APPENDIX III

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 1, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-24642

CORPORATE EXPRESS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

COLORADO 84-0978360
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

1 ENVIRONMENTAL WAY 80021
BROOMFIELD, COLORADO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 664-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, PAR VALUE $.0002 PER SHARE
(TITLE OF CLASS)

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 [_]

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. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant at April 30, 1997 was $1,231,242,000.

The number of shares outstanding of the registrant's Common Stock as of
April 30, 1997 was 126,824,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference:

Part III--The Registrant's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders, to be filed not later than 120 days after the end of
the fiscal year.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto appearing elsewhere in this
Form 10-K.

Some of the information presented in this Form 10-K constitutes forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results of the
Company's operations and acquisition activities and their effect on the
Company's results of operations will not differ materially from its
expectations. See Item 1.--"Business--Important Factors Regarding Forward
Looking Statements."

GENERAL

Corporate Express has grown primarily through a series of acquisitions
including the acquisition of HMI on January 30, 1997, Sofco on January 24,
1997, UT on November 8, 1996, Nimsa on October 31, 1996, Delivery on March 1,
1996, and Young on February 27, 1996, all of which were accounted for as
poolings of interest. Accordingly, the Consolidated Financial Statements have
been restated to include the accounts and operations of Sofco, HMI, Nimsa,
Delivery and Young for all periods prior to the mergers. The accompanying
financial statements have been restated to include the operations of UT
effective March 3, 1996 and Nimsa effective for fiscal 1995. Reference to
fiscal 1996 refers to the year ended March 1, 1997 for Corporate Express and
all pooled companies. Reference to fiscal 1995 refers to the year ended March
2, 1996 for Corporate Express, Delivery, Young, and Sofco, to the year ended
December 31, 1995 for HMI, and to the year ended June 30, 1996 for Nimsa.
Reference to the fiscal year 1994 and prior fiscal years refers to the
February year end for Corporate Express, to the December 31 year end for
Delivery and HMI, to the May 31 year end for Sofco, to the June 30 year end
for Nimsa, and to the September 30 year end for Young.

During the third and fourth quarters of fiscal 1996, the Company recorded
net expense of $12,366,000 and $7,474,000 primarily related to the mergers
with Nimsa and UT in the third fiscal quarter and Sofco and HMI in the fourth
fiscal quarter, respectively. These merger and other nonrecurring charges
primarily consisted of transaction costs, severance, facility closure costs
and asset writedowns.

The Company continues to significantly increase the scope of its operations
throughout the United States, Canada, the United Kingdom, and Australia, and
has entered new markets with acquisitions in New Zealand, Germany, France and
Italy. Corporate Express expanded the delivery service segment through the
acquisition of UT and other delivery companies. Substantial emphasis will be
placed in fiscal 1997 on improving operations while implementing the Corporate
Express business model in the most recently acquired operations and on
pursuing additional acquisition opportunities. These anticipated acquisitions,
if they occur, will result in increased accounts receivable, inventory,
accounts payable and other account balances, as well as increased warehouse
closing costs in future periods. Implementation of the Company's expansion and
acquisition strategy, both domestically and internationally, involves
significant risks and uncertainties. See Item 1.--"Business--International
Operations"; "Expansion Strategy"; "Structure and Integration of
Acquisitions."

In addition to acquisitions, Corporate Express will place substantial
emphasis on internal growth through implementation of the Corporate Express
business model, including increased sales of the Company's various product
lines to existing customers. The Company also plans to increase sales to
existing customers by cross-selling its expanded product and service offering
and developing existing customers into international, national or multi-
regional accounts.

International markets historically have higher gross profit margins and
higher operating costs than the Company experiences domestically. Certain
complementary products now offered by the Company, such as computer software,
have lower gross profit margins and lower operating costs than the products
traditionally sold by the Company. In addition, the acquisition of companies
with break-even or marginal operating results may impact the operating margins
and profitability of the Company.

RESULTS OF OPERATIONS

The following table sets forth the percentages which the items in the
Company's consolidated statements of operations bear to net sales for the
periods indicated:

FISCAL YEAR
-------------------
1996 1995 1994
----- ----- -----

Statements of Operations Data:
Net sales............................................. 100.0% 100.0% 100.0%
Cost of sales......................................... 75.6 75.0 74.7
Merger related inventory provisions................... -- 0.3 --
----- ----- -----
Gross profit........................................ 24.4 24.7 25.3
Warehouse operating and selling expenses.............. 17.6 18.1 19.1
Corporate general and administrative expenses......... 3.0 2.6 2.6
Merger and other nonrecurring charges................. 0.6 1.9 --
----- ----- -----
Operating profit.................................... 3.2 2.1 3.6
Interest expense, net................................. 0.8 1.0 1.5
Other income.......................................... 0.0 0.1 0.0
----- ----- -----
Income before income taxes.......................... 2.4 1.2 2.1
Income tax expense.................................... 1.1 0.7 0.7
----- ----- -----
Income before minority interest..................... 1.3 0.5 1.4
Minority interest (income) expense.................... (0.0) 0.1 0.0
----- ----- -----
Income from continuing operations................... 1.3 0.4 1.4
Loss from discontinued operations..................... -- 0.1 0.0
----- ----- -----
Income before extraordinary item...................... 1.3 0.3 1.4
Extraordinary gain.................................... -- -- 0.0
----- ----- -----
Net income.......................................... 1.3% 0.3% 1.4%
===== ===== =====
Pro forma net income................................ 1.3% 0.3% 1.4%
===== ===== =====

FISCAL YEARS 1996 AND 1995

Net Sales. Consolidated net sales increased 69.0% to $3,196,056,000 in
fiscal 1996 from $1,890,639,000 in fiscal 1995. Net sales for the Company's
product distribution segment increased 57.4% to $2,436,296,000 in fiscal 1996
from $1,548,175,000 in fiscal 1995 while net sales for its service segment
increased 121.9% to $759,760,000 from $342,464,000 in the same periods. These
increases were primarily attributable to 100 acquisitions in fiscal 1996 of
which 77 were product based companies (48 domestic and 29 international) and
23 were service based companies (21 domestic and two international) and the
merger with UT, which was accounted for as a pooling of interests with the
result of operations included from March 3, 1996 (prior year results were
immaterial). Also contributing to the sales increase was strong internal
growth reflecting increased market penetration in products distribution. HMI,
Nimsa and Sofco were accounted for as material poolings of interest and their
results of operations were included for all applicable periods.

International operations accounted for 17.7% of total sales or $565,126,000
in fiscal 1996 and 12.6% of total sales or $238,201,000 in fiscal 1995. The
Company expanded its international operations in fiscal 1996 to include
operations in New Zealand, Germany, France, and Italy.

Gross Profit. Cost of sales includes merchandise, occupancy and delivery
costs. Consolidated gross profit as a percentage of sales was 24.4% for fiscal
1996 compared to 24.7% for fiscal 1995. Included in cost of sales in fiscal
1995 is a merger related inventory provision of $5,952,000, representing 0.3%
of sales. In fiscal 1995, the Company made the decision to expand to new
product categories, while discontinuing certain low-end products, to
standardize core product lines and to eliminate certain inventory historically
maintained for specific customers and wrote certain inventory down to its fair
market value. Impacting the declining gross profit percentage in fiscal 1996
was the addition of a desktop software line of products which has
substantially lower gross profit margins, and decreased gross margins in the
delivery business.

The gross profit percentage of sales for the product distribution segment
was 24.0% in fiscal 1996 and 23.8% in fiscal 1995 (excluding the merger
related inventory provision). The increase reflects gross margin improvement
in all of the domestic office product distribution operations which was
partially offset by lower margin sales from an acquired desktop software
distributor. The improvement in domestic office product distribution gross
profit is due, in part, to the expanded usage of the Company's In-Stock
Catalog resulting in fewer wholesaler purchases and increased vendor rebates.
The gross profit percentage in the service segment was 25.5% in fiscal 1996
compared to 30.8% in fiscal 1995. The decrease in the gross profit percentage
in the service segment is primarily attributable to the acquisition of UT
which had lower gross profit margins than other delivery services operations.

Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating regional warehouses and sales offices, selling expenses and
commissions related to the Company's direct sales force, and warehouse
assimilation costs. Warehouse operating and selling expenses decreased as a
percentage of sales to 17.6% in fiscal 1996 from 18.1% in fiscal 1995. This
decrease is primarily attributable to the Company's efforts to leverage and
streamline its operations and to the software distribution operation and UT,
both of which have lower operating expenses as a percentage of sales.

Corporate General and Administrative Expenses. Corporate general and
administrative expenses include both the central expenses incurred to provide
corporate oversight and support for regional operations, and goodwill
amortization. Corporate general and administrative expenses increased to
$95,101,000 in fiscal 1996 from $49,742,000 in fiscal 1995, reflecting the
Company's expanded operations. As a percentage of net sales, corporate general
and administrative expenses increased to 3.0% in fiscal 1996 from 2.6% in
fiscal 1995. This increase reflects increased goodwill amortization resulting
from purchase acquisitions in fiscal 1995 and fiscal 1996 and costs associated
with developing a larger corporate staff to support acquisition efforts and
expanded operations, including an expanded information system staff.

Merger and Other Nonrecurring Charges. During fiscal 1996, the Company
recorded $19,840,000 in net merger and other non-recurring charges primarily in
conjunction with the acquisitions of Nimsa, UT, Sofco and HMI. Of the total
charge, a net $12,366,000 was recorded in the third quarter and $7,474,000 was
recorded in the fourth quarter of fiscal 1996. The third quarter charge is
comprised of merger and other nonrecurring charges primarily in conjunction with
the acquisitions of UT and Nimsa, offset by $7,571,000 in adjustments to the
merger and other nonrecurring charge established in the fourth quarter of fiscal
1995. The fiscal 1995 charge included an exit plan for the integration of the
newly acquired delivery business into the Company's core product distribution
business. In the third quarter of fiscal 1996, nine months after the creation of
the original exit plan, the Company acquired UT, approximately doubling its
delivery services capacity. At that time, the Company adopted a new plan to
integrate the delivery services business separate from the core product
distribution business. In connection with the new exit plan, the Company
evaluated its facility and personnel requirements and identified duplicate
facilities consistent with the new plan. As a result of this new plan, the
closure of thirteen delivery facilities and five distribution facilities,
incorporated in the original fiscal 1995 plan, was superseded. The third quarter
fiscal 1996 charge includes the planned closure of 115 facilities and reduction
of approximately 485 employees. The fourth quarter fiscal 1996 charge primarily
reflects the actual costs of completing the acquisitions of Sofco and HMI. (See
Note 3 to the Consolidated Financial Statements).
13

Operating Profit. Consolidated operating profit was $100,490,000, or 3.2% of
net sales, in fiscal 1996, compared to operating profit of $38,160,000, or
2.1% of net sales, in fiscal 1995. Before merger related and other
nonrecurring charges, operating profit increased 48.6% to $120,330,000 in
fiscal 1996 from $80,950,000 in fiscal 1995, reflecting increased
acquisitions, internal growth, and improved operating efficiencies. Before
merger related and other nonrecurring charges, operating profit for the
product distribution segment increased 52.1% to $88,802,000, or 3.6% of net
sales, in fiscal 1996 from fiscal 1995 operating profit of $58,394,000 or 3.8%
of net sales. Operating profit before nonrecurring charges for the service
segment increased 39.8% to $31,528,000, or 4.1% of net sales, in fiscal 1996
from $22,556,000, or 6.6% of net sales, in fiscal 1995. The decrease in
operating profit for the service segment as a percentage of sales reflects the
results of UT which had lower operating margins, poor performance at several
delivery locations and expenses related to consolidation projects. Operating
profit before nonrecurring charges for international operations decreased to
1.1% of net international sales in fiscal 1996 from 3.9% of net international
sales in fiscal 1995 reflecting operating losses in Australia related to
warehouse consolidation projects and expansion to new European markets,
partially offset by increased operating profits in Canada. International
operating profit before nonrecurring charges accounted for 6.8% of total
office products operating profit in fiscal 1996 and 15.8% of total office
products operating profit in fiscal 1995.

Interest Expense. Net interest expense of $26,949,000 in fiscal 1996
increased from $17,968,000 in fiscal 1995. This increase reflects increased
borrowings under the Senior Credit Facility and the sale of $325,000,000
aggregate principal amount of the Company's 4 1/2% Convertible Notes due July
1, 2000 (the "Convertible Notes"). The proceeds from the sale of the Notes
were used to fund acquisitions and provide the additional working capital
required as a result of increased business and general corporate purposes. See
"Liquidity and Capital Resources."

Minority Interest. Minority interest income of $1,860,000 in fiscal 1996
compares to an expense of $1,436,000 in fiscal 1995, reflecting a 47.6%
minority interest in the operating losses at Corporate Express Australia
partially offset by a 49.0% minority interest in operating profits in
Corporate Express United Kingdom through November 1996. The Company acquired a
majority ownership interest in Corporate Express Australia in May 1995 and a
majority ownership interest in Corporate Express United Kingdom in December
1995. In November 1996, the Company acquired the remaining 49.0% ownership
interest in Corporate Express United Kingdom.

