<PAGE>
--------------------------------------------------------------------------------
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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


                                  FORM 10-K/A



                                AMENDMENT NO. 1


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

                    FOR THE FISCAL YEAR ENDED APRIL 29, 2000

                        COMMISSION FILE NUMBER 000-25372

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

                           US OFFICE PRODUCTS COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                     <C>
            DELAWARE                         52-1906050
(State or Other Jurisdiction of            I.R.S. Employer
 Incorporation or Organization)          Identification No.

1025 THOMAS JEFFERSON STREET, NW                20007
           SUITE 600E                        (Zip Code)
        WASHINGTON, D.C.
(Address of principal executive
            offices)
</TABLE>

       Registrant's telephone number, including area code: (202) 339-6700

          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 $.001

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


    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  /X/    No  / /



    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K.  / /



    The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of July 20, 2000 was $23,088,501.



    As of July 20, 2000, 36,941,602 shares of the Registrant's common stock,
$.001 par value per share, were outstanding.



    DOCUMENTS INCORPORATED BY REFERENCE: PROXY STATEMENT FOR 2000 ANNUAL MEETING
OF US OFFICE PRODUCTS COMPANY (TO BE FILED).


--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

US Office Products Company (the "Company"), by this Form 10-K/A, Amendment
No. 1, hereby amends and restates in its entirety Item 8 of Part II contained in
its Annual Report on Form 10-K for the fiscal year ended April 29, 2000.



EXPLANATORY NOTE TO AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED APRIL 29, 2000



In this Amendment, the Company amends Item 8 of Part II by correcting the
"Maturities of Debt" disclosure contained in Note 10, "Credit Facilities," of
the Company's consolidated financial statements appearing in the Annual Report
on Form 10-K for the fiscal year ended April 29, 2000.

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
US OFFICE PRODUCTS COMPANY:

    In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 100 present fairly, in all material
respects, the financial position of US Office Products Company and its
subsidiaries at April 29, 2000 and April 24, 1999, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended April 29, 2000, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(2) on
page 100 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Washington, DC
June 15, 2000

                                       1
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                           CONSOLIDATED BALANCE SHEET

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                              APRIL 29,    APRIL 24,
                                                                 2000         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $   39,711   $   76,102
  Accounts receivable, less allowance for doubtful accounts
    of $11,766 and $11,720, respectively....................     259,287      304,374
  Inventories, net..........................................     155,206      206,857
  Prepaid expenses and other current assets.................      89,184      106,771
                                                              ----------   ----------
      Total current assets..................................     543,388      694,104
Property and equipment, net.................................     210,903      231,152
Intangible assets, net......................................     791,393      858,197
Other assets................................................     199,982      228,706
                                                              ----------   ----------
      Total assets..........................................  $1,745,666   $2,012,159
                                                              ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt...........................................  $   78,956   $   19,193
  Accounts payable..........................................     156,840      168,976
  Accrued compensation......................................      39,861       46,384
  Other accrued liabilities.................................     100,386      100,688
                                                              ----------   ----------
    Total current liabilities...............................     376,043      335,241
Long-term debt..............................................   1,055,069    1,171,429
Other long-term liabilities and minority interests..........      28,512       25,947
                                                              ----------   ----------
      Total liabilities.....................................   1,459,624    1,532,617
                                                              ----------   ----------
Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.001 par value, 500,000 shares
    authorized, 73,262 issued and outstanding,
    respectively............................................
  Common stock, $.001 par value, 500,000,000 shares
    authorized, 37,100,642 and 36,853,505 shares issued,
    36,941,602 and 36,702,778 shares outstanding, and
    159,040 and 150,727 held in treasury, respectively......          37           37
  Additional paid-in capital................................     728,443      727,614
  Accumulated other comprehensive loss......................    (120,506)    (119,941)
  Accumulated deficit.......................................    (321,932)    (128,168)
                                                              ----------   ----------
      Total stockholders' equity............................     286,042      479,542
                                                              ----------   ----------
      Total liabilities and stockholders' equity............  $1,745,666   $2,012,159
                                                              ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                      CONSOLIDATED STATEMENT OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                FOR THE FISCAL YEAR ENDED
                                                           ------------------------------------
                                                           APRIL 29,    APRIL 24,    APRIL 25,
                                                              2000         1999         1998
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Revenues.................................................  $2,499,393   $2,664,589   $2,611,740
Cost of revenues.........................................   1,826,876    1,933,796    1,884,892
                                                           ----------   ----------   ----------
      Gross profit.......................................     672,517      730,793      726,848

Selling, general and administrative expenses.............     637,743      635,181      591,463
Amortization expense.....................................      24,002       25,834       19,938
Impaired asset write-offs................................      17,429       58,735
Operating restructuring costs............................      15,376       24,042        6,187
Strategic Restructuring Plan costs.......................                   97,505
                                                           ----------   ----------   ----------
      Operating income (loss)............................     (22,033)    (110,504)     109,260

Interest expense.........................................     113,375      106,291       37,837
Interest income..........................................      (2,404)      (2,070)      (1,853)
Unrealized foreign currency transaction loss.............      49,004
Equity in (income) loss of affiliates....................      32,564          748       (1,687)
Loss on sale and closure of businesses...................      15,032       10,199
Other (income) expense...................................       1,572        2,232       (5,459)
                                                           ----------   ----------   ----------
Income (loss) from continuing operations before provision
  for (benefit from) income taxes and extraordinary
  items..................................................    (231,176)    (227,904)      80,422
Provision for (benefit from) income taxes................     (28,304)     (30,402)      36,946
                                                           ----------   ----------   ----------
Income (loss) from continuing operations before
  extraordinary items....................................    (202,872)    (197,502)      43,476
Income (loss) from discontinued operations, net of income
  taxes..................................................                   (1,294)      23,712
                                                           ----------   ----------   ----------
Income (loss) before extraordinary items.................    (202,872)    (198,796)      67,188
Extraordinary items--(gain) loss on early terminations of
  debt facilities, net of income taxes...................      (9,108)         269
                                                           ----------   ----------   ----------
Net income (loss)........................................  $ (193,764)  $ (199,065)  $   67,188
                                                           ==========   ==========   ==========

Per share amounts:
Basic:
  Income (loss) from continuing operations before
    extraordinary items..................................  $    (5.51)  $    (5.45)  $     1.45
  Income (loss) from discontinued operations.............                    (0.03)        0.80
  Extraordinary items....................................        0.25        (0.01)
                                                           ----------   ----------   ----------
  Net income (loss)......................................  $    (5.26)  $    (5.49)  $     2.25
                                                           ==========   ==========   ==========

Diluted:
  Income (loss) from continuing operations before
    extraordinary items..................................  $    (5.51)  $    (5.45)  $     1.43
  Income (loss) from discontinued operations.............                    (0.03)        0.77
  Extraordinary items....................................        0.25        (0.01)
                                                           ----------   ----------   ----------
  Net income (loss)......................................  $    (5.26)  $    (5.49)  $     2.20
                                                           ==========   ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                                     ACCUMULATED       RETAINED
                                          PREFERRED STOCK          COMMON STOCK        ADDITIONAL       OTHER          EARNINGS
                                        -------------------   ----------------------    PAID-IN     COMPREHENSIVE    (ACCUMULATED
                                         SHARES     AMOUNT      SHARES       AMOUNT     CAPITAL     INCOME (LOSS)      DEFICIT)
                                        --------   --------   -----------   --------   ----------   --------------   ------------
<S>                                     <C>        <C>        <C>           <C>        <C>          <C>              <C>
Balance at April 26, 1997.............             $           26,119,753    $   26    $ 867,117      $  (5,583)      $  59,588
  Issuances of common stock, net of
    associated expenses in conjunction
    with:
    Acquisitions......................                          6,944,625         7      584,470
    Repayment of debt.................                              7,044                    570
    Exercise of stock options,
      including tax benefits..........                            335,516                 15,908
    Employee stock purchase plan......                             62,974                  4,060
  Share adjustments at Pooled
    Companies.........................                             (9,048)
  Comprehensive loss:
    Other comprehensive loss..........                                                                 (107,220)
    Net income........................                                                                                   67,188
                                         ------    --------   -----------    ------    ----------     ---------       ---------
Balance at April 25, 1998.............                         33,460,864        33    1,472,125       (112,803)        126,776

  Issuance of preferred stock, net of
    associated expenses in conjunction
    with equity investment by
    Investor..........................   73,262                                           49,332
  Issuances of common stock, net of
    associated expenses in conjunction
    with:
    Equity Investment by Investor.....                          9,101,129         9      254,167
    2001 Notes Exchange...............                          2,025,185         2      151,423
    Conversion of 2003 Notes..........                              7,911                  1,000
    Exercise of stock options,
      including tax benefits..........                          1,203,688         1       66,790
    Employee stock purchase plan......                            160,788         1        2,019
    Purchase price adjustments related
      to acquisitions.................                              2,474                   (102)

  Repurchase of common stock, net of
    associated expenses in conjunction
    with Equity Tender................                         (9,259,261)       (9)    (999,991)
  Compensation expense related to
    options repurchased in Equity
    Tender............................                                                    57,711
  Adjustments related to the
    Distributions.....................                                                  (326,860)         1,150         (55,879)
  Comprehensive loss:
    Other comprehensive loss..........                                                                   (8,288)
    Net loss..........................                                                                                 (199,065)
                                         ------    --------   -----------    ------    ----------     ---------       ---------
Balance at April 24, 1999.............   73,262                36,702,778        37      727,614       (119,941)       (128,168)
  Issuances of common stock, net of
    associated expenses in conjunction
    with employee stock purchase
    plan..............................                            238,824                    829
  Comprehensive loss:
    Other comprehensive loss..........                                                                     (565)
    Net loss..........................                                                                                 (193,764)
                                         ------    --------   -----------    ------    ----------     ---------       ---------
Balance at April 29, 2000.............   73,262    $           36,941,602    $   37    $ 728,443      $(120,506)      $(321,932)
                                         ======    ========   ===========    ======    ==========     =========       =========

<CAPTION>

                                        STOCKHOLDERS'
                                           EQUITY
                                        -------------
<S>                                     <C>
Balance at April 26, 1997.............   $   921,148
  Issuances of common stock, net of
    associated expenses in conjunction
    with:
    Acquisitions......................       584,477
    Repayment of debt.................           570
    Exercise of stock options,
      including tax benefits..........        15,908
    Employee stock purchase plan......         4,060
  Share adjustments at Pooled
    Companies.........................
  Comprehensive loss:
    Other comprehensive loss..........      (107,220)
    Net income........................        67,188
                                         -----------
Balance at April 25, 1998.............     1,486,131
  Issuance of preferred stock, net of
    associated expenses in conjunction
    with equity investment by
    Investor..........................        49,332
  Issuances of common stock, net of
    associated expenses in conjunction
    with:
    Equity Investment by Investor.....       254,176
    2001 Notes Exchange...............       151,425
    Conversion of 2003 Notes..........         1,000
    Exercise of stock options,
      including tax benefits..........        66,791
    Employee stock purchase plan......         2,020
    Purchase price adjustments related
      to acquisitions.................          (102)
  Repurchase of common stock, net of
    associated expenses in conjunction
    with Equity Tender................    (1,000,000)
  Compensation expense related to
    options repurchased in Equity
    Tender............................        57,711
  Adjustments related to the
    Distributions.....................      (381,589)
  Comprehensive loss:
    Other comprehensive loss..........        (8,288)
    Net loss..........................      (199,065)
                                         -----------
Balance at April 24, 1999.............       479,542
  Issuances of common stock, net of
    associated expenses in conjunction
    with employee stock purchase
    plan..............................           829
  Comprehensive loss:
    Other comprehensive loss..........          (565)
    Net loss..........................      (193,764)
                                         -----------
Balance at April 29, 2000.............   $   286,042
                                         ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  FOR THE FISCAL YEAR ENDED
                                                             -----------------------------------
                                                             APRIL 29,    APRIL 24,    APRIL 25,
                                                               2000         1999         1998
                                                             ---------   -----------   ---------
<S>                                                          <C>         <C>           <C>
Cash flows from operating activities:
  Net income (loss)........................................  $(193,764)  $  (199,065)  $ 67,188
  Adjustments to reconcile net income (loss) to net cash
    (used in) provided by operating activities:
    (Income) loss from discontinued operations.............                    1,294    (23,712)
    Depreciation and amortization..........................     69,219        67,573     57,167
    Unrealized foreign currency transaction loss...........     49,004
    Equity in net loss (income) of affiliates..............     32,564           748     (1,687)
    Deferred income taxes..................................     25,126       (10,239)     4,534
    Impaired asset write-offs..............................     17,429        58,735
    Loss on sale and closure of businesses.................     15,032        10,199
    Provision for doubtful accounts........................      9,763         6,982      5,298
    Provision for slow moving or obsolete inventory........      8,947        21,829      9,437
    Extraordinary (gain) loss..............................     (9,108)          269
    Strategic Restructuring Plan costs.....................                   70,380
    Loss (gain) on sale of assets..........................                      303       (991)
    Changes in current assets and liabilities (net of
      assets acquired and liabilities assumed in business
      combinations):
      Accounts receivable..................................     (6,934)        1,585    (17,202)
      Inventories..........................................      2,423        (2,902)   (13,222)
      Prepaid expenses and other current assets............    (16,514)        3,181     (1,912)
      Accounts payable.....................................     10,655         5,796     (3,258)
      Accrued liabilities..................................    (33,132)       24,878      1,922
                                                             ---------   -----------   --------
        Net cash (used in) provided by operating
          activities.......................................    (19,290)       61,546     83,562
                                                             ---------   -----------   --------

Cash flows from investing activities:
  Proceeds from sale of businesses.........................    104,142
  Additions to property and equipment, net of disposals....    (62,669)      (41,556)   (46,695)
  Cash paid in acquisitions, net of cash received..........     (9,329)      (34,508)   (69,299)
  Investments in affiliates................................     (7,500)                 (40,773)
  Payments of acquisition costs............................                   (2,580)    (3,431)
  Proceeds from sale of investments........................                    1,990      5,729
  Other....................................................      1,474         1,988      4,080
                                                             ---------   -----------   --------
        Net cash (used in) provided by investing
          activities.......................................     26,118       (74,666)  (150,389)
                                                             ---------   -----------   --------
</TABLE>

                                       5
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   FOR THE FISCAL YEAR ENDED
                                                              -----------------------------------
                                                              APRIL 29,    APRIL 24,    APRIL 25,
                                                                2000         1999         1998
                                                              ---------   -----------   ---------
<S>                                                           <C>         <C>           <C>
Cash flows from financing activities:
  Payments of long-term debt................................   (127,425)     (226,171)    (13,972)
  Proceeds from (payments of) short-term debt, net..........     49,502      (370,371)    206,698
  Proceeds from issuance of long-term debt..................     34,945     1,153,176         649
  Proceeds from issuance of common stock....................        829       322,987      15,696
  Repurchase of common stock in Equity Tender...............               (1,000,000)
  Net repayments by (advances to) discontinued operations...                  123,551    (132,653)
  Proceeds from issuance of preferred stock.................                   49,332
  Payments to terminate credit facility.....................                   (3,121)
                                                              ---------   -----------   ---------
      Net cash (used in) provided by financing activities...    (42,149)       49,383      76,418
                                                              ---------   -----------   ---------
Effect of exchange rates on cash and cash equivalents.......     (1,070)          336      (4,002)
Cash provided by (used in) discontinued operations..........                  (12,518)      2,406
                                                              ---------   -----------   ---------
Net increase (decrease) in cash and cash equivalents........    (36,391)       24,081       7,995
Cash and cash equivalents at beginning of period............     76,102        52,021      44,026
                                                              ---------   -----------   ---------
Cash and cash equivalents at end of period..................  $  39,711   $    76,102   $  52,021
                                                              =========   ===========   =========
</TABLE>

