... $ 66,076 $ 37,931 $ 32,728
Foreign...................................................... 27,765 4,433 2,193
--------- --------- ---------
Total........................................................ $ 93,841 $ 42,364 $ 34,921
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes consists of:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
-----------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
--------- ----------- -----------
Income taxes currently payable:
Federal....................................................... $ 22,829 $ 6,011 $ 2,374
State......................................................... 3,797 608 704
Foreign....................................................... 11,737 836 809
--------- ----------- -----------
38,363 7,455 3,887
--------- ----------- -----------
Deferred income tax expense (benefit)......................... (3,260) 32 (133)
--------- ----------- -----------
Total provision for income taxes.............................. $ 35,103 $ 7,487 $ 3,754
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
F-30
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 10--INCOME TAXES (CONTINUED)
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
--------- ----------
<S> <C> <C>
Current deferred tax assets:
Inventory............................................................. $ 1,223 $ 1,087
Allowance for doubtful accounts....................................... 2,028 1,475
Net operating loss carryforward....................................... 3,192 3,192
Accrued liabilities................................................... 4,177 3,289
--------- ----------
Total current deferred tax assets................................... 10,620 9,043
--------- ----------
Long-term deferred tax liabilities:
Property and equipment................................................ (4,540) (4,998)
Intangible assets..................................................... (670) (441)
Internal Revenue Service tax assessment............................... (3,383) (3,383)
Other................................................................. (63) (1,230)
--------- ----------
Total long-term deferred tax liabilities............................ (8,656) (10,052)
--------- ----------
Subtotal............................................................ 1,964 (1,009)
Valuation allowance................................................. (5,468)
--------- ----------
Net deferred tax asset (liability).................................. $ 1,964 $ (6,477)
--------- ----------
--------- ----------
</TABLE>
At April 30, 1996, a valuation allowance had been recorded, related to
deferred tax assets of a Pooled Company, including net operating loss
carryforwards. Based upon the improved profitability of this Pooled Company
during fiscal 1997, the valuation allowance was reversed resulting in a lower
provision for income taxes.
The Internal Revenue Service ("IRS") tax assessment relates to the deferral
of a gain on the sale of land and a building by a subsidiary of the
Company. The IRS has determined that a portion of the gain recorded by the
subsidiary does not qualify for deferral and has assessed the Company additional
taxes. The subsidiary has recorded a deferred tax liability, including
interest, as a result of the assessment. The Company has filed an appeal with
the IRS relating to the above assessment; however, the IRS has not yet responded
to the appeal.
F-31
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 10--INCOME TAXES (CONTINUED)
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
-------------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
----------- ----------- -----------
U.S. federal statutory rate.................................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit.......... 2.9 5.4 4.1
Subchapter S corporation income not subject to corporate level
taxation..................................................... (8.1) (30.5) (31.0)
Foreign earnings not subject to U.S. taxes..................... 2.0 (0.6)
Minority interest in foreign taxes............................. 2.5
Nondeductible goodwill......................................... 3.1 2.6 1.4
Nondeductible acquisition costs................................ 5.3 1.1
Reversal of valuation allowance................................ (5.8)
Other.......................................................... 3.0 2.2 1.2
--- ----- -----
Effective income tax rate...................................... 37.4% 17.7% 10.7%
--- ----- -----
--- ----- -----
</TABLE>
One Combined Company and certain Pooled Companies were organized as
subchapter S corporations prior to the closing of their acquisitions by the
Company and, as a result, the federal tax on their income was theresponsibility
of their individual stockholders. Accordingly, the Combined Company and the
specific Pooled Companies provided no federal income tax expense prior to these
acquisitions by the Company.
The following unaudited pro forma income tax information is presented in
accordance with SFAS 109 as if the Combined Company and the specific Pooled
Companies had been subject to federal income taxes for the entire periods
presented.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
-------------------------------
<S> <C> <C> <C>
APRIL 26, APRIL 30, APRIL 30,
1997 1996 1995
--------- --------- ---------
Income before extraordinary items per consolidated statement
of income.................................................. $ 58,738 $ 34,877 $ 31,167
Pro forma income tax provision adjustment.................... 7,595 12,932 10,808
--------- --------- ---------
Pro forma income before extraordinary items.................. $ 51,143 $ 21,945 $ 20,359
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-32
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 11--LEASE COMMITMENTS
The Company leases various types of retail, warehouse and office facilities
and equipment, furniture and fixtures under noncancelable lease agreements which
expire at various dates. Future minimum lease payments under noncancelable
capital and operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
1998................................................................... $ 2,057 $ 53,197
1999................................................................... 1,995 44,640
2000................................................................... 1,147 35,873
2001................................................................... 726 24,994
2002................................................................... 492 18,919
Thereafter............................................................. 3,433 58,759
--------- ----------
Total minimum lease payments........................................... 9,850 $ 236,382
----------
----------
Less: Amounts representing interest.................................... (2,869)
---------
Present value of net minimum lease payments............................ $ 6,981
---------
---------
</TABLE>
Rent expense for all operating leases for fiscal 1997, 1996 and 1995 was
$49,704, $29,443 and $18,352, respectively.
NOTE 12--COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
POSTEMPLOYMENT BENEFITS
The Company has entered into employment agreements with several employees
that would result in payments to these employees upon a change of control or
certain other events. No amounts have been accrued at April 26, 1997 or April
30, 1996 related to these agreements.
NOTE 13--EMPLOYEE BENEFIT PLANS
Effective September 1, 1996, the Company implemented the U.S. Office
Products 401(k) Retirement Plan (the "401(k) Plan") which allows employee
contributions in accordance with Section 401(k) of the Internal Revenue
Code. The Company matches a portion of employee contributions and all full-time
employees are eligible to participate in the 401(k) Plan after one year of
service. In fiscal 1997, the Company's matching contribution expense was
$1,195.
Certain subsidiaries of the Company have, or had prior to implementation of
the 401(k) Plan, qualified defined contribution benefit plans, which allow for
voluntary pre-tax contributions by the employees. The subsidiaries paid all
general and administrative expenses of the plans and in some cases
F-33
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 13--EMPLOYEE BENEFIT PLANS (CONTINUED)
made matching contributions on behalf of the employees. For fiscal 1997, 1996
and 1995, the subsidiaries incurred expenses totaling $2,524, $3,292 and $3,089,
respectively, related to these plans.
NOTE 14--STOCKHOLDERS' EQUITY
STOCK COMPENSATION PLANS
In October 1994, the Board of Directors and the Company's stockholders
approved the Company's 1994 Long-Term Compensation Plan (the "Plan"). The
purpose of the Plan is to provide officers, key employees and consultants with
additional incentives by increasing their ownership interests in the
Company. The maximum number of options to purchase common stock granted in any
calendar or fiscal year under the Plan, as amended, is equal to 20% of the
aggregate number of shares of the Company's common stock outstanding at the time
an award is granted, less, in each case, the number of shares subject to
previously outstanding awards under the Plan.
In August 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Non-Employee Directors' Stock Plan (the "Directors'
Plan"). The purpose of the Directors' Plan is to promote ownership by
non-employee directors of a greater proprietary interest in the Company, thereby
aligning such directors' interests more closely with the interests of
stockholders of the Company. A total of 750,000 shares of common stock has been
reserved for issuance under the Directors' Plan. At April 26, 1997, options to
acquire 108,000 shares of common stock have been granted under the Directors'
Plan.
The Company applies APB Opinion No. 25 in accounting for its stock option
plans. Accordingly, because the exercise prices of the options have equaled the
market price on the date of grant, no compensation expense has been recognized
for stock options granted. Had compensation cost for the Company's stock
options been recognized based upon the fair value of the stock options on the
grant date under the methodology prescribed by SFAS 123, the Company's net
income and net income per share would have been impacted as indicated in the
following table. The pro forma results shown below reflect only the impact of
options granted in fiscal 1997 and 1996.
<TABLE>
<CAPTION>
APRIL 26, APRIL 30,
1997 1996
--------- ---------
<S> <C> <C>
Net income:
As reported........................................................... $ 57,288 $ 34,176
Pro forma............................................................. 44,643 32,017
Net income per share:
As reported........................................................... $ 0.94 $ 0.75
Pro forma............................................................. 0.73 0.70
</TABLE>
F-34
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 14--STOCKHOLDERS' EQUITY (CONTINUED)
The fair value of options granted (which is amortized to expense over the
option vesting period in determining the pro forma impact) is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Expected life of option.................................................. 7 years 7 years
Risk free interest rate.................................................. 6.66% 6.58%
Expected volatility of USOP stock........................................ 44.0% 58.5%
</TABLE>
The weighted-average fair value of options granted was $17.06 and $12.44 for
fiscal 1997 and 1996, respectively.
A summary of option transactions follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE OPTIONS EXERCISE
OPTIONS PRICE EXERCISABLE PRICE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at April 30, 1994............. 83,665 $ 0.68 83,665 $ 0.68
Granted............................. 629,500 8.92
Canceled............................ (7,000) 10.00
----------
Balance at April 30, 1995............. 706,165 7.93 118,665 2.84
Granted............................. 2,764,591 18.83
Exercised........................... (63,350) 9.37
Canceled............................ (16,200) 12.70
----------
Balance at April 30, 1996............. 3,391,206 16.77 216,532 5.66
Granted............................. 4,486,110 30.62
Exercised........................... (131,829) 12.58
Canceled............................ (48,963) 18.98
----------
Balance at April 26, 1997............. 7,696,524 24.90 1,065,485 15.15
----------
----------
</TABLE>
The following table summarizes information about stock options outstanding
at April 26, 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE EXERCISABLE PRICE
- -------------------------------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$0.68 to $10.00................. 589,665 7.1 years $ 7.63 317,753 $ 6.48
$10.01 to $20.00................ 1,773,599 8.6 years 14.13 468,202 14.55
$20.01 to $30.00................ 2,823,324 9.3 years 26.33 209,244 24.37
$30.01 to $40.00................ 2,491,336 9.3 years 34.91 70,286 30.97
$40.01 to $44.88................ 18,600 9.1 years 42.19
---------- ----------
$0.68 to $44.88................. 7,696,524 9.0 years 24.90 1,065,485 15.15
---------- ----------
---------- ----------
</TABLE>
F-35
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 14--STOCKHOLDERS' EQUITY (CONTINUED)
The option outstanding information includes 83,665, 39,201 and 228,992
shares subject to options to acquire common stock at exercise prices of $0.68,
$15.89 and $16.05, respectively, which were granted at certain Pooled Companies
prior to their respective acquisitions by the Company.
Non-qualified options granted to employees are generally exercisable
beginning one year from the date of grant in cumulative yearly amounts of 25% of
the shares under option and generally expire ten years from the date of grant.
