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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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<Table>

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
</Table>

COMMISSION FILE NUMBER 0-25400
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DAISYTEK INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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<Table>

DELAWARE 75-2421746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</Table>

1025 CENTRAL EXPRESSWAY SOUTH, SUITE 200, ALLEN, TEXAS 75013
(Address of principal executive offices, including zip code)

(972) 881-4700
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE

Indicate by a 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 a 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 as of June 1, 2002 (based on the closing price as reported by the
National Association of Securities Dealers Automated Quotation System) was
approximately $254.9 million. Solely for purposes of the preceding calculation,
outstanding shares of common stock held by directors and executive officers have
been treated as held by affiliates. As of June 1, 2002, there were 18,032,488
shares of the registrant's Common Stock, $.01 par value, outstanding, excluding
1,773,905 shares of common stock in treasury.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference certain information
contained in the proxy statement of Daisytek International Corporation for its
annual meeting of stockholders to be held during 2002.
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INDEX

<Table>
<Caption>
PAGE
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 10
Item 6. Selected Consolidated Financial Data........................ 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of
Operations................................................ 13
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 26
Item 8. Financial Statements and Supplementary Data................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial
Disclosure................................................ 56
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 56
Item 11. Executive Compensation...................................... 56
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related
Stockholder Matters....................................... 56
Item 13. Certain Relationships and Related Transactions.............. 56
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 56
SIGNATURES............................................................ 65
</Table>

Unless otherwise indicated, all references to "Daisytek," "we," "us" and
"our" refer to Daisytek International Corporation, a Delaware corporation, and
its direct and indirect subsidiaries, including Daisytek, Incorporated, which is
Daisytek's primary operating subsidiary. References in this Form 10-K to
Daisytek's fiscal year means the twelve-month period ended on March 31 of such
year.

PART I

ITEM 1. BUSINESS

Daisytek is a leading global distributor of computer and office supplies
and professional tape products. To enhance our relationship with our computer
and office supplies customers worldwide, we also provide unique, value-added
services such as direct marketing, merchandising and demand generation. We sell
our products and services in the United States, Europe, Canada, Australia,
Mexico and South America. We were originally incorporated in 1978.

COMPUTER AND OFFICE SUPPLIES

We distribute over 23,000 consumable computer and office supplies,
including such items as toner and inkjet cartridges, diskettes, data cartridges
and other supplies for inkjet and laser printers, photocopiers and fax machines,
as well as traditional office products. We market and sell internationally
known, name brand products from major manufacturers such as Apple, Avery
Denison, Brother, Canon, Epson, Fellowes, Hewlett-Packard, IBM, Imation,
Lexmark, Maxell, Okidata, Panasonic, Quantum, Sanford, Sharp, Smead, Sony,
Tektronix and Xerox. Our customers include computer supply specialists, contract
stationers, office products dealers and retailers, consumer-convenient channel
retailers (including drug and grocery stores), other retailers and value added
resellers (VARs), internet-based resellers and other independents who resell the
products to end-users. During fiscal year 2002, we distributed computer and
office supplies to more than 70,000 customer locations. This segment also
includes VirtualDemand, our wholly-owned subsidiary, which provides database
management, outbound telemarketing, inbound customer support and e-marketing on
a fee basis to manufacturer and reseller partners.

We operate a highly efficient, low-cost, centralized business platform for
computer supplies distribution in the United States and have expanded
internationally into Canada in 1989, Mexico in 1994, Australia in 1996 and
Argentina in 2000. We began distribution to Central and South America in 1996
from our Miami facility. In addition, in May 2002 we announced an offer to
acquire ISA International plc ("ISA"), a pan-European distributor of computer
supplies, and to date, we have obtained receipt of acceptances of our offer by
holders of more than 90% of ISA ordinary shares. We entered the traditional
office products industry in May 2000 with the acquisition of B.A. Pargh Company,
LLC. We believe we are one of the world's largest independent wholesale
distributors of computer and office supplies. Computer and office supplies
revenues represented approximately 94% of Daisytek's total revenues in fiscal
year 2002, including approximately 60% from domestic revenues and approximately
34% from international revenues.

Computer and office supplies products are used in a broad range of
computers and office automation products, including inkjet and laser printers,
photocopiers, fax machines, data storage products and, increasingly, digital
imaging applications. We regularly update our product line to reflect advances
in technology and to provide a wide product range of the most popular products.
Our major product and service categories can generally be classified as follows:

Non-Impact Printer Supplies. Non-impact printer supplies include toner
cartridges, inkjet cartridges, optical photo conductor kits, photocopier
supplies and fax machine supplies. Non-impact printers, such as laser printers,
personal photocopiers and fax machines, continue to grow in popularity and have
a wide range of applications.

Office Products. Office products include envelopes, business forms,
writing instruments, office machines and all desktop supplies.

Magnetic Media Products. Magnetic media products include computer tapes,
data cartridges, diskettes, optical disks, compact disc recordable drives and
media, zip drives and media, and other products which store or record computer
information and are used in a variety of computers ranging from notebook and
personal computers to large mainframe computer systems.

Impact Printer Supplies. Impact printer supplies include printwheels,
ribbons, elements, fonts and other consumable supplies used in impact printers
ranging from electronic typewriters to high-speed dot
2

matrix printers. While new technology is moving toward non-impact printing, we
believe that a base of impact printers, such as dot matrix printers, are still
in use and require a continuing amount of computer supplies products.

Accessories and Other Products. Accessories include cleaning supplies,
disk storage boxes, data cartridge storage, racks, surge protection devices,
workstation accessories and anti-glare screens. We also sell a number of other
products such as specialty paper, banking supplies and selected business
machines. In fiscal 2002, we introduced a range of electronic peripheral
products including internet video cameras, mice, trackballs, keyboards,
audio/telephony products and interactive gaming controllers.

Daisytek's wholly-owned subsidiary VirtualDemand leverages our experience
in database management, outbound telemarketing, inbound customer care and
e-marketing to offer a fee-based menu of direct marketing and targeted demand
generation services for many of our existing manufacturer and reseller partners.
We believe the services offered by VirtualDemand generate increased customer
satisfaction, improved brand loyalty, incremental demand and enhanced sales
growth.

OFFER TO ACQUIRE ISA

On May 23, 2002, we mailed a recommended offer to shareholders of ISA, a
pan-European distributor of computer supplies, which indirectly owns 47% of
Kingfield Heath Ltd., a U.K.-based wholesaler of office products. At the time of
the mailing, we had received irrevocable commitments to accept the offer in
respect of 56.5% of ISA ordinary shares. To date, we have received acceptances
totaling more than 90% of ISA ordinary shares and all conditions to the offer
have either been satisfied or waived. Acceptances from shareholders owning 33.8
million ISA ordinary shares have selected the cash offer of 7.5 pence, or
approximately $0.11, representing cash consideration of approximately 2.5
million British pounds, or approximately $3.6 million. Acceptances from
shareholders owning 14.9 million ISA ordinary shares have selected the
alternative offer to receive unregistered Daisytek common shares instead of
cash, representing share consideration of approximately 136,000 Daisytek common
shares. Additionally, we acquired 4.7 million ISA ordinary shares in open-market
purchases, representing cash consideration of approximately 0.4 million British
pounds, or approximately $0.5 million. The cash offer for ISA ordinary shares
will remain open until July 10, 2002 and we then intend to exercise our rights
under U.K. law to pursue compulsory acquisition of the remainder of ISA ordinary
shares. The alternative offer to receive Daisytek common shares instead of cash
expired at the close of trading in the U.K. on June 27, 2002. We appointed three
members to the board of ISA on June 14, 2002.

During September 2001, we invested 8.0 million British pounds, or
approximately $11.4 million, in preference shares of ISA convertible into 50%
plus one share of ISA at our option at any time over a period of five years. We
were also granted warrants to purchase an additional 15.4 million ISA ordinary
shares for 2 million British pounds, or approximately $2.8 million, at our
option any time over the next five years. The preference shares earn a quarterly
variable rate cumulative preferential dividend. In addition to the preference
share investment, as of March 31, 2002, we have advanced funds to ISA of
approximately 11.7 million British pounds, or approximately $16.7 million,
including 3.1 million British pounds, or approximately $4.4 million, for
pro-rata participation in a shareholder rights issue by Kingfield Heath, and
approximately 8.6 million British pounds, or approximately $12.3 million, for
working capital purposes. Subsequent to March 31, 2002, we advanced additional
funds to ISA of 3.2 million British pounds, or approximately $4.6 million, for
working capital purposes.

ISA did not pay the preference dividend due to Daisytek on April 1, 2002.
Failure to pay a preference dividend for more than 14 days after its due date
constitutes an event of default under ISA's articles of association, unless
waived by us. We had agreed to waive the outstanding payment, but this agreement
to waive expired on May 6, 2002. As a result of this event of default, as of May
7, 2002, we were entitled to vote our preference shares on an as-converted basis
(50% plus one share), entitling us to majority voting control and allowing us to
appoint to the board of ISA a number of directors equivalent to 50%.
Accordingly, we will use consolidation accounting for our investment in ISA
effective May 7, 2002.

OTHER RECENT DEVELOPMENTS

In May 2001, we terminated certain transaction management services
agreements between Daisytek and former subsidiary PFSweb, Inc. ("PFSweb") and
purchased certain Memphis distribution assets from PFSweb, including assets
previously sold to PFSweb at the time of its initial public offering in December
1999. In connection with this transaction, PFSweb continued to offer services to
Daisytek under a separate fee agreement for a six-month period in order to
support the transfer of fulfillment operations and transaction processing back
to Daisytek, including the transition to a separate information technology
platform. During October 2001, we completed a transition to an information
technology platform separate from PFSweb.

During June 2001, we announced our decision to exit the IBM master
distribution agreements, under which our subsidiaries Business Supplies
Distributors, Inc., Business Supplies Distributors Europe BV, and BSD (Canada),
Inc. (collectively, "BSD") provided financing to enable PFSweb to service
logistics contracts with IBM. As part of our plan to completely exit this
business, we completed the sale of BSD during September 2001. The exit of this
business allowed us to redeploy the working capital required by this business to
other strategic business opportunities that provide higher returns on our
investment. Daisytek continues to buy and sell IBM products as part of its
normal operations. We adopted Statement of Financial Accounting Standards
("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, effective as of April 1, 2001. Under the provisions of SFAS No. 144, the
results of operations of BSD, which were previously included in our computer and
office supplies business segment, are presented as discontinued operations in
the accompanying financial statements.

We acquired certain assets and liabilities of Digital Storage, LLC
line to include computer
peripheral and connectivity products, announcing agreements to distribute
products from Logitech International and iBIZ Technology Corp.

During the quarter ended December 31, 2001, we announced a strategic
alliance with eCommerce Industries Inc. (ECI(2)) to provide technology tools to
help our resellers and the acquisition of exclusive worldwide licensing rights
to distribute OpenSupply, a software that monitors toner and ink usage and
automatically reorders product from preferred resellers.

In the United States, we are working to build a leveragable distribution
and business support platform that will position Daisytek for continued growth,
improve financial performance and support us in our vision to be the leading
distributor of computer supplies, office products and accessories in the world.
During the third quarter of fiscal year 2002, we commenced a restructuring plan
that includes (1) information technology enhancements to ensure growth in the
business will be technologically supported; (2) distribution improvements and
consolidation of subsidiary warehouses into five new regional hub facilities (in
addition to the Memphis superhub) in order to leverage distribution costs; and
(3) centralization of certain back-office resources into a shared services
organization to reduce costs and improve efficiencies. The first two regional
distribution sites are scheduled to open near Bakersfield, California in late
summer 2002 and near Albany, New York in fall 2002. During the fiscal year ended
March 31, 2002, we recognized pre-tax charges of $4.1 million related to
restructuring activities, including $2.2 million related to warehouse and
distribution initiatives (including the integration of office products at our
central distribution center in Memphis), $1.2 million related to termination of
employees and $0.7 million related to other back-office improvements. We expect
that the restructuring plan will be completed in approximately 12 to 15 months
with an additional $6 to $8 million of pre-tax restructuring charges, and we are
targeting improvements in profitability of approximately $5 million in fiscal
year 2004 and $7 million in fiscal year 2005.

During April 2002, we announced our expansion into the Quebec market with
the opening of a new Canadian sales office in Montreal.

GROWTH STRATEGIES

Daisytek's goal is to be the leading distributor of computer supplies,
office products and accessories in the world. To attain this goal, we are
pursuing the following growth strategies.

Capitalize on the Strong Growth in Computer Supplies. We believe we are
favorably positioned to benefit from industry trends that are generating strong
growth in computer supplies, including the following:

- Increasing use of email and the internet and the related printing of
content;

- Decreasing cost of hardware such as printers and imaging equipment which
has resulted in increased use in the workplace and home and higher
supplies usage;

- Increasing use of laser and color-printer technologies, which require
significantly more consumable supplies than the older technologies;

- Increasing use of digital imaging, including digital photography; and

- Increasing manufacturers' demand for distributors with broad geographic
coverage and value-added services such as marketing, merchandising and
other customer support.

Continue International Expansion. We plan to continue to expand our
business into new markets outside the United States and believe that many of
these markets have higher growth opportunities than the United States. This may
involve expansion into new countries or increased geographic coverage in
countries in which we already operate. We operate sales and distribution centers
in Toronto, Vancouver, Montreal, Mexico City, Monterrey, Guadalajara, Sydney,
Perth, Brisbane and Buenos Aires. We have recently expanded into the European
market (see "Offer to Acquire ISA"). We believe our international leadership in
the computer supplies and office products market and broad product range place
us in a favorable competitive position in emerging international markets. It
also positions us as a multinational partner for both manufacturers and
customers.

Focus on High Growth Consumer Channels. We are focusing on new, more
end-user convenient retail channels such as drug and grocery stores, direct mail
marketers, web-based resellers and mass merchants. Through our suite of
electronic services, low-cost distribution model, expanding offering of products
and experience in selling computer supplies and office products, we are
aggressively marketing to these emerging channels. We believe the fastest growth
in supplies, particularly computer-related, is in the consumer or home-user
segment. Falling prices of technology hardware, such as inkjet printers and
digital cameras, are expanding placements and therefore usage in the home. Since
late 1999, we have taken steps to capture this growth by identifying and
exploiting channels where it is convenient for the home user to shop. Daisytek
currently services over 17,000 retail storefronts in the United States in this
new channel and is the dominant supplier to this consumer related channel.

Leverage Customer Management Systems and Distribution Capabilities to Sell
Services (VirtualDemand). Our wholly-owned subsidiary VirtualDemand leverages
our experience in database management, outbound telemarketing, inbound customer
care and e-marketing to offer a fee-based menu of direct marketing and targeted
demand generation services for many of our existing manufacturer and reseller
partners. VirtualDemand provides support to better serve the end-user customer
by generating increased customer satisfaction, improved brand loyalty,
incremental demand and enhanced sales growth. We believe the VirtualDemand model
will allow us to improve operating margins over time by providing increased
demand for our products in addition to fees for our services.

Expand Supplies Offering to Include Office and Other Products. We are
continuously evaluating new products and market trends to broaden our selection
of products and services to meet customer demands. Optimization of product mix
is intended to maximize sales opportunities while maintaining operating
efficiencies as we continue to manage our single-source solution. We have
recently increased our product offering to include a full line of traditional
office products in response to demand by our existing customer base for a
one-stop, low-cost resource for both computer supplies and office products. We
have recently

completed the set-up of office products in our Memphis superhub and we are
targeting to mail a 900-page full-line catalog by late 2002. In addition, we are
finalizing the suite of technology services that we are building with ECI(2),
the platform that much of the office products industry uses to order products.
Our alliance with ECI(2) is intended to mutually pursue increased placements of
the online ordering systems in the computer supplies and office products
industries, with a view to directing product transaction flow through Daisytek.
We expect to fully launch our office products initiative by end of calendar year
2002.

Selectively Pursue Strategic Acquisitions and Alliances. We plan to
continue to pursue strategic transactions, including the addition of selected
product lines or services to complement our existing business. We may pursue
transactions intended to expand geographic reach globally, reach new customer
segments or increase sales to existing customers.

SUPPLIERS

Our computer and office supplies products are manufactured by approximately
500 suppliers, including manufacturers such as Apple, Avery Denison, Brother,
Canon, Epson, Fellowes, Hewlett-Packard, IBM, Imation, Lexmark, Maxell, Okidata,
Panasonic, Quantum, Sanford, Sharp, Smead, Sony, Tektronix and Xerox. During
fiscal year 2002, approximately 70% of the computer and office supplies product
net revenues were derived from products supplied by the computer and office
supplies segment's ten largest suppliers. The sale of Hewlett-Packard products
accounted for approximately 36% of computer and office supplies net revenues and
the sales of the other nine largest suppliers each accounted for between 2% to
7% of computer and office supplies net revenues. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Risk
Factors -- The loss of key suppliers and/or shipping companies could adversely
affect our business."

Many of our suppliers offer rebate programs under which, subject to our
purchasing certain predetermined amounts of inventory, we receive rebates based
on a percentage of the dollar volume of total rebate program purchases. We also
take advantage of several other programs offered by many of our suppliers. These
include price protection plans under which we receive credits if the supplier
lowers prices on previously purchased inventory and stock rotation or stock
balancing privileges under which we can return slow moving inventory in exchange
for other products. In addition, in order to introduce new products, many
suppliers will permit us to return all unsold inventory after an introductory
trial period.

Although we purchase most of our products directly from authorized United
States manufacturers, we may also import certain products from foreign sources,
particularly when fluctuations in foreign exchange rates or product prices make
it attractive to do so. Similarly, depending upon product pricing and
availability, we may also purchase certain products from secondary sources, such
as other wholesalers and selected dealers, rather than directly from the
manufacturer. We utilize our ability to purchase imported and secondary source
products in order to provide our customers with competitive prices and a wide
range of product lines. In order to ensure that such imported and secondary
source products are not produced by unauthorized manufacturers, we have
established various procedures which we believe enable us to identify
unauthorized products and, to the extent possible, return such unauthorized
products to the foreign or secondary source.

Our purchases of inventory generally are closely tied to sales and are
usually based upon the sales volume of the most recent six to ten week periods.
In some circumstances, we may buy additional inventory where pricing, purchase
incentives and market conditions make it economically beneficial to do so.

DISTRIBUTION OF PRODUCTS

In the United States, we are working to build a leveragable, low-cost
national distribution model which will include five regional distribution
facilities in addition to our Memphis, Tennessee superhub. The first two
regional distribution sites are scheduled to open near Bakersfield, California
in late summer 2002 and near Albany, New York in fall 2002. We plan to open
three additional regional facilities during calendar year 2003. During January
2002, we announced a new multi-year agreement with FedEx
6

Corporate Services, Inc. to provide a mix of air and ground shipping services.
The opening of the new regional facilities will position us for continued growth
and allow us to take advantage of lower-cost overnight ground shipping. We have
historically shipped the majority of our products using Federal Express
overnight delivery air transportation from our Memphis superhub. In addition to
the cost savings generated by using ground transportation services, we are also
planning to consolidate many of our existing subsidiary companies' warehouses
into the new regional hub facilities. Daisytek's central distribution center in
Memphis is located about four miles from the Memphis International Airport,
where both Federal Express and United Parcel Service operate large hub
facilities.

We operate strategically located, low-cost regional sales and distribution
centers to service our international markets. At year end, we operated
facilities in Toronto, Ontario; Vancouver, British Columbia; Mexico City and
Monterrey, Mexico; Sydney, Perth and Brisbane, Australia; Buenos Aires,
Argentina; and Miami, Florida. Subsequent to year-end, we have opened sales and
distribution centers in Guadalajara, Mexico and Montreal, Quebec, and have
expanded into Europe with the recent acquisition of ISA.

COMPETITION

Most, if not all, of our customers maintain several sources of supply for
their product requirements. Accordingly, we compete with national, regional and
specialty wholesalers of technology and office products and consumables; large
hardware wholesalers who sell supplies as an ancillary product line; and
manufacturers wishing to sell direct to resellers or end-users. Competition in
the distribution business is generally based on price, breadth of product lines,
product and credit availability, delivery time and the level and quality of
customer services. We compete primarily on the basis of the ability to offer
competitive prices and quality service while maintaining a high level of
operating efficiency. We believe that we have developed key competitive
strengths that allow us to capitalize on industry trends and successfully
execute our growth strategy. Our key competitive strengths include the
following.

Daisytek is an International Market Leader for Computer Supplies. In the
highly fragmented market for computer supplies, our global presence and success
in growing our business both internally and through acquisitions has placed
Daisytek in a leadership position among our competitors. We believe we have an
excellent reputation with all significant customers and manufacturers. We
provide a critical connection between the manufacturer, the reseller and the
consumer, and we have achieved significant economies of scale as a result of
purchasing leverage, further strengthening our competitive position. We are also
able to pursue acquisitions that are too large for many other industry
participants.

Consumable Products Provide a Stable, Recurring Revenue Stream. Our
product offering consists of consumables that are supported by a large,
installed technology base. We believe that demand for the consumable products we
offer is less subject to rapid changes in technology or obsolescence and tends
to be relatively stable in the event of a contraction in the overall economy. As
demand for printing technology, including digital imaging, continues to migrate
towards color laser and inkjet printers, we expect an increasing amount of
consumables will be used to support the equipment. Furthermore, as PC and
printer equipment costs continue to fall, personal and home technology
expenditures are broadening, driving higher supplies usage by consumers.

Daisytek is a Single-Source Provider in a Converging Market. End user
demand for a complete office supplies solution is driving the convergence of
resellers' product lines to include both computer supplies and office products.
To address this trend, we have broadened our offering to fully serve the
combining computer supplies and office products channels. Daisytek's range of
branded products appeals to a broader customer base than competitors that serve
either channel exclusively.

Daisytek has a Low-Cost, Technologically Advanced Distribution System. We
have implemented a unique distribution strategy that allows us to manage
distribution from centralized facilities, leveraging carriers such as FedEx to
provide next-business-day delivery throughout North America. This provides
significant economies of scale and allows us to be the one of the lowest cost
national distributors of consumable supplies.

Daisytek Offers Unique Value-Added Supply Chain and Marketing
Services. Our unique combination of channel and product expertise has enabled
us to develop marketing and demand generation programs for supply chain
participants including both manufacturers and resellers. Growth in our
consumer-convenient channels has been led by a category management approach,
whereby we design and manage retail shelf spaces for the retailer. Our
VirtualDemand subsidiary leverages our experience in database management,
outbound telemarketing, inbound customer care and e-marketing to offer a
fee-based menu of services to our manufacturer and reseller partners. Our
proprietary SOLOnet system provides our reseller customers with an
electronic-commerce solution that allows end-user customers access to online
ordering. We have also developed a strategic alliance with ECI(2) to provide
technology tools to help our resellers and have acquired exclusive worldwide
licensing rights to distribute OpenSupply, a software that monitors toner and
ink usage and automatically reorders product from preferred resellers. These
unique tools address resellers' demand for enhanced operating efficiency,
increasing their reliance on Daisytek and enhancing customer retention.