<TABLE>
<CAPTION>
                                                                   FOR THE FISCAL YEAR ENDED
                                                              -----------------------------------
                                                              APRIL 29,    APRIL 24,    APRIL 25,
                                                                2000         1999         1998
                                                              ---------   -----------   ---------
<S>                                                           <C>         <C>           <C>
Supplemental disclosure of cash flow information:
  Interest paid.............................................  $ 107,900   $    92,251   $  37,211
  Income taxes paid.........................................      5,523         3,990      27,944
</TABLE>

    The Company issued common stock and cash in connection with certain business
combinations related to continuing operations accounted for under the purchase
method during fiscal 2000, 1999 and 1998. The fair values of the assets and
liabilities of the acquired companies at the dates of the acquisitions are
presented as follows:

<TABLE>
<CAPTION>
                                                                   FOR THE FISCAL YEAR ENDED
                                                              -----------------------------------
                                                              APRIL 29,    APRIL 24,    APRIL 25,
                                                                2000         1999         1998
                                                              ---------   -----------   ---------
<S>                                                           <C>         <C>           <C>
Accounts receivable.........................................  $           $     3,251   $  33,270
Inventories, net............................................                    3,189      22,136
Prepaid expenses and other current assets...................                    3,929      15,877
Property and equipment......................................      1,578         3,050      55,438
Intangible assets...........................................      9,785        29,691     403,114
Other assets................................................                      465      33,692
Short-term debt.............................................       (192)       (2,586)     (9,615)
Accounts payable............................................                   (1,222)    (27,161)
Accrued liabilities.........................................       (943)         (842)    (11,194)
Long-term debt..............................................       (899)         (580)    (22,324)
Other long-term liabilities and minority interest...........                   (3,837)       (834)
                                                              ---------   -----------   ---------
      Net assets acquired...................................  $   9,329   $    34,508   $ 492,399
                                                              =========   ===========   =========
The acquisitions were funded as follows:
  Common stock..............................................  $           $             $ 423,100
  Cash......................................................      9,329        34,508      69,299
                                                              ---------   -----------   ---------
      Total.................................................  $   9,329   $    34,508   $ 492,399
                                                              =========   ===========   =========
</TABLE>

                                       6
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

NON-CASH TRANSACTIONS:

    - During fiscal 1999, the Company issued 2,025,185 shares of common stock
      upon conversion of $130,989 of the 2001 Notes in conjunction with the 2001
      Notes Exchange.

    - During fiscal 1999, the Company issued 7,911 shares of common stock upon
      conversion of $1,000 of the 2003 Notes.

    - During fiscal 1999 and 1998, the Company recorded additional paid-in
      capital of approximately $217 and $4,272, respectively, related to the tax
      benefit on stock options exercised.

    - During fiscal 1998, the Company issued 7,044 shares of common stock to
      repay $570 of indebtedness.

          See accompanying notes to consolidated financial statements.

                                       7
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1--BUSINESS ORGANIZATION

    US Office Products Company ("US Office Products" or the "Company") was
founded in October 1994. The Company is a supplier of a broad range of office
products and business services to corporate customers. The Company serves a
broad range of business customers, from large corporations to small businesses.
The Company provides office products and business services in North America, New
Zealand and Australia and, through a 49% owned subsidiary, in the United
Kingdom. The Company also owns Mail Boxes Etc. ("MBE"), which franchises retail
business, communications and postal service centers around the world.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

    The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of US Office Products and
the companies acquired in business combinations accounted for under the purchase
method (the "Purchased Companies") from their respective acquisition dates. As a
result of the Company's spin-off of its Technology Solutions, Print Management,
Educational Supplies, and Corporate Travel Services businesses (collectively,
the "Spin-Off Companies"), the accompanying consolidated financial statements
reflect the results of the Spin-Off Companies as discontinued operations through
June 9, 1998 (the effective date of the Spin-Off). The Company's continuing
operations consist of its North American Operations (which includes office
supplies and office furniture products and services; breakroom products, office
coffee, beverage and vending services, MBE, which the Company acquired in
November 1997; the Company's international operations in New Zealand and
Australia (referred to herein as the "Blue Star Group"); and the Company's 49%
interest in Dudley Stationery Limited ("Dudley"), a U.K. contract stationer.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

DEFINITION OF FISCAL YEAR

    The Company's fiscal year ends on the last Saturday in April. As used in
these consolidated financial statements and related notes to consolidated
financial statements, "fiscal 2000" "fiscal 1999" and "fiscal 1998" refer to the
Company's fiscal years ended April 29, 2000, April 24, 1999 and April 25, 1998,
respectively. Fiscal 2000 includes 53 weeks, while fiscal 1999 and 1998 include
52 weeks.

PRINCIPLES OF CONSOLIDATION

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

                                       8
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT IN AFFILIATES

    The Company maintains a less than 50% ownership interest in certain
affiliates. Investments in affiliates in which the Company has 20%-50% ownership
are accounted for under the equity method, and accordingly, the Company's share
of these affiliates' net income (loss) is recorded as equity in (income) loss of
affiliates in the consolidated statement of operations. Investments in
affiliates in which the Company has less than 20% ownership are accounted for
under the cost method and are carried at cost, except for investments in equity
securities that the Company considers available-for-sale. Available-for-sale
securities are carried at market value, based on quoted market prices.
Unrealized gains (losses) on available-for-sale securities are excluded from net
income and are reported as other comprehensive income, a separate component of
stockholders' equity. Realized gains (losses) on available-for-sale securities
are recorded in the consolidated statement of operations upon liquidation of the
Company's investment.

RECLASSIFICATIONS

    Certain reclassifications have been made to fiscal 1999 and 1998 to conform
to the current year presentation.

CASH AND CASH EQUIVALENTS

    The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.

CONCENTRATION OF CREDIT RISK

    Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of trade accounts receivable. Receivables
arising from sales to customers are not collateralized and, as a result,
management continually monitors the financial condition of its customers to
reduce the risk of loss.

INVENTORIES

    Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out (FIFO) basis and consist primarily of products held for
sale.

PROPERTY AND EQUIPMENT

    Property and equipment is stated at cost. Additions and improvements that
extend the physical or economic life of property and equipment are capitalized.
Maintenance and repairs are expensed as incurred. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the respective assets. The estimated useful lives range from 25 to
40 years for buildings and its components and 3 to 15 years for furniture,
fixtures and equipment. Property and equipment leased under capital leases are
being amortized over the lesser of its useful life or its lease term. Gains and
losses from sales and retirements are included in operations as they occur.

                                       9
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERNAL USE SOFTWARE

    The Company either develops software internally or purchases internal use
software through third party vendors. Costs incurred in the preliminary project
stages are expensed as incurred. Costs incurred in the purchase, development and
implementation of internal use software, including consulting costs, are
capitalized and amortized over three years using the straight-line method. Other
costs, such as maintenance and training, are expensed as incurred.

INTANGIBLE ASSETS

    Intangible assets consist primarily of goodwill, which represents the excess
of cost over the fair value of net assets acquired in business combinations
accounted for under the purchase method. Goodwill is amortized on a
straight-line basis over estimated useful lives ranging from 20 to 40 years.
Management periodically evaluates the recoverability of goodwill, which would be
adjusted for a permanent decline in value, if any, as determined by comparing
anticipated undiscounted future cash flows from operations to net book value.

ACCRUED ACQUISITION COSTS

    The Company accrues the direct external costs incurred in conjunction with
the consummation of business combinations and the costs incurred to consolidate
acquired operations into existing Company facilities, including the external
costs and liabilities to close redundant facilities and severance and relocation
costs related to the acquired entity's employees in accordance with EITF Issue
No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination."

TRANSLATION OF FOREIGN CURRENCIES

    Balance sheet accounts of foreign subsidiaries are translated using the
period-end exchange rate, and statement of operations accounts are translated
using the monthly average exchange rates. Translation adjustments are recorded
in stockholders' equity as a separate component of accumulated other
comprehensive loss. In fiscal 2000, 1999 and 1998, currency translation
adjustments were not adjusted for income taxes as the Company considered its
investment in foreign subsidiaries to be permanent in nature. During fiscal 1999
and 1998, US Office Products Company (the "Parent") considered its intercompany
loans to the Blue Star Group to be long-term investments and, therefore, the
unrealized foreign currency transaction gain (loss) related to the intercompany
loans was recorded in stockholders' equity as a component of other comprehensive
loss. As a result of the strategic review of operations conducted during the
fourth quarter of fiscal 1999, the Parent changed its perspective on the Blue
Star Group operations and no longer considers the intercompany loans to be
long-term in nature. Accordingly, during fiscal 2000, the Company recorded
unrealized foreign currency transaction losses related to its intercompany loans
with the Blue Star Group as a component of loss from continuing operations.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company enters into interest rate swap agreements to reduce the impact
of changes in interest rates on its floating rate debt. The swap agreements are
contracts to exchange floating rate for fixed interest payments periodically
over the life of the agreements without the exchange of the underlying

                                       10
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
notional amounts. The notional amounts of interest rate swap agreements are used
to measure interest to be paid or received and do not represent the amount of
exposure to credit loss. For interest rate instruments that effectively hedge
interest rate exposures, the net cash amounts paid or received on the agreements
are accrued and recognized as a component of interest expense.

    The Company also enters into foreign currency forward contracts to reduce
the impact of changes in the exchange rates of the New Zealand and Australian
dollars. As of April 29, 2000, the Company held contracts denominated in U.S.
dollars for a total notional amount of approximately $5,500 at a rate of $0.50.
These contracts matured on May 15, 2000.

FAIR VALUE OF FINANCIAL INSTRUMENTS

    The estimated fair value of the Company's financial instruments has been
determined using the following methods and assumptions:

    - The carrying amounts of cash and cash equivalents, accounts receivable and
      accounts payable approximate fair value;

    - The fair values of the 5 1/2% Convertible Subordinated Notes due 2001 (the
      "2001 Notes"), the 5 1/2% Convertible Subordinated Notes due 2003 (the
      "2003 Notes") and the 9 3/4% Senior Subordinated Notes due 2008 (the "2008
      Notes") are based on quoted market prices;

    - The carrying amounts of the Company's debt, other than the 2001 Notes, the
      2003 Notes and the 2008 Notes, approximate fair value, based on discounted
      cash flow analyses using the Company's current incremental borrowing rates
      for similar types of borrowing arrangements.

INCOME TAXES

    Income taxes have been computed utilizing the asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.

TAXES ON UNDISTRIBUTED EARNINGS

    No provision was made for U.S. income taxes on earnings of subsidiary
companies which the Company controls but does not include in the consolidated
federal income tax return, since it is management's practice and intent to
permanently reinvest the earnings of these subsidiaries.

REVENUE RECOGNITION

    Revenue is recognized upon the delivery of products or upon the completion
of services provided to customers when no additional obligations to the
customers exist. The Company also leases equipment to customers under both
short-term and long-term lease agreements. Revenue related to short-term leases
is recognized on a monthly basis over the life of the lease. Certain long-term
leases qualify as sales-type leases and, accordingly, the present value of the
future lease payments is recognized as income upon delivery of the equipment to
the customer. The Company, through its wholly owned subsidiary MBE, enters into
area and individual franchise agreements in the United States and master license
agreements in

                                       11
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
other countries. Area franchise agreements grant the area franchisee the
exclusive right to market individual franchise centers for the Company in the
area franchisee's territory. The area franchisee generally receives a commission
on the individual franchises sold as well as a share of the royalties earned by
the Company from centers in the area franchisee's territory. Individual
franchise agreements grant the individual franchisee the exclusive right to open
and operate a franchise center in the individual franchisee's territory.

    Franchise fee revenue is recognized upon the completion of all significant
initial services provided to the franchisee, area franchisee or master licensee
and upon satisfaction of all material conditions of the franchise agreement,
area franchise agreement or master license. For individual franchise sales, the
significant initial obligations that must be completed before any revenue is
recognized are: the site is located, a store lease is in place, the franchise
agreement has been signed, the store design and layout is complete, all manuals
and systems have been provided, and training at MBE is complete. For area
franchise sales, the significant initial obligations that must be completed
before any revenue is recognized are: all operating manuals are provided,
training is completed and a pilot center is opened. For master license
agreements, the significant obligations that must be completed before any
revenue is recognized are: all operating manuals are provided and training is
completed. Revenue is recognized using the installment method when the revenue
is collectible over an extended period and no reasonable basis exists for
estimating collectibility.

    On a monthly basis, all individual franchisees are required to pay royalty
and marketing fees to the Company based upon a percentage of each franchisee's
sales (as defined). Such fees are recognized as revenue based upon reported or
estimated sales activity by the franchisees. Revenue from sales of supplies and
equipment is recognized when orders are shipped, or the lease is completed,
whichever is later.

COST OF REVENUES

    Delivery and occupancy costs are included in cost of revenues. Vendor
rebates are recorded as a reduction in the cost of inventory and recognized as a
reduction in cost of revenues when such inventory is sold.

STRATEGIC RESTRUCTURING PLAN COSTS

    Strategic Restructuring Plan Costs represent costs incurred in conjunction
with the completion of the Company's Strategic Restructuring Plan. See Note 3,
"Strategic Restructuring Plan" for a description of the components of this plan.

OPERATING RESTRUCTURING COSTS

    The Company records the costs of consolidating existing Company facilities,
including the external costs and liabilities to close redundant Company
facilities, and severance costs related to the Company's employees in accordance
with EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in Restructuring)."

                                       12
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS

    The Company expenses advertising costs when the advertisement occurs.
Advertising costs are included in the consolidated statement of operations as a
component of selling, general and administrative expenses. During fiscal 2000,
1999 and 1998, the Company incurred advertising expenses of $18,358, $20,276 and
$18,473, respectively.

NET INCOME (LOSS) PER SHARE

    Net income (loss) per share is calculated in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS
No. 128 requires the dual presentation of basic and diluted earnings per share
("EPS") on the face of the consolidated statement of operations. Basic EPS
excludes dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.

NEW ACCOUNTING PRONOUNCEMENTS

    In fiscal 2000, the Company adopted Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance for accounting for the costs of
computer software developed or obtained for internal use. The adoption of SOP
98-1 had no impact on the results of operations or financial position of the
Company.

    In fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income (loss) and its components. Comprehensive income (loss)
consists of net income (loss), foreign currency translation adjustments and
unrealized gains on available-for-sale securities as presented in the
consolidated statement of stockholders' equity. The adoption of SFAS No. 130 had
no impact on total stockholders' equity or net income (loss).

    In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which supersedes SFAS
No. 14. SFAS No. 131 requires the Company to report segment information based on
the "management," or "operating segment," approach rather than the "industry"
approach required under SFAS No. 14. Additionally, SFAS No. 131 requires
disclosures about the Company's products and services, geographic areas and
major customers. The adoption of SFAS No. 131 had no impact on the results of
operations or financial position of the Company, but did affect the disclosure
of segment information.

