BROOMFIELD, Colo., June 2 /PRNewswire/ -- Corporate Express, Inc.
(Nasdaq: CEXP), a leading supplier of essential office and computer
products and services to corporations that value innovative
procurement solutions, today announced the results of its first
quarter ended May 1, 1999.
EBITDA from continuing operations was $59 million for first
quarter 1999, compared with EBITDA of $38 million in the fourth
quarter of 1998, excluding restructuring, merger and one-time
charges, and $55 million in the first quarter of 1998.
Revenues from continuing operations for the first quarter
increased to $972.1 million, compared with $918.5 million in first
quarter 1998, an increase of 5.8 percent. Operating profit was $42.4
million, compared with $40.3 million reported for the first quarter
of the prior year, an increase of 5.2 percent. The operating margin
was 4.4 percent for the period, compared with 2.3 percent in fourth
quarter 1998, excluding restructuring, merger and one-time charges,
and 4.4 percent in first quarter 1998.
Earnings per share from continuing operations were $0.10 for the
first quarter of 1999, compared with a loss per share of $0.05 in
the fourth quarter of 1998, excluding restructuring, merger and
one-time charges, and earnings per share of $0.12 in first quarter
1998.
''We are pleased with Corporate Express' first quarter results,
which showed a significant improvement versus the previous quarter
and reflected the initial benefits of the restructuring efforts that
we began in the fourth quarter of last year,'' said Robert King,
President and CEO. ''The Company generated solid EBITDA of $59
million and significantly improved its operating margin versus the
previous quarter, despite some additional restructuring-related
activity. We remain very focused on increasing our top-line growth,
and we have implemented aggressive sales initiatives, which are
expected to increase revenue growth in the latter half of 1999.''
INTERNET SALES GROW SIGNIFICANTLY
''Our Internet business continued to grow significantly in the
first quarter. Corporate Express' April 1999 annualized sales
through E-Way, our proprietary Internet ordering system, were almost
$100 million, compared with annualized sales of just $22 million in
April 1998,'' added King. ''We are focused on leveraging our
e-commerce growth and capabilities, and we expect E-Way sales to be
in the range of $150 million to $200 million in fiscal 1999.''
As electronic commerce continues to grow in use and popularity,
Corporate Express' strategy is to provide customers with
leading-edge technologies that enhance productivity. To leverage
these market dynamics, the Company is expanding and enhancing E-Way,
while cultivating alliances with technology partners and service
providers. The Company has entered into a number of key alliances
and partnerships, including one with Requisite Technology. The
Requisite Technology partnership provides an advanced search engine
capability giving customers an e-commerce ready catalog that is
pre-populated with Corporate Express' product selection for use in
solutions like Oracle Corporation's Fast Forward Internet
Procurement solution.
Other examples of the Company's partnerships and value-added
arrangements include:
Participation in OrderZone.com, a partnership with WW Grainger
that provides a one-stop, online business-to-business service for
the procurement of business supplies and services for smaller
businesses;
A North American partnership with United Technologies Corp for
office supplies via IBM's procurement service;
Participation in American Express' Purchasing Solutions
program;
Participation in the Clarus Corporation / Microsoft /
MasterCard Web Purchasing program;
A marketing alliance with ImageX.com that allows companies to
edit, proof, order and manage printed business materials through
the Internet.
"Our Internet strategy is clearly focused on providing customers
with value-added capabilities. These partnerships add value to the
customer/company relationship by building on our existing technology
platforms, providing systems integration, facilitating the use of
the e-commerce technologies, and developing new alternative
procurement models," said King. "We are actively exploring
additional partnerships."
DIVESTITURES
As part of the Company's effort to focus on its operations that
have the strongest strategic fit and greatest potential for
sustained, profitable growth, the Company announced on June 1, 1999,
that it signed a definitive agreement to sell Sofco, Inc., its
cleaning and service supply subsidiary, to U.S. Foodservice. Sofco
serves the New York markets of Albany, Buffalo and Rochester with
net sales of approximately $160 million for the fiscal year ended
January 30, 1999. Subject to customary regulatory approval and
certain other conditions, it is anticipated that the transaction
will close by the end of June 1999.