MARKETING AND CUSTOMER SUPPORT

Our customers include computer supply specialists, contract stationers,
office products dealers and retailers, consumer-convenient channel retailers
(including drug and grocery stores), other retailers and value added resellers
(VARs), internet-based resellers and other independents who resell the products
to end-users. No single customer accounts for more than 10% of the total
computer and office supplies sales for any of the fiscal years ended March 31,
2002, 2001 and 2000.

We use sophisticated telemarketing, direct mail programs and frequent
innovative sales promotions and other efforts to market our products. One of our
primary marketing tools is a quarterly catalog known as the "Book of Deals."
Other marketing tools include customized catalogs produced by us for resellers
to distribute to their end-user customers and direct mail vehicles such as
flyers, postcards and mini catalogs, which announce new product line additions
or special promotions. We also market our products through trade show exhibits
and trade publication advertising, and are increasingly utilizing web-based
vehicles such as the Daisytek internet site (www.daisytek.com), permission based
e-mail broadcasts and internet advertising. We are planning to mail a new
900-page full-line catalog including both computer supplies and office products
by late 2002.

We use electronic commerce marketing tools designed to win further market
share and to reduce cost in the customer relationship by automating information
flow. By accepting both externally developed commercially available technologies
as well as internally developed proprietary technologies, we can offer a suite
of electronic commerce solutions including: traditional X.12; proprietary EDI;
integrated FTP; third party software systems such as DDMS, Copas, and The
Systems House; internet; intranet; and extranet systems. Daisytek offers an
exclusive online ordering and information system known as SOLOnet. SOLOnet
provides customers with on-line ordering capabilities; fingertip access to
up-to-date pricing, product and order information; search and retrieval
capabilities based on part numbers, manufacturers, product description, retail
price, machine compatibility and other factors; convenient access to
manufacturers' product literature and training videos; and access to view their
own customer account information.

We have developed technology that is specifically targeted at quickly
integrating and synchronizing our systems with those of our customers and
clients with a high degree of accuracy and reliability. Using our suite of
e-business applications, we enable our customers and clients to easily integrate
to their web sites or ERP systems to our systems for real-time transaction
processing without regard to their specific hardware platform or operating
system. This application suite is an open systems XML-based set of products that
allows for quick implementation and universal compatibility. This high level of
systems integration allows our customers and clients to automatically process
orders, process credit card payments, obtain shipment tracking information and
transact other key e-commerce information. We also have developed systems to
track information sent to us by customers and clients as it moves through our
systems in the same manner a package would be tracked by a carrier throughout
the delivery process. Our systems enable us to trace at a detailed level what
information was received, transmission timing and any

errors or special handling that had to take place to process it and what was
transmitted back to the customer or client.

During fiscal 2002, we acquired exclusive worldwide licensing rights to
distribute OpenSupply, a software that monitors toner and ink usage and
automatically reorders product from preferred resellers. Also during fiscal
2002, we announced a strategic alliance with ECI(2), a provider of information
technology solutions, that included: the adoption of ECI(2)'s front-end
e-commerce solution, Dealer Station xTended(TM), for Daisytek's customers; the
license of Daisytek computer and office supplies electronic catalog content to
ECI(2); and formal adoption of the ECI(2) Private Supply Network solution (a set
of secure, web-enabled, hosted services) by Daisytek. We expect that access to
these technology tools will help our resellers remain competitive and
cost-efficient.

We believe that our highly-trained sales and telemarketing personnel
provide superior customer service. Together with our major suppliers, we provide
our sales personnel with ongoing product-specific training and education
emphasizing computer supplies as well as new technologies, new products, new
product applications and vertical market intelligence. By utilizing
sophisticated telecommunications equipment, we are able to measure the number of
calls being fielded by a sales representative, their success rate in terms of
orders obtained compared to calls taken, and customer service statistics such as
abandoned call rates and average response times. Our sales force receives a base
salary as well as varying sales incentives based on gross profit margin
achievements. In addition, a number of suppliers periodically offer sales bonus
programs in connection with specific product sales campaigns.

PROFESSIONAL TAPE PRODUCTS

The professional tape products segment, headquartered near Chicago,
Illinois, distributes media products to the entertainment, broadcast, news,
motion picture and multimedia industries throughout the United States. Daisytek
began operating the professional tape products segment in 1998 and currently
distributes more than 2,800 professional tape products. Our customers include
production and broadcast companies, advertising agencies, governmental agencies,
cable television providers, educational institutions and healthcare providers,
as well as other users of recordable media. Professional tape products include
videotape, audiotape, motion picture film and data storage media. Our
professional tape products are supplied by over 30 manufacturers, including
Sony, Fuji, Maxell, Quantegy, Panasonic, EMTEC-BASF, TDK and Russ Bassett.
Professional tape products revenues represented 6% of Daisytek's total revenues
in fiscal year 2002.

SEGMENTS

See Note 16 -- "Segment Data" to the Consolidated Financial Statements
included elsewhere in this Form 10-K for additional information on our operating
segments and geographic areas.

EMPLOYEES

As of March 31, 2002, we had approximately 1,200 employees, including
approximately 850 employees within the United States and approximately 350
persons employed outside of the United States. We believe that our employee
relations are good. None of our employees are represented by a labor union, and
we have never suffered an interruption of business as a result of a labor
dispute.

REGULATION

Our businesses are either subject to or may be affected by current and
future governmental regulation in many different jurisdictions. The rules,
regulations, policies and procedures affecting these businesses are constantly
subject to change.

SEASONALITY

Although historically we have experienced our greatest sequential quarter
revenue growth in our fourth fiscal quarter, management has not been able to
determine the specific or, if any, seasonal factors that may cause quarterly
variability in operating results. Management believes, however, that factors
that may influence quarterly variability include the overall growth in the
non-paper computer supplies industry and shifts in demand for computer supplies
products due to a variety of factors, including sales increases resulting from
the introduction of new products. We generally experience a relative slowness in
sales during the summer months, which may adversely affect our first and second
fiscal quarters in relation to sequential quarter performance.

ITEM 2. PROPERTIES

The computer and office supplies business is headquartered in a 46,000
square foot office space in Allen, Texas, a Dallas suburb. We operate a 400,000
square foot central distribution center in Memphis, Tennessee, and we will soon
begin operations in a 325,000 square foot regional distribution center near
Bakersfield, California and a 350,000 square foot regional distribution center
near Albany, New York.

In the United States, we also operate regional subsidiary sales,
distribution and headquarter facilities in or near Chicago, Illinois;
Libertyville, Illinois; Columbus, Ohio; New York, New York; Hollywood,
California; Cincinnati, Ohio; Detroit, Michigan; Minneapolis, Minnesota;
Philadelphia, Pennsylvania; Kansas City, Kansas; Atlanta, Georgia; Dallas,
Texas; Seattle, Washington; Kearney, New Jersey; and Los Angeles, California.

We operate international regional sales and distribution centers in
Toronto, Ontario; Vancouver, British Columbia; Mexico City and Monterrey,
Mexico; Sydney, Perth and Brisbane, Australia; Buenos Aires, Argentina; and
Miami, Florida.

All of our facilities are leased.

Subsequent to year-end, we have opened sales and distribution centers in
Guadalajara, Mexico and Montreal, Quebec, and have expanded into Europe with the
recent acquisition of ISA.

ITEM 3. LEGAL PROCEEDINGS

Daisytek is involved in certain litigation arising in the ordinary course
of business. Management believes that such litigation will be resolved without
material adverse effect on our financial position, results of operations or
liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Daisytek's common stock is listed and trades on the Nasdaq Stock Market's
National Market under the symbol DZTK. As of June 1, 2002, there were 84
shareholders of record. This figure does not include an estimate of the number
of beneficial holders whose shares may be held of record by brokerage firms and
clearing agencies. The table below sets forth for the period indicated the high
and low sale price for the common stock as reported by the Nasdaq Stock Market's
National Market.

On July 7, 2000, Daisytek completed the spin-off of PFSweb and distributed
approximately 0.81 shares of PFSweb common stock for each share of Daisytek
common stock owned by Daisytek shareholders. Daisytek's closing stock price
reported by Nasdaq on July 6, 2000, the date of the PFSweb

spin-off, was $9.1875 and the opening stock price reported by Nasdaq on July 7,
2000 was $5.7875. The market prices prior to July 7, 2000 in the table below
have not been adjusted to give effect to the spin-off.

<Table>
<Caption>
PRICE
---------------
HIGH LOW
------ ------

Fiscal Year 2001
First Quarter............................................. $16.13 $ 8.13
Second Quarter............................................ 9.56 5.25
Third Quarter............................................. 8.25 4.44
Fourth Quarter............................................ 9.75 6.56
Fiscal Year 2002
First Quarter............................................. 15.75 7.06
Second Quarter............................................ 16.96 10.01
Third Quarter............................................. 14.35 11.35
Fourth Quarter............................................ 16.85 12.76
</Table>

Daisytek has never paid cash dividends on its common stock and does not
anticipate the payment of cash dividends on its common stock in the foreseeable
future. We currently intend to retain all earnings to finance further
development of our business. The payment of any future cash dividends will be at
the discretion of our Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of Daisytek and general business conditions. In addition, credit
facilities contain restrictive covenants that significantly limit the discretion
of the Board of Directors with respect to the payment of dividends. We refer you
to "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Risk Factors -- Our credit
facilities impose restrictions with respect to various business matters."

During December 2001, we completed the private placement of approximately
1.6 million shares of unregistered Daisytek common stock to a group of
institutional investors for net proceeds of approximately $16.4 million. The
proceeds from the private placement were used to reduce outstanding balances
under our credit facility. We believe that the issuance of securities in the
private placement was exempt from registration in reliance on Section 4(2)
and/or Regulation D of the Securities Act of 1933, as amended, as a transaction
not involving a public offering.

See Note 10 -- "Stock Plans -- Securities Authorized for Issuance Under
Equity Compensation Plans" to the Consolidated Financial Statements included in
Item 8 of this Form 10-K for equity compensation plan information.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below has been derived
from our annual audited consolidated financial statements, and should be read in
conjunction with the consolidated financial statements of Daisytek and with the
related notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" set forth in Part II -- Item 7
herein.

During the fourth quarter of fiscal year 2001, we reclassified in all prior
periods freight costs billed to customers and rebates paid to customers as
components of net revenues in compliance with Emerging Issues Task Force Issues
No. 00-10, Accounting for Shipping and Handling Fees and Costs, and No. 00-14,
Accounting for Certain Sales Incentives. Freight costs billed to customers and
rebates paid to customers had previously been recorded as a component of cost of
sales.

Effective April 1, 2001, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets, under which goodwill is no longer amortized but reviewed for
impairment annually, or more frequently if certain indicators arise.

Effective April 1, 2001, we adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Under the provisions of SFAS No.
144, the results of operations of BSD, which was sold during September 2001, are
presented as discontinued operations in our historical consolidated financial
statements.

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
--------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF INCOME DATA:
Net revenues........................................... $1,185,030 $1,012,130 $987,206 $916,518 $806,800
Cost of revenues....................................... 1,059,539 894,766 880,471 808,151 719,256
---------- ---------- -------- -------- --------
Gross profit......................................... 125,491 117,364 106,735 108,367 87,544
Selling, general and administrative expenses........... 90,710 88,193 95,471 70,648 55,974
Restructuring and nonrecurring costs................... 8,556 6,940 (381) 3,911 735
---------- ---------- -------- -------- --------
Income from operations............................... 26,225 22,231 11,645 33,808 30,835
Interest expense....................................... 7,221 3,857 3,186 2,797 3,134
---------- ---------- -------- -------- --------
Income from continuing operations before income taxes
and minority interest.............................. 19,004 18,374 8,459 31,011 27,701
Provision for income taxes............................. 7,066 7,384 4,602 11,823 10,185
---------- ---------- -------- -------- --------
Income from continuing operations before minority
interest............................................. 11,938 10,990 3,857 19,188 17,516
Minority interest...................................... -- 47 566 -- --
---------- ---------- -------- -------- --------
Income from continuing operations...................... 11,938 11,037 4,423 19,188 17,516
Discontinued operations:
Income (loss) from operations of discontinued
subsidiary, net of tax............................. (1,085) 389 116 -- --
---------- ---------- -------- -------- --------
Income before cumulative effect of accounting change... 10,853 11,426 4,539 19,188 17,516
Cumulative effect of accounting change, net of tax... -- -- -- (405) --
---------- ---------- -------- -------- --------
Net income............................................. $ 10,853 $ 11,426 $ 4,539 $ 18,783 $ 17,516
========== ========== ======== ======== ========
NET INCOME PER COMMON SHARE:
Basic
Income from continuing operations.................. $ 0.75 $ 0.69 $ 0.25 $ 1.12 $ 1.20
Income (loss) from operations of discontinued
subsidiary, net of tax........................ (0.07) 0.03 0.01 -- --
---------- ---------- -------- -------- --------
Income before cumulative effect of accounting
change........................................... 0.68 0.72 0.26 1.12 1.20
Cumulative effect of accounting change, net of
tax........................................... -- -- -- (0.02) --
---------- ---------- -------- -------- --------
Net income......................................... $ 0.68 $ 0.72 $ 0.26 $ 1.10 $ 1.20
========== ========== ======== ======== ========
Diluted
Income from continuing operations.................. $ 0.69 $ 0.69 $ 0.24 $ 1.08 $ 1.14
Income (loss) from operations of discontinued
subsidiary, net of tax........................ (0.07) 0.02 0.01 -- --
---------- ---------- -------- -------- --------
Income before cumulative effect of accounting
change........................................... 0.62 0.71 0.25 1.08 1.14
Cumulative effect of accounting change, net of
tax........................................... -- -- -- (0.02) --
---------- ---------- -------- -------- --------
Net income......................................... $ 0.62 $ 0.71 $ 0.25 $ 1.06 $ 1.14
========== ========== ======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS
OUTSTANDING:
Basic................................................ 15,963 15,904 17,248 17,101 14,541
Diluted.............................................. 17,396 16,108 18,186 17,789 15,318
</Table>

<Table>
<Caption>
AS OF MARCH 31,
----------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Working capital............................. $203,342 $177,269 $153,921 $138,764 $123,986
Total assets................................ 414,390 380,868 372,746 315,879 257,845
Total debt.................................. 118,412 78,043 44,823 43,167 19,926
Shareholders' equity........................ 196,020 159,102 210,686 157,170 137,731
</Table>

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

The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes thereto appearing
elsewhere in this Form 10-K. See Note 16 to the Consolidated Financial
Statements included elsewhere in this Form 10-K for additional information on
our operating segments and geographic areas.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED MARCH 31, 2002 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2001

Net Revenues. Net revenues for the year ended March 31, 2002 increased
17.1% to $1.2 billion compared to $1.0 billion for the year ended March 31,
2001. Computer and office supplies net revenues increased 20.9% for fiscal year
2002 compared to the prior year, attributable to (1) growth in the emerging
consumer channels such as web-based resellers, drug and grocery stores, mass
merchants and direct marketers; (2) growth in the international computer
supplies business; and (3) the impact of the acquisitions of Etertin y CIA, S.A.
("Etertin") during fiscal year 2001 and Digital Storage and General Stationery
Supplies during fiscal year 2002. Increases were primarily volume-related.
Within the computer and office supplies segment, domestic operations increased
approximately 22.7% and international operations, in U.S. dollars, increased
approximately 17.8% compared to the prior year. For comparative purposes, we
experienced a deterioration in the value of both the Canadian and Australian
dollar relative to the U.S dollar, which has negatively impacted fiscal 2002
growth in U.S. dollars.

The computer and office supplies revenue increase for the year ended March
31, 2002 was partially offset by a 13.6% revenue decrease in our professional
tape products segment, due to increased competition, decreases in volume and
industry price decreases which continued to impact our revenues on a comparable
basis. Results for the prior year include revenues of $8.5 million (net of
intercompany eliminations) related to our former subsidiary PFSweb, which was
spun off during July 2000.

The growth in net revenues for the year ended March 31, 2002 was also
partially offset by operational disruptions following the United States
terrorist attacks on September 11, 2001. All United States subsidiaries
experienced declines in orders and sales immediately subsequent to this date.

Gross Profit. Gross profit as a percentage of net revenues was 10.6% for
the fiscal year 2002 compared to 11.6% for the prior year. The decline in gross
margin percentage is attributable to (1) the lower contributions from foreign
product sourcing opportunities following the events of September 11, 2001; (2)
the acquisition of certain assets and liabilities of Digital Storage, which
typically operates at lower gross margins than the remainder of our business;
and (3) the reduction in revenue in the professional tape products segment,
which typically operates at higher gross margin percentages. The sell-off during
the first quarter of fiscal 2002 of certain overstocked inventory (purchased in
anticipation of a price increase) at lower than expected margins also
contributed to the decreased margin. In addition, we incurred restructuring
charges of $0.9 million related to our warehouse and distribution initiatives
which are included in cost of revenues for fiscal year 2002.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") for the year ended March 31, 2002 was $90.7
million, or 7.7% of net revenues, compared to $88.2 million, or 8.7% of net
revenues, for the prior year. The decrease in SG&A as a percentage of

revenues is due to (1) our adoption during the first quarter of fiscal year 2002
of SFAS No. 142, under which goodwill is no longer amortized but reviewed for
impairment at least once a year; (2) the acquisition of our Memphis distribution
assets and termination of the transaction services agreement with PFSweb in May
2001, which has allowed us to operate the facility rather than pay an
outsourcing service fee; (3) the acquisition of Digital Storage, which operates
at lower SG&A percentages than our other business; and (4) improvements
resulting from our restructuring activities. Certain incremental costs incurred
relative to the events of September 11, 2001 partially offset these favorable
impacts.

Restructuring and Nonrecurring Costs. During the year ended March 31,
2002, we recognized pre-tax charges of (1) $4.1 million related to restructuring
activities, including $2.2 million related to warehouse and distribution
initiatives (including the integration of office products at our central
distribution center in Memphis), $1.2 million related to the termination of
employees and $0.7 million related to other back-office improvements and (2)
$4.4 million related to the acquisition of the Memphis distribution assets and
the termination of certain transaction management service agreements between
PFSweb and Daisytek, including transaction costs, a separation payment and
finalization of other balances with PFSweb. During the year ended March 31,
2001, we recognized charges of $6.9 million primarily related to reorganization
and separation activities following the spin-off of our subsidiary PFSweb during
July 2000.

Interest Expense, net. Interest expense increased to $7.2 million for
fiscal year 2002 compared to $3.9 million for the prior year. The increase in
interest expense is primarily attributable to increases in our debt levels due
to: (1) the repurchase of 20% of our outstanding shares under terms of a share
buyback program we completed during the last fiscal year; (2) the impact of the
acquisitions of Etertin during fiscal year 2001 and Digital Storage and General
Stationery Supplies during fiscal year 2002; (3) the acquisition of our Memphis
distribution assets; and (4) our investment in ISA. These increases in debt
levels and corresponding impact to interest expense were partially offset by
lower interest rates during the current fiscal year and debt reductions using
cash proceeds from the exercise of stock options and the completion of a private
placement of common stock on December 20, 2001. The weighted average interest
rate, including the effect of our interest rate swaps, was 6.4% and 7.9% for the
years ended March 31, 2002 and 2001, respectively.

Discontinued Operations. During June 2001, we announced our decision to
exit the IBM master distribution agreements, under which BSD provided financing
to enable our former subsidiary PFSweb to service logistics contracts with IBM.
As part of our plan to completely exit this business, we completed the sale of
BSD during September 2001 for net proceeds of approximately $0.9 million. We
adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, effective as of April 1, 2001. Under the provisions of SFAS No. 144, the
results of operations of BSD, which were previously included in our computer and
office supplies business segment, are presented as discontinued operations in
the financial statements.

For information concerning the provision for income taxes as well as
information regarding differences between effective rates and statutory rates,
see Note 12 of the Notes to Consolidated Financial Statements.

FISCAL YEAR ENDED MARCH 31, 2001 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2000

Net Revenues. Net revenues for the year ended March 31, 2001 increased by
$24.9 million, or 2.5%, to $1.0 billion as compared to $987.2 million for fiscal
year 2000. The growth is attributable to our computer and office supplies
segment, which experienced a revenue increase of 6.0% primarily due to (1)
higher international computer supplies sales; (2) product expansion including
traditional office products which we began offering with the acquisition of B.A.
Pargh Company, LLC, on May 3, 2000; (3) the impact of the copier and fax
consumables we began offering with the acquisition of Arlington Industries, Inc.
on October 1, 1999; and (4) revenue earned by our new subsidiary VirtualDemand
including revenue from our consumer-convenient channel. Increases were primarily
volume-related. United States computer supplies net revenues, excluding B.A.
Pargh, increased by approximately 2% compared to

the prior year. The computer and office supplies revenue increase was partially
offset by a 12.7% revenue decrease in our professional tape products segment
primarily due to industry price decreases which continued to affect our revenues
on a comparable basis. The overall net revenue increase was also offset by the
impact of the PFSweb spin-off completed in July 2000. PFSweb net revenues
included in our consolidated results of operations, net of intercompany
eliminations, were $8.5 million for fiscal year 2001 and $24.0 million for
fiscal year 2000.

As previously mentioned, international sales were a primary contributor to
our growth during fiscal year 2001 compared to 2000. International computer and
office supplies net revenues, in U.S. dollars, increased by approximately 23.9%
in fiscal year 2001 compared to 2000. Effective March 31, 2000, we elected to
close our Singapore operation and consolidate the remaining business activity
into our Asia Pacific headquarters in Australia. This reduction in revenue was
offset by the acquisition of Etertin in October 2000, which added revenue in
Argentina. All of our other international regions experienced growth in fiscal
year 2001 except for our Latin America subsidiary based in Miami (due to a
change in certain tariffs, which made it more attractive for our customers to
source product locally rather than import from our Miami facility).