COMMON STOCK
In November 1994, the Board of Directors of the Company approved a one
thousand-for-one split of the Company's common stock and changed the par value
of common stock from $1 per share to $.001 per share. The consolidated
financial statements have been adjusted to reflect the stock split. In February
1996, the Company's stockholders approved the amendment to the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of common stock from 25,000,000 to 100,000,000 shares. In August 1996,
the Company's stockholders approved the amendment to the Company's Restated
Certified of Incorporation to increase the number of authorized shares of common
stock from 100,000,000 to 500,000,000.
NOTE 15--SEGMENT REPORTING
INDUSTRY SEGMENT
The Company currently operates in two reportable industry segments: office
products and print management. The office products industry segment involves
the sale and distribution of office and related supplies and equipment, catalog,
contract and remanufactured furniture, and office coffee and beverage products
and services. The print management industry segment involves the manufacturing,
distribution, management and printing of business forms, envelopes and
promotional products. The other industry segments that the Company operates in
include technology solutions, education products
F-36
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 15--SEGMENT REPORTING (CONTINUED)
and corporate travel services. The following table sets forth information as to
the Company's operations in its different industry segments:
<TABLE>
<CAPTION>
OFFICE PRINT
PRODUCTS MANAGEMENT OTHER TOTAL
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Fiscal 1997:
Revenues............................. $ 2,042,321 $ 368,378 $ 425,176 $ 2,835,875
Operating income..................... 91,030 20,300 17,091 128,421
Identifiable assets.................. 1,274,335 185,357 350,660 1,810,352
Depreciation and amortization........ 31,522 8,758 8,084 48,364
Capital expenditures................. 30,684 16,599 14,494 61,777
Fiscal 1996:
Revenues............................. $ 1,051,660 $ 317,033 $ 317,737 $ 1,686,430
Operating income..................... 31,567 12,388 12,377 56,332
Identifiable assets.................. 517,479 122,027 351,344 990,850
Depreciation and amortization........ 10,464 5,089 4,836 20,389
Capital expenditures................. 18,395 6,098 2,341 26,834
Fiscal 1995:
Revenues............................. $ 653,791 $ 139,732 $ 247,781 $ 1,041,304
Operating income..................... 19,962 5,571 15,183 40,716
Identifiable assets.................. 227,300 51,906 85,516 364,722
Depreciation and amortization........ 4,697 4,478 4,095 13,270
Capital expenditures................. 5,675 2,456 4,923 13,054
</TABLE>
F-37
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 15--SEGMENT REPORTING (CONTINUED)
GEOGRAPHIC SEGMENTS
The following table sets forth information as to the Company's operations in
its different geographic segments:
<TABLE>
<CAPTION>
NEW ZEALAND
UNITED AND
STATES AUSTRALIA CANADA TOTAL
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Fiscal 1997:
Revenues............................. $ 2,006,017 $ 700,793 $ 129,065 $ 2,835,875
Operating income..................... 89,793 28,708 9,920 128,421
Identifiable assets at year-end...... 998,824 753,254 58,274 1,810,352
Fiscal 1996:
Revenues............................. $ 1,489,172 $ 77,141 $ 120,117 $ 1,686,430
Operating income..................... 47,422 3,533 5,377 56,332
Identifiable assets at year-end...... 748,002 188,134 54,714 990,850
Fiscal 1995:
Revenues............................. $ 1,005,609 $ 28,574 $ 7,121 $ 1,041,304
Operating income..................... 38,386 1,429 901 40,716
Identifiable assets at year-end...... 356,201 5,512 3,009 364,722
</TABLE>
NOTE 16--QUARTERLY FINANCIAL DATA (UNAUDITED)
The following presents certain unaudited quarterly financial data. The
amounts differ from the amounts previously reported during fiscal 1997 and 1996
in the Company's Quarterly Reports on Form 10-Q as a result of the restatement
of the financial statements to give retroactive effect to the results of the
companies acquired during fiscal 1997 and 1996 in business combinations
accounted for under the pooling-of-interests method.
<TABLE>
<CAPTION>
FISCAL 1997 QUARTERS
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ---------- ---------- ------------
Revenues..................... $ 552,489 $ 736,686 $ 756,707 $ 789,993 $ 2,835,875
Gross profit................. 153,745 209,509 214,253 226,655 804,162
Operating income............. 27,877 39,063 31,253 30,228 128,421
Net income................... 16,330 18,092 10,770 12,096 57,288
Net income per share......... 0.29 0.31 0.18 0.18 0.94
Pro forma income before
extraordinary item (see
Note 10)................... 12,985 16,578 10,212 11,368 51,143
Pro forma income per share
before extraordinary
item....................... 0.23 0.28 0.17 0.16 0.84
</TABLE>
F-38
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 16--QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1996 QUARTERS
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ---------- ---------- ------------
Revenues..................... $ 330,612 $ 406,538 $ 458,222 $ 491,058 $ 1,686,430
Gross profit................. 84,339 104,745 118,107 132,592 439,783
Operating income............. 6,330 15,979 22,272 11,751 56,332
Net income................... 4,847 10,179 13,516 5,634 34,176
Net income per share......... 0.12 0.23 0.30 0.11 0.75
Pro forma income before
extraordinary item (see
Note 10)................... 1,735 6,477 9,421 4,312 21,945
Pro forma income per share
before extraordinary
item....................... 0.04 0.15 0.21 0.08 0.48
</TABLE>
NOTE 17--SUBSEQUENT EVENTS
BUSINESS COMBINATION SUBSEQUENT TO YEAR-END
On May 22, 1997, the Company signed a definitive agreement (the "Agreement")
to acquire Mail Boxes Etc. ("MBE"), the world's largest franchisor of business,
communication and postal service centers with more than 3,300 centers operating
worldwide. The Company will exchange one share of its common stock for each
share of outstanding MBE common stock in the transaction, subject to adjustment
in certain circumstances. As of May 21, 1997, MBE had approximately 11.3
million shares of common stock outstanding. The transaction, which will be
accounted for under the pooling-of-interests method of accounting, is subject to
the approval of the shareholders of MBE and other conditions (including
regulatory approvals) described in the Agreement. If all of the conditions to
the acquisition contained in the Agreement are satisfied or waived prior
thereto, the Company expects the acquisition to be completed during the second
quarter of fiscal 1998.
The following presents the unaudited pro forma results of operations of the
Company for fiscal 1997 as if the acquisition described above had been
consummated as of the beginning of fiscal 1997. The results presented below
include certain pro forma adjustments to reflect the amortization of intangible
assets, adjustments in executive compensation and the inclusion of a federal
income tax provision on all earnings:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
APRIL 26, 1997
----------------
<S> <C>
Revenues.................................................................... $ 3,293,418
Income before extraordinary items........................................... 81,672
Income per share before extraordinary items................................. 0.99
</TABLE>
The unaudited 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 1997 or the
results which may occur in the future.
F-39
<PAGE>
SCHEDULE II
U.S. OFFICE PRODUCTS COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE FISCAL YEARS ENDED APRIL 26, 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER
DESCRIPTION DATE OF PERIOD EXPENSES ACCOUNTS
- --------------------------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts................. May 1, 1994 $1,502,000 $2,519,000 $ 195,000(a)
May 1, 1995 1,905,000 2,634,000 3,344,000(a)(c)
May 1, 1996 6,000,000 6,861,000 945,000(a)
Accumulated amortization of
intangibles.............. May 1, 1994 4,277,000 1,600,000
May 1, 1995 4,953,000 5,229,000 562,000(e)
May 1, 1996 8,270,000 14,224,000
<CAPTION>
BALANCE
AT END OF
DESCRIPTION DEDUCTIONS DATE PERIOD
- ----------------------------------------- --------------- --------------
<S> <C> <C> <C>
Allowance for doubtful
accounts.................$ (2,311,000)(b) April 30, 1995 $ 1,905,000
(1,883,000)(b) April 30, 1996 6,000,000
(3,740,000)(b) April 26, 1997 10,066,000
Accumulated amortization of
intangibles.............. (924,000)(d) April 30, 1995 4,953,000
(2,474,000)(d) April 30, 1996 8,270,000
(1,178,000)(d) April 26, 1997 21,316,000
</TABLE>
- ------------------------
(a) Allowance for doubtful accounts acquired in purchase acquisitions.
(b) Represents write-offs of uncollectible accounts receivable.
(c) Includes a $581,000 adjustment to conform the year-ends of certain Pooled
Companies.
(d) Represents write-offs of fully amortized intangible assets.
(e) Represents a $562,000 adjustment to conform the year-ends of certain Pooled
Companies.
F-40
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides, for the periods indicated, certain summary
information concerning the cash and non-cash compensation earned by or awarded
to (i) the Company's Chief Executive Officer and (ii) each of the Company's
other executive officers during or at the end of the Company's 1997 fiscal year
(collectively, the "named executive officers"). The Company was organized in
October 1994 and did not conduct any operations prior to February 1995.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------- --------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION (1) YEAR (2) (3) (4) SARS (#) (5) (6)
- ----------------------------------- --------- ---------- --------- ------------- -------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan J. Ledecky 1997 $ 950,000 -- -- 500,000 $ 10,256
Chief Executive Officer 1996 250,000 -- -- 500,000 --
and Chairman of the Board 1995 145,833 -- -- 100,000 --
Timothy J. Flynn 1997 300,000 -- -- 75,000 18,409
President and Chief 1996 250,000 75,000 -- 310,000 15,256
Operating Officer 1995 45,912 -- -- 25,000 15,390
Thomas I. Morgan 1997 101,000 37,500 36,500 250,000 --
President--North American
Office Products Division
Donald H. Platt 1997 200,000 100,000 -- 75,000 3,394
Senior Vice President-Chief 1996 150,000 125,000 45,300 250,000 --
Financial Officer
Mark D. Director 1997 200,000 100,000 -- 75,000 --
Executive Vice President, 1996 38,061 75,000 -- 100,000 --
General Counsel and
Assistant Secretary
Martin S. Pinson 1997 175,000 -- -- 25,000 1,720
Executive Vice President 1996 150,000 50,000 -- 100,000 --
1995 57,757 -- -- 25,000 --
</TABLE>
- ------------------------
(1) The positions of Messrs. Flynn, Morgan, Director and Pinson changed after
the end of the Company's 1997 fiscal year. Their new positions are indicated
in Item 10 herein. Mr. Pinson resigned from his position after the end of
the fiscal year.