    In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000 (fiscal 2002 for the Company). SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. Management of the Company anticipates that, due to its limited use
of derivative instruments, the

                                       13
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adoption of SFAS No. 133 will not have a significant effect on the results of
operations or financial position of the Company.

    In December 1999, the Securities and Exchange Commission ("SEC") staff
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements," which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements. In June 2000, the SEC staff
extended the effective date of SAB No. 101 until the fourth quarter of fiscal
2001. Management does not expect SAB No. 101 to have a material effect on the
Company's financial position or results of operations.

NOTE 3--STRATEGIC RESTRUCTURING PLAN

    In June 1998, the Company completed a comprehensive restructuring plan (the
"Strategic Restructuring Plan") that was approved by the Company's Board of
Directors in January 1998. The principal elements of the Strategic Restructuring
Plan were:

    - EQUITY TENDER OFFER. Pursuant to a self-tender offer (the "Equity
      Tender"), the Company repurchased 9,259,261 shares of its common stock,
      including 1,140,186 shares that were issued on exercise of vested and
      unvested options for common stock at $108.00 per share (or in the case of
      stock options, at $108.00 per share minus the exercise price of the
      options). The Company repurchased the shares for $934,569 in cash. In
      fiscal 1999, the Company recorded a non-cash compensation expense of
      $57,711, related to the participation of stock options in the Equity
      Tender.

    - SPIN-OFF DISTRIBUTIONS. After acceptance of the shares in the Equity
      Tender, the Company distributed to US Office Products' stockholders the
      shares of four separate companies: Aztec Technology Partners, Inc. (one
      share for every 1.25 shares of US Office Products common stock held),
      Workflow Management, Inc. (one share for every 1.875 shares of US Office
      Products common stock held), School Specialty, Inc. (one share for every
      2.25 shares of US Office Products common stock held) and Navigant
      International, Inc. (one share for every 2.5 shares of US Office Products
      common stock held) (collectively, the "Spin-Off Companies"). The
      distributions of the shares of the Spin-Off Companies are referred to in
      these consolidated financial statements as the "Distributions." The
      Spin-Off Companies hold US Office Products' former Technology Solutions,
      Print Management, Educational Supplies and Corporate Travel Services
      businesses, respectively.

    - EQUITY INVESTMENT. After the Distributions, an affiliate ("Investor") of
      an investment fund managed by Clayton, Dubilier & Rice, Inc., a private
      investment firm, acquired the following equity securities of the Company
      for $254,176, net of $15,824 in fees: (i) 9,101,129 shares (24.9%) of the
      Company's common stock, (ii) special warrants (the "Special Warrants")
      entitling Investor to purchase additional common stock in certain
      circumstances intended to permit Investor to maintain its 24.9% equity
      ownership position, and (iii) warrants (the "Warrants") entitling Investor
      to purchase additional shares of common stock for $405,000 equal to the
      number of shares of common stock it purchased outright plus the number of
      shares it acquires or is entitled to acquire pursuant to the Special
      Warrants. In April 1999, in conjunction with Investor's additional
      investment in the Company (see Note 15, "Stockholders' Equity"), the
      exercise price of the Warrants was reduced to $5.625 per share.

                                       14
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 3--STRATEGIC RESTRUCTURING PLAN (CONTINUED)
    In conjunction with the Strategic Restructuring Plan, US Office Products
completed the following financing transactions (the "Financing Transactions") in
June 1998:

    - Pursuant to a tender offer, the Company repurchased $222,215 of its 2003
      Notes for a purchase price of 94.5% of the principal amount and accrued
      interest on such notes.

    - Pursuant to an exchange offer, the Company exchanged $130,989 of its 2001
      Notes for 2,025,185 shares of common stock at an exchange rate of 15.461
      shares of US Office Products common stock for each $1 principal amount of
      such notes, which effectively reduced the conversion price of such notes
      from $76.00 to $64.68 while the exchange offer was open.

    - The Company entered into a new $1,225,000 senior secured bank credit
      facility (the "New Credit Facility") that consisted of the following
      (i) a $200,000 seven-year multi-draw loan facility; (ii) a $250,000
      seven-year revolving credit facility; (iii) a $100,000 seven-year term
      loan facility; and (iv) a $675,000 eight-year term loan facility. As a
      result of the Company entering into the New Credit Facility, the former
      credit facility was terminated. In agreement with the Company's lenders,
      certain terms of the New Credit Facility were subsequently modified. (see
      Note 10, "Credit Facilities").

    - The Company issued and sold $400,000 of the 2008 Notes in a private
      placement at 99.583% of the principal amount.

DISCONTINUED OPERATIONS

    As a result of the Strategic Restructuring Plan, the Spin-Off Companies are
reflected as discontinued operations for all periods presented in the Company's
consolidated financial statements. The Spin-Off Companies (and their respective
lines of business) are Aztec Technology Partners, Inc. (technology solutions),
Navigant International, Inc. (corporate travel services), School
Specialty, Inc. (educational supplies), and Workflow Management, Inc. (print
management). The Spin-Off Companies began operating as independent companies on
June 10, 1998. Accordingly, the fiscal 1999 results of discontinued operations
represent the period from April 26, 1998 to June 9, 1998.

                                       15
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 3--STRATEGIC RESTRUCTURING PLAN (CONTINUED)
    The income (loss) from discontinued operations included in the consolidated
statement of operations represents the sum of the results of the Spin-Off
Companies for the periods they were included in the results of the Company and
is summarized as follows:

<TABLE>
<CAPTION>
                                                     CORPORATE                                 TOTAL
                                          PRINT       TRAVEL     EDUCATIONAL   TECHNOLOGY   DISCONTINUED
                                        MANAGEMENT   SERVICES     SUPPLIES     SOLUTIONS     OPERATIONS
                                        ----------   ---------   -----------   ----------   ------------
<S>                                     <C>          <C>         <C>           <C>          <C>
Fiscal 1999:
  Revenues............................   $41,132      $19,346      $40,785       $30,951      $132,214
  Operating income (loss).............    (1,601)          14        1,836           403           652
  Income (loss) before provision for
    (benefit from) income taxes.......    (2,043)        (108)       1,069           381          (701)
  Provision for (benefit from) income
    taxes.............................      (732)         158          703           464           593
  Income (loss) from discontinued
    operations, net of income taxes...    (1,311)        (266)         366           (83)       (1,294)
</TABLE>

<TABLE>
<S>                                     <C>          <C>        <C>         <C>        <C>
Fiscal 1998:
  Revenues............................   $353,351    $120,424   $310,455    $208,341    $992,571
  Operating income....................     16,776       7,808     18,103     13,091       55,778
  Income before provision for income
    taxes.............................     15,099       7,631     12,173     13,114       48,017
  Provision for income taxes..........      7,392       4,569      6,065      6,279       24,305
  Income from discontinued operations,
    net of income taxes...............      7,707       3,062      6,108      6,835       23,712
</TABLE>

    The results of the Spin-Off Companies include allocations of interest
expense, at US Office Products' weighted average interest rates, based on the
average intercompany debt outstanding during the periods presented. Intercompany
debt allocated to the Spin-Off Companies generally was comprised of funding
provided to the Spin-Off Companies by US Office Products for acquisitions and
acquisition related expenses, repayments of long-term and short-term debt of
acquired companies, payments of direct operating expenses of the Spin-Off
Companies and the net results of daily advances and sweeps of cash by the
Company to keep each Spin-Off Company's cash balance at or near zero on a daily
basis. To the extent that the sum of the intercompany funding and third-party
debt outstanding exceeded the amount of debt to be allocated to the Spin-Off
Companies pursuant to the investment agreement with Investor, such excess
amounts have been characterized as divisional equity. The results of the
Spin-Off Companies do not include any allocations of corporate overhead from the
Company during the periods presented.

NOTE 4--BUSINESS COMBINATIONS

    In fiscal 2000, the Company acquired one business, which was accounted for
under the purchase method, for a cash purchase price of $9,329 and completed
nine business divestitures, including the sale of 60% of the technology division
of the Blue Star Group ("Business Solutions"). The Company's remaining 40%
interest in Business Solutions is accounted for under the equity method of
accounting. The nine

                                       16
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 4--BUSINESS COMBINATIONS (CONTINUED)
business divestitures generated total proceeds of $114,402, including $104,142
in cash, and resulted in the recognition of a pre-tax loss of $15,032.

    In fiscal 1999, the Company made 22 acquisitions, all related to continuing
operations, which were accounted for under the purchase method. The aggregate
purchase price for these 22 acquisitions was $34,508, consisting entirely of
cash. The total assets related to these 22 acquisitions were $43,575, including
goodwill of $29,691. The results of these acquisitions have been included in the
Company's results from their respective dates of acquisition. The Company also
completed the sale or closure of seven businesses during fiscal 1999, which
resulted in the recognition of a pre-tax loss of $10,199.

    In fiscal 1998, the Company made 73 acquisitions, including 51 related to
continuing operations, accounted for under the purchase method. The aggregate
purchase price for these 73 acquisitions was $762,456, consisting of $177,979 of
cash and 6,944,625 shares of common stock with a market value of $584,477. The
total assets related to these 73 acquisitions were $900,870, including goodwill
of $643,413. The results of these acquisitions have been included in the
Company's results from their respective dates of acquisition.

    In addition, there is the potential for the payment to a former owner of up
to an additional 750,000 shares of common stock, subject to an upward adjustment
on the share limit to take account of the Strategic Restructuring Plan and the
Financing Transactions (which the Company currently estimates could cause the
limit to be increased to 1,500,000 to 1,800,000 shares) related to a 1996
purchase acquisition. Whether any additional payment is due is calculated by
comparing the pre-tax earnings of such purchase acquisition for fiscal 1999 to
the value of the Company's common stock at the end of fiscal 1999. Based upon
the reported pre-tax earnings for fiscal 1999 of the acquired business, the
Company does not believe that it is required to issue any additional shares to
the former owner. The former owner disagrees with this conclusion, and the
matter may result in litigation. The issuance of shares under this arrangement
would entitle Investor to anti-dilution protection under the terms of the
Special Warrants.

    The following presents the unaudited pro forma results of operations of the
Company for fiscal 2000 and 1999 and includes the Company's consolidated
financial statements and the results of the Purchased Companies and excludes the
results of all business divestitures and closures as if all such purchase
acquisitions and business divestitures and closures had been made at the
beginning of fiscal 1999. The results presented below include certain pro forma
adjustments to reflect the amortization of intangible assets, removal of
Strategic Restructuring Plan costs, and the inclusion of an appropriate income
tax benefit on all losses:

<TABLE>
<CAPTION>
                                                              FOR THE FISCAL YEAR ENDED
                                                              -------------------------
                                                               APRIL 29,     APRIL 24,
                                                                 2000          1999
                                                              -----------   -----------
<S>                                                           <C>           <C>
Revenues....................................................  $2,347,974    $2,349,855
Loss from continuing operations before extraordinary
  items.....................................................    (180,786)      (83,409)
Basic and diluted loss per share from continuing operations
  before extraordinary items................................       (4.91)        (2.30)
</TABLE>

                                       17
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 4--BUSINESS COMBINATIONS (CONTINUED)

    The unaudited pro forma results of operations are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the purchase acquisitions and business divestitures and closures
occurred at the beginning of fiscal 1999 or the results which may occur in the
future.

NOTE 5--INVESTMENT IN AFFILIATES

    The Company maintains ownership in several affiliates, ranging from 0.2% to
49.0%, that either operate in similar lines of business or provide a strategic
partnership. As of April 29, 2000, the Company's investments in affiliates,
which are included in other assets on the consolidated balance sheet, include
the following:

<TABLE>
<CAPTION>
                                                             APRIL 29,   APRIL 24,
INVESTMENT                                     OWNERSHIP       2000        1999
----------                                   -------------   ---------   ---------
<S>                                          <C>             <C>         <C>
Equity Method:
Dudley Stationery Limited..................       49%         $50,431     $83,344
Business Solutions.........................       40%           9,196
                                                              -------     -------
                                                               59,627      83,344
Cost Method:
Stamps.com.................................       17%          26,088
Other......................................  less than 12%      5,278
                                                              -------     -------
                                                               31,366
                                                              -------     -------
                                                              $90,993     $83,344
                                                              =======     =======
</TABLE>

EQUITY METHOD

    In November 1996, the Company acquired a 49% equity interest in Dudley
Stationery Limited ("Dudley"). Under the terms of the agreement, the Company
invested $82,043 in Dudley. The Company's investment in Dudley as of April 29,
2000 was $50,431, including $29,348 which represents the excess of the Company's
proportionate share of the underlying net assets of Dudley, and is included in
other assets on the consolidated balance sheet. The portion of the investment in
excess of the Company's proportionate share of the underlying assets of Dudley
is being amortized over 40 years. In fiscal 2000, the Company evaluated the
recoverability of the portion of the investment in excess of the Company's
proportionate share of the underlying assets of Dudley. The Company determined
that the carrying value of the investment exceeds the Company's proportionate
share of Dudley's future undiscounted cash flow projections, thus indicating
impairment. Accordingly, the Company recognized an impairment loss of $3,360,
which reduced the Company's investment by the amount equal to the excess of the
carrying value

                                       18
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5--INVESTMENT IN AFFILIATES (CONTINUED)
over the Company's proportionate share of Dudley's future discounted cash flows.
The Company's investment in Dudley is as follows:

<TABLE>
<S>                                                           <C>
Original investment.........................................  $ 82,043
Cumulative losses...........................................   (24,354)
Cumulative amortization.....................................    (3,898)
Impairment of investment....................................    (3,360)
                                                              --------
                                                              $ 50,431
                                                              ========
</TABLE>

    In December 1999, Blue Star sold 60% of its technology division. The
Company's remaining 40% investment amounted to $9,196, including $3,651 of
goodwill, as of April 29, 2000.

COST METHOD

    In the fiscal year ended April 29, 2000, MBE invested $4,000 in iShip.com, a
provider of web-based shipping solutions, for 17% of iShip.com common stock. In
March 2000, Stamps.com acquired iShip.com, and in the transaction MBE received
1,317,973 shares of Stamps.com common stock in exchange for its equity interest
in iShip.com. As of April 29, 2000, the fair market value of the Company's
investment in Stamps.com was $21,088, based on Stamps.com's quoted stock price
as of April 29, 2000. Included in the Company's investment in Stamps.com is
$5,000 for warrants to purchase 658,986 additional shares of Stamps.com common
stock at an exercise price of $6.07 per share. Because the common stock
underlying the warrants are not registered securities and MBE cannot freely sell
the shares of common stock underlying the warrants until after April 2001, the
warrants are carried at a cost of $5,000 and are included in the Company's
investment in Stamps.com.

    As of April 29, 2000, the Company maintained investments in several other
businesses, ranging from 0.2% to 12.0% ownership, totaling $5,278.

NOTE 6--ACCRUED ACQUISITION COSTS

    As of the consummation date of an acquisition, the Company begins to assess
and formulate a plan to exit activities of the acquired companies. Typically,
this involves evaluating the facilities of the Company and the acquired
companies in the specific geographic areas, determining which of the acquired
facilities will be exited and identifying employee groups that will be
terminated or relocated. In most cases, the facilities are closed and the
employees terminated within one year of the completion of the plan.