Gross Profit. Gross profit as a percent of net revenues was 11.6% for the
year ended March 31, 2001, compared to 10.8% for the prior year. Our gross
profit for fiscal year 2000 was negatively impacted by incremental operational
charges of $5.0 million. These charges represent costs for the closure of our
Singapore operations, write-downs of inventory and vendor programs. We believe
that these charges were incremental to normal operations during this period.
Excluding these incremental charges for fiscal year 2000, our gross profit was
11.3%. The increase in gross profit percentage, on a basis adjusted for these
incremental charges, was the result of several different factors. In the United
States and international business divisions, the prior year gross profit amounts
for the quarter ended December 31, 1999 reflect the beginning of our focus on
improving the key balance sheet areas of inventory and accounts receivable. In
order to make improvements in this area, we avoided certain vendor incentive
programs, which negatively impacted our gross margins during this period. Since
then, we have elected not to participate in certain of these programs. This is
part of our ongoing focus on improving inventory levels to strengthen our
balance sheet position and improve our overall return on invested capital.
Additionally, we focused during fiscal year 2001 on improving all aspects of
customer profitability, which had a favorable impact on gross margins. These
increases in gross profit percentage were partially offset by a negative impact
on our gross profit percentage due to the reduction in our professional tape
products revenue and PFSweb revenue (resulting from the spin-off), which have
typically carried higher margin percentages than the remainder of our business.

Selling, General and Administrative Expenses. SG&A for the year ended
March 31, 2001 was $95.1 million, or 9.4% of net revenues, as compared to $95.1
million, or 9.6% of net revenues, for the year ended March 31, 2000, including
restructuring and nonrecurring costs. Our SG&A expenses for the year ended March
31, 2001 were negatively impacted by non-recurring costs of $6.9 million
relating to separation costs associated with the PFSweb spin-off, as well as
certain costs related to the closure of B.A. Pargh's Nashville headquarters and
restructuring activities for the professional tape products division. Our SG&A
expenses for the year ended March 31, 2000 were negatively impacted by costs of
$6.1 million related to certain repositioning and separation activities
associated with the PFSweb spin-off, increases in allowances for bad debts
related primarily to issues in our Latin American accounts receivable, legal and
professional fees related to an unsolicited acquisition offer, costs incurred in
connection with closing our Singapore operation, and certain other charges.

Excluding these incremental charges, our SG&A percentages would be 8.7% and
9.1%, respectively, for the years ended March 31, 2001 and 2000. Excluding
PFSweb SG&A expenses included for the full year in fiscal year 2000 and for the
first quarter of fiscal year 2001, the increase in overall expenses is due to
the acquisitions of Arlington Industries, Inc. in October 1999, B.A. Pargh
Company, LLC in May 2000, and Etertin in October 2000. The decline in SG&A as a
percentage of net revenues is primarily attributable to the significant
investments in resources and technology to implement new contracts and further
develop the infrastructure for PFSweb during the prior fiscal year. This impact
was partially offset

by a reduction in net revenues to certain large customers, which typically have
lower SG&A expense ratios.

Interest Expense. Interest expense increased 21.1% during fiscal year
2001, primarily due to (1) our repurchase of 3.4 million shares of common stock;
(2) the acquisitions of Arlington Industries, Inc., B.A. Pargh Company, LLC and
Etertin; and (3) higher interest rates during calendar year 2000. The weighted
average interest rate was 7.9% and 6.5% for the fiscal years ended March 31,
2001 and 2000, respectively.

DILUTION

Because of the wide range of exercise prices on outstanding stock options,
the number of shares included in our dilutive earnings per share calculation and
the resulting diluted earnings per share could vary greatly depending on the
average market price of our common stock. The following table summarizes the
diluted shares outstanding at various price points using common stock
outstanding at March 31, 2002 of 17,910,806.

<Table>
<Caption>
DILUTED SHARES
AVERAGE SHARE PRICE OUTSTANDING
- ------------------- --------------

$12.00...................................................... 18,996,767
$13.00...................................................... 19,140,028
$14.00...................................................... 19,286,525
$15.00...................................................... 19,420,239
$16.00...................................................... 19,541,120
$17.00...................................................... 19,647,789
$18.00...................................................... 19,742,605
</Table>

LIQUIDITY AND CAPITAL RESOURCES

We expect to fund our anticipated cash requirements, including the
anticipated cash requirements of our capital expenditures and acquisition and
investment activity, if any, with internally generated funds and other various
external sources of funds that may be available to us. The external sources of
funds include our credit agreements and amendments thereto and may include the
future issuance of debt, equity or other securities. However, we cannot assure
you that we will be able to access capital markets in the future on terms that
will be satisfactory to us. We believe that such internally and externally
generated funds will provide us with adequate liquidity and capital necessary
for the next twelve months.

Net cash provided by (used by) operating activities from continuing
operations was $(7.3) million, $8.0 million and $4.6 million for fiscal years
2002, 2001 and 2000, respectively, including cash used by operating activities
related to restructuring and nonrecurring costs of $8.6 million during fiscal
year 2002 and $6.9 million during fiscal year 2001. Working capital, excluding
the current portion of long-term debt and cash balances, increased to $206.3
million at March 31, 2002 from $176.7 million at March 31, 2001, attributable
primarily to growth in our business including the acquisitions of Digital
Storage and General

Stationery Supplies. The working capital requirements were funded primarily with
proceeds from our credit facilities.

Net cash used in investing activities during the year ended March 31, 2002
was $60.7 million. Payments during fiscal year 2002 included cash paid for the
investment in ISA, the acquisitions of Digital Storage and General Stationery
Supplies and the transaction to acquire the Memphis distribution assets from
PFSweb, which were funded with proceeds from our credit facilities and the sale
and leaseback of certain Memphis distribution assets. Capital expenditures for
the fiscal year 2002 were $14.4 million, including $3.1 million acquired under a
capital lease and $11.3 million funded with proceeds from our credit facilities.
Proceeds from the exercise of stock options and the issuance of common shares
under our employee stock purchase plan were $17.3 million for the year ended
March 31, 2002, which were used to reduce outstanding balances under our credit
facilities.

During December 2001, we completed the private placement of approximately
1.6 million shares of Daisytek common stock to a group of institutional
investors for net proceeds of approximately $16.4 million. The proceeds from the
private placement were initially used to reduce outstanding balances under our
credit facility.

On May 23, 2002, we mailed a recommended offer to shareholders of ISA, a
pan-European distributor of computer supplies, which indirectly owns 47% of
Kingfield Heath Ltd., a U.K.-based wholesaler of office products. At the time of
the mailing, we had received irrevocable commitments to accept the offer in
respect of 56.5% of ISA ordinary shares. To date, we have received acceptances
totaling more than 90% of ISA ordinary shares and all conditions to the offer
have either been satisfied or waived. Acceptances from shareholders owning 33.8
million ISA ordinary shares have selected the cash offer of 7.5 pence, or
approximately $0.11, representing cash consideration of approximately 2.5
million British pounds, or approximately $3.6 million. Acceptances from
shareholders owning 14.9 million ISA ordinary shares have selected the
alternative offer to receive unregistered Daisytek common shares instead of
cash, representing share consideration of approximately 136,000 Daisytek common
shares. Additionally, we acquired 4.7 million ISA ordinary shares in open-market
purchases, representing cash consideration of approximately 0.4 million British
pounds, or approximately $0.5 million. The cash offer for ISA ordinary shares
will remain open until July 10, 2002 and we then intend to exercise our rights
under U.K. law to pursue compulsory acquisition of the remainder of ISA ordinary
shares. The alternative offer to receive Daisytek common shares instead of cash
expired at the close of trading in the U.K. on June 27, 2002. We will fund this
transaction, including related costs, with proceeds from our credit facilities
and have deposited $6.6 million with the Royal Bank of Scotland to be delivered
as payment of the cash consideration.

FINANCING ACTIVITIES

Substantially all of our debt is incurred under revolving credit facilities
in the countries in which we operate, and is lent against our working capital
assets. Consequently, as working capital increases, we will be able to draw
further against these existing facilities.

Domestic Credit Facilities. At March 31, 2001, we were party to an
agreement entered into in December 2000 with certain banks for a revolving line
of credit in the United States that had a maximum borrowing availability, as
amended, of $150 million expiring on December 19, 2003. Availability under the
credit facility was subject to certain borrowing base limitations, including
eligible accounts receivable and inventory, as defined. Borrowings under the
credit facility accrued interest, at our option, at the prime rate of the lead
bank or a Eurodollar rate, plus an adjustment ranging from 1.05% to 2.0%
depending on our financial performance. This facility was paid off upon
commencement of the new $200 million facility in April 2002. As of March 31,
2002, the outstanding balance under the domestic credit facility was $98.5
million with a weighted average interest rate of 3.68%.

During April 2002, we signed a $200 million senior secured debt facility
expiring on April 24, 2005, which was amended and increased to $250 million
during June 2002. This credit facility replaced the existing $150 million credit
facility expiring on December 19, 2003. Availability under the credit facility
is
17

subject to certain borrowing base limitations, including eligible accounts
receivable and inventory, as defined. Borrowings under the credit facility
accrue interest, at our option, at the prime rate of the lead bank plus an
adjustment ranging from 0.0% to 0.75% or the LIBOR rate plus an adjustment
ranging from 2.0% to 2.75%, both of which are limited by a maximum rate, as
defined. Approximately $32.4 million was available for future borrowings upon
signing of the new credit facility in April 2002.

Foreign Credit Facilities. During March 2001, we refinanced a revolving
term loan with a Canadian bank expiring on August 31, 2002 and an unsecured
revolving line of credit facility with a Canadian bank expiring on January 1,
2002 with a single revolving credit facility with current maximum credit
availability of 40.0 million Canadian dollars, or approximately $25.1 million,
expiring during March 2004. Availability under the credit facility is subject to
certain borrowing base limitations, as defined. For Canadian dollar borrowings,
the Canadian credit facility accrues interest at the bank's prime rate plus 75
basis points. For U.S. dollar borrowings, the Canadian credit facility accrues
interest at the bank's U.S. dollar base rate in New York plus 75 basis points.
As of March 31, 2002, the outstanding balance under the Canadian credit facility
was 18.0 million Canadian dollars, or approximately $11.3 million, at an
interest rate of 4.25%. We had 22.0 million Canadian dollars, or approximately
$13.8 million, available for future borrowings.

In December 2000, our Australian subsidiary entered into an agreement with
an Australian bank for an unsecured revolving line of credit facility allowing
us to borrow Australian dollars up to a maximum of 20.0 million Australian
dollars, or approximately $10.7 million, as amended. The Australian credit
facility, as amended, expires on January 1, 2003. The Australian credit facility
accrues interest at the Australian Bill Rate plus an adjustment ranging from
142.5 basis points to 212.5 basis points depending on our financial performance.
As of March 31, 2002, the outstanding balance under the Australian credit
facility was 11.1 million Australian dollars, or approximately $5.9 million, at
an interest rate of 6.48%. We had 8.9 million Australian dollars, or
approximately $4.8 million, available for future borrowings.

Contractual Obligations and Guarantees. Obligations under long-term debt,
capital leases and non-cancelable operating leases are as follows (in millions):

<Table>
<Caption>
PAYMENTS DUE BY PERIOD
--------------------------------------------------------
LESS THAN AFTER
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS 5 YEARS
- ----------------------- ------ --------- --------- --------- -------

Long-term debt...................... $115.7 $ 5.9 $11.3 $ 98.5 $ --
Capital lease obligations........... 2.7 1.2 1.5 -- --
Operating leases.................... 41.8 8.1 13.5 9.2 11.0
------ ----- ----- ------ -----
Total............................... $160.2 $15.2 $26.3 $107.7 $11.0
</Table>

In connection with the initial public offering of PFSweb, we have
guaranteed or subleased to PFSweb certain operating lease obligations. Total
minimum payments for these agreements are $18.5 million, including $5.5 million
due in less than one year, $6.5 million due in one to three years, $5.2 million
due in four to five years and $1.3 million due after five years. We do not
expect to make payments under these guarantees or sublease agreements; however,
if performance were required, we would seek to mitigate our exposure with lease
terminations and/or subleases.

RELATED PARTY TRANSACTIONS AND RELATIONSHIPS

We make available one-year and three-year loans to our executive officers
and non-employee directors. The one-year loans accrue interest at our effective
borrowing rate and the three-year loans accrue interest at the prime rate plus
one percent. Loan amounts classified as short-term under these contracts totaled
$0.5 million at March 31, 2002. Loan amounts classified as long-term under these
contracts totaled $1.0 million at March 31, 2002.

During fiscal year 2002, we recorded sales to ISA of approximately $5.0
million, purchases from ISA of approximately $0.6 million, interest income
related to loans made to ISA of approximately $0.1 million and preference share
dividends of $0.2 million.

OTHER MATTERS

INVENTORY MANAGEMENT

Daisytek manages its inventories held for sale in its core wholesale
distribution business by maintaining sufficient quantities of product to achieve
high order fill rates while at the same time maximizing inventory turnover
rates. Inventory balances will fluctuate as we add new product lines and make
large purchases from suppliers to take advantage of attractive terms. To reduce
the risk of loss due to supplier price reductions and slow moving inventory, we
have entered into purchasing agreements with many of our suppliers, including
most of our major suppliers, which contain price protection and stock return
privileges under which we receive credits if the supplier lowers prices on
previously purchased inventory or if we return slow moving inventory in exchange
for other products.

CRITICAL ACCOUNTING POLICIES

The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The following critical accounting policies
are utilized by management in the preparation of the consolidated financial
statements.

Revenue Recognition. We recognize product revenue upon shipment of product
to customers and provide for estimated returns and allowances. We permit our
customers to return defective products (many of which we then return to the
manufacturer) and incorrect shipments for credit against other purchases. We
offer terms to our customers that we believe are standard for our industries.

Inventories. Inventories (merchandise held for resale, all of which are
finished goods) are stated at the lower of weighted average cost or market. We
estimate an inventory reserve for excess quantities and obsolete items based on
specific identification and historical write-offs. Actual losses could differ
from our estimates.

Allowance for Doubtful Accounts. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. Our allowance for doubtful accounts is based on a review
of specifically identified accounts in addition to an overall aging analysis. We
make judgments on the collectibility of our accounts receivable based on
historical experience and current trends. Actual losses could differ from our
estimates.

Customer Promotional Programs. We offer sales incentives to our customers
such as volume rebates, sales growth incentives and other promotional and
discount programs. We recognize sales incentives to our customers as a reduction
in revenue on the date the revenue is recorded or the sales incentive is
offered. For our time-based or volume-based programs, we allocate the incentive
to each underlying revenue transaction based on an estimate of customer
participation.

Vendor Promotional Programs. Our vendors often offer sales incentives such
as rebates, cooperative advertising and marketing development funds. We
recognize vendor rebates as a reduction to our cost of revenues at the time
inventory is purchased. Volume-based programs are accrued based on our inventory
purchase volume estimates. We record cooperative advertising and marketing
development funds as an offset to our marketing expense.

Impairment of Long-Lived Assets and Goodwill. We periodically evaluate
whether events or circumstances have occurred that indicate that long-lived
assets may not be recoverable or that the remaining useful life may warrant
revision. When such events or circumstances are present, we assess the
recoverability of long-lived assets by determining whether the carrying value
will be recovered through the expected undiscounted future cash flows. In the
event the sum of the expected undiscounted future cash flows resulting from the
use of the asset is less than the carrying value of the asset, an impairment
loss equal to the excess of the asset's carrying value over its fair value is
recorded.

We adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective
April 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but reviewed
for impairment annually, or more frequently if certain indicators arise.

INFLATION

Our management believes that inflation has not had a material effect on our
operations.

RISK FACTORS

RISKS RELATED TO OUR BUSINESS

WE FACE COMPETITION FROM MANY SOURCES THAT COULD ADVERSELY AFFECT OUR
BUSINESS.

We operate in a highly competitive environment. Our current and potential
competitors include:

- national, regional and specialty wholesalers of technology and office
products and consumables;

- large hardware wholesalers who sell supplies as an ancillary product
line; and

- manufacturers wishing to sell direct to resellers or end-users.

Some of these competitors are larger than we are and have greater financial
and other resources available to them than we do. We cannot assure you that we
can continue to compete successfully against these or other competitors in the
future. In addition, increased competition in the business products industry,
together with increased advertising, has heightened price awareness among end
users. This heightened price awareness has led to margin pressure on business
products. In the event that this trend continues, our business, financial
condition and results of operations could be adversely affected.

THE LOSS OF KEY SUPPLIERS AND/OR SHIPPING COMPANIES COULD ADVERSELY AFFECT OUR
BUSINESS.

We depend on our suppliers to provide us with the products and services we
need to serve our customers. Our agreements with our suppliers are generally
terminable at any time or on short notice, with or without cause, and, while we
consider our relationships with our suppliers to be good, we cannot assure you
that any or all of our relationships will not be terminated or that such
relationships will continue as presently in effect. Foreign-sourced product may
be impacted by macroeconomic or international events. Termination of such
relationships or changes by our suppliers in their policies regarding wholesale
distributors or volume discount schedules, other marketing programs applicable
to us or product pricing generally may have a material adverse effect on our
business. In addition, we rely on strategic product shipping relationships to
ship our products from our distribution centers to our customers. Loss of any of
these relationships could reduce our ability to deliver our products to our
customers on a timely basis and material changes in delivery terms and pricing
could adversely affect our business, financial condition and results of
operations.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A SYSTEMS OR EQUIPMENT FAILURE.

Our business depends upon the reliability of our systems and equipment,
some of which may be operated by third parties. Although we have disaster
recovery plans in place, sustained or repeated system failures could
significantly impair our ability to take orders and reduce the traffic on our
website. We may, from time to time, experience interruptions due to several
factors including hardware failures, unsolicited bulk e-mail and operating
system failures. If delays or interruptions continue to occur, our reputation
may be impaired, our customers could perceive our network as being unreliable,
traffic on our website could deteriorate, customers may become less inclined to
purchase from us, and our brand could be adversely affected. Any failure on our
part to minimize or prevent capacity constraints or system interruptions could
have an adverse effect on our business, financial condition and results of
operations.

WE DEPEND ON THE CONTINUED OPERATION OF OUR DISTRIBUTION AND FULFILLMENT
CENTER IN MEMPHIS, TENNESSEE.

We currently conduct a significant amount of our distribution and
fulfillment operations and our order processing and fulfillment functions from
our facility in Memphis, Tennessee. Any disruption in the operations at our
Memphis distribution and fulfillment center for any reason, including due to
damage from fire, natural disaster, power loss, telecommunications failure or
similar events, could cause us to be unable to fulfill orders. This failure
could cause us to lose customers, would harm our business and would lead to a
decline in revenues. Additionally, we operate regional sales and distribution
centers in Toronto, Ontario; Vancouver, British Columbia; Montreal, Quebec;
Mexico City, Monterrey and Guadalajara, Mexico; Sydney, Brisbane and Perth,
Australia; and Buenos Aires, Argentina and other regional facilities in the
United States. To the extent we open additional distribution facilities in the
future, we may face significant logistical and inventory management issues. We
cannot assure you that we will be able to successfully manage these issues in
the future or that we will be able to deal effectively with a disruption in the
operation of our Memphis facility.

A SIGNIFICANT PORTION OF OUR BUSINESS IS CONDUCTED IN FOREIGN COUNTRIES,
EXPOSING US TO ADDITIONAL RISKS.

A significant portion of our operations is conducted in foreign countries.
There are several risks inherent in doing business internationally, including:

- changing regulatory requirements;

- legal uncertainty regarding foreign laws, tariffs and other trade
barriers;

- political instability;

- potentially adverse tax consequences;

- exchange rate fluctuations and foreign currency devaluations; and

- cultural differences.

Any one or more of these factors may materially and adversely affect our
business, financial condition and results of operations in a number of ways,
such as increased costs, operational difficulties and reduction in revenue and
may affect the carrying value of our investments.

CHANGING MANUFACTURERS' PRICES AND PRICE FLUCTUATIONS DUE TO INFLATIONARY AND
OTHER MARKET CONDITIONS COULD ADVERSELY IMPACT OUR NET SALES, GROSS MARGINS
AND NET INCOME.

We maintain substantial inventories to accommodate the prompt service and
delivery requirements of our customers. Accordingly, we purchase our products on
a regular basis in an effort to maintain our inventory at levels that we believe
to be sufficient to satisfy the anticipated needs of our customers based upon
historic buying practices and market conditions. Although we have historically
been able to pass through manufacturers' price increases to our customers on a
timely basis, competitive conditions will influence how much of future price
increases can be passed on to our customers. Conversely, when manufacturers'
prices decline, lower sales prices could result in lower margins as we sell
existing inventory. Changes in the prices paid by us for our products therefore
could have a material adverse effect on our business, financial condition and
results of operations, including our net sales, gross margins and net income,
and the timing of such changes throughout the year could adversely impact
quarterly results.

A BREACH OF OUR E-COMMERCE SECURITY MEASURES COULD REDUCE DEMAND FOR OUR
SERVICES.

We offer several products through our SOLOnet service on our website and
may offer additional products in the future. Advances in computer capabilities
and new discoveries in the field of cryptography may compromise the security
measures we use to protect our website, access to our databases, and
transmissions to and from our website. A party who is able to circumvent our
security measures could misappropriate proprietary information or interrupt our
operations. Any compromise or elimination of our security could reduce demand
for our services.

We may be required to expend significant capital and other resources to
protect against security breaches or to address any problem they may cause.
Because our activities involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage our
reputation and expose us to litigation and possible liability. Our security
measures may not prevent security breaches and failure to prevent security
breaches may disrupt our operations.

WE MAY ENGAGE IN FUTURE ACQUISITIONS OR INVESTMENTS THAT COULD DILUTE OUR
EXISTING STOCKHOLDERS, CAUSE US TO INCUR SIGNIFICANT EXPENSES OR HARM OUR
BUSINESS.

Our growth strategy is dependent to a substantial degree on our ability to
effect acquisitions. Some of our major competitors have similar acquisition
strategies, and the office products distribution industry is consolidating
rapidly. As a result, there is substantial competition for suitable acquisition
candidates in many markets. We are continuously engaged in the pursuit of
acquisitions and investments and are currently in discussions with several
acquisition and investment candidates, both domestic and foreign. Future
acquisitions or investments by us, including the acquisition of ISA, could
result in risks such as the following:

- we may be exposed to unknown liabilities of acquired companies;

- our acquisition and integration costs may be higher that we anticipated
and may cause our quarterly and annual operating results to fluctuate;

- we may experience difficulty and expense in assimilating the operations
and personnel of the acquired businesses, disrupting our business and
diverting management's time and attention;

- we may be unable to integrate or complete the development and application
of acquired technology;

- we may experience difficulties in establishing and maintaining uniform
standards, controls, procedures and policies;

- our relationships with key customers of acquired businesses may be
impaired due to changes in management and ownership of the acquired
businesses;

- we may be unable to retain key employees of the acquired businesses;

- we may incur amortization expenses if an acquisition results in
significant identifiable intangible assets with finite lives; and

- our stockholders may be diluted if we pay for the acquisition with equity
securities.