(2) The salary for Mr. Morgan for fiscal 1997 represents less than one full
year's compensation, as he commenced employment with the Company during
fiscal 1997. The salary for Mr. Director for fiscal 1996 represents less
than one full year's compensation, as he commenced employment with the
Company during fiscal 1996. Each salary shown for fiscal 1995 represents
less than one full year's compensation. No compensation was paid to any
named executive officer prior to February 23, 1995, the date that the
Company commenced operations. With respect to Messrs. Ledecky and Pinson,
the salary amounts for 1995 include $99,921 and $30,000 respectively, for
services rendered prior to the commencement of operations by the Company.
(3) In addition to the cash bonuses paid related to fiscal 1996, the Company
granted options in fiscal 1997 as bonuses for fiscal 1996 to Messrs. Flynn,
Platt, Director and Pinson to purchase 75,000, 75,000, 75,000 and 25,000
shares of common stock, respectively, at an exercise price of $38.00 per
share. The amount of $37,500 reflects an accrual of the pro rata portion of
a bonus payable to Mr. Morgan no later than 12 months after the date of his
employment. See "--Employment Agreements."
(4) Includes $36,500 of moving related expenses for Mr. Morgan during fiscal
1997 and $45,300 in moving and automobile related expenses for Mr. Platt in
fiscal 1996.
11
<PAGE>
(5) Represents options granted during fiscal years 1997, 1996 and 1995 with
respect to the stated number of shares of Common Stock.
(6) For Mr. Ledecky, this amount represents matching contributions under the
Company's 401(k) Retirement Plan in the amount of $2,170 and the payment
of executive disability insurance premiums in the amount of $8,086; for
Mr. Flynn, this amount represents matching contributions under the
Company's 401(k) Retirement Plan in the amount of $1,001, the payment of
executive disability insurance premiums in the amount of $2,295 and the
payment of split-dollar life insurance premiums in the amount of $15,113;
for Mr. Platt, this amount represents matching contributions under the
Company's 401(k) Retirement Plan in the amount of $1,740 and the payment
of executive disability insurance premiums in the amount of $1,654; and
for Mr. Pinson, this amount represents the payment of executive disability
insurance premiums in the amount of $1,720. All amounts cited herein
reflect payments made for the 1997 fiscal year.
EMPLOYMENT AGREEMENTS
Each named executive officer has entered into an employment agreement with
the Company. The employment agreements (the "Employment Agreements") for
Jonathan Ledecky, Timothy J. Flynn, Donald H. Platt, Mark D. Director and Martin
S. Pinson (the "Specific Officers") include substantially the same terms (except
for base salary amounts) and are described together below; Thomas I. Morgan's
employment agreement is described separately below.
Pursuant to the Employment Agreements, the named executive officers are
entitled to receive annual base salaries of no less then the following amount:
Jonathan Ledecky, $250,000; Timothy J. Flynn, $250,000; Donald H. Platt,
$150,000; Mark D. Director, $150,000; and Martin S. Pinson, $150,000. Base
salaries are reviewed and subject to upward adjustment by the Compensation
Committee of the Board of Directors on an annual basis. The base salaries of the
Specific Officers for the Company's last three fiscal years are set forth under
the heading "Executive Compensation--Summary Compensation Table." In addition,
each Specific Officer is eligible to earn additional year-end bonus compensation
in an amount equal to up to 100% of such employee's base salary, payable out of
a bonus pool determined by the Compensation Committee of the Board of
Directors. Bonuses are determined by measuring such officer's performance and
the Company's overall performance against target performance levels, typically
based upon the following criteria: (i) the Company's overall profit; (ii) the
Company's internal revenue growth; and (iii) the Company's revenue growth due to
acquisitions. Each Employment Agreement is for an initial term of four years and
is automatically renewable at the end of the second year and each succeeding
year for an additional year, such that the remaining terms of such agreements
are at all times more than two years, unless terminated or not renewed by the
Company or the employee.
Each of the Employment Agreements provides that, in the event of a
termination of employment by the Company without cause, the Specific Officer
shall be entitled to receive from the Company such employee's then current
salary for whatever period is remaining under the term of the agreement. In the
event of a change in control of the Company (involving a change in the ownership
of a majority of the voting stock of the Company, a change in the majority of
the Board of Directors without approval of the current Board, a merger,
consolidation, recapitalization, reorganization or reverse stock split in which
the stockholders of the Company prior to such transaction do not continue to own
at least 75% of the stock of the Company following such transaction or the
approval by the stockholders of a plan of complete liquidation or disposition of
more than 50% of the Company's assets), each Employment Agreement permits the
employee to elect to terminate his employment, entitling him to receive his base
salary at the rate then in effect for the remaining term of the agreement or two
years, whichever is greater.
Each Employment Agreement contains a covenant not to compete with the
Company for a period equal to the longer of: (i) two years immediately following
the termination of employment; or (ii) in the case of a termination without
cause pursuant to which such employee is entitled to continue to receive his
base salary, for as long as the Company continues to pay such salary. Applicable
law may reduce the scope of the covenant not to compete. In the event that the
term of any such covenant is reduced in accordance with applicable law, the
compensation to which the Specific Officer is entitled shall be paid to the
employee only for such reduced period of time as the employee is so prohibited
from competing or is not so competing.
Mr. Morgan's employment agreement provides for a base salary of $450,000,
which is reviewed and subject to upward adjustment by the Compensation Committee
of the Board of Directors on an annual basis. Mr. Morgan is entitled to a bonus
under the same terms as are the Specific Officers, except that his employment
agreement guarantees the payment of an incentive bonus of no less than $150,000
to be paid
12
<PAGE>
no later than the end of the first 12 months after the date of his employment.
In addition, Mr. Morgan's employment agreement provides for an initial grant of
an option for 250,000 shares of common stock to Mr. Morgan, which grant was made
on February 3, 1997. Mr. Morgan's employment agreement is for an initial term of
two years and is automatically renewable for additional, successive one-year
terms, unless terminated or not renewed by the Company or Mr. Morgan. In the
event of a termination of employment by the Company without cause, Mr. Morgan is
entitled to receive his base salary for the longer of one year from the date of
termination or whatever period is remaining under the employment agreement.
Pursuant to his agreement, Mr. Morgan is subject to the same covenant not to
compete as is included in the Employment Agreements.
OPTION GRANTS IN FISCAL 1997
The following tables set forth certain information concerning the grant and
exercise of options to purchase common stock of the Company during the last
completed fiscal year to each of the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO
GRANTED EMPLOYEES IN EXERCISE EXPIRATION
NAME (1) FISCAL YEAR PRICE DATE
- ------------------------------------- ---------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Jonathan J. Ledecky.................. 500,000 11.1% $ 25.38 3/6/2006
Timothy J. Flynn..................... 75,000 1.7% $ 38.00 6/3/2006
Thomas I. Morgan..................... 250,000 5.6% $ 33.13 2/3/2007
Donald H. Platt...................... 75,000 1.7% $ 38.00 6/3/2006
Mark D. Director..................... 75,000 1.7% $ 38.00 6/3/2006
Martin S. Pinson..................... 25,000 0.6% $ 38.00 6/3/2006
All Optionees........................ 4,486,110 100.0% $ 30.62 Various
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR OPTION
TERM (2)
--------------------------------------
NAME 0% 5% 10%
- ------------------------------------- ------- ------------- -------------
<S> <C> <C> <C>
Jonathan J. Ledecky.................. $ -- $ 7,979,101 $ 20,220,607
Timothy J. Flynn..................... -- 1,792,350 4,542,166
Thomas I. Morgan..................... -- 5,208,034 13,198,180
Donald H. Platt...................... -- 1,792,350 4,542,166
Mark D. Director..................... -- 1,792,350 4,542,166
Martin S. Pinson..................... -- 597,450 1,514,055
All Optionees........................ -- 86,387,914 218,923,936
</TABLE>
- ------------------------
(1) The options granted are non-qualified stock options, which are exercisable
at the market price on the date of grant beginning one year from the date of
grant in cumulative yearly amounts of 25% of the shares and expire ten years
from the date of grant. The options become fully exercisable upon a change
in control, as defined in the Incentive Plan.
(2) The dollar amounts under these columns are the results of calculations at
assumed annual rates of stock appreciation of zero percent (0%), five
percent (5%) and ten percent (10%). These assumed rates of growth were
selected by the Securities and Exchange Commission for illustration purposes
only. They are not intended to forecast possible future appreciation, if
any, of the Company's stock price. No gain to the optionees is possible
without an increase in stock prices, which will benefit all stockholders. A
zero percent (0%) gain in stock price will result in a zero percent (0%)
benefit to optionees.
13
<PAGE>
OPTION EXERCISES IN FISCAL 1997 AND VALUE OF OPTIONS AT APRIL 26, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT FISCAL IN-THE-MONEY (3) OPTIONS AT
SHARES VALUE YEAR END (#) FISCAL YEAR END ($)(4)
ACQUIRED ON REALIZED -------------------------- ---------------------------
NAME EXERCISE (#) (1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------- -------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan J. Ledecky............. 0 0 175,000 925,000 $ 1,298,438 $ 2,432,813
Timothy J. Flynn................ 0 0 90,000 320,000 613,438 1,474,688
Thomas Morgan................... 0 0 250,000 -- --
Donald H. Platt................. 1,650 $ 32,950 60,850 262,500 392,750 1,228,219
Mark D. Director................ 0 0 25,000 150,000 157,813 473,438
Martin S. Pinson................ 0 0 37,500 112,500 350,781 686,719
</TABLE>
- ------------------------
(1) Represents the number of shares with respect to which options were
exercised.
(2) The value of exercised options represents the difference between the
exercise price of such options and the closing market price of the Company's
common stock on the date of exercise.
(3) Options are "in-the-money" if the closing market price of the Company's
common stock exceeds the exercise price of the options.
(4) The value of unexercised options represents the difference between the
exercise price of such options and $22.625, the closing market price of the
Company's common stock on April 26, 1997.
DIRECTORS' REMUNERATION
Non-employee directors of the Company receive an annual retainer of $25,000
and are reimbursed for all expenses relating to attendance at meetings. During
the fiscal year ended April 26, 1997, fees for all directors aggregated
$100,000. In addition, each non-employee director who agreed to serve as such
prior to the consummation of the Company's initial public offering of its common
stock in February 1995 (Messrs. Lefever, Mathias and Quelch) received options to
acquire 15,000 shares of common stock, exercisable in three equal installments,
commencing on the date of the grant and on each anniversary thereof, at an
exercise price per share of $8.00. Under the U.S. Office Products Company 1996
Non-Employee Directors' Stock Plan (the "Directors' Plan"), non-employee
directors will receive options to acquire 21,000 shares of common stock upon
their initial election as a member of the Board of Directors and thereafter will
receive annually options to acquire 6,000 shares. In connection with the
adoption of the Directors' Plan at the Company's 1996 Annual Meeting, each of
the four non-employee directors who served as directors during the 1996 fiscal
year received upon their re-election options for 21,000 shares of common stock
and, for the 1997 fiscal year, received options for 6,000 shares of common
stock. In addition, pursuant to the Directors' Plan, non-employee directors are
entitled to have their directors' fees paid in the form of shares of the
Company's common stock or "deferred" shares of the Company's common stock. Two
directors, Mr. Lefever and Mr. Quelch, made elections to have their 1997
directors' fee paid in the form of deferred shares. Directors who are employees
of the Company do not receive additional compensation for serving as directors.