                                       19
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 6--ACCRUED ACQUISITION COSTS (CONTINUED)
    The following table sets forth the Company's accrued acquisition costs for
the periods ended April 24, 1999 and April 29, 2000:

<TABLE>
<CAPTION>
                                                                  EMPLOYEE      DISPOSAL OF
                                                   REDUNDANT    SEVERANCE AND   ASSETS AND
                                                   FACILITIES    RELOCATION        OTHER       TOTAL
                                                   ----------   -------------   -----------   --------
<S>                                                <C>          <C>             <C>           <C>
Balance at April 25, 1998........................   $ 2,383        $ 3,117        $ 5,392     $ 10,892
  Additions......................................       334            367          1,077        1,778
  Utilizations and reversals.....................    (2,053)        (2,485)        (6,353)     (10,891)
                                                    -------        -------        -------     --------
Balance at April 24, 1999........................       664            999            116        1,779
  Utilizations and reversals.....................      (272)          (972)            82       (1,162)
                                                    -------        -------        -------     --------
Balance at April 29, 2000........................   $   392        $    27        $   198     $    617
                                                    =======        =======        =======     ========
</TABLE>

NOTE 7--OPERATING RESTRUCTURING COSTS

    The following table sets forth the Company's accrued operating restructuring
costs for the periods ended April 25, 1998, April 24, 1999 and April 29, 2000:

<TABLE>
<CAPTION>
                                                                                 OTHER ASSET
                                                    FACILITY       SEVERANCE       WRITE-
                                                  CLOSURE AND         AND           DOWNS
                                                 CONSOLIDATIONS   TERMINATIONS    AND COSTS     TOTAL
                                                 --------------   ------------   -----------   --------
<S>                                              <C>              <C>            <C>           <C>
Balance at April 26, 1997......................     $ 1,035         $     79       $   406     $  1,520
  Additions....................................       2,008            3,053         1,126        6,187
  Utilizations.................................      (2,076)          (1,877)       (1,058)      (5,011)
                                                    -------         --------       -------     --------
Balance at April 25, 1998......................         967            1,255           474        2,696
  Additions....................................       6,786           13,090         4,166       24,042
  Utilizations.................................      (2,166)          (9,775)       (3,854)     (15,795)
                                                    -------         --------       -------     --------
Balance at April 24, 1999......................       5,587            4,570           786       10,943
  Additions....................................       2,530           12,057           789       15,376
  Utilizations.................................      (4,036)         (10,298)         (496)     (14,830)
                                                    -------         --------       -------     --------
Balance at April 29, 2000......................     $ 4,081         $  6,329       $ 1,079     $ 11,489
                                                    =======         ========       =======     ========
</TABLE>

    In fiscal 2000, management approved restructuring plans, which included
initiatives to continue streamlining its operating structure by reducing the
number of employees, eliminating duplicative facilities and deploying a common
information system. The total operating restructuring costs recorded during
fiscal 2000 included $12,057 of employee separation costs for 355 employees
working in the majority of the Company's business functions, job classes and
geographies. These costs also include $2,530 related to the closure or
consolidation of 55 facilities containing redundant or unutilized warehousing,
sales and/or administrative activities. These costs primarily represent the
estimated excess lease costs associated with exited facilities. The remaining
$789 recorded during fiscal 2000 relates to the write-off of unutilized assets
resulting from facility closings. The total cost of $15,376 represents $14,587
of cash and $789 of non-cash charges.

                                       20
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 7--OPERATING RESTRUCTURING COSTS (CONTINUED)

    In fiscal 1999, management approved restructuring plans, which included
initiatives to streamline its operating structure by reducing the number of
employees, eliminating duplicative facilities, and deploying a common
information system. The total operating restructuring costs recorded during
fiscal 1999 included $13,090 of employee separation costs for 503 employees
working in the majority of the Company's business functions, job classes and
geographies. These costs also include $6,786 related to the closure or
consolidation of 89 facilities containing redundant or unutilized warehousing,
sales and/or administrative activities. These costs primarily represent the
estimated excess lease costs associated with exited facilities. The remaining
$4,166 recorded during fiscal 1999 relates to the write-off of unutilized assets
resulting from facility closings and the deployment of the Company's common
information system. The total cost of $24,042 represents $19,876 of cash and
$4,166 of non-cash charges.

    In fiscal 1998, management approved restructuring plans in conjunction with
its continuing initiatives to integrate acquired companies and streamline
operations. The operating restructuring costs recorded during fiscal 1998
included $3,053 of employee separation costs for 241 employees working primarily
in the general administrative and warehouse areas. The costs also included
$2,008 related to closure or consolidation of 28 facilities, primarily related
to excess lease costs at exited facilities containing primarily redundant
warehouse and administrative activities. The remaining $1,126 relates to the
write-off of unutilized assets resulting from facility closures. The total cost
of $6,187 represents $4,248 of cash and $1,939 of non-cash charges.

NOTE 8--PROPERTY AND EQUIPMENT

    Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                         APRIL 29,   APRIL 24,
                                                           2000        1999
                                                         ---------   ---------
<S>                                                      <C>         <C>
Land...................................................  $ 15,064    $  25,529
Buildings..............................................    25,482       40,516
Furniture and fixtures.................................   145,416      152,741
Warehouse equipment....................................    85,911       78,397
Equipment under capital leases.........................    10,577        9,296
Leasehold improvements.................................    26,408       27,674
                                                         --------    ---------
                                                          308,858      334,153
Less: Accumulated depreciation.........................   (97,955)    (103,001)
                                                         --------    ---------
Property and equipment, net............................  $210,903    $ 231,152
                                                         ========    =========
</TABLE>

    Depreciation expense for fiscal 2000, 1999 and 1998 was $45,217, $41,739 and
$33,260, respectively.

                                       21
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 9--INTANGIBLE ASSETS

    Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                          APRIL 29,   APRIL 24,
                                                            2000        1999
                                                          ---------   ---------
<S>                                                       <C>         <C>
Goodwill................................................  $860,188    $909,675
Other...................................................     4,369       4,225
                                                          --------    --------
                                                           864,557     913,900
Less: Accumulated amortization..........................   (73,164)    (55,703)
                                                          --------    --------
                                                          $791,393    $858,197
                                                          ========    ========
</TABLE>

    Amortization expense for fiscal 2000, 1999 and 1998 was $24,002, $24,709 and
$19,938, respectively.

    During the Company's evaluation of the recoverability of goodwill, certain
operating companies were identified as having future undiscounted cash flow
projections that were less than the carrying value of the unamortized goodwill
related to such companies, thus indicating impairment. As a result, in fiscal
2000 and 1999, impairment losses of $13,642 and $58,735, respectively, were
recorded as reductions to goodwill in amounts equal to the excess of the
carrying value over the future discounted cash flows of the entities.

NOTE 10--CREDIT FACILITIES

SHORT-TERM DEBT

    Short-term debt consists of the following:

<TABLE>
<CAPTION>
                                                            APRIL 29,   APRIL 24,
                                                              2000        1999
                                                            ---------   ---------
<S>                                                         <C>         <C>
Seven-year revolving credit facility due 2005, interest at
  8.29% at April 29, 2000, interest payable monthly.......   $50,000
Convertible Subordinated Notes due 2001, interest at
  5 1/2%, convertible into shares of common stock at any
  time prior to maturity at a conversion price of $38.70
  per share, subject to adjustment in certain events,
  interest payable semi-annually..........................    12,761
Current maturities of long-term debt......................    16,195      19,193
                                                             -------     -------
    Total short-term debt.................................   $78,956     $19,193
                                                             =======     =======
</TABLE>

    Under the Company's credit facility, the revolving credit facility provides
the Company with up to $150,000 of borrowing availability. See "Long-Term Debt."

    The 2001 Notes are redeemable, in whole or in part, at the Company's option
at specified redemption prices. The fair value of the 2001 Notes at April 29,
2000, based upon quoted market prices, totaled $6,381. In conjunction with the
Strategic Restructuring Plan in fiscal 1999, $130,989 of the 2001 Notes were
exchanged for 2,025,185 shares of common stock at a conversion price that was
temporarily reduced from $76.00 per share to $64.68 per share. The Company
recorded an expense in fiscal 1999 of $20,436 as a result of the reduction in
the conversion price, and the conversion price on the remaining outstanding 2001
Notes was adjusted to $38.70. In addition, in fiscal 1999 the Company recorded
an extraordinary expense

                                       22
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10--CREDIT FACILITIES (CONTINUED)
of $2,911, before benefit from income taxes, related to the write-off of debt
issue costs previously capitalized in connection with the issuance of the 2001
Notes.

    Upon completion of the Strategic Restructuring Plan in June 1998, the
Company terminated and repaid the balance outstanding under its former $500,000
credit facility (the "Former Credit Facility") with a syndicate of financial
institutions and entered into the New Credit Facility. As a result, in fiscal
1999, the Company recorded a non-cash extraordinary expense of $4,745, before
benefit from income taxes, related to the write-off of debt issue costs
capitalized in conjunction with the Former Credit Facility.

LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                       APRIL 29,    APRIL 24,
                                                          2000         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>
Seven-year term loan due 2005, interest at 8.41% at
  April 29, 2000, principal and interest payable
  quarterly..........................................  $   67,328   $   91,667
Eight-year term loan due 2006, interest at 8.66% at
  April 29, 2000, principal and interest payable
  quarterly..........................................     594,474      674,333
Seven-year multi-draw term loan facility due 2005,
  interest at 8.38% at April 29, 2000, interest
  payable monthly....................................      34,200
Senior Subordinated Notes due 2008, interest at
  9 3/4%, redeemable at any time on or after June 15,
  2003, interest payable semi-annually...............     361,645      398,321
Convertible Subordinated Notes due 2003, interest at
  5 1/2%, convertible into shares of common stock at
  any time prior to maturity at a conversion price of
  $64.36 per share, subject to adjustment in certain
  events, interest payable semi-annually.............       4,144        4,614
Convertible Subordinated Notes due 2001, interest at
  5 1/2%, convertible into shares of common stock at
  any time prior to maturity at a conversion price of
  $38.70 per share, subject to adjustment in certain
  events, interest payable semi-annually.............                   12,761
Other................................................       1,463        2,265
Capital lease obligations............................       8,010        6,661
                                                       ----------   ----------
                                                        1,071,264    1,190,622
Less: Current maturities of long-term debt...........     (16,195)     (19,193)
                                                       ----------   ----------
    Total long-term debt, net of current
      maturities.....................................  $1,055,069   $1,171,429
                                                       ==========   ==========
</TABLE>

    The New Credit Facility, which was entered into in June 1998, originally
provided for an aggregate principal amount of $1,225,000, consisting of (i) a
seven-year multi-draw term loan facility totaling $200,000, (ii) a seven-year
revolving credit facility totaling $250,000, (iii) a seven-year term loan
facility totaling $100,000, and (iv) an eight-year term loan facility totaling
$675,000. Interest rates on such

                                       23
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10--CREDIT FACILITIES (CONTINUED)
borrowings were to bear interest, at the Company's option, at the lending bank's
base rate plus an applicable margin of up to 1.50%, or a eurodollar rate plus an
applicable margin of up to 2.50%. The Company's obligations under the New Credit
Facility are guaranteed by its present domestic subsidiaries; future material
domestic subsidiaries will also be required to guarantee these obligations. The
New Credit Facility is collateralized by substantially all of the assets of the
Company and its domestic subsidiaries; future material domestic subsidiaries
also will be required to pledge their assets as collateral.

    During fiscal 1999, the Company reached an agreement with its bank lenders
to revise the terms of the New Credit Facility. The amendments included
modifications to the financial covenants and a reduction in the amount available
under the multi-draw term loan facility from $200,000 to $50,000 and under the
revolving credit facility from $250,000 to $200,000. There was no change to the
interest rates that the Company paid on borrowings under the New Credit
Facility. The Company paid amendment fees of $2,929 in connection with these
modifications to the New Credit Facility and, in fiscal 1999, recorded a
non-cash expense of $1,857, which was included in interest expense, to write-off
capitalized debt issue costs.

    Effective April 28, 2000, the New Credit Facility was further amended. The
amendment to the New Credit Facility (the "Amended New Credit Facility") revised
the applicable interest rates, the financial covenants and certain other terms,
including a reduction in the amount of the revolving credit facility from
$200,000 to $150,000 and the amount of the multi-draw term loan facility from
$50,000 to $34,200, the amount outstanding under that facility at the time of
the amendment. The applicable interest rate margins were raised on all loans by
0.75% to 1.0% and the commitment fee for the revolving credit facility was fixed
at 0.5%. The Company paid amendment fees of $1,100 in connection with these
modifications to the Amended New Credit Facility. As of April 29, 2000,
capitalized debt issue costs related to the Amended New Credit Facility totaling
$5,191 are included in other assets and are being amortized over the period to
maturity.

    Under this amendment, if the Company does not reduce the aggregate debt
outstanding under the Amended New Credit Facility by a total of at least
$100,000 by October 31, 2000 and, cumulatively, $425,000 by January 31, 2001,
the applicable interest rate margins will increase by an additional 0.5% in each
case subsequent to those dates. This additional interest will not become payable
until the earlier of the date on which the aggregate debt outstanding is reduced
by the specified amounts or April 29, 2001 (the first day of the fiscal year
ending April 27, 2002). The Company expects to use the proceeds from the sale of
certain of its non-core assets to reduce outstanding indebtedness under the
Amended New Credit Facility. The amendment also limits the permitted level of
capital expenditures during fiscal 2001, investments and acquisitions the
Company can make, and the amount of additional indebtedness and guarantees the
Company may incur.

    The Company is required to ensure that the effective interest rate paid by
the Company on at least 50% of the aggregate amount outstanding under the
Amended New Credit Facility and the 2008 Notes is at a fixed rate of interest.
As a result, the Company has entered into interest rate swap arrangements to
limit the LIBOR-based interest rate exposure on $500,000 of the outstanding
balance under the Amended New Credit Facility to rates ranging from 5.7% to
6.0%. The interest rate swap agreements expire over a period ranging from 2001
to 2003. As a result of these swap agreements (and including the fixed-rate 2008
Notes), the Company has fixed the interest rates on $879,000 (77.5%) of the
long-term debt outstanding at April 29, 2000. The Company's weighted average
interest rate in fiscal year 2000 was 8.9%.

                                       24
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10--CREDIT FACILITIES (CONTINUED)
    The Amended New Credit Facility includes, among others, (1) restrictions on
the Company's ability to incur additional indebtedness, sell assets, pay
dividends, or engage in certain other transactions, (2) requirements that the
Company maintain certain financial ratios, and (3) other provisions customary
for loans to highly leveraged companies, including representations by the
Company, conditions to funding, cost and yield protections, restricted payment
provisions, amendment provisions and indemnification provisions. The Amended New
Credit Facility is subject to mandatory prepayment in a variety of
circumstances, including upon certain asset sales and financing transactions,
and also from excess cash flow (as defined in the Amended New Credit Facility).