Any of these factors could harm our business, financial condition and
results of operations. In addition, we cannot assure you that we will be able to
acquire other computer supplies and office products businesses on terms
favorable to us, that acquired companies will perform as anticipated, or that
investments will permanently retain their value.

OUR CREDIT FACILITIES IMPOSE RESTRICTIONS WITH RESPECT TO VARIOUS BUSINESS
MATTERS.

Our credit agreements contain numerous restrictive covenants that limit the
discretion of management with respect to certain business matters. These
covenants place significant restrictions on, among other things, our ability to
incur additional indebtedness, to create liens or other encumbrances, to pay
dividends or make other payments in respect of our capital stock, to engage in
transactions with affiliates, to make certain payments and investments and to
merge or consolidate with another entity. The credit agreements also contain a
number of financial covenants that require us to meet certain financial ratios
and tests. A failure to comply with the obligations in the credit agreements
could result in an event of default under the credit agreements, which, if not
cured or waived, could permit acceleration of the indebtedness thereunder and
acceleration of indebtedness under other instruments that may contain
cross-acceleration or cross-default provisions, any of which could have a
material adverse effect on our business, financial condition and results of
operations.

Because the obligations under our credit facilities are guaranteed on a
secured basis by substantially all of our subsidiaries, failure to comply with
those obligations or our inability to pay that indebtedness when due would
entitle those creditors immediately to foreclose on our stock in our
subsidiaries and substantially all of the assets of our subsidiaries, which
serve as collateral. In this event, those secured lenders would be entitled to
be repaid in full from the proceeds of the liquidation of those assets before
those assets would be available for distribution to other creditors, and, lastly
to the holders of our common stock.

OUR QUARTERLY OPERATING RESULTS MAY BE SUBJECT TO SIGNIFICANT FLUCTUATION.

Our operating results may fluctuate from quarter to quarter as a result of
any of the following:

- the mix of products and services sold;

- pricing actions of our competitors and us;

- pricing actions of our freight providers;

- pricing actions of manufacturers;

- seasonality;

- accounts receivable collectibility issues;

- charges associated with acquisitions and investments; and

- events such as those on September 11, 2001 disrupting domestic and
international business and trading environments.

A significant portion of our operating expenses, such as rent expense,
depreciation and certain employee salaries, do not vary directly with the amount
of our sales and are difficult to adjust in the short term. As a result, if our
sales in a particular quarter are below expectations for that quarter, we may
not proportionately reduce operating expenses for that quarter, and therefore
any sales shortfall would have a disproportionate effect on our net income for
the quarter.

WE ARE DEPENDENT ON OUR KEY PERSONNEL, AND WE NEED TO HIRE AND RETAIN SKILLED
PERSONNEL TO SUSTAIN OUR BUSINESS.

Our performance is highly dependent on the continued services of our
executive officers and other key personnel, the loss of any of whom could
materially adversely affect our business. We currently do not have employment
agreements with our executive officers and key personnel. In addition, we need
to attract and retain other highly-skilled technical and managerial personnel
for whom there is intense competition. We cannot assure you that we will be able
to attract and retain the personnel necessary for the continuing growth of our
business. Our inability to attract and retain qualified technical and managerial
personnel would materially adversely affect our ability to maintain and grow our
business.

OUR CERTIFICATE OF INCORPORATION, OUR BYLAWS AND DELAWARE CORPORATE LAW MAKE
IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, DESPITE THE POSSIBLE BENEFIT TO
OUR STOCKHOLDERS.

Provisions of our certificate of incorporation, our bylaws and Delaware
General Corporate Law, as well as our share rights purchase plan and change in
control agreements we have with various Daisytek executives, could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. For example, our certificate of incorporation provides for
a classified board of directors, meaning that only approximately one-third of
our directors will be subject to re-election at each annual stockholder meeting.
Our certificate of incorporation also permits our Board of Directors to issue
one or more series of preferred stock which may have rights and preferences
superior to those of the common stock. The availability to issue preferred stock
could have the effect of delaying or preventing a third party from acquiring us.
In addition, we have a share rights purchase plan pursuant to which preferred
stock will be issued upon the occurrence of certain triggering events, including
a change in

control of Daisytek (defined as a person or group acquiring, or announcing a
tender offer to acquire, 15% or more of our common stock). Finally, our change
in control agreements provide various benefits to our executives upon the
occurrence of an acquisition or other change in control of Daisytek. These anti-
takeover measures could discourage takeover attempts and could materially
adversely affect the price of our stock.

THE PRICE OF OUR STOCK MAY FLUCTUATE SIGNIFICANTLY.

The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control,
including:

- quarterly variations in operating results;

- changes in financial estimates by securities analysts; and

- announcements by us of significant contracts, acquisitions, strategic
partnerships, investments, joint ventures or capital commitments.

In addition, stock markets in general, and the Nasdaq Stock Market's
National Market, have experienced extreme price and volume fluctuations
recently. These fluctuations often have been unrelated or disproportionate to
the operating performance of these companies. These broad market and industry
factors may decrease the market price of our common stock, regardless of our
actual operating performance.

If our stock price proves to be volatile, we may be subject to securities
class action litigation, which could result in substantial costs. In the past,
securities class action litigation has often been brought against a company
following periods of volatility in the market price of its securities. In the
future, we may be the target of similar litigation. Securities litigation could
result in substantial costs and divert management's attention and resources,
which could adversely affect our business, financial condition and results of
operations.

THE TERRORIST ATTACKS THAT TOOK PLACE IN THE UNITED STATES ON SEPTEMBER 11,
2001 AND THE RESULTING WAR ON TERRORISM ARE UNPRECEDENTED EVENTS THAT HAVE
CREATED MANY ECONOMIC AND POLITICAL UNCERTAINTIES.

The terrorist attacks that took place in the United States on September 11,
2001 and the resulting war on terrorism have adversely impacted many businesses,
including ours. There could be further acts of terrorism in the United States or
elsewhere that could have a similar impact. In addition, the national and global
responses to these terrorist attacks and the resulting war on terrorism may
materially adversely affect us in ways we cannot predict at the present. Some of
the possible material adverse impacts to our business include, but are not
limited to: lower order levels from our customers; difficulties or delays
related to our receipt or shipment of products by common carrier both within the
United States and internationally; the lengthening of our sales cycles and
implementations, which might result from a number of factors such as changes in
security measures and disruptions to our business as a result of these changes;
increased credit and business risk for customers in industries that were
severely impacted by the attacks; and further instability in financial markets
caused by armed hostilities or further acts of terrorism.

RISKS RELATED TO OUR INDUSTRY

CONSOLIDATION IN THE BUSINESS PRODUCTS INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS.

Consolidation continues throughout all levels of the business products
industry. Consolidation has resulted in (a) an increased ability of resellers
and end-users to buy goods directly from manufacturers on their own or through
their participation in buying groups, (b) the ability of larger resellers who
grow primarily through acquisitions to qualify for larger volume rebates than
the acquired companies would have qualified for on a stand-alone basis and (c)
fewer independent resellers to purchase from wholesalers. In addition, over the
last decade, office products superstores (which largely buy directly from
manufacturers)

have entered virtually every major metropolitan market. Continuing consolidation
could adversely affect our business, financial condition and results of
operations.

OUR MARKET IS SUBJECT TO RAPID CHANGE AND TO COMPETE WE MUST CONTINUALLY
ENHANCE OUR SYSTEMS TO COMPLY WITH EVOLVING STANDARDS.

To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our services and the underlying
network infrastructure. If we are unable to adapt to changing market conditions,
client requirements or emerging industry standards, our business could be
adversely affected. We must continue to address the increasingly sophisticated
and varied needs of our clients and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.

OUR INDUSTRY IS SUBJECT TO SEASONALITY AND END-USER DEMANDS MAY CHANGE
RAPIDLY.

Although historically we have experienced our greatest sequential quarter
revenue growth in our fourth fiscal quarter, our management has not been able to
determine the specific or, if any, seasonal factors that may cause quarterly
variability in operating results. Our management believes, however, that factors
that may influence quarterly variability include the overall growth in the
computer and office supplies industry and shifts in demand for our computer and
office supplies products due to a variety of factors, including sales increases
resulting from the introduction of new products. We generally experience a
relative slowness in sales during the summer months, which may adversely affect
our first and second fiscal quarter results in relation to sequential quarter
performance. Any impact upon sales during this peak season could have a
disproportionate effect on our results of operations for the full year.

In addition, our sales and profitability are largely dependent on our
ability to continually enhance our product offerings in order to meet changing
end-user demands. End-users' traditional demands for business products have
changed over the last several years as a result of, among other things, the
widespread use of computers and other technological advances (resulting in the
reduction in use of traditional office products), efforts by various businesses
to establish "paperless" work environments, increased recycling efforts and a
trend toward non-traditional offices (such as home offices). Our ability to
continually monitor and react to such trends and changes in end-user demands
will be necessary to avoid adverse effects on our sales and profitability. In
addition, our business, financial condition and results of operations could be
adversely affected if and to the extent that end-user demand for a broad product
selection or the need for overnight delivery were to diminish substantially or
end-user demand for a higher proportion of low margin products were to increase
substantially.

WE OPERATE IN AN UNCERTAIN REGULATORY AND LEGAL ENVIRONMENT. NEW LAWS AND
REGULATIONS COULD HARM OUR BUSINESS.

Our business is either subject to or may be affected by current and future
governmental regulation in many different jurisdictions. These rules,
regulations, policies and procedures are constantly subject to change. Our
business could suffer depending on the extent to which our activities are
regulated or proposed to be regulated. Various jurisdictions already have
enacted laws covering intellectual property, privacy and taxation that could
affect our business. If we become subject to claims that we have violated any
laws, even if we successfully defend against these claims, our business could
suffer. Moreover, new laws that impose restrictions on our ability to follow
current business practices or increase our costs of doing business could
adversely effect our business, financial condition and results of operations.

FORWARD-LOOKING STATEMENTS

Certain statements used in this Form 10-K are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements about the financial condition, prospects, operations
and business of Daisytek are generally accompanied by words such as
"anticipates," "expects,"

"estimates," "believes," "intends," "plans" or similar expressions. These
forward-looking statements are subject to numerous risks, uncertainties and
other factors, some of which are beyond the control of Daisytek that could cause
actual results to differ materially from those forecasted or anticipated in such
forward-looking statements.

These risks, uncertainties and other factors include, but are not limited
to: general economic conditions; industry trends; the loss of or inability to
hire skilled personnel; the loss of key suppliers or customers; the loss or
material decline in service of strategic product shipping relationships;
customer demand; product availability; competition (including pricing and
availability); risks inherent in acquiring, integrating and operating new
businesses and investments; concentrations of credit risk; distribution
efficiencies; capacity constraints; technological difficulties (including
equipment failure or a breach of our security measures); the volatility of our
common stock; economic and political uncertainties arising as a result of
terrorist attacks; seasonality; exchange rate fluctuations; foreign currency
devaluations; and the regulatory and trade environment (both domestic and
foreign).

Because such forward-looking statements are subject to risks, uncertainties
and assumptions, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
the forward-looking statement is made. We undertake no obligation to update
publicly any forward-looking statement for any reason, even if new information
becomes available or other events occur in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Daisytek is exposed to various market risks including interest rates on its
debt and foreign exchange rates. In the normal course of business Daisytek
employs established policies and procedures to manage these risks.

INTEREST RATE RISK

Our interest rate risk is limited to our outstanding balances on our credit
facilities, which amounted to $115.7 million at March 31, 2002 and $77.9 million
at March 31, 2001. To mitigate this risk, we have converted $25.0 million of our
outstanding balance from variable interest to a fixed rate of 5.93% and $25.0
million of our outstanding balance from variable interest to a fixed rate of
5.19%. The interest rate swaps have a fair value loss position of $1.6 million
at March 31, 2002. An 80 basis point movement in interest rates would result in
approximately $526,000, $423,000 and $337,000 annualized increase or decrease in
interest expense based on the outstanding balance of the revolving line of
credit at March 31, 2002, 2001 and 2000, respectively.

We anticipate managing our future interest rate exposure by using a mix of
fixed and floating interest rate debt and, if appropriate, financial derivative
instruments.

FOREIGN CURRENCY EXCHANGE RATE RISK

During fiscal year 2002, approximately 34% of our revenues were derived
from customers located outside the United States. Operating in international
markets involves exposure to movements in currency exchange rates. Currency
exchange rate movements typically also reflect economic growth, inflation,
interest rates, government actions and other factors. As currency exchange rates
fluctuate, translation of the statements of operations of our international
businesses into U.S. dollars may affect year-over-year comparability and could
cause us to adjust our financing and operating strategies.

For our foreign subsidiaries, the local currency is the functional
currency. All assets and liabilities are translated at exchange rates in effect
at the end of the period, and income and expense items are translated at the
average exchange rates for the period. Translation adjustments are reported as a
separate component of shareholders' equity. Gains and losses from foreign
currency transactions have not been material. The functional currency for our
Mexican subsidiary was changed from the United States dollar to the Mexican peso
effective July 1, 2001. Argentina has recently undergone significant economic
and

political change. During January 2002, Argentina abandoned the fixed
dollar-to-peso exchange rate and devalued the Argentinean peso. Our Argentina
subsidiary began accounting for the effect of the devaluation effective December
21, 2001 at a rate of 1.65 Argentinean pesos to $1. Since the devaluation, we
have recorded translation losses of $7.7 million as a component of accumulated
other comprehensive income.

During fiscal years 2001 and 2000, we entered into foreign currency
exchange contracts to manage foreign currency exchange risk related to net
investment and intercompany balances denominated in foreign currencies. These
contracts typically required the exchange of a foreign currency for U.S. dollars
at a fixed rate at a future date. A currency rate fluctuation of 10% from
year-end rates would have changed the fair value of the foreign exchange
contracts outstanding at March 31, 2001 and 2000 by $1.6 million and $1.5
million, respectively. As of March 31, 2002, we had no outstanding foreign
currency exchange contracts to manage risk associated with our net investment in
foreign subsidiaries.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
PAGE
----

Report of Independent Auditors.............................. 29
Report of Independent Public Accountants.................... 30
Consolidated Balance Sheets as of March 31, 2002 and 2001... 31
Consolidated Statements of Income for the Fiscal Years Ended
March 31, 2002, 2001 and 2000............................. 32
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended March 31, 2002, 2001 and 2000.......... 33
Consolidated Statements of Cash Flows for the Fiscal Years
Ended March 31, 2002, 2001 and 2000....................... 34
Notes to Consolidated Financial Statements.................. 35
</Table>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of Daisytek International Corporation:

We have audited the accompanying consolidated balance sheets of Daisytek
International Corporation and subsidiaries as of March 31, 2002 and 2001, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Daisytek
International Corporation and subsidiaries at March 31, 2002 and 2001, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States.

As discussed in Note 1 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, in 2002.

We also audited the adjustments described in Note 4 that were applied to
restate the 2000 financial statements. In our opinion, such adjustments are
appropriate and have been properly applied.

ERNST & YOUNG LLP

Dallas, Texas,
May 6, 2002, except as to paragraphs 1 and
3 of Note 3, as to which the
date is May 23, 2002

THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF A REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Daisytek International Corporation:

We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Daisytek International Corporation (a
Delaware corporation) for the year ended March 31, 2000 prior to the
restatements (and, therefore, are not presented herein) to reflect the
discontinued operations described in Note 4 to the consolidated financial
statements. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Daisytek
International Corporation and subsidiaries for the year ended March 31, 2000, in
conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Dallas, Texas,
May 4, 2000

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
MARCH 31,
-------------------
2002 2001
-------- --------
(IN THOUSANDS,
EXCEPT SHARE DATA)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,147 $ 1,971
Accounts receivable, net of allowance for doubtful
accounts of $4,038 and $4,979 at March 31, 2002 and
2001, respectively..................................... 175,921 134,966
Inventories, net.......................................... 115,377 83,615
Prepaid expenses and other current assets................. 13,259 7,194
Current assets of discontinued subsidiary................. -- 94,682
-------- --------
Total current assets................................... 308,704 322,428
-------- --------
Property and equipment, at cost:
Furniture, fixtures and equipment......................... 38,176 23,325
Leasehold improvements.................................... 3,875 3,641
-------- --------
42,051 26,966
Less -- Accumulated depreciation and amortization......... (21,245) (15,569)
-------- --------
Net property and equipment................................ 20,806 11,397
Investment in ISA (Note 3).................................. 28,082 --
Other assets................................................ 1,928 550
Goodwill, net............................................... 54,870 46,493
-------- --------
Total assets........................................... $414,390 $380,868
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 7,069 $ 1,436
Trade accounts payable.................................... 84,718 39,762
Accrued expenses and other current liabilities............ 13,575 10,471
Current liabilities of discontinued subsidiary............ -- 93,490
-------- --------
Total current liabilities.............................. 105,362 145,159
-------- --------
Long-term debt, less current portion........................ 111,343 76,607
Other liabilities........................................... 1,665 --
Commitments and contingencies (Note 14)
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized at March 31, 2002 and 2001, none issued and
outstanding............................................ -- --
Common stock, $0.01 par value; 30,000,000 shares
authorized; 19,684,711 issued at March 31, 2002 and
17,689,850 shares issued at March 31, 2001............. 197 177
Additional paid-in capital................................ 117,946 94,663
Retained earnings......................................... 103,268 92,415
Accumulated other comprehensive loss...................... (13,699) (6,043)
Treasury stock at cost, 1,773,905 shares at March 31, 2002
and 3,352,305 shares at March 31, 2001................. (11,692) (22,110)
-------- --------
Total shareholders' equity............................. 196,020 159,102
-------- --------
Total liabilities and shareholders' equity............. $414,390 $380,868
======== ========
</Table>

The accompanying notes are an integral part of these consolidated statements.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
-------------------------------------
2002 2001 2000
----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net revenues.............................................. $1,185,030 $1,012,130 $987,206
Cost of revenues.......................................... 1,059,539 894,766 880,471
---------- ---------- --------
Gross profit............................................ 125,491 117,364 106,735
Selling, general and administrative expenses.............. 90,710 88,193 95,471
Restructuring and nonrecurring costs...................... 8,556 6,940 (381)
---------- ---------- --------
Income from operations.................................. 26,225 22,231 11,645
Interest expense.......................................... 7,221 3,857 3,186
---------- ---------- --------
Income from continuing operations before income taxes
and minority interest................................ 19,004 18,374 8,459
Provision for income taxes................................ 7,066 7,384 4,602
---------- ---------- --------
Income from continuing operations before minority
interest............................................. 11,938 10,990 3,857
Minority interest......................................... -- 47 566
---------- ---------- --------
Income from continuing operations....................... 11,938 11,037 4,423
Discontinued operations (Note 4):
Income (loss) from operations of discontinued
subsidiary, net of tax............................... (1,085) 389 116
---------- ---------- --------
Net income................................................ $ 10,853 $ 11,426 $ 4,539
========== ========== ========
Net income per common share:
Basic
Income from continuing operations.................... $ 0.75 $ 0.69 $ 0.25
Income (loss) from operations of discontinued
subsidiary, net of tax.......................... (0.07) 0.03 0.01
---------- ---------- --------
Net income........................................... $ 0.68 $ 0.72 $ 0.26
========== ========== ========
Diluted
Income from continuing operations.................... $ 0.69 $ 0.69 $ 0.24
Income (loss) from operations of discontinued
subsidiary, net of tax.......................... (0.07) 0.02 0.01
---------- ---------- --------
Net income........................................... $ 0.62 $ 0.71 $ 0.25
========== ========== ========
WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS
OUTSTANDING:
Basic................................................... 15,963 15,904 17,248
Diluted................................................. 17,396 16,108 18,186
</Table>

The accompanying notes are an integral part of these consolidated statements.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<Table>
<Caption>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS LOSS
---------- ------ ---------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)

BALANCE AT MARCH 31,
1999..................... 17,162,382 $172 $ 87,394 $ 71,801 $ (2,197)
Net income................. -- -- -- 4,539 --
Currency translation
adjustment............... -- -- -- -- (369)
Comprehensive income.......
PFSweb offering............ -- -- 42,955 -- --
Deferred compensation
expense on PFSweb stock
options.................. -- -- 48 -- --
Employee stock purchase
plan..................... 31,823 -- 368 -- --
Net proceeds from exercise
of common stock
options.................. 402,548 4 5,926 -- --
Issuance of common stock... 3,411 -- 45 -- --
---------- ---- -------- -------- --------
BALANCE AT MARCH 31,
2000..................... 17,600,164 176 136,736 76,340 (2,566)
Net income................. -- -- -- 11,426 --
Currency translation
adjustment............... -- -- -- -- (3,789)
Disposition of PFSweb...... -- -- (42,826) 4,649 312
Comprehensive income.......
Treasury stock purchases... -- -- -- -- --
Employee stock purchase
plan..................... 42,801 1 328 -- --
Net proceeds from exercise
of common stock
options.................. 39,333 360 -- --
Issuance of common stock... 7,552 -- 65 -- --
---------- ---- -------- -------- --------
BALANCE AT MARCH 31,
2001..................... 17,689,850 177 94,663 92,415 (6,043)
Net income................. -- -- -- 10,853 --
Currency translation
adjustment............... -- -- -- -- (6,609)
Cumulative effect of
adoption of SFAS 133 as
of April 1, 2001, net of
tax of $240.............. -- -- -- -- (445)
Change in fair value of
derivative financial
instruments, net of tax
of $324.................. -- -- -- -- (602)
Comprehensive income.......
Employee stock purchase
plan..................... 79,962 1 547 -- --
Net proceeds from exercise
of common stock
options.................. 1,912,381 19 16,773 -- --
Issuance of common stock... 2,518 -- 5,963 -- --
---------- ---- -------- -------- --------
BALANCE AT MARCH 31,
2002..................... 19,684,711 $197 $117,946 $103,268 $(13,699)
========== ==== ======== ======== ========

TREASURY STOCK
--------------------- TOTAL COMPREHENSIVE
SHARES AMOUNT EQUITY INCOME
---------- -------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)

