SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 26, 1995
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _______
Commission File No. 0-24642
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CORPORATE EXPRESS, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0978360
--------------------------- -----------------
(State of incorporation or (I.R.S. Employer
organization) Identification No.)
325 Interlocken Parkway
Broomfield, Colorado 80021
--------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 373-2800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _______
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The number of shares of the registrant's common stock, par value $.0002 per
share, outstanding as of September 30, 1995 was 50,190,979.
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
August 26, February 25,
1995 1995
---------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents................................ $ 13,217 $ 11,546
Trade accounts receivable, net
of allowance of $3,346
and $3,323, respectively.............................. 160,189 119,861
Notes and other receivables.............................. 12,798 4,627
Inventories.............................................. 81,585 54,581
Deferred income taxes.................................... 11,318 13,434
Other current assets..................................... 11,612 13,189
-------- --------
Total current assets............................... 290,719 217,238
-------- --------
Property and equipment:
Land..................................................... 2,276 2,104
Buildings and leasehold improvements..................... 18,200 16,393
Furniture and equipment.................................. 46,842 28,147
-------- --------
67,318 46,644
Less accumulated depreciation............................ (16,682) (9,286)
-------- --------
50,636 37,358
-------- --------
Goodwill, net of $8,267 and $5,459 of accumulated
amortization, respectively.................................. 219,747 179,142
Other assets, net........................................... 15,324 11,940
-------- --------
235,071 191,082
-------- --------
Total assets....................................... $576,426 $445,678
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-2-
CORPORATE EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
(IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
August 26, February 25,
1995 1995
---------- ------------
(Unaudited)
Current liabilities:
Accounts payable - trade.................................... $ 93,692 $ 70,186
Accounts payable - other.................................... - 6,454
Accrued payroll and benefits................................ 14,769 10,892
Accrued purchase costs...................................... 13,470 11,253
Other accrued liabilities................................... 15,365 14,147
Current portion of long-term debt
and capital leases....................................... 4,497 3,679
Net liabilities of discontinued
operations............................................... 230 441
-------- --------
Total current liabilities............................. 142,023 117,052
Capital lease obligations...................................... 7,107 6,433
Long-term debt................................................. 159,738 120,923
Deferred income taxes.......................................... 5,291 4,333
Minority interest in subsidiaries.............................. 11,718 -
Other non-current liabilities.................................. 57 160
-------- --------
Total liabilities..................................... 325,934 248,901
-------- --------
Contingencies (Note 6)
Shareholders' equity:
Common stock, $.0002 par value, 100,000,000
shares authorized, 42,234,000 and
38,841,000 shares issued and
outstanding, respectively (Note 3)....................... 8 8
Additional paid-in capital.................................. 263,792 216,317
Accumulated deficit......................................... (13,664) (19,601)
Foreign currency translation adjustments.................... 356 53
-------- --------
Total shareholders' equity............................ 250,492 196,777
-------- --------
Total liabilities and.............................. $576,426 $445,678
shareholders' equity ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-3-
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
-------------------------- -------------------------
August 26, August 31, August 26, August 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Net sales........................................ $262,970 $144,140 $488,075 $284,924
Cost of sales.................................... 196,004 107,370 364,129 212,705
-------- -------- -------- --------
Gross profit................................. 66,966 36,770 123,946 72,219
Warehouse operating and selling expenses......... 47,968 29,279 89,082 56,924
New warehouse assimilation expenses.............. 3,626 875 5,724 1,647
Corporate general and administrative