    The revisions to the Amended New Credit Facility in fiscal 2000 increased
the Company's permissible leverage ratio through the end of fiscal 2001 and
reduced the minimum required ratio of operating cash flow to cash interest
expense. These changes reflect the reduced level of EBITDA that the Company has
reported and are intended to permit the Company to remain in compliance with the
financial covenants in the bank agreement during fiscal 2001. However, there can
be no assurance that the Company will be able to remain in compliance, as
various factors could affect the Company's financial results and its reported
EBITDA. Should the Company's cash flow from operations be insufficient to
maintain compliance with the financial covenants, there would be an event of
default under the credit facility. In this event, the Company's lenders would
have the right to declare all amounts outstanding under the credit facility to
be immediately due and payable. Due to cross-default provisions in the Company's
other borrowing agreements, substantially all of the Company's long-term debt,
including the 2008 Notes, could also become callable. After fiscal 2001, the
Company's financial covenants will revert to the financial covenant levels that
existed prior to the fiscal 2000 amendments. These covenants require a
substantially lower leverage ratio and an increase in the minimum required ratio
of operating cash flow to cash interest expense. Based upon current projections
of its operating performance, the Company anticipates that it likely will be
required to seek further amendments of the financial covenants under the credit
facility applicable to the first quarter of fiscal 2002 and subsequent periods.
There can be no assurance that the Company's lenders will agree to additional
amendments to the terms of the credit facility.

    Costs incurred in connection with the issuance of the two single-draw term
loan facilities, totaling $7,112 are included in other assets and are being
amortized over the period to maturity.

    The 2008 Notes are redeemable at any time on or after June 15, 2003,
initially at 104.875% of their principal amount, plus accrued interest, if any,
declining ratably to 100% of their principal amount, plus accrued interest, to
the redemption date, on or after June 15, 2006. In addition, at any time prior
to June 15, 2001, the Company at its option may redeem up to 35% of the original
principal amount of the 2008 Notes with the proceeds of one or more equity
offerings at a redemption price of 109.75% of the principal amount of the 2008
Notes. The 2008 Notes are unsecured but are guaranteed by the Company's present
domestic subsidiaries; future material domestic subsidiaries will be required to
guarantee the 2008 Notes. The indenture governing the 2008 Notes places
restrictions on the Company's ability to incur indebtedness, to make certain
payments, investments, loans and guarantees and to sell or otherwise dispose of
a substantial portion of its assets to, or merge or consolidate with, another
entity. Costs incurred in connection with the issuance of the 2008 Notes
totaling $8,352 are included in other assets and are being amortized over the
ten year period of maturity. The fair value of the 2008 Notes at April 29, 2000,
based upon quoted market prices, totaled $108,900. In fiscal 2000, the Company
repurchased $37,000 of 2008

                                       25
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10--CREDIT FACILITIES (CONTINUED)
Notes for $20,542, which represented 54.75% of par value, resulting in an
extraordinary gain, net of taxes, of $9,108.

    The 2003 Notes are redeemable, in whole or in part, at the Company's option
at specified redemption prices. The fair value of the 2003 Notes at April 29,
2000, based upon quoted market prices, totaled $2,072. In conjunction with the
Strategic Restructuring Plan in fiscal 1999, $222,215 of the 2003 Notes were
retired at 94.5% of the principal amount, resulting in an extraordinary gain of
$12,396, before provision for income taxes, and the conversion price on the
remaining outstanding 2003 Notes was adjusted to $64.36. In addition, in fiscal
1999, the Company recorded an extraordinary expense of $5,174, before benefit
from income taxes, related to the write-off of debt issue costs previously
capitalized in connection with the issuance of the 2003 Notes.


MATURITIES OF DEBT



    Maturities of debt, including capital lease obligations, are as follows:



<TABLE>
<S>                                                           <C>
2001........................................................  $   78,956
2002........................................................      19,285
2003........................................................      24,229
2004........................................................      33,916
2005........................................................      79,974
Thereafter..................................................     897,665
                                                              ----------
                                                              $1,134,025
                                                              ==========
</TABLE>


NOTE 11--INCOME TAXES

    The Company files a consolidated income tax return for its wholly owned
domestic subsidiaries. Separate returns are filed for its foreign subsidiaries.
The consolidated tax provision, therefore, is based upon the separate tax
provisions of the domestic and foreign jurisdictions.

    Domestic and foreign income (loss) from continuing operations before
provision for (benefit from) income taxes and extraordinary items consists of
the following:

<TABLE>
<CAPTION>
                                                   FOR THE FISCAL YEAR ENDED
                                               ---------------------------------
                                               APRIL 29,   APRIL 24,   APRIL 25,
                                                 2000        1999        1998
                                               ---------   ---------   ---------
<S>                                            <C>         <C>         <C>
Domestic.....................................  $(165,388)  $(156,873)   $53,478
Foreign......................................    (65,788)    (71,031)    26,944
                                               ---------   ---------    -------
  Total......................................  $(231,176)  $(227,904)   $80,422
                                               =========   =========    =======
</TABLE>

                                       26
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 11--INCOME TAXES (CONTINUED)
    The provision for (benefit from) income taxes consists of:

<TABLE>
<CAPTION>
                                                     FOR THE FISCAL YEAR ENDED
                                                 ---------------------------------
                                                 APRIL 29,   APRIL 24,   APRIL 25,
                                                   2000        1999        1998
                                                 ---------   ---------   ---------
<S>                                              <C>         <C>         <C>
Income taxes currently (receivable) payable:
  Federal......................................  $(28,507)   $(17,301)    $16,746
  State........................................     1,062      (4,124)      4,161
  Foreign......................................   (25,985)      1,262      11,505
                                                 --------    --------     -------
                                                  (53,430)    (20,163)     32,412
Deferred income tax expense (benefit)..........   (16,973)    (10,239)      4,534
Valuation allowance............................    42,099
                                                 --------    --------     -------
  Total provision for (benefit from) income
    taxes......................................  $(28,304)   $(30,402)    $36,946
                                                 ========    ========     =======
</TABLE>

    During fiscal 2000, the Company also recorded a current income tax provision
of $6,597 related to the extraordinary gain on the early termination of debt of
$15,705.

                                       27
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 11--INCOME TAXES (CONTINUED)

    Deferred taxes are comprised of the following:

<TABLE>
<CAPTION>
                                                          APRIL 29,   APRIL 24,
                                                            2000        1999
                                                          ---------   ---------
<S>                                                       <C>         <C>
Current deferred tax assets:
  Inventory.............................................  $  4,178    $  7,338
  Allowance for doubtful accounts.......................     3,760       5,000
  Accrued liabilities...................................     5,668      16,939
  Foreign net operating losses..........................                 1,869
                                                          --------    --------
    Total current deferred tax assets...................    13,606      31,146
                                                          --------    --------
Long-term deferred tax assets:
  Domestic net operating losses.........................    20,421
  Foreign net operating losses..........................    47,251      29,775
  Restructuring reserves................................     4,390       5,380
  Minimum tax credits...................................     2,423
  Foreign currency losses...............................     3,148
  Other.................................................     6,789       6,312
                                                          --------    --------
    Total gross long-term deferred tax assets...........    84,422      41,467
    Less: valuation allowance...........................   (42,099)
                                                          --------    --------
    Total long-term deferred tax assets.................    42,323      41,467
                                                          --------    --------
Current deferred tax liabilities:
  Rebates...............................................    (2,203)
                                                          --------    --------
    Total current deferred tax liabilities..............    (2,203)
                                                          --------    --------
Long-term deferred tax liabilities:
  Property and equipment................................    (6,545)     (7,760)
  Intangible assets.....................................    (2,625)     (1,457)
  Other.................................................   (14,843)    (14,397)
                                                          --------    --------
    Total long-term deferred tax liabilities............   (24,013)    (23,614)
                                                          --------    --------
    Net deferred tax asset..............................  $ 29,713    $ 48,999
                                                          ========    ========
</TABLE>

    The Company's foreign net operating losses ("NOLs") arise from Blue Star
Group's operations in New Zealand and Australia. In fiscal 2000, the Company
established a full valuation allowance, totaling $42,099, against the portion of
the foreign NOLs generated by the Blue Star Group's New Zealand operations as it
is more likely than not that these items will expire before the Company is able
to realize their benefit.

    Management believes it is more likely than not that the Company's deferred
tax assets in all other jurisdictions are realizable and, accordingly, no
additional valuation allowances have been provided. The Company has domestic net
operating loss carryforwards, which expire in 2020, and foreign net operating
loss carryforwards generated by its Australian operations that have no
limitation on the carryforward period. The Company expects to utilize its
domestic net operating loss carryforwards through tax planning

                                       28
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 11--INCOME TAXES (CONTINUED)
strategies in fiscal 2001. In addition, the Company expects to utilize the
Australian net operating loss carryforwards in fiscal 2001.

    The Company's effective income tax (benefit) rate varied from the U.S.
federal statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                        FOR THE FISCAL YEAR ENDED
                                                    ---------------------------------
                                                    APRIL 29,   APRIL 24,   APRIL 25,
                                                      2000        1999        1998
                                                    ---------   ---------   ---------
<S>                                                 <C>         <C>         <C>
U.S. federal statutory rate.......................    (35.0)%     (35.0)%     35.0%
State income taxes, net of federal income tax
  benefit.........................................     (2.2)       (2.0)       4.1
Nondeductible domestic goodwill...................      2.1         4.3        3.9
Nondeductible foreign goodwill....................      2.8         7.2        3.8
Difference between foreign taxation and U.S.
  taxation........................................     (5.1)        2.7       (1.2)
Equity in loss of affiliates......................      5.0
Nondeductible Strategic Restructuring Plan
  costs...........................................                  7.0
Valuation allowance...............................     18.2
Other.............................................      2.0         2.5        0.3
                                                      -----       -----       ----
Effective income tax (benefit) rate...............    (12.2)%     (13.3)%     45.9%
                                                      =====       =====       ====
</TABLE>

NOTE 12--LEASE COMMITMENTS

    The Company leases various types of retail, warehouse and office facilities
and equipment, furniture and fixtures under noncancelable lease agreements that
expire at various dates, some of which include rent escalation clauses. Future
minimum lease payments under noncancelable capital and operating leases are as
follows:

<TABLE>
<CAPTION>
                                                           CAPITAL    OPERATING
                                                            LEASES     LEASES
                                                           --------   ---------
<S>                                                        <C>        <C>
2001.....................................................  $ 1,684    $ 45,992
2002.....................................................    2,186      37,062
2003.....................................................    1,271      29,947
2004.....................................................    1,121      23,376
2005.....................................................      997      19,723
Thereafter...............................................    3,655      52,062
                                                           -------    --------
Total minimum lease payments.............................   10,914    $208,162
                                                                      ========
Less: Amounts representing interest......................   (2,904)
                                                           -------
Present value of net minimum lease payments..............  $ 8,010
                                                           =======
</TABLE>

    Rent expense for all operating leases for fiscal 2000, 1999 and 1998 was
$58,060, $66,555 and $57,535, respectively.

                                       29
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 13--COMMITMENTS AND CONTINGENCIES

LITIGATION

    During fiscal 1999, individuals purporting to represent various classes of
the Company's stockholders filed actions in U.S. District Courts for the
Southern District of New York and for the District of Columbia. The actions
claim the named defendants, including the Company, made misstatements and failed
to disclose material information in connection with the Company's Strategic
Restructuring Plan. Two of the actions allege breach of contract under
California law in conjunction with the Company's acquisition of MBE. The actions
seek declaratory relief, damages and attorney's fees. A consolidated amended
complaint was filed by the plaintiffs in all of these actions in fiscal 2000. An
additional action making factual allegations similar to those made in the
consolidated amended complaint was filed in fiscal 2000, but has not been served
on the Company. The Company intends to vigorously contest these actions.

    Complaints were also filed in fiscal 1999 by sellers of businesses that the
Company acquired in the fall of 1997 and that were spun off in connection with
the Strategic Restructuring Plan. The complaints assert violation of Federal
and/or state securities and other laws, claims of fraud, misrepresentation,
conspiracy, breach of contract, negligence and/or breach of fiduciary duty. The
Company believes that these claims may be subject to indemnification, in part,
under the terms of the distribution agreement executed in connection with the
Strategic Restructuring Plan. The Company intends to vigorously contest these
actions.

    The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

NOTE 14--EMPLOYEE BENEFIT PLANS

POST-EMPLOYMENT BENEFITS

    The Company has entered into employment agreements with several employees
that would result in payments to these employees upon a change of control or
certain other events. No amounts have been accrued at April 29, 2000 or
April 24, 1999 related to these agreements.

    The Company offers domestic employees the opportunity to participate in the
US Office Products 401(k) Retirement Plan (the "401(k) Plan") which allows
employee contributions in accordance with Section 401(k) of the Internal Revenue
Code. The Company matches a portion of employee contributions and all full-time
employees are eligible to participate in the 401(k) Plan after six months of
service. In fiscal 2000, 1999 and 1998, the Company's matching contribution
expense was $2,926, $2,329 and $2,906, respectively.

                                       30
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 15--STOCKHOLDERS' EQUITY

EARNINGS PER SHARE

    The following information presents the Company's computations of basic and
diluted EPS from continuing operations before extraordinary items for the
periods presented in the consolidated statement of operations.

<TABLE>
<CAPTION>
                                                           INCOME (LOSS)      SHARES       PER SHARE
                                                            (NUMERATOR)    (DENOMINATOR)    AMOUNT
                                                           -------------   -------------   ---------
<S>                                                        <C>             <C>             <C>
Fiscal 2000:
  Basic and diluted EPS..................................    $(202,872)      36,789,160     $(5.51)
                                                             ---------       ----------     ------

Fiscal 1999:
  Basic and diluted EPS..................................    $(197,502)      36,259,075     $(5.45)
                                                             ---------       ----------     ------

Fiscal 1998:
  Basic EPS..............................................    $  43,476       29,889,007     $ 1.45
                                                             ---------       ----------     ------
  Effect of dilutive employee stock options..............                       592,787
                                                                             ----------
 Diluted EPS.............................................    $  43,476       30,481,794     $ 1.43
                                                             =========       ==========     ======
</TABLE>

    The basic and diluted loss per share amounts for fiscal 2000 and 1999 were
calculated using the same weighted average number of shares outstanding since,
as a result of the loss from continuing operations during the periods presented,
all of the Company's employee stock options and the two series of convertible
debt securities outstanding during the periods were anti-dilutive. The Company
had additional employee stock options and two series of convertible debt
securities outstanding during fiscal 1998 that were not included in the
computation of diluted EPS because they were anti-dilutive.

COMPREHENSIVE (INCOME) LOSS

    The components of accumulated other comprehensive loss are as follows:

<TABLE>
<CAPTION>
                                                                  FOR THE FISCAL YEAR ENDED
                                                              ---------------------------------
                                                              APRIL 29,   APRIL 24,   APRIL 25,
                                                                2000        1999        1998
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Net income (loss)...........................................  $(193,764)  $(199,065)  $  67,188
Other comprehensive loss:
  Cumulative translation adjustment.........................    (17,629)     (8,288)   (107,220)
  Unrealized gain on securities.............................     17,064
                                                              ---------   ---------   ---------
  Total other comprehensive loss............................       (565)     (8,288)   (107,220)
                                                              ---------   ---------   ---------
Comprehensive income (loss).................................  $(194,329)  $(207,353)  $ (40,032)
                                                              =========   =========   =========
</TABLE>

    The fair market value of MBE's investment in Stamps.com, based on the number
of Stamps.com shares it received in the merger transaction, was approximately
$21,088 as of April 29, 2000. Since the Company considers its investment in
Stamps.com to be an available-for-sale security, the $17,064 unrealized gain on
the Company's investment in Stamps.com as of April 29, 2000 is recorded as other

                                       31
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 15--STOCKHOLDERS' EQUITY (CONTINUED)
comprehensive income, a component of stockholders' equity. If the Company does
liquidate its investment, any resulting gain would be recognized in the
consolidated statement of operations.