Net Income. Net income of $41,996,000 in fiscal 1996 compares to net income
of $5,551,000 in fiscal 1995. This increase reflects the increased profits
from the Company's more mature operations, the lower merger and other
nonrecurring charges recorded in fiscal 1996 and the purchase acquisitions.
The Company experienced an effective tax rate of 45.6% in fiscal 1996 compared
to 62.6% in fiscal 1995. The fiscal 1995 tax rate reflects certain non-
deductible merger costs, the utilization of certain net operating losses
("NOLs"), and certain non-deductible goodwill. The fiscal 1996 tax rate
reflects certain non-deductible merger costs and certain non-deductible
goodwill. The valuation allowance remaining in fiscal 1996 reflects net
operating losses subject to restriction on realization and certain loss
carryforwards of foreign subsidiaries acquired in fiscal 1996. The principal
reason the 1995 effective tax rate exceeds the 1996 rate is the higher level
of non-deductible merger costs in fiscal 1995.

Other. The net accounts receivable balance at March 1, 1997 of $494,199,000
increased $173,716,000 from $320,483,000 at March 2, 1996 primarily as a
result of acquired receivables and internal sales growth in

existing regions. The allowance for doubtful accounts as a percentage of
consolidated accounts receivable was 2.6% and 2.1% at the end of fiscal 1996
and fiscal 1995, respectively. The Company's historical bad debt write-offs
have been very low due to the high credit quality of its customers, resulting
from the Company's focus on large corporations, and the fact that, in certain
acquisitions, the seller guarantees acquired receivables.

The inventory amount at March 1, 1997 of $187,558,000 increased $58,755,000
from $128,803,000 at March 2, 1996 primarily as a result of acquired
inventories and inventory growth to support increased sales.

Goodwill at March 1, 1997 of $671,967,000 increased $338,806,000 from
$333,161,000 reflecting additions from acquisitions of $357,125,000 offset by
current year amortization of $15,907,000 and reversals of $2,412,000.

The accounts payable trade balance at March 1, 1997 of $292,041,000
increased $114,746,000 from $177,295,000 at March 2, 1996 primarily as a
result of acquired trade payables.

Accrued purchase costs at March 1, 1997 of $12,888,000 increased by
$9,839,000 from the March 2, 1996 balance of $3,049,000. This increase
reflects acquisition additions of $21,429,000, payments of $9,178,000, and
reversals of $2,412,000 against goodwill. Of the remaining balance, $9,233,000
represents the current estimate for costs to be incurred in conjunction with
consolidation projects in the international operations.

FISCAL YEARS 1995 AND 1994

Net Sales. Net sales increased 65.1% to $1,890,639,000 in fiscal 1995 from
$1,145,151,000 in fiscal 1994. Net sales in the product distribution segment
increased 67.4% to $1,548,175,000 in fiscal 1995 from $924,886,000 in fiscal
1994, while the service segment increased 55.5% to $342,464,000 from
$220,265,000 in the same periods. These increases were primarily attributable
to 51 acquisitions, of which 28 were product based companies (17 domestic and
11 international), seven were repurchases of computer product franchises by
Young, and 16 were service based companies principally in the delivery
services business (all domestic). Also contributing to the sales increase was
the inclusion of the results of operations of acquisitions accounted for as
purchases during fiscal 1995 and internal growth.

Gross Profit. Consolidated gross profit as a percentage of sales was 24.7%
for fiscal 1995 compared to 25.3% for fiscal 1994. Included in cost of sales
for fiscal 1995 is a merger related inventory provision of $5,952,000. The
gross profit percentage, excluding the merger related inventory provision was
25.0% in fiscal 1995. The gross profit percentage in product distribution,
excluding the merger related inventory provision was 23.8% in fiscal 1995
compared to 23.9% in fiscal 1994 and services segment gross profit percentage
was 30.8% in fiscal 1995 compared to 31.3% in fiscal 1994. Decreases in
services are primarily attributable to increased delivery costs resulting from
unusually severe weather in the Northeast.

Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses decreased as a percentage of sales to 18.1% in fiscal 1995 from 19.1%
in fiscal 1994. This decrease reflects cost savings as a result of the
implementation of the Corporate Express business model at certain regional
warehouses, which includes centralizing certain administrative functions. Also
contributing to this decrease is a reduction of approximately $3,100,000 in
Delivery compensation expense which was eliminated in fiscal 1995 pursuant to
agreements made in connection with companies acquired in poolings of interest
acquisitions.

Corporate General and Administrative Expenses. As a percentage of net sales,
corporate general and administrative expenses were 2.6% in both fiscal 1995
and fiscal 1994. Expenses increased to $49,742,000 in fiscal 1995 from
$29,624,000 in fiscal 1994, reflecting the Company's expanded operations.

Merger and Other Nonrecurring Charges. During the fourth quarter of fiscal
1995, the Company recorded $36,838,000 in merger and other nonrecurring
charges (in addition to $5,952,000 in merger related inventory provisions)
primarily in conjunction with the acquisitions of Delivery and Young. The
charges include the actual costs of completing the acquisitions and additional
costs associated with a plan to integrate the combined

companies' operations. The major activities associated with the plan include
merging various Delivery and Young facilities into Company locations, closing
duplicate facilities and centralizing certain administrative functions. These
merger and other nonrecurring charges include merger transaction related costs
of $13,273,000; severance and employee termination costs of $7,457,000
(representing approximately 760 employees); facility closure and consolidation
costs of $9,693,000; and other asset write-downs and costs of $6,415,000. Of
the $36,838,000 charges, $7,724,000 are non-cash charges.

Operating Profit. Operating profit of $38,160,000 in fiscal 1995 compares to
operating profit of $40,953,000 in fiscal 1994. Operating profit before
nonrecurring charges for product distribution increased to $58,394,000 in
fiscal 1995 from $29,811,000 in fiscal 1994. This increase reflects the
contribution of acquired companies and increased regional operating profits at
the Company's other regional operations. Operating profit before nonrecurring
charges for services increased to $22,556,000, or 6.6% of net sales, in fiscal
1995 from $11,142,000, or 5.1% of net sales, in fiscal 1994.

Interest Expense. Net interest expense increased to $17,968,000 in fiscal
1995 from $16,915,000 in fiscal 1994. Increases due to the elimination of the
0.5% per annum additional illiquidity payment of the Senior Notes effective
upon completion of a registered exchange offer in March 1995 and principal
reductions on the line of credit using funds from the public offerings of
Common Stock completed in March 1995 and September 1995 were offset by higher
levels of Delivery, Young and HMI debt outstanding as a result of their
increased borrowings to fund acquisitions and to provide the additional
working capital required as a result of increased business. On February 27,
1996, the Company borrowed on its line of credit and repaid in full, as
required under its terms, the Young revolving line of credit balance of
$10,809,000 which bore interest at prime plus 1.25%, the Young subordinated
debt of $11,930,000 which bore interest at 17.5% and debt payable to the
selling shareholders of $10,834,000 which bore interest at 9.75%. The Delivery
bank credit facility became due as of the acquisition date due to a change of
control provision. This facility was amended to expire on May 31, 1996 to
provide time for the Company to renegotiate its primary bank revolver, which
has been completed and the Delivery credit facility has been repaid. See
"Liquidity and Capital Resources."

Extraordinary Item. The extraordinary gain of $586,000, net of tax, in the
second quarter of fiscal 1994 related to the repurchase of $10,000,000
principal amount of Senior Notes.

Net Income. Net income of $5,551,000 in fiscal 1995 decreased compared to a
net income of $16,496,000 in fiscal 1994. This decrease reflects the merger
and other nonrecurring charges recorded in fiscal 1995 offset by contributions
from purchase acquisitions and increased profits from the Company's more
mature operations. The pre-tax profitability is reduced by an increase in the
effective tax rate to 62.6% in fiscal 1995 from 33.7% in fiscal 1994. The
fiscal 1995 tax rate reflects certain non-deductible merger costs,
international tax rates, the utilization of certain NOLs, and certain non-
deductible goodwill. The fiscal 1994 tax rate included the utilization of
certain NOLs and certain non-deductible goodwill. The principal reason the
1995 effective tax rate exceeds the 1994 effective tax rate is the non-
deductibility of certain merger costs. The fiscal 1994 period included in net
income an extraordinary gain of $586,000, net of tax, related to the
repurchase of $10,000,000 principal amount of Notes.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has 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.

Credit Facility was previously amended on May 10, 1996 to increase the
Company's borrowing capacity from $90,000,000 to $250,000,000, subject to
borrowing base and other restrictions and to lower the cost of its borrowings
to LIBOR plus 1.25%. On May 31, 1996, the Company borrowed on its Senior
Credit Facility and repaid in full the $33,270,000 outstanding revolving
credit facility previously established by Delivery. On June 24, 1996, the
outstanding amounts under the Senior Credit Facility were paid in full from
funds generated from the issuance of the Convertible Notes. Upon this
repayment, the borrowing capacity of the Senior Credit Facility was reduced
from the amended capacity of $250,000,000 to $90,000,000, subject to borrowing
base and other restrictions. As of May 2, 1997, the Company had $145,000,000
outstanding under the Senior Credit Facility and an unused borrowing capacity
of $205,000,000.

On June 24, 1996, the Company issued $325,000,000 aggregate principal amount
of Convertible Notes. The notes are convertible into the Company's common
stock at a conversion price of $33.33 per share, subject to adjustments under
certain conditions. A portion of the proceeds from the sale of the Convertible
Notes was used to repay the Company's Senior Credit Facility and an
acquisition note payable with the remaining proceeds being used to fund
acquisitions and for other general corporate purposes.

During fiscal 1996, the Company acquired, for a net cash purchase price of
$241,846,000 and 5,542,000 shares of common stock, 77 office products
distributors and 23 service companies. Of these 100 acquisitions, 86 were
accounted for as purchases and 14 were accounted for as immaterial poolings of
interest. In addition, the Company acquired UT, which was accounted for as a
pooling of interests with financial results included from March 3, 1996 for
6,332,000 shares of common stock. Total liabilities assumed in connection with
these acquisitions were $282,777,000 (including accounts payable and assumed
debt). In addition, the Company made payments of approximately $13,984,000
related to prior acquisitions. Included in the net cash purchase price of
$241,846,000 is the purchase of ASAP, a computer software distribution
company, in May 1996 for approximately $98,000,000 in cash offset by cash
acquired of approximately $14,000,000.

The Company had capital expenditures of $119,639,000 in fiscal 1996 which
included $30,905,000 of capitalized software, $29,075,000 for the new
corporate headquarters facility in Broomfield, Colorado, and $10,804,000 for
the new warehouse facility in Miami, Florida.

Cash and cash equivalents increased by $24,686,000 in fiscal 1996. This
increase reflects proceeds of $325,000,000 from issuance of the convertible
debt, net borrowings on lines of credit of $104,382,000 and cash from
operations of $25,753,000, offset by capital expenditures of $119,639,000,
payments for acquisitions of $255,830,000, repayment of debt of $64,893,000
and net other additions of $9,913,000. Net cash provided by operating
activities of $25,753,000 reflects cash generated by net income plus non-cash
expenses, primarily depreciation and amortization, offset by an increase in
accounts receivable, inventories, and accrued liabilities reflecting increased
sales. The repayment of debt is primarily debt of acquired operations.

The Company expects net capital expenditures for fiscal 1997 of
approximately $95,000,000 comprised of approximately $64,000,000 to be used
for upgrading and enhancing its information systems, approximately $40,000,000
for warehouse reconfiguration and equipment, approximately $13,000,000 to be
used for acquisition related initial capital costs, and approximately
$3,000,000 for transportation and telecommunications equipment offset by
anticipated sales and lease backs or mortgages on a number of its facilities
of approximately $25,000,000. Actual capital expenditures for fiscal 1997 may
be greater or less than budgeted amounts.

During fiscal 1995, the Company purchased 45 companies for a net cash
purchase price of $96,971,000 and newly issued securities representing a 52.5%
interest in Corporate Express Australia for a net cash outlay of $98,000
($16,785,000 purchase price less cash acquired of $16,687,000). The Company
also repurchased seven computer product franchises for $21,187,000. Total
liabilities assumed in connection with these acquisitions were $118,447,000
(including accounts payable and assumed debt). In addition, the Company made
payments of approximately $6,044,000 related to acquisitions completed in
fiscal 1994. During fiscal 1995, the Company sold its high-end furniture
business for $4,362,000, which was acquired as part of the acquisition of
Joyce International, Inc.'s office products division ("Joyce"). The sale was
contemplated at the time of the Joyce acquisition and was reflected in the
financial statements accordingly.

Cash and cash equivalents increased by $14,314,000 in fiscal 1995. This
increase reflects net proceeds from the sale of common stock of $449,288,000
(primarily from the March and September 1995 public offerings) offset by the
purchase of common stock held by OfficeMax, Inc. for $195,831,000, net
payments on the line of credit of $18,871,000, payments for capital
expenditures during fiscal 1995 of $53,124,000, cash paid for acquisitions of
$124,300,000, cash used for operations and repayment of debt of $99,838,000
and net other additions of $56,990,000. Net cash used for operating activities
of $16,433,000 reflects cash generated by net income plus non-cash expenses
offset by an increased investment in accounts receivable and inventories
reflecting increased sales and the introduction of the In-Stock Catalog into
acquired operations. The repayment of debt includes the repayment of debt of
acquired companies.