BALANCE AT MARCH 31,
1999..................... -- $ -- $157,170
Net income................. -- -- 4,539 $ 4,539
Currency translation
adjustment............... -- -- (369) (369)
-------
Comprehensive income....... $ 4,170
=======
PFSweb offering............ -- -- 42,955
Deferred compensation
expense on PFSweb stock
options.................. -- -- 48
Employee stock purchase
plan..................... -- -- 368
Net proceeds from exercise
of common stock
options.................. -- -- 5,930
Issuance of common stock... -- -- 45
---------- -------- --------
BALANCE AT MARCH 31,
2000..................... -- -- 210,686
Net income................. -- -- 11,426 $11,426
Currency translation
adjustment............... -- -- (3,789) (3,789)
Disposition of PFSweb...... -- -- (37,865) 312
-------
Comprehensive income....... $ 7,949
=======
Treasury stock purchases... (3,352,305) (22,110) (22,110)
Employee stock purchase
plan..................... -- -- 329
Net proceeds from exercise
of common stock
options.................. -- -- 360
Issuance of common stock... -- -- 65
---------- -------- --------
BALANCE AT MARCH 31,
2001..................... (3,352,305) (22,110) 159,102
Net income................. -- -- 10,853 $10,853
Currency translation
adjustment............... -- -- (6,609) (6,609)
Cumulative effect of
adoption of SFAS 133 as
of April 1, 2001, net of
tax of $240.............. -- -- (445) (445)
Change in fair value of
derivative financial
instruments, net of tax
of $324.................. -- -- (602) (602)
-------
Comprehensive income....... $ 3,197
=======
Employee stock purchase
plan..................... -- -- 548
Net proceeds from exercise
of common stock
options.................. -- -- 16,792
Issuance of common stock... 1,578,400 10,418 16,381
---------- -------- --------
BALANCE AT MARCH 31,
2002..................... (1,773,905) $(11,692) $196,020
========== ======== ========
</Table>

The accompanying notes are an integral part of these consolidated statements.
33

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
--------------------------------
2002 2001 2000
-------- -------- --------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (excluding operations of discontinued
subsidiary)........................................... $ 11,938 $ 11,037 $ 4,423
Adjustments to reconcile net income to net cash provided
by operating activities, net of effects of
acquisitions and dispositions:
Depreciation and amortization......................... 5,563 7,438 9,242
Provision for doubtful accounts....................... 4,566 3,360 7,670
Minority interest..................................... -- (47) (566)
Other................................................. 473 16 48
Deferred income tax expense (benefit)................. 30 (394) (112)
Change in operating assets and liabilities, net of
effects of acquisitions and dispositions:
Accounts receivable................................... (29,698) 4,142 1,357
Inventories, net...................................... (24,419) (3,787) 49,762
Prepaid expenses and other assets..................... (7,409) 3,621 1,765
Trade accounts payable and accrued expenses........... 30,887 (19,390) (64,656)
Income taxes receivable and payable................... 755 2,016 (4,302)
-------- -------- --------
Net cash provided by (used by) operating activities from
continuing operations................................. (7,314) 8,012 4,631
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................... (11,272) (7,549) (15,175)
Proceeds from the sale and leaseback of equipment........ 8,000 -- --
Acquisition of Memphis distribution assets............... (10,700) -- --
Payment for investment in and advances to ISA............ (28,082) -- --
Acquisitions of businesses, net of cash acquired......... (19,046) (17,131) (21,132)
Disposition of subsidiary................................ 923 (22,113) --
Decrease (increase) in notes receivable and other
assets................................................ (523) 1,615 8,618
-------- -------- --------
Net cash used in investing activities...................... (60,700) (45,178) (27,689)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) revolving lines of credit,
net................................................... 37,718 36,647 (910)
Payments to acquire treasury stock....................... -- (22,110) --
Payments on capital leases and notes payable............. (608) (4,650) (8,533)
Net proceeds of PFSweb initial public offering........... -- -- 53,014
Net proceeds from sale of stock, exercise of stock
options and issuance of common stock.................. 33,715 738 6,343
-------- -------- --------
Net cash provided by financing activities.................. 70,825 10,625 49,914
-------- -------- --------
Effect of exchange rates on cash........................... (635) 340 (235)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 2,176 (26,201) 26,621
CASH AND CASH EQUIVALENTS at beginning of year............. 1,971 28,172 1,551
-------- -------- --------
CASH AND CASH EQUIVALENTS at end of year................... $ 4,147 $ 1,971 $ 28,172
======== ======== ========
Net cash provided by operating activities from discontinued
operations............................................... $ (685) $ 671 $ 14
</Table>

The accompanying notes are an integral part of these consolidated statements.
34

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Daisytek International Corporation ("Daisytek" or the "Company") is a
leading global distributor of computer and office supplies and professional tape
products. To enhance its relationship with computer and office supplies
customers worldwide, the Company also provides unique, value-added services such
as direct marketing, merchandising and demand generation services. The Company
sells its products and services in the United States, Europe, Canada, Australia,
Mexico and South America. Prior to the spin-off of the Company's subsidiary
PFSweb, Inc. ("PFSweb") during July 2000, the Company also provided transaction
management services to both traditional and electronic commerce companies.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.

REVENUE RECOGNITION

The Company recognizes product revenue upon shipment of product to
customers and provides for estimated returns and allowances. The Company permits
its customers to return defective products (many of which are then returned by
the Company to the manufacturer) and incorrect shipments for credit against
other purchases. The Company offers terms to its customers that it believes are
standard for its industries. PFSweb service fee revenues were recognized at the
time the service was provided to the client.

CASH AND CASH EQUIVALENTS

Cash equivalents are defined as short-term highly liquid investments with
original maturities of three months or less.

INVENTORIES

Inventories (merchandise held for resale, all of which are finished goods)
are stated at the lower of weighted average cost or market.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation expense is computed
by a straight-line method over estimated useful lives of the respective assets
which range from three to seven years. Expenditures for maintenance and repairs
are charged to operations as incurred, whereas expenditures for renewal and
betterments are capitalized and depreciated over the remaining useful lives of
the assets.

GOODWILL

Goodwill represents the excess of cost over the fair value of net assets
acquired and is stated at cost. The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and
35

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other Intangible Assets, effective April 1, 2001. Under SFAS No. 142, goodwill
is no longer amortized but reviewed for impairment annually, or more frequently
if certain indicators arise. To date, no such impairment has been recognized. At
the time of adoption of SFAS No. 142, accumulated amortization of goodwill was
$5.2 million. Had the Company been accounting for its goodwill under SFAS No.
142 for all periods presented, the Company's net income (in thousands) and
earnings per share would have been as follows:

<Table>
<Caption>
FISCAL YEAR ENDED MARCH 31,
-----------------------------
2002 2001 2000
-------- -------- -------

Reported net income...................................... $10,853 $11,426 $4,539
Add back goodwill amortization, net of tax............... -- 1,384 812
------- ------- ------
Adjusted net income...................................... $10,853 $12,810 $5,351
======= ======= ======
Basic earnings per share:
Reported net income.................................... $ 0.68 $ 0.72 $ 0.26
Goodwill amortization, net of tax...................... -- 0.09 0.05
------- ------- ------
Adjusted net income.................................... $ 0.68 $ 0.81 $ 0.31
======= ======= ======
Diluted earnings per share:
Reported net income.................................... $ 0.62 $ 0.71 $ 0.25
Goodwill amortization, net of tax...................... -- 0.09 0.04
------- ------- ------
Adjusted net income.................................... $ 0.62 $ 0.80 $ 0.29
======= ======= ======
</Table>

IMPAIRMENT OF LONG-LIVED ASSETS

The Company adopted SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, effective as of April 1, 2001. The Company periodically
evaluates whether events or circumstances have occurred that indicate that
long-lived assets may not be recoverable or that the remaining useful life may
warrant revision. When such events or circumstances are present, the Company
assesses the recoverability of long-lived assets by determining whether the
carrying value will be recovered through the expected undiscounted future cash
flows. In the event the sum of the expected undiscounted future cash flows
resulting from the use of the asset is less than the carrying value of the
asset, an impairment loss equal to the excess of the asset's carrying value over
its fair value is recorded. To date, no such impairment has been recognized.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

For the Company's foreign subsidiaries, the local currency is the
functional currency. All assets and liabilities are translated at exchange rates
in effect at the end of the period, and income and expense items are translated
at the average exchange rates for the period. Translation adjustments are
reported as a separate component of shareholders' equity. Gains and losses from
foreign currency transactions have not been material. The functional currency
for the Company's Mexican subsidiary was changed from the United States dollar
to the Mexican peso effective July 1, 2001.

INCOME TAXES

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for tax purposes. A valuation allowance must be provided when it is more likely
than not that the deferred income tax asset will not be realized.

STOCK OPTION PLANS

The Company accounts for its stock-based award plans in accordance with
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price at the date of grant. Note 10 provides pro forma net
income and pro forma earnings per share disclosures as if the stock-based awards
had been accounted for using the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation.

RECLASSIFICATIONS

Certain prior year data has been reclassified to conform to the current
period presentation. These reclassifications had no effect on previously
reported net income, shareholders' equity or net cash flows. See Note 4
regarding discontinued operations.

During the fourth quarter of fiscal year 2001, Daisytek reclassified in all
prior periods freight costs billed to customers and rebates paid to customers as
components of net revenues in compliance with Emerging Issues Task Force Issues
No. 00-10, Accounting for Shipping and Handling Fees and Costs, and No. 00-14,
Accounting for Certain Sales Incentives. Freight costs billed to customers and
rebates paid to customers had previously been recorded as a component of cost of
sales. Freight costs incurred by the Company continue to be recorded as a
component of cost of sales.

NOTE 2 -- ACQUISITIONS

On October 1, 1999, the Company acquired certain assets and liabilities of
Arlington Industries, Inc., a specialty wholesaler of copier and fax
consumables, for an initial price of approximately $19.5 million. This
transaction was accounted for using the purchase method of accounting and the
Company initially recorded goodwill of $8.2 million. The purchase agreement
provided for an adjustment to the purchase price based on certain performance
criteria for each of the twelve-month periods ended September 30, 2000 and 2001.
The performance criteria were achieved and the Company has increased the
original purchase price and goodwill by approximately $1.6 million for the
performance period ended September 30, 2000 and approximately $2.6 million for
the performance period ended September 30, 2001. The entire cost of the
acquisition was funded through the Company's available cash. The accompanying
consolidated financial statements include the results of this entity from the
date of acquisition. This acquisition was not material to the financial position
or results of operations of the Company.

On May 3, 2000, the Company acquired certain assets and liabilities of B.A.
Pargh Company, LLC, a wholesaler of office products, for approximately $2.5
million. In addition, as part of this acquisition, the Company paid off
approximately $6.5 million in assumed debt. The acquisition was accounted for by
the purchase method of accounting for business combinations and the related
goodwill recorded was approximately $3.6 million. The entire cost of the
acquisition was funded through the Company's credit facility. The accompanying
consolidated financial statements include the results of this entity from the
date of acquisition. This acquisition was not material to the financial position
or results of operations of the Company.

Effective October 1, 2000, the Company acquired the capital stock of
Etertin y CIA, S.A. in Buenos Aires, Argentina, a wholesale distributor of
computer supplies and accessories, for approximately $5.8 million, of which $1.0
million is subject to adjustment for realization of assets at lower than book
value acquired. In addition, the Company assumed approximately $4.7 million in
debt. The acquisition was

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounted for by the purchase method of accounting for business combinations and
the Company recorded related goodwill of approximately $6.5 million. The entire
cost of the acquisition was funded through the Company's credit facility. The
accompanying consolidated financial statements include the results of this
entity from the date of acquisition. This acquisition was not material to the
financial position or results of operations of the Company.

During May 2001, the Company completed a transaction to terminate certain
transaction management services agreements between the Company and PFSweb and to
purchase certain Memphis distribution assets from PFSweb, including assets
previously sold to PFSweb at the time of its initial public offering in December
1999. The Company recorded goodwill of approximately $2.5 million related to
this transaction.

The Company acquired certain assets and liabilities of Digital Storage, LLC
("Digital Storage"), a value-added distributor of computer media, accessories
and supplies in the United States and Canada, during the quarter ended June 30,
2001. This acquisition was accounted for using the purchase method of accounting
for business combinations and increased the Company's goodwill by approximately
$5.5 million, including $4.4 million of goodwill related to Digital Storage's
business in the United States and $1.1 million of goodwill related to Digital
Storage's Canadian subsidiary. This acquisition was not material to the
financial position or results of operations of the Company.

During the quarter ended September 30, 2001, the Company acquired certain
assets and liabilities of General Stationery Supplies, an Australian office
products wholesaler. This acquisition was accounted for using the purchase
method of accounting for business combinations and increased the Company's
goodwill by approximately $1.7 million. This acquisition was not material to the
financial position or results of operations of the Company.

NOTE 3 -- ISA ACQUISITION OFFER

On May 23, 2002, the Company mailed a recommended offer to shareholders of
ISA International plc ("ISA"), a pan-European distributor of computer supplies,
which indirectly owns 47% of Kingfield Heath Ltd., a U.K.-based wholesaler of
office products. Daisytek has received acceptances from ISA shareholders
totaling more than 90% of ISA ordinary shares and all conditions to the offer
have either been satisfied or waived. The cash offer for ISA ordinary shares
will remain open until July 10, 2002 and Daisytek then intends to exercise its
rights under U.K. law to pursue compulsory acquisition of the remainder of ISA
ordinary shares. The alternative offer to receive Daisytek common shares instead
of cash expired at the close of trading in the U.K. on June 27, 2002. Subsequent
to year-end, the Company appointed three members to the board of ISA.

During September 2001, Daisytek invested 8.0 million British pounds, or
approximately $11.4 million, in preference shares of ISA convertible into 50%
plus one share of ISA at Daisytek's option at any time over a period of five
years. Daisytek was also granted warrants to purchase an additional 15.4 million
ISA ordinary shares for 2 million British pounds, or approximately $2.8 million,
at the Company's option any time over the next five years. The preference shares
earn a quarterly variable rate cumulative preferential dividend. In addition to
the preference share investment, as of March 31, 2002, the Company has advanced
funds to ISA of approximately 11.7 million British pounds, or approximately
$16.7 million, including 3.1 million British pounds, or approximately $4.4
million, for pro-rata participation in a shareholder rights issue by Kingfield
Heath, and approximately 8.6 million British pounds, or approximately $12.3
million, for working capital purposes. Subsequent to March 31, 2002, the Company
advanced additional funds to ISA of 3.2 million British pounds, or approximately
$4.6 million, for working capital purposes. The advances to ISA earn interest.
The investment in ISA, including applicable acquisition costs, is carried at
cost at March 31, 2002.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ISA did not pay the preference dividend due to Daisytek on April 1, 2002.
Failure to pay a preference dividend for more than 14 days after its due date
constitutes an event of default under ISA's articles of association, unless
waived by Daisytek. Daisytek had agreed to waive the outstanding payment, but
this agreement to waive expired on May 6, 2002. As a result of this event of
default, as of May 7, 2002, Daisytek was entitled to vote its preference shares
on an as-converted basis (50% plus one share), entitling Daisytek to majority
voting control and allowing the Company to appoint to the board of ISA a number
of directors equivalent to 50%. Accordingly, the Company will use consolidation
accounting for the investment in ISA effective May 7, 2002.

NOTE 4 -- DISCONTINUED OPERATIONS

During June 2001, the Company announced its decision to exit the IBM master
distribution agreements, under which the Company's subsidiaries Business
Supplies Distributors, Inc., Business Supplies Distributors Europe BV, and BSD
(Canada), Inc. (collectively, "BSD") provided financing to enable the Company's
former subsidiary PFSweb to service logistics contracts with IBM. As part of the
Company's plan to completely exit this business, Daisytek completed the sale of
BSD during September 2001 for net proceeds of approximately $0.9 million. The
Company recorded a gain on the sale of approximately $0.2 million. Daisytek
continues to buy and sell IBM products as part of its normal operations.

Under the provisions of SFAS No. 144, which the Company adopted effective
April 1, 2001, the results of operations of BSD, which were previously included
in the Company's computer and office supplies business segment, are presented as
discontinued operations in the accompanying financial statements. The income
(loss) from operations of discontinued subsidiary are presented net of a tax
benefit (expense) of approximately $0.6 million, $(0.2) million and $(0.1)
million for the years ended March 31, 2002, 2001 and 2000, respectively, and
include net revenues of approximately $66.6 million, $177.5 million and $83.1
million for the years ended March 31, 2002, 2001 and 2000, respectively.

NOTE 5 -- PFSWEB SPIN-OFF

Daisytek completed the spin-off PFSweb, its international provider of
transaction management services to both traditional and e-commerce companies,
during July 2000. In December 1999, PFSweb completed an initial public offering
("IPO") of 3,565,000 shares of its common stock. On July 7, 2000, the Company
announced the completion of the spin-off of PFSweb by means of a tax-free
distribution of Daisytek's remaining 80.1 percent ownership of PFSweb. The pro
rata distribution of 14,305,000 shares of PFSweb was made at the close of
business July 6, 2000 to Daisytek shareholders of record as of June 19, 2000.
Based on the shares outstanding of each company on the record date, Daisytek
shareholders received approximately 0.81 shares of PFSweb stock for each share
of Daisytek stock they owned on the record date. In June 2000, the Company
received a favorable private letter ruling from the Internal Revenue Service
regarding the tax-free treatment of the distribution of Daisytek's remaining
ownership in PFSweb.

As part of the IPO, PFSweb and Daisytek entered into various agreements
governing the transaction management services that PFSweb provided for Daisytek.
Additionally, PFSweb purchased from Daisytek certain fixed assets in the central
distribution complex in Memphis, Tennessee. On May 25, 2001, the Company
completed a transaction to terminate certain transaction management services
agreements between the two companies and to purchase certain Memphis
distribution assets from PFSweb, including those assets previously sold to
PFSweb at the time of the IPO. The Company recognized a pre-tax charge of
approximately $4.4 million during the first quarter of fiscal year 2002 related
to this transaction. Prior to completion of the transaction, the Company
received a favorable supplemental ruling from the Internal Revenue Service that
the acquisition of certain fixed assets would not adversely affect the June 2000
Internal Revenue Service ruling. In connection with this transaction, PFSweb
continued to offer services to

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Daisytek under a separate fee agreement for a six-month period in order to
support the transfer of fulfillment operations and transaction processing back
to Daisytek, including the transition to a separate information technology
platform. During October 2001, Daisytek completed the transition to an
information technology platform separate from PFSweb.

NOTE 6 -- DEBT

Debt as of March 31, 2002 and 2001 consists of the following (in
thousands):

<Table>
<Caption>
MARCH 31,
-------------------
2002 2001
-------- -------

United States credit facility............................... $ 98,500 $74,000
Canadian credit facility.................................... 11,289 2,607
Australian credit facility.................................. 5,914 1,287
Capital lease liability and other........................... 2,709 149
-------- -------
118,412 78,043
Less: Current portion of long-term debt..................... (7,069) (1,436)
-------- -------
Long-term debt, less current portion........................ $111,343 $76,607
======== =======
</Table>

UNITED STATES CREDIT FACILITY

At March 31, 2002, the Company was party to an agreement entered into in
December 2000 with certain banks for a revolving line of credit in the United
States that had a maximum borrowing availability, as amended, of $150.0 million
expiring on December 19, 2003. Availability under the credit facility was
subject to certain borrowing base limitations, including eligible accounts
receivable and inventory, as defined. Borrowings under the credit facility
accrued interest, at the Company's option, at the prime rate of the lead bank or
a Eurodollar rate, plus an adjustment ranging from 1.05% to 2.0% depending on
the Company's financial performance. The Company paid fees ranging from 0.20% to
0.375% on the entire credit facility. The credit facility contained various
covenants including, among other things, the maintenance of certain financial
ratios including the achievement of a minimum fixed charge ratio and minimum
level of net worth, and restrictions on certain activities, including loans and
payments to related parties, payment of dividends, incurring additional debt,
acquisitions, investments and asset sales. As of March 31, 2002, the outstanding
balance under this credit facility was $98.5 million with a weighted average
interest rate of 3.68%.

During April 2002, Daisytek signed a $200 million senior secured debt
facility expiring on April 24, 2005, which was subsequently amended and
increased to $250 million. This credit facility replaced the existing $150
million credit facility expiring on December 19, 2003. Availability under the
credit facility is subject to certain borrowing base limitations, including
eligible accounts receivable and inventory, as defined. Borrowings under the
credit facility accrue interest, at the Company's option, at the prime rate of
the lead bank plus an adjustment ranging from 0.0% to 0.75% or the LIBOR rate
plus an adjustment ranging from 2.0% to 2.75%, both of which are limited by a
maximum rate, as defined. The Company pays fees of 0.375% per annum on the
unused portion of the credit facility. The credit facility contains various
covenants including, among other things, the maintenance of certain financial
ratios including the achievement of a minimum fixed charge ratio and minimum
level of tangible net worth, and restrictions on certain activities, including
loans and payments to related parties, payment of dividends, capital
expenditures, acquisitions, investments and asset sales. Approximately $32.4
million was available for future borrowings upon signing of the new credit
facility in April 2002.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CANADIAN CREDIT FACILITY

During March 2001, the Company refinanced a revolving term loan with a
Canadian bank expiring on August 31, 2002 and an unsecured revolving line of
credit facility with a Canadian bank expiring on January 1, 2002 with a single
revolving credit facility with current maximum credit availability of 40.0
million Canadian dollars, or approximately $25.1 million, expiring during March
2004. Availability under the credit facility is subject to certain borrowing
base limitations, as defined. For Canadian dollar borrowings, the Canadian
credit facility accrues interest at the bank's prime rate plus 75 basis points.
For U.S. dollar borrowings, the Canadian credit facility accrues interest at the
bank's U.S. dollar base rate in New York plus 75 basis points. The credit
facility includes a standby fee of 0.25% on the unused portion of the credit
facility. As of March 31, 2002, the outstanding balance under the Canadian
credit facility was 18.0 million Canadian dollars, or approximately $11.3
million, at an interest rate of 4.25%. The Company had 22.0 million Canadian
dollars, or approximately $13.8 million, available for future borrowings.

AUSTRALIAN CREDIT FACILITY

In December 2000, the Company's Australian subsidiary entered into an
agreement with an Australian bank for an unsecured revolving line of credit
facility allowing the Company to borrow Australian dollars up to a maximum of
20.0 million Australian dollars, or approximately $10.7 million, as amended. The
Australian credit facility, as amended, expires on January 1, 2003. The
Australian credit facility accrues interest at the Australian Bill Rate plus an
adjustment ranging from 142.5 basis points to 212.5 basis points depending on
the Company's financial performance. A facility fee of 0.325% to 0.50% is
charged on the entire amount of the Australian facility. As of March 31, 2002,
the outstanding balance under the Company's Australian credit facility was 11.1
million Australian dollars, or approximately $5.9 million, at an interest rate
of 6.48%. The Company had 8.9 million Australian dollars, or approximately $4.8
million, available for future borrowings.

