8-K 1 l98414ae8vk.txt PIONEER-STANDARD ELECTRONICS, INC. Securities and Exchange Commission Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report February 28, 2003 ----------------- (Date of earliest event reported) PIONEER-STANDARD ELECTRONICS, INC. ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio (0-5734) 34-0907152 --------------------------------------------- ------------------------------ ----------------------------- (State or other jurisdiction of (Commission File No.) (I.R.S. Employer incorporation) Identification No.)
6065 Parkland Boulevard, Mayfield Heights, Ohio 44124 ---------------------------------------------------------------------------- ----------------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 720-8500 -------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On February 28, 2003, Pioneer-Standard Electronics, Inc. ("Pioneer-Standard" or "the Company") completed the sale of substantially all of the assets and liabilities of its Industrial Electronics Division ("IED") to Arrow Electronics, Inc., ("Arrow") for estimated pre-tax proceeds of $240 million of which approximately $230 million was received on the closing date. The estimated pre-tax proceeds related to the sale are subject to adjustment on the basis of an audit of the assets and liabilities sold. The terms of the transaction were agreed upon through arm's length negotiations. The terms of the sale as well as a description of the assets and liabilities sold are more fully explained in the Purchase Agreement dated as of January 13, 2003 by and between Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics Canada Ltd., and Pioneer-Standard Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard Canada, Inc., a copy of which is attached as Exhibit 2.1. In conjunction with the sale, the operations associated with the remaining assets and liabilities of IED and Aprisa, Inc., the Company's majority owned software business, were discontinued. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired. None. (b) Pro Forma Financial Information. The following unaudited pro forma condensed consolidated financial statements present pro forma financial information for Pioneer-Standard giving effect to the February 28, 2003 sale of certain IED assets and liabilities to Arrow Electronics, Inc.; the discontinuance of operations associated with the remaining assets and liabilities of IED and the Company's majority owned software business; and the use of proceeds from the sale to redeem debt, as described in this Current Report on Form 8-K. The December 31, 2002 Unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if the sale, the discontinuance and the redemption of debt were effective December 31, 2002. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended December 31, 2002, and for each of the years in the three year period ended March 31, 2002 assume the sale, the discontinuance and the redemption of debt were effective as of the beginning of the fiscal year ended March 31, 2000. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the consolidated financial statements and related footnotes included in Pioneer-Standard's 2002 Annual Report on Form 10-K and Pioneer-Standard's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2002, September 30, 2002 and December 31, 2002. 2 THE FOLLOWING UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION IS PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT NECESSARILY AN INDICATION OF THE FUTURE FINANCIAL POSITION OR RESULTS OF OPERATIONS OF PIONEER-STANDARD. 3 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 2002