The Company believes the borrowing capacity under the credit facility,
together with proceeds from future debt and/or equity activity, coupled with
its cash on hand, capital resources and cash flows, will be sufficient to fund
its ongoing operations, anticipated capital expenditures and acquisition
activity for the next twelve months. However actual capital needs may change,
particularly in connection with acquisitions which the Company may make in the
future.

INFLATION

Certain of the Company's product offerings, particularly paper products,
have been and are expected to continue to be subject to significant price
fluctuations due to inflationary and other market conditions. The Company
generally is able to pass such increased costs on to its customers through
price increases, although it may not be able to adjust its prices immediately.
Significant increases in paper, fuel and other costs in the future could
materially affect the Company's profitability if these costs cannot be passed
on to customers. In general, the Company does not believe that inflation has
had a material effect on its results of operations in recent years. However,
there can be no assurance that the Company's business will not be affected by
inflation in the future.

SEASONALITY AND QUARTERLY RESULTS

The Company's product distribution business is subject to seasonal
influences. In particular, net sales and profits in the United States and
Canada are typically lower in the three months ended August 31 due to lower
levels of business activity during the summer months. Because cost of sales
includes delivery and occupancy expenses, gross profit as a percentage of net
sales may be impacted by seasonal fluctuations in net sales, more costly
delivery costs during inclement weather, and the acquisition of less efficient
operations. Quarterly results may be materially affected by the timing of
acquisitions and the timing and magnitude of acquisition assimilation costs.
Therefore, the operating results for any three month period are not
necessarily indicative of the results that may be achieved for any subsequent
fiscal quarter or for a full fiscal year.

Revenues and profit margins from the Company's local delivery services are
subject to seasonal variations. Prolonged inclement weather can have an
adverse impact on the Company's business to the extent that transportation and
distribution channels are disrupted.

ACCOUNTING STANDARDS

In the fourth quarter of fiscal 1997, the Company will adopt SFAS No. 128,
"Earnings per Share." This statement simplifies the standards for computing
earnings per share found in APB Opinion No. 15, "Earnings per Share" and makes
them comparable to international EPS standards. Had SFAS No. 128 been
effective during fiscal 1996, 1995 and 1994, (i) "Basic earnings per share"
under SFAS No. 128 would have been $0.33, $0.05 and $0.22, respectively, and
(ii) "Dilutive earnings per share" under SFAS No. 128 would have been $0.31,
$0.05 and $0.19, respectively.

The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation"
during fiscal 1996 (See Note 11 to the consolidated financial statements).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders ofCorporate Express, Inc.:

We have audited the accompanying consolidated financial statements and the
consolidated financial statement schedule of Corporate Express, Inc. as of
March 1, 1997 and March 2, 1996 and for the years ended March 1, 1997, March
2, 1996 and February 25, 1995 listed in the index in Item 14. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Corporate Express, Inc. as of March 1, 1997 and March 2, 1996 and the
consolidated results of their operations and their cash flows for the years
ended March 1, 1997, March 2, 1996, and February 25, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

Coopers & Lybrand L.L.P.

Denver, Colorado
April 18, 1997

CORPORATE EXPRESS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

MARCH 1, MARCH 2,
1997 1996
---------- ----------

ASSETS
Current assets:
Cash and cash equivalents............................ $ 54,499 $ 29,813
Trade accounts receivable, net of allowance of
$13,004 and $6,964, respectively.................... 494,199 320,483
Notes and other receivables.......................... 55,530 30,046
Inventories.......................................... 187,558 128,803
Deferred income taxes................................ 29,076 18,470
Other current assets................................. 28,548 27,357
---------- ----------
Total current assets............................... 849,410 554,972
Property and equipment:
Land................................................. 14,105 8,715
Buildings and leasehold improvements................. 106,824 38,663
Furniture and equipment.............................. 249,693 130,497
---------- ----------
370,622 177,875
Less accumulated depreciation........................ (106,891) (60,744)
---------- ----------
263,731 117,131
Goodwill, net of accumulated amortization of $36,471
and $16,292, respectively............................. 671,967 333,161
Other assets, net...................................... 58,869 18,101
---------- ----------
Total assets....................................... $1,843,977 $1,023,365
========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

CONSOLIDATED BALANCE SHEETS, CONTINUED
(IN THOUSANDS)

MARCH 1, MARCH 2,
1997 1996
---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade............................... $ 292,041 $ 177,295
Accounts payable--acquisitions........................ 5,078 2,063
Accrued payroll and benefits.......................... 45,512 26,648
Accrued purchase costs................................ 12,888 3,049
Accrued merger and related costs...................... 18,484 24,880
Other accrued liabilities............................. 52,012 42,955
Current portion of long-term debt and capital leases.. 29,742 24,389
---------- ----------
Total current liabilities........................... 455,757 301,279
Capital lease obligations............................... 11,545 9,568
Long-term debt.......................................... 621,705 153,831
Deferred income taxes................................... 26,819 7,374
Minority interest in subsidiaries....................... 22,015 24,843
Other non-current liabilities........................... 12,529 4,694
---------- ----------
Total liabilities................................... 1,150,370 501,589
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.0001 par value, 25,000,000 shares
authorized, none issued or outstanding............... -- --
Common stock, $.0002 par value, 300,000,000 shares
authorized, 126,171,467 and 111,954,350 shares issued
and outstanding, respectively........................ 25 22
Common stock, non-voting, $.0002 par value, 3,000,000
shares authorized, none issued or outstanding........ -- --
Additional paid-in capital............................ 646,536 513,358
Retained earnings..................................... 48,222 8,200
Foreign currency translation adjustments.............. (1,176) 196
---------- ----------
Total shareholders' equity.......................... 693,607 521,776
---------- ----------
Total liabilities and shareholders' equity........ $1,843,977 $1,023,365
========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEARS ENDED
------------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
---------- ---------- ------------

Net sales................................ $3,196,056 $1,890,639 $1,145,151
Cost of sales............................ 2,417,746 1,417,366 855,361
Merger related inventory provisions...... -- 5,952 --
---------- ---------- ----------
Gross profit........................... 778,310 467,321 289,790
Warehouse operating and selling
expenses................................ 562,879 342,581 219,213
Corporate general and administrative
expenses................................ 95,101 49,742 29,624
Merger and other nonrecurring charges.... 19,840 36,838 --
---------- ---------- ----------
Operating profit....................... 100,490 38,160 40,953
Interest expense, net.................... 26,949 17,968 16,915
Other income............................. 244 1,786 562
---------- ---------- ----------
Income before income taxes............. 73,785 21,978 24,600
Income tax expense....................... 33,649 13,766 8,294
---------- ---------- ----------
Income before minority interest........ 40,136 8,212 16,306
Minority interest (income) expense....... (1,860) 1,436 69
---------- ---------- ----------
Income from continuing operations...... 41,996 6,776 16,237
Discontinued operations:
Loss from discontinued operations...... -- -- 327
Loss on disposals...................... -- 1,225 --
---------- ---------- ----------
Income before extraordinary item....... 41,996 5,551 15,910
Extraordinary item:
Gain on early extinguishment of debt... -- -- 586
Net income............................. $ 41,996 $ 5,551 $ 16,496
========== ========== ==========
Pro forma net income (Note 13)........... $ 40,281 $ 5,140 $ 15,769
========== ========== ==========
Weighted average common shares
outstanding............................. 130,029 110,408 80,993
========== ========== ==========
Pro forma per common share:
Continuing operations.................. $ .31 $ .06 $ .19
Discontinued operations................ -- (.01) (.01)
Extraordinary item..................... -- -- .01
---------- ---------- ----------
Net income............................. $ .31 $ .05 $ .19
========== ========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED FEBRUARY 25, 1995, MARCH 2, 1996 AND MARCH 1, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

FOREIGN
PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY
-------------------- ------------------- PAID-IN TRANSLATION RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS
----------- ------- ----------- ------ ---------- ----------- --------

Balance, February 28,
1994................... 26,980,000 $ 7,502 38,378,246 $ 8 $115,805 $ 9 $(6,963)
Issuance of common
stock.................. 31,602,150 6 138,300
Conversion of common
stock.................. 100,000 (112,500) --
Conversion of preferred
stock.................. (19,580,000) (2) 22,027,500 4 (2)
Redemption of preferred
stock.................. (7,500,000) (7,500)
Preferred stock
dividend............... (432)
S Corporation dividends
and other equity
transactions of pooled
companies.............. 117 (4,076)
Net income.............. 16,496
Foreign currency
translation
adjustment............. 50
----------- ------- ----------- --- -------- ------- -------
Balance, February 25,
1995................... -- -- 91,895,396 18 254,220 59 5,025
Issuance of common
stock.................. 20,058,954 4 245,573
Young capital
contribution........... 12,182
Adjustment to conform
fiscal year ends of
certain pooled
companies.............. 1,876
S Corporation dividends
and other equity
transactions of pooled
companies.............. 1,383 (4,252)
Net income.............. 5,551
Foreign currency
translation
adjustment............. 137
----------- ------- ----------- --- -------- ------- -------
Balance, March 2, 1996.. -- -- 111,954,350 22 513,358 196 8,200
Issuance of common
stock.................. 14,217,117 3 119,274
Tax benefit on non-
qualified stock options
exercised.............. 11,161
Adjustment to conform
fiscal year ends of
certain pooled
companies.............. (430)
S Corporation dividends
and other equity
transactions of pooled
companies.............. 2,743 (1,544)
Net income.............. 41,996
Foreign currency
translation
adjustment............. (1,372)
----------- ------- ----------- --- -------- ------- -------
Balance, March 1, 1997.. -- $ -- 126,171,467 $25 $646,536 $(1,176) $48,222
=========== ======= =========== === ======== ======= =======

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEARS ENDED
----------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
--------- --------- ------------

Cash flows from operating activities:
Net income................................. $ 41,996 $ 5,551 $ 16,496
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation............................... 30,319 18,765 10,705
Amortization............................... 18,417 9,733 6,373
Non-cash portion of merger and
restructuring charge...................... 3,761 10,268 --
Adjustment to conform fiscal years......... (430) 1,876 --
Gain on early extinguishment of debt....... -- -- (700)
Minority interest (income)/expense......... (1,860) 1,436 69
Other...................................... 1,496 (1,263) 492
Changes in assets and liabilities,
excluding acquisitions:
Increase in accounts receivable............ (45,552) (43,173) (29,672)
Increase in inventory...................... (12,015) (11,538) (5,934)
Increase in other current assets........... (1,984) (12,494) (3,338)
(Increase) decrease in other assets........ 3,694 (2,194) (1,260)
Increase (decrease) in accounts payable.... (667) (8,798) 16,167
Increase (decrease) in accrued
liabilities............................... (11,422) 15,398 2,638
--------- --------- ---------
Net cash provided by (used in) operating
activities................................. 25,753 (16,433) 12,036
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of assets............... 3,026 5,899 463
Capital expenditures....................... (119,639) (53,124) (18,670)
Payment for acquisitions, net of cash
acquired.................................. (255,830) (124,300) (87,886)
Purchase of marketable securities.......... (15,602) -- --
Other, net................................. (1,978) 72 (612)
--------- --------- ---------
Net cash used in investing activities....... (390,023) (171,453) (106,705)
--------- --------- ---------
Cash flows from financing activities:
Issuance of preferred and common stock..... 12,643 449,288 134,993
Stock offering costs....................... 0 (20,313) (9,388)
Issuance of subsidiary common stock........ 2,258 7,733 --
Young capital contribution................. -- 12,182 --
Purchase of common stock held by
OfficeMax................................. -- (195,831) --
Preferred stock redemption................. -- -- (7,500)
Debt issuance costs........................ (8,818) -- (869)
Proceeds from long-term borrowings......... 347,829 44,208 35,189
Repayments of long-term borrowings......... (37,948) (71,813) (35,422)
Proceeds from short-term borrowings........ 772 12,835 --
Repayments of short-term borrowings........ (26,945) (11,592) (11,095)
Cash paid to retire bonds.................. -- -- (9,300)
Net proceeds from (payments on) line of
credit.................................... 104,382 (18,871) 1,778
Other...................................... (4,833) (4,245) (1,647)
--------- --------- ---------
Net cash provided by financing activities... 389,340 203,581 96,739
--------- --------- ---------
Net cash provided by (used in) discontinued
operations................................. 61 (222) (600)
--------- --------- ---------
Effect of foreign currency exchange rate
changes on cash............................ (445) (1,159) 25
--------- --------- ---------
Increase in cash and cash equivalents....... 24,686 14,314 1,495
Cash and cash equivalents, beginning of
period..................................... 29,813 15,499 14,004
--------- --------- ---------
Cash and cash equivalents, end of period.... $ 54,499 $ 29,813 $ 15,499
--------- --------- ---------
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest... $ 35,526 $ 20,469 $ 13,829
--------- --------- ---------
Cash paid during the period for taxes...... $ 25,413 $ 16,046 $ 6,082
--------- --------- ---------

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Capital lease obligations in the amount of $7,198,000, $4,305,000 and
$3,103,000 were incurred during fiscal 1996, 1995 and 1994, respectively, for
equipment.