CAPITAL LEASE LIABILITY AND OTHER

The Company's property held under capital leases at March 31, 2002,
included in furniture, fixtures and equipment in the balance sheet, amounted to
approximately $2.7 million, net of accumulated amortization of approximately
$0.4 million. At March 31, 2001, other debt represents notes payable assumed in
connection with the acquisition of Etertin in Argentina, effective October 1,
2000.

Future maturities of long-term debt and capital leases at March 31, 2002,
giving effect to the refinancing of the United States credit facility, are as
follows (in thousands):

<Table>

FISCAL YEAR ENDED MARCH 31,
2003...................................................... $ 7,069
2004...................................................... 12,616
2005...................................................... 227
2006...................................................... 98,500
2007...................................................... --
Thereafter................................................ --
--------
$118,412
========
</Table>

NOTE 7 -- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company estimates fair value based on market information and
appropriate valuation methodologies. Fair value is the amount at which the
instrument could be exchanged in a current

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

transaction between willing parties, other than in a forced sale or liquidation.
The fair values of financial instruments approximate their carrying amounts in
the accompanying consolidated balance sheets.

In the opinion of management, credit risk with respect to trade receivables
is limited due to a large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any uncollectible trade receivables are maintained. The Company's derivative
instruments are subject to credit risk of non-performance by counterparties
under such agreements. However, this risk is minimal as the Company selects
counterparties with high credit ratings.

Effective April 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended. SFAS No. 133 requires
the Company to recognize all derivative instruments on the balance sheet at fair
value. Derivative instruments that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in its fair value will either be offset against the change in
fair value of the hedged asset, liability or firm commitment through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. Any ineffective portion of a derivative instrument's change in fair
value will be immediately recognized in earnings. The Company does not hold or
issue derivative financial instruments for trading purposes.

INTEREST RATE MANAGEMENT

To diversify its risk associated with interest rate fluctuations, the
Company has entered into interest rate swap agreements under which the Company
agrees with other parties to exchange, at specified intervals, the difference
between fixed rate and floating rate interest amounts. As of March 31, 2002,
interest rate swaps are hedging underlying variable-rate obligations with a
principal amount of $50.0 million. Under SFAS No. 133, the Company accounts for
its interest rate swap contracts as cash flow hedges whereby the fair value of
the interest rate swap agreement is reflected in the balance sheet with the
corresponding offset, net of tax, to accumulated other comprehensive income. The
interest rate swap agreements are effective hedges and meet the criteria for
accounting under the short-cut method as defined in SFAS No. 133. Upon adoption
of SFAS No. 133 on April 1, 2001, the Company recorded a derivative liability of
approximately $0.7 million. At March 31, 2002, the outstanding interest rate
swap agreements had a fair value loss position of approximately $1.6 million.

CURRENCY RATE MANAGEMENT

Upon adoption of SFAS No. 133 on April 1, 2001, the Company had outstanding
foreign currency exchange contracts to manage foreign currency exchange risk
related to its net investment in Canadian and Australian subsidiaries, which
were settled during the quarter ended June 30, 2001. The gains upon settlement
of these contracts during the quarter ended June 30, 2001 were reflected as a
cumulative translation adjustment within accumulated other comprehensive income.
As of March 31, 2002, the Company had no outstanding foreign currency exchange
contracts to manage risk associated with its net investment in foreign
subsidiaries.

From time to time, the Company enters into foreign currency exchange
contracts to manage risk related to foreign currency transactions. The impact of
these transactions was not material to the financial statements of the Company
during the years ended March 31, 2002, 2001 and 2000.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- RESTRUCTURING AND NONRECURRING COSTS

Restructuring and nonrecurring costs consist of the following for the years
ended March 31, 2002, 2001 and 2000 (in thousands):

<Table>
<Caption>
2002 2001 2000
------ ------ -----

Restructuring charges(a).................................. $4,131 $ -- $ --
Final PFSweb separation charges(b)........................ 4,425 -- --
PFSweb spin-off charges(c)................................ -- 5,588 --
Closure of B.A. Pargh Nashville headquarters(d)........... -- 679 --
Professional tape products restructuring activities(e).... -- 673 --
Professional tape products acquisition and disposition
costs(f)................................................ -- -- (381)
------ ------ -----
$8,556 $6,940 $(381)
====== ====== =====
</Table>

- ---------------
(a) During the third quarter of fiscal 2002, the Company commenced a United
States restructuring plan that includes (1) information technology
enhancements to ensure growth in the business will be technologically
supported; (2) distribution improvements and consolidation of subsidiary
warehouses into five new regional hub facilities in order to leverage
distribution costs; and (3) centralization of certain back-office resources
into a shared services organization to reduce costs and improve
efficiencies. The Company incurred pre-tax charges of approximately $4.1
million during fiscal 2002, including $2.2 million related to warehouse and
distribution initiatives, including the integration of office products at
the Company's central distribution center in Memphis; $1.2 million related
to the termination of employees; and $0.7 million related to other
back-office improvements. These costs have been paid as incurred. In
addition, inventory costs of $0.9 million related to the warehouse and
distribution initiatives of the restructuring plan are included in cost of
revenues.

(b) As part of the Company's May 2001 transaction to terminate certain
transaction management services agreements between the Company and its
former subsidiary PFSweb and to purchase certain Memphis distribution assets
from PFSweb, the Company recognized a pre-tax nonrecurring charge of $4.4
million. This charge included transaction costs, a separation payment and
finalization of other balances between the Company and PFSweb. See Note 5.

(c) The Company incurred pre-tax charges of $5.6 million during the year ended
March 31, 2001 related to reorganization and separation activities following
the spin-off of the Company's subsidiary PFSweb during July 2000.

(d) The Company acquired certain assets and liabilities of B.A. Pargh Company,
LLC, during May 2000 and incurred pre-tax charges of $0.7 million during the
year ended March 31, 2001 related to closure of its Nashville headquarters.

(e) The Company incurred pre-tax charges of $0.7 million during the year ended
March 31, 2001 related to its restructuring plan to improve revenues and
earnings for the professional tape products segment. The plan focused on new
leadership, efforts to rationalize warehouses to reduce costs and improve
customer service, better utilization of inside telemarketing teams and
development of new sales and marketing initiatives.

(f) During fiscal year 1999, the Company sold certain assets of its professional
hardware division to VTP, a Glendale, California-based distributor of
professional-grade audio and video media and professional hardware products,
and recorded a $2.8 million one-time charge relating to this disposition. In
fiscal year 2000, the Company reversed $1.0 million of this charge as
management was able to avoid some of the costs associated with this
disposition. In addition, the Company recorded costs of approximately

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$0.6 million related to transition, integration and merger activities
related to the professional tape products segment.

NOTE 9 -- SHAREHOLDERS' EQUITY

PRIVATE PLACEMENT OF COMMON STOCK

During December 2001, the Company completed the private placement of
approximately 1.6 million shares of Daisytek common stock to a group of
institutional investors for total gross proceeds of approximately $17.7 million.
Related offering costs were approximately $1.3 million.

PUBLIC OFFERINGS

In December 1999, PFSweb successfully completed the IPO of 19.9% of its
outstanding stock and sold 3,565,000 shares of common stock at $17 per share.
Net proceeds from the IPO aggregated $53 million and were used to repay PFSweb's
intercompany payable to Daisytek of approximately $27 million and to acquire
from Daisytek all fixed assets in its Memphis distribution facility, as well as
certain assets providing information technology services, for $5.0 million.
Daisytek used these proceeds to repay bank debt. As a result of the IPO, the
Company's additional paid-in capital increased by approximately $43 million.

On July 7, 2000, Daisytek completed the spin-off of PFSweb and distributed
approximately 0.81 shares of PFSweb common stock for each share of Daisytek
common stock owned by Daisytek shareholders. Daisytek's stock price was adjusted
on July 7, 2000 to exclude the value of PFSweb.

SHAREHOLDER RIGHTS PLAN

On October 15, 1999, the Daisytek Board of Directors declared a dividend
distribution of one Daisytek preferred stock purchase right (a "right") for each
share of the Company's common stock outstanding on October 25, 1999. Each right
entitles the registered shareowners to purchase from the Company one
one-thousandth of a share of preferred stock at an exercise price of $70.00,
subject to adjustment. The rights are not currently exercisable, but would
become exercisable if certain events occurred relating to a person or group
acquiring or attempting to acquire 15 percent or more of the outstanding shares
of common stock. The rights expire on October 25, 2009, unless redeemed or
exchanged by the Company earlier.

STOCK REPURCHASE

On July 10, 2000, the Company announced the authorization by the Board of
Directors of the repurchase of up to 10% of the outstanding shares of its common
stock, and on September 13, 2000, the Company announced the authorization of the
repurchase of up to an additional 10% of the then outstanding shares of common
stock. As of March 31, 2001, the two approved share buy-back programs were
completed and a total of approximately 3.4 million shares have been repurchased
using cash of approximately $22 million. The Company reissued 1.6 million of
these shares in connection with the private placement during December 2001.

RECONCILIATION OF EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts). Weighted-average
shares excluded from the calculation that related to potentially dilutive
securities amount to approximately 0.2 million, 1.3 million and 0.7 million for
the years

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ended March 31, 2002, 2001 and 2000, respectively. Potentially dilutive
securities represent stock options that are priced higher than the average
market value of the Company's common stock during each period.

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
------------------------------
2002 2001 2000
-------- -------- --------

NUMERATOR:
Income from continuing operations..................... $11,938 $11,037 $ 4,423
Income (loss) from operations of discontinued
subsidiary, net of tax............................. (1,085) 389 116
------- ------- -------
Net income............................................ $10,853 $11,426 $ 4,539
======= ======= =======
DENOMINATOR:
Denominator for basic earnings per share -- Weighted
average shares........................................ 15,963 15,904 17,248
Effect of dilutive securities:
Stock options......................................... 1,433 204 938
------- ------- -------
Denominator for diluted earnings per share -- Adjusted
weighted average shares............................... 17,396 16,108 18,186
Net income per common share:
Basic:
Income from continuing operations.................. $ 0.75 $ 0.69 $ 0.25
Income (loss) from operations of discontinued
subsidiary, net of tax........................... (0.07) 0.03 0.01
------- ------- -------
Net income......................................... $ 0.68 $ 0.72 $ 0.26
======= ======= =======
Diluted:
Income from continuing operations.................. $ 0.69 $ 0.69 $ 0.24
Income (loss) from operations of discontinued
subsidiary, net of tax........................... (0.07) 0.02 0.01
------- ------- -------
Net income......................................... $ 0.62 $ 0.71 $ 0.25
======= ======= =======
</Table>

NOTE 10 -- STOCK PLANS

EMPLOYEE STOCK PURCHASE PLAN

Daisytek provides its employees an opportunity to acquire a proprietary
interest in the company under its 1998 Employee Stock Purchase Plan qualified
under Section 423 of the Internal Revenue Code of 1986. The stock purchase plan
provides for acquisition of Daisytek common stock at a 15% discount of market
value and permits each employee of Daisytek's domestic subsidiaries who have
completed ninety days of service to elect to participate in the plan. Eligible
employees may elect to contribute up to 10% of their compensation with after-tax
dollars up to a maximum annual contribution of $25,000. The Company has reserved
500,000 shares of its common stock under the stock purchase plan. As of March
31, 2002, 154,586 shares of common stock had been purchased under the plan.

STOCK OPTION PLANS

The Company has established various stock option plans which provide for
the grant of incentive awards in the form of stock options to directors,
executive management and key employees of Daisytek. These plans are administered
by the Compensation Committee of the Board of Directors. Options issued

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

under these stock option plans and outside of the Company's existing stock
option plans have exercise prices equal to the fair market value of the
Company's common stock on the date of issuance, generally vest over a three-year
period from the date of grant and expire ten years after the date of grant.

In connection with the completion of the PFSweb spin-off as of July 6,
2000, all outstanding Daisytek options ("Daisytek Pre-spin Options") were
adjusted and/or replaced with Daisytek options (the "Daisytek Post-spin
Options") and PFSweb options (the "PFSweb Post-spin Options")(collectively, the
"Replacement Options"). The exercise price and the number of shares subject to
each of the Replacement Options was established pursuant to a formula designed
to ensure that: (1) the aggregate "intrinsic value" (i.e., the difference
between the exercise price of the option and the market price of the common
stock underlying the option) of the Replacement Option did not exceed the
aggregate intrinsic value of the outstanding Daisytek Pre-spin Option which is
replaced by such Replacement Option immediately prior to the spin-off and (2)
the ratio of the exercise price of each option to the market value of the
underlying stock immediately before and after the spin-off was preserved. Other
terms and conditions of each Replacement Option, including the time or times
when, and the manner in which, each option is exercisable, the duration of the
exercise period, the permitted method of exercise, settlement and payment, the
rules that apply in the event of the termination of employment of the employee,
the events, if any, that may give rise to an employee's right to accelerate the
vesting or the time or exercise thereof and the vesting provisions, are the same
as those of the replaced Daisytek Pre-spin Option, except that option holders
who are employed by one company are permitted to exercise, and are subject to
all of the terms and provisions of, options to acquire shares in the other
company as if such holder was an employee of such other company.

The following table summarizes the Company's stock option activity for the
fiscal years ended March 31, 2002, 2001 and 2000:

<Table>
<Caption>
WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
----------- --------------

Balance at March 31, 1999................................... 3,984,069 $14.37
Granted................................................... 473,500 $ 9.83
Exercised................................................. (402,548) $11.73
Canceled.................................................. (97,226) $16.46
----------
Balance at March 31, 2000................................... 3,957,795 $13.07
Granted................................................... 25,000 $10.69
Exercised................................................. (28,800) $10.78
Canceled.................................................. (70,721) $16.20
Terminated -- PFSweb spin-off............................. (3,883,274) $14.00
Reissued -- PFSweb spin-off............................... 3,634,736 $ 8.00
Granted................................................... 2,441,000 $ 6.43
Exercised................................................. (10,533) $ 7.44
Canceled.................................................. (356,932) $ 8.00
----------
Balance at March 31, 2001................................... 5,708,271 $ 7.33
Granted................................................... 1,866,300 $10.68
Exercised................................................. (1,912,381) $ 7.46
Canceled.................................................. (364,214) $ 7.93
----------
Balance at March 31, 2002................................... 5,297,976 $ 8.43
==========
</Table>

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at March 31, 2002:

<Table>
<Caption>
OUTSTANDING EXERCISABLE
- ------------------------------------------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES OPTIONS CONTRACTUAL LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- --------------- --------- ---------------- -------------- --------- --------------

$ 4.88-$ 7.22 2,002,959 8.1 years $ 6.21 996,224 $ 6.20
$ 7.38-$10.17 2,321,274 7.7 years 8.36 1,236,173 8.07
$11.10-$15.01 973,743 9.4 years 13.14 132,743 14.17
--------- ---------
5,297,976 $ 8.43 2,365,140 $ 7.62
========= =========
</Table>

As of March 31, 2002, 2001 and 2000, 2,365,140, 2,367,243 and 1,038,568,
respectively, of options outstanding were exercisable. The weighted-average fair
value of options granted during fiscal years 2002, 2001 and 2000 was $5.39,
$3.44 and $5.41, respectively.

The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost is recognized in the consolidated
financial statements for stock options which have exercise prices equal to or in
excess of the market value of the Company's common stock on the date of
issuance. Had the Company determined compensation cost based on the fair value
of stock options at the grant date under SFAS No. 123, the Company's pro forma
net income (in thousands) and earnings per share would have been as follows:

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
------------------------------
2002 2001 2000
-------- -------- --------

Net income (loss):
As reported........................................... $10,853 $11,426 $ 4,539
Pro forma............................................. $ 7,252 $ 5,586 $(3,801)
Earnings (loss) per share:
Basic:
As reported........................................ $ 0.68 $ 0.72 $ 0.26
Pro forma.......................................... $ 0.45 $ 0.35 $ (0.22)
Diluted
As reported........................................ $ 0.62 $ 0.71 $ 0.25
Pro forma.......................................... $ 0.42 $ 0.35 $ (0.21)
</Table>

The fair value of the options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for fiscal years 2002, 2001 and 2000: risk-free interest rates
ranging from 3.4% to 6.0%; dividend yields of 0%; expected stock volatility
ranging from 49.4% to 61.5%; and expected lives ranging from four to six years.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

As of March 31, 2002, Daisytek has authorized an aggregate of 5,550,000
shares of common stock for issuance under the various stock option plans.
Additionally, the Company's Board of Directors has authorized shares for
issuance outside the existing shareholder-approved plans under individual stock
option agreements with employees. Options granted outside the existing
shareholder-approved plans under individual stock option agreements are subject
to a multi-year vesting schedule and have an exercise price of not less than the
fair market value of the Company's stock on the date of grant. The following
table provides information regarding the Company's outstanding stock options in
plans approved by shareholders (line item "Equity compensation plans approved by
shareholders") compared to those stock options issued

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outside of shareholder-approved plans (line item "Equity compensation plans not
approved by shareholders") as of March 31, 2002:

<Table>
<Caption>
NUMBER OF
SECURITIES REMAINING
AVAILABLE FOR FUTURE
NUMBER OF SECURITIES WEIGHTED-AVERAGE ISSUANCE UNDER EQUITY
TO BE ISSUED EXERCISE PRICE OF COMPENSATION PLANS
UPON EXERCISE OF OUTSTANDING (EXCLUDING SECURITIES
OUTSTANDING OPTIONS OPTIONS REFLECTED IN 1ST COLUMN)
-------------------- ----------------- ------------------------

Equity compensation plans
approved by shareholders... 3,750,756 $8.20 327,748
Equity compensation plans not
approved by shareholders... 1,547,220 $8.98 --
--------- -------
Total........................ 5,297,976 $8.43 327,748
========= =======
</Table>

NOTE 11 -- SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS):

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
-----------------------------
2002 2001 2000
------- ------- -------

Cash paid during the period for:
Interest............................................... $7,159 $5,664 $3,853
Income taxes........................................... $3,355 $3,892 $7,669
Fixed assets acquired under capital leases............... $3,088 $ -- $2,400
</Table>

NOTE 12 -- INCOME TAXES

Deferred taxes reflect the impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. These differences relate
primarily to provisions for doubtful accounts, capitalization of inventory
costs, reserves for inventory, book versus tax depreciation differences, and
certain accrued expenses deducted for book purposes but not yet deductible for
tax purposes. A reconciliation of the difference between the expected income tax
provision for continuing operations at the U.S. Federal statutory corporate tax
rate of 35% for fiscal years 2002 and 2001 and 34% for fiscal year 2000 and the
Company's effective tax rate is as follows (in thousands):

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
------------------------------
2002 2001 2000
-------- -------- --------

Provision computed at statutory rate....................... $6,651 $6,431 $2,876
Impact of foreign taxation at different rate............... 368 487 264
State income taxes, net of federal benefit................. 376 373 410
Expenses not deductible for tax purposes................... 159 352 420
Change in valuation reserve................................ -- -- 807
Other...................................................... (488) (259) (175)
------ ------ ------
Provision for income taxes............................... $7,066 $7,384 $4,602
====== ====== ======
</Table>

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (benefit) for income taxes is summarized as follows (in
thousands):

<Table>
<Caption>
FISCAL YEARS ENDED MARCH 31,
------------------------------
2002 2001 2000
-------- -------- --------

Current
Domestic................................................. $2,110 $3,744 $1,395
State.................................................... 376 547 623
Foreign.................................................. 4,550 3,487 2,696
------ ------ ------
Total current......................................... 7,036 7,778 4,714
------ ------ ------
Deferred
Domestic................................................. 130 (278) (151)
State.................................................... 20 -- --
Foreign.................................................. (120) (116) 39
------ ------ ------
Total deferred........................................ 30 (394) (112)
------ ------ ------
Total................................................. $7,066 $7,384 $4,602
====== ====== ======
</Table>

The components of the deferred tax asset (liability) as of March 31, 2002
and 2001 are as follows (in thousands):

<Table>
<Caption>
MARCH 31,
---------------
2002 2001
------ ------

Deferred tax assets:
Allowance for doubtful accounts........................... $2,973 $1,570
Inventory................................................. 2,699 885
Foreign net operating loss carryforwards.................. 3,685 3,809
Other..................................................... 490 376
------ ------
Total deferred tax assets.............................. 9,847 6,640
------ ------
Deferred tax liabilities:
Accounts receivable discount.............................. -- 571
Foreign inventory purchases............................... 3,294 2,954
Intangibles............................................... 3,248 810
Other..................................................... 2,964 2,664
------ ------
Total deferred tax liabilities......................... 9,506 6,999
------ ------
Net deferred tax asset (liability).......................... $ 341 $ (359)
====== ======
</Table>

The foreign net operating loss carryforwards at March 31, 2002 and 2001
relate primarily to taxable losses of the Company's Mexican subsidiary.
Management believes it is more likely than not that these deferred tax assets
will be realized. The loss carryforwards begin to expire in fiscal year 2013.

As of March 31, 2000, a valuation allowance was recorded due to
uncertainties regarding the Company's ability to utilize PFSweb deferred tax
assets following its spin-off from the Company. During fiscal year 2001, the
valuation allowance and related deferred tax assets were transferred to PFSweb
upon completion of the PFSweb spin-off.

The Company received a tax benefit due to the exercise of certain stock
options of $2.2 million during fiscal year 2002 and $1.1 million during fiscal
year 2000.
49

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- RELATED PARTY TRANSACTIONS AND RELATIONSHIPS

The Company makes available one-year and three-year loans to its executive
officers and non-employee directors. The one-year loans accrue interest at the
Company's effective borrowing rate (3.8% at March 31, 2002 and 6.9% at March 31,
2001) and the three-year loans accrue interest at the prime rate plus one
percent. Loan amounts classified as short-term under these contracts are
included in prepaid expenses and other current assets on the Company's
consolidated balance sheets and totaled $0.5 million at March 31, 2002 and 2001.
Loan amounts classified as long-term under these contracts are included in other
assets on the Company's consolidated balance sheets and totaled $1.0 million and
$0.6 million at March 31, 2002 and 2001, respectively.

During fiscal year 2002, the Company recorded sales to ISA of approximately
$5.0 million, purchases from ISA of approximately $0.6 million, interest income
related to loans made to ISA of approximately $0.1 million and preference share
dividends of $0.2 million. See Note 3.

