-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, U6DxdAd5K/UfGT6rr5pSH+PJdgo/ZgskexLXBDXrpnx7OYkX2tmDbBlK0L2oT/CW JBVVlVzU4mVajXe9CPG/wQ== 0000950152-94-000662.txt : 19940702 0000950152-94-000662.hdr.sgml : 19940702 ACCESSION NUMBER: 0000950152-94-000662 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: 5065 IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05734 FILM NUMBER: 94536337 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 10-K 1 PIONEER STANDARD 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K X Annual Report Pursuant to Section 13 or 15(d) ----- of the Securities Exchange Act of 1934 (Fee required) For the fiscal year ended MARCH 31, 1994 or Transition Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 Commission File No. 0-5734 ------ Pioneer-Standard Electronics, Inc. --------------------------------------------------------- (Exact name of Registrant as specified in its charter) Ohio 34-0907152 - - - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. employer iden- incorporation or organization) tification no.) 4800 East 131st Street, Cleveland, Ohio 44105 - - - --------------------------------------- ------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (216) 587-3600 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - - - ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Shares, without par value -------------------------------- (Title of class) Common Share Purchase Rights ---------------------------- (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------------------- ---------------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ---- The aggregate market value of voting shares of the Registrant held by non-affiliates (which excludes voting shares held by officers and Directors of the Registrant) was $216,859,018 as of June 1, 1994, computed on the basis of the last reported sale price per share ($23.75) of such shares on the NASDAQ National Market System. The number of Common Shares outstanding as of June 1, 1994 was 9,930,256. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 26, 1994 are incorporated by reference into Part III of this Form 10-K. Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 1994. The Common Share information contained in this Form 10-K does not reflect a three-for-two share split effected in the form of a 50% share dividend declared on June 23, 1994 payable on August 1, 1994 to shareholders of record on July 6, 1994. PART I ------ Item 1. Business - - - ----------------- (a) Pioneer-Standard Electronics, Inc. was organized as an Ohio corporation in 1963 and maintains its principal office at 4800 East 131st Street, Cleveland, Ohio 44105 (telephone number (216) 587-3600). The Company first offered its securities to the public in 1971. In November, 1982, the Company purchased substantially all of the assets of the Electronics and Military divisions of The Harvey Group, Inc., a New York corporation. On December 28, 1990, the Company purchased from Lex Electronics, Inc., a New York corporation, certain assets of Lex's Computer Systems Division. On June 1, 1994, Pioneer-Standard Canada Inc., a newly-formed Canadian subsidiary of the Company, purchased from United Westburne Inc., a Canadian corporation, certain of the assets and assumed certain liabilities of Westburne's Zentronics Division ("Zentronics"), which the Company believes is one of the largest distributors of electronic components and computer products in Canada. There have not been any material changes in the nature of the business done by the Company since April 1, 1993. Except as otherwise stated, the term "Company" as used herein shall mean Pioneer-Standard Electronics, Inc. (b) The Company is engaged in the distribution of industrial and end-user electronic products, which business comprises only one basic industry segment. (c) The following is a description of various aspects of the Company's business: INDUSTRIAL AND END-USER DISTRIBUTION - The Company distributes a broad range of electronic components and computer products manufactured by others. These products are sold to original equipment manufacturers, value-added resellers, research laboratories, government agencies, and end-users, including manufacturing -2- 3 companies, and service and other non-manufacturing organizations. These products are classified into three broad categories: semiconductors, computer products, and passive and electromechanical components. During 1994, semiconductor products accounted for 41% of the Company's sales compared with 37% in 1993 and 36% in 1992. These products include microprocessors, memory devices, programmable logic devices, analog and digital integrated circuits and other semiconductor devices. During fiscal 1994, computer products accounted for 33% of the Company's sales compared with 39% in 1993 and 42% in 1992. These products include computers (primarily mini and personal), display terminals, disk drives, development systems, modems and networking products. During 1994, passive and electromechanical products accounted for 24% of the Company's sales, up from 21% in 1993 and 19% in 1992. These products include capacitors, connectors, resistors, relays, potentiometers, switches, wire and cable, and power conditioning equipment. As a part of its distributor operations, the Company provides value-added services including systems integration, just-in-time kitting operations, memory and logic device programming and connector assemblies to customer specifications. Sales amounts for these services are included among the three broad categories discussed above. Miscellaneous products accounted for 2% of sales in 1994 and for 3% of sales in 1993 and 1992. PIONEER TECHNOLOGIES GROUP, INC. - The Company owns 50% of the outstanding common stock of Pioneer Technologies Group, Inc. ("Pioneer Technologies"), a Maryland corporation headquartered in Gaithersburg, Maryland. The business of Pioneer Technologies is substantially the same as that of the Company. The companies have an agreement which provides, among other things, that they have the right to buy each other's products at cost of the product plus handling. In addition, Pioneer Technologies utilizes the Company's data processing system for processing order, warehousing, accounting and administrative information, for which it is charged a monthly fee. For further information as to transactions between the companies, including certain first right of refusal agreements concerning the Company's 50% ownership of Pioneer Technologies, see Note 9 (Pioneer Technologies Group, Inc.) of Notes to Financial Statements of the Company. PRODUCTS DISTRIBUTED AND SOURCES OF SUPPLY - The Company (together with Pioneer Technologies) is the third largest of the approximately 1,500 electronics distributors in the United States in terms of total sales. The Company currently has approximately 135,000 items produced by over 100 manufacturers in its product file. A majority of the Company's revenues comes from products sourced by relatively few suppliers. During the 1994 fiscal year, products purchased from the Company's five largest suppliers accounted for 72% of total sales volume, with Digital Equipment -3- 4 Corporation and Intel Corporation being the largest two suppliers. The loss of any one of the top five suppliers and/or a combination of certain other suppliers could have a material adverse effect on the Company's sales and earnings unless alternative products manufactured by others are available to the Company. The majority of the products sold by the Company are purchased pursuant to distributor agreements which generally provide for inventory return privileges by the Company upon cancellation of a distributor agreement. The distributor agreements also typically provide protection to the Company for product obsolescence and price erosion. The Company believes it has good relationships with its suppliers. CUSTOMERS - The Company serves over 15,800 customers in many major markets of the United States. No single customer accounted for more than five percent of the Company's total sales for the fiscal year ended March 31, 1994. BACKLOG - The Company historically has not had a significant backlog of orders, although some shipments may be scheduled for delivery over an extended period of time. There was not a significant backlog during the last fiscal year. COMPETITION - The sale and distribution of industrial electronic components and computer products are highly competitive, primarily with respect to price and product availability, but also with respect to service, variety and availability of products carried, number of locations and promptness of service. Many of the distributors with whom the Company competes are regional or local distributors. However, several of the Company's strongest competitors have national and international distribution businesses. The Company also experiences competition from manufacturers, including some of the Company's suppliers, who may sell directly to the industrial and end-user account base. EMPLOYEES - The Company currently has 1,078 employees, with approximately 1,060 of these persons employed on a full-time basis and the balance on a part-time basis. The number of employees does not include the employees the Company obtained through the acquisition of Zentronics. The Company is not a party to any collective bargaining agreement, has had no strikes or work stoppages and considers its employee relations to be excellent. (d) The distribution of the Company's products has been primarily in the United States. The Company gained a West Coast presence through its March, 1989 acquisition of the assets of Compumech Electronics, Inc. and its December, 1990 acquisition of certain assets of the Lex Computer Systems Division of Lex Electronics, Inc. In addition, the Company entered the Canadian market through its June, 1994 acquisition of certain assets of Zentronics. The Company is not significantly involved in export sales. -4- 5 Item 2. Properties - - - ------------------- The Company's major distribution facilities are set forth below:
Owned or Expiration Date Location Sq. Ft. Leased of Lease (1) -------- ------- -------- -------------- Chicago, Illinois 11,300 Leased April 14, 1998 Cleveland, Ohio (2) 87,000 Owned Dallas, Texas 13,500 Leased October 31, 1994 Dayton, Ohio 60,800 Owned Eden Prairie, Minnesota 12,800 Leased August 31, 1997 Freemont, California 12,000 Leased March 14, 1999 Irvine, California 14,700 Leased February 28, 1997 Lexington, Massachusetts 26,400 Owned Solon, Ohio 86,300 Leased March 31, 1996 Solon, Ohio 30,000 Leased October 31, 1994 Solon, Ohio (3) 44,700 Leased May 31, 1999 Twinsburg, Ohio (4) 106,000 Owned Woodbury, New York 35,600 Leased September 30, 1997 - - - --------------- (1) The major leases contain renewal options for periods ranging from one to twenty years. (2) Corporate headquarters. (3) Systems and Services Division facility. (4) Corporate Distribution Center. The Company also has entered into various leases for distribution facilities of 10,000 square feet or less. The list of properties set forth above does not include the properties the Company obtained through the acquisition of Zentronics.