expenses....................................... 6,627 3,820 12,461 7,052
-------- -------- -------- --------
Operating profit............................. 8,745 2,796 16,679 6,596
Interest expense, net............................ 3,422 3,438 6,103 6,661
-------- -------- -------- --------
Income (loss) before income taxes............ 5,323 (642) 10,576 (65)
Income tax expense (benefit)..................... 2,088 (109) 4,075 (55)
Net income (loss) before minority interest and -------- -------- -------- --------
extraordinary item.............................. 3,235 (533) 6,501 (10)
Minority interest................................ 449 8 564 40
-------- -------- -------- --------
Net income (loss) before extraordinary item...... 2,786 (541) 5,937 (50)
Extraordinary item:
Gain on early extinguishment of debt (net
of tax)..................................... - 586 - 586
-------- -------- -------- --------
Net income....................................... $ 2,786 $ 45 $ 5,937 $ 536
======== ======== ======== ========
Net income (loss) per share:
Before extraordinary item..................... $ .06 $ (.02) $ .13 $ -
Extraordinary item............................ - .02 - .02
-------- -------- -------- --------
Net income per share............................. $ .06 $ - $ .13 $ .02
======== ======== ======== ========
Weighted average common shares outstanding....... 45,672 29,585 45,038 27,758
======== ======== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-4-
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended
--------------------------
August 26, August 31,
1995 1994
---------- ----------
(Unaudited)
Cash flows from operating activities:
Net income................................................... $ 5,937 $ 536
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation............................................. 3,768 2,116
Amortization............................................. 3,303 2,599
Minority interest........................................ 564 40
Extinguishment of debt with stock........................ - (700)
Other.................................................... - (14)
Changes in assets and liabilities, excluding
acquisitions:
(Increase) decrease in accounts receivable........... (15,410) 11,662
(Increase) in inventory.............................. (12,063) (1,371)
Decrease (increase) in other current assets.......... (1,093) (2,729)
(Increase) in other assets........................... (425) (236)
(Decrease) in accounts payable....................... (3,395) (7,164)
(Decrease) in accrued liabilities.................... (384) (6,689)
-------- --------
Net cash used in operating activities........................... (19,198) (1,950)
-------- --------
Cash flows from investing activities:
Proceeds from sale of assets................................. 4,362 12
Capital expenditures......................................... (10,214) (1,569)
Payment for acquisitions, net of cash acquired............... (46,579) (15,118)
Other, net................................................... (4,502) (285)
-------- --------
Net cash used in investing activities........................... (56,933) (16,960)
-------- --------
Cash flows from financing activities:
Issuance of preferred and common stock....................... 50,896 11,545
Stock offering costs......................................... (2,967) -
Proceeds from long-term borrowings........................... 7,376 783
Repayments of long-term borrowings........................... (2,397) (3,816)
Proceeds from short-term borrowings.......................... - 86
Repayments of short-term borrowings.......................... (5,893) (1,318)
Cash paid to retire bonds.................................... - (9,300)
Net proceeds from line of credit............................. 31,400 16,250
-------- --------
Net cash provided by financing activities....................... 78,415 14,230
-------- --------
Net cash used in discontinued operations........................ (211) (405)
-------- --------
Effect of foreign currency exchange rate changes on cash........ (402) -
-------- --------
Increase (decrease) in cash and cash equivalents................ 1,671 (5,085)
Cash and cash equivalents, beginning of period.................. 11,546 11,400
-------- --------
Cash and cash equivalents, end of period........................ $ 13,217 $ 6,315
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-5-
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations in the amount of $1,695,000 and $835,000 were incurred
during the six months ended August 26, 1995 and August 31, 1994, respectively,
for equipment and software.
During the six months ended August 26, 1995, the Company purchased, for a net
cash purchase price of $40,117,000, 11 office products distributors -- including
two distributors purchased by Macquarie Office Limited ("Macquarie"), an
Australian contract stationer in which the Company acquired a 52.7% interest
through the purchase, in May 1995, of newly issued securities of Macquarie.