No non-employee member of the Board of Directors was paid compensation during
the 1997 fiscal year for his service as a director of the Company other than
pursuant to the standard compensation arrangement described above.
14
<PAGE>
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K.
(a) Financial Statements, Schedules and Exhibits.
1. Financial Statements (See Item 8 hereof.)
Reports of Independent Accountants
Consolidated Balance Sheet as of April 26, 1997 and April 30, 1996
Consolidated Statement of Income for the years ended April 26, 1997
and April 30, 1996 and 1995
Consolidated Statement of Stockholders' Equity for the years ended
April 26, 1997 and April 30, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended April 26,
1997 and April 30, 1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules (See Item 8 hereof.)
Schedule II -- Valuation and Qualifying Accounts and Reserves.
All schedules, other than those outlined above, are omitted as the
information is not required or is otherwise furnished.
3. Exhibits
<TABLE>
<CAPTION>
Number Description
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 22, 1997, among the Company, Santa Fe
Acquisition Corp. and Mail Boxes Etc. (Exhibit 2.1 of the Company's Current Report on
Form 8-K (File No. 0-25372), filed on May 29, 1997, is hereby incorporated by
reference)
3.1 Amended and Restated Certificate of Incorporation of U.S. Office Products Company
(Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the period ended July
27, 1996 is hereby incorporated by reference)
3.2 Amended and Restated Bylaws of U.S. Office Products Company (Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the year ended April 30, 1996 is hereby
incorporated by reference)
4.1 Form of Indenture relating to the Company's $143.75 million 5 1/2 % Convertible
Subordinated Notes due 2001 (including form of Note) (Exhibit 4.1 of the Company's
Registration Statement on Form S-1 (File No. 33-80553) is hereby incorporated by
reference)
15
<PAGE>
4.2 Form of Indenture relating to the Company's $230.0 million 5 1/2% Convertible
Subordinated Notes due 2003 (including form of Note) (Exhibit 4.2 of the Company's
Annual Report on Form 10-K for the year ended April 30, 1996 is hereby incorporated by
reference)
4.3 Registration Rights Agreement, dated as of May 22, 1996, by and among the Company and
Robertson Stephens & Company LLC and Natwest Securities Limited, as Managers (Exhibit
4.3 of the Company's Annual Report on Form 10-K for the year ended April 30, 1996 is
hereby incorporated by reference)
4.4 Registration Rights Agreement, dated September 17, 1996, by and between the Company and
Quantum Partners, LDC. (Exhibit 4.4 of the Company's Registration Statement on Form S-4
(file No. 333-13133) 1996 is hereby incorporated by reference)
*10.1 U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive Plan, as
amended (Exhibit A to the Company's Proxy Statement, dated July 22, 1996, is hereby
incorporated by reference)
*10.2 Form of Employment Agreement for Jonathan J. Ledecky (Exhibit 10.3 of the Company's
Registration Statement on Form S-1 (File No. 33-88096) is hereby incorporated by
reference)
*10.3 Employment Agreement for Timothy J. Flynn (Exhibit 10.4 of the Company's Post-Effective
Amendment No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
*10.4 Employment Agreement for Jack L. Becker (Exhibit 10.6 of the Company's Post-Effective
Amendment No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
*10.5 Employment Agreement for Donald H. Platt (Exhibit 10.14 of the Company's Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
*10.6 Employment Agreement for Clifton B. Phillips (Exhibit 10.21 of the Company's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No.
33-80117) is hereby incorporated by reference)
*10.7 Employment Agreement for David Gezon (Exhibit 10.22 of the Company's Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby
incorporated by reference)
*10.8 Employment Agreement for David C. Copenhaver (Exhibit 10.23 of the Company's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No.
33-80117) is hereby incorporated by reference)
*10.9 Employment Agreement for Mark D. Director (Exhibit 10.14 of the Company's Annual Report
on Form 10-K for the year ended April 30, 1996 is hereby incorporated by reference)
10.10 Merger Agreement, dated as of January 31, 1996, by and among U.S. Office Products
Company, Oak Brook Office Supply & Equipment Corporation, Oak Brook Acquisition Corp.,
and the Stockholders named therein (Exhibit 2.7 of the Company's Post-Effective
Amendment No. 1 to Form S-1 (File No.33-80117) is hereby incorporated by reference)
10.11 Stock Purchase Agreement, dated as of January 31, 1996, by and between U.S. Office
Products Company and Eric John Watson (Exhibit 2.8 of the Company's Post-Effective
Amendment No. 1 to Form S-1 (File No. 33-80117) is hereby incorporated by reference)
4
<PAGE>
10.12 Amendment to Stock Purchase Agreement, dated as of June 20, 1996, by and between the
Company and Eric John Watson (Exhibit 10.24 of the Company's Annual Report on Form 10-K
for the year ended April 30, 1996 is hereby incorporated by reference)
10.13 Merger Agreement dated March 15, 1995 among U.S. Office Products Company, the H.H. West
Company, a Wisconsin corporation, the H.H. West Company, a Delaware corporation and the
stockholders named therein (Exhibit 2.1 to the Company's Form 8-K (Commission file No.
0-25372) dated March 15, 1995 is hereby incorporated by reference)
10.14 Merger Agreement, dated as of May 16, 1995, among U.S. Office Products Company, Coffee
Butler Acquisition Corp., Coffee Butler Service, Inc., and the stockholders named
therein (Exhibit 2.1 of the Current Report on Form 8-K dated May 16, 1995, filed with
the Commission on May 22, 1995 (Commission file No. 0-25372), is hereby incorporated by
reference)
10.15 Merger Agreement, dated as of June 8, 1995, among U.S. Office Products Company, C.W.
Mills Paper Company, C.W. Mills Acquisition Corp. and the stockholders named therein
(Exhibit 10.10 of the Company's Registration Statement on Form S-1 (File No. 33-93956)
is hereby incorporated by reference)
10.16 Merger Agreement dated as of June 12, 1995, among U.S. Office Products Company, Mills
Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and the stockholders named
therein (Exhibit 10.11 of the Company's Registration Statement on Form S-1 (File No.
33-93956) is hereby incorporated by reference)
10.17 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, Coffee Butler Acquisition Corp., Coffee Butler Service, Inc., and the
stockholders named therein (Exhibit 10.16 Company's Registration Statement on Form S-1
(File No. 33-93956) is hereby incorporated by reference)
10.18 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, C.W. Mills Paper Company, C.W. Mills Acquisition Corp. and the
stockholders named therein (Exhibit 10.17 of the Company's Registration Statement on
Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.19 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, Mills Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and
the stockholders named therein (Exhibit 10.18 of the Company's Registration Statement
on Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.20 Asset Purchase Agreement, dated as of August 16, 1995, among OSCO Acquisition Corp.,
MISSCO Corporation of Jackson and U.S. Office Products Company (Exhibit 10.19 of the
Company's Post-Effective Amendment No. 6 to the Registration Statement on Form S-1
(File No. 33-89978) is hereby incorporated by reference)
10.21 Form of Merger Agreement, dated as of August 16, 1995, among U.S. Office Products
Company, Smith-Wilson Co., a Florida corporation, Smith-Wilson Acquisition Corp., a
Delaware corporation, Copenhaver Holdings, Incorporated, a Florida corporation and the
stockholders named therein (Exhibit 10.20 of the Company's Post-Effective Amendment No.
5 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated
by reference)
10.22 Assets Purchase Agreement, dated as of January 12, 1996, among U.S. Office Products
Company, Emmons-Napp Office Products, Inc. and EN Acquisition Corp. (Exhibit 2.1 of the
Company's Current Report on Form 8-K (File No. 0-25372), filed on January 31, 1996, is
hereby incorporated by reference)
5
<PAGE>
10.23 Agreement and Plan of Reorganization, dated as of January 10, 1996, by and among U.S.
Office Products Company, National Office Supply, Inc., Tuscarawas Office Supply, Inc.,
Stark Office Supply, Inc. and NST Acquisition Corp. (Exhibit 2.2 of the Company's
Current Report on Form 8-K (File No. 0-25372), filed on January 31, 1996, is hereby
incorporated by reference)
10.24 Amendment No. 2 to Merger Agreement, dated August 10, 1995, by and among C.W. Mills,
C.W. Mills Acquisition Corp., U.S. Office Products Company and certain stockholders
named therein (Exhibit 2.1 of the Company's Current Report on Form 8-K (File No.
0-25372), filed on February 21, 1996, is hereby incorporated by reference)
10.25 Agreement and Plan of Reorganization, dated as of April 29, 1996, by and among School
Specialty, School Acquisition Corp, U.S. Office Products Company and certain other
investors of School Specialty named therein (Exhibit 2.2 of the Company's Current
Report on Form 8-K (File No. 0-25372), filed on May 17, 1996, is hereby incorporated by
reference)
10.26 Stock Purchase Agreement, dated as of July 22, 1996, by and among Blue Star Group
Limited, Rank Commercial Limited, the Company and Graeme Richard Hart (Exhibit 10.1 of
the Company's Current Report on Form 8-K (File No. 0-25372), filed on July 26, 1996, is
hereby incorporated by reference)
10.27 Agreement and Plan of Reorganization, dated as of July 26, 1996, by and among Mile High
Office Supply, Inc., MHOS Acquisition Corp, the Company and the stockholders named
therein (Exhibit 10.2 of the Company's Current Report on Form 8-K (File No. 0-25372),
filed on July 26, 1996, is hereby incorporated by reference)
10.28 Agreement and Plan of Reorganization, dated as of July 26, 1996, by and among American
Looseleaf, Acquisition Corp., the Company and the stockholders named therein (Exhibit
10.3 of the Company's Current Report on Form 8-K (File No. 0-25372), filed on July 26,
1996, is hereby incorporated by reference)
10.29 Credit Agreement, dated as of August 21, 1996, among the Company, Various Lending
Institutions and Bankers Trust Company, as agent, including Amendment No. 1 (Exhibit
10.41 of the Company's Registration Statement on Form S-4 (file No. 333-13133) 1996 is
hereby incorporated by reference)
*10.30 U.S. Office Products Company Executive Deferred Compensation Plan (Exhibit B to the
Company's Proxy Statement, dated July 22, 1996, is hereby incorporated by reference)
*10.31 U.S. Office Products Company 1996 Non-Employee Directors' Stock Plan (Exhibit C to the
Company's Proxy Statement, dated July 22, 1996, is hereby incorporated by reference)
*10.32 U.S. Office Products Company Amended and Restated Employee Stock Purchase Plan, as
amended (Exhibit D to the Company's Proxy Statement, dated July 22, 1996, is hereby
incorporated by reference)
10.33 Agreement and Plan of Reorganization, dated as of October 26, 1996, by and among the
Company, Fortran Corp., Lawrence F. Glaser, Brian E. Stowers and Fortran Acquisition
Corp. (Exhibit 10.1 of the Company's Current Report on Form 8-K/A (File No. 0-25372),
filed on December 9, 1996, is hereby incorporated by reference)
*/**10.34 Employment Agreement for Thomas I. Morgan
**10.35 Amendment No. 2 of the Credit Agreement, dated October 30, 1996 among the Company,
Various Lending Institutions and Bankers Trust Company, as agent
**10.36 Amendment No. 3 of the Credit Agreement, dated April 15, 1996 among the Company,
Various Lending Institutions and Bankers Trust Company, as agent
10.37 Split Dollar Life Insurance Policy for Timothy J. Flynn
6
<PAGE>
**11.1 Statement Regarding Computation of Net Income Per Share
21.1 List of subsidiaries of U.S. Office Products Company
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Parent, McLaughlin & Nangle
23.3 Consent of Rubin, Koehmstedt & Nadler, PLC
23.4 Consent of Ernst & Young LLP
23.5 Consent of Ernst & Young
23.6 Consent of Hertz, Herson & Company LLP
23.7 Consent of KPMG Peat Marwick LLP
23.8 Consent of BDO Seidman, LLP
23.9 Consent of Deloitte & Touche LLP
23.10 Consent of Hertz, Herson & Company LLP
**27.1 Financial Data Schedule
</TABLE>
___________
* Management contract or compensatory plan or arrangement.