Today, the Company also announced that on Friday, May 28, 1999,
it sold two forms distribution businesses and a forms distribution
software business to Global DocuGraphix, Inc. Combined, these three
businesses generated net sales of approximately $21 million in the
fiscal year ended January 30, 1999.
DISCONTINUED OPERATIONS
As previously announced, the Company intends to sell Corporate
Express Delivery Systems, its same-day courier delivery service, and
has presented it as discontinued operations for financial reporting
purposes, for all periods presented. The Company expects to
consummate disposition of this business before the end of fiscal
1999.
CONTINUING OPERATIONS
The Company's consolidated quarterly statements of continuing
operations are summarized below, and exclude the financial results
of Corporate Express Delivery Systems.
CONDENSED CONSOLIDATED STATEMENTS OF CONTINUING OPERATIONS
(Unaudited)
($ in millions) 1st 1st 1Q98 v. 1Q99 4th 4Q98 v.1Q99
Quarter Quarter Percentage Quarter Percentage
Ended Ended Change Ended Change
May 1, May 2, Jan. 30,
1999 1998 1999(1)
Net Sales $972.1 $918.5 5.8% $963.3 0.9%
Gross Profit $226.6 $216.8 4.5% $216.4 4.7%
Operating Profit $42.4 $40.3 5.2% $22.4 89.3%
Income (Loss)
from Continuing
Operations $10.0 $15.6 (35.9)% $(5.2) n/a
Operating Margin 4.4% 4.4% (2) 0.0 ppts 2.3% 2.1 ppts
EBITDA $58.8 $55.1 6.7% $38.4 53.1%
(1) Excluding restructuring charge
(2) Excluding Extraordinary item
The Company generated year-over-year gains in net
sales, gross profit,
operating profit and EBITDA due largely to
continued sales growth, especially
in its Desktop Software and
International divisions, strong gross margin
improvement in its
North American Office Products business, and its broad
cost
containment program. Income from continuing operations
decreased year-over-
year due primarily to increased interest
expense, which resulted from the
Company's April 1998 share
repurchase and associated increase in indebtedness.
SEGMENT RESULTS
The following table summarizes the Company's product category
segment financial results from continuing operations for the
three-month periods ended May 1, 1999 and May 2, 1998. Product
categories include North American Office Products (including
Canada), International Office Products (excluding Canada), Desktop
Software, and Other Products and Services (including promotional
marketing, cleaning supplies, and certain other small business
units).
FINANCIAL SUMMARY -- BY PRODUCT CATEGORY
FOR CONTINUING OPERATIONS
(Unaudited) / ($ in millions)
First Quarter Ended May 1, 1999 May 2, 1998 Change
Revenue:
-- N.A. Office Products $576.5 $582.1 (1.0)%
-- Int'l. Office Products 171.2 144.9 18.2%
-- Desktop Software 155.7 123.8 25.8%
-- Other Products & Services 69.8 70.3 (0.7)%
-- Intercompany Elimination (1.1) (2.6) nm
Consolidated $972.1 $918.5 5.8%
Operating Profit:
-- N.A. Office Products $52.0 $46.7 11.3%
-- Int'l. Office Products 2.1 1.1 90.9%
-- Desktop Software 6.7 6.9 (2.9)%
-- Other Products & Services 1.0 2.4 (58.3)%
-- Unallocated Corp. Costs (19.4) (16.8) nm
Consolidated $42.4 $40.3 5.2%
Operating Margin:
-- N.A. Office Products 9.0% 8.0% 1.0 ppts
-- Int'l Office Products 1.2% 0.8% 0.4 ppts
-- Desktop Software 4.3% 5.6% (1.3) ppts
-- Other Products & Services 1.4% 3.4% (2.0) ppts
Consolidated 4.4% 4.4% 0.0 ppts
Excluding the impact of restructuring-related business closings
and paper price decreases, the North American Office Products
segment posted year-over- year revenue growth of approximately one
percent. This performance reflects continued revenue growth pressure
in a number of areas, including the Northeast, several
energy-producing areas in Alaska, Oklahoma and Texas, and North
Carolina, where the Company has begun a major facility
consolidation. North American Office Products generated a strong
11.3 percent year-over-year increase in operating profit, due
primarily to increased gross margin and the Company's cost
containment program.