Pro forma Adjustments ------------------------------- Sale (Dollars In Thousands) Historical Transaction Other Pro Forma ------------- -------------- ------------- ------------- ASSETS Current Assets Cash and cash equivalents $ 70,274 $ 234,938 (a) $(157,500)(e) $ 147,712 Accounts receivable, net 369,661 (76,593)(a) (991)(b) 292,077 Inventories, net 220,232 (123,478)(a) (36,242)(b) 60,512 Deferred income taxes 15,039 (7,019)(a) (1,411)(b) 6,609 Prepaid expenses 1,651 (24)(a) (83)(b) 1,544 Assets of discontinued operations - - 47,399 (b) 47,399 ------------- -------------- ------------- ------------ Total current assets 676,857 27,824 (148,828) 555,853 Goodwill & intangible assets, net 118,993 - (1,522)(b)(c) 117,471 Investments in affiliated companies 32,406 (11,400)(a) - 21,006 Other assets 14,531 (129)(a) - 14,402 Property and equipment, net 71,827 (3,394)(a) (12,943)(b)(c) 55,490 ------------- -------------- ------------- ------------ Total Assets $ 914,614 $ 12,901 $(163,293) $ 764,222 ============= ============== ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 270,988 $ (34,605)(a) $ (17,600)(b) $ 218,783 Accrued salaries, wages, commissions and benefits 12,440 (689)(a) (5,779)(b) 5,972 Other accrued liabilities 19,550 - 8,735 (b)(d) 28,285 Liabilities of discontinued operations - - 18,594 (b) 18,594 ------------- -------------- ------------- ------------ Total current liabilities 302,978 (35,294) 3,950 271,634 Long-Term Debt 150,032 - (150,000)(e) 32 Deferred Income Taxes 11,106 (90)(a) (353)(b) 10,663 Other Long-Term Liabilities 4,151 - 1,003 (b) 5,154 Mandatorily Redeemable Convertible Trust Preferred Securities 143,675 - - 143,675 Shareholders' Equity 302,672 48,285 (a) (17,893)(c)(d)(e) 333,064 ------------- -------------- ------------- ------------ Total Liabilities and Shareholders' Equity $ 914,614 $ 12,901 $(163,293) $ 764,222 ============= ============== ============= ============
4 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Nine Months Ended December 31, 2002
Pro forma Adjustments -------------------------------------------- Other Sale Discontinued (Dollars In Thousands, Except Transaction Operations Share and Per Share Data) Historical (f) (g) Other Pro forma --------------- -------------- --------------- --------- ------------- Net Sales $ 1,542,277 $ (631,985) $ - $ - $ 910,292 Cost of Goods Sold 1,320,918 (525,513) - - 795,405 --------------- -------------- --------------- --------- ------------- Gross Margin 221,359 (106,472) - - 114,887 Warehouse, Selling and Administrative Expenses 199,381 (89,669) (6,508) (85)(h) 103,119(i) --------------- -------------- --------------- --------- ------------- Operating Income (Loss) 21,978 (16,803) 6,508 85 11,768 Other (Income) Expense Other (Income) Expense (1,417) 947 - - (470) Interest Expense 13,180 (6,125) (368) (5,467)(h) 1,220 --------------- -------------- --------------- --------- ------------- Income (Loss) Before Income Taxes 10,215 (11,625) 6,876 5,552 11,018 Provision (Benefit) for Income Taxes 2,248 (2,589) 2,407 2,133 4,199 Minority Interest Income (1,073) - 1,073 - - Distributions on Mandatorily Redeemable Convertible Preferred Securities, net of tax 5,673 (1,073) - (100) 4,500 --------------- -------------- --------------- --------- ------------- Income (Loss) from Continuing Operations $ 3,367 $ (7,963) $ 3,396 $ 3,519 $ 2,319 =============== ============== =============== ========= ============= PER SHARE DATA: Income (Loss) from Continuing Operations - basic $ 0.12 $ 0.09 Income (Loss) from Continuing Operations - diluted $ 0.12 $ 0.08 Weighted Average Shares Outstanding: Basic 27,270,774 27,270,774 Diluted 27,698,764 27,698,764
5 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended March 31, 2002
Pro forma Adjustments ------------------------------------------- Other Sale Discontinued (Dollars In Thousands, Except Transaction Operations Share and Per Share Data) Historical (f) (f) Other Pro forma --------------- -------------- -------------- ------------- ----------------- Net Sales $ 2,323,593 $ (1,029,271) $ - $ - $ 1,294,322 Cost of Goods Sold 2,007,618 (883,779) - - 1,123,839 --------------- -------------- -------------- ------------- ----------------- Gross Margin 315,975 (145,492) - - 170,483 Warehouse, Selling and Administrative Expenses 293,903 (134,186) (5,035) (4,194)(h)(j) 150,488(i) Restructuring Expense 3,796 (3,323) - - 473 --------------- -------------- -------------- ------------- ----------------- Operating Income (Loss) 18,276 (7,983) 5,035 4,194 19,522 Other (Income) Expense Other (Income) Expense (721) (152) - - (873) Interest Expense 22,046 (10,718) (71) (7,286)(h) 3,971 --------------- -------------- -------------- ------------- ----------------- Income (Loss) Before Income Taxes (3,049) 2,887 5,106 11,480 16,424 Provision (Benefit) for Income Taxes (1,256) 1,283 1,591 3,835 5,453 Minority Interest Income (450) - 450 - - Distributions on Mandatorily Redeemable Convertible Preferred Securities, net of tax 5,704 533 - (79) 6,158 --------------- -------------- -------------- ------------- ----------------- Income (Loss) from Continuing Operations $ (7,047) $ 1,071 $ 3,065 $ 7,724 $ 4,813 =============== ============== ============== ============= ================= PER SHARE DATA: Income (Loss) from Continuing Operations - basic $ (0.26) $ 0.18 Income (Loss) from Continuing Operations - diluted $ (0.26) $ 0.17 Weighted Average Shares Outstanding: Basic 27,040,171 27,040,171 Diluted 27,040,171 27,608,010
6 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended March 31, 2001
Pro forma Adjustments --------------------------------------------- Other Sale Discontinued (Dollars In Thousands, Except Transaction Operations Share and Per Share Data) Historical (f) (g) Other Pro forma -------------- --------------- ------------ ------------- ----------------- Net Sales $ 2,901,353 $ (1,469,515) $ - $ - $ 1,431,838 Cost of Goods Sold 2,468,571 (1,214,940) - - 1,253,631 -------------- --------------- ------------ ------------- ----------------- Gross Margin 432,782 (254,575) - - 178,207 Warehouse, Selling and Administrative Expenses 318,400 (154,139) (1,079) (4,203)(h)(j) 158,979(i) Write-down of IT system assets 14,200 - - - 14,200 -------------- --------------- ------------ ------------- ----------------- Operating Income (Loss) 100,182 (100,436) 1,079 4,203 5,028 Other (Income) Expense Other (Income) Expense (480) (99) 100 - (479) Interest Expense 34,349 (16,635) (16) (7,098)(h) 10,600 -------------- --------------- ------------ ------------- ----------------- Income (Loss) Before Income Taxes 66,313 (83,702) 995 11,301 (5,093) Provision (Benefit) for Income Taxes 25,823 (29,990) 220 3,606 (341) Distributions on Mandatorily Redeemable Convertible Preferred Securities, net of tax 5,914 391 - - 6,305 -------------- --------------- ------------ ------------- ----------------- - Income (Loss) from Continuing Operations $ 34,576 $ (54,103) $ 775 $ 7,695 $ (11,057) ============== =============== ============ ============= ================= PER SHARE DATA: Income (Loss) from Continuing Operations - basic $ 1.29 $ (0.41) Income (Loss) from Continuing Operations - diluted $ 1.11 $ (0.41) Weighted Average Shares Outstanding: Basic 26,793,457 26,793,457 Diluted 36,615,950 26,793,457
7 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended March 31, 2000
Pro forma Adjustments --------------------------------------------------- Other Sale Discontinued (Dollars In Thousands, Except Transaction Operations Share and Per Share Data) Historical (f) (g) Other Pro forma ---------------- ---------------- ------------- ----------- ----------------- Net Sales $ 2,560,711 $ (1,341,222) $ - $ - $ 1,219,489 Cost of Goods Sold 2,170,684 (1,129,627) - - 1,041,057 ---------------- ---------------- ------------- ----------- ----------------- Gross Margin 390,027 (211,595) - - 178,432 Warehouse, Selling and Administrative Expenses 289,631 (133,652) - (4,134)(h)(j) 151,845(i) ---------------- ---------------- ------------- ----------- ----------------- Operating Income (Loss) 100,396 (77,943) - 4,134 26,587 Other (Income) Expense Other (Income) Expense (1,058) - - - (1,058) Gain on Sale of Assets (1,845) - - - (1,845) Interest Expense 26,074 (12,825) - (6,613)(h) 6,636 ---------------- ---------------- ------------- ----------- ----------------- Income (Loss) Before Income Taxes 77,225 (65,118) - 10,747 22,854 Provision (Benefit) for Income Taxes 31,210 (24,356) - 3,512 10,366 Distributions on Mandatorily Redeemable Convertible Preferred Securities, net of tax 5,870 334 - - 6,204 ---------------- ---------------- ------------- ----------- ----------------- Income (Loss) from Continuing Operations $ 40,145 $ (41,096) $ - $ 7,235 $ 6,284 ================ ================ ============= =========== ================= PER SHARE DATA: Income (Loss) from Continuing Operations - basic $ 1.52 $ 0.24 Income (Loss) from Continuing Operations - diluted $ 1.27 $ 0.23 Weighted Average Shares Outstanding: Basic 26,409,156 26,409,156 Diluted 36,178,307 27,051,323