** Previously filed on U.S. Office Products Company's Form 10-K filed with
the Commission on July 8, 1997.
7
<PAGE>
(b) Reports on Form 8-K. During the last quarter of the fiscal year
covered by this report, the Company filed the following Current Reports on
Form 8-K:
i. Form 8-K dated January 29, 1997 and filed with the Commission
on January 30, 1997 reporting information under Items 5 and 7.
Financial statements included:
(a) Supplemental financial statements of U.S. Office Products
Company as of April 30, 1996 and 1995 and October 26, 1996
(unaudited) and for each of the three fiscal years in the period
ended April 30, 1996, and the six months ended October 26, 1996
(unaudited) and October 31, 1995 (unaudited).
(b) Unaudited pro forma financial information as of October
26, 1996 and for the years ended April 30, 1996, 1995, and 1994 and
for the six months ended October 26, 1996 and October 31, 1995.
(c) Financial Statements of Whitcoulls Group Limited as of
June 30, 1996 and 1995 and for the years then ended.
(d) Financial Statements of SFI Corp. as of December 31, 1995
and for the year then ended and as of September 30, 1996 (unaudited)
and for the nine months ended September 30, 1996 and 1995
(unaudited).
(e) Financial Statements of Hano Document Printers, Inc. as of
December 31, 1995 and for the year then ended and as of September
30, 1996 (unaudited) and for the nine months ended September 30,
1996 and 1995 (unaudited).
ii. Form 8-K dated April 25, 1997 and filed with the Commission on
April 25, 1997 reporting information under Items 5 and 7.
Financial statements included:
(a) Consolidated financial statements of the Company as of
April 30, 1996 and 1995 and January 25, 1997 (unaudited) and for
each of the fiscal years ended April 30, 1996, 1995 and 1994 and the
nine months ended January 25, 1997 and January 31, 1996 (unaudited).
(b) Unaudited pro forma combined financial information of the
Company as of January 25, 1997 and for each of the years ended April
30, 1996, 1995 and 1994 and for the nine months ended January 25,
1997 and January 31, 1996.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
U.S. OFFICE PRODUCTS COMPANY
(Registrant)
Date: August 22, 1997 By: /s/Mark D. Director
------------------------------
Mark D. Director
Chief Administrative Officer,
General Counsel and Secretary
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Number Description
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 22, 1997, among the Company, Santa
Fe Acquisition Corp. and Mail Boxes Etc. (Exhibit 2.1 of the Company's Current
Report on Form 8-K File No. 0-25372), filed on May 29, 1997, is hereby
incorporated by reference)
3.1 Amended and Restated Certificate of Incorporation of U.S. Office Products Company
(Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the period ended
July 27, 1996 is hereby incorporated by reference)
3.2 Amended and Restated Bylaws of U.S. Office Products Company (Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the year ended April 30, 1996 is hereby
incorporated by reference)
4.1 Form of Indenture relating to the Company's $143.75 million 51 % Convertible
Subordinated 2 Notes due 2001 (including form of Note) (Exhibit 4.1 of the
Company's Registration Statement on Form S-1 (File No. 33-80553) is hereby
incorporated by reference)
4.2 Form of Indenture relating to the Company's $230.0 million 51 % Convertible
Subordinated 2 Notes due 2003 (including form of Note) (Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the year ended April 30, 1996 is hereby
incorporated by reference)
4.3 Registration Rights Agreement, dated as of May 22, 1996, by and among the Company
and Robertson Stephens & Company LLC and Natwest Securities Limited, as Managers
(Exhibit 4.3 of the Company's Annual Report on Form 10-K for the year ended April
30, 1996 is hereby incorporated by reference)
4.4 Registration Rights Agreement, dated September 17, 1996, by and between the Company and
Quantum Partners, LDC. (Exhibit 4.4 of the Company's Registration Statement on Form S-4
(file No. 333-13133) 1996 is hereby incorporated by reference)
10.1 U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive Plan,
as amended (Exhibit A to the Company's Proxy Statement, dated July 22, 1996, is
hereby incorporated by reference)
10.2 Form of Employment Agreement for Jonathan J. Ledecky (Exhibit 10.3 of the
Company's Registration Statement on Form S-1 (File No. 33-88096) is hereby
incorporated by reference)
10.3 Employment Agreement for Timothy J. Flynn (Exhibit 10.4 of the Company's
Post-Effective Amendment No. 6 to the Registration Statement on Form S-1 (File
No. 33-89978) is hereby incorporated by reference)
<PAGE>
10.4 Employment Agreement for Jack L. Becker (Exhibit 10.6 of the Company's
Post-Effective Amendment No. 6 to the Registration Statement on Form S-1 (File
No. 33-89978) is hereby incorporated by reference)
10.5 Employment Agreement for Donald H. Platt (Exhibit 10.14 of the Company's
Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File
No. 33-89978) is hereby incorporated by reference)
10.6 Employment Agreement for Clifton B. Phillips (Exhibit 10.21 of the Company's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No.
33-80117) is hereby incorporated by reference)
10.7 Employment Agreement for David Gezon (Exhibit 10.22 of the Company's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No.
33-80117) is hereby incorporated by reference)
10.8 Employment Agreement for David C. Copenhaver (Exhibit 10.23 of the Company's
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No.
33-80117) is hereby incorporated by reference)
10.9 Employment Agreement for Mark D. Director (Exhibit 10.14 of the Company's Annual
Report on Form 10-K for the year ended April 30, 1996 is hereby incorporated by
reference)
10.10 Merger Agreement, dated as of January 31, 1996, by and among U.S. Office Products
Company, Oak Brook Office Supply & Equipment Corporation, Oak Brook Acquisition Corp.,
and the Stockholders named therein (Exhibit 2.7 of the Company's Post-Effective
Amendment No. 1 to Form S-1 (File No.33-80117) is hereby incorporated by reference)
10.11 Stock Purchase Agreement, dated as of January 31, 1996, by and between U.S. Office
Products Company and Eric John Watson (Exhibit 2.8 of the Company's Post-Effective
Amendment No. 1 to Form S-1 (File No. 33-80117) is hereby incorporated by reference)
10.12 Amendment to Stock Purchase Agreement, dated as of June 20, 1996, by and between the
Company and Eric John Watson (Exhibit 10.24 of the Company's Annual Report on Form 10-K
for the year ended April 30, 1996 is hereby incorporated by reference)
10.13 Merger Agreement dated March 15, 1995 among U.S. Office Products Company, the H.H. West
Company, a Wisconsin corporation, the H.H. West Company, a Delaware corporation and the
stockholders named therein (Exhibit 2.1 to the Company's Form 8-K (Commission file No.
0-25372) dated March 15, 1995 is hereby incorporated by reference)
10.14 Merger Agreement, dated as of May 16, 1995, among U.S. Office Products Company, Coffee
Butler Acquisition Corp., Coffee Butler Service, Inc., and the stockholders named
<PAGE>
therein (Exhibit 2.1 of the Current Report on Form 8-K dated May 16, 1995, filed with
the Commission on May 22, 1995 (Commission file No. 0-25372), is hereby incorporated by
reference)
10.15 Merger Agreement, dated as of June 8, 1995, among U.S. Office Products Company, C.W.
Mills Paper Company, C.W. Mills Acquisition Corp. and the stockholders named therein
(Exhibit 10.10 of the Company's Registration Statement on Form S-1 (File No. 33-93956)
is hereby incorporated by reference)
10.16 Merger Agreement dated as of June 12, 1995, among U.S. Office Products Company, Mills
Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and the stockholders named
therein (Exhibit 10.11 of the Company's Registration Statement on Form S-1 (File No.
33-93956) is hereby incorporated by reference)
10.17 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, Coffee Butler Acquisition Corp., Coffee Butler Service, Inc., and the
stockholders named therein (Exhibit 10.16 Company's Registration Statement on Form S-1
(File No. 33-93956) is hereby incorporated by reference)
10.18 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, C.W. Mills Paper Company, C.W. Mills Acquisition Corp. and the
stockholders named therein (Exhibit 10.17 of the Company's Registration Statement on
Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.19 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office
Products Company, Mills Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and
the stockholders named therein (Exhibit 10.18 of the Company's Registration Statement
on Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.20 Asset Purchase Agreement, dated as of August 16, 1995, among OSCO Acquisition Corp.,
MISSCO Corporation of Jackson and U.S. Office Products Company (Exhibit 10.19 of the
Company's Post-Effective Amendment No. 6 to the Registration Statement on Form S-1
(File No. 33-89978) is hereby incorporated by reference)
10.21 Form of Merger Agreement, dated as of August 16, 1995, among U.S. Office Products
Company, Smith-Wilson Co., a Florida corporation, Smith-Wilson Acquisition Corp., a
Delaware corporation, Copenhaver Holdings, Incorporated, a Florida corporation and the
stockholders named therein (Exhibit 10.20 of the Company's Post-Effective Amendment No.