The International Office Products segment posted solid growth in
revenue and operating profit in the first quarter. International
revenue growth was driven by strong organic growth in Australia and
prior period European acquisitions. The International segment
generated revenue growth of approximately 6.6 percent excluding the
impact of these acquisitions. The United Kingdom's revenues declined
year-over-year, but were in line with the Company's expectations.
The International segment's strong operating profit increase was due
in part to strong results in Australia.
The Company's Desktop Software segment, which includes operations
in the United States and Europe, generated strong revenue growth in
the quarter, increasing 25.8 percent year-over-year. This increase
was driven largely by the growth of enterprise agreements, which are
frequently used by organizations seeking to standardize desktop
software applications and, consequently, usually involve significant
unit sales volumes per customer. These agreements foster longer-term
relationships that are valuable to the Company, however, they
generally reflect lower gross margins. An increase in enterprise
agreement revenue as a percentage of total sales contributed to the
decline in Desktop Software's operating margin.
The Company's Other Products and Services segment posted a slight
revenue decline of $0.5 million and an operating profit decrease of
$1.4 million. The revenue decline was due in part to restructuring
activities in the promotional marketing business, which reflected
the exit of an unprofitable sales promotion business line. The
promotional marketing business' operating profit improved slightly
year-over-year. In addition, the Other Products and Services'
segment results were impacted by costs associated with the launching
of a new call center services facility.
RESTRUCTURING PROGRAM
The Company continued to implement its restructuring program,
which is aimed at lowering its fixed operating cost structure by
reducing the number of its employees, accelerating facility
consolidations, and prioritizing operational and technology
initiatives. At the end of the first quarter, the Company had
reduced its workforce by approximately 420 employees of its total
planned reduction of approximately 1,000 employees, and had closed
or consolidated approximately 30 facilities of its planned reduction
of approximately 70 facilities.
''While we anticipate continued cost saving benefits from our
restructuring program in the second quarter, we expect the second
quarter to reflect some normal seasonality pressure,'' added King.
NET CAPITAL EXPENDITURES AND DEBT
Corporate Express' ''Net Capital Expenditures'' (defined as
capital expenditures less proceeds from sale of assets, primarily
the sale/leaseback of real estate) from continuing operations were
$14 million in the first quarter. The Company expects its 1999 net
capital spending for continuing operations to be approximately $50
million.
The Company's total debt for continuing operations was $1.299
billion as of May 1, 1999 compared to $1.275 billion as of January
30, 1999. The Company's ''net debt'' (defined as total debt less
cash) for continuing operations as of May 1, 1999 was $1.280 billion
compared with $1.260 billion as of January 30, 1999. The $20 million
increase in net debt is attributable in part to cash requirements of
the Company's discontinued operations and certain cash restructuring
charges.
In its continuing operations, Corporate Express currently
operates in nearly 300 locations, including 89 distribution centers,
and employs approximately 15,000 people in the United States,
Australia, Canada, France, Italy, Germany, the United Kingdom,
Switzerland, Ireland, New Zealand, and the Netherlands.
This press release contains forward-looking statements that
involve risks and uncertainties, including statements about the
Company's plans to improve operating performance, plans to divest
certain operations, and estimates concerning the outlook for fiscal
1999 performance, and other statements of belief, expectations and
objectives. There can be no assurance that actual results or future
events will not differ materially from the Company's expectations.