During fiscal 1996, the Company acquired, for a net cash purchase price of
$241,846,000 and 5,542,000 shares of common stock, 77 office products
distributors and 23 service companies. Of these 100 acquisitions, 86 were
accounted for as purchases and 14 were accounted for as immaterial poolings of
interest. In addition, the Company merged with UT, which was accounted for as
a pooling of interests with financial results included from March 3, 1996 for
6,332,000 shares of common stock and Nimsa, which was accounted for as a
pooling of interests with financial results included beginning in fiscal 1995
for 1,125,000 shares of common stock. The Company completed 52 acquisitions
for a net cash outlay in fiscal 1995 of $118,256,000. During fiscal 1994, the
Company completed 24 acquisitions for a net cash outlay of $74,707,000. In
conjunction with the acquisitions, liabilities were assumed as follows:

YEARS ENDED
------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
-------- -------- ------------
(IN THOUSANDS)

Fair value of assets acquired............... $620,252 $271,264 $135,248
Cash paid, net of cash acquired............. 241,846 118,256 74,707
Issuance of notes payable................... 4,650 11,111 --
Issuance of stock........................... 86,922 9,562 4,614
Forgiveness of debt......................... -- 11,138 150
Purchase price payable, included in current
liabilities................................ 4,057 2,750 5,325
-------- -------- --------
Liabilities assumed......................... $282,777 $118,447 $ 50,452
======== ======== ========

In addition to the amounts set forth above, Corporate Express paid
$11,695,000 and $6,044,000 for prior period acquisitions during fiscal 1996
and fiscal 1995, respectively.

During fiscal 1996, the Company paid $2,289,000 to dissenting shareholders
of a pooled company; purchased a warehouse facility for 202,500 shares of
common stock; issued 107,207 shares of common stock to retire convertible debt
of $1,449,400 previously issued by one of the Company's acquired subsidiaries;
and acquired the remaining 49% interest in Corporate Express United Kingdom.

In January 1995, the Company purchased for $1,186,000 in cash, $1,000,000 in
accounts payable, and $650,000 in notes payable the remaining interest of a
company for which a majority interest was acquired in fiscal 1993.

In December 1994, the Company recorded a liability of $1,855,000 for
subsequent payments due to the sellers of a company acquired by Lucas in
fiscal 1993.

On September 30, 1994, the Company issued 14,610,000 shares of Common Stock
upon conversion of its Series A, B and C preferred on a two for one basis.

In August 1994, the Company purchased for $350,000 in cash and $100,000 in
notes payable a 45% interest in an office products distributor. During fiscal
1994, the Company paid $234,000 for additional expenses for prior period
acquisitions. In addition, the Company made a final payment of $11,409,000 for
the Hanson acquisition and Delivery distributed non-cash dividends of $493,000
to certain Delivery stockholders in fiscal 1994.

During January 1994, accrued dividends of $2,044,007 on Young's preferred
stock were converted to a subordinated promissory note. This note and accrued
interest of $138,712 was contributed as additional paid-in capital in December
1994.

The accompanying notes are an integral part of the consolidated financial
statements.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. As more fully described in Note 2, the
following acquisitions have been consummated by the Company:

. CEX Acquisition Corp., a wholly-owned subsidiary of the Company, was
merged with and into Young on February 27, 1996.

. DSU Acquisition Corp., a wholly-owned subsidiary of the Company, was
merged with and into Delivery on March 1, 1996.

. Nimsa was acquired by the Company on October 31, 1996.

. Bevo Acquisition Corp., Inc. a wholly-owned subsidiary of the Company,
was merged with and into UT on November 8, 1996.

. IMS Acquisition, Inc., a wholly-owned subsidiary of the Company, was
merged with and into Sofco on January 24, 1997.

. H.M. Acquisition Corp., Inc. a wholly-owned subsidiary of the Company,
was merged with and into HMI on January 30, 1997.

These acquisitions were accounted for as poolings of interests and,
accordingly, the accompanying financial statements have been restated to
include the accounts and operations of Delivery, Young, Nimsa, HMI and Sofco
for all applicable periods. The accompanying financial statements have been
restated to include the operations of UT effective March 3, 1996 and Nimsa
effective for fiscal 1995; prior UT results were immaterial. Acquisitions
accounted for as purchases are included in the accounts and operations as of
the effective date of the transaction and immaterial acquisitions accounted
for as poolings of interests are included in the accounts and operations as of
the beginning of the fiscal quarter in which the transaction is effective. 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.

Definition of Fiscal Year:

As used in these consolidated financial statements and notes to consolidated
financial statements, "fiscal 1996," "fiscal 1995," and "fiscal 1994" refer to
the Company's fiscal years ended March 1, 1997, March 2, 1996 and February 25,
1995, respectively. In connection with the mergers, Nimsa, UT and HMI changed
their 1996 fiscal year ends, Sofco changed its 1996 and 1995 fiscal year ends,
and Delivery and Young changed their 1995 fiscal year ends to conform to the
fiscal year ends of the Company. References to fiscal 1995 for Nimsa refers to
Nimsa's June 1996 year end; references to fiscal 1995 and prior fiscal years
for HMI refers to HMI's December year end; and references to fiscal 1994 and
prior fiscal years for Sofco, Delivery and Young refer to Sofco's May year
end, Delivery's December year end and Young's September year end.

Cash and Cash Equivalents:

Cash and cash equivalents include short-term investments with original
maturities of three months or less.

Inventories:

Inventories primarily consist of finished goods which are valued at the
lower of first-in, first-out (FIFO) cost or market. The Company periodically
assesses its inventory to determine market value based upon such

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

factors as historical sales and purchases, inclusion in the Company's
proprietary In-Stock Catalog and other factors. Included in cost of sales for
fiscal 1995 is a merger related inventory provision of $5,952,000. This
provision reflects the write-down to fair market value of certain inventory
which the Company decided to eliminate from its product line.

Property and Equipment:

Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over estimated useful lives which range from three to
seven years for furniture and equipment; up to 40 years for buildings; and
over the life of the lease for leasehold improvements. Ordinary maintenance
and repairs are charged to operations while expenditures which extend the
physical or economic life of property and equipment are capitalized. Gains and
losses on disposition of property and equipment are recognized in operations
in the year of disposition.

The Company capitalizes certain internal and external software costs that
benefit future years. The amortization commencement and useful life is
dependent upon whether the software is non-interactive or interactive. Non-
interactive software has functionality that is not directly tied into and/or
dependent upon future development or software at other company sites.
Interactive software has significant functionality that is dependent upon
future development or that is directly tied into and/or dependent upon the
installation of the same software at other Company sites. All software is
amortized over its economic useful life, which is three to ten years using the
straight-line method.

Capitalized software costs totaled $47,695,000 and $16,790,000 at March 1,
1997 and March 2, 1996, respectively. Software amortization expense was
$476,000 for fiscal year 1996. There was no software amortization expense for
fiscal years 1995 and 1994.

Concentration of Credit Risk:

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company places
its cash and temporary cash investments with high quality credit institutions.
At times, such investments may be in excess of the FDIC insurance limit.

Concentration of credit risk with respect to trade receivables is limited
due to the wide variety of customers and markets into which the Company's
products are sold, as well as their dispersion across many geographic areas.
As a result, as of March 1, 1997, the Company did not consider itself to have
any significant concentrations of credit risk. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.

The Company maintains allowances for potential credit losses and historical
losses have been within management's expectations.

Intangible Assets:

Goodwill is amortized on a straight-line basis over periods of 25 and 40
years. Noncompete agreements, which are included in other assets, are
amortized on a straight-line basis over periods of 2-10 years. The Company
evaluates intangible assets periodically in accordance with Statement of
Financial Accounting Standards No. 121 to determine whether they are properly
reflected in the financial statements based upon future undiscounted operating
cash flows. If an impairment is determined to exist, the impaired asset is
written down to fair market value. The balance of $671,967,000 at March 1,
1997 reflects additions from acquisitions and changes in foreign exchange
rates of $357,125,000.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Accrued Purchase Costs:

The Company accrues direct external costs incurred to consummate an
acquisition, other external costs and liabilities to close the acquired
entity's facilities, and severance and relocation payments to the acquired
entity's employees. Prior to the adoption of EITF 95-3 effective with the
consensus, the Company also accrued the external incremental costs of
converting certain computer systems to the Company's systems.

Accrued Merger and Related Costs:

Accrued merger and related costs include the actual costs of completing
acquisitions accounted for as poolings of interests transactions and
additional costs associated with integrating the combined companies'
operations, including liabilities for severance benefits for employees
expected to be terminated.

Revenue Recognition:

Revenue is recognized upon the shipment of products and completion of
service to customers.

Cost of Sales:

Vendor rebates and similar payments are recognized on an accrual basis in
the period earned and are recorded as a reduction to cost of sales. Delivery
and occupancy costs are included as an increase to cost of sales.

Warehouse Operating and Selling Expenses:

Warehouse operating and selling expenses include all costs associated with
operating regional warehouses and sales offices, including warehouse labor,
related warehouse general and administrative expenses (excluding occupancy),
selling expenses and commissions related to the Company's direct sales force
and warehouse assimilation costs.

Foreign Currency Translation:

Balance sheet accounts of foreign operations are translated using the year-
end exchange rate, and income statement accounts are translated on a monthly
basis using the average exchange rate for the period. Translation gains and
losses are recorded in shareholders' equity, and realized gains and losses
from transactions are reflected in income. An aggregate transaction gain of
$116,000 and a loss of $37,000 were included in the determination of net
income in fiscal 1996 and 1995, respectively. No transaction gains or losses
were included in the determination of net income in fiscal 1994. The Company
does not currently hedge foreign currency risk exposure.

Income Taxes:

For all periods presented, income taxes are calculated using the liability
method in accordance with the provisions set forth in Statement of Financial
Accounting Standards (SFAS) No. 109.

Pro Forma Income Taxes:

In fiscal 1996, the Company acquired an entity in a pooling of interests
transaction, which was previously an S Corporation for income tax purposes
prior to its acquisition by Corporate Express and, accordingly, any income tax
liabilities for the periods prior to the acquisition are the responsibility of
the previous owner. For

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

purposes of these consolidated financial statements, federal and state income
taxes have been provided as a pro forma adjustment as if the acquired entity
had filed C Corporation tax returns for the pre-acquisition periods (See Note
13).

Pro Forma Net Income Per Share:

Pro forma net income per share is calculated by dividing pro forma net
income (net income after giving effect to the pro forma tax adjustment), after
preferred stock dividend requirements of Young of $432,000 for the year ended
February 25, 1995 by the weighted average shares of common stock and common
stock equivalents outstanding. Pursuant to the rules of the Securities and
Exchange Commission, common stock equivalents related to common stock,
preferred stock, stock options and warrants issued within one year prior to
the Company's initial public offering have been included as if they were
outstanding for all periods presented. Fully diluted earnings per share differ
from primary earnings per share by less than 3%.

Stock Split and Stock Dividends:

In connection with its initial public offering, the Company effected a one-
for-two reverse stock split in August 1994 and converted all of its
outstanding preferred stock to common stock on a three for two share basis in
September 1994. The Company distributed a 50% share dividend in June 1995 and
January 1997. All share numbers and prices have been adjusted to reflect the
reverse stock split, the conversion of preferred to common and the 50% share
dividends.

Use of Estimates in the Preparation of Financial Statements:

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
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.

Reclassifications:

Certain reclassifications have been made to the fiscal 1995 and fiscal 1994
consolidated financial statements to conform to the fiscal 1996 presentation.
These reclassifications had no impact on net income.

New Accounting Standards:

The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation"
during fiscal 1996 (See Note 11).

2. POOLING OF INTERESTS:

Effective January 30, 1997, the Company issued approximately 4,650,000
shares of common stock in exchange for all of the outstanding stock of HMI,
the largest privately-held supplier of promotional products to large
corporations.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Effective January 24, 1997, the Company issued approximately 2,550,000
shares of common stock in exchange for all of the outstanding stock of Sofco,
one of the largest suppliers of janitorial and cleaning supplies in the United
States.

Effective November 8, 1996, the Company issued approximately 6,332,000
shares of common stock in exchange for all of the outstanding stock of UT, the
second largest same-day delivery service provider in the United States.

Effective October 31, 1996, the Company issued approximately 1,125,000
shares of common stock and paid approximately $2,289,000 to the consenting and
dissenting sharesholders, respectively, of Nimsa, a computer software reseller
located in Paris, France, in exchange for all of Nimsa's outstanding stock.

Effective March 1, 1996, the Company issued approximately 23,409,000 shares
of common stock in exchange for all of the outstanding stock of Delivery, a
provider of same-day local delivery services.

Effective February 27, 1996, the Company issued approximately 4,398,000
shares of common stock in exchange for all of the outstanding stock of Young,
a distributor of computer and imaging supplies and accessories.