PREFERRED STOCK

    In April 1999, the Company issued 73,262 shares of non-voting convertible
preferred stock to a fund led by Investor for $49,332, net of fees of $1,668.
The preferred shares are convertible to 7,326,200 shares of common stock, upon
transfer to anyone other than Investor or its affiliates, and require no
additional investment upon conversion. The preferred shares do not have dividend
rights in addition to the level of dividends provided to common stockholders and
have a nominal liquidation preference. The preferred stock carries no voting
rights, but where stockholder approval is required for a merger, consolidation,
or sale of all or substantially all of the Company's assets, the preferred stock
will vote together with the common stock.

COMMON STOCK

    In June 1998, the Company repurchased 9,259,261 shares of common stock in
the Equity Tender Offer described in Note 3. In June 1998, the Company effected
a one-for-four reverse split of the Company's common stock whereby each four
shares of common stock were exchanged for one share of common stock. In
October 1997, the Company effected a three-for-two split of the Company's common
stock. All share and per share data appearing in these consolidated financial
statements and notes hereto have been retroactively adjusted for these splits.

STOCK WARRANTS

    In June 1998, the Company issued the Special Warrants entitling Investor to
purchase additional shares of common stock in certain circumstances intended to
permit Investor to maintain its 24.9% equity ownership position. In addition,
the Company issued the Warrants entitling Investor to purchase additional shares
of common stock for $405,000 equal to the number of shares of common stock it
purchased as part of its initial equity investment plus the number of shares it
acquires or is entitled to acquire pursuant to the Special Warrants. The
Warrants are exercisable at any time after June 10, 2000 until June 10, 2010. In
April 1999, in conjunction with investor's additional investment in the Company,
the exercise price of the Warrants was reduced to $5.625 per share.

STOCK COMPENSATION PLANS

    In October 1994, the Board of Directors and the Company's stockholders
approved the Company's 1994 Long-Term Compensation Plan (the "Plan"). The
purpose of the Plan is to provide officers, key employees and consultants with
additional incentives by increasing their ownership interests in the Company.
The maximum number of options to purchase common stock granted in any calendar
or fiscal year under the Plan, as amended, is equal to 20% of the aggregate
number of shares of the Company's common stock outstanding at the time an award
is granted, less, in each case, the number of shares subject to previously
outstanding awards under the Plan. At April 29, 2000, options to acquire
5,348,210 shares of common stock were outstanding under the Plan.

                                       32
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 15--STOCKHOLDERS' EQUITY (CONTINUED)
    In August 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Non-Employee Directors' Stock Plan (the "Directors'
Plan"). The purpose of the Directors' Plan is to promote ownership by
non-employee directors of a greater proprietary interest in the Company, thereby
aligning such directors' interests more closely with the interests of
stockholders of the Company. A total of 750,000 shares of common stock have been
reserved for issuance under the Directors' Plan. At April 29, 2000, options to
acquire 68,165 shares of common stock were outstanding under the Directors'
Plan.

    Upon consummation of the merger with MBE in November 1997, the Company
assumed each outstanding and unexercised option to purchase shares of MBE common
stock and converted such options into options to purchase shares of the
Company's common stock. The purpose of the MBE plans was to provide MBE
employees with additional incentives by increasing their ownership interests in
the Company. These plans granted either incentive stock options or non-qualified
stock options. No additional options have been granted under these plans since
the date of the merger. At April 29, 2000, options to acquire 20,137 shares of
the Company's common stock were outstanding under the plans.

    The Company applies APB Opinion No. 25 in accounting for its stock option
plans. Accordingly, because the exercise prices of the options granted have
equaled the market price on the date of grant, no compensation expense has been
recognized for stock options granted. Had compensation cost for the Company's
stock options been recognized based upon the fair value of the stock options on
the grant date under the methodology prescribed by SFAS No. 123, the Company's
income (loss) from continuing operations before extraordinary items and income
(loss) per share from continuing operations before extraordinary items would
have been impacted as indicated in the following table. The pro forma results
shown below reflect only the impact of options granted in fiscal 2000, 1999 and
1998.

<TABLE>
<CAPTION>
                                                                  FOR THE FISCAL YEAR ENDED
                                                              ---------------------------------
                                                              APRIL 29,   APRIL 24,   APRIL 25,
                                                                2000        1999        1998
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Income (loss) from continuing operations before
  extraordinary items:
  As reported...............................................  $(202,872)  $(197,502)   $43,476
  Pro forma.................................................   (240,030)   (243,487)    24,333
Income (loss) from continuing operations before
  extraordinary items per share:
  As reported:
    Basic...................................................  $   (5.51)  $   (5.45)   $  1.45
    Diluted.................................................      (5.51)      (5.45)      1.43
  Pro forma:
    Basic...................................................  $   (6.52)  $   (6.72)   $  0.81
    Diluted.................................................      (6.52)      (6.72)      0.80
</TABLE>

                                       33
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 15--STOCKHOLDERS' EQUITY (CONTINUED)
    The fair value of options granted (which is amortized to expense over the
option vesting period in determining the pro forma impact) is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
                                                                  FOR THE FISCAL YEAR ENDED
                                                              ---------------------------------
                                                              APRIL 29,   APRIL 24,   APRIL 25,
                                                                2000        1999        1998
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Expected life of option.....................................   7 years     7 years     7 years
Risk free interest rate.....................................      6.38%       5.18%       6.36%
Expected volatility of Company stock........................      79.5%       78.4%       44.0%
</TABLE>

    The weighted average fair value of options granted was $3.47, $3.81 and
$34.77 for fiscal 2000, 1999 and 1998, respectively.

<TABLE>
<CAPTION>
                                                                    WEIGHTED                 WEIGHTED
                                                                    AVERAGE                  AVERAGE
                                                                    EXERCISE     OPTIONS     EXERCISE
                                                        OPTIONS      PRICE     EXERCISABLE    PRICE
                                                       ----------   --------   -----------   --------
<S>                                                    <C>          <C>        <C>           <C>
Balance at April 26, 1997............................   2,886,197    $66.40       399,557     $40.41
  Granted............................................   3,259,442     63.22
  Exercised..........................................    (335,516)    34.88
  Canceled...........................................    (278,230)    70.17
                                                       ----------
Balance at April 25, 1998............................   5,531,893     66.21       950,035      63.99
  Granted............................................   3,310,417      5.77
  Exercised..........................................  (1,203,688)    56.04
  Canceled...........................................  (7,310,579)    30.96
  Adjustment due to Distributions....................   3,476,362
                                                       ----------
Balance at April 24, 1999............................   3,804,405     10.30       805,723      12.63
  Granted............................................   2,764,978      4.52
  Canceled...........................................  (1,132,871)     8.28
                                                       ----------
Balance at April 29, 2000............................   5,436,512    $ 7.36     1,661,159     $10.71
                                                       ==========
</TABLE>

                                       34
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 15--STOCKHOLDERS' EQUITY (CONTINUED)
    The following table summarizes information about stock options outstanding
at April 29, 2000:

<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                                            ----------------------------------   ---------------------
                                                         WEIGHTED
                                                          AVERAGE     WEIGHTED                WEIGHTED
                                                         REMAINING    AVERAGE                 AVERAGE
                                                        CONTRACTUAL   EXERCISE                EXERCISE
RANGE OF EXERCISE PRICES                     OPTIONS       LIFE        PRICE      OPTIONS      PRICE
------------------------                    ---------   -----------   --------   ----------   --------
<S>                                         <C>         <C>           <C>        <C>          <C>
$2.55 to $10.00...........................  4,932,098   9.1 years      $ 5.11     1,280,173     5.61
$10.01 to $20.00..........................    140,801   5.3 years       16.99       140,678    16.99
$20.01 to $30.00..........................    103,463   7.0 years       27.62        75,674    27.48
$30.01 to $40.00..........................    202,432   7.0 years       34.21       124,039    34.60
$40.01 to $54.90..........................     57,718   6.3 years       45.33        40,595    45.34
                                            ---------                            ----------
$2.55 to $54.90...........................  5,436,512   8.9 years        7.36     1,661,159    10.71
                                            =========                            ==========
</TABLE>

    Non-qualified options granted to employees are generally exercisable
beginning one year from the date of grant in cumulative yearly amounts of 25% of
the shares under option and generally expire ten years from the date of grant.

    In December 1998, the Company completed a program in which it offered its
employees holding stock options issued by the Company the opportunity to
surrender their existing options for a smaller number of options at a lower
exercise price per share. Each employee holding options issued by the Company
was given the opportunity to have the Company (i) cancel existing options and
(ii) issue to the employee a smaller number of new options with an exercise
price equal to $5.375, the closing price of the Company's common stock on
December 11, 1998. The number of options received was equal to the number of old
options multiplied by a fraction that varied with the exercise price of old
options. The fraction ranged from 0.8844 for old options with an exercise price
of $9.78 to 0.0984 for old options with an exercise price of $54.90. Prior to
the program, options to acquire 7,546,722 shares were outstanding; after
completion of the program, options to acquire 2,618,413 shares were issued and
outstanding.

    In June 1998, 1,140,186 stock options were exercised as part of the Equity
Tender. In addition, as a result of the Distributions, 713,015 stock options
held by employees of the Spin-Off Companies were canceled as they were replaced
with stock options of the Spin-Off Companies and, consistent with the
anti-dilution provisions of the Plan and the Director's Plan, the Company
increased the number of options outstanding and reduced the exercise prices of
such options in order to keep option holders in the same economic position
immediately before and after the Distributions. This was accomplished by
multiplying the number of options by 2.18 and dividing the exercise prices of
such options by 2.18.

                                       35
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 16--SEGMENT REPORTING

BUSINESS SEGMENTS

    The Company has five reportable segments, which include:

    - NORTH AMERICAN OFFICE SUPPLIES--a direct-to-business contract stationer
      that offers items such as desktop accessories, writing instruments, paper
      products, computer consumables, business machines and catalog furniture;

    - NORTH AMERICAN OFFICE FURNITURE--a group of operating companies that offer
      middle-market and contract furniture products and related services;

    - NORTH AMERICAN OTHER--the balance of the Company's North American
      operations, which includes a group of operating companies that offer
      office coffee and vending services ("USRefresh"), a group of non-core
      operating businesses and the corporate costs associated with the North
      American operations, including the Company's information technology and
      e-commerce departments;

    - BLUE STAR GROUP--a group of operating companies that include business
      supplies, print and consumer retailing operations that operate in New
      Zealand and Australia, as well as Business Solutions prior to its
      divestiture in December 1999;

    - MBE--a franchisor of retail business, communication and postal service
      centers which offers a range of business products and services for
      personal and business consumers.

    Other consists of costs related to the Company's corporate headquarters and
the Company's equity interests in Dudley and Business Solutions. Eliminations
consist of the elimination of the Company's investments in subsidiaries.

    At the beginning of fiscal 2000, the Company reorganized the structure of
its North American businesses. Prior to fiscal 2000, these businesses were
organized into a series of geographic regions and districts, all operated within
a single management structure as part of the North American Office Products
Group ("NAOPG"). As a result of this change, the fiscal 1999 results of
operations and other significant items have been restated to reflect the new
organization structure. The fiscal 1998 results of operations and other
significant items have not been restated for the segments within North America
because it was not practicable to obtain such information.

                                       36
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 16--SEGMENT REPORTING (CONTINUED)
    Management measures the performance of the business segments based on
several factors, including revenues, gross profit, operating income (loss) and
EBITDA, as defined below. The accounting policies of the segments are the same
as those described in the summary of significant accounting policies in Note 2.
<TABLE>
<CAPTION>
                                                                  FISCAL 2000
                       -------------------------------------------------------------------------------------------------
                                 NORTH AMERICAN OPERATIONS
                       ----------------------------------------------
                         OFFICE      OFFICE                             BLUE STAR
                        SUPPLIES    FURNITURE    OTHER      SUBTOTAL      GROUP       MBE        OTHER      ELIMINATIONS
                       ----------   ---------   --------   ----------   ---------   --------   ----------   ------------
<S>                    <C>          <C>         <C>        <C>          <C>         <C>        <C>          <C>
Revenues.............  $1,044,300   $391,154    $224,423   $1,659,877   $758,372    $ 81,144
Gross profit.........     267,874     83,612      53,584      405,070    224,281      43,166
Depreciation and
  amortization.......      16,609      4,873      13,732       35,214     25,118       8,072   $      815
Operating income
  (loss) before
  restructuring costs
  and impaired asset
  write-offs.........      33,676     10,135     (43,647)         164     23,077      11,291      (23,760)
EBITDA(a)............      50,285     15,008     (29,915)      35,378     48,195      19,363      (22,945)
Other significant
  items:
  Identifiable
    Assets...........     415,213    158,291     167,684      741,188    379,045     338,933    1,241,279     (954,779)
  Net capital
    expenditures.....       2,679      1,477      32,917       37,073     22,506       2,218          872

<CAPTION>
                       FISCAL 2000
                       ------------

                       CONSOLIDATED
                          TOTALS
                       ------------
<S>                    <C>
Revenues.............   $2,499,393
Gross profit.........      672,517
Depreciation and
  amortization.......       69,219
Operating income
  (loss) before
  restructuring costs
  and impaired asset
  write-offs.........       10,772
EBITDA(a)............       79,991
Other significant
  items:
  Identifiable
    Assets...........    1,745,666
  Net capital
    expenditures.....       62,669
</TABLE>
<TABLE>
<CAPTION>
                                                                  FISCAL 1999
                       -------------------------------------------------------------------------------------------------
                                 NORTH AMERICAN OPERATIONS
                       ----------------------------------------------
                         OFFICE      OFFICE                             BLUE STAR
                        SUPPLIES    FURNITURE    OTHER      SUBTOTAL      GROUP       MBE        OTHER      ELIMINATIONS
                       ----------   ---------   --------   ----------   ---------   --------   ----------   ------------
<S>                    <C>          <C>         <C>        <C>          <C>         <C>        <C>          <C>
Revenues.............  $1,052,539   $428,933    $309,520   $1,790,992   $801,352    $ 72,245
Gross profit.........     286,598     91,396      70,356      448,350    244,056      38,387
Depreciation and
  amortization.......      16,764      3,744      12,767       33,275     26,128       7,695   $      475
Operating income
  (loss) before
  restructuring costs
  and impaired asset
  write-offs.........      51,475      8,598       1,624       61,697     26,660      12,454      (31,033)
EBITDA(a)............      68,239     12,342      14,391       94,972     52,788      20,149      (30,558)
Other significant
  items (b):
  Identifiable
    Assets...........                                         767,751    738,170     310,477    1,167,788    $(972,027)
  Net capital
    expenditures.....                                          18,432     20,032         958        2,046           88

<CAPTION>
                       FISCAL 1999
                       ------------

                       CONSOLIDATED
                          TOTALS
                       ------------
<S>                    <C>
Revenues.............   $2,664,589
Gross profit.........      730,793
Depreciation and
  amortization.......       67,573
Operating income
  (loss) before
  restructuring costs
  and impaired asset
  write-offs.........       69,778
EBITDA(a)............      137,351
Other significant
  items (b):
  Identifiable
    Assets...........    2,012,159
  Net capital
    expenditures.....       41,556
</TABLE>

                                       37
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 16--SEGMENT REPORTING (CONTINUED)

<TABLE>
<CAPTION>
                                                                                   FISCAL 1998
                                                   ----------------------------------------------------------------------------
                                                                BLUE STAR                                          CONSOLIDATED
                                                     NAOPG        GROUP       MBE        OTHER      ELIMINATIONS      TOTALS
                                                   ----------   ---------   --------   ----------   ------------   ------------
<S>                                                <C>          <C>         <C>        <C>          <C>            <C>
Revenues from external customers.................  $1,708,365   $872,855    $ 30,520                                $2,611,740
Gross profit.....................................     440,521    269,519      16,808                                   726,848
Depreciation and amortization....................      23,656     26,357       3,150   $    4,004                       57,167
Operating income before restructuring and non-
  recurring acquisition costs....................      85,579     37,691       7,606      (15,429)                     115,447
EBITDA(a)........................................     109,235     64,048      10,756      (11,425)                     172,614
Other significant items:
  Identifiable assets............................     778,751    798,953     315,472    1,301,653   $(1,140,020)     2,054,809
  Net capital expenditures.......................      19,321     20,325         377        6,350           322         46,695
</TABLE>

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

(a) EBITDA represents earnings from continuing operations before interest
    expense, interest income, provision for (benefit from) income taxes,
    depreciation expense, amortization expense, impaired asset write-offs,
    operating restructuring costs, Strategic Restructuring Plan costs,
    unrealized foreign currency transaction loss, equity in (income) loss of
    affiliates, loss on sale and closure of businesses, other (income) expense
    and extraordinary items. EBITDA is not a measurement of performance under
    generally accepted accounting principles and should not be considered an
    alternative to net income as a measure of performance or to cash flow as a
    measure of liquidity. EBITDA is not necessarily comparable with similarly
    titled measures for other companies.