NOTE 14 -- COMMITMENTS, CONTINGENCIES AND GUARANTEES

The Company and its subsidiaries lease facilities and warehouse, office,
transportation and other equipment under operating leases expiring in various
years. In most cases, management expects that, in the normal course of business,
leases will be renewed or replaced by other leases. Minimum future annual rental
payments at March 31, 2002 under non-cancelable operating leases having original
terms in excess of one year are as follows (in thousands):

<Table>

2003........................................................ $ 8,127
2004........................................................ 7,788
2005........................................................ 5,739
2006........................................................ 4,983
2007........................................................ 4,189
Thereafter.................................................. 10,983
-------
Total minimum lease payments................................ 41,809
Less: sublease rentals...................................... (1,815)
-------
$39,994
=======
</Table>

During the second quarter of fiscal year 2002, the Company completed the
sale and leaseback of certain Memphis distribution assets for total proceeds of
$8 million. The Company's minimum future annual rental payments include payments
to be made under the terms of the related lease.

Total rental expense under operating leases approximated $7.6 million, $6.0
million and $8.8 million for the fiscal years ended March 31, 2002, 2001 and
2000, respectively.

Although the Company carries products and accessories supplied by numerous
vendors, the Company's net revenues from products manufactured by its ten
largest suppliers were approximately 70%, 76% and 78% of total net revenues
during fiscal years 2002, 2001 and 2000, respectively. The Company has entered
into written distribution agreements with nearly all of its major suppliers. As
is customary in the industry, these agreements generally provide non-exclusive
distribution rights, have one-year renewable terms and are terminable by either
party at any time, with or without cause. Additionally, many of the Company's
suppliers offer rebate programs under which, subject to the Company purchasing
certain predetermined amounts of inventory, the Company receives rebates based
on a percentage of the dollar volume of total rebate program purchases. The
Company also takes advantage of several other programs offered by substantially
all of its suppliers. These include price protection plans under which the
Company

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

receives credits if the supplier lowers prices on previously purchased inventory
and stock rotation or stock balancing privileges under which the Company can
return slow-moving inventory in exchange for other products.

A significant portion of the Company's computer and office supplies
operations is conducted in foreign countries, exposing the Company to risks such
as changing regulatory requirements; legal uncertainty regarding foreign laws,
tariffs and other trade barriers; political instability; potentially adverse tax
consequences; foreign currency fluctuations; and cultural differences. Revenues
from operations outside the United States totaled $408.3 million, $346.5 million
and $279.7 million and operating contribution from operations outside the United
States totaled $15.8 million, $13.1 million and $5.2 million for the fiscal
years ended March 31, 2002, 2001 and 2000, respectively.

The Company is involved in certain litigation arising in the ordinary
course of business. Management believes that such litigation will be resolved
without material effect on the Company's financial position, results of
operations or cash flows.

In connection with the IPO of PFSweb, the Company has guaranteed or
subleased to PFSweb certain operating lease obligations. The Company does not
expect to make any payments under these guarantees or sublease agreements;
however, if performance were required, the amounts listed below would be
mitigated by terminations and/or subleases. The total minimum payments for the
PFSweb operating leases which are guaranteed by the Company are as follows (in
thousands):

<Table>

2003........................................................ $ 5,484
2004........................................................ 3,860
2005........................................................ 2,649
2006........................................................ 2,693
2007........................................................ 2,516
Thereafter.................................................. 1,319
-------
Total.................................................. $18,521
=======
</Table>

NOTE 15 -- EMPLOYEE SAVINGS PLAN

The Company has a defined contribution employee savings plan under Section
401(k) of the Internal Revenue Code. Substantially all full-time and part-time
U.S. employees are eligible to participate in the plan. The Company, at its
discretion, may match employee contributions to the plan and also make an
additional matching contribution in the form of profit sharing in recognition of
Company performance. For fiscal years 2002, 2001 and 2000, the Company matched
10% of employee contributions resulting in a charge against income of
approximately $138,000, $143,000 and $91,000, respectively.

NOTE 16 -- SEGMENT DATA

The Company currently operates in two reportable business
segments -- computer and office supplies and professional tape products. Prior
to the spin-off of PFSweb during July 2000, the Company also provided
transaction management services to both traditional and electronic commerce
companies. The Company's reportable segments are strategic business units that
offer different products and services and are managed separately based on the
fundamental differences in their operations. PFSweb segment revenue includes
revenue earned for certain services provided to the computer and office supplies
segment, which is eliminated in consolidation. The accounting policies of the
segments are the same as those described in Note 1. No single customer accounted
for more than 10% of the Company's annual net revenues for the fiscal years
ended March 31, 2002, 2001 and 2000.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COMPUTER AND OFFICE SUPPLIES

The computer and office supplies segment distributes over 23,000 products,
including such items as toner and inkjet cartridges, diskettes, data cartridges
and other supplies for inkjet and laser printers, photocopiers and fax machines,
as well as traditional office products. Computer and office supplies products
are used in a broad range of computers and office automation products, including
laser and inkjet printers, photocopiers, fax machines, data storage products
and, increasingly, digital imaging applications. The Company markets and sells
internationally known, name brand products from all major manufacturers such as
Apple, Avery Denison, Brother, Canon, Epson, Fellowes, Hewlett-Packard, IBM,
Imation, Lexmark, Maxell, Okidata, Panasonic, Quantum, Sanford, Sharp, Smead,
Sony, Tektronix and Xerox. Customers include computer supply specialists,
contract stationers, office products dealers and retailers, consumer-convenient
channel retailers (including drug and grocery stores), other retailers and value
added resellers (VARs), internet-based resellers and other independents who
resell the products to end-users. During fiscal year 2002, the Company
distributed computer and office supplies to more than 70,000 customer locations.
This segment also includes VirtualDemand, the Company's wholly-owned subsidiary
which provides database management, outbound telemarketing, inbound customer
support and e-marketing on a fee basis to manufacturer and reseller partners.
The Company expanded its computer and office supplies operations internationally
into Canada in 1989, Mexico in 1994, Australia in 1996 and Argentina in 2000.
Daisytek began distribution to Central and South America in 1996 from a Miami
facility.

PROFESSIONAL TAPE PRODUCTS

The professional tape products segment, headquartered near Chicago,
Illinois, distributes media products to the entertainment, broadcast, news,
motion picture and multimedia industries throughout the United States. Daisytek
began operating the professional tape products segment in 1998 and currently
distributes more than 2,800 professional tape products. Customers include
production and broadcast companies, advertising agencies, governmental agencies,
cable television providers, educational institutions and healthcare providers,
as well as other users of recordable media. Professional tape products include
videotape, audiotape, motion picture film and data storage media. The Company's
professional tape products are supplied by over 30 manufacturers, including
Sony, Fuji, Maxell, Quantegy, Panasonic, EMTEC-BASF, TDK and Russ Bassett.

PFSWEB

The Company's former subsidiary PFSweb provided transaction management
services to both traditional and e-commerce companies and sold products and
services primarily in the United States, Canada and Europe. The Company
completed the spin-off of PFSweb during July 2000, as discussed in Note 5.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Separate financial data for each of the Company's operating segments is
provided below (in thousands):

<Table>
<Caption>
2002 2001 2000
---------- ---------- --------

Net revenues:
Computer and office supplies, excluding
discontinued operations...................... $1,114,351 $ 921,793 $869,458
Professional tape products...................... 70,679 81,790 93,723
PFSweb.......................................... -- 15,836 38,619
Intersegment eliminations....................... -- (7,289) (14,594)
---------- ---------- --------
Consolidated.................................... $1,185,030 $1,012,130 $987,206
========== ========== ========
Operating contribution:
Computer and office supplies, excluding
discontinued operations...................... $ 30,949 $ 26,593 $ 25,330
Professional tape products...................... 4,732 3,541 5,085
PFSweb.......................................... -- (505) (7,940)
Intersegment eliminations....................... -- (458) (79)
---------- ---------- --------
Consolidated.................................... $ 35,681 $ 29,171 $ 22,396
========== ========== ========
Identifiable assets:
Computer and office supplies, excluding
discontinued operations...................... $ 374,199 $ 247,377 $219,356
Professional tape products...................... 40,191 38,809 43,638
PFSweb.......................................... -- -- 64,840
Intersegment eliminations....................... -- -- (4,539)
Assets of discontinued subsidiary............... -- 94,682 49,451
---------- ---------- --------
Consolidated.................................... $ 414,390 $ 380,868 $372,746
========== ========== ========
</Table>

The Company's computer and office supplies segment includes certain
expenses and assets that relate to the professional tape products segment which
are not allocated by management to this segment. These expenses primarily
represent: (1) costs related to the Company's centralized management
information, warehouse and telephone systems and (2) executive, administrative
and other corporate costs. The assets not allocated to the professional tape
products segment primarily relate to the Company's centralized management
information and telephone systems and leasehold improvements on shared
facilities.

Certain amounts have not been allocated to the reportable segments and must
be included to reconcile to the income from operations reported in the Company's
consolidated financial statements, including restructuring and nonrecurring
charges described in Note 8. Unallocated transition and other costs for fiscal
year 2000 include certain repositioning and separation activities associated
with the spin-off of PFSweb, bad debt allowance increases, costs related to the
closing of Singapore and write-downs of inventory.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of segment operating contribution to consolidated income
from operations follows (in thousands):

<Table>
<Caption>
2002 2001 2000
------- ------- -------

Segment operating contribution.......................... $35,681 $29,171 $22,396
Restructuring and nonrecurring costs.................... (8,556) (6,940) 381
Unallocated cost of revenues -- restructuring........... (900) -- --
Transition and other unallocated costs.................. -- -- (11,132)
------- ------- -------
Consolidated income from operations..................... $26,225 $22,231 $11,645
======= ======= =======
</Table>

GEOGRAPHIC INFORMATION

The Company's computer and office supplies segment has significant
international operations. A summary of this segment by geographic region follows
(in thousands):

<Table>
<Caption>
2002 2001 2000
---------- -------- --------

Net revenues -- computer and office supplies:
United States..................................... $ 706,012 $575,275 $589,751
Canada............................................ 177,304 128,604 105,248
Latin America, including Mexico................... 149,628 151,511 111,490
Australia......................................... 81,407 66,124 54,656
Other............................................. -- 279 8,313
---------- -------- --------
$1,114,351 $921,793 $869,458
========== ======== ========
Long-lived assets -- computer and office supplies:
United States..................................... $ 42,472 $ 28,734 $ 15,336
Investment in ISA (European investment)........... 28,082 -- --
Canada............................................ 1,729 732 973
Latin America, including Mexico................... 3,806 1,715 1,090
Australia......................................... 4,484 1,910 2,528
Other............................................. -- -- 118
---------- -------- --------
$ 80,573 $ 33,091 $ 20,045
========== ======== ========
</Table>

NOTE 17 -- QUARTERLY DATA (UNAUDITED)

Summarized unaudited quarterly financial data for fiscal years 2002 and
2001 are as follows (dollars in thousands, except per share data). Quarterly
data as previously presented in the Company's Form 10-Qs, as applicable, has
been restated to reflect the operations of BSD as discontinued operations (see
Note 4). See Note 8 for information regarding certain restructuring and
nonrecurring costs which affect the comparability of quarterly data.

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
FISCAL YEAR 2002
-----------------------------------------
4TH QTR. 3RD QTR. 2ND QTR. 1ST QTR.
-------- -------- -------- --------
(UNAUDITED)

Net revenues............................... $323,971 $309,338 $278,769 $272,952
Gross profit............................... $ 33,484 $ 30,938 $ 29,621 $ 31,448
Gross profit margin...................... 10.3% 10.0% 10.6% 11.5%
Restructuring and nonrecurring costs....... $ 2,087 $ 2,044 $ -- $ 4,425
Income from operations..................... $ 8,254 $ 6,718 $ 6,879 $ 4,374
Operating margin......................... 2.5% 2.2% 2.5% 1.6%
Income from continuing operations.......... $ 3,877 $ 3,116 $ 3,209 $ 1,736
Percent of net revenues.................. 1.2% 1.0% 1.2% 0.6%
Income (loss) from operations of
discontinued subsidiary, net of tax...... $ -- $ -- $ (1,120) $ 35
Net income................................. $ 3,877 $ 3,116 $ 2,089 $ 1,771
Net margin............................... 1.2% 1.0% 0.7% 0.6%
Income from continuing operations per
common share:
Basic.................................... $ 0.22 $ 0.20 $ 0.21 $ 0.12
Diluted.................................. $ 0.20 $ 0.18 $ 0.19 $ 0.11
Net income per common share:
Basic.................................... $ 0.22 $ 0.20 $ 0.13 $ 0.12
Diluted.................................. $ 0.20 $ 0.18 $ 0.12 $ 0.11
</Table>

<Table>
<Caption>
FISCAL YEAR 2001
-----------------------------------------
4TH QTR. 3RD QTR. 2ND QTR. 1ST QTR.
-------- -------- -------- --------
(UNAUDITED)

Net revenues............................... $264,066 $251,034 $242,305 $254,725
Gross profit............................... $ 31,301 $ 28,372 $ 28,247 $ 29,444
Gross profit margin...................... 11.9% 11.3% 11.7% 11.6%
Restructuring and nonrecurring costs....... $ 1,909 $ 2,843 $ 1,555 $ 633
Income from operations..................... $ 6,155 $ 4,314 $ 6,077 $ 5,685
Operating margin......................... 2.3% 1.7% 2.5% 2.2%
Income before minority interest............ $ 3,006 $ 2,004 $ 3,193 $ 2,787
Percent of net revenues.................. 1.1% 0.8% 1.3% 1.1%
Income from continuing operations.......... $ 3,006 $ 2,004 $ 3,193 $ 2,834
Percent of net revenues.................. 1.1% 0.8% 1.3% 1.1%
Income (loss) from operations of
discontinued subsidiary, net of tax...... $ 113 $ 202 $ (72) $ 146
Net income................................. $ 3,119 $ 2,206 $ 3,121 $ 2,980
Net margin............................... 1.2% 0.9% 1.3% 1.2%
Income from continuing operations per
common share:
Basic.................................... $ 0.21 $ 0.13 $ 0.19 $ 0.16
Diluted.................................. $ 0.20 $ 0.13 $ 0.19 $ 0.16
Net income per common share:
Basic.................................... $ 0.21 $ 0.15 $ 0.19 $ 0.17
Diluted.................................. $ 0.21 $ 0.15 $ 0.19 $ 0.17
</Table>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Information regarding Daisytek's change in accountants was disclosed in a
Current Report on Form 8-K filed on December 22, 2000.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item regarding our directors and executive
officers is to be set forth in our Proxy Statement for our 2002 Annual Meeting
of Shareholders under the heading "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance," which information is incorporated
herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is to be set forth in our Proxy
Statement for our 2002 Annual Meeting of Shareholders under the heading
"Executive Compensation," which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The remaining information required by this item is to be set forth in our
Proxy Statement for our 2002 Annual Meeting of Shareholders under the heading
"Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters," which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is to be set forth in our Proxy
Statement for our 2002 Annual Meeting of Shareholders under the heading "Certain
Relationships and Related Transactions," which information is incorporated
herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements.

See Index to Consolidated Financial Statements on page 28 of this Form
10-K.

(a) 2. Financial Statement Schedule.

The following financial statement schedule and related reports of
independent accountants are filed as part of this Form 10-K and should be read
in conjunction with the Consolidated Financial Statements.

<Table>
<Caption>
PAGE
----

Report of Independent Auditors on Financial Statement
Schedule.................................................. 62
Report of Independent Public Accountants on Financial
Statement Schedule........................................ 63
Schedule II -- Valuation and Qualifying Accounts............ 64
</Table>

All other schedules are omitted because the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements or notes
thereto.

(a) 3. Exhibits.

The exhibits to this Form 10-K are listed under Item 14(c) below.

(b) Reports on Form 8-K.

Current Report on Form 8-K (Items 5 and 7), dated September 25, 2001 and
filed January 7, 2002, to report historical financial statements for the fiscal
years ended March 31, 2001, 2000 and 1999 with the operations of BSD, which was
sold during September 2001, reclassified as discontinued operations.

Current Report on Form 8-K (Items 5 and 7), dated February 12, 2002 and
filed February 13, 2002, to announce Daisytek's earnings for the quarter and
year ended March 31, 2002.

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.3.1 -- First Amendment to 1994 Stock Option Plan of Daisytek
International Corporation (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 2001, dated November 14, 2001 (File No.
000-25400)).
10.4(*) -- Non-Employee Director Stock Option and Retainer Plan.
10.4.1 -- Daisytek International Corporation First Amendment to
Non-Employee Director Stock Option and Retainer Plan
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2001, dated
February 14, 2002 (File No. 000-25400)).
10.5 -- 1998 Amended and Restated Stock Option Plan of Daisytek
International Corporation (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 1998 dated November 16, 1998 (File No.
000-25400)).
10.5.1 -- First Amendment to 1998 Amended and Restated Stock Option
Plan of Daisytek International Corporation (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 2001, dated November
14, 2001 (File No. 000-25400)).
10.6 -- Daisytek International Corporation 1998 Employee Stock
Purchase Plan (incorporated by reference from Quarterly
Report on Form 10-Q for the Quarterly Period Ended Septem-
ber 30, 1998 dated November 16, 1998 (File No. 000-25400)).
10.6.1 -- First Amendment to Daisytek International Corporation 1998
Employee Stock Purchase Plan (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-73078)).
10.6.2 -- Second Amendment to Daisytek International Corporation 1998
Employee Stock Purchase Plan (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-73078)).
10.7 -- Lease Agreement between Enterprise Business Park D-2, L.P.
and Daisytek, Inc. dated May 3, 2000 (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 2000 dated August 14, 2000
(File No. 000-25400)).
10.8 -- Asset purchase agreement between BAP Acquisition Corp., and
B.A. Pargh Company, LLC dated May 3, 2000 (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 2000 dated August 14, 2000
(File No. 000-25400)).
10.9 -- Tenth Amendment to Credit Agreement dated July 11, 2000
between Daisytek, Incorporated, as Borrower, Daisytek
International and Borrower's Subsidiaries, as Guarantors,
and Citizens Bank of Massachusetts, Bank One, IBM Credit
Corporation, and Chase Bank of Texas, N.A., as Lenders
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 2000,
dated November 14, 2000 (File No. 000-25400)).
10.10 -- Eleventh Amendment to Credit Agreement dated August 17, 2000
between Daisytek, Incorporated, as Borrower, Daisytek
International and Borrower's Subsidiaries, as Guarantors,
and Citizens Bank of Massachusetts, Bank One, IBM Credit
Corporation, and Chase Manhattan Bank, as Lenders
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 2000,
dated November 14, 2000 (File No. 000-25400)).
10.11 -- Credit Facility dated December 14, 2000 from Bank One
Canada, as Lender, to Daisytek Canada, as Borrower, and
Daisytek, Inc. and Daisytek International Corporation, as
Guarantors (incorporated by reference from Quarterly Report
on Form 10-Q for the Quarterly Period Ended December 31,
2000, dated February 14, 2001 (File No. 000-25400)).
10.12 -- Guaranty by Daisytek, Inc. and Daisytek International
Corporation for the benefit of Bank One, NA under the Credit
Facility dated December 14, 2000 (incorporated by reference
from Quarterly Report on Form 10-Q for the Quarterly Period
Ended December 31, 2000, dated February 14, 2001 (File No.
000-25400)).
10.13 -- Demand Note Agreement dated December 14, 2000, from Daisytek
Canada, as Borrower, for the benefit of Bank One Canada
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.14 -- Credit Agreement dated December 18, 2000, among Daisytek,
Incorporated, as Borrower, Daisytek International
Corporation, as Guarantor, with the banks listed therein as
Lenders, Bank One, N.A., as an LC Issuer and Bank One,
Texas, N.A., as Administrative Agent (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended December 31, 2000, dated February 14,
2001 (File No. 000-25400)).
10.14.1 -- Amended and Restated Credit Agreement dated as of April 30,
2001 among Daisytek, Incorporated, as Borrower, the Lenders,
Bank One, Texas, NA, as Administrative Agent, Citizens Bank
of Massachusetts, as Syndication Agent, Bank of America,
N.A., as Documentation Agent, and Bank One, Texas, NA and
Bank One, NA, as LC Issuers (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
December 31, 2001, dated February 14, 2002 (File No.
000-25400)).
10.14.2 -- Second Amendment to Credit Agreement among Daisytek,
Incorporated, as Borrower, the Lenders, Bank One, NA, as
Administrative Agent, Citizens Bank of Massachusetts, as
Syndication Agent, Bank of America, N.A., as Documentation
Agent, and Bank One, NA, as LC Issuers dated as of October
19, 2001 (incorporated by reference from Quarterly Report on
Form 10-Q for the Quarterly Period Ended December 31, 2001,
dated February 14, 2002 (File No. 000-25400)).
10.15 -- Parent Guaranty dated December 18, 2000 by Daisytek
International Corporation for the benefit of the Lenders and
the LC Issuer under the Credit Agreement (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended December 31, 2000, dated February 14,
2001 (File No. 000-25400)).
10.16 -- Subsidiary Guaranty dated December 18, 2000 by Certain
Subsidiaries of Daisytek International Corporation for the
benefit of the Lenders and the LC Issuer under the Credit
Agreement (incorporated by reference from Quarterly Report
on Form 10-Q for the Quarterly Period Ended December 31,
2000, dated February 14, 2001 (File No. 000-25400)).
10.17 -- Pledge and Security Agreement dated December 18, 2000
between Daisytek, Incorporated and Steadi-Systems, Ltd., as
Co-Pledgors and Bank One, Texas, NA, as Administrative Agent
for the LC Issuer and the Lenders under the Credit Agreement
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
10.18 -- Security Agreement dated December 18, 2000 by and among
Daisytek, Incorporated and its domestic subsidiaries a party
thereto and Bank One, Texas, NA (incorporated by reference
from Quarterly Report on Form 10-Q for the Quarterly Period
Ended December 31, 2000, dated February 14, 2001 (File No.
000-25400)).
10.19 -- Credit Agreement dated December 18, 2000 between Daisytek
Australia Pty Ltd., as Borrower, and Bank One, NA, as Lender
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
10.20 -- Recommended Offer by Robert W. Baird Limited on behalf of
Daisytek UK Limited, a wholly-owned subsidiary of Daisytek
International Corporation, for ISA International plc
(incorporated by reference from Current Report on Form 8-K
dated May 24, 2002 (File No. 000-25400)).
10.21(*) -- Master Lease Agreement, dated September 16, 1999, between
Daisytek International Corporation, as Lessee, and General
Electric Capital Corporation, as Lessor.
10.22(*) -- Lease Agreement, dated March 15, 2002, between Selkirk
Ventures, LLC, as landlord, and Daisytek, Incorporated, as
tenant, relating to the property located at 158 West Yard
Road, Bethlehem, New York.
10.23(*) -- Industrial Lease Agreement between New York Life Insurance
Company, as landlord, and Daisytek Incorporated, as tenant,
dated March 31, 1999.
10.24(*) -- Letter Agreement, dated December 13, 2001, between Daisytek
Australia Pty Limited, as the Borrower, and Bank One, NA, as
the Lender amending that certain Credit Agreement dated
December 18, 2000.
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.25(*) -- Standard Industrial Lease, dated March 25, 2002, between
Tejon Dermody Industrial LLC, as landlord, and Daisytek,
Incorporated, as tenant, relating to the property located at
4049 Industrial Parkway, Wheeler Ridge, California.
10.26(*) -- Guaranty, dated March 25, 2002, by Daisytek International
Corporation for the benefit of Tejon Dermody Industrial LLC,
as landlord under that certain Standard Industrial Lease,
dated March 25, 2002, by and between Daisytek, Incorporated
and Tejon Dermody Industrial LLC relating to the property
located at 4049 Industrial Parkway, Wheeler Ridge,
California.
10.27(*) -- Credit Agreement dated April 24, 2002, among Daisytek,
Incorporated, Arlington Industries, Inc., B.A. Pargh
Company, Daisytek Latin America, Inc., Digital Storage,
Inc., Tapebargains.Com. Inc., the Tape Company and Virtual
Demand, Inc. as borrowers; Daisytek International
Corporation as guarantor; Bank of America, National
Association and each of the other lenders party thereto, as
lenders; and Bank of America, National Association, as the
agent.
10.28(*) -- Security Agreement dated as of April 24, 2002 from Daisytek
International Corporation for the benefit of Bank of
America, National Association, as agent, under the Credit
Agreement dated as of April 24, 2002.
10.29(*) -- Security Agreement dated as of April 24, 2002 from Daisytek,
Incorporated, Arlington Industries, Inc., B.A. Pargh
Company, Daisytek Latin America, Inc., Digital Storage,
Inc., Tapebargains.Com. Inc., the Tape Company and Virtual
Demand, Inc. for the benefit of Bank of America, National
Association, as agent, under the Credit Agreement dated as
of April 24, 2002.
10.30(*) -- Guaranty by Daisytek International Corporation for the
benefit of Bank of America, National Association, as agent,
under the Credit Agreement dated as of April 24, 2002.
10.31(*) -- Guaranty by Daisytek, Incorporated, Arlington Industries,
Inc., B.A. Pargh Company, Daisytek Latin America, Inc.,
Digital Storage, Inc., Tapebargains.Com. Inc., the Tape
Company and Virtual Demand, Inc. for the benefit of Bank of
America, National Association, as agent, under the Credit
Agreement dated as of April 24, 2002.
10.32(*) -- First Amendment to April 2002 Credit Agreement dated as of
May 31, 2002 among Daisytek, Incorporated, Arlington
Industries, Inc., B.A. Pargh Company, Daisytek Latin
America, Inc., Digital Storage, Inc., Tapebargains.Com.
Inc., the Tape Company and Virtual Demand, Inc. as
borrowers; Daisytek International Corporation as guarantor;
Bank of America, National Association and each of the other
lenders party thereto, as lenders; and Bank of America,
National Association, as the agent.
10.33(*) -- Second Amendment to April 2002 Credit Agreement dated as of
June 21, 2002 among Daisytek, Incorporated, Arlington
Industries, Inc., B.A. Pargh Company, Daisytek Latin
America, Inc., Digital Storage, Inc., Tapebargains.Com.
Inc., the Tape Company and Virtual Demand, Inc. as
borrowers; Daisytek International Corporation as guarantor;
Bank of America, National Association and each of the other
lenders party thereto, as lenders; and Bank of America,
National Association, as the agent
10.34(*) -- Subscription and Shareholders' Agreement dated August 9,
2001 between ISA, Daisytek International Corporation, David
Heap and Chisa LLC.
10.35(*) -- Warrant constituted by Deed Poll issued by ISA dated
September 3, 2001.
10.36(*) -- Loan facility with effective date of October 12, 2001
between Daisytek UK and ISA.
10.37(*) -- Commitment Letter dated February 27, 2001, between The Bank
of Nova Scotia and Daisytek (Canada), Inc.
10.38(*) -- Commitment Letter dated March 15, 2001, between The
Toronto-Dominion Bank and Daisytek (Canada), Inc.
10.39(*) -- Commitment Letter, dated October 2, 2001, between the Bank
of Nova Scotia and Daisytek (Canada), Inc.
10.40(*) -- Letter Agreement, dated October 12, 2001, between the
Toronto-Dominion Bank and Daisytek (Canada), Inc. amending
that certain Commitment Letter dated March 15, 2001.
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.41(*) -- Letter Agreement, dated March 25, 2002, between The
Toronto-Dominion Bank and Daisytek (Canada), Inc. amending
that certain Commitment Letter dated March 15, 2001.
10.42(*) -- Commitment Letter, dated April 3, 2002, between the Bank of
Nova Scotia and Daisytek (Canada), Inc.
10.43 -- Form of Daisytek International Corporation Non-Qualified
Stock Option Agreement (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-91384)).
21(*) -- Subsidiaries of the Registrant.
23.1(*) -- Consent of Ernst & Young LLP.
</Table>