In addition to the above acquisitions, the Company completed 14 other
acquisitions which were accounted for as immaterial poolings of interests for
approximately 1,942,000 shares of common stock during fiscal 1996. The
financial statements for these immaterial acquisitions for periods prior to
the acquisition have not been restated.

During fiscal 1995, prior to merging with the Company, Delivery acquired the
outstanding stock of 14 companies in exchange for approximately 3,951,000
shares of Delivery common stock. During fiscal 1994, Delivery acquired the
stock of six companies in exchange for approximately 1,722,000 shares of
Delivery common stock.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Separate results of operations for Corporate Express and the pooled
operations for the periods prior to the mergers are as follows:

YEAR ENDED
------------------------------------
MARCH 1, MARCH 2, FEBRUARY 25,
1997 1996 1995
---------- ---------- ------------
(IN THOUSANDS)

Net sales:
Corporate Express................... $2,715,785 $1,132,012 $ 621,469
HMI................................. 92,080 84,013 83,752
Sofco............................... 139,734 144,621 133,481
UT.................................. 196,199 -- --
Nimsa............................... 52,258 71,901 --
Young............................... -- 115,628 86,184
Delivery............................ -- 306,364 109,865
Delivery poolings prior to merger
with Delivery...................... -- 36,100 110,400
---------- ---------- ----------
Combined............................ $3,196,056 $1,890,639 $1,145,151
========== ========== ==========
Net income (loss):
Corporate Express................... $ 31,710 $ 3,702 $ 5,248
HMI................................. 4,182 990 1,772
Sofco............................... 3,529 319 1,989
UT.................................. 1,369 -- --
Nimsa............................... 1,206 1,762 --
Young............................... -- (3,073) 1,264
Delivery............................ -- 815 4,223
Delivery poolings prior to merger
with Delivery...................... -- 1,036 2,000
---------- ---------- ----------
Combined............................ $ 41,996 $ 5,551 $ 16,496
========== ========== ==========
Other changes in shareholders' equity:
Corporate Express................... $ 106,299 $ 229,356 $ 115,024
HMI................................. (3,761) (2,193) (1,917)
Sofco............................... 1,538 (230) 692
UT.................................. 26,135 -- --
Nimsa............................... (376) 6,026 --
Young............................... -- 13,028 (7,932)
Delivery............................ -- 12,032 23,211
Delivery poolings prior to merger
with Delivery...................... -- (1,116) (2,613)
---------- ---------- ----------
Combined............................ $ 129,835 $ 256,903 $ 126,467
========== ========== ==========

Certain reclassifications and adjustments have been made to the prior
financial statements of the pooled companies to conform to the Corporate
Express financial presentation and policies which adjustments had an
immaterial effect on net income.

All intercompany transactions have been eliminated.

The consolidated statement of operations for fiscal 1996 includes the income
and expenses of Corporate Express (including Young and Delivery), HMI, Sofco,
UT and Nimsa for the twelve months ended March 1, 1997.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The consolidated statement of operations for fiscal 1995 includes the income
and expenses of Corporate Express, Sofco, Young and Delivery for the twelve
months ended March 2, 1996, of HMI for the twelve months ended December 31,
1995, and of Nimsa for the twelve months ended June 30, 1996. In order to
conform the HMI and Nimsa year ends to Corporate Express' fiscal year end,
Nimsa net income for the March 1996 to June 1996 period was included in both
fiscal 1995 and 1996, and HMI net income for the January 1996 to February 1996
period was excluded from fiscal 1995. Accordingly, an adjustment has been made
in fiscal 1996 to debit retained earnings directly for the March 1996 to June
1996 Nimsa net income of $630,000 and to credit retained earnings directly for
the January 1996 to February 1996 HMI net income of $200,000.

The consolidated statement of operations for fiscal 1994 includes the income
and expenses of Corporate Express for the twelve months ended February 25,
1995, of Sofco for the twelve months ended May 26, 1995, of HMI for the twelve
months ended December 31, 1994, of Young for the twelve months ended September
30, 1994, and of Delivery for the twelve months ended December 31, 1994. In
order to conform the Sofco, Young and Delivery year ends to Corporate Express'
fiscal year end, Sofco net income for the March 1995 to May 1995 period was
included in both fiscal 1994 and 1995, Young net income for the October 1994
to February 1995 period was excluded from fiscal 1994, and Delivery net income
for the January 1995 to February 1995 period was excluded from fiscal 1994.
Accordingly, an adjustment has been made in fiscal 1995 to debit retained
earnings directly for the March 1995 to May 1995 Sofco net income of $747,000,
and to credit retained earnings for the October 1994 to February 1995 Young
net income of $846,000 and the January 1995 to February 1995 Delivery net
income of $1,777,000.

The results of operations for the adjustment periods are as follows:

PERIOD NET SALES NET INCOME
---------- --------- ----------

Nimsa........................................ 3/96-6/96 $25,986 $ 630
HMI.......................................... 1/96-2/96 15,415 200
Sofco........................................ 3/95-5/95 33,085 747
Young........................................ 10/94-2/95 39,683 846
Delivery..................................... 1/95-2/95 50,382 1,777

3. MERGER AND OTHER NONRECURRING COSTS:

During fiscal year 1996, the Company recorded an estimated net merger and
other nonrecurring charge of $19,840,000. This charge is comprised of
$27,411,000 in merger and other nonrecurring charges primarily in conjunction
with the acquisitions of UT, Nimsa, HMI and Sofco, offset by $7,571,000 in
revisions to the merger and other nonrecurring charge established in the fourth
quarter of fiscal 1995. The fiscal 1995 charge included an exit plan for the
integration of the newly acquired delivery business into the Company's core
product distribution business. In the third quarter of fiscal 1996, nine months
after the creation of the original exit plan, the Company acquired UT,
approximately doubling its delivery services capacity. At that time, the Company
adopted a new plan to integrate the delivery services business separate from the
core product distribution business. In connection with the new exit plan, the
Company evaluated its facility and personnel requirements and identified
duplicate facilities consistent with the new plan. As a result of this new plan,
the closure of thirteen delivery facilities and five distribution facilities,
incorporated in the original fiscal 1995 plan, was superseded. Included in the
distribution facilities that were to be retained, was the South Carolina
facility which was expected to be merged into the Atlanta and planned North
Carolina facilities. Due to significant new business in the Atlanta area and
several unexpected acquisitions, the Atlanta facility is at full capacity and
this closure plan was terminated. Additionally, several subsequent acquisitions
in fiscal 1996, which were not contemplated at the end of fiscal 1995, were
completed in the Carolinas and surrounding markets, which eliminated the
opportunity to close the South Carolina facility and maintain a high level of
customer service.

The fiscal year 1996 charges include the actual costs of completing the
acquisitions, the anticipated costs for integrating the delivery business,
closing other redundant facilities, and severance for employee terminations. The
charge includes the closure of 115 facilities and the reduction of approximately
485 employees.

BALANCE
CASH NON-CASH TOTAL USAGE 3/1/97
------- -------- ------- -------- -------

Merger transaction costs(1)..... $15,274 $15,274 $(12,706) $ 2,568
Severance and terminations(2)... 5,333 5,333 (760) 4,573
Facility closure and
consolidation(3)............... 3,575 3,575 (102) 3,473
------- ------- -------- -------
Accrued merger and related
costs, balance................. 24,182 24,182 (13,568) 10,614
Other asset write-downs and
costs(4)....................... -- $3,229 3,229 (1,180) 2,049
------- ------ ------- -------- -------
Total......................... $24,182 $3,229 $27,411 $(14,748) $12,663
======= ====== ======= ======== =======

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

- --------

(1) Merger transaction costs are the direct costs from the pooling
transactions and include legal, investment banking, printing and other
related costs, such as contract buy-outs for certain terminated employees.
These costs are expected to be paid by the end of fiscal 1997.

(2) Severance and employee termination costs are related to the elimination of
duplicate management positions and facility closures and consolidations.
Approximately 34 of the 485 employees estimated to be terminated have been
terminated as of March 1, 1997. The remaining terminations will occur in
conjunction with the facility closures and be concluded by the end of fiscal
1998.

(3) Facility closure and consolidation costs are the estimated costs to close
redundant facilities, lease costs and other costs associated with closed
facilities. Eight of the 115 facilities estimated to be closed or
consolidated have been closed or consolidated as of March 1, 1997. The
remaining facilities are expected to be closed by the end of fiscal
1998.

(4) Other asset write-downs and costs are recorded as contra assets and
include software, leasehold improvements and equipment being abandoned or
written off as a result of the UT acquisition. The remaining balance
primarily represents assets that will be disposed of in conjunction with
facility closures which are expected to be completed by the end of fiscal
1998.

The fiscal 1995 merger and other nonrecurring charge of $36,838,000 consisted
of merger transaction related costs of $13,273,000; severance and employee
termination costs of $7,457,000 (representing approximately 760 employees);
facility closure and consolidation costs of $9,693,000; and other asset write-
downs and costs of $6,415,000. Of the $36,838,000 charges, $7,724,000 are non-
cash charges. This liability was adjusted in fiscal 1996 to reflect the actual
merger transaction costs incurred and to eliminate the original liability
established for specific facilities which will not be closed as a result of the
significant change in circumstances due to the acquisition of UT.

BALANCE CASH NON-CASH BALANCE
3/2/96 PAYMENTS USAGE ADJUSTMENTS 3/1/97
------- -------- -------- ----------- -------

Merger transaction
costs(1).................. $ 9,161 $ (7,388) $ (259) $1,514
Severance and
terminations(2)........... 7,165 (1,523) (2,550) 3,092
Facility closure and
consolidation(3).......... 8,554 (1,169) (4,121) 3,264
------- -------- ------- ------
Accrued merger and related
costs, balance............ 24,880 (10,080) (6,930) 7,870
Other asset write-downs and
costs(4).................. 3,789 -- $(1,045) (641) 2,103
------- -------- ------- ------- ------
Total.................... $28,669 $(10,080) $(1,045) $(7,571) $9,973
======= ======== ======= ======= ======

- --------

(1) Remaining merger transactions costs represent the estimated contract buy-
outs for certain former Delivery employees and other transaction costs, both
of which are being negotiated and are expected to be resolved by the end of
fiscal 1997.

(2) Severance and termination costs are the severance payments related to
facility closures and centralization of certain shared services.
Approximately 58 of the 760 employees estimated to be terminated have been
terminated as of March 1, 1997, and 278 positions will no longer be
eliminated as a result of the revised exit plan. The Company expects to
complete the facility closures and related terminations by the end of the
first quarter in fiscal 1998. The centralization of certain shared services
will begin in the second quarter of fiscal 1997 and will continue through
fiscal 1998.

(3) Of the 88 facilities estimated to be closed or consolidated, 31 have been
closed or consolidated as of March 1, 1997, and 18 facilities will no longer
be eliminated as a result of the revised exit plan. The remaining facilities
are expected to be closed by the end of the first quarter in fiscal
1998.

(4) Other asset write downs and costs are recorded as contra assets and
include software, leasehold improvements and equipment being abandoned or
written off as a result of the acquisition. The remaining balance primarily
represents assets that will be disposed of in conjunction with facility
closures which are expected to be completed by the end of the first quarter
in fiscal 1998.

4. PURCHASES:

Fiscal 1996

The Company purchased for a net cash purchase price of $241,846,000 and
approximately 3,600,000 shares of common stock, 46 domestic office product
distributors, 29 international office product distributors and 11 delivery
service companies. The excess of the purchase price over the fair market value
of the net tangible assets

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

acquired was allocated to goodwill and is being amortized over 40 years for
office product distributors and 25 years for delivery service companies.
Included in the 46 domestic product acquisitions are three purchases and one
immaterial pooling consummated by UT prior to its acquisition by Corporate
Express, and ASAP Software Express, Inc. ("ASAP"), a distributor of software
to large corporations. The ASAP purchase price was $97,611,000 offset by cash
acquired of $13,792,000. Included in the 29 international product acquisitions
is Boulevard Produits De Bureau, Inc. ("Boulevard"), a seller of office
supplies, furniture and equipment, for a net cash purchase price of
$16,102,000. The Company also repaid $9,498,000 of Boulevard promissory notes
with cash of $731,900 and 356,832 shares of the Company's common stock.

In January 1997, Corporate Express Australia ("CEA") shareholders approved a
one for five non-renounceable common stock rights offer at a price of A$.85
(US$.65) per share. Pursuant to the rights offer, on February 27, 1997, CEA
issued 8,216,721 shares to Corporate Express and 3,553,370 shares to
institutional investors. As of March 1, 1997, Corporate Express interest in
CEA was 54.6%. On March 10, 1997, an additional 3,750,000 shares were issued
to institutional investors which changed the Corporate Express interest in CEA
to 52.4%.

In November 1996, Corporate Express purchased the remaining 49% interest in
the Chisholm Group by issuance of shares of Corporate Express common stock.
The Company has earn-out agreements with former shareholders that may require
additional payments by the Company of up to $3,259,000. Any additional
payments will be accounted for as increases to the purchase price.