(b) The identifiable assets as of April 24, 1999 and the net capital
    expenditures for the fiscal year ended April 24, 1999 have not been
    presented for the segments of the Company's North American operations
    because it was not practicable to obtain such information.

    Effective April 30, 2000, the Company will evaluate its operations by the
following business segments: US Office Products--North America, which includes
the North American office supplies, office furniture, and North American
corporate operations; USRefresh, which includes breakroom, office coffee and
vending services; other non-core businesses in North America; the Blue Star
Group; Mail Boxes Etc.; and Other.

                                       38
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 16--SEGMENT REPORTING (CONTINUED)
GEOGRAPHIC SEGMENTS

    The following table sets forth information as to the Company's operations in
its different geographic segments:

<TABLE>
<CAPTION>
                                                        NEW ZEALAND
                                             NORTH          AND
                                            AMERICA      AUSTRALIA      TOTAL
                                           ----------   -----------   ----------
<S>                                        <C>          <C>           <C>
Fiscal 2000:
  Revenues...............................  $1,741,021    $758,372     $2,499,393
  Operating income (loss)................     (29,210)      7,177        (22,033)
  Identifiable assets of continuing
    operations at year-end...............   1,366,621     379,045      1,745,666
Fiscal 1999:
  Revenues...............................  $1,863,237    $801,352     $2,664,589
  Operating loss.........................     (87,566)    (22,938)      (110,504)
  Identifiable assets of continuing
    operations at year-end...............   1,273,989     738,170      2,012,159
Fiscal 1998:
  Revenues...............................  $1,738,885    $872,855     $2,611,740
  Operating income.......................      71,756      37,504        109,260
  Identifiable assets of continuing
    operations at year-end...............   1,255,856     798,953      2,054,809
</TABLE>

                                       39
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 17--QUARTERLY FINANCIAL DATA (UNAUDITED)

    The following presents certain unaudited quarterly financial data.

<TABLE>
<CAPTION>
                                                           FISCAL 2000 QUARTERS
                                          -------------------------------------------------------
                                           FIRST      SECOND     THIRD      FOURTH       TOTAL
                                          --------   --------   --------   ---------   ----------
<S>                                       <C>        <C>        <C>        <C>         <C>
Revenues................................  $625,503   $642,511   $624,439   $ 606,940   $2,499,393
Gross profit............................   174,783    179,130    174,782     143,822      672,517
Operating income (loss).................     8,274      6,903      4,285     (41,495)     (22,033)
Loss from continuing operations before
  extraordinary items...................   (27,527)   (27,423)   (26,209)   (121,713)    (202,872)
Extraordinary items.....................                           9,108                    9,108
Net loss................................   (27,527)   (27,423)   (17,101)   (121,713)    (193,764)
Per share amounts:
  Basic and Diluted:
    Loss from continuing operations.....  $  (0.75)  $  (0.75)  $  (0.71)  $   (3.30)  $    (5.51)
    Extraordinary items.................                            0.25                     0.25
    Net loss............................     (0.75)     (0.75)     (0.46)      (3.30)       (5.26)
</TABLE>

<TABLE>
<CAPTION>
                                                           FISCAL 1999 QUARTERS
                                          -------------------------------------------------------
                                           FIRST      SECOND     THIRD      FOURTH       TOTAL
                                          --------   --------   --------   ---------   ----------
<S>                                       <C>        <C>        <C>        <C>         <C>
Revenues................................  $651,949   $677,205   $676,622   $ 658,813   $2,664,589
Gross profit............................   177,664    185,039    194,073     174,017      730,793
Operating income (loss).................   (83,346)    24,763     25,782     (77,703)    (110,504)
Loss from continuing operations before
  extraordinary items...................   (83,543)    (3,982)   (12,463)    (97,514)    (197,502)
Loss from discontinued operations.......    (1,294)                                        (1,294)
Extraordinary items.....................      (269)                                          (269)
Net loss................................   (85,106)    (3,982)   (12,463)    (97,514)    (199,065)
Per share amounts:
  Basic and Diluted:
    Loss from continuing operations.....  $  (2.38)  $  (0.11)  $  (0.34)  $   (2.66)  $    (5.45)
    Loss from discontinued operations...     (0.04)                                         (0.03)
    Extraordinary items.................     (0.01)                                         (0.01)
    Net loss............................     (2.43)     (0.11)     (0.34)      (2.66)       (5.49)
</TABLE>

                                       40
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION

    The following is summarized condensed consolidating financial information
for the Company, segregating guarantor subsidiaries and non-guarantor
subsidiaries. The accompanying financial information in the "Guarantor
Subsidiaries" column represents the financial information of the domestic
subsidiaries that guarantee the Amended New Credit Facility and the 2008 Notes.
The guarantor subsidiaries are wholly owned subsidiaries of the Company and the
guarantees are full, unconditional and joint and several. Separate financial
statements of the guarantor subsidiaries are not presented because management
believes that separate financial statements would not be material to investors.

                                       41
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              APRIL 29, 2000
                                               ----------------------------------------------------------------------------
                                                  US OFFICE                        NON-
                                               PRODUCTS PARENT    GUARANTOR     GUARANTOR    CONSOLIDATING     CONSOLIDATED
                                               (PARENT COMPANY)  SUBSIDIARIES  SUBSIDIARIES   ADJUSTMENTS         TOTAL
                                               ----------------  ------------  ------------  -------------     ------------
<S>                                            <C>               <C>           <C>           <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents..................     $    1,120      $   18,489    $  20,102                       $   39,711
  Accounts receivable, less allowance for
    doubtful accounts........................                        200,117       59,170                          259,287
  Inventories, net...........................                         70,780       84,476     $      (50)(b)       155,206
  Prepaid expenses and other current
    assets...................................         74,577           3,974       10,633                           89,184
                                                  ----------      ----------    ---------     ----------        ----------
      Total current assets...................         75,697         293,360      174,381            (50)          543,388
Property and equipment, net..................          5,391         105,983       99,939           (410)(b)       210,903
Intangible assets, net.......................                        538,433      252,960                          791,393
Investment in subsidiaries...................        954,779                                    (954,779)(a)
Other assets.................................        159,926          66,262      (26,206)                         199,982
                                                  ----------      ----------    ---------     ----------        ----------
      Total assets...........................     $1,195,793      $1,004,038    $ 501,074     $ (955,239)       $1,745,666
                                                  ==========      ==========    =========     ==========        ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt............................     $   76,889      $      700    $   1,367                       $   78,956
  Short-term intercompany balances...........        479,845        (480,813)         968
  Accounts payable...........................          6,635         102,643       47,562                          156,840
  Accrued compensation.......................          2,799          23,346       13,716                           39,861
  Other accrued liabilities..................         34,510          18,306       47,797     $     (227)(b)       100,386
                                                  ----------      ----------    ---------     ----------        ----------
      Total current liabilities..............        600,678        (335,818)     111,410           (227)          376,043

Long-term debt...............................      1,047,664           3,755        3,650                        1,055,069
Other long-term liabilities and minority
  interests..................................         24,089           4,210          213                           28,512
Long-term intercompany balances..............       (872,959)        577,013      295,946
                                                  ----------      ----------    ---------     ----------        ----------
      Total liabilities......................        799,472         249,160      411,219           (227)        1,459,624
                                                  ----------      ----------    ---------     ----------        ----------
Stockholders' equity:
  Preferred stock............................
  Common stock...............................             37                                                            37
  Additional paid-in capital.................        670,381         714,619      298,222       (954,779)(a)       728,443
  Accumulated other comprehensive loss.......        (76,443)         17,063      (61,126)                        (120,506)
  Retained earnings (accumulated deficit)....       (197,654)         23,196     (147,241)          (233)(b)      (321,932)
                                                  ----------      ----------    ---------     ----------        ----------
      Total stockholders' equity.............        396,321         754,878       89,855       (955,012)          286,042
                                                  ----------      ----------    ---------     ----------        ----------
      Total liabilities and stockholders'
        equity...............................     $1,195,793      $1,004,038    $ 501,074     $ (955,239)       $1,745,666
                                                  ==========      ==========    =========     ==========        ==========
</TABLE>

                                       42
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
                                                                              APRIL 24, 1999
                                               ----------------------------------------------------------------------------
                                                  US OFFICE                        NON-
                                               PRODUCTS PARENT    GUARANTOR     GUARANTOR    CONSOLIDATING     CONSOLIDATED
                                               (PARENT COMPANY)  SUBSIDIARIES  SUBSIDIARIES   ADJUSTMENTS         TOTAL
                                               ----------------  ------------  ------------  -------------     ------------
<S>                                            <C>               <C>           <C>           <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents..................     $   48,094      $    9,281     $ 18,727                       $   76,102
  Accounts receivable, less allowance for
    doubtful accounts........................                        214,826       89,548                          304,374
  Inventories, net...........................                         98,517      108,396     $      (56)(b)       206,857
  Prepaid expenses and other current
    assets...................................         46,988          12,178       47,375            230 (b)       106,771
                                                  ----------      ----------     --------     ----------        ----------
      Total current assets...................         95,082         334,802      264,046            174           694,104
Property and equipment, net..................         11,224         104,271      116,067           (410)(b)       231,152
Intangible assets, net.......................                        556,468      301,729                          858,197
Investment in subsidiaries...................        972,027                                    (972,027)(a)
Other assets.................................        130,615          31,550       66,541                          228,706
                                                  ----------      ----------     --------     ----------        ----------
      Total assets...........................     $1,208,948      $1,027,091     $748,383     $ (972,263)       $2,012,159
                                                  ==========      ==========     ========     ==========        ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt............................     $   16,500      $    1,542     $  1,151                       $   19,193
  Short-term intercompany balances...........        251,459        (252,938)       1,479
  Accounts payable...........................          1,503         100,120       67,353                          168,976
  Accrued compensation.......................          4,555          22,751       19,078                           46,384
  Other accrued liabilities..................         28,925          17,239       54,524                          100,688
                                                  ----------      ----------     --------     ----------        ----------
      Total current liabilities..............        302,942        (111,286)     143,585                          335,241
Long-term debt...............................      1,165,196           4,111        2,122                        1,171,429
Other long-term liabilities and minority
  interests..................................         22,104           3,526          317                           25,947
Long-term intercompany balances..............       (816,154)        398,400      417,851     $      (97)(b)
                                                  ----------      ----------     --------     ----------        ----------
      Total liabilities......................        674,088         294,751      563,875            (97)        1,532,617
                                                  ----------      ----------     --------     ----------        ----------
Stockholders' equity:
  Preferred stock............................
  Common stock...............................             37                                                            37
  Additional paid-in capital.................        800,478         627,923      271,240       (972,027)(a)       727,614
  Accumulated other comprehensive loss.......        (68,311)                     (51,630)                        (119,941)
  Retained earnings (accumulated deficit)....       (197,344)        104,417      (35,102)          (139)(b)      (128,168)
                                                  ----------      ----------     --------     ----------        ----------
      Total stockholders' equity.............        534,860         732,340      184,508       (972,166)          479,542
                                                  ----------      ----------     --------     ----------        ----------
      Total liabilities and stockholders'
        equity...............................     $1,208,948      $1,027,091     $748,383     $ (972,263)       $2,012,159
                                                  ==========      ==========     ========     ==========        ==========
</TABLE>

                                       43
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               APRIL 29, 2000
                              ---------------------------------------------------------------------------------
                                 US OFFICE                          NON-
                              PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING       CONSOLIDATED
                              (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS           TOTAL
                              ----------------   ------------   ------------   -------------       ------------
<S>                           <C>                <C>            <C>            <C>                 <C>
Revenues....................                      $1,748,935     $ 772,387      $  (21,929)(c)      $2,499,393
Cost of revenues............     $   4,221         1,301,268       543,270         (21,883)(c)       1,826,876
                                 ---------        ----------     ---------      ----------          ----------
  Gross profit..............        (4,221)          447,667       229,117             (46)            672,517
Selling, general and
  administrative expenses...        53,898           387,095       196,802             (52)(c)         637,743
Amortization expense........           278            15,736         7,988                              24,002
Impaired asset write-offs...         2,218             3,788        11,423                              17,429
Operating restructuring
  costs.....................         5,153             5,716         4,507                              15,376
                                 ---------        ----------     ---------      ----------          ----------
  Operating income (loss)...       (65,768)           35,332         8,397               6             (22,033)
Interest expense............       139,796           (57,098)       30,677                             113,375
Interest income.............          (526)           (1,319)         (559)                             (2,404)
Unrealized foreign currency
  transaction loss..........         7,871                          41,133                              49,004
Equity in loss of
  affiliates................           (67)                         32,631                              32,564
Loss on sale and closure of
  businesses................       (12,215)           25,604         1,643                              15,032
Other (income) expense......         1,198              (260)          538              96               1,572
                                 ---------        ----------     ---------      ----------          ----------
Income (loss) from
  continuing operations
  before provision for
  (benefit from) income
  taxes and extraordinary
  items.....................      (201,825)           68,405       (97,666)            (90)           (231,176)
Provision for (benefit from)
  income taxes..............       (51,496)            9,342        13,847               3 (c)         (28,304)
                                 ---------        ----------     ---------      ----------          ----------
Income (loss) from before
  extraordinary items.......      (150,329)           59,063      (111,513)            (93)           (202,872)
Extraordinary items-gains on
  early terminations of debt
  facilities, net of income
  taxes.....................        (9,108)                                                             (9,108)
                                 ---------        ----------     ---------      ----------          ----------
  Net income (loss).........     $(141,221)       $   59,063     $(111,513)     $      (93)         $ (193,764)
                                 =========        ==========     =========      ==========          ==========
</TABLE>