Item 3. Legal Proceedings - - - -------------------------- As of March 31, 1994, the Company was not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders - - - ------------------------------------------------------------ No matters were submitted to a vote of the Company's security holders during the last quarter of its fiscal year ended March 31, 1994. -5- 6 Executive Officers of the Company(1) - - - --------------------------------- The name, age and positions of each executive officer of the Company as of June 1, 1994 are as follows: Name Age Position ---- --- -------- Preston B. Heller, Jr. 64 Chairman of the Board and Chief Executive Officer of the Company since June, 1984. James L. Bayman 57 President and Chief Operating Officer of the Company since June, 1984. Arthur Rhein 48 Senior Vice President of the Company since April, 1993 and Vice President - Marketing of the Company from 1986 to April, 1993. Prior thereto, Vice President - Northeast Division of the Company from 1984 to 1986. John V. Goodger 58 Vice President, Treasurer, and Assistant Secretary of the Company since February, 1990. Prior thereto, Vice President, Treasurer and Assistant Secretary of Ferro Corporation from 1987 to 1990 and Vice President and Treasurer of Ferro Corporation from 1984 to 1990. Janice M. Margheret 39 Senior Vice President of the Company since April, 1993 and Vice President and Controller of the Company from July, 1987 to April, 1993. Prior thereto, Group Controller of the Company from 1983 to 1987. -6- 7 William A. Papenbrock 55 Secretary of the Company since 1986. Mr. Papenbrock is a partner of the law firm of Calfee, Halter & Griswold(2). __________________________ (1) The description of Executive Officers called for in this Item is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K. (2) The law firm of Calfee, Halter & Griswold serves as counsel to the Company. There is no relationship by blood, marriage or adoption among the above-listed officers. Messrs. Heller, Bayman, Rhein, and Goodger and Ms. Margheret have entered into Amended and Restated Employment Agreements with the Company, all of which are included as Exhibits hereto. Messrs. Heller, Bayman, Rhein, and Goodger and Ms. Margheret hold office until terminated as set forth in their Amended and Restated Employment Agreements. Mr. Papenbrock holds office until his successor is elected by the Board of Directors. -7- 8 PART II ------- Item 5. Market for Registrant's Common Stock and Related Stockholder Matters - - - ------- -------------------------------------------------------------------- The Company's Common Shares, without par value, are traded on the NASDAQ National Market System. Common Share prices are quoted daily under the symbol PIOS. The high and low sales prices for the Common Shares, and the cash dividends paid on the Common Shares, for each quarter of the two most recent fiscal years and additional information required by this Item is included under Exhibit 99(c) to this Form 10-K Annual Report. Cash dividends are payable quarterly, upon authorization of the Board of Directors. Regular payment dates are the 1st day of August, November, February and May. The Company maintains a Dividend Reinvestment Plan whereby cash dividends, and a maximum of an additional $5,000 per month, may be invested in the Company's Common Shares at no commission cost. On April 25, 1989, the Company adopted a Common Share Purchase Rights Plan. For further information about the Common Share Purchase Rights Plan, see Note 6 (Common Share Purchase Rights Plan) of Notes to Financial Statements of the Company. Item 6. Selected Financial Data - - - ------- ----------------------- The information required by this Item, is included under Exhibit 99(d) to this Form 10-K Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and - - - ------- --------------------------------------------------------------- Results of Operations - - - --------------------- The information required by this Item is included under Exhibit 99(e) to this Form 10-K Annual Report. Item 8. Financial Statements and Supplementary Data - - - ------- ------------------------------------------- The information required by this Item is included under Exhibit 99(f) to this Form 10-K Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and - - - ------- --------------------------------------------------------------- Financial Disclosure - - - -------------------- Not applicable. -8- 9 PART III -------- Item 10. Directors and Executive Officers of the Registrant - - - -------- -------------------------------------------------- Information required by this item as to the Directors of the Company appearing under the caption "Nominees for Election" and "Directors Continuing in Office" in the Company's Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on July 26, 1994 (the "1994 Proxy Statement") is incorporated herein by reference. Information required by this item as to the executive officers of the Company is included in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation - - - -------- ---------------------- The information required by this item is incorporated herein by reference to "Compensation of Executive Officers" in the 1994 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management - - - -------- -------------------------------------------------------------- The information required by this item is incorporated herein by reference to "Share Ownership" in the 1994 Proxy Statement. Item 13. Certain Relationships and Related Transactions - - - -------- ---------------------------------------------- The information required by this item is incorporated herein by reference to "Certain Transactions" in the 1994 Proxy Statement. -9- 10 PART IV ------- Item 14. Exhibits, Financial Statement Schedules, and Reports on - - - -------- ------------------------------------------------------- Form 8-K -------- (a) The following financial statements and schedules are filed as part of this report on Exhibit 99(f) as indicated: Page in Exhibit 99(f) ------------- (1) Financial Statements and Schedules ---------------------------------- Pioneer-Standard Electronics, Inc. ---------------------------------- Report of independent auditors 11 Balance sheet as of March 31, 1994 and 1993 2 For the years ended March 31, 1994, 1993 and 1992: Statements of income 3 Statements of shareholders' equity 4 Statements of cash flows 5 Notes to financial statements 6 Report of independent auditors 12 Schedules for years ended March 31, 1994, 1993 and 1992: II - Amounts receivable from related parties and underwriters, promoters, and employees other than related parties 13 VIII - Valuation and qualifying accounts 14 IX - Short-term borrowings 15 Quarterly Financial Data 16 Pioneer Technologies Group, Inc. -------------------------------- Report of independent auditors 19 Balance sheet as of March 31, 1994 and 1993 20 For the years ended March 31, 1994, 1993 and 1992: Statements of income and retained earnings 22 Statements of cash flows 23 Notes to financial statements 24 -10- 11 Schedules for years ended March 31, 1994, 1993 and 1992: VIII - Valuation and qualifying accounts 31 IX - Short-term borrowings 32 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or the notes thereto. (2) Exhibits -------- See the Index to Exhibits at page E-1 of this Form 10-K. (b) Reports on Form 8-K ------------------- No Current Reports on Form 8-K were filed during the quarter ended March 31, 1994. -11- 12 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. PIONEER-STANDARD ELECTRONICS, INC. Date: June 28, 1994 By: /s/ Preston B. Heller, Jr. -------------------------- Preston B. Heller, Jr., Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature and Title Date - - - ------------------- ---- /s/ Preston B. Heller, Jr. Chairman of the ) - - - -------------------------- Board and Chief ) Preston B. Heller, Jr. Executive Officer ) ) /s/ John V. Goodger Vice President, ) - - - -------------------------- Treasurer and ) John V. Goodger Assistant Secretary ) ) /s/ Janice M. Margheret Senior Vice ) - - - -------------------------- President ) Janice M. Margheret ) ) /s/ James L. Bayman Director ) - - - -------------------------- ) James L. Bayman ) ) /s/ Frederick A. Downey Director ) - - - -------------------------- ) June 28, 1994 Frederick A. Downey ) ) /s/ Victor Gelb Director ) - - - -------------------------- ) Victor Gelb ) ) /s/ Gordon E. Heffern Director ) - - - -------------------------- ) Gordon E. Heffern ) ) /s/ Arthur Rhein Director ) - - - -------------------------- ) Arthur Rhein ) ) /s/ Edwin Z. Singer Director ) - - - -------------------------- ) Edwin Z. Singer ) ) /s/ Thomas C. Sullivan Director ) - - - -------------------------- ) Thomas C. Sullivan ) ) /s/ Karl E. Ware Director ) - - - -------------------------- ) Karl E. Ware ) -12- 13 Pioneer-Standard Electronics, Inc. Exhibit Index Sequential Exhibit No. Description Page No. - - - ----------- ----------- ---------- 3.(a) Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1982. N/A (b) Amended Code of Regulations, as amended, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1988. N/A 4.(a) Credit Agreement dated as of January 23, 1992 by and among the Company and three banks, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1992. N/A (b) Amendment Agreement, dated as of June 30, 1993, by and among the Company, National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A. 16 (c) Second Amendment Agreement, dated as of May 27, 1994, by and among the Company, National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A. and National City Bank, as Agent. 17 (d) Rights Agreement dated as of April 25, 1989 by and between the Company and AmeriTrust Company National Association, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1989. N/A (e) Note Purchase Agreement dated as of October 31, 1990 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1990. N/A (f) Amendment No. 1 to Note Purchase Agreement dated as of November 1, 1991 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A E-1 14 Sequential Exhibit No. Description Page No. - - - ----------- ----------- ---------- 10.(a) Amended and Restated Employment Agreement effective as of April 1, 1993 by and between the Company and Preston B. Heller, Jr., which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A (b) Amended and Restated Employment Agreement effective as of April 1, 1993 by and between the Company and James L. Bayman, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A (c) Amended and Restated Employment Agreement effective as of April 1, 1993 by and between the Company and Janice M. Margheret, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A (d) Amended and Restated Employment Agreement effective as of April 1, 1993 by and between the Company and Arthur Rhein, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A (e) Amended and Restated Employment Agreement effective as of April 1, 1994 by and between the Company and John V. Goodger. 22 (f) Stock Purchase Agreement dated July 24, 1986 among Pioneer-Standard Electronics, Inc. and the other shareholders of Pioneer Technologies Group, Inc., which is incorporated herein by reference from the Company's Current Report on Form 8-K dated July 24, 1986. N/A (g) 1982 Incentive Stock Option Plan, as amended, which is incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1988. N/A (h) Amended and Restated 1991 Stock Option Plan. 37 (i) Asset Purchase Agreement dated April 22, 1994 between Pioneer-Standard Electronics, Inc. and Westburne Industrial Enterprises Ltd., which is incorporated herein by reference from the Company's Current Report on Form 8-K dated June 1, 1994. N/A 11. Statement regarding computation of per share earnings. 43 21. Subsidiaries of the Registrant. 44 24. Consents of Ernst & Young, Independent Auditors. 45 E-2 15 Sequential Exhibit No. Description Page No. - - - ----------- ----------- ---------- 99.(a) Certificate of Insurance Policy effective November 1, 1993 between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc. 47 99.(b) Forms of Amended and Restated Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers. 48 99.(c) Dividend Information and Price Range of Common Shares 52 99.(d) Selected Financial Data 53 99.(e) Management's Discussion and Analysis of Financial Condition and Results of Operations. 54 99.(f) Financial Statements and Schedules listed under Item 14(a) 61 431/15154HZF.458 E-3 EX-4.B 2 PIONEER STANDARDS 1 [Pioneer Logo] Exhibit 4(b) June 30, 1993 National City Bank Society National Bank Star Bank, N.A. Re: Extension of Subject Commitments under Credit Agreement dated January 23, 1992 Gentlemen: Reference is made to the Credit Agreement by and among you, the undersigned (Borrower) and National City Bank as your agent which provides for, among other things, subject commitments aggregating $30,000,000 and available to Borrower, upon certain terms and conditions, on a revolving basis until January 1, 1996 (the conversion date now in effect) and on an amortizing basis thereafter until January 1, 2000 subject, however, in either case to earlier reduction or termination pursuant to the credit agreement. Borrower hereby requests that the credit agreement be amended by deleting the date "January 1, 1996" from subsection 2A.02 (captioned "TERM"), as amended, and by substituting for that deleted date the date "January 1, 1997". In all other respects the credit agreement shall remain in full effect. This letter has been executed and delivered to each of you in triplicate. If you assent to the extension, kindly send two signed copies of your assent to your agent who will, if the extension becomes effective, forward one such copy to Borrower and inform you of the extension. Pioneer-Standard Elecnonics, Inc. By: /s/ John V. Goodger --------------------------------- The undersigned hereby assents to the foregoing. National City Bank Society National Bank By: /s/ By: /s/ -------------------------------- ---------------------------------- Star Bank, N.A. By: /s/ -------------------------------- EX-4.C 3 PIONEER STANDARD 1 lgw40160.am2 05/26/94 Exhibit 4(c) SECOND AMENDMENT AGREEMENT Second Amendment Agreement (this "Amendment") made as of May 27, 1994, by and among Pioneer-Standard Electronics, Inc. (Borrower), National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A. (together "banks") and National City Bank in its capacity as agent of those three banks ("NCB-Agent") for the purposes of the Credit Agreement referred to below and the related writings: Whereas, the parties have entered into a Credit Agreement dated January 23, 1992, as amended by Amendment Agreement dated as of June 30, 1993 (as amended, the "Credit Agreement") which sets forth the terms and conditions upon which Borrower may obtain (a) loans "subject loans" on a revolving basis until the "conversion date" (originally January 1, 1995 but now January 1, 1997), as that term is defined in the Credit Agreement, and on an amortizing basis thereafter and (b) "subject BAs"; AND each term defined in the Credit Agreement shall have the same meaning in this Amendment as is ascribed thereto in the Credit Agreement; Whereas, the parties desire to amend certain provisions of the Credit Agreement as provided below: THEREFORE, in consideration of the premises above and the mutual promises below and for other considerations, the parties agree as follows: 1. Subsection 2A.01 of the Credit Agreement is hereby amended in its entirety to read as follows: 2A.01 AMOUNTS -- The aggregate amount of the subject commitments shall be thirty-five million dollars ($35,000,000), but that amount may be reduced from time to time pursuant to subsection 2A.03 or 2A.04 and the subject commitments may be terminated pursuant to section 5B. The amount of each bank's subject commitment (subject to such reduction or termination), and the proportion (expressed as a percentage) that it bears to all of the subject commitments, is set forth opposite the bank's name below, to-wit: $17,500,000 50% National City Bank 10,500,000 30% Society National Bank 7,000,000 20% Star Bank, N.A. ----------- --- $35,000,000 100% Total