- ---------------

(*) Filed herewith.

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders of Daisytek International Corporation:

We have audited the consolidated financial statements of Daisytek
International Corporation and subsidiaries as of March 31, 2002 and 2001 and for
the fiscal years then ended and have issued our report thereon dated May 6,
2002, except as to paragraphs 1 and 3 of Note 3, as to which the date is May 23,
2002. Our audit also included the financial statement schedule included in Item
14(a)(2) for the fiscal years ended March 31, 2002 and 2001. This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audit.

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 set forth herein.

ERNST & YOUNG LLP

Dallas, Texas
May 6, 2002

THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF A REPORT
PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Daisytek International Corporation:

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Daisytek International Corporation (a
Delaware corporation) and subsidiaries and the related consolidated statements
of income, shareholders' equity, and cash flows for the year ended March 31,
2000 included in this report on Form 10-K and have issued our report thereon
dated May 4, 2000. Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. Schedule II of
this report on Form 10-K is the responsibility of the company's management and
is presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
as of March 31, 2000 and for the year then ended taken as a whole.

ARTHUR ANDERSEN LLP

Dallas, Texas
May 4, 2000

SCHEDULE II

DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED MARCH 31, 2002

<Table>
<Caption>
ADDITIONS
------------------------
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS PERIOD
---------- ---------- ----------- ---------- ----------
(IN THOUSANDS)

Fiscal Year Ended March 31, 2002:
Allowance for doubtful accounts...... $4,979 4,566 242 (5,749) $4,038
Fiscal Year Ended March 31, 2001:
Allowance for doubtful accounts...... $5,784 3,360 554 (4,719) $4,979
Income tax valuation allowance....... $ 915 -- -- (915) $ --
Fiscal Year Ended March 31, 2000:
Allowance for doubtful accounts...... $2,857 7,670 -- (4,743) $5,784
Income tax valuation allowance....... $ 108 915 -- (108) $ 915
</Table>

- ---------------

(1) Additions charged to other accounts are related to business acquisitions in
fiscal years 2002 and 2001.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

DAISYTEK INTERNATIONAL CORPORATION

By: /s/ RALPH MITCHELL
-------------------------------------------
Ralph Mitchell
Chief Financial Officer and
Executive Vice President -- Finance

June 28, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ JAMES R. POWELL Chief Executive and Operating Officer, June 28, 2002
- -------------------------------------- President and acting Chairman of the
James R. Powell Board (principal executive officer)

/s/ RALPH MITCHELL Chief Financial Officer and Executive June 28, 2002
- -------------------------------------- Vice President -- Finance (principal
Ralph Mitchell financial and accounting officer)

/s/ DALE A. BOOTH Director June 28, 2002
- --------------------------------------
Dale A. Booth

/s/ NICHOLAS A. GIORDANO Director June 28, 2002
- --------------------------------------
Nicholas A. Giordano

/s/ DANIEL T. OWEN Director June 28, 2002
- --------------------------------------
Daniel T. Owen

/s/ PETER P. J. VIKANIS Director June 28, 2002
- --------------------------------------
Peter P. J. Vikanis

/s/ JOHN D. KEARNEY, SR. Director June 28, 2002
- --------------------------------------
John D. Kearney, Sr.

/s/ PETER D. WHARF Director June 28, 2002
- --------------------------------------
Peter D. Wharf
</Table>

EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 -- Amended and Restated Certificate of Incorporation of
Daisytek International Corporation (incorporated by
reference from Registration Statement on Form S-8 (File No.
333-91384)).
3.1.1 -- Certificate of Amendment of Amended and Restated Certificate
of Incorporation of Daisytek International Corporation
(incorporated by reference from Registration Statement on
Form S-8 (File No. 333-91384)).
3.2 -- Amended and Restated By-laws of Daisytek International
Corporation, as amended (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-62840)).
3.3 -- Certificate of Amendment of Amended and Restated Certificate
of Incorporation of Daisytek International Corporation
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 1998 dated
November 16, 1998 (File No. 000-25400)).
3.4 -- Amendment to Section 2.9 of the Amended and Restated Bylaws
of Daisytek International Corporation dated June 26, 2002
(incorporated by reference from Registration Statement on
Form S-8 (File No. 333-91384)).
4.1 -- Rights Agreement, dated as of October 15, 1999, between
Daisytek International Corporation and ChaseMellon
Shareholder Services, LLC, which includes the Certificate of
Designations in respect of the Series A Preferred Stock as
Exhibit A, the form of Right Certificate as Exhibit B and
the Summary of Rights to Purchase Series A Preferred Stock
as Exhibit C. Pursuant to the Rights Agreement, Right
Certificates will not be mailed until after the Separation
Date (as defined therein) (incorporated by reference from
Current Report on Form 8-K dated October 15, 1999 (File No.
000-25400)).
4.2 -- Securities Purchase Agreement dated December 19, 2001
(incorporated by reference from Registration Statement on
Form S-3 (File No. 333-75802)).
4.3 -- Registration Rights Agreement dated December 19, 2001
(incorporated by reference from Registration Statement on
Form S-3 (File No. 333-75802)).
10.1 -- Director and Officer Loan Plan, dated November 9, 2000
(incorporated by reference from Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 2001 dated June 27, 2001
(File No. 000-25400)).
10.2 -- Form of Loan Agreement in connection with the Director and
Officer Loan Plan (incorporated by reference from Annual
Report on Form 10-K for the Fiscal Year Ended March 31, 2001
dated June 27, 2001 (File No. 000-25400)).
10.3 -- 1994 Stock Option Plan of Daisytek International Corporation
(incorporated by reference from Registration Statement on
Form S-1 (File No. 33-86926)).
10.3.1 -- First Amendment to 1994 Stock Option Plan of Daisytek
International Corporation (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 2001, dated November 14, 2001 (File No.
000-25400)).
10.4(*) -- Non-Employee Director Stock Option and Retainer Plan.
10.4.1 -- Daisytek International Corporation First Amendment to
Non-Employee Director Stock Option and Retainer Plan
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2001, dated
February 14, 2002 (File No. 000-25400)).
10.5 -- 1998 Amended and Restated Stock Option Plan of Daisytek
International Corporation (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 1998 dated November 16, 1998 (File No.
000-25400)).
10.5.1 -- First Amendment to 1998 Amended and Restated Stock Option
Plan of Daisytek International Corporation (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 2001, dated November
14, 2001 (File No. 000-25400)).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.6 -- Daisytek International Corporation 1998 Employee Stock
Purchase Plan (incorporated by reference from Quarterly
Report on Form 10-Q for the Quarterly Period Ended Septem-
ber 30, 1998 dated November 16, 1998 (File No. 000-25400)).
10.6.1 -- First Amendment to Daisytek International Corporation 1998
Employee Stock Purchase Plan (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-73078)).
10.6.2 -- Second Amendment to Daisytek International Corporation 1998
Employee Stock Purchase Plan (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-73078)).
10.7 -- Lease Agreement between Enterprise Business Park D-2, L.P.
and Daisytek, Inc. dated May 3, 2000 (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 2000 dated August 14, 2000
(File No. 000-25400)).
10.8 -- Asset purchase agreement between BAP Acquisition Corp., and
B.A. Pargh Company, LLC dated May 3, 2000 (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 2000 dated August 14, 2000
(File No. 000-25400)).
10.9 -- Tenth Amendment to Credit Agreement dated July 11, 2000
between Daisytek, Incorporated, as Borrower, Daisytek
International and Borrower's Subsidiaries, as Guarantors,
and Citizens Bank of Massachusetts, Bank One, IBM Credit
Corporation, and Chase Bank of Texas, N.A., as Lenders
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 2000,
dated November 14, 2000 (File No. 000-25400)).
10.10 -- Eleventh Amendment to Credit Agreement dated August 17, 2000
between Daisytek, Incorporated, as Borrower, Daisytek
International and Borrower's Subsidiaries, as Guarantors,
and Citizens Bank of Massachusetts, Bank One, IBM Credit
Corporation, and Chase Manhattan Bank, as Lenders
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 2000,
dated November 14, 2000 (File No. 000-25400)).
10.11 -- Credit Facility dated December 14, 2000 from Bank One
Canada, as Lender, to Daisytek Canada, as Borrower, and
Daisytek, Inc. and Daisytek International Corporation, as
Guarantors (incorporated by reference from Quarterly Report
on Form 10-Q for the Quarterly Period Ended December 31,
2000, dated February 14, 2001 (File No. 000-25400)).
10.12 -- Guaranty by Daisytek, Inc. and Daisytek International
Corporation for the benefit of Bank One, NA under the Credit
Facility dated December 14, 2000 (incorporated by reference
from Quarterly Report on Form 10-Q for the Quarterly Period
Ended December 31, 2000, dated February 14, 2001 (File No.
000-25400)).
10.13 -- Demand Note Agreement dated December 14, 2000, from Daisytek
Canada, as Borrower, for the benefit of Bank One Canada
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
10.14 -- Credit Agreement dated December 18, 2000, among Daisytek,
Incorporated, as Borrower, Daisytek International
Corporation, as Guarantor, with the banks listed therein as
Lenders, Bank One, N.A., as an LC Issuer and Bank One,
Texas, N.A., as Administrative Agent (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended December 31, 2000, dated February 14,
2001 (File No. 000-25400)).
10.14.1 -- Amended and Restated Credit Agreement dated as of April 30,
2001 among Daisytek, Incorporated, as Borrower, the Lenders,
Bank One, Texas, NA, as Administrative Agent, Citizens Bank
of Massachusetts, as Syndication Agent, Bank of America,
N.A., as Documentation Agent, and Bank One, Texas, NA and
Bank One, NA, as LC Issuers (incorporated by reference from
Quarterly Report on Form 10-Q for the Quarterly Period Ended
December 31, 2001, dated February 14, 2002 (File No.
000-25400)).
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.14.2 -- Second Amendment to Credit Agreement among Daisytek,
Incorporated, as Borrower, the Lenders, Bank One, NA, as
Administrative Agent, Citizens Bank of Massachusetts, as
Syndication Agent, Bank of America, N.A., as Documentation
Agent, and Bank One, NA, as LC Issuers dated as of October
19, 2001 (incorporated by reference from Quarterly Report on
Form 10-Q for the Quarterly Period Ended December 31, 2001,
dated February 14, 2002 (File No. 000-25400)).
10.15 -- Parent Guaranty dated December 18, 2000 by Daisytek
International Corporation for the benefit of the Lenders and
the LC Issuer under the Credit Agreement (incorporated by
reference from Quarterly Report on Form 10-Q for the
Quarterly Period Ended December 31, 2000, dated February 14,
2001 (File No. 000-25400)).
10.16 -- Subsidiary Guaranty dated December 18, 2000 by Certain
Subsidiaries of Daisytek International Corporation for the
benefit of the Lenders and the LC Issuer under the Credit
Agreement (incorporated by reference from Quarterly Report
on Form 10-Q for the Quarterly Period Ended December 31,
2000, dated February 14, 2001 (File No. 000-25400)).
10.17 -- Pledge and Security Agreement dated December 18, 2000
between Daisytek, Incorporated and Steadi-Systems, Ltd., as
Co-Pledgors and Bank One, Texas, NA, as Administrative Agent
for the LC Issuer and the Lenders under the Credit Agreement
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
10.18 -- Security Agreement dated December 18, 2000 by and among
Daisytek, Incorporated and its domestic subsidiaries a party
thereto and Bank One, Texas, NA (incorporated by reference
from Quarterly Report on Form 10-Q for the Quarterly Period
Ended December 31, 2000, dated February 14, 2001 (File No.
000-25400)).
10.19 -- Credit Agreement dated December 18, 2000 between Daisytek
Australia Pty Ltd., as Borrower, and Bank One, NA, as Lender
(incorporated by reference from Quarterly Report on Form
10-Q for the Quarterly Period Ended December 31, 2000, dated
February 14, 2001 (File No. 000-25400)).
10.20 -- Recommended Offer by Robert W. Baird Limited on behalf of
Daisytek UK Limited, a wholly-owned subsidiary of Daisytek
International Corporation, for ISA International plc
(incorporated by reference from Current Report on Form 8-K
dated May 24, 2002 (File No. 000-25400)).
10.21(*) -- Master Lease Agreement, dated September 16, 1999, between
Daisytek International Corporation, as Lessee, and General
Electric Capital Corporation, as Lessor.
10.22(*) -- Lease Agreement, dated March 15, 2002, between Selkirk
Ventures, LLC, as landlord, and Daisytek, Incorporated, as
tenant, relating to the property located at 158 West Yard
Road, Bethlehem, New York.
10.23(*) -- Industrial Lease Agreement between New York Life Insurance
Company, as landlord, and Daisytek Incorporated, as tenant,
dated March 31, 1999.
10.24(*) -- Letter Agreement, dated December 13, 2001, between Daisytek
Australia Pty Limited, as the Borrower, and Bank One, NA, as
the Lender amending that certain Credit Agreement dated
December 18, 2000.
10.25(*) -- Standard Industrial Lease, dated March 25, 2002, between
Tejon Dermody Industrial LLC, as landlord, and Daisytek,
Incorporated, as tenant, relating to the property located at
4049 Industrial Parkway, Wheeler Ridge, California.
10.26(*) -- Guaranty, dated March 25, 2002, by Daisytek International
Corporation for the benefit of Tejon Dermody Industrial LLC,
as landlord under that certain Standard Industrial Lease,
dated March 25, 2002, by and between Daisytek, Incorporated
and Tejon Dermody Industrial LLC relating to the property
located at 4049 Industrial Parkway, Wheeler Ridge,
California.
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.27(*) -- Credit Agreement dated April 24, 2002, among Daisytek,
Incorporated, Arlington Industries, Inc., B.A. Pargh
Company, Daisytek Latin America, Inc., Digital Storage,
Inc., Tapebargains.Com. Inc., the Tape Company and Virtual
Demand, Inc. as borrowers; Daisytek International
Corporation as guarantor; Bank of America, National
Association and each of the other lenders party thereto, as
lenders; and Bank of America, National Association, as the
agent.
10.28(*) -- Security Agreement dated as of April 24, 2002 from Daisytek
International Corporation for the benefit of Bank of
America, National Association, as agent, under the Credit
Agreement dated as of April 24, 2002.
10.29(*) -- Security Agreement dated as of April 24, 2002 from Daisytek,
Incorporated, Arlington Industries, Inc., B.A. Pargh
Company, Daisytek Latin America, Inc., Digital Storage,
Inc., Tapebargains.Com. Inc., the Tape Company and Virtual
Demand, Inc. for the benefit of Bank of America, National
Association, as agent, under the Credit Agreement dated as
of April 24, 2002.
10.30(*) -- Guaranty by Daisytek International Corporation for the
benefit of Bank of America, National Association, as agent,
under the Credit Agreement dated as of April 24, 2002.
10.31(*) -- Guaranty by Daisytek, Incorporated, Arlington Industries,
Inc., B.A. Pargh Company, Daisytek Latin America, Inc.,
Digital Storage, Inc., Tapebargains.Com. Inc., the Tape
Company and Virtual Demand, Inc. for the benefit of Bank of
America, National Association, as agent, under the Credit
Agreement dated as of April 24, 2002.
10.32(*) -- First Amendment to April 2002 Credit Agreement dated as of
May 31, 2002 among Daisytek, Incorporated, Arlington
Industries, Inc., B.A. Pargh Company, Daisytek Latin
America, Inc., Digital Storage, Inc., Tapebargains.Com.
Inc., the Tape Company and Virtual Demand, Inc. as
borrowers; Daisytek International Corporation as guarantor;
Bank of America, National Association and each of the other
lenders party thereto, as lenders; and Bank of America,
National Association, as the agent.
10.33(*) -- Second Amendment to April 2002 Credit Agreement dated as of
June 21, 2002 among Daisytek, Incorporated, Arlington
Industries, Inc., B.A. Pargh Company, Daisytek Latin
America, Inc., Digital Storage, Inc., Tapebargains.Com.
Inc., the Tape Company and Virtual Demand, Inc. as
borrowers; Daisytek International Corporation as guarantor;
Bank of America, National Association and each of the other
lenders party thereto, as lenders; and Bank of America,
National Association, as the agent
10.34(*) -- Subscription and Shareholders' Agreement dated August 9,
2001 between ISA, Daisytek International Corporation, David
Heap and Chisa LLC.
10.35(*) -- Warrant constituted by Deed Poll issued by ISA dated
September 3, 2001.
10.36(*) -- Loan facility with effective date of October 12, 2001
between Daisytek UK and ISA.
10.37(*) -- Commitment Letter dated February 27, 2001, between The Bank
of Nova Scotia and Daisytek (Canada), Inc.
10.38(*) -- Commitment Letter dated March 15, 2001, between The
Toronto-Dominion Bank and Daisytek (Canada), Inc.
10.39(*) -- Commitment Letter, dated October 2, 2001, between the Bank
of Nova Scotia and Daisytek (Canada), Inc.
10.40(*) -- Letter Agreement, dated October 12, 2001, between the
Toronto-Dominion Bank and Daisytek (Canada), Inc. amending
that certain Commitment Letter dated March 15, 2001.
10.41(*) -- Letter Agreement, dated March 25, 2002, between The
Toronto-Dominion Bank and Daisytek (Canada), Inc. amending
that certain Commitment Letter dated March 15, 2001.
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.42(*) -- Commitment Letter, dated April 3, 2002, between the Bank of
Nova Scotia and Daisytek (Canada), Inc.
10.43 -- Form of Daisytek International Corporation Non-Qualified
Stock Option Agreement (incorporated by reference from
Registration Statement on Form S-8 (File No. 333-91384)).
21(*) -- Subsidiaries of the Registrant.
23.1(*) -- Consent of Ernst & Young LLP.
</Table>

- ---------------

(*) Filed herewith.