During the six months ended August 31, 1994, the Company purchased substantially
all of the assets and assumed certain liabilities of six contract stationers for
a net cash outlay of $14,586,000. In conjunction with these acquisitions,
liabilities were assumed as follows:
Six Months Ended
-----------------------
August 26, August 31,
1995 1994
---------- ----------
(In thousands)
(Unaudited)
Fair value of assets acquired........... $92,668 $28,317
Cash paid, net of cash acquired......... 40,117 14,586
Issuance of notes payable............... - 325
Issuance of stock....................... - 245
Minority interest in subsidiary......... 11,138 -
Purchase price payable, included
in current liabilities............... 54 3,552
------- -------
Liabilities assumed..................... $41,359 $ 9,609
======= =======
In addition to the amounts set forth above, during the six month periods ended
August 26, 1995 and August 31, 1994, the Company paid $6,462,000 and $182,000,
respectively, for prior period acquisitions. Of the amounts paid for prior
period acquisitions in the first six months of fiscal 1995, $5,000,000 was
related to the acquisition of certain assets of the office products division of
Joyce International.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-6-
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED STATEMENTS
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------------------
The consolidated financial statements include the accounts of Corporate Express,
Inc. ("Corporate Express" or the "Company") and majority owned subsidiaries.
The Company accounts for its investments in less than 50% owned entities using
the equity or cost methods. All intercompany balances and transactions have
been eliminated.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods presented. The results of operations for these interim periods are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes included in the Company's Form 10-K for the
year ended February 25, 1995.
Certain of the Company's locations calculate cost of sales using an estimated
gross profit method for interim periods. Cost of sales at these locations are
adjusted based on physical inventories which are performed no less than once a
year.
Certain reclassifications from warehouse operating and selling expense to
corporate general and administrative expense have been made to the August 31,
1994 statement of operations to conform to the August 26, 1995 presentation with
respect to certain goodwill amortization. Certain reclassifications have been
made to the February 25, 1995 balance sheet to conform to the August 26, 1995
balance sheet presentation.
NOTE 2 - CHANGES IN REPORTED AMOUNTS
- ------------------------------------
The Company has revised its previously issued financial statements for the three
and six month periods ended August 26, 1995 to reflect adjustments to expense
amounts that were previously charged to accrued purchase costs for the
integration of certain warehouses and computer systems. The adjustments had no
impact on previously reported cash flows from operations. These adjustments
reduced previously reported results of operations as follows:
Three Months Six Months
Ended Ended
August 26, 1995 August 26, 1995
--------------- ---------------
Income before income taxes:
As previously reported $6,753 $12,006
As revised 5,323 10,576
Net income:
As previously reported 3,658 6,809
As revised 2,786 5,937
Net income per common share:
As previously reported $.08 $.15
As Revised .06 .13
-7-
CORPORATE EXPRESS, INC.
NOTES TO CONSOLIDATED STATEMENTS
NOTE 3- COMMON STOCK
- --------------------
On March 30, 1995 the Company sold 3.0 million primary shares (post 50% share
dividend) in a follow-on public offering of its common stock, and selling
shareholders sold 3.6 million shares at a price of $16.67 (post dividend) per
share. The $48.3 million of net proceeds from the offering were used by the
Company to repay existing debt and to finance the Company's acquisitions.
In June 1995, the Company's Board of Directors declared a 50% stock dividend of
the Company's common stock. The distribution of the stock dividend was made on
June 21, 1995 to shareholders of record as of June 16, 1995.
Shareholders of record were entitled to one additional share of common stock for
each two shares of the Company's common stock held on June 16, 1995. All
information in these financial statements has been restated to reflect the
distribution of this stock dividend.
NOTE 4 - COMPUTATION OF NET INCOME PER SHARE AND RESTATEMENT OF COMMON SHARES
- -----------------------------------------------------------------------------
OUTSTANDING
- -----------
Net income per share is calculated by dividing net income by the weighted
average shares of common stock and common stock equivalents outstanding. For
the six months ended August 31, 1994, and pursuant to the rules of the
Securities and Exchange Commission, common stock equivalents related to common
stock, preferred stock and stock options and warrants issued within the last
year have been included as if they were outstanding for the entire period.