5 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated
by reference)
10.22 Assets Purchase Agreement, dated as of January 12, 1996, among U.S. Office Products
Company, Emmons-Napp Office Products, Inc. and EN Acquisition Corp. (Exhibit 2.1
<PAGE>
of the Company's Current Report on Form 8-K (File No. 0-25372), filed on January 31,
1996, is hereby incorporated by reference)
10.23 Agreement and Plan of Reorganization, dated as of January 10, 1996, by and among U.S.
Office Products Company, National Office Supply, Inc., Tuscarawas Office Supply, Inc.,
Stark Office Supply, Inc. and NST Acquisition Corp. (Exhibit 2.2 of the Company's
Current Report on Form 8-K (File No. 0-25372), filed on January 31, 1996, is hereby
incorporated by reference)
10.24 Amendment No. 2 to Merger Agreement, dated August 10, 1995, by and among C.W. Mills,
C.W. Mills Acquisition Corp., U.S. Office Products Company and certain stockholders
named therein (Exhibit 2.1 of the Company's Current Report on Form 8-K (File No.
0-25372), filed on February 21, 1996, is hereby incorporated by reference)
10.25 Agreement and Plan of Reorganization, dated as of April 29, 1996, by and among School
Specialty, School Acquisition Corp, U.S. Office Products Company and certain other
investors of School Specialty named therein (Exhibit 2.2 of the Company's Current
Report on Form 8-K (File No. 0-25372), filed on May 17, 1996, is hereby incorporated by
reference)
10.26 Stock Purchase Agreement, dated as of July 22, 1996, by and among Blue Star Group
Limited, Rank Commercial Limited, the Company and Graeme Richard Hart (Exhibit 10.1 of
the Company's Current Report on Form 8-K (File No. 0-25372), filed on July 26, 1996, is
hereby incorporated by reference)
10.27 Agreement and Plan of Reorganization, dated as of July 26, 1996, by and among Mile High
Office Supply, Inc., MHOS Acquisition Corp, the Company and the stockholders named
therein (Exhibit 10.2 of the Company's Current Report on Form 8-K (File No. 0-25372),
filed on July 26, 1996, is hereby incorporated by reference)
10.28 Agreement and Plan of Reorganization, dated as of July 26, 1996, by and among American
Looseleaf, Acquisition Corp., the Company and the stockholders named therein (Exhibit
10.3 of the Company's Current Report on Form 8-K (File No. 0-25372), filed on July 26,
1996, is hereby incorporated by reference)
10.29 Credit Agreement, dated as of August 21, 1996, among the Company, Various Lending
Institutions and Bankers Trust Company, as agent, including Amendment No. 1 (Exhibit
10.41 of the Company's Registration Statement on Form S-4 (file No. 333-13133) 1996 is
hereby incorporated by reference)
10.30 U.S. Office Products Company Executive Deferred Compensation Plan (Exhibit B to the
Company's Proxy Statement, dated July 22, 1996, is hereby incorporated by reference)
<PAGE>
10.31 U.S. Office Products Company 1996 Non-Employee Directors' Stock Plan (Exhibit C to the
Company's Proxy Statement, dated July 22, 1996, is hereby incorporated by reference)
10.32 U.S. Office Products Company Amended and Restated Employee Stock Purchase Plan, as
amended (Exhibit D to the Company's Proxy Statement, dated July 22, 1996, is hereby
incorporated by reference)
10.33 Agreement and Plan of Reorganization, dated as of October 26, 1996, by and among the
Company, Fortran Corp., Lawrence F. Glaser, Brian E. Stowers and Fortran Acquisition
Corp. (Exhibit 10.1 of the Company's Current Report on Form 8-K/A (File No. 0-25372),
filed on December 9, 1996, is hereby incorporated by reference)
*10.34 Employment Agreement for Thomas I. Morgan
*10.35 Amendment No. 2 of the Credit Agreement, dated October 30, 1996 among the Company,
Various Lending Institutions and Bankers Trust Company, as agent
*10.36 Amendment No. 3 of the Credit Agreement, dated April 15, 1997 among the Company,
Various Lending Institutions and Bankers Trust Company, as agent
10.37 Split Dollar Life Insurance Policy for Timothy J. Flynn
*11.1 Statement Regarding Computation of Net Income Per Share
21.1 List of subsidiaries of U.S. Office Products Company
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Parent, McLaughlin & Nangle
23.3 Consent of Rubin, Koehmstedt & Nadler, PLC
23.4 Consent of Ernst & Young LLP
23.5 Consent of Ernst & Young
23.6 Consent of Hertz, Herson & Company, LLP
23.7 Consent of KPMG Peat Marwick LLP
23.8 Consent of BDO Seidman, LLP
23.9 Consent of Deloitte & Touche LLP
<PAGE>
23.10 Consent of Hertz, Herson & Company, LLP
*27.1 Financial Data Schedule
</TABLE>
__________________
* Previously filed on U.S. Office Products Company's Form 10-K filed
with the Commission on July 8, 1997.
<PAGE>
MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY
SPRINGFIELD, MASSACHUSETTS 01111
Whole Life Policy
Policy Number 9 608 308
Insured TIMOTHY J. FLYNN
Face Amount $750,000
Requested Supplemental
Insurance Amount $750,000
Dear Policy Owner:
READ YOUR POLICY CAREFULLY. It has been written in readable language to
help you understand its terms. We have used examples to explain some of
its provisions. These examples do not reflect the actual amounts or status
of this policy. As you read through the policy, remember the words "we",
"us" and "our" refer to Massachusetts Mutual Life Insurance Company.
We will, subject to the terms of this policy, pay the death benefit to
the Beneficiary when due proof of the Insured's death is received at our
Home Office. The terms of this policy are contained on this and the
following pages.
For service or information on this policy, contact the agent who sold
the policy, any of our agency offices or our Home Office.
YOU HAVE A RIGHT TO RETURN THIS POLICY. If you decide not to keep
this policy, return it within ten days after you receive it. It may be
returned by delivering or mailing it to our Home Office, to any of our
agency offices or to the agent who sold the policy. Then, the policy will
be as though it had never been issued. We will promptly refund any premium
paid for it.
Signed for Massachusetts Mutual Life Insurance Company at Springfield,
Massachusetts.
Sincerely yours,
/s/ Thomas B. Wheeler /s/ Thomas J. Finnegan, Jr.
- --------------------- ---------------------------
President Secretary
This policy provides that: Insurance is payable when the Insured dies
Premiums are payable during the Insured's lifetime
Annual dividends may be paid
<PAGE>
ASSIGNMENT OF LIFE INSURANCE DEATH BENEFIT
AS COLLATERAL
A. For value received, the undersigned hereby assigns, transfers and sets over
to Andrews Office Supply and Equipment Company, Inc., its successors or
assigns, (herein called the "Assignee") the death benefit under Policy
No. 9 608 308, issued by Massachusetts Mutual Life Insurance Company or
its MML affiliated Insurance Company (herein called the "Insurer"; the
identity of the Insurance Company is determined by the policy number)
and any supplementary contracts issued in connection therewith (said
policy and contracts being herein called the "Policy"); upon the life
of Timothy J. Flynn subject to all of the terms and conditions of the
Policy and to all superior liens, if any, which the Insurer may have
against the Policy. The undersigned by this instrument agrees and the
Assignee by the acceptance of this assignment agrees to the conditions
and provisions herein set forth.
B. It is understood and agreed that the Assignee shall have the sole right
to collect from the Insurer the net proceeds of the Policy when it
becomes a claim by death or maturity and that all other rights under the
Policy, including, by way of illustration and not limitation, the right
to surrender the Policy, the right to make the Policy loans, the right to
designate and change the beneficiary, and the right to elect and to
receive dividends are reserved exclusively to the owner of the Policy and
are excluded from this assignment and do not pass by virtue hereof and
may be exercised by the owner on the sole signature of the owner.
Nothing herein shall affect funds, if any, now or hereafter held by the
Insurer for the purpose of paying premiums under the Policy.
C. The Assignee covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities, matures or
unmatured, shall be paid by the Assignee to the persons entitled
thereto under the terms of the Policy had this assignment not been
executed;
2. That the Assignee, not having any right to obtain policy loans from
the Insurer, will not take any steps to borrow against the Policy,
except that the owner of the Policy MAY direct the Insurer to pay
the proceeds of any Policy loan to the Assignee, in which event the
Assignee shall reduce the amount of existing Liabilities by the
amount of such Policy loan and interest accrued to the date such
Policy loans are repaid by the Assignee.
3. That the Assignee will upon request forward without unreasonable
delay to the Insurer the Policy for endorsement of any designation
or change of beneficiary or any election of an optional mode of
settlement; provided, however, that any such designation, change or
election shall be made subject to this assignment and to the rights
of the Assignee hereunder.
<PAGE>
4. That, upon surrender of the Policy or any portion thereof or upon
the surrender of any or all of the paid-up additions standing to the
credit of the Policy, if any, by the undersigned at any time before
any death benefit is payable under the Policy, the Assignee shall
have the sole right to collect such surrender proceeds of the Policy
or any such surrender value of such paid-up additions.
D. This assignment of the life insurance death benefit under the Policy is
made as collateral security for all liabilities of the undersigned, or
any of them, to the Assignee, either now existing or that may hereafter
arise with respect to premiums advanced for or paid on the Policy by the
Assignee (all of which liabilities secured or to become secured are
herein called "Liabilities").
E. The Insurer is hereby authorized to recognize the Assignee's claim
hereunder without investigating the validity or the amount of the
Liabilities, or the application to be made by the Assignee of any amount
to be paid to the Assignee. The sole receipt of the Assignee for any sum
received shall be a full disclosure and release therefore to the Insurer.
A check for all or any part of the insurance death benefit payable under
the Policy and assigned herein shall be drawn to the exclusive order of
the Assignee in such amount as may be requested by the Assignee.
F. Except as otherwise provided in any other document evidencing Liabilities
owing to the Assignee from the undersigned, his successors and assigns,
if any, the Assignee shall be under no obligation to pay any premium on
the Policy. The principal of or interest on any loans or advanced on the
Policy, or any other charges on the Policy shall be an obligation of the
undersigned, and not an obligation of the Assignee, except as otherwise
specifically provided herein under Paragraph C.2.
G. The Assignee may take or release other security, may release any party
primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or
may apply to the Liabilities in such order as the Assignee shall
determine, the insurance death benefit payable under the Policy hereby
assigned without resorting or regard to other security.
H. In the event of any conflict between the provisions of this assignment or
provisions of the note or other evidence of any Liability, with respect
to the Policy or rights of collateral security therein, the provisions of
this assignment shall prevail.