                                       44
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                               APRIL 24, 1999
                              ---------------------------------------------------------------------------------
                                 US OFFICE                          NON-
                              PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING       CONSOLIDATED
                              (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS           TOTAL
                              ----------------   ------------   ------------   -------------       ------------
<S>                           <C>                <C>            <C>            <C>                 <C>
Revenues....................                      $1,884,150      $813,769      $  (33,330)(c)      $2,664,589
Cost of revenues............     $  (3,593)        1,404,692       565,939         (33,242)(c)       1,933,796
                                 ---------        ----------      --------      ----------          ----------
  Gross profit..............         3,593           479,458       247,830             (88)            730,793
Selling, general and
  administrative expenses...        39,909           383,938       211,586            (252)(c)         635,181
Amortization expense........         1,125            15,834         8,875                              25,834
Strategic Restructuring Plan
  costs.....................        96,950               555                                            97,505
Impaired asset write-offs...                          17,486        41,249                              58,735
Operating restructuring
  costs.....................         1,918            13,708         8,416                              24,042
                                 ---------        ----------      --------      ----------          ----------
  Operating income (loss)...      (136,309)           47,937       (22,296)            164            (110,504)
Interest expense............       115,592           (47,956)       38,655                             106,291
Interest income.............          (114)             (831)       (1,125)                             (2,070)
Equity in loss of
  affiliates................                                           748                                 748
Loss on sale and closure of
  businesses................                             360         9,839                              10,199
Other (income) expense......       (69,329)           71,166           395                               2,232
                                 ---------        ----------      --------      ----------          ----------
Income (loss) from
  continuing operations
  before provision for
  (benefit from) income
  taxes and extraordinary
  items.....................      (182,458)           25,198       (70,808)            164            (227,904)
Provision for (benefit from)
  income taxes..............       (52,909)           26,512        (4,009)              4 (c)         (30,402)
                                 ---------        ----------      --------      ----------          ----------
Income (loss) from
  continuing operations
  before extraordinary
  items.....................      (129,549)           (1,314)      (66,799)            160            (197,502)
Loss from discontinued
  operations, net of income
  taxes.....................                                        (1,294)                             (1,294)
                                 ---------        ----------      --------      ----------          ----------
Income (loss) before
  extraordinary items.......      (129,549)           (1,314)      (68,093)            160            (198,796)
Extraordinary items-losses
  on early terminations of
  debt facilities, net of
  income taxes..............           269                                                                 269
                                 ---------        ----------      --------      ----------          ----------
  Net income (loss).........     $(129,818)       $   (1,314)     $(68,093)     $      160          $ (199,065)
                                 =========        ==========      ========      ==========          ==========
</TABLE>

                                       45
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                               APRIL 25, 1998
                              ---------------------------------------------------------------------------------
                                 US OFFICE                          NON-
                              PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING       CONSOLIDATED
                              (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS           TOTAL
                              ----------------   ------------   ------------   -------------       ------------
<S>                           <C>                <C>            <C>            <C>                 <C>
Revenues....................                      $1,749,247      $885,292      $  (22,799)(c)      $2,611,740
Cost of revenues............      $(1,647)         1,297,349       611,415         (22,225)(c)       1,884,892
                                  -------         ----------      --------      ----------          ----------
  Gross profit..............        1,647            451,898       273,877            (574)            726,848
Selling, general and
  administrative expenses...       19,025            346,826       225,834            (222)(c)         591,463
Amortization expense........                          10,771         9,167                              19,938
Operating restructuring
  costs.....................          685              5,331           171                               6,187
                                  -------         ----------      --------      ----------          ----------
  Operating income (loss)...      (18,063)            88,970        38,705            (352)            109,260
Interest expense............       30,464             (7,789)       15,162                              37,837
Interest income.............        8,279             (8,325)       (1,807)                             (1,853)
Equity in income of
  affiliates................                                        (1,687)                             (1,687)
Other (income) expense......      (43,090)            37,423           208                              (5,459)
                                  -------         ----------      --------      ----------          ----------
Income (loss) from
  continuing operations
  before provision for
  (benefit from) income
  taxes.....................      (13,716)            67,661        26,829            (352)             80,422
Provision for (benefit from)
  income taxes..............       (6,519)            32,159        11,457            (151)(c)          36,946
                                  -------         ----------      --------      ----------          ----------
Income (loss) from
  continuing operations.....       (7,197)            35,502        15,372            (201)             43,476
Income from discontinued
  operations, net of income
  taxes.....................                                        23,712                              23,712
                                  -------         ----------      --------      ----------          ----------
  Net income (loss).........      $(7,197)        $   35,502      $ 39,084      $     (201)         $   67,188
                                  =======         ==========      ========      ==========          ==========
</TABLE>

                                       46
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                APRIL 29, 2000
                                 -----------------------------------------------------------------------------
                                    US OFFICE                          NON-
                                 PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING   CONSOLIDATED
                                 (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS       TOTAL
                                 ----------------   ------------   ------------   -------------   ------------
<S>                              <C>                <C>            <C>            <C>             <C>
Cash flows from operating
  activities...................     $(121,834)        $ 85,740       $ 16,805         $  (1)(d)     $(19,290)
Cash flows from investing
  activities...................        38,516          (39,354)        26,955             1 (d)       26,118
Cash flows from financing
  activities...................        36,344          (37,178)       (41,315)                       (42,149)
Effect of exchange rates on
  cash and cash equivalents....                                        (1,070)                        (1,070)
                                    ---------         --------       --------         -----         --------
Net increase (decrease) in cash
  and cash equivalents.........       (46,974)           9,208          1,375                        (36,391)
Cash and cash equivalents at
  beginning of period..........        48,094            9,281         18,727                         76,102
                                    ---------         --------       --------         -----         --------
Cash and cash equivalents at
  end of period................     $   1,120         $ 18,489       $ 20,102         $             $ 39,711
                                    =========         ========       ========         =====         ========
</TABLE>

<TABLE>
<CAPTION>
                                                                APRIL 24, 1999
                                 -----------------------------------------------------------------------------
                                    US OFFICE                          NON-
                                 PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING   CONSOLIDATED
                                 (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS       TOTAL
                                 ----------------   ------------   ------------   -------------   ------------
<S>                              <C>                <C>            <C>            <C>             <C>
Cash flows from operating
  activities...................       $(76,238)      $ 123,043       $ 14,652         $  89 (d)     $ 61,546
Cash flows from investing
  activities...................        (28,363)        (20,249)       (25,966)          (88)(d)      (74,666)
Cash flows from financing
  activities...................        133,011        (109,256)        25,629            (1)(d)       49,383
Effect of exchange rates on
  cash and cash equivalents....                                           336                            336
Cash used in discontinued
  operations...................                                       (12,518)                       (12,518)
                                      --------       ---------       --------         -----         --------
Net increase (decrease) in cash
  and cash equivalents.........         28,410          (6,462)         2,133                         24,081
Cash and cash equivalents at
  beginning of period..........         19,684          15,743         16,594                         52,021
                                      --------       ---------       --------         -----         --------
Cash and cash equivalents at
  end of period................       $ 48,094       $   9,281       $ 18,727         $             $ 76,102
                                      ========       =========       ========         =====         ========
</TABLE>

                                       47
<PAGE>
                           US OFFICE PRODUCTS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 18--CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                               APRIL 25, 1998
                              ---------------------------------------------------------------------------------
                                 US OFFICE                          NON-
                              PRODUCTS PARENT     GUARANTOR      GUARANTOR     CONSOLIDATING       CONSOLIDATED
                              (PARENT COMPANY)   SUBSIDIARIES   SUBSIDIARIES    ADJUSTMENTS           TOTAL
                              ----------------   ------------   ------------   -------------       ------------
<S>                           <C>                <C>            <C>            <C>                 <C>
Cash flows from operating
  activities................       $(34,147)       $66,097        $ 51,837       $    (225)(d)       $  83,562
Cash flows from investing
  activities................        (21,240)       (20,700)       (108,771)            322 (d)        (150,389)
Cash flows from financing
  activities................         61,861        (37,412)         52,066             (97)(d)          76,418
Effect of exchange rates on
  cash and cash
  equivalents...............                                        (4,002)                             (4,002)
Cash provided by
  discontinued operations...                                         2,406                               2,406
                                   --------        -------        --------       ---------           ---------
Net increase (decrease) in
  cash and cash
  equivalents...............          6,474          7,985          (6,464)                              7,995
Cash and cash equivalents at
  beginning of period.......         13,210          7,758          23,058                              44,026
                                   --------        -------        --------       ---------           ---------
Cash and cash equivalents at
  end of period.............       $ 19,684        $15,743        $ 16,594                           $  52,021
                                   ========        =======        ========       =========           =========
</TABLE>

    Consolidating adjustments to the condensed consolidating balance sheets
include the following:

       (a) Elimination of investments in subsidiaries.

       (b) Elimination of intercompany profit in inventory and property and
           equipment.

    Consolidating adjustments to the condensed consolidating statements of
income include the following:

       (c) Elimination of intercompany sales.

    Consolidating adjustments to the condensed consolidating statements of cash
flows include the following:

       (d) Elimination of intercompany profits.

NOTE 19--SUBSEQUENT EVENTS (UNAUDITED)

    On May 29, 2000, the Blue Star Group completed an agreement to sell
Commonwealth Paper, a wholesale paper distributor, which is a subsidiary of Blue
Star Group Limited. The Company received proceeds of approximately $9,054 from
the sale, of which $8,241 was cash. The Company will record the transaction in
the first quarter of fiscal 2001.

                                       48
<PAGE>
                           US OFFICE PRODUCTS COMPANY

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

         FOR THE THREE FISCAL YEARS IN THE PERIOD ENDED APRIL 29, 2000
<TABLE>
<CAPTION>
                                        BALANCE AT     CHARGED TO      CHARGED TO
                                         BEGINNING      COSTS AND         OTHER
DESCRIPTION                 DATE         OF PERIOD      EXPENSES        ACCOUNTS          DEDUCTION             DATE
-----------            --------------   -----------   -------------   -------------     --------------     --------------
<S>                    <C>              <C>           <C>             <C>               <C>                <C>
Allowance for........  April 27, 1997   $ 7,337,000       5,298,000       1,402,000 (a)     (5,398,000)(d) April 25, 1998
  doubtful             April 26, 1998     8,639,000       6,982,000       1,516,000 (b)     (5,417,000)(d) April 24, 1999
  accounts             April 25, 1999    11,720,000       9,763,000        (799,000)(c)     (8,918,000)(d) April 29, 2000

Accumulated..........  April 27, 1997    16,663,000      19,938,000                         (1,770,000)(e) April 25, 1998
  amortization of      April 26, 1998    34,831,000      24,709,000                         (3,837,000)(e) April 24, 1999
  intangibles          April 25, 1999    55,703,000      24,002,000                         (6,541,000)(e) April 29, 2000

Accrued..............  April 27, 1997     1,520,000       6,187,000                         (5,011,000)(f) April 25, 1998
  restructuring        April 26, 1998     2,696,000      24,042,000                        (15,795,000)(f) April 24, 1999
  costs                April 25, 1999    10,943,000      15,376,000                        (14,830,000)(f) April 29, 2000

                       April 27, 1997    13,906,000       9,437,000       1,302,000 (a)    (13,663,000)(g) April 25, 1998
                       April 26, 1998    10,982,000      21,829,000          23,000 (a)    (11,314,000)(g) April 24, 1999
Inventory reserve....  April 25, 1999    21,520,000       8,947,000      (5,223,000)(h)    (16,302,000)(g) April 29, 2000

<CAPTION>
                          BALANCE
                         AT END OF
DESCRIPTION                PERIOD
-----------            --------------
<S>                    <C>
Allowance for........       8,639,000
  doubtful                 11,720,000
  accounts                 11,766,000
Accumulated..........      34,831,000
  amortization of          55,703,000
  intangibles              73,164,000
Accrued..............       2,696,000
  restructuring            10,943,000
  costs                    11,489,000
                           10,982,000
                           21,520,000
Inventory reserve....       8,942,000
</TABLE>

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

(a) Allowance for doubtful accounts and inventory reserve acquired in purchase
    acquisitions.

(b) Includes $1,656,000 of recoveries and ($174,000) related to the effect of
    foreign currency fluctuations on transactions in Canada, Australia and New
    Zealand.

(c) Includes $1,068,000 of recoveries, ($305,000) related to the effect of
    foreign currency fluctuations on transactions in Canada, Australia and New
    Zealand, and ($1,562,000) related to the businesses sold in fiscal 2000.

(d) Represents write-offs of uncollectible accounts receivable.

(e) Represents write-offs of fully amortized intangible assets and amortized
    portion of impaired intangible assets.

(f) Represents cash payments related to facility closures, severance and
    terminations.

(g) Represents write-offs of obsolete or damaged inventory.

(h) Includes ($4,402,000) related to businesses sold in fiscal 2000 and
    ($821,000) related to the effect of foreign currency fluctuations on
    transactions in Canada, Australia and New Zealand.

                                       49
<PAGE>

                                   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.



<TABLE>
<S>                                                    <C>    <C>
                                                                     US OFFICE PRODUCTS COMPANY

                                                       By:    /s/ WARREN D. FELDBERG
                                                              ---------------------------------------
                                                              Name: Warren D. Feldberg
                                                              Title: Chief Executive Officer

                                                       Date:  August 23, 2000
</TABLE>



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



<TABLE>
<CAPTION>
                      SIGNATURE                           CAPACITY IN WHICH SIGNED          DATE
                      ---------                           ------------------------          ----
<C>                                                    <S>                             <C>
                          *
     -------------------------------------------       Chairman of the Board           August 23, 2000
                  Charles P. Pieper

               /s/ WARREN D. FELDBERG                  Chief Executive Officer and
     -------------------------------------------         Director (Principal           August 23, 2000
                 Warren D. Feldberg                      Executive Officer)

                          *                            Chief Financial Officer
     -------------------------------------------         (Principal Financial          August 23, 2000
                   Joseph T. Doyle                       Officer)

                                                       Senior Vice President and
                          *                              Corporate Controller
     -------------------------------------------         (Principal Accounting         August 23, 2000
                  Kevin J. Thimjon                       Officer)

                          *
     -------------------------------------------       Director                        August 23, 2000
                   Kevin J. Conway

                          *
     -------------------------------------------       Director                        August 23, 2000
                   Frank P. Doyle

                          *
     -------------------------------------------       Director                        August 23, 2000
                    Brian D. Finn
</TABLE>


                                       50
<PAGE>


<TABLE>
<CAPTION>
                      SIGNATURE                           CAPACITY IN WHICH SIGNED          DATE
                      ---------                           ------------------------          ----
<C>                                                    <S>                             <C>
                          *
     -------------------------------------------       Director                        August 23, 2000
                 L. Dennis Kozlowski

                          *
     -------------------------------------------       Director                        August 23, 2000
                  Milton H. Kuyers

                          *
     -------------------------------------------       Director                        August 23, 2000
                  Allon H. Lefever

                          *
     -------------------------------------------       Director                        August 23, 2000
                  Edward J. Mathias
</TABLE>



<TABLE>
<S>    <C>                                                    <C>
*By:   /s/ WARREN D. FELDBERG
       -------------------------------------------
       Warren D. Feldberg
       ATTORNEY-IN-FACT
</TABLE>


                                       51