Preferred stock has been shown as if converted to common stock on a two for one
and one-half basis for all periods presented because all shares of preferred
stock were automatically converted upon completion of the Company's initial
public offering in September 1994. The weighted average shares outstanding for
the three and six months ended August 26, 1995 and August 31, 1994 and the
common shares issued and outstanding at August 26, 1995 have been restated to
reflect the one for two reverse stock split in August 1994 and the 50% share
dividend distributed in June 1995.
NOTE 5 - SUBSEQUENT EVENT
- -------------------------
On September 15, 1995 the Company sold 16,324,528 primary shares in a follow-on
public offering of its common stock, and selling shareholders sold 2,075,472
shares at a price of $24.00 per share. Of the $375.2 million of net Company
proceeds from the offering, $195.8 million was used to pay for the purchase of
the Company shares held by OfficeMax, Inc., the Company's largest shareholder,
and $61.0 million was used to repay existing indebtedness. The remaining
proceeds will be used to finance the Company's acquisitions and for general
corporate purposes.
NOTE 6 - CONTINGENCIES
- ----------------------
The Company is a party to certain legal proceedings in the normal course of
business. In the opinion of management, the outcome of such litigation will not
have a material adverse effect on the Company's financial position or operating
results.
-8-
CORPORATE EXPRESS, INC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased to $262,970,000 in the three months ended August
26, 1995 from $144,140,000 in the three months ended August 31, 1994 and
increased to $488,075,000 for the six months ended August 26, 1995 from
$284,924,000 for the six months ended August 31, 1994. This increase was
primarily attributable to fifteen acquisitions since August 31, 1994. Of the
fifteen acquisitions, four closed in the fourth quarter of fiscal 1994 (two in
the U.S. and two in Canada), eight closed in the first quarter of fiscal 1995
(one in Australia, one in Canada, and six in the United States) and three closed
in the current quarter (two in Australia and one in the U.S.) The largest of
these was the acquisition during February 1995 of certain assets and the
assumption of certain liabilities of the office products division of Joyce
International, which included operations in six states. Acquisitions since May
31, 1994 provided entry into Canada, Australia, Texas, the Carolinas, Florida
and the Midwest, and added to operations in several existing regions in the
United States. Internal growth in existing regions also contributed to the
sales increase.
Gross Profit. Cost of sales includes merchandise, occupancy and delivery costs.
Gross profit as a percentage of sales was 25.5% and 25.4% for the three and six
month periods ended August 26, 1995 as compared to 25.5% and 25.3% for the same
periods in the previous year. Improvements in the merchandise component of
gross profit are primarily a result of increased purchasing efficiencies and
benefits associated with the introduction of the Company's proprietary In-Stock
Catalog and increased vendor rebates. These improvements were offset by the
impact of lower gross profit from newly acquired operations which initially have
lower merchandise margins and higher delivery and occupancy costs and by
supplier price increases on certain of the Company's product offerings,
particularly paper products, on which price increases were effective before
corresponding price increases were passed on to customers. The Company expects
that, over the near term, gross profit will be somewhat negatively impacted by
these factors.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating a regional warehouse and selling expenses and commissions related to
the Company's direct sales force. Warehouse operating and selling expenses
decreased as a percentage of sales to 18.2% in the three months ended August 26,
1995 from 20.3% for the same period in the prior year, and also decreased to
18.3% of sales for the six months ended August 26, 1995 compared to 20.0% for
the same period in the prior year. The decrease reflects the implementation of
the Corporate Express business model, which includes centralizing certain
administrative functions. Management expects that these operating expenses, as
a percentage of net sales, will decrease gradually over time as the Corporate
Express business model is implemented in a greater percentage of the Company's
operations. In order to be consistent with industry practices, certain
reclassifications were made from warehouse operating and selling expenses to
corporate general and administrative expenses on the August 31, 1994 statement
of operations to conform to the August 26, 1995 presentation with respect to
certain goodwill amortization.