Factors that could cause actual results or future events to differ
include: inability of the Company to successfully identify and
execute strategic transaction(s) that create shareholder value;
inability to complete divestitures of the delivery business, the
cleaning supplies or other operations on acceptable terms and on the
desired timetable, or at all, or to realize the expected operating
and financial benefits of the divestitures; inability to achieve the
expected cost reductions and other operating benefits relating to
the restructuring plan; inability to successfully integrate
acquisitions; inability to realize growth from sales initiatives and
increase profitability of the core business and to successfully
develop and implement the Corporate Supplier plans; and
deterioration in general economic conditions and the corresponding
impact on revenues. Corporate Express undertakes no obligation to
review or confirm analysts' expectations or estimates or to release
publicly any revision to any forward-looking statement to reflect
unanticipated events or events and circumstances after the date of
this press release.
CORPORATE EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
May 1, % of May 2, % of
1999 Net Sales 1998 Net Sales
Net sales $972,059 100.0% $918,472 100.0%
Cost of sales 745,433 76.7% 701,646 76.4%
Gross profit 226,626 23.3% 216,826 23.6%
Warehouse operating and
selling expenses 151,369 15.6% 147,444 16.1%
Corporate general and
administrative expenses 23,832 2.5% 21,224 2.3%
Amortization of intangibles 9,042 0.9% 7,833 0.9%
Operating profit 42,383 4.4% 40,325 4.4%
Interest expense, net 22,377 2.3% 11,721 1.3%
Other (expense) income, net (60) 0.0% 51 0.0%
Income before income
taxes 19,946 2.1% 28,655 3.1%
Income tax expense 9,115 0.9% 12,869 1.4%
Income before minority
interest 10,831 1.1% 15,786 1.7%
Minority interest expense 839 0.1% 196 0.0%
Income from continuing
operations 9,992 1.0% 15,590 1.7%
Discontinued operations, net
of tax:
Income from discontinued
operations -- 0.0% 223 0.0%
Income before
extraordinary item 9,992 1.0% 15,813 1.7%
Extraordinary item:
Loss on early
extinguishment of debt -- 0.0% (1,104) -0.1%
Net income $9,992 1.0% $14,709 1.6%
Pro forma net income per
share - Basic:
Continuing operations $0.10 $0.12
Discontinued operations 0.00 0.00
Extraordinary item 0.00 (0.01)
Net income $0.10 $0.11
Pro forma net income per
share - Diluted:
Continuing operations $0.10 $0.12
Discontinued operations 0.00 0.00
Extraordinary item 0.00 (0.01)
Net income $0.10 $0.11
Weighted average common
shares outstanding:
Basic 104,185 134,410
Diluted 104,640 136,729
EBITDA (from continuing
operations excluding
extraordinary items $58,762 6.0% $55,092 6.0%
CORPORATE EXPRESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
May 1, January 30,
1999 1999
ASSETS
Current Assets
Cash and cash equivalents $18,695 $14,831
Trade accounts receivable, net 612,531 601,569
Inventory 289,672 285,754
Other current assets 179,113 188,239
Total Current Assets 1,100,011 1,090,393
Net Property and Equipment 220,937 224,762
Goodwill, net 780,057 788,963
Software and other assets, net 209,133 206,851
Net assets from discontinued
operations 122,770 104,621
Total Assets $2,432,908 $2,415,590
LIABILITIES
Current Liabilities
Accounts payable-trade $409,653 $422,087
Other accrued liabilities 160,095 161,427
Current portion of long-term
debt and capital leases 69,620 67,811
Total Current Liabilities 639,368 651,325
Capital lease obligations 6,960 7,081
Long-term debt 1,221,998 1,200,346
Other non-current liabilities 117,417 112,511
Total Long-Term Liabilities 1,346,375 1,319,938
Total Equity 447,165 444,327
Total Liabilities and Equity $2,432,908 $2,415,590