2
<PAGE>
I. The undersigned declares no proceedings in bankruptcy are pending against
him and that his property is not subject to any assignment for the
benefit of creditors.
Signed and sealed this 11th day of April, 1994.
/s/ Patrick W. Furey /s/ Timothy J. Flynn
- --------------------------- -------------------------------
Witness Owner
5612 Roosevelt St. 15113 Peachstone Drive
- --------------------------- -----------------------------------------
Address Address
Bethesda, MD 20817 Silver Spring, MD 20905
- --------------------------- -----------------------------------------
5/11/94
ACCEPTANCE OF ASSIGNMENT -----------------------------------------
Date
Andrews Office Supply & Equipment Co., Inc.
BY: /s/ Timothy J. Flynn /s/ Patrick W. Furey
------------------------- -----------------------------------------
Witness Patrick W. Furey
V.P. Patrick W. Furey
------------------------- -----------------------------------------
Title President
3
<PAGE>
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this 11th day of April, 1994, by and between Andrews
Office Supply and Equipment Company, Inc., a District of Columbia corporation
(hereinafter called the "Corporation"); and Timothy J. Flynn, (hereinafter
called the "Employee");
WITNESSETH:
WHEREAS, the Employee is a valuable and experienced Employee; and
WHEREAS, the parties desire to establish a split-dollar life insurance
plan in order to provide insurance protection for the benefit of the Employee;
NOW THEREFORE, in consideration of the services heretofore rendered and
to be rendered by the Employee and of the mutual covenants considered herein,
the parties hereby agree as follows:
1. PURCHASE OF POLICY. The Employee shall apply to Massachusetts
Mutual Life Insurance Company for a life insurance policy on the life of the
Employee in the face amount of $1,500,000 and on the Whole Life Plan. The
Employee will agree to a medical examination as required by the insurance
company and shall sign any form as requested by the insurance company as
required for the issuance of the policy.
2. OWNERSHIP OF THE POLICY. The Employee shall be the owner of the
insurance policy on the Employee's life identified in Exhibit "A", attached
hereto and made a part hereof, and may exercise all rights of ownership with
respect to the policy except as otherwise hereinafter provided.
3. PAYMENT OF PREMIUMS ON POLICY. The company agrees to remit to the
insurance company issuing the policy and named in Exhibit "A" (the "Insurer")
the entire annual premium due in a timely manner at the beginning of each
policy year.
4. ELECTION OF DIVIDEND OPTION. All dividends hereafter declared by
insurer on the policy, or any part thereof as may be so used, shall be
applied to purchase option term insurance on the life of the Employee. Such
dividend shall be applied in its entirety to purchase option term to the
extent possible. Any portion of the dividend not used to purchase option
term shall be applied to purchase paid up additions.
5. COLLATERAL ASSIGNMENT FOR BENEFIT OF CORPORATION. The Employee
shall execute and cause to be filed with the insurer a collateral assignment
of the policy to the Corporation as security for the payment of any
indebtedness of the Employee to the Corporation as hereinafter set forth in
paragraphs Six and Seven. Such collateral assignment shall be attached and
made a part of this Agreement and referred to as Exhibit "B".
<PAGE>
6. DISPOSITION OF POLICY PROCEEDS. Notwithstanding any beneficiary
designation made on the policy, the Corporation shall be entitled to the
following amounts from the policy:
(a) Death of Employee -- At the Employee's death the Corporation
shall be entitled to an amount equal to the total premiums paid by the
Corporation.
(b) Termination of Employment for Reasons Other Than Death -- In
the even of Termination of employment rather than by reason of death, the
Corporation shall be entitled to receive an amount equal to the lessor of
premiums paid or cash surrender value of the policy as of the date to which
premiums were paid at the time of the Employee's termination of employment,
increased by any unpaid dividends allowed for the year in which the
termination occurs, plus any unused portion of the premium payment, less any
indebtedness to the insurance on the policy.
(c) Termination of Agreement -- In the event of Termination of
Agreement rather than by reason of death, the Corporation shall be entitled
to receive an amount equal to the lessor of premiums paid or cash surrender
value of the policy as of the date to which premiums were paid at the time of
the termination of Agreement, increased by any unpaid dividends allowed for
the year in which the termination occurs, plus any unused portion of the
premium payment, less any indebtedness to the insurance on the policy.
7. TERMINATION OF AGREEMENT. This Agreement shall terminate on the
occurrence of any of the following events:
(a) Cessation of business by the Corporation except in the event of
the acquisition of all or substantially all the assets or shares of the
Corporation by another company or a merger or consolidation of another
company if immediately subsequent to such event the Employee is employed by
such acquiring company or the surviving company of such merger or
consolidation;
(b) Written notice given by the Employee to the Corporation or by
the Corporation to the Employee;
(c) Termination of the Employee's services with the Corporation; or
(d) Bankruptcy, receivership, or dissolution of the Corporation.
8. DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT. If this
Agreement is terminated under any subsection of paragraph Seven, the Employee
shall have thirty (30) days from the date of the event causing such
termination in which to pay the Corporation an amount equal to that which
would be payable to the Corporation under paragraph Six hereof had the
Employee terminated his employment on the date said payment is made. Upon
payment of such
2
<PAGE>
amount to the Company the Employee shall be entitled to
receive from the Corporation a release of the collateral assignment described
under paragraph Five of this Agreement.
9. INCLUDABLE INCOME. The Employee shall be responsible for
determining the amount, if any, includable in his gross income for Federal
income tax purposes as the result of this Agreement.
10. LIABILITY OF LIFE INSURANCE COMPANY. It is understood by the
parties hereto that in issuing policies of insurance pursuant to this
Agreement Massachusetts Mutual Life Insurance Company shall have no liability
except that set forth in the policy. Said insurance company shall not be
bound to inquire into, or take notice of, any of the covenants herein
contained as to such policies of insurance, or as to the application of the
proceeds of such policy. Upon the death of the insured, said insurance
company shall be discharged from all liability on payment of the proceeds in
accordance with the policy provisions without regard to this Agreement or any
amendment hereto.
11. AMENDMENTS. Amendments may be made to this Agreement by a writing
signed by each of the parties and attached hereto. Additional policies of
insurance on the life of the Employee may be purchased under this Agreement
by amendment to paragraph one hereof.
IN WITNESS WHERE OF, the parties have set their hands and seals, the
Corporation by its duly authorized officer, on the day and year above written.
WITNESS:
Andrews Office Supply and Equipment
Company, Inc.
/s/ Timothy J. Flynn By: /s/ Patrick W. Furey
- ------------------------------ --------------------------------
Patrick W. Furey
Title:
--------------------------------
President
/s/ Patrick W. Furey /s/ Timothy J. Flynn
- ------------------------------- ------------------------------------
Timothy J. Flynn (Employee)
3
<PAGE>
EXHIBIT "A"
Name of Life Insurance Company:
Massachusetts Mutual Life Insurance Company
- -------------------------------------------
Policy Number:
9 608 308
- ---------
Face Amount:
$1,500,000
- ----------
4
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF U.S. OFFICE PRODUCTS COMPANY
<TABLE>
<CAPTION>
U.S. SUBSIDIARIES: STATE
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
AAA Coffee Service of Oregon, Inc. Delaware
AAA Coffee Service of Washington, Inc. Delaware
Access to Computer Suppliers, Inc. California
Action Wholesale Service, Inc. Michigan
Affordable Interior Systems, Inc. Massachusetts
All Pro Holdings Corp. Delaware
All Pro Vending Company Texas
American Loose Leaf/Business Products, Inc. Missouri
Andrews Office Supply and Equipment Co. District of Columbia
Baird Acquisition Corp. Delaware
Bay State Computer Group, Inc. Massachusetts
Becton Office Products North Carolina
BESCO, Inc. Delaware
Blue Ribbon Enterprises, Inc. Pennsylvania
Brasan, Inc. Florida
Bri-Kris Distributors Louisiana
Bri-Kris Refreshment Service, Inc. Louisiana
Burgess, Anderson & Tate, Inc. Illinois
Business Works, Inc. Delaware
C&G Acquisition Corp. Delaware
C. W. Mills Acquisition Corp. Delaware
Caddo Design (49%) Colorado
Cal Bennett, Inc. California
Cal Simmons Travel Virginia
Carithers-Wallace-Courtenay, Inc. Georgia
Carolina Office Equipment Company, Inc. North Carolina
Carter Vending Company Texas
CCR Office Products, Inc. Delaware
Certified Supply Kentucky
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
CK Coffee, Inc. Delaware
Coffee Butler Acquisition Corp. Delaware
Copenhaver Holdings, Incorporated Florida
Courtland-Cain, Inc. Georgia
Dameron-Pierson Company, Ltd. Louisiana
Davids Office Supply & Furniture Co., Inc. Michigan
DBI Business Interiors, Inc. Michigan
DeKalb Acquisition Corp. Delaware
Digital Network Associates New York
Discount Desk Center, Inc. California
Emmons-Napp Office Products, Inc. Delaware
Evers, Inc. Illinois
Expert Office Services Maryland
Fortran Corp. Maryland
Forty-Fifteen Papin Redevelopment Corporation Missouri
FOS Holding, Inc. Ohio
Franklin Office Products Ohio
Furniture Consultants NY, Inc. New York
G&L VBJ Texas
General Office Products Company Minnesota
GP Acquisition Corp. Delaware
Grodons, Inc. California
Group 90, Inc. Michigan
Halsey's Florida
Hano Document Printers Virginia
HBI Office Interiors Washington
Healy-Matthews Stationers, Incorporated New Mexico
Huxley Envelope Corp. New York
Insta-Copy Printing, Inc. New Mexico
Interiors Unlimited, Inc. Missouri
International Interiors Incorporated Florida
IQ 2000, Inc. Texas
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Kanak & Sons, Inc. Illinois
Kentwood Marketing, Inc. Michigan
Kentwood Office Furniture, Inc. Michigan
Kramer Office Furniture CT New York
Landmark Enterprises, Inc. Delaware
Lee Office Products Illinois
Lincoln Office Products Illinois
Loy's Office Supply Georgia
LP Acquisition Corp. Delaware
Magic City Acquisition Corp. Delaware
Majordomo Service, Inc. Florida
Mark's Office Furniture Acquisition Corp. Florida
McWhorters Stationery Company, Inc. California
Mile High Office Supply Corp. Colorado