New Warehouse Assimilation Expenses. New warehouse assimilation expenses
represent the readily identifiable incremental costs of acquiring, restructuring
and assimilating an acquisition into the Company's operations. Costs which are
not readily identifiable are included in warehouse operating and selling
expenses rather than in new warehouse assimilation expenses. New warehouse
assimilation expenses were $3,626,000 in the three months ended August 26, 1995
compared to $875,000 in the fiscal 1994 period and $5,724,000 in the six months
ended August 26, 1995 compared to $1,647,000 in the same period in the prior
year. Contributing to this increase is utilization of contract labor of
$702,000 related to the consolidation of the Hayward and San Jose facilities in
Northern California. This project was originally scheduled to start in September
of 1994 but was delayed due to logistical problems in preparing the facility to
accommodate the combined operations. The Company expects that, in fiscal 1995,
new warehouse assimilation expense will continue to increase compared to fiscal
1994 as more of the Company's acquisitions are integrated.
-9-
CORPORATE EXPRESS, INC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Corporate General and Administrative Expenses. Corporate general and
administrative expenses are those central expenses that are incurred to support
the Company's regional operations and goodwill amortization. Corporate general
and administrative expenses increased $2,807,000 to $6,627,000 in the second
quarter of fiscal 1995 from $3,820,000 in the second quarter of fiscal 1994 and
increased $5,409,000 to $12,461,000 in the six months ended August 26, 1995 from
$7,052,000 in the same period in the previous year, reflecting the Company's
expanded operations described above. As a percentage of net sales, corporate
general and administrative expenses decreased slightly to 2.5% in the second
quarter of fiscal 1995 from 2.7% in the second quarter of fiscal 1994 and was
2.6% in the six months ended August 26, 1995 compared to 2.5% in the same period
of the previous year. The decrease, as a percentage of net sales, in the fiscal
1995 quarter compared to the 1994 quarter reflects the leverage of a higher
revenue base. As a percentage of net sales, the slight increase in corporate
general and administrative expenses in the current six-month period compared to
the same period in the prior year is due to centralization of certain
administrative functions, and the inclusion of acquisition revenue in net sales
only from the date of acquisition while ongoing investment in the administrative
and information system support services was necessary to adequately support
acquisitions and planned expansion. As the Company integrates acquisitions into
its operations and centralizes administrative functions, the resulting increase
in corporate, general and administrative expenses is expected, over time, to be
more than offset by a decrease in regional warehouse operating and selling
expenses.
Operating Profit. Operating profit of $10,175,000 and $18,109,000 for the three
month and six month periods ended August 26, 1995, respectively, compares to
$2,796,000 and $6,596,000 for the same periods in the previous year. This
increase reflects the contribution of acquired companies and increased regional
operating profits at the Company's other regional operations. As a percentage
of net sales, operating profit increased to 3.9% and 3.7% for the three and six
month periods ending August 26, 1995 from 1.9% and 2.3% in the same periods of
the previous year.
Interest Expense. Net interest expense decreased slightly to $3,422,000 and
$6,103,000 in the three and six-month periods ended August 26, 1995 from
$3,438,000 and $6,661,000 in the three and six month periods ended August 31,
1994. This decrease was primarily due to the repurchase of $10 million of Notes
(as defined herein) in July 1994. Also contributing to the decrease in interest
expense was the elimination of the approximately 0.5% per annum additional
illiquidity payment on the Notes effective upon completion of a registered
exchange offer in March 1995.
Minority Interest. Minority interest increased to $449,000 and $564,000 for the
three and six month periods ended August 26, 1995 from $8,000 and $40,000 for
the same periods in the previous year, reflecting the 47.3% minority interest in
Corporate Express/Macquarie, the Company's 52.7% owned Australian subsidiary.
The Company acquired its interest in Corporate Express/Macquarie effective in
May 1995.