8 The pro forma adjustments to the December 31, 2002 Unaudited Condensed Consolidated Balance Sheet include the effects of the receipt of cash at the closing date of the sale as if the closing date was December 31, 2002, a receivable of approximately $12 million for the estimated remaining sales proceeds that have been held back until audited results are available, disposal of assets and liabilities sold, discontinuance of the remaining IED assets and liabilities and the Company's majority owned software business, redemption of debt and recording of related transaction and debt redemption costs. Included in Shareholders' Equity is the estimated gain on sale, after tax. The actual gain from the sale when recorded in the fourth quarter of Fiscal 2003 will differ based on the audited carrying value of the net assets as of February 28, 2003 and determination of final transaction costs. (a) To adjust for the assets and liabilities sold, the related taxes and receipt of the sales proceeds. (e) To adjust for assets and liabilities of the discontinued operations not sold to Arrow. (c) To adjust the value of the Company's majority owned software company and other impaired assets. Intangible assets and Property and equipment, net were adjusted by approximately $1.2 million and $4.6 million, respectively. (d) To reflect transaction costs of the sale of approximately $4.6 million. (e) To adjust for the redemption of debt and related costs. The estimated gain on sale, loss on redemption of debt and asset impairments have been excluded from the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended December 31, 2002, and each of the years in the three year period ended March 31, 2002. (f) To eliminate the sales and operating costs of IED as if the disposition and discontinuance had occurred at the beginning of the fiscal year ended March 31, 2000. (g) To eliminate the operating costs of Aprisa, Inc., the Company's majority owned software business, as if the discontinuance had occurred at the beginning of the fiscal year ended March 31, 2000. (h) To eliminate interest expense and other related debt costs as if the redemption had occurred at the beginning of the fiscal year ended March 31, 2000. (i) Operating expenses do not reflect the impact of restructuring the Company. Had the Company been restructured beginning in fiscal year 2000, pro forma operating expenses may have been reduced by approximately $5.1 million for the nine months ended December 31, 2002, and approximately $10.0 million, $9.5 million and $8.7 million for each of the years in the three year period ended March 31, 2002. (j) Effective April 1, 2002, the Company discontinued amortization of its goodwill in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". This adjustment is to eliminate goodwill amortization of $4.1 million for the fiscal years ended March 31, 2002 and 2001 and $4.0 million for the fiscal year ended March 31, 2000, assuming the adoption of this Statement occurred at the beginning of the fiscal year ended March 31, 2000. 9 (c) Exhibits. 2.1 Purchase Agreement dated as of January 13, 2003 by and between Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics Canada Ltd., and Pioneer-Standard Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard Canada Inc. 99.1 Press release of Pioneer-Standard Electronics, Inc. dated March 3, 2003. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ Steven M. Billick -------------------------------------------------- Steven M. Billick Executive Vice President and Chief Financial Officer Date: March 17, 2003 10 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE ----------- ----------- ---- 2.1 Purchase Agreement dated as of January 13, 2003 by and between Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics Canada Ltd., and Pioneer-Standard Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard Canada Inc. 99.1 Press release of Pioneer-Standard Electronics, Inc. dated March 3, 2003.
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