Mills Morris Business Products, Inc. Tennessee
Mutual Travel, Inc. Washington
National Office Supply Co. Ohio
New Office Plus, Inc. Wisconsin
New World Vending, Inc. Delaware
North Howard Corporation Florida
Oak Brook Office Supply and Equipment Corp. Delaware
Office Equipment Service Company, Inc. Tennessee
Office Extra Missouri
Office Furniture Distributors, Inc. Texas
Office Furniture Store Ohio
Office Products Center Michigan
Office Specialties California
Office Supply Feather Sound, Inc. Florida
OFN, Inc. Tennessee
OPC Office Products Inc. Minnesota
Paul Griffin & Associates, Inc. Alabama
Pear Commercial Interiors, Inc. Colorado
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Pear Custom Furniture, Inc. Colorado
Pence-Dickens & Heeter, Inc. Indiana
Pocono Envelope Corp. Pennsylvania
Poor Richard's Almanac California
Portland Supply & Printing Oregan
Price Modern of Norfolk, Inc. Virginia
Price Modern of Va, Inc. Virginia
Price Modern, Inc. Maryland
Professional Computer Solutions, Inc. New York
Professional Office Supply Michigan
Professional Travel Corp. Colorado
Prossaire, Inc. Florida
Prudential of Florida, Inc. Florida
Radar Business Systems, Inc. Tennessee
Rainen Business Interiors, Inc. Missouri
Raleigh Office Supply Company, Inc. North Carolina
Raygo Coffee Enterprises, Inc. Wisconsin
Rex Envelope Co., Inc. New York
Sagot Office Interiors, Inc. New Jersey
School Specialty, Inc. Wisconsin
Shamrock Acquisition Corp. Pennsylvania
Sharp Pencil Holdings, Inc. Delaware
Sletten Vending Services, Inc. Wisconsin
Standard Forms Inc. New York
Steve's Office Supply California
Sturgis Acquisition Corp. Delaware
T.H. Payne Co. Tennessee
The H.H. West Company Delaware
The J. Thayer Company Oregon
The Office Connection, Inc. Florida
The Office Works, Inc. Pennsylvania
The RePrint Corporation Alabama
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
The Smith-Wilson Co. Florida
The Systems House, Inc. Illinois
Thomas & Grayston Company Minnesota
Travel Arrangements, Inc. Texas
United Envelope Co., Inc. New Jersey
USOP Merchandising Company Delaware
Way Acquisition Corp. Pennsylvania
WBT Holdings, Inc. Texas
Whittington, Inc. Missouri
WJ Saunders & Co., Inc. Illinois
</TABLE>
]
<TABLE>
<CAPTION>
FOREIGN SUBSIDIARIES: COUNTRY
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Armidale Industries Limited (65%) New Zealand
Bennetts Government Bookshop Limited New Zealand
Blue Star Consumer Retailing Limited New Zealand
Blue Star Finance Limited New Zealand
Blue Star Graphics Limited New Zealand
Blue Star Group Limited New Zealand
Blue Star Office Automation Limited New Zealand
Blue Star Office Products (Hawkes Bay) Limited New Zealand
Blue Star Office Technology Limited New Zealand
Blue Star Print Limited New Zealand
Blue Star Properties (Crawford Street) Limited New Zealand
Blue Star Properties (Grey Street) Limited New Zealand
Blue Star Properties (Karamu Road) Limited New Zealand
Blue Star Properties (Spey Street) Limited New Zealand
Blue Star Properties Limited New Zealand
Blue Star Systems Limited (50%) New Zealand
Blue Star Telecommunications Limited New Zealand
Calendar Club NZ Limited (50%) New Zealand
Croxley Stationery Limited New Zealand
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
General Packaging Limited New Zealand
GPO Properties (Masterton) Limited New Zealand
Hart Candy Communications Limited (75%) New Zealand
Hart Candy Rentals Limited (75%) New Zealand
Imaging Solutions Limited New Zealand
London Bookshops Finance Limited New Zealand
Lullingstone Investments Limited New Zealand
Marketplace Centre Limited (33%) New Zealand
New Zealand Office Products Limited New Zealand
Orbit Software Limited New Zealand
PC Direct Limited New Zealand
The Office Products Specialist Limited New Zealand
U-Bix Business Machines Limited New Zealand
University Bookshop (Auckland) Limited (50%) New Zealand
University Bookshop (Canterbury) Limited (50%) New Zealand
University Bookshop (Otago) Limited (50%) New Zealand
Wang New Zealand Limited New Zealand
WGL Retail Holdings Limited New Zealand
Whitcoulls Group Services Limited New Zealand
Angus & Robertson Bookworld Pty Limited Australia
Blue Star Corporate Pty Limited (75%) Australia
Blue Star Group Pty Limited Australia
Commonwealth Paper Company Pty Limited Australia
Dixon Office Warehouse Pty Limited Australia
Empire Office Supplies Pty Limited Australia
Paperwealth Limited Australia
1186202 Ontario Limited Canada
1186203 Ontario Limited Canada
1203803 Ontario Limited Canada
3303471 Canada Inc. Canada
452007 British Columbia Limitied Canada
Arbuckle Foods, Inc. Canada
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY
OF
NAME INCORPORATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
CCR Leasing, Inc. Canada
Data Business Forms Canada
Marced Holdings, Inc. Canada
Take a Break Services, Inc. Canada
Dudley Stationery (49%) United Kingdom
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-01574), (333-12789) and (333-24581); on Form S-3
(Nos. 333-10383) and (333-14025); and on Form S-4 (No. 333-13133) of U.S.
Office Products Company of our report dated June 6, 1997, appearing on page
F-1 which report appears in this Annual Report on Form 10-K/A Amendment No. 1
of U.S. Office Products Company for the year ended April 26, 1997. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statements. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected
Financial Data."
/s/PRICE WATERHOUSE LLP
Minneapolis, Minnesota
June 30, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 (333-01574), (333-12789) and (333-24581); on Form S-3
(333-10383) and (333-14025); and on Form S-4 (333-13133) of U.S. Office
Products Company of our report dated May 23, 1996, except for Note N as to
which the date is October 14, 1996, relating to the financial statements of
Bay State Computer Group, Inc., included in U.S. Office Products Company's
Annual Report on Form 10-K/A Amendment No. 1 for the year ended April 26,
1997.
/s/PARENT, MCLAUGHLIN & NANGLE
Boston, Massachusetts
August 18, 1997
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
Nos. 333-01574, 333-12789, and 333-24581 on Form S-8, Registration Statements
Nos. 333-10383 and 333-14025 on Form S-3, and Registration Statement No.
333-13133 on Form S-4 of U.S. Office Products Company of our report dated
June 7, 1996 and October 24, 1996 on the financial statements of Fortran
Corp. As of and for the period ended March 31, 1996, appearing in the Annual
Report on Form 10-K/A Amendment No. 1 of U.S. Office Products Company for the
year ended April 26, 1997.
/s/Gary A. Koehmstedt, CPA
RUBIN, KOEHMSTEDT & NADLER, PLC
Springfield, Virginia
August 18, 1997
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-8 (Nos. 333-01574, 333-12789 and 333-24581); on Form S-3 (Nos.
333-10383 and 333-14025); and on Form S-4 (No. 333-13133) of U.S. Office
Products Company of our report dated February 2, 1996, with respect to the
financial statements of School Specialty, Inc. for the years ended December
31, 1995 and 1994 (not presented separately in the Registration Statements)
which report appears in this Annual Report on Form 10-K/A Amendment No. 1 of
U.S. Office Products Company for the year ended April 26, 1997.
/s/ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 18, 1997
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-8 (333-01574), (333-12789) and (333-24581); Form S-3 (333-10383)
and (333-14025); and Form S-4 (333-13133) of U.S. Office Products Company of
our report, with respect to the financial statements of Data Business Forms
Limited for the period ended December 31, 1995, dated February 6, 1996,
appearing on page F-8 of U.S. Office Products Company's Annual Report on Form
10-K/A Amendment No. 1 for the year ended April 26, 1997.
/s/ERNST & YOUNG
Chartered Accountants
Toronto, Canada
August 18, 1997
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-01574, (333-12789) and (333-24581); Form S-3
(333-10383) and (333-14025); and on Form S-4 (333-13133) of the U.S. Office
Products Company of our report dated on March 6, 1996 with respect to the
combined financial statements of United Envelope Co., Inc. and its affiliate
for the years ended December 31, 1995 and 1994 (not presented separately in
the Registration Statements) which report appears in the Annual Report on
Form 10-K/A Amendment No. 1 of the U.S. Office Products Company for the year
ended April 26, 1997.
/s/HERTZ, HERSON & COMPANY, LLP
New York, New York
August 18, 1997
<PAGE>
Exhibit 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
U.S. Office Products Company:
We consent to the incorporation by reference in the registration statements
on Form S-8 3(33-01574), (333-12789) and (333-24581), on Form S-3 (333-10383)
and (333-14025) and on Form S-4 (333-13133) of U.S. Office Products Company
of our reports dated August 18, 1996 with respect to the balance sheets of
SFI Corp. and Hano Document Printers, Inc. as of December 31, 1995, and the
related statements of income, stockholders' equity, and cash flows for each
of the years in the two-year period ended December 31, 1995, which reports
appear in this Annual Report on Form 10-K/A Amendment No. 1 of U.S. Office
Products Company.
/s/KPMG PEAT MARWICK LLP
Norfolk, Virginia
August 18, 1997
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-8 (333-01574), (333-12789) and (333-24581); on Form S-3 (333-10383)
and (333-14025); and on Form S-4 (333-13133) of our report dated February 8,
1996 with respect to the financial statements of The Re-Print Corporation for
the years ended December 31, 1995 and 1994 of U.S. Office Products Company's
Annual Report on Form 10-K/A Amendment No. 1 for the year ended April 26,
1997.
/s/BDO SEIDMAN, LLP
Atlanta, Georgia
August 18, 1997
<PAGE>
Exhibit 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Registration Statements Nos.
333-01574, 333-12789, and 333-24581 on Form S-8, Registration Statements Nos.
333-10383 and 333-14025 on Form S-3, and Registration Statement No. 333-13133
on Form S-4 of U.S. Office Products Company of our report dated September 23,
1996, on the financial statements of MTA, Inc. as of and for the period ended
December 31, 1995, appearing in the Annual Report on Form 10-K/A, Amendment
No. 1 of U.S. Office Products Company for the year ended April 26, 1997.
/s/DELOITTE & TOUCHE LLP
Seattle, Washington
August 18, 1997
<PAGE>
Exhibit 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-01574), (333-12789) and (333-24581); Form S-3
(333-10383) and (333-14025); and on Form S-4 (333-13133) of the U.S. Office
Products Company of our report dated March 4, 1996, with respect to the
financial statements of Huxley Envelope Corporation for the years ended
December 31, 1995 and 1994 (not presented separately in the Registration
Statements), which report appears int he Annual Report on Form 10-K/A
Amendment No. 1 of the U.S. Office Products Company for the year ended April
26, 1997.
/s/HERTZ, HERSON & COMPANY, LLP
New York, New York
August 18, 1997