Net Income. As described in Note 2 to the financial statements, the Company
has revised its previously issued financial statements to reflect adjustments to
charge certain warehouse and computer conversion costs to expense in the current
period rather than as charges against accrued purchase costs. These adjustments
decreased net income by $872,000 for the three and six-month periods ended
August 26, 1996. The adjustments had no impact on previously reported cash
flows from operations. The Company will reverse $4,699,000 of unused accrued
purchase costs against goodwill in the fourth quarter of fiscal 1995, which will
reduce the related goodwill amortization expense in future periods. Net income
was $2,786,000 and $5,937,000 in the three and six-month periods ended August
26, 1995, compared to net income of $45,000 and $536,000 for the same periods in
the prior year. This increase reflects contributions from acquisitions and
increased profits from the Company's more mature operations. The increased pre-
tax profitability is partially offset by an increase in the effective tax rate
to 39% for fiscal 1995 from approximately 16% for the 1994 fiscal year. The
fiscal 1994 tax rate was significantly lower due to utilization of net
-10-
CORPORATE EXPRESS, INC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
operating loss carryforwards ("NOLs"). The fiscal 1995 tax rate reflects
international tax rates and changes in estimates regarding the utilization of
certain NOLs, offset by the impact of the inclusion of certain non-deductible
goodwill. The fiscal 1994 periods included an extraordinary gain of $586,000,
net of tax, related to the repurchase of $10 million principal amount of Notes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through internally
generated funds and borrowings from commercial banks, and has financed its
acquisitions through the use of such funds and the issuance of equity and debt
securities.
In February 1994, the Company completed a private placement of $100,000,000 of
9 1/8% Senior Subordinated Notes (the "Notes"). In July 1994, $10,000,000
principal amount of the Notes were repurchased by the Company for $9,300,000
plus accrued interest. Interest on the $90,000,000 of outstanding Notes is
payable semi-annually on March 15 and September 15 of each year. The Notes will
mature on March 15, 2004 and will not be redeemable prior to March 15, 1999.
Thereafter, the Notes will be redeemable at the option of the Company, in whole
or in part. On March 17, 1995, the Company completed an offer to exchange the
privately placed Notes for registered Notes. The additional illiquidity payment
of approximately 0.5% per annum ceased on completion of the exchange offer,
reducing the Company's interest rate with respect to the Notes from
approximately 9 5/8% to 9 1/8% per annum.
The Company has a revolving credit facility of $90,000,000, subject to borrowing
base and other restrictions (the "Senior Credit Facility"). At September 25,
1995, the Company had no debt outstanding under its Senior Credit Facility, and
an unused remaining borrowing line of $90,000,000. Borrowings under the Senior
Credit Facility bear interest, at the Company's option at (i) the applicable
30-, 60-, 90-, or 180-day adjusted Eurodollar rate, plus 2.25% (plus or minus
0.25%), subject, with respect to the plus or minus 0.25% adjustment, to a
performance-based grid based on the Company's financial results and availability
under the Senior Credit Facility or (ii) the applicable prime rate, plus .50%
(plus or minus 0.25%). The indebtedness under the Senior Credit Facility is
secured by substantially all of the assets of the Company and its United States
subsidiaries, including accounts receivable and inventory.
During the first six months of fiscal 1995, the Company purchased 11 contract
stationers for a net cash purchase price of $40,117,000 (including two contract
stationers purchased by Corporate Express/Macquarie), and including the purchase
of newly issued securities representing a 52.7% interest in Macquarie for a net
cash outlay of $98,000 ($16,785,000 purchase price less cash acquired of
$16,687,000), and made additional payments related to acquisitions completed in
fiscal 1994 of approximately $6,462,000. Total liabilities assumed in
connection with these acquisitions were $41,359,000 (including accounts payable
and assumed debt). During the first six months of fiscal 1995, the Company sold
its high end furniture business which was acquired as part of the Joyce
Acquisition for $4,366,000. The sale was contemplated at the time of the Joyce
Acquisition and was reflected in the financial statements accordingly. In
addition, the Company spent approximately $10,214,000 in the first six months of
fiscal 1995 of cash for capital expenditures, primarily for warehouse relayouts,
computer systems and trucks.