2. Borrower agrees to cause its subsidiary, Pioneer-Standard Canada Inc., to comply with all the provisions of sections 3A, 3B, 3C and 3D of the Credit Agreement and agrees that all references to financial information in section 3A shall be deemed to be references to financial information of Borrower and its subsidiaries on a consolidating and consolidated basis; PROVIDED, 2 that Pioneer-Standard Canada Inc. shall not be required to comply with the provisions of subsection 3D.06 (captioned "DIVIDENDS"). 3. Subsections 3B.01, 3B.02, 3B.03, 3B.04 and 3B.05 of the Credit Agreement are hereby amended their entirety to read as follows: 3B.01 NET WORTH -- Borrower will not suffer or permit the sum of the consolidated net worth of the companies at any time to be less than the then required minimum amount. The required minimum amount shall be eighty-nine million dollars ($89,000,000) EXCEPT that the required minimum amount shall be permanently increased (a) on June 30, 1994 and on each quarterly date thereafter by an amount equal to the sum of fifty percent (50%) of the consolidated net income of the companies, if any, for the quarter-annual period then ending plus (b) upon each issuance or other sale by Borrower of any of its equity securities by an amount equal to the net proceeds (after costs and expenses) thereof. 3B.02 LEVERAGE -- Borrower will not suffer or permit the total liabilities of the companies at any time to exceed an amount equal to two hundred twenty-five percent (225%) of the sum of the net worth of the companies, all as determined on a consolidated basis. 3B.03 WORKING CAPITAL -- Borrower will not suffer or permit the companies' aggregate working capital at any time to fall below sixty million dollars ($60,000,000). 3B.04 CURRENT RATIO -- Borrower will not suffer or permit the current assets of the companies at any time to fall below an amount equal to one and seven-tenths (1.7) times the amount of their current liabilities, all as determined on a consolidated basis. 3B.05 FIXED CHARGE COVERAGE -- Borrower will not suffer or permit the aggregate of (a) the aggregate net income of the companies (EXCEPT Borrower's equity in any income or loss of PTGI) plus (b) the aggregate interest expense of the companies plus (c) the aggregate federal, state and local income taxes of the companies plus (d) the aggregate operating lease expense of the companies for any four-quarter period to be less than an amount equal to one hundred eighty percent (180%) of the sum of -2- 3 (a) the aggregate interest expense of the companies plus (b) the aggregate operating lease expense of the companies for that four-quarter period, all as determined on a consolidated basis. 4. Subsection 3D.01 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clause (iii): (iii) Borrower's investment in Pioneer-Standard Canada Inc. (exclusive of retained earnings of Pioneer-Standard Canada Inc.) so long as the aggregate amount of such investments does not exceed ten million eight hundred thousand dollars ($10,800,000). 5. Subsection 3D.02 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clause (v): (v) any advance or loan to, or guaranty of the obligations of, Pioneer-Standard Canada Inc., so long as the aggregate amount of all such advances, loans and guaranties does not exceed eighteen million five hundred thousand dollars ($18,500,000) at any one time. 6. The following new definition is hereby added to section 9 ofthe Credit Agreement: COMPANY refers to Borrower or to a subsidiary of Borrower, as the case may be; 7. It is a condition of this Amendment that prior to or at the execution of this Amendment Borrower shall have delivered, or caused to be delivered, to NCB-Agent the following: (a) a promissory note in favor of each bank, in the form of Exhibit B to this Amendment, it being agreed that from and after the date of this Amendment the form of promissory note attached hereto as Exhibit B shall be deemed to be Exhibit B to the Credit Agreement; and (b) a guaranty of Borrower's obligations under the Credit Agreement, in form and substance satisfactory to banks, executed by Pioneer-Standard Canada Inc. 8. Borrower hereby represents and warrants to cach of the other parties to this Amendment that (1) none of the representations and warranties made in subsections 4B.01 through 4B.08 of the Credit Agreement has ceased to be true and complete in any material respect; and (2) no "default under this Agreement" has occurred that is continuing. -3- 4 9. In all other respects the Credit Agreement and each of the related writings shall remain in full effect and be unaffected hereby. Each reference to the Credit Agreement (whether made in the Credit Agreement or any related writings or elsewhere) shall hereafter be deemed to be a reference to the Credit Agreement as amended hereby. This Amendment may be executed in counterparts, each counterpart to be executed by one or more or all of the parties but collectively to constitute but one agreement. National City Bank, Agent Pioneer-Standard Electronics, Inc. By: /s/ Phillip Marshall By: /s/ John V. Goodger ------------------------------ -------------------------------- Title: Asst. Vice President Title: Vice President, Treasurer --------------------------- ----------------------------- National City Bank Star Bank, N.A. By: /s/ Phillip Marshall By: John D. Barett ------------------------------ -------------------------------- Title: Asst. Vice President Title: Vice President --------------------------- ----------------------------- Society National Bank By: /s/ ----------------------------- Title: Vice President -------------------------- - 4 - 5 NOTE ---- $ _________________ Cleveland, Ohio ______________ , 1994 FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc. (BORROWER), an Ohio corporation, promises to pay to the order of _______________________ , at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of ____________________________________ DOLLARS (or, if less, the aggregate unpaid principal balance from time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued pursuant to an Agreement dated January 23, 1992, as amended from time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating thirty-five million dollars ($35,000,000) pursuant to which Borrower may obtain subject loans from the banks upon certain terms and conditions. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any allonge thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By: _______________________________ EXHIBIT B EX-10.E 4 PIONEER STANDARD 1 Exhibit 10(e) EXECUTION COPY -------------- AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JOHN V. GOODGER May 20, 1994 2 Table of Contents -----------------
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . . . . . . . . . . . . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6. Effect of Death or Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 15. Amendment or Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Successors to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT ----------------------------------------- AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JOHN V. GOODGER ("Goodger"), dated May ___, 1994, effective April 1, 1994. W I T N E S S E T H: WHEREAS: The Company and Goodger have given consideration to an employment agreement providing for the services of Goodger as Vice President, Treasurer and Assistant Secretary; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Goodger has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Goodger as follows: 1 . Employment ---------- The Company hereby agrees to continue to employ Goodger, and Goodger hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2 . Period of Employment -------------------- For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3 . Position, Duties, Responsibilities ---------------------------------- 3.01 (a) During the Period of Employment, Goodger shall serve as Vice President, Treasurer and Assistant Secretary of the Company reporting to the Chairman of the Board of the Company and shall have the authority, power, and duties with regard to his position as may from time to time be assigned by the President, Chairman of the Board, or the Board of Directors of the Company. His duties shall exclude the Company's affiliate, Pioneer/ Technologies Group, Inc. ("Technologies"). 3.01 (b) At all times during the Period of Employment, Goodger shall hold a position of responsibility and importance and a position of scope, with the functions, duties and 4 responsibilities attached thereto, at least equal in responsibility and importance and in scope to and commensurate with his position on the date of this Agreement described in general terms in paragraph 3.01(a) above. 3.02. Throughout the Period of Employment Goodger shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers consistent with past practices and except for illness or incapacity, but nothing in this Agreement shall preclude Goodger from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 3.03. Goodger's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Goodger shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time. 4 . Compensation, Compensation Plans, Perquisites ---------------------------------------------- 4.01 (a) For all services rendered by Goodger in any capacity during the Period of Employment, Goodger shall be paid as compensation: (i) A base salary, payable not less often than monthly, at the rate of no less than $10,833 per month, with such increases in such rate as shall be awarded from time to time in accordance with the Company's regular administrative practices of salary increases applicable to executives of the Company in effect on the date of this Agreement; and (ii) A cash incentive bonus equal to the product of 15/100 of 1% of the sum of the "actual operating income" of the Company plus its equity earnings in profits/losses from Technologies, multiplied by the ratio of the Company's "actual return on capital" to 22.0%, or such equivalent successor bonus plan as may be adopted by the Company with Goodger's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax), interest, and the Company's equity earnings in profits/losses from Technologies. The term "actual return on capital" shall be defined as the Company's "actual operating income" divided by the sum of its interest-bearing debt, plus equity, less the Company's equity investment in Technologies (the denominator shall be calculated for each fiscal year as the average of such amounts as at the end of -2- 5 each of the Company's four (4) fiscal quarters). The Company shall calculate and pay 75% of such bonus to Goodger at the end of each of the first three (3) fiscal quarters. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company shall pay Goodger the balance of any bonus due Goodger based on the full year calculation less payments made for the first three (3) fiscal quarters, which payment shall be vested in the event of termination by reason of Death or Disability (Section 6), Change of Control, (Section 7.02), or Without Cause (Section 7.04), but shall be forfeited in the event of termination For Cause or Voluntary Termination (Section 7.03). (b) Any increase in salary or bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Goodger. 4.02. During the Period of Employment Goodger shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Goodger shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to his office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties. 5 . Employee Benefit Plans ---------------------- 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Goodger, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice -3- 6 after the Period of Employment as a result of participation in such plan or practice during the Period of Employment. 5.03. Goodger shall be eligible to participate in the Company's 1991 Stock Option Plan (which, together with any successor stock option plan or plans that may be adopted by the Company, is referred to herein as the "Option Plan"). The Company has granted Goodger stock options ("Options") at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of Goodger's Options shall be as is set forth in Goodger's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control, as defined in paragraph 18.02 below, then notwithstanding the provisions of said Option Agreements, all options (including those granted to him under the 1982 Incentive Stock Option Plan) shall immediately be 100% vested and Goodger shall have the immediate right of exercise with respect to all Options and their underlying Common Shares covered by said Option Agreements. In the event that Goodger's employment is terminated as a result of a Change in Control, as defined in paragraph 18.02 below, Goodger shall have the period of one (1) year after the date of such termination to exercise his Options or the remainder of the term of such Options, whichever is shorter, and any such exercise shall be irrevocable. 