Fiscal 1995

Corporate Express purchased for a net cash purchase price of $79,111,000, 27
office product distributors including five distributors purchased by CEA and a
software distributor purchased by Nimsa. Also included in the above purchases
is one office product distributor purchased by the Chisholm Group, a United
Kingdom contract stationer, in which Corporate Express acquired a 51% interest
in February 1996.

Young repurchased its remaining seven franchises for approximately
$20,512,000, terminated four franchises for consideration of $233,000 and
purchased substantially all of the business, properties and assets of a
computer supplies distributor for a purchase price of $675,000. The excess of
the purchase price over the fair value of the net tangible assets acquired was
allocated to goodwill and is being amortized over 40 years. Delivery completed
16 acquisitions accounted for as purchases. The net cash purchase price paid
in these transactions was $15,208,000 in cash, 378,000 shares of Delivery
common stock and $5,565,000 in convertible notes. The excess of the purchase
price over the fair value of the net tangible assets acquired has been
allocated to goodwill and is being amortized over 25 years. All of the
companies acquired provide same-day delivery service.

In December 1994, Young purchased all of the issued and outstanding shares
of a computer supplies distributor for a purchase price of $2,750,000 and the
assumption of other liabilities. Young may be required to pay additional
consideration to the former shareholders should the acquired company reach
certain earnings thresholds. No such additional amounts were paid in 1995. The
excess purchase price over the fair value of net tangible assets acquired was
allocated to goodwill and is being amortized over 40 years.

In February 1996, CEA shareholders approved the issue of an additional
12,939,000 shares and 50,000 shares of its common stock at a price of A$1.30
(US$.96) per share and A$1.00 (US$.74) per share, respectively. Of the shares
issued, 5,789,000 were purchased by Corporate Express, 4,600,000 were
purchased by institutional investors and 2,600,000 shares were approved for
issue to CEA officers and employees as employee incentive shares (of which
1,710,000 were issued as of March 2, 1996). As a result, at March 2, 1996,
Corporate Express' interest in CEA was 51.8%.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On December 21, 1995 CEA issued an additional 6,110,000 shares of its common
stock at a price of A$1.30 (US$.96) per share. Of the shares offered,
3,110,000 were purchased by Corporate Express and 3,000,000 were purchased by
institutional investors for cash. As a result, Corporate Express' interest in
CEA changed from 52.7% to 52.5%.

The operating results of all of the above acquisitions, which were accounted
for as purchases, are included in the Company's consolidated statements of
operations from the dates of acquisition. The following pro forma financial
information assumes the acquisitions occurred at the beginning of the period.
These results have been prepared for comparative purposes only and do not
purport to be indicative of what would have occurred had the acquisitions been
made at the beginning of the year, or of results which may occur in the
future. The pro forma results listed below are unaudited and reflect purchase
price adjustments.

YEAR ENDED YEAR ENDED
MARCH 1, MARCH 2,
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

Net sales............................................. $3,550,205 $2,995,708
Net income before extraordinary items................. 41,302 29,769
Net income............................................ 41,302 29,010
Net income per common share........................... 0.31 0.25

5. ACCRUED PURCHASE COSTS:

In conjunction with purchase acquisitions, the Company accrues the direct
external costs associated with closing redundant facilities of acquired
companies, and severance and relocation payments to the acquired company's
employees. Prior to the adoption of EITF 95-3 in May 1995, the Company also
accrued the external incremental costs of converting acquired company computer
systems to the Company's systems.

The following tables set forth activity in the Company's accrued purchase
liabilities:

Prior to EITF 95-3:

WAREHOUSE DISPOSITION
& SYSTEM REDUNDANT OF ASSETS
TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER
------- ------------ ---------- --------- -----------
(IN THOUSANDS)

Balance, February 25,
1995................... $11,252 $ 8,109 $1,005 $ 1,596 $ 542
Additions............... 1,731 659 223 734 115
Payments................ (6,469) (3,630) (784) (1,766) (289)
Reversals............... (5,250) (4,388) (41) (523) (298)
------- ------- ------ ------- -----
Balance, March 2, 1996.. 1,264 750 403 41 70
Payments................ (675) (452) (182) (41) --
Reversals to goodwill... (589) (298) (221) -- (70)
------- ------- ------ ------- -----
Balance, March 1,
1997(1)................ $ 0 $ 0 $ 0 $ 0 $ 0
======= ======= ====== ======= =====

- --------
(1) All consolidation projects relating to companies acquired prior to the
adoption of EITF 95-3 have been successfully completed.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

After adoption of EITF 95-3:

WAREHOUSE DISPOSITION
& SYSTEM REDUNDANT OF ASSETS
TOTAL INTEGRATIONS FACILITIES SEVERANCE & OTHER
------- ------------ ---------- --------- -----------
(IN THOUSANDS)

Balance, February 25,
1995................... $ -- $ -- $ -- $ -- $ --
Additions............... 2,414 691 202 1,065 456
Payments................ (629) (177) (4) (293) (155)
------- ------ ------- ------- -------
Balance, March 2, 1996.. 1,785 514 198 772 301
Additions............... 21,429 2,037 4,912 9,727 4,753
Payments................ (8,503) (699) (557) (4,066) (3,181)
Reversals to goodwill... (1,823) (7) (1,284) (284) (248)
------- ------ ------- ------- -------
Balance, March 1,
1997(1)................ $12,888 $1,845 $ 3,269 $ 6,149 $ 1,625
======= ====== ======= ======= =======

- --------
(1) Accrued purchase costs, after adoption of EITF 95-3, primarily represent
the liabilities incurred to consolidate acquired operations into existing
Company facilities.

6. DISCONTINUED OPERATIONS:

During fiscal 1995, Sofco adopted a plan to discontinue the operations of
Sofco-Eastern, Inc. ("Eastern"). Accordingly, the consolidated financial
statements have been reclassified to report separately the net assets,
liabilities and operating results of the Eastern operations. As of March 1,
1997, all Eastern operations have been disposed of and actual losses recorded
on the disposal of the assets. The loss from discontinued operations in fiscal
1995 and fiscal 1994 were $1,225,000 (net of tax benefits of $851,000),
representing the loss on disposal and $327,000 (net of tax benefits of
$225,000), representing the net loss on operations. The Eastern revenues were
not material to total consolidated revenues for fiscal years 1996, 1995 and
1994.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. DEBT:

Debt consisted of the following:

MARCH 1, MARCH 2,
1997 1996
-------- --------
(IN THOUSANDS)

4 1/2% Convertible Notes (the "Notes"), due July 1, 2000,
interest payable on January 1 and July 1 of each year
commencing on January 1, 1997, convertible into shares of
the Company's common stock at a conversion price of $33.33
per share.................................................. 325,000 --
$350,000,000 unsecured multi-currency revolving line of
credit. Interest rates are equal to either (i) the
Corporate Base Rate or (ii) LIBOR plus .5%, each of which
is based upon a performance grid (6.0% at March 1, 1997),
with principal due on March 31, 2000. Commitment fees on
the unused balance are based on the ratio of debt to cash
flow (as defined) and was 0.18% at March 1, 1997........... 136,000 8,000
9 1/8% Series B Senior Subordinated Notes, unsecured,
subordinated to existing debt up to an aggregate of $155
million, guaranteed by the operating subsidiaries of the
Company. Due March 15, 2004, semi-annual interest payments
beginning September 15, 1994. Redeemable by the Company
from March 1999 to March 2001 at premiums ranging from
3.422% to 1.141%........................................... 90,000 90,000
Various revolving lines of credit, variable interest rates
ranging from 4.0% to 9.5% at March 1, 1997................. 23,959 --
HMI revolving bank line of credit agreement collateralized
by accounts receivable, inventory and other assets.
Interest payable monthly at the lesser of the lender's
prime rate or the applicable average federal funds rate
plus 1.5%. This agreement was repaid in full on January 31,
1997....................................................... -- 15,873
$55,000,000 Delivery unsecured revolving credit facility.
Interest rates are equal to
i) LIBOR plus 1.25% or ii) the prime rate, at the Company's
option (weighted average rate of 6.56% for fiscal 1995).
This loan was repaid in full on May 31, 1996............... -- 11,900
Term loan facility collateralized by CEA's assets. Fixed
interest rates ranging from 8.9% to 10.95%. $4,409,000
repaid in March 1997. Principal payments of $389,000 per
quarter plus interest commencing October 1998. Final
payment of $156,000 plus interest due in July 1999......... 5,682 6,094
CEA revolving loans, interest at floating rates, 7.7% at
March 1, 1997. Interest payable monthly. Maturity dates
range from December 1998 to July 1999...................... 13,396 --
Bank term loans, collateralized by equipment, with interest
floating at LIBOR plus 1.75% to 2.0%, principal and
interest payable monthly, maturities range from 48 months
to 60 months through March 2002............................ 9,341 5,620
Convertible subordinated notes due between March 31, 1997
and January 31, 1998, bearing interest of 5.0% to 6.0%,
payable quarterly or semi-annually, and convertible prior
to maturity at the holder's option at prices ranging from
$19.97 to $32.70, into 222,000 shares of common stock...... 4,864 5,565
City of Aurora, Colorado Industrial Development Bonds,
Series 1984, collateralized by land and building, interest
at a floating rate, as defined, ranging from 4.8% in 1995
to 5.0% at March 1, 1997, payable semi-annually and
principal installments of varying amounts ($100,000 in 1995
and $200,000 in 1996) payable annually through November
2009....................................................... 4,380 4,480
Various notes payable due December 2006, variable interest
rates (4.75% on March 1, 1997 and 5.34% on March 2, 1996),
collateralized by cash deposits............................ 4,015 4,641
Other, interest from 2.9% to 17.4%.......................... 28,870 21,810
-------- --------
Total debt.................................................. 645,507 173,983
Less current portion of debt................................ 23,802 20,152
-------- --------
Long-term portion of debt................................... $621,705 $153,831
======== ========

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The annual maturities of debt for succeeding years are as follows:

FISCAL YEAR (IN THOUSANDS)
----------- --------------

1997............................... $ 23,802
1998............................... 10,909
1999............................... 19,506
2000............................... 465,627
2001............................... 2,244
Thereafter......................... 123,419
--------
Total............................ $645,507
========

Certain of the debt agreements contain provisions which require maintenance
of the Company's minimum net worth, certain financial ratios, including debt
to cash flow and fixed charge coverage, and limit the Company's ability to pay
dividends. Delivery's credit facility became due upon the acquisition by the
Company but was extended until May 31, 1996, when it was repaid using the
Company's line of credit.

The Company's revolving credit facility (the "Senior Credit Facility") was
amended and restated on November 26, 1996 to increase the borrowing capacity
from $90,000,000 to $350,000,000, extend the facility termination date to
March 31, 2000, lower the cost of its borrowings to LIBOR plus .50%, unsecure
the assets of the Company (the previous facility was secured by substantially
all of the assets, including accounts receivable and inventory of the Company
and its United States subsidiaries), and to make certain other changes. The
Senior Credit Facility was previously amended on May 10, 1996 to increase the
Company's borrowing capacity from $90,000,000 to $250,000,000, subject to
borrowing base and other restrictions and to lower the cost of its borrowings
to LIBOR plus 1.25%. On May 31, 1996, the Company borrowed on its Senior
Credit Facility and repaid in full the $33,270,000 outstanding revolving
credit facility previously established by Delivery. On June 24, 1996, the
outstanding amounts under the Senior Credit Facility were paid in full from
funds generated from the issuance of the Convertible Notes. Upon this
repayment, the borrowing capacity of the Senior Credit Facility was reduced
from the amended capacity of $250,000,000 to $90,000,000, subject to borrowing
base and other restrictions.

On June 24, 1996, the Company issued $325,000,000 principal amount of
Convertible Notes. The Convertible Notes are convertible into the Company's
common stock at a conversion price of $33.33 per share, subject to adjustments
under certain conditions. A portion of the proceeds from the sale of the Notes
was used to repay the Company's revolving credit facility and an acquisition
note payable with the remaining proceeds being used to fund acquisitions and
for other general corporate purposes.

On March 17, 1995, the Company exchanged its 9 1/8% Series A Senior
Subordinated Notes due 2004 (the "Series A Notes") for 9 1/8% Series B Senior
Subordinated Notes due 2004 (the "Series B Notes"). The terms of the Series B
Notes are substantially the same as the Series A Notes, except that the Series
B Notes are registered under the Securities Act of 1933. The illiquidity
payment of approximately .5% per annum previously payable on the Series A
Notes ceased when they were exchanged for the Series B Notes on March 17,
1995, reducing the annual interest rate from 9 5/8% to 9 1/8%. In fiscal 1994,
the Company repurchased $10,000,000 principal amount of the Series A Notes.

The Company's Senior Credit Facility prohibits the distribution of dividends
without the prior written consent of the lenders and the Indenture governing
the Series B Notes prohibits the Company from paying a dividend which would
cause a default under such indenture or which would cause the Company to fail
to comply with certain financial covenants.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company capitalized $3,887,000 and $882,000 of interest expense in
fiscal 1996 and 1995, respectively, primarily related to software developed
for internal use and the construction of corporate facilities. No interest was
capitalized in fiscal 1994.

8. COMMITMENTS AND CONTINGENCIES:

Operating Leases:

The Company has various noncancellable operating leases, primarily for
warehouse buildings and delivery trucks. Lease expense, net of sublease
rentals of $992,000, $30,000, and $127,000 for the years ended March 1, 1997,
March 2, 1996, and February 25, 1995 was $54,567,000, $19,195,000, and
$13,906,000, respectively.

Future minimum lease payments are as follows:

FISCAL YEAR (IN THOUSANDS)
----------- --------------

1997............................... $ 42,191
1998............................... 33,135
1999............................... 26,340
2000............................... 18,908
2001............................... 13,295
Thereafter......................... 46,950
--------
Total.............................. 180,819
Less subleases..................... 1,361
--------
Net obligation..................... $179,458
========

The leases generally are for periods of three to ten years and provide for
renewals of one month to five years at the Company's option.

Capital Leases:

The Company is the lessee of certain property and equipment under capital
leases expiring in various years through 2009. Included in furniture and
equipment at March 1, 1997 is $24,511,000 of assets under capital leases and
related accumulated depreciation of $9,677,000.

Future minimum lease payments required under these capital leases are as
follows:

FISCAL YEAR (IN THOUSANDS)
----------- --------------

1997............................... $ 7,187
1998............................... 5,397
1999............................... 3,753
2000............................... 2,242
2001............................... 1,070
Thereafter......................... 2,250
-------
Total minimum lease payments....... 21,899
Less amount representing interest.. 4,414
-------
Present value of minimum lease
payments.......................... 17,485
Less current portion of capital
lease obligations................. 5,940
-------
Non-current portion of capital
lease obligations................. $11,545
=======

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Contingencies:

In the normal course of business, the Company is subject to certain legal
proceedings. 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. The Company has a dispute with certain of the former
shareholders of a company acquired by the Company in fiscal 1996. No legal
proceedings have been commenced by these shareholders and the Company cannot
determine if any legal action will be initiated, or the results or materiality
of any such action.

9. INCOME TAXES:

Federal, state and foreign income taxes for the fiscal years ended March 1,
1997, March 2, 1996, and February 25, 1995 consisted of the following:

1996 1995 1994
------- ------- -------
(IN THOUSANDS)

Current
Federal......................................... $ 202 $10,604 $ 7,707
State........................................... 615 1,089 1,218
Foreign......................................... 1,943 3,205 --
Deferred
Federal......................................... 17,149 (429) (2,499)
State........................................... 5,401 1,544 (251)
Foreign......................................... (793) -- --
Utilization of net operating loss................. -- (2,247) (1,051)
Change in tax status.............................. (2,029) -- --
Allocated to goodwill............................. -- -- 4,374
Allocated to contributed capital.................. 11,161 -- --
Adjustment of beginning valuation allowance....... -- -- (1,204)
------- ------- -------
Total income tax expense.......................... $33,649 $13,766 $ 8,294
======= ======= =======

The benefit recognized in fiscal 1996 for change in tax status relates to
establishing deferred tax assets for an acquired S corporation. The
$11,161,000 contribution to capital relates to deductions recognizable only
for tax purposes of non-qualified stock options exercised during fiscal 1996.

At March 1, 1997 the Company had, for United States federal and foreign tax
purposes, net operating loss carryforwards of $33,650,000 and alternative
minimum tax net operating loss carryforwards of $11,908,000 expiring beginning
in 2003.

Included in the net operating loss carryforwards are losses from acquired
subsidiaries. The utilization of these carryforwards may be affected by
limitations under the Internal Revenue Code and, therefore, the benefit of
these pre-acquisition net operating loss carryforwards may be limited.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The components of the net deferred tax assets and liabilities as of March 1,
1997 and March 2, 1996 are as follows:

MARCH 1, MARCH 2,
1997 1996
-------- --------
(IN THOUSANDS)

Deferred tax assets:
Inventory.............................................. $ 5,999 $ 3,712
Allowance accounts..................................... 4,532 1,615
Accrued purchase costs................................. 3,734 1,053
Insurance reserves..................................... 3,980 271
Accrued merger and other costs......................... 8,760 6,767
Vacation and benefits accrual.......................... 5,407 396
Accounting methods..................................... -- 4,066
Other current.......................................... 949 2,240
Net operating loss carryforwards....................... 13,275 4,879
Valuation allowance.................................... (6,049) (2,433)
Other non-current...................................... 784 1,092
------- -------
Total deferred tax assets................................ 41,371 23,658
------- -------
Deferred tax liabilities:
Accounting methods..................................... 4,943 1,650
Other current.......................................... 281 --
Property, plant and equipment.......................... 28,807 4,731
Intangible assets...................................... 3,926 5,886
Other non-current...................................... 1,157 295
------- -------
Total deferred tax liability............................. 39,114 12,562
------- -------
Net deferred tax asset................................... $ 2,257 $11,096
======= =======
Financial Statements
Current deferred tax assets............................ 29,076 18,470
Non-current deferred tax liabilities................... 26,819 7,374
------- -------
Net deferred tax asset................................... $ 2,257 $11,096
======= =======

The net change in the valuation allowance for deferred taxes in the year
ended March 1, 1997 is an increase of $3,616,000, primarily related to net
operating losses acquired in the current year. The Company reviewed the need
for a valuation allowance and determined that it was more likely than not that
certain deferred tax assets of acquired foreign subsidiaries may go
unrealized. This increase was partially offset by the lapsing of restrictions
placed on the usage of certain net operating losses.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A reconciliation of the differences between the Company's expense (benefit)
for income taxes and taxes at the statutory rate for the fiscal years ended
March 1, 1997, March 2, 1996 and February 25, 1995 is as follows:

1996 1995 1994
------- ------- -------
(IN THOUSANDS)

Statutory federal income tax expense............ $25,825 $ 7,692 $ 8,610
Adjustments:
State income taxes, net of federal effect..... 3,910 1,521 886
Foreign income taxes.......................... (123) 461 --
Merger costs.................................. 4,924 4,952 --
Amortization of goodwill...................... 3,693 1,404 1,784
Untaxed S Corporation earnings and change in
tax status................................... (3,514) (347) (620)
Other non-deductible items.................... 739 366
Valuation allowance on tax loss carryforward.. (47) (2,247) (2,636)
Other......................................... (1,758) (36) 270
------- ------- -------
Income tax expense............................ $33,649 $13,766 $ 8,294
======= ======= =======

10. EMPLOYEE BENEFIT PLANS:

Effective September 1, 1992, the Company implemented a retirement plan which
allows employee contributions in accordance with Section 401(k) of the
Internal Revenue Code. The Company matches a portion of the employee's salary
and all full-time employees are eligible to participate in the plan after six
months of service. For the years ended March 1, 1997, March 2, 1996, and
February 25, 1995, the Company's matching contribution expense was $2,204,000,
$1,807,000, and $1,704,000, respectively.

CEA, the Company's majority-owned Australian subsidiary since May 1995,
sponsors superannuation funds for its employees (similar to 401(k) plans in
the United States). Total matching contributions by the Company for the year
ended March 1, 1997 and March 2, 1996 were approximately $1,912,000 and
$980,000, respectively.

Certain of the Delivery pooled companies have qualified defined contribution
plans, which allow for voluntary pretax contributions by employees. Expenses
related to these plans totaled $316,000, $96,000, and $192,000 during fiscal
1996, 1995, and 1994, respectively.

Young had a retirement plan which allowed employee contributions in
accordance with Section 401(k). Young's matching contribution expenses were
$106,000 and $52,000 in fiscal 1995 and 1994, respectively.

On August 29, 1994, the Company's shareholders approved the adoption of the
1994 Employee Stock Purchase Plan. A maximum of 1,125,000 shares of Common
Stock may be purchased by eligible employees under the 1994 Employee Stock
Purchase Plan. All full-time employees with six months service at the start of
the annual offering period are eligible to participate at contribution levels
ranging from 1% to 15% of compensation. Contributions are applied to purchase
common stock at a price equal to the lower of the beginning of the year or end
of the year market price, less a discount of up to 15%. Contributions to this
plan during fiscal 1996 and fiscal 1995 totaled approximately $2,066,000 and
$679,000, respectively and purchases under the plan totaled 115,488 and 49,200
shares. There were no contributions to or stock purchases under the 1994
Employee Stock Purchase Plan during fiscal 1994.

Sofco has an Employee Stock Ownership Plan ("the ESOP") covering
substantially all full-time employees. The ESOP invested in the common stock
of Sofco which was converted to Corporate Express common stock upon
consummation of the acquisition. As of March 1, 1997 and March 2, 1996, the
ESOP owned

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1,512,164 shares and 1,303,512 shares, respectively, of Corporate Express
common stock or equivalents. Of the shares owned, 329,034 were in escrow as of
March 2, 1996. Employer contributions were $436,000 for fiscal 1996,
$1,925,000 for fiscal 1995, and $805,000 for fiscal 1994. In December 1990,
Sofco guaranteed a $4,000,000 loan to the ESOP which is collateralized by the
stock held in escrow and a security interest in accounts receivable and
inventory. The loan had an approximate interest rate of 85% of prime and was
repaid in full in August 1996. The loan balance at March 2, 1996 was
$1,047,619 and is included in liabilities on the Company's consolidated
balance sheets with a corresponding reduction in additional paid-in capital.

11. COMMON STOCK:

As of March 1, 1997 and March 2, 1996 there were 126,171,467 and 111,954,350
common shares outstanding, respectively (after giving effect to the three-for-
two stock split effected in the form of a stock dividend in January 1997). On
January 31, 1997, a 50% share dividend of approximately 39,979,000 shares of
common stock was distributed to shareholders of record as of January 24, 1997.

On September 15, 1995, the Company sold 24,486,792 shares in a follow-on
public offering of its common stock, and selling shareholders sold 3,113,208
shares at a price of $16.00 per share. Of the $375,200,000 of net proceeds to
the Company from the offering, $195,800,000 was used to pay for the prior
purchase of the Company shares held by OfficeMax, Inc., the Company's largest
shareholder, and $61,000,000 was used to repay existing indebtedness. The
remaining proceeds were used to finance the Company's acquisitions and for
general corporate purposes.

On June 21, 1995, a 50% share dividend of approximately 21,075,000 shares of
common stock was distributed to shareholders of record as of June 15, 1995.

On March 30, 1995, a follow-on public offering of 10,155,938 shares of
common stock was consummated at a price to the public of $11.12 per share. Of
the shares offered, 4,500,000 shares were sold by the Company and 5,655,938
shares were sold by selling security holders, including 397,407 shares issued
upon exercise of warrants purchased by the underwriters.

On September 30, 1994, the Company consummated its initial public offering
of 15,750,000 shares of common stock at a price of $7.11 per share. Selling
shareholders sold an additional 3,656,250 shares of common stock in the
initial public offering. In connection with this offering, the Company
effected a one-for-two reverse stock split in August 1994 and converted all of
its outstanding preferred stock to common stock on a three-for-two basis in
September 1994.

The Company has authorized 3,000,000 shares of Non-Voting Common Stock, par
value $.0002 per share. No shares of the Non-Voting Common Stock are issued or
outstanding at March 1, 1997 or March 2, 1996. In addition, the Company has
authorized 25,000,000 shares of Preferred Stock, par value $.0001 per share.
No shares of Preferred Stock are issued or outstanding at March 1, 1997 or
March 2, 1996.

STOCK-BASED COMPENSATION PLANS:

Options:

1992 Stock Option Plan. In February 1992, the Company adopted the Corporate
Express, Inc. 1992 Stock Option Plan (the "1992 Stock Option Plan"). The 1992
Stock Option Plan was approved by the Company's shareholders in May 1992 and
amended in January 1994. Options were granted under the 1992 Stock Option Plan
at the fair market value at the time of grant as determined by the Board of
Directors or the Compensation

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Committee, based on recent stock transactions. Options granted under the 1992
Stock Option Plan typically vest in equal monthly installments over a five-
year period, beginning on the month after the first anniversary of the grant
date. The options generally expire on the seventh anniversary of the grant
date.

Executive Plan. In June 1994, the Board of Directors adopted the 1994
Executive Stock Option Plan (the "Executive Plan") which permits the grant of
stock options to the Company's executive officers. The Compensation Committee
administers the plan and establishes the terms of the options granted,
including the number of shares, the exercise price, vesting schedule and
termination provisions. The particular terms of each grant are set forth in
separate stock option agreements entered into between the Company and the
executive officer. The maximum aggregate number of shares of common stock for
which options may be granted under this plan originally was 3,375,000 and was
increased to 5,625,000 in August 1995, which increase was approved by
shareholders in August 1996, and no single executive officer may be granted
options covering more than 750,000 shares of common stock in any calendar
year. Vesting accelerates upon occurrence of certain conditions, including
increases in the Company's stock price and changes in control of the Company.
The options expire ten years from the date of grant.

1994 Stock Option Plan. The 1994 Stock Option and Incentive Plan (the "1994
Stock Option Plan") was adopted by the Board of Directors and approved by
shareholders in August 1994. This plan replaced, for future grants, the 1992
Stock Option Plan. The 1994 Stock Option Plan permits the Company to grant
incentive stock options and nonqualified stock options. The maximum aggregate
number of shares of common stock which may be issued under the 1994 Stock
Option Plan was 2,812,500 and was increased to 9,562,500 in March 1996 and
approved by the shareholders in August 1996. Options granted under the 1994
Stock Option Plan typically vest in equal monthly installments over a period
of five years, beginning in the month after the first anniversary of the grant
date. The options generally expire on the seventh anniversary of the grant
date. Options and awards that expire, terminate or are cancelled or forfeited
will again be available for grant or award under the plan.

Delivery Plan. Delivery had a stock option plan which was approved by its
shareholders in January 1994. On March 1, 1996, effective with the merger with
Corporate Express, all Delivery options became vested and were exercisable
into shares of common stock, as adjusted to reflect the exchange ratio as
defined in the merger agreement.

UT Plan. UT had stock option plans which, effective with the merger with
Corporate Express on November 8, 1996, became vested and were exercisable into
shares of common stock, as adjusted to reflect the exchange ratio as defined
in the merger agreement.

Directors Plan. The 1996 Stock Option Plan for Outside Directors (the
"Directors Plan") was adopted by the Board of Directors and approved by
shareholders in August 1996. The maximum aggregate number of shares of common
stock for which options may be granted under this plan is 375,000. Initial
options granted under the Directors Plan vest at 40% on the first anniversary
of the date of grant, 40% on the second anniversary and the remaining 20% on
the third anniversary. All other stock options shall become exercisable at 50%
on the first anniversary of the date of grant and the remaining 50% on the
second anniversary of the date of grant. Each eligible director who first
becomes a member of the Board shall automatically be granted stock options to
purchase 37,500 shares on the date of his or her selection or election to the
Board. Each eligible director shall also automatically be granted stock
options to purchase 15,000 shares on each anniversary of the date of such
initial grant (beginning on the second such anniversary).

Supplemental Plan. The 1996 Supplemental Stock Option Plan (the
"Supplemental Plan") was adopted by the Board of Directors in December 1996.
The maximum aggregate number of shares of common stock for which options may
be granted under this plan is 6,000,000. Option grants under the Supplemental
Plan and the terms of the grants are identical to the 1994 Stock Option Plan.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The summary of the status of the Company's seven fixed stock option plans as
of March 1, 1997, March 2, 1996 and February 25, 1995, and changes during the
years ending on those dates is presented below:

MARCH 1, 1997 MARCH 2, 1996 FEBRUARY 25, 1995
------------------ ------------------ -----------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000'S) PRICE (000'S) PRICE (000'S) PRICE
------- --------- ------- --------- ------- ---------

Outstanding at beginning
of year................ 15,216 $10.90 6,465 $4.57 2,914 $2.88
Granted................. 4,405 21.15 9,872 14.21 4,076 5.74
Exercised............... (1,686) 5.98 (819) 2.03 (240) 3.83
Forfeited............... (1,102) 18.46 (302) 7.67 (285) 4.62
------ ------ -----
Outstanding at end of
year................... 16,833 13.59 15,216 10.90 6,465 4.57
====== ====== =====
Options exercisable at
year end............... 5,407 3,324 716
Weighted-average fair
value of options
granted during the
year................... $ 7.61 $ 6.26

The following table summarizes information about fixed stock options
outstanding as of March 1, 1997:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
OUTSTANDING REMAINING EXERCISABLE
RANGE OF AT 3/1/97 CONTRACTUAL LIFE WEIGHTED-AVERAGE AT 3/1/97 WEIGHTED-AVERAGE
EXERCISE PRICES (000'S) IN YEARS EXERCISE PRICE (000'S) EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------

$ .10 to 3.55........... 1,200 3.4 $ 2.99 731 $ 2.92
4.50 to 6.53............ 4,114 7.2 5.05 3,622 5.07
7.11 to 11.11........... 756 6.1 8.68 357 8.72
12.45 to 14.67.......... 3,323 7.5 13.37 355 12.95
15.38 to 19.83.......... 5,209 6.3 19.43 191 16.63
21.75 to 38.70.......... 2,231 6.5 23.37 151 29.83
------ -----
16,833 6.6 13.59 5,407 6.63
====== =====

The Company applies APB Opinion 25 and related interpretations in accounting
for the above plans. Accordingly, no compensation cost has been recognized for
its fixed stock-based plans. The fair value of each option grant was estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions for fiscal 1996 and 1995: risk-free interest rates
ranging from 5.38% to 6.58%; expected life of four years; volatility of 35%;
dividend yield of 0%. Had compensation cost been determined based on the fair
value at the grant dates for awards under those plans consistent with the
method of FASB Statement 123, the Company's net income and net income per
common share would have been reduced to the pro forma amounts indicated below:

YEAR ENDED
-----------------
MARCH 1, MARCH 2,
1997 1996
-------- --------

Net income (loss)........................... As reported $40,281 $5,140(1)
Pro forma 32,062 $2,808
Net income (loss) per common share.......... As reported $ 0.31 $ 0.05(1)
Pro forma 0.25 0.03

- --------
(1) Net income and net income per common share as reported represent pro forma
net income and pro forma net income per common share as adjusted for the
effects of pro forma S Corporation taxes as more fully described in Note
13.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Warrants:

As of February 25, 1995, warrants to purchase 1,489,500 shares of the
Company's common stock, had been issued with exercise prices of $.02 per share
for 6,750 shares, $4.89 per share for 562,500 shares and $1.78 for the
remaining 920,250 shares. As of March 1 1997, warrants to purchase 675,000 of
common stock were outstanding, with exercise prices of $4.89 per share for
562,500 shares and $1.78 per share for the remaining 112,500 shares. The
warrants expire on various dates through January 31, 1999.

Outstanding warrants to purchase Delivery common stock are vested and
exercisable into shares of Corporate Express common stock, effective with the
merger with Corporate Express on March 1, 1996, at an exchange ratio as
defined in the merger agreement. As of March 1 1997, warrants to purchase
49,950 and 54,000 shares of Corporate Express common stock were outstanding at
prices of $5.55 and $9.44 per share, respectively.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments," the Company has estimated the fair value of its financial
instruments using the following methods and assumptions:

. The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value;

. The fair value of the Convertible Notes is based on quoted market prices
and was approximately $295,750,000 at March 1, 1997;

. The fair value of the Series B Notes is based on quoted market prices and
was approximately $92,025,000 at March 1, 1997;

. The carrying amounts of the Company's debt, other than the Convertible
Notes and the Series B Notes, approximates fair value, estimated by
discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

13. PRO FORMA NET INCOME:

The pro forma net income and pro forma net income per share reflects the tax
adjustment for a fiscal 1996 acquisition accounted for as a pooling of
interests that was previously an S corporation for income tax purposes, as if
the acquired company had filed a C corporation tax returns for all periods
presented. The effect is as follows:

FISCAL FISCAL FISCAL
1996 1995 1994
------- ------ -------
(IN THOUSANDS)

Net income before pro forma adjustments, per
consolidated statements of operations............. $41,996 $5,551 $16,496
Pro forma provision for income taxes............... 1,715 411 727
------- ------ -------
Pro forma net income............................... $40,281 $5,140 $15,769
======= ====== =======

14. INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION

The Company's major operations consist of providing the distribution of
products and services. The product distribution segment has operations in the
United States, Australia, New Zealand, Canada, the United Kingdom, Germany,
France and Italy. Currently, the largest operations in the international
segment are in Australia. Services include same day delivery, distribution and
logistics management and call center.

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Net sales, merger and other nonrecurring charges, operating profit,
identifiable assets, capital expenditures and depreciation and amortization
pertaining to the industries and geographic areas in which the Company
operates are presented below.

INDUSTRY SEGMENTS:

CORPORATE
EXPRESS PRODUCT
CONSOLIDATED DISTRIBUTION SERVICES
------------ ------------ --------
(IN THOUSANDS)

Fiscal year ended March 1, 1997:
Net sales.................................. $3,196,056 $2,436,296 $759,760
Merger and other nonrecurring charges...... 19,840 8,406 11,434
Operating profit........................... 100,490 80,396 20,094
Identifiable assets........................ 1,843,977 1,685,716 158,261
Capital expenditures....................... 119,639 104,432 15,207
Depreciation and amortization.............. 48,736 33,446 15,290
Fiscal year ended March 2, 1996:
Net sales.................................. $1,890,639 $1,548,175 $342,464
Merger and other nonrecurring charges...... 42,790 29,203 13,587
Operating profit........................... 38,160 29,191 8,969
Identifiable assets........................ 1,023,365 900,722 122,643
Capital expenditures....................... 53,124 41,469 11,655
Depreciation and amortization.............. 28,498 19,977 8,521
Fiscal year ended February 25, 1995:
Net sales.................................. $1,145,151 $ 924,886 $220,265
Operating profit........................... 40,953 29,811 11,142
Identifiable assets........................ 645,309 568,562 76,747
Capital expenditures....................... 18,670 11,525 7,145
Depreciation and amortization.............. 17,078 12,694 4,384

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

GEOGRAPHICAL SEGMENTS:

CORPORATE
EXPRESS DOMESTIC INTERNATIONAL
CONSOLIDATED OPERATIONS OPERATIONS
------------ ---------- -------------
(IN THOUSANDS)

Fiscal year ended March 1, 1997:
Net sales............................... $3,196,056 $2,630,930 $565,126
Merger and other nonrecurring charges... 19,840 18,511 1,329
Operating profit........................ 100,490 95,788 4,702
Identifiable assets..................... 1,843,977 1,519,152 324,825
Capital expenditures.................... 119,639 108,655 10,984
Depreciation and amortization........... 48,736 41,598 7,138
Fiscal year ended March 2, 1996:
Net sales............................... $1,890,639 $1,652,438 $238,201
Merger and other nonrecurring charges... 42,790 42,790 --
Operating profit........................ 38,160 28,943 9,217
Identifiable assets..................... 1,023,365 868,227 155,138
Capital expenditures.................... 53,124 50,963 2,161
Depreciation and amortization........... 28,498 26,010 2,488
Fiscal year ended February 25, 1995:
Net sales............................... $1,145,151 $1,143,457 $ 1,694
Operating profit........................ 40,953 40,939 14
Identifiable assets..................... 645,309 641,898 3,411
Capital expenditures.................... 18,670 18,665 5
Depreciation and amortization........... 17,078 17,066 12

CORPORATE EXPRESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

15. QUARTERLY FINANCIAL DATA (UNAUDITED):(A)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Fiscal year ended March 1, 1997:
Net sales..................... $ 650,861 $ 755,009 $ 889,563 $ 900,623
Gross profit.................. 164,329 182,814 217,197 213,970
Net income.................... 12,082 13,417 9,290(b) 7,208(b)
Pro forma net income.......... 11,752 13,090 8,918 6,521
Pro forma net income per
common share................. .09 .10 .07 .05
Fiscal year ended March 2, 1996:
Net sales..................... $ 394,115 $ 452,540 $ 493,725 $ 550,259
Gross profit.................. 99,211 111,075 125,670 131,365
Income(loss) from continuing
operations................... 7,154 7,637 11,898 (19,913)
Net income (loss)............. 6,069 7,637 11,898 (20,053)(c)
Pro forma income (loss) from
continuing operations........ 7,236 7,501 11,691 (20,064)
Pro forma net income (loss)... 6,152 7,501 11,691 (20,204)
Pro forma income (loss) from
continuing operations per
common share................. .07 .07 .10 (.18)
Pro forma net income (loss)
per common share............. .06 .07 .10 (.18)

- --------
(a) Quarterly amounts have been restated to include the accounts and
operations of HMI, Sofco, Nimsa and UT for fiscal 1996, and HMI, Sofco,
Nimsa, Delivery and Young for fiscal 1995.
(b) In the third and fourth quarters of fiscal 1996, the Company recognized
pretax charges of $12.4 million and $7.5 million, respectively, related to
merger and other nonrecurring items.
(c) In the fourth quarter of fiscal 1995, the Company recognized pretax
charges of $42.8 million related to merger and other nonrecurring items.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

Corporate Express, Inc.
(Registrant)

/s/ Sam R. Leno
By: _________________________________
SAM R. LENO
EXECUTIVE VICE PRESIDENT ANDCHIEF
FINANCIAL OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Jirka Rysavy Chairman of the May 14, 1997
- ------------------------------------- Board and Chief
JIRKA RYSAVY Executive Officer
(Principal
Executive Officer)

/s/ Robert L. King President, Chief May 14, 1997
- ------------------------------------- Operating Officer
ROBERT L. KING and Director

/s/ Gary M. Jacobs Executive Vice May 14, 1997
- ------------------------------------- President and
GARY M. JACOBS Secretary

/s/ Sam R. Leno Executive Vice May 14, 1997
- ------------------------------------- President and Chief
SAM R. LENO Financial Officer
(Principal
Financial Officer)

/s/ Joanne C. Farver Vice President, May 14, 1997
- ------------------------------------- Controller
JOANNE C. FARVER (Principal
Accounting Officer)

/s/ Mo Siegal Director May 14, 1997
- -------------------------------------
MO SIEGAL

/s/ Janet A. Hickey Director May 14, 1997
- -------------------------------------
JANET A. HICKEY