During the six months ended August 26, 1995, cash and cash equivalents increased
$1,671,000. This increase reflects net proceeds from the sale of common stock
in March 1995 of $47,929,000 and net borrowings under the Senior Credit Facility
of $31,400,000, which were partially offset by payments for acquisitions and
capital expenditures during the six months ended August 26, 1995 of $56,793,000,
as well as cash used for operations and repayment of
-11-
CORPORATE EXPRESS, INC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
debt of $27,488,000. Net cash used for operating activities reflects cash
generated by net income plus non-cash expenses offset by (i) an increased
investment in accounts receivable and inventories reflecting increased sales and
the introduction of the In-Stock Catalog into acquired operations and (ii)
decreased accounts payable as a result of accelerating payments to wholesalers
and vendors of acquired companies to take advantage of available discounts. The
repayment of debt includes debt of acquired companies.
For fiscal 1995, the Company expects capital expenditures of approximately $17
million (comprised of approximately $13 million to be used for upgrading and
enhancing the Company's information systems and approximately $4 million for
maintenance capital items) and approximately $7 million to be used for
acquisition related initial capital costs. Actual capital expenditures for
fiscal 1995 may be greater or less than budgeted amounts depending on the level
of acquisition activity and other factors. The Company has an option to
purchase certain real estate which, if purchased and built on, would be the site
of the Company's corporate headquarters, replacing presently leased space. The
purchase price for the real estate is $4.6 million. Construction of the new
headquarters, which the Company anticipates would be funded through third party
financing, is currently estimated to cost approximately $30 million, including
the $4.6 million land cost. The Company has not yet exercised the option.
On September 15, 1995 the Company sold 16,324,528 primary shares in a follow-on
public offering of its common stock, and selling shareholders sold 2,075,472
shares at a price of $24.00 per share. Of the $375.2 million of net Company
proceeds from the offering, $195.8 million was used to pay for the purchase of
the Company shares held by OfficeMax, Inc., the company's largest shareholder,
and $61.0 million was used to repay existing indebtedness. The remaining
proceeds will be used to finance the Company's acquisitions and for general
corporate purposes.
The Company believes that its cash on hand, borrowing capacity under the Senior
Credit Facility, capital resources, cash flows and the proceeds from its public
offerings will be sufficient to fund its ongoing operations and anticipated
capital expenditures for the next twelve months, although actual capital needs
may change, particularly in connection with acquisitions which the Company may
make in the future.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on July 19,
1995. A total of 42,150,608 shares of Company common stock were issued and
outstanding as of June 1, 1995, the record date for the meeting. A total of
38,425,076 shares were eligible to be voted at the meeting, in person or by
proxy, representing 91% of the total issued and outstanding shares.
The matters voted upon at the annual meeting and the votes cast for, against and
abstaining as to each matter, were as follows:
(1) The election of directors of the Company to serve until the next meeting
of shareholders or until their successors are duly elected and
qualified.
Name Shares For Shares Withheld
---- ---------- ---------------
Jirka Rysavy 38,184,918 240,158
Robert L. King 38,182,668 242,408
Michael Feuer 36,664,992 1,760,084
Janet A. Hickey 38,184,918 240,158
Donald H. Patrick, Jr. 38,184,168 240,908
(2) The ratification of the appointment of Coopers & Lybrand LLP as the
Company's independent auditors for the 1995 fiscal year.
38,408,421 Votes For
2,195 Votes Against
14,460 Abstained
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
11.1 Computation of Earnings Per Share
(b) Reports on Form 8-K
-------------------
Report on Form 8-K filed on June 5, 1995
Form 8-K/A filed on August 4, 1995
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORPORATE EXPRESS, INC.
By: /s/ SAM R. LENO
------------------------------
Sam R. Leno
Executive Vice President and
Chief Financial Officer
Date: June 13, 1996 (Principal Financial Officer)
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