6 . Effect of Death or Disability ----------------------------- 6.01. In the event of the death of Goodger during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above for the month in which death shall take place at the rate being paid at the time of death, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to death, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Goodger from performing his duties under this Agreement for a period of three (3) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such three (3) months' period but without prejudice to any payments due Goodger in respect of disability. (b) In the event of the Disability of Goodger during the Period of Employment, Goodger shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above, at the rate being paid at the time of the commencement of Disability, -4- 7 for the period of such Disability but not in excess of three (3) months, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Disability, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Goodger may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. 7. Termination ----------- 7.01. GENERAL. The Company may terminate Goodger with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Goodger shall have the right to terminate his employment with the Company and there shall be paid or provided to Goodger, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a)(i) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to his previous twenty four (24) months of base salary plus an amount equal to the incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such amount shall be paid to Goodger in one payment, immediately upon Termination. Goodger shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Change of Control, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above. (b) For two (2) years following the date of Termination, Goodger, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Goodger, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of Termination, or any such plan, program or arrangement is -5- 8 discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Goodger, his dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Goodger, his dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Goodger to terminate his employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Goodger under paragraph 7.03 of this Agreement or any plan or practice of the Company. 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Goodger's employment shall be deemed to have been For Cause only if: (a) termination of his employment shall have been the result of Goodger's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Goodger during the Period of Employment of the provisions of paragraph 3.02 above, relating to devotion of full time to the affairs of the Company, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Goodger shall have failed to remedy such proven breach within thirty (30) days from his receipt of written notice from the Company. If Goodger's employment is terminated by the Company For Cause, or if Goodger shall Voluntarily Terminate his employment with the Company, Goodger shall be entitled to the compensation provided for in paragraph 4.01(a)(i) through the date of such termination. Goodger shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Goodger with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of -6- 9 Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Goodger's employment, Without Cause, there shall be paid or provided to Goodger, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a)(i) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to his previous twenty-four (24) months of base salary plus an amount equal to the incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Goodger or, in case of his prior death, to his legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of six (6) months. Goodger shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to termination Without Cause, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. 7.05. ARBITRATION. In the event that Goodger's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Goodger is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Goodger shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment or within such longer period as may reasonably be necessary for Goodger to take action in the event that his illness or incapacity should preclude his taking such action within such one hundred and twenty (120) day period. 8. Competition ----------- There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Goodger shall, during the six (6) months following termination of Goodger's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this Agreement shall mean taking any employment or consulting position with or control of one -7- 10 of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of ELECTRONIC BUYER'S NEWS and/or ELECTRONIC NEWS; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9 . Confidential Information ------------------------ 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Goodger, or which is required by law or court order to be disclosed, or information given to Goodger by a third party not bound by any obligation of confidentiality, Goodger shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Goodger may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of his position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination. 9.02. Goodger also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference --------------- Except for Change of Control as described in paragraph 7.02, Goodger shall not, at any time during or within six (6) months after his employment is terminated with the Company, without the prior written consent of the Company, directly or indirectly, induce or attempt to induce any key employee, key agent or other -8- 11 key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy ------ Goodger acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Goodger and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Goodger and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Goodger shall be adjudged to have been in violation of any of his obligations under such Sections. 12. Withholding ----------- Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Goodger or his estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices ------- All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Assistant Secretary -9- 12 To Goodger: John V. Goodger 2996 Falmouth Road Shaker Heights, Ohio 44122 14. General Provisions ------------------ 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Goodger, his dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Goodger; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Goodger's estate. 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Goodger's death or a judicial determination of his incompetence, reference in this Agreement to Goodger shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Goodger and, subject to the provisions of paragraphs 14.02 and 14.03, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 17 hereof. -10- 13 15. Amendment or Modification; Waiver ---------------------------------- No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Goodger and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability ------------ In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 17. Successors to the Company ------------------------- Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement ---------------------- 18.01. This Agreement is effective as of April 1, 1994, and supersedes the Amended and Restated Employment Agreement, dated June 23, 1993 and effective April 1, 1993, between Goodger and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company -11- 14 representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Goodger, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs ----------------- The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Goodger the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Goodger not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Goodger hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Goodger that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Goodger, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be provided to Goodger hereunder, and that Goodger has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Goodger from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 19, to represent Goodger in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Goodger entering into an attorney-client relationship with such counsel, and in that connection the Company and Goodger agree that a confidential relationship shall exist between Goodger and such counsel. The reasonable fees and expenses of counsel selected from time to time by Goodger as hereinabove provided shall be paid or reimbursed to Goodger by the Company on a regular, periodic basis upon presentation by Goodger of a statement or -12- 15 statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Colleen M. Simon By /s/ Preston B. Heller - - - --------------------------- ----------------------------- Preston B. Heller, Jr. Chairman of the Board ATTEST: /s/ Beverly M. Fisher /s/ John V. Goodger - - - --------------------------- ----------------------------- John V. Goodger 431/15154ELC.350 -13- EX-10.H 5 PIONEER STANDARD EXHIBIT 10.H 1 EXHIBIT 10(h) PIONEER-STANDARD ELECTRONICS, INC. AMENDED AND RESTATED 1991 STOCK OPTION PLAN 1. PURPOSE OF THE PLAN The Plan is intended to provide a method of providing key employees of Pioneer-Standard Electronics, Inc. (the "Company") and its subsidiaries with greater incentive to serve and promote the interests of the Company and its shareholders. The premise of the Plan is that, if such key employees acquire a proprietary interest in the business of the Company or increase such proprietary interest as they may already hold, then the incentive of such key employees to work toward the Company's continued success will be commensurately increased. Accordingly, the Company will, from time to time during the effective period of the Plan, grant to such employees as may be selected to participate in the Plan options to purchase Common Shares, without par value ("Shares"), of the Company on the terms and subject to the conditions set forth in the Plan. 2. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Executive Committee of the Board of Directors or by such other Committee composed of no fewer than three (3) disinterested members of the Board of Directors of the Company as may be designated by the Board of Directors (the "Committee"), provided that the Committee shall not include any person who has been granted or awarded equity securities under the Plan or under any other plan of the Company entitling the participants therein to acquire Shares or options to purchase Shares of the Company at any time within the twelve (12) month period immediately preceding the date on which such person becomes a member of the Committee. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all of the members, shall be the acts of the Committee. Subject to the provisions of the Plan, the Committee shall have full and final authority, in its absolute discretion, (a) to determine the employees to be granted options under the Plan, (b) to determine the number of Shares subject to each option, (c) to determine the time or times at which options will be granted, (d) to determine the option price of the Shares subject to each option, which price shall not be less than the minimum specified in Section 6 of the Plan, (e) to determine the time or times when each option becomes exercisable and the duration of the exercise period, (f) to prescribe the form or forms of the agreements evidencing any options granted under the Plan (which forms shall be consistent with the Plan), (g) to adopt, amend and rescind such rules and regulations as, in the Committee's opinion, may be advisable in the 2 administration of the Plan, and (h) to construe and interpret the Plan, the rules and regulations and the agreements evidencing options granted under the Plan and to make all other determinations deemed necessary or advisable for the administration of the Plan. Any decision made or action taken in good faith by the Committee in connection with the administration, interpretation, and implementation of the Plan and of its rules and regulations, shall, to the extent permitted by law, be conclusive and binding upon all optionees under the Plan and upon any person claiming under or through such an optionee, and no member of the Board of Directors shall be liable for any such decision made or action taken by the Committee. 3. SHARES AVAILABLE FOR OPTIONS Subject to the provisions of Section 9 of the Plan, the aggregate number of Shares for which options may be granted under the Plan shall not exceed seven hundred fifty thousand (750,000). The Shares to be delivered under exercise of options under the Plan shall be made available, at the discretion of the Board of Directors, either from the authorized but unissued Shares of the Company or from Shares held by the Company as treasury shares, including Shares purchased in the open market. If an option granted under the Plan shall expire or terminate unexercised as to any Shares covered thereby, such Shares shall thereafter be available for the granting of other options under the Plan. Options granted under the Plan shall constitute either incentive stock options, as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), hereinafter referred to as "incentive stock options", or non-qualified stock options as the Committee shall determine with respect to each option granted on or after such date. 4. ELIGIBILITY Options will be granted only to persons who are employees of the Company, of a subsidiary of the Company, or of the Company's fifty percent (50%) - owned affiliate. The term "subsidiary" as used herein shall mean any corporation, a majority of the stock of which having normal voting rights is owned directly or indirectly by the Company. The term "employees" shall include officers as well as all other employees of the Company and its subsidiaries and shall include Directors who are also employees of the Company or of a subsidiary of the Company. Neither the members of the Committee nor any other member of the Board of Directors who is not an employee of the Company (or of a subsidiary of the Company) shall be eligible to receive an option under the Plan. Each grant of an option shall be evidenced by an agreement executed on behalf of the -2- 3 Company by the Chairman of the Board or another executive officer and delivered to and accepted by the optionee. In selecting the persons to whom options shall be granted under the Plan, as well as in determining the number of Shares subject to and the type and terms and provisions of each option, the Committee shall weigh such factors as it shall deem relevant to accomplish the purpose of the Plan, namely, to enhance the incentive of those key employees of the Company and its subsidiaries who exert authority over and are responsible for the management and conduct of the Company's business. A person who has been granted an option under the Plan may be granted an additional option or options if the Committee shall so determine. 5. TERM OF OPTIONS The full term of each option granted under the Plan shall be such period as the Committee shall determine, but shall not be more than ten (10) years from the date of granting thereof; provided, however, that if an employee to whom an incentive stock option is granted is at the time of grant of the incentive stock option an owner as defined in Section 425(d) of the Code of more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (hereinafter referred to as a "Substantial Shareholder") no incentive stock option granted to such an employee shall be exercisable after the expiration of five (5) years from the date of grant of such option. Each option shall be subject to earlier termination as provided in Paragraphs (c) and (d) of Section 8. 6. OPTION PRICE The option price shall be determined by the Committee at the time any option is granted but shall not be less than one hundred percent (100%) of the fair market value of the Shares covered thereby at the time the option is granted, such fair market value to be determined in accordance with procedures to be established by the Committee; provided, however, that if an employee to whom an incentive stock option is granted is at the time of the grant of the incentive stock option a Substantial Shareholder, the option price shall be determined by the Committee from time to time but shall never be less than one hundred ten percent (110%) of the fair market value of the Company's Shares on the date such option is granted. 7. NON-TRANSFERABILITY OF OPTION No option granted under the Plan shall be transferable by the optionee otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code; and such option may be exercised during the -3- 4 optionee's lifetime only by the optionee or by his guardian or legal representative. 8. EXERCISE OF OPTIONS (a) Each option granted under the Plan shall be exercisable on such date or dates and during such period and for such number of Shares as shall be set forth in the agreement evidencing such option. (b) A person electing to exercise an option shall give written notice to the Company of such election and the number of Shares such person has elected to purchase and shall, at the time of exercise, tender the full purchase price of the Shares such person has elected to purchase. The purchase price may be paid either in cash or in the Company's Shares (excluding fractional shares), or a combination thereof; provided, however, that the practice known as "Pyramiding", which involves successive option exercises using Shares received from a preceding exercise to immediately exercise another option and so on, shall not be permitted. Shares delivered in payment of the purchase price shall be valued at the fair market value of such Shares on the date immediately preceeding the exercise of the option. Until such person has been issued a certificate or certificates for the Shares so purchased, such person shall possess no rights of a record holder with respect to any such Shares. (c) No option shall be affected by any change of duties or position of the optionee (including transfer to or from a subsidiary), so long as such optionee continues to be an employee of the Company or one of its subsidiaries. If an optionee shall cease to be an employee for any reason other than death, the options held by such optionee shall thereafter be exercisable only to the extent of the purchase rights, if any, which had accrued as of the date of such cessation, provided that the Committee may provide in the agreement evidencing any option that the Committee may in its absolute discretion, upon any such cessation of employment, determine (but shall be under no obligation to determine) that such accrued purchase rights shall be deemed to include additional Shares covered by such option. Upon any such cessation of employment, such accrued rights to purchase shall in any event terminate upon the earlier of (A) the expiration of the full term of the option or (B) the expiration of thirty (30) days from the date of such cessation of employment if by reason of discharge or if by reason of voluntary quit. The agreements evidencing options granted under the Plan may contain such provisions as the Committee shall approve with reference to the effect of approved leaves of absence. Nothing in the Plan or in any option granted hereunder shall confer upon any optionee any right to continue in the employ of the Company or any of its subsidiaries, or to limit or interfere in any way with the right of the Company or its subsidiaries to terminate such optionee's employment at any time, with or without cause. -4- 5 (d) Should an optionee die while in the employ of the Company or one of its subsidiaries or within thirty (30) days after cessation of such employment, such person as shall have acquired, by will or by the laws of descent and distribution (the "personal representative"), the right to exercise any option theretofore granted such optionee may, in either case, exercise such option at any time prior to expiration of its full term or one (1) year from the date of death of the optionee, whichever is earlier, provided that any such exercise shall be limited to the purchase rights which had accrued as of the date when the optionee ceased to be an employee, whether by death or otherwise, and provided further, however, that the Committee may provide in the agreement evidencing any option that all Shares covered by such option shall become subject to purchase immediately upon the death of the optionee. (e) In the case of incentive stock options, the aggregate fair market value (determined as of the date the option is granted) of the Shares with respect to which options are exercisable for the first time by any individual during any calendar year (under this Plan and all such plans of the Company and any parent or subsidiary corporation) shall not exceed $100,000. 9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION In the event of any change in the number of outstanding Shares through the declaration of share dividends, share splits, or consolidations, through recapitalizations, or by reason of any other increase or decrease in the number of outstanding Shares effected without receipt of consideration by the Company, the number of Shares available and reserved for options which may thereafter be granted, the number of Shares reserved for and subject to any options outstanding but unexercised, and the price per share payable on the exercise of any options outstanding but unexercised, shall be adjusted as the Committee considers appropriate, and all such adjustments by the Committee shall be conclusive and binding upon all optionees under the Plan and upon any person claiming under or through such an optionee. 10. ISSUANCE OF SUBSTITUTE OPTIONS The Committee may also make a determination, subject to approval and authorization by the Board of Directors, to issue options having terms and provisions which vary from those specified herein, provided that any options issued pursuant to this Section are issued in substitution for, or in connection with the assumption of, existing options issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation in which the Company or a subsidiary is a party. -5- 6 11. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN The Board of Directors may at any time terminate or from time to time amend or suspend the Plan; provided, however, that no such amendment shall, without approval of the shareholders of the Company, except as provided in Section 9 hereof, (a) increase the aggregate number of Shares as to which options may be granted under the Plan; (b) change the minimum option exercise price; (c) increase the maximum period during which options may be exercised; (d) extend the effective period of the Plan; (e) modify the requirements for participation in the Plan; or (f) permit the granting of options to members of the Committee. No option may be granted during any suspension of the Plan or after the Plan has been terminated and no amendment, suspension or termination shall, without the optionee's consent, alter or impair any of the rights or obligations under any option theretofore granted to such person under the Plan. 12. EFFECTIVE DATE AND DURATION OF PLAN This Plan shall become effective upon its approval by the affirmative vote of the holders of a majority of the outstanding Shares present in person or by proxy and entitled to vote on this Plan at the Annual Meeting of the Shareholders of the Company on July 23, 1991, or any adjournment thereof. No options may be granted under this Plan subsequent to July 22, 2001. 431/15154HDA.354 -6- EX-11 6 PIONEER STANDARD EXHIBIT 11 1 Exhibit 11 PIONEER-STANDARD ELECTRONICS, INC. CALCULATION OF EARNINGS PER SHARE Years Ended March 31, 1994, 1993, and 1992
1994 1993 1992 ---- ---- ---- Primary Weighted average Common Shares and Common Share equivalents outstanding 10,078,682 9,188,512 8,204,623 Net income $19,676,000 $12,913,000 $5,327,000 =========== =========== ========== Earings per share $1.95 $1.41 $.65 ===== ==== Fully diluted Weighted average Common Shares and Common Share equivalents outstanding 10,112,512 9,221,018 8,279,137 Assumed conversion of 9% convertible debentures -- 756,651 1,636,775 ----------- ----------- ---------- Total 10,112,592 9,977,669 9,915,912 =========== =========== ========== Net income $19,676,000 $12,913,000 $5,327,000 Add 9% convertible debenture interest, net of federal income tax effect -- 399,000 865,000 ----------- ----------- ---------- Total net income as adjusted $19,676,000 $13,312,000 $6,192,000 =========== =========== ========== Earnings per share $1.95 $1.33 $.63 ===== ===== ====
EX-21 7 PIONEER STANDARD EXHIBIT 21 1 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT Pioneer-Standard Canada Inc. EX-24 8 PIONEER STANDARD EXHIBIT 24 1 Exhibit 24 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Pioneer-Standard Electronics, Inc. of our report dated May 4, 1994 included in the 1994 Annual Report to Shareholders of Pioneer-Standard Electronics, Inc. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the 1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and in the related Prospectuses and in the Registration Statement (Form S-8 No. 33-18790) pertaining to the 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and in the related Prospectus of our reports dated May 4, 1994 with respect to the financial statements and schedules of Pioneer-Standard Electronics, Inc. incorporated by reference and included in this Annual Report (Form 10-K) for the year ended March 31, 1994. ERNST & YOUNG Cleveland, Ohio June 27, 1994 2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the 1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and (Form S-8 No. 33-18790) pertaining to the 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc., of our report dated April 29, 1994 with respect to the financial statements and schedules of Pioneer Technologies Group, Inc. included in this Annual Report (Form 10-K) for the year ended March 31, 1994. ERNST & YOUNG Washington, DC June 23, 1994 EX-99.A 9 PIONEER STANDARD EXHIBIT 99.A 1 Exhibit 99(a) ACORD CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY) PRODUCER 5093 / / 6-JUN-1994 Willis Corroon Corporation of Northern Ohio, Inc. 1700 Bond Court Building 1300 East Ninth Street Cleveland OH 44114-1503 (216) 861-9100 Contact: Linda M. Dowdy INSURED Pioneer Standard Electronics, Inc. 4800 East 131st Street Cleveland OH 44105 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. COMPANIES AFFORDING COVERAGE COMPANY LETTER A Federal Insurance Company COMPANY LETTER B Any person who, with intent to defraud or knowing that he is faclitating a fraud against an COMPANY insurer, submits an application or files a claim LETTER C containing a false or deceptive statement is guilty of insurance fraud. COMPANY LETTER D COMPANY LETTER E COVERAGES THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS LTR DATE (MM/DD/YY) DATE (MM/DD/YY) - - - ------------------------------------------------------------------------------------------------------------------------------------ GENERAL LIABILITY GENERAL AGGREGATE $ PRODUCTS-COMP/OP AGG. $ / / COMMERCIAL GENERAL LIABILITY PERSONAL & ADV. INJURY $ /// / / CLAIMS MADE / / OCCUR. EACH OCCURENCE $ / / OWNER'S & CONTRACTOR'S PROT. FIRE DAMAGE (Any one fire) $ / / _____________________________ MED. EXPENSE (Any one person) $ - - - ------------------------------------------------------------------------------------------------------------------------------------ AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT $ / / ANY AUTO BODILY INJURY (Per person) $ / / ALL OWNED AUTOS / / SCHEDULED AUTOS BODILY INJURY (Per accident) $ / / HIRED AUTOS / / NON-OWNED AUTOS PROPERTY DAMAGE $ / / GARAGE LIABILITY / / - - - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS LIABILITY EACH OCCURENCE $ / / UMBRELLA FORM AGGREGATE $ / / OTHER THAN UMBRELLA FORM ////////////////////////////////// - - - ------------------------------------------------------------------------------------------------------------------------------------ WORKER'S COMPENSATION / / STATUTORY LIMITS //// AND EACH ACCIDENT $ EMPLOYER'S LIABILITY DISEASE-POLICY LIMIT $ DISEASE-EACH EMPLOYEE $ - - - ------------------------------------------------------------------------------------------------------------------------------------ OTHER Directors & Officers Liab. A Executive Risk 8102-64-55F 01-NOV-1993 01-NOV-1994 $10,000,000. Each Loss $10,000,000. Ea. Policy Year - - - ------------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS Deductible - $250,000. Insured Organization - - - ------------------------------------------------------------------------------------------------------------------------------------ CERTIFICATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESNETATIVES. _________________________________________________________________________ AUTHORIZED REPRESENTATIVE Willis Corroon Corp. of N. Ohio By: /s/ Linda Dowdy ACORD 25-S (7/90) (C) ACORD CORPORATION 1990 - - - ------------------------------------------------------------------------------------------------------------------------------------
EX-99.B 10 PIONEER STANDARD EXHIBIT 99.B 1 EXHIBIT 99(b) SECOND AMENDMENT TO INDEMNIFICATION AGREEMENT --------------------------------------------- THIS SECOND AMENDMENT is made and entered into on this _____ day of __________, 1994 at Cleveland, Ohio, by and between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation ("Corporation"), and _______________ ("Officer"). WITNESSETH THAT: WHEREAS, Officer is an executive officer of Corporation and in such capacity is performing a valuable service for Corporation and its shareholders; and WHEREAS, Corporation and Officer entered into a certain Indemnification Agreement, dated as of _________ __, 199_, as amended on July 24, 1990 (the "Indemnification Agreement"); and WHEREAS, it is the desire of Corporation and Officer to amend the Indemnification Agreement in accordance with the terms hereof (the "Second Amendment"); and WHEREAS, on January 25, 1994, the Board of Directors of Corporation approved in good faith the Second Amendment in accordance with the requirements of paragraph 14(c) of the Indemnification Agreement; and WHEREAS, since the Board of Directors of Corporation approved in good faith the Second Amendment, paragraph 14(c) of the Indemnification Agreement sets forth that the Second Amendment need not be submitted to the shareholders for subsequent approval or ratification; and WHEREAS, paragraph 14(c) of the Indemnification Agreement also requires that any Amendment to the Indemnification Agreement be in writing and properly executed; NOW, THEREFORE, in consideration of the premises and the mutual understandings of the parties, IT IS AGREED, as follows: 1. Section 1 of the Indemnification Agreement shall be deleted in its entirety and replaced as follows: 1. INDEMNITY OF OFFICER. Corporation hereby agrees to indemnify and hold harmless Officer from loss or liability, including any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Officer or his or her spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of the Corporation) to which Officer is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Officer is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise, to the maximum extent now authorized or permitted by the provisions of the Regulations and 2 Ohio Statute, or by any subsequent amendment(s) thereto or other Regulations or statutory provisions authorizing or permitting such indemnification which are adopted after the date hereof by the shareholders of the Corporation or the State of Ohio, respectively. It is the intent of this Agreement that the Officer shall be fully and completely indemnified by either the Corporation or the D&O Insurance (or a combination thereof) to the absolute maximum permitted by law and except to the extent absolutely prohibited by law on the grounds of illegality as finally determined by a court of competent jurisdiction after all presumptions are made in favor of the Officer and from which no appeal is or can be taken by Officer. 2. Section 3 of the Indemnification Agreement shall be deleted in its entirety and replaced as follows: 3. ADDITIONAL INDEMNITY. "Loss to or liability of Officer" as used in this Agreement shall include any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Officer or his or her spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of the Corporation) to which Officer is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Officer is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise. 3. EFFECTIVE DATE. The effective date of this Second Amendment shall be ______________ __, 1994. IN WITNESS WHEREOF, the parties have executed this Second Amendment to the Indemnification Agreement on the date and at the place first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. _______________________________ By:_____________________________ ATTEST: ________________________________ _____________________________ 431/15154FUB.418 -2- 3 EXHIBIT 99(b) SECOND AMENDMENT TO INDEMNIFICATION AGREEMENT --------------------------------------------- THIS SECOND AMENDMENT is made and entered into on this _____ day of __________, 1994 at Cleveland, Ohio, by and between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation ("Corporation"), and _______________ ("Director"). WITNESSETH THAT: WHEREAS, Director is a member of the Board of Directors of Corporation and in such capacity is performing a valuable service for Corporation and its shareholders; and WHEREAS, Corporation and Director entered into a certain Indemnification Agreement, dated as of _________ __, 199_, as amended on July 24, 1990 (the "Indemnification Agreement"); and WHEREAS, it is the desire of Corporation and Director to amend the Indemnification Agreement in accordance with the terms hereof (the "Second Amendment"); and WHEREAS, on January 25, 1994, the Board of Directors of Corporation approved in good faith the Second Amendment in accordance with the requirements of paragraph 14(c) of the Indemnification Agreement; and WHEREAS, since the Board of Directors of Corporation approved in good faith the Second Amendment, paragraph 14(c) of the Indemnification Agreement sets forth that the Second Amendment need not be submitted to the shareholders for subsequent approval or ratification; and WHEREAS, paragraph 14(c) of the Indemnification Agreement also requires that any Amendment to the Indemnification Agreement be in writing and properly executed; NOW, THEREFORE, in consideration of the premises and the mutual understandings of the parties, IT IS AGREED, as follows: 1. Section 1 of the Indemnification Agreement shall be deleted in its entirety and replaced as follows: 1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to indemnify and hold harmless Director from loss or liability, including any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his or her spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of the Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise, to the maximum extent now authorized or permitted by the provisions of the Regulations and 4 Ohio Statute, or by any subsequent amendment(s) thereto or other Regulations or statutory provisions authorizing or permitting such indemnification which are adopted after the date hereof by the shareholders of the Corporation or the State of Ohio, respectively. It is the intent of this Agreement that the Director shall be fully and completely indemnified by either the Corporation or the D&O Insurance (or a combination thereof) to the absolute maximum permitted by law and except to the extent absolutely prohibited by law on the grounds of illegality as finally determined by a court of competent jurisdiction after all presumptions are made in favor of the Director and from which no appeal is or can be taken by Director. 2. Section 3 of the Indemnification Agreement shall be deleted in its entirety and replaced as follows: 3. ADDITIONAL INDEMNITY. "Loss to or liability of Director" as used in this Agreement shall include any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his or her spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of the Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise. 3. EFFECTIVE DATE. The effective date of this Second Amendment shall be ______________ __, 1994. IN WITNESS WHEREOF, the parties have executed this Second Amendment to the Indemnification Agreement on the date and at the place first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. _______________________________ By:______________________________ ATTEST: ________________________________ ______________________________ 431/15154FVA.418 -2- EX-99.C 11 PIONEER STANDARD EXHIBIT 99.C 1 Exhibit 99(c) DIVIDEND INFORMATION AND PRICE RANGE OF COMMON SHARES - - - ------------------------------------------------------------------------------ PIONEER-STANDARD ELECTRONICS, INC.
============================================================================== Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - - - ------------------------------------------------------------------------------ 1994 High $17.75 $24.00 $24.75 $28.25 $28.25 Low 12.00 16.75 18.75 18.50 12.00 Dividends paid .03 .03 .035 .035 .13 - - - ------------------------------------------------------------------------------ 1993 High $8.33 $12.67 $18.17 $20.00 $20.00 Low 7.00 7.33 11.33 14.50 7.00 Dividends paid .027 .027 .027 .03 .11 - - - ------------------------------------------------------------------------------
As of April 6, 1994 there were 9,912,906 Common Shares of Pioneer-Standard Electronics, Inc. outstanding, and there were 535 shareholders of record. The market price of Pioneer-Standard Electronics, Inc. Common Shares at the close of business May 20, 1994 was $24.375. See Note 3 for information regarding dividend restrictions. EX-99.D 12 PIONEER STANDARD EXHIBIT 99.D 1 Exhibit 99(d) SUMMARY OF OPERATIONS/FISCAL YEARS ENDED MARCH 31 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
=========================================================================================================================== For the Year 1994 1993 1992 1991 1990 - - - --------------------------------------------------------------------------------------------------------------------------- Combined Sales (Pioneer-Standard Electronics, Inc. and Pioneer Technologies Group, Inc.) $ 1,002,758 $ 714,021 $ 552,294 $ 501,834 $ 473,850 Pioneer-Standard Electronics, Inc. Net Sales 580,757 430,013 362,386 345,064 319,908 Interest Expense 2,687 3,581 4,505 4,748 4,946 Income from Continuing Operations before Income Taxes and Equity in Earnings of Pioneer Technologies Group, Inc. 28,702 17,480 7,888 12,673 9,025 Equity in Earnings of Pioneer Technologies Group, Inc. 3,001 2,505 654 703 490 Income Taxes 12,027 7,072 3,215 5,084 3,771 lncome from Continuing Operations 19,676 12,913 5,327 8,292 5,744 Net Income* 19,676 12,913 5,327 8,292 5,744 - - - --------------------------------------------------------------------------------------------------------------------------- Year-End Position Accounts Receivable 81,155 62,347 50,004 51,378 51,256 Inventory 85,754 67,101 60,983 56,981 56,786 Working Capital 85,132 70,781 69,325 66,553 64,399 Net Property and Equipment 25,572 23,159 23,579 22,534 21,329 Total Assets* 220,039 171,860 150,871 146,348 145,006 Long-Term Debt* 22,272 21,328 44,717 44,306 49,374 Shareholders' Equity* 102,740 84,117 57,455 52,855 44,795 Weighted Average Shares Outstanding 10,078,682 9,188,512 8,204,623 8,122,585 8,102,898 Average Number of Employees 1,003 940 937 917 906 - - - --------------------------------------------------------------------------------------------------------------------------- Per Share Data Income Per Share from Continuing Operations 1.95 1.41 .65 1.02 .71 Net Income Per Share* 1.95 1.41 .65 1.02 .71 Cash Dividends Paid Per Share* .13 .11 .107 .10 .093 Shareholders' Equity Per Share* 10.36 8.59 7.00 6.45 5.53 Price Range of Common Shares* High 28.25 20.00 11.83 10.33 7.00 Low 12.00 7.00 6.67 4.83 4.75 - - - --------------------------------------------------------------------------------------------------------------------------- Measurement Data Gross Margin Percent of Sales 19.8 21.7 21.4 22.5 22.7 Income from Continuing Operations Percent of Sales 3.4 3.0 1.5 2.4 1.8 Net Income Percent of Average Shareholders' Equity 21.1 18.2 9.7 17.0 13.6 Sales Per Employee 579 457 387 376 353 Accounts Receivable Days Outstanding at Year-End 43 45 47 50 48 Turns on Annual Average Inventory 6.1 5.3 4.8 4.7 4.2 Interest Bearing Debt Percent of Equity Plus Debt* 21.0 22.3 46.4 45.9 54.6 - - - --------------------------------------------------------------------------------------------------------------------------- Notes: *All data are for continuing operations unless marked with an asterisk. 1 Price range covers the period when the stock was first publicly traded, January 7, 1971 through March 31, 1972.
EX-99.E 13 PIONEER STANDARD EXHIBIT 99.E 1 Exhibit (99e) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - - ------------------------------------------------------------------------------- COMBINED SALES UP 40 PERCENT Combined sales of Pioneer-Standard and its 50%-owned affiliate, Pioneer Technol- ogies Group, Inc., rose to a record $1.0 billion, 40 percent above the $714.0 million of 1993 which in turn was 29 percent above the $552.3 million of 1992. Pioneer Tech- nologies sales are combined with those of Pioneer-Standard for industry ranking pur- poses only. Combined sales of the Company and its affiliate ranked third in the industry in calendar 1993, up from fourth in 1992 and fifth in 1991. This was accomplished en- tirely by internal growth, there were no acquisitions. Sales of the Company and its affiliate in both fiscal 1994 and 1993 benefited from the strong demand for electronic components and computer products. The combined companies realized significant gains in market share in each of the two years. Combined calendar 1993 sales represented 7.3 percent of the $12.95 billion North American industrial electronics market, up from 6.6 percent in 1992 which was up from 5.8 percent in 1991. 2 The sales performance of the Company and its affiliate in 1994 and 1993 reflected a number of positive factors including geo- graphical expansion, emphasis on technical support of customers, focus on customer ser- vice and adding value, marketing products from the nation's leading electronic manufac- turers and beneficial effects of FutureStart, the Company's total quality management in- itiative. Also evidence of the Company's pro- gress, Pioneer-Standard received International Organization for Standardization (ISO) 9002 Certification in July, 1993. PIONEER-STANDARD SALES UP 35 PERCENT Fiscal 1994 was the eighth consecutive year of record Pioneer-Standard sales and the 22nd year in the 23 years the Company has been public that sales increased. The year's sales were $580.8 million, up 35 percent from $430.0 million in 1993 and 60 percent above $362.4 million in 1992. All three of the Company's major prod- uct categories contributed to sales growth this past year. During 1994, semiconductor pro- ducts accounted for 41 percent of Pioneer- Standard's sales. This compares to 37 percent and 36 percent in 1993 and I992, respectively. Computer systems products comprised 33 percent of fiscal 1994 sales compared with 39 percent in 1993 and 42 percent in 1992. Passive and electro- mechanical products were 24 percent of Pioneer-Standard's fiscal 1994 sales, 21 percent in 1993 and 19 percent in 1992. Miscellaneous products accounted for 2 per- cent in 1994 and 3 percent in 1993 and 1992. The 1994 gross margin was 19.8 percent compared to 21.7 percent in 1993 and 21.4 percent in 1992. A principal reason for the reduced gross margin percent in 1994 is attributable to a change in product mix, par- ticularly with respect to the increase in sales volume of microprocessors earning a rela- tively low gross profit margin and which are marketed through an efficient low cost sales channel. During this past year, computer system products had the highest line item value and passive and electromechanical pro- ducts had the lowest average line item value, with the gross margin percent of passives 3 being the higher of these two products. The gross margin percent of the semiconductor products was below that of the other two categories primarily due to the effect of the microprocessor sales described above. Pioneer Technologies sales for fiscal 1994 were a record $422.0 million, up from $284.0 million in 1993 and $189.9 million in 1992. The sales increase in 1994 was par- tially attributable to highly concentrated sales of certain microprocessors in large quantities, the sales of which might not be sustainable in future periods and the effect of which could result in a significant impact on net income of the affiliate. In 1993, microprocessor sales represented a major factor in the affiliate's growth, representing a significant portion of that year's sales increase. 4 OPERATING EFFICIENCIES CONTRIBUTE As was the case in fiscal 1993, Pioneer- Standard's operating profit in 1994 increased at rates greater than sales. Operating profit amounted to $31.4 million, 49 percent ahead of the $21.1 million of fiscal 1993 which was 70 percent greater than the $12.4 million of 1992. The increased operating profit is directly attributable to operating efficiencies. Ware- house, selling and administrative expenses in 1994 were 14.4 percent of sales, down substantially from the 16.8 percent of 1993 or the 18.0 percent of 1992. The improve- ments in 1994 and 1993 reflect to some extent the greater sales volume, and to a larger extent the many efficiencies promul- gated through FutureStart, the Company's total quality management initiative. Operating expenses in all three years included outlays for geographic expansion of sales operations. Sales per employee rose to a record $579,000, up from $457,000 in 1993 and $387,000 in 1992. Turns on annual average inventory were 6.1. This compares to 5.3 in 1993, 4.8 in 1992 and 3.9 as recently as five years ago. The gain resulting from operating effi- ciencies more than offset the effect of reduced gross profit margins. Operating profit amounted to $31.4 million, or 5.4 per- cent of net sales in 1994 compared with 4.9 percent in 1993 and 3.4 percent in 1992. The Company benefited in both 1994 and 1993 from lower interest expense. This in large measure reflects the retirement in the second quarter of fiscal 1993 of the 9% Subordinated Convertible Debentures in the principal amount of $15.2 million, of which $14.3 million was converted to shareholders' 5 equity. Interest expense totaled $2,687,000 in 1994, $3,581,000 in 1993 and $4,505,000 in 1992. The Company's equity interest in the net income of its 50%-owned affiliate, Pioneer Technologies, was $3,001,000 in fiscal 1994. This compares to $2,505,000 in 1993 and $654,000 in 1992. The Company adopted Financial Accounting Standard No. 109 (FAS 109), "Accounting for Income Taxes," in the first quarter of fiscal 1994. Adoption of this Stan- dard was not material to quarterly or annual results. See Footnote 1 for additional infor- mation. The increase in the effective tax rate from 35.4 percent a year ago to 37.9 percent in 1994 is primarily attributable to a 1.0% increase in the statutory rate and the accrual of taxes on the Company's unremitted earn- ings of its affiliate as required by FAS 109. Primarily due to the factors outlined above, fiscal 1994 net income was a record $19.7 million, up 52 percent from $12.9 million of 1993 which was 142 percent greater than the $5.3 million earned in 1992. Earnings per share were a record $1.95, and compare with fully diluted $1.33 per share in 1993 and 63 cents fully diluted in 1992. Inflation has had little effect on the Company's operations. The Company extends credit based on an evaluation of customers' financial condition, and generally collateral is not required. Credit losses are provided for in the financial statements when collectibility is in doubt. 6 CAPITAL AND LIQUIDITY Pioneer-Standard has a strong financial position with excellent liquidity. Current assets at fiscal 1994 year-end were $178.2 million, 1.9 times current liabilities. Of significance, the sales have increased 92 percent in the past five years with only a 17 percent increase in working capital requirements. Reflective of sales and earnings progress, the Company increased the annual dividend rate from 12 cents per share to 14 cents per share, a 17 percent increase during the past year. This marks the sixth consecutive year of a dividend increase and the 18th increase in the 23 years the Company's stock has been publicly traded. The Company also has invested in pro- grams designed to stimulate and support future growth. Capital expenditures were $7,626,000 in 1994, $4,160,000 in 1993 and $5,110,000 in 1992. The Company plans to incur approximately $9,950,000 of capital expenditures in 1995. Prior year expenditures and those planned for 1995 relate to ongoing initiatives designed to improve efficiencies through computer enhancement of operating processes as well as meeting normal expan- sion needs of the business. In addition to excellent liquidity, the Company has available credit facilities to fi- nance its growth. The Company has a $30.0 million unsecured revolving credit facility, $26.0 million of which was available for use as of March 31, 1994. The revolving credit facility capacity was subsequently increased to $35.0 million on May 27, 1994. Addition- ally, the Company has unsecured short-term lines of credit available whereby a maximum of $15.0 million may be borrowed at any one time. At year-end 1994, borrowings pur- suant to these lines totaled $2,000,000. In April 1994, the Company entered into a purchase agreement with United Westburne Inc. to acquire certain assets and to assume certain liabilities of Zentronics, the Canadian electronics distribution division of West- burne. The asset acquisition was completed on June 1, 1994 for approximately $12 million. Zentronics had annual sales of ap- proximately $71.0 million (Cdn.) or $54.0 million (U.S.). Considering the available credit lines and funds derived from current operations plus the financing flexibility provided by the conservative debt to capitalization ratio of 21 percent, the Company has alternative re- sources available to finance its growth needs. EX-99.F 14 PIONEER STANDARD EXHIBIT 99.F 1 Exhibit 99(f) PIONEER-STANDARD ELECTRONICS, INC. FINANCIAL STATEMENTS AND SCHEDULES PIONEER-TECHNOLOGIES GROUP, INC. FINANCIAL STATEMENTS AND SCHEDULES 1 2 BALANCE SHEETS - - - -------------------------------------------------------------------------------- PIONEER-STANDARD ELECTRONICS, INC.
MARCH 31, 1994 AND 1993 - - - -------------------------------------------------------------------------------------------------------- ASSETS 1994 1993 - - - -------------------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash $ 5,954,000 $ 1,864,000 Accounts receivable, less allowance for doubtful accounts (1994-$2,869,000, 1993-$1,713,000) 81,155,000 62,347,000 Merchandise inventory 85,754,000 67,101,000 Prepaid expenses 919,000 773,000 Deferred income taxes 4,391,000 3,471,000 - - - -------------------------------------------------------------------------------------------------------- Total current assets 178,173,000 135,556,000 INVESTMENT AND OTHER ASSETS: Investment in 50%-owned company 14,463,000 11,462,000 Other assets 1,831,000 1,683,000 PROPERTY AND EQUIPMENT, AT COST: Land 1,070,000 1,070,000 Buildings 12,706,000 12,076,000 Furniture and equipment 30,165,000 25,557,000 Leasehold improvements 1,876,000 2,091,000 - - - -------------------------------------------------------------------------------------------------------- 45,817,000 40,794,000 Less accumulated depreciation and amortization 20,245,000 17,635,000 - - - -------------------------------------------------------------------------------------------------------- Net property and equipment 25,572,000 23,159,000 - - - -------------------------------------------------------------------------------------------------------- $220,039,000 $171,860,000 =================================== ======================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY - - - -------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES: Notes payable to banks $ 2,000,000 $ 2,500,000 Accounts payable 68,585,000 46,019,000 Income taxes 3,088,000 3,119,000 Accrued salaries, wages and commissions 6,835,000 4,762,000 Other accrued liabilities 9,477,000 8,113,000 Long-term debt due within one year 3,056,000 262,000 - - - -------------------------------------------------------------------------------------------------------- Total current liabilities 93,041,000 64,775,000 LONG-TERM DEBT 22,272,000 21,328,000 DEFERRED INCOME TAXES 1,986,000 1,640,000 SHAREHOLDERS' EQUITY: Common shares, without par value, $.67 stated value: authorized 20,000,000 shares; outstanding 9,912,906 shares in 1994 and 9,793,374 shares in 1993 6,609,000 6,529,000 Capital in excess of stated value 15,806,000 15,665,000 Retained earnings 80,325,000 61,923,000 - - - -------------------------------------------------------------------------------------------------------- Total shareholders' equity 102,740,000 84,117,000 - - - -------------------------------------------------------------------------------------------------------- $220,039,000 $171,860,000 =================================== See accompanying notes.
2 3 STATEMENTS OF INCOME - - - ------------------------------------------------------------------------ PIONEER-STANDARD ELECTRONICS, INC.
YEARS ENDED MARCH 31, 1994, 1993 AND 1992 - - - ----------------------------------------------------------------------------------------------- 1994 1993 1992 - - - ----------------------------------------------------------------------------------------------- NET SALES $580,757,000 $430,013,000 $362,386,000 Operating costs and expenses: Cost of goods sold 465,614,000 336,589,000 284,897,000 Warehouse, selling and administrative expenses 83,754,000 72,363,000 65,096,000 - - - ----------------------------------------------------------------------------------------------- 549,368,000 408,952,000 349,993,000 - - - ----------------------------------------------------------------------------------------------- Operating profit 31,389,000 21,061,000 12,393,000 Equity in earnings of 50%-owned company 3,001,000 2,505,000 654,000 Interest expense (2,687,000) (3,581,000) (4,505,000) - - - ----------------------------------------------------------------------------------------------- Income from operations before income taxes 31,703,000 19,985,000 8,542,000 Provision for income taxes: Federal Current 9,946,000 6,267,000 2,082,000 Deferred (574,000) (811,000) 418,000 - - - ----------------------------------------------------------------------------------------------- 9,372,000 5,456,000 2,500,000 State 2,655,000 1,616,000 715,000 - - - ----------------------------------------------------------------------------------------------- 12,027,000 7,072,000 3,215,000 - - - ----------------------------------------------------------------------------------------------- NET INCOME $ 19,676,000 $ 12,913,000 $ 5,327,000 =============================================================================================== INCOME PER COMMON SHARE: Primary $1.95 $1.41 $.65 Fully diluted 1.95 1.33 .63 =============================================================================================== See accompanying notes.
3 4 STATEMENTS OF SHAREHOLDERS' EOUITY - - - -------------------------------------------------------------------------------- PIONEER-STANDARD ELECTRONICS, INC.
YEARS ENDED MARCH 31, 1994, 1993 AND 1992 - - - --------------------------------------------------------------------------------------------------------------- Stated value Capital in of common excess of Retained shares stated value earnings Total - - - --------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1991 $5,458,000 $ 1,849,000 $45,548,000 $ 52,855,000 Net income 5,327,000 5,327,000 Cash dividends ($.107 per share) (875,000) (875,000) Shares issued upon exercise of stock options 13,000 106,000 119,000 Tax benefit related to exercise of stock options 29,000 29,000 - - - --------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1992 5,471,000 1,984,000 50,000,000 57,455,000 Net income 12,913,000 12,9I3,000 Cash dividends ($.11 per share) (990,000) (990,000) Shares issued upon conversion of debentures 1,026,000 13,280,000 14,306,000 Shares issued upon exercise of stock options 32,000 344,000 376,000 Tax benefit related to exercise of stock options 57,000 57,000 - - - --------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1993 6,529,000 15,665,000 61,923,000 84,117,000 Net income 19,676,000 19,676,000 Cash dividends ($.13 per share) (1,274,000) (1,274,000) Shares issued upon exercise of stock options 95,000 719,000 814,000 Tax benefit related to exercise of stock options 21,000 21,000 Shares retired (15,000) (599,000) (614,000) - - - --------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1994 $6,609,000 $15,806,000 $80,325,000 $102,740,000 =============================================================================================================== See accompanying notes.
4 5 STATEMENTS OF CASH FLOWS - - - ------------------------------------------------------------------------------- PIONEER-STANDARD ELECTRONICS, INC.
YEARS ENDED MARCH 31, 1994, 1993 AND 1992 ============================================================================================================ 1994 1993 1992 - - - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 19,676,000 $ 12,913,000 $ 5,327,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,264,000 4,646,000 4,127,000 Undistributed earnings of affiliate (3,001,000) (2,505,000) (654,000) (Increase) decrease in operating working capital (11,635,000) 1,532,000 (6,083,000) (Increase) decrease in other assets (199,000) 140,000 (802,000) Deferred taxes (574,000) (622,000) 535,000 - - - ------------------------------------------------------------------------------------------------------------ Total adjustments (10,145,000) 3,191,000 (2,877,000) - - - ------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 9,531,000 16,104,000 2,450,000 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (7,626,000) (4,160,000) (5,110,000) Acquisition of business -- -- (2,125,000) - - - ------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (7,626,000) (4,160,000) (7,235,000) CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term financing (500,000) -- 2,500,000 Borrowings under revolving credit 25,000,000 8,000,000 22,000,000 Repayment under revolving credit (21,000,000) (17,000,000) (19,000,000) Purchase of subordinated debt -- (916,000) -- Principal payments under long-term debt obligations (262,000) (1,494,000) (575,000) Issuance of common shares under stock option plan 200,000 376,000 119,000 Tax benefit related to exercise of stock options 21,000 57,000 29,000 Dividends paid (1,274,000) (990,000) (875,000) - - - ------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 2,185,000 (11,967,000) 4,198,000 - - - ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH 4,090,000 (23,000) (587,000) CASH AT BEGINNING OF YEAR 1,864,000 1,887,000 2,474,000 - - - ------------------------------------------------------------------------------------------------------------ CASH AT END OF YEAR $ 5,954,000 $ 1,864,000 $ 1,887,000 ============================================================================================================ See accompanying notes.
5 6 NOTES TO FINANCIAL STATEMENTS - - - ------------------------------------------------------------------------------- PIONEER-STANDARD ELECTRONICS, INC. 1 ACCOUNTING POLICIES - - - --------------------------------------------------- The Company is a distributor of electronic com- ponents and computer products and maintains the following accounting policies: CASH EQUIVALENTS--The Company considers highly liquid instruments with a maturity of ninety days or less at date of purchase to be cash equivalents. MERCHANDISE INVENTORY--Inventory is stated at the lower of cost (first-in, first-out basis) or market. Reserves for slow-moving and obsolete inventory at March 31, were $2,540,000 in 1994 and $2,659,000 in 1993. AFFILIATED COMPANY--The Company owns 50% of the outstanding common stock of Pioneer Technol- ogies Group, Inc. The investment is accounted for by the equity method. OTHER ASSETS--Other assets include the excess of cost over value assigned to net assets of a pur- chased business, which is being amortized on the straight-line method over 40 years; cash surrender value of life insurance; security deposits; and certain deferred charges. PROPERTY AND EQUIPMENT--The Company capitalizes costs associated with software developed for its own use. Depreciation and amortization is computed using principally the straight-line method. Accelerated methods are used for tax reporting purposes. INCOME TAXES--Effective April 1, 1993, the Com- pany adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This statement requires the use of the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences be- tween financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax ex- pense was determined using the deferred method. Deferred tax expense was based on items of in- come and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As permitted by Statement No. 109, the Com- pany has elected not to restate the financial statements of any prior years. Adoption of this statement was not material to quarterly or annual results in the current year. STOCK SPLIT--On January 26, 1993, the Board of Directors declared a three-for-two stock split ef- fected in the form of a 50% share dividend of the Company's Common Shares payable March 15, 1993 to shareholders of record February 12, 1993. All share and per share data have been restated for all periods presented to reflect the stock split. COMMON SHARES AND NET INCOME PER COMMON SHARE--Net income per common share is com- puted using the weighted average common shares and common share equivalents outstanding during the year of 10,078,682 in 1994, 9,188,512 in 1993, and 8,204,623 in 1992. Common share equivalents consists of shares issuable upon exer- cise of stock options computed by using the treasury stock method. Fully diluted net income per common share is computed on the same basis as above with the assumption that all of the 9% Subordinated Con- vertible Debentures were converted into common shares and that the related interest expense, net of income taxes, was added to net income. The number of shares used for this computation was 9,977,669 and 9,915,912 in 1993 and 1992, respectively. 2 SUBSEQUENT EVENT--ACQUISITION - - - -------------------------------------------------------- In April, 1994, the Company entered into a pur- chase agreement with United Westburne Inc. to ac- quire certain assets and to assume certain liabilities of Zentronics, the Canadian electronics distribution division of Westburne, subject to satisfactory com- pletion of due diligence. The purchase price, dependent upon values as of the closing scheduled for June 1, is estimated to be $12,000,000. Zen- tronics had annual sales of approximately $71,000,000 (Cdn.) or $54,000,000 (U.S.). 6 7 3 LOAN AGREEMENTS - - - ------------------------------------------------- Short-Term: The Company has unsecured short-term lines of credit aggregating $20,000,000 available for use. Terms of the Company's revolving credit agree- ment limit the aggregate borrowings against these unsecured lines to a maximum of $15,000,000. The unsecured lines, which may be withdrawn at the option of the revolving credit lendors, permit the Company to borrow at varying interest rates. There were $2,000,000 of borrowings against these lines at March 31, 1994. Long-Term: Long-term debt at March 31, 1994 and 1993 consists of the following:
- - - ----------------------------------------------------- 1994 1993 - - - ----------------------------------------------------- Revolving credit $ 4,000,000 $ -- 9.79% Senior Notes 20,000,000 20,000,000 Obligations under capital leases 1,328,000 1,590,000 -------------------------- 25,328,000 21,590,000 -------------------------- Less amounts due within one year 3,056,000 262,000 -------------------------- $22,272,000 $21,328,000 ==========================
Terms of the Company's revolving credit agree- ment provide for up to an aggregate of $30,000,000 of unsecured borrowings on a revolving credit basis until January 1, 1997 after which time any outstanding borrowings are convertible into a four- year term loan amortized in equal quarterly in- stallments. The agreement contains a provision whereby annually, upon consent of the parties, the maturity date may be extended for one additional year resulting in a remaining three-year revolving credit and four-year term loan facility. At the choice of the Company, interest on borrowings is payable at a floating prime rate or at other floating rate options (certificate of deposit, LIBOR, or banker's acceptance) plus 3/4%. There is a commit- ment fee of 1/4% on the unborrowed amount. Annual principal payments of $2,860,000 on the 9.79% Senior Notes will begin November 1, 1994 and continue through November 1, 2000 when the last payment of $2,840,000 is due. Interest is pay- able semi-annually. The terms of both the revolving credit agreement and Senior Note Purchase Agreement provide for, among other things, restrictions regarding the pay- ment of cash dividends, limitations on other bor- rowings and capital expenditures, minimum work- ing capital requirements and the maintenance of certain financial ratios. Unrestricted retained earn- ings available for dividends at March 31, 1994 under the most restrictive covenants are $5,244,000. The Company's 9% Subordinated Convertible Debentures due in 1998, aggregating $15,222,000, were retired during fiscal 1993. As a result of a combination of a call to satisfy the sinking fund in- stallment balance due August 1, 1992, voluntary conversions of Debentures and redemption of the Debentures effective September 23, 1992, the Debentures were retired for issuance of 1,538,451 common shares, plus cash of $916,000. Aggregate maturities of long-term debt for the next five fiscal years are: 1995--$3,056,000; 1996--$2,953,000; 1997--$3,121,000; 1998--$3,873,000 and 1999--$3,874,000. 4 LEASE COMMITMENTS - - - ----------------------------------------------------- The Company is committed under lease agree- ments, which contain renewal options for periods up to twenty years, for certain facilities and equip- ment expiring at various dates to the year 2017. Amounts for capitalized leases are included in property and equipment at cost of $3,061,000 at March 31, 1994 and 1993, less accumulated amor- tization of $1,706,000 and $1,410,000 at March 31, 1994 and 1993, respectively. Future minimum lease payments under capital leases and operating leases at March 31, 1994 are as follows:
Capital Operating Leases Leases - - - ----------------------------------------------------- 1995 $335,000 $1,603,000 1996 218,000 1,405,000 1997 132,000 972,000 1998 132,000 723,000 1999 132,000 585,000 Thereafter 2,442,000 58,000 - - - ----------------------------------------------------- Total minimum lease payments 3,391,000 $5,346,000 ========== Less amount repre- senting interest 2,063,000 ---------- Present value of minimum lease payments $1,328,000 ==========
Rental expense for operating leases was $2,166,000, $1,979,000 and $1,940,000 for 1994, 1993 and 1992, respectively. 7 8 5 INCOME TAXES - - - ------------------------------------------------- As discussed in Note 1, the Company adopted SFAS No. 109, Accounting for Income Taxes, ef- fective April 1, 1994. The following is a reconciliation of the Corn- pany's effective income tax rate to the statutory rate:
Liability Deferred Method Method - - - --------------------------------------------------- 1994 1993 1992 - - - --------------------------------------------------- Statutory rate 35.0% 34.0% 34.0% Equity in undistributed earnings of 50%-owned company (2.6) (4.3) (2.6) Provision for state taxes 5.4 5.3 5.5 Other items .1 .4 .7 ----------------------- Effective rate 37.9% 35.4% 37.6% =======================
Deferred tax assets and liabilities as of March 31, 1994 are presented below: Deferred tax assets: Capitalized inventory costs $1,373,000 Accrued expenses 1,105,000 Allowance for doubtful accounts 1,024,000 Inventory valuation reserve 445,000 Other 444,000 ---------- Total deferred tax assets 4,391,000 ---------- Deferred tax liabilities: Depreciation expense 1,310,000 Other 676,000 ---------- Total deferred tax liabilities 1,986,000 ---------- Net deferred tax assets $2,405,000 ==========
The components of the provision for deferred in- come taxes for 1993 and 1992 are as follows:
- - - -------------------------------------------------------- 1993 1992 - - - -------------------------------------------------------- Depreciation and amortization $ 57,000 $ 213,000 Inventory valuation reserve (156,000) 4,000 Allowance for doubtful accounts (166,000) 42,000 Costs capitalized in inventory (235,000) (136,000) State tax (123,000) 59,000 Excess of fair market value over cost of assets acquired -- 199,000 Other (188,000) 37,000 ---------------------- Deferred tax $(811,000) $ 418,000 ======================
6 COMMON SHARE PURCHASE RIGHTS PLAN - - - ------------------------------------------------------ The Company maintains a Common Share Pur- chase Rights Plan whereby, until the occurrence of certain events, each share of the Company's out- standing common shares represents ownership of one right (Right). The Rights may only be exer- cised if a person or group acquires twenty percent (20%) or more of the Company's Common Shares, or announces a tender offer for at least twenty per- cent (20%) of the Company's Common Shares. The exercise price of each Right is $26.67 per Common Share subject to adjustment in certain events. The Rights trade with the Company's Common Shares until the Rights become exer- cisable. If the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then- exercise price, a number of the acquiring com- pany's common shares (or other securities) having a market value at the time of twice the Right's then-current exercise price. In addition, if a person or group acquires twenty percent (20%) or more of the Company's Common Shares or certain specified transactions occur while a person or group beneficially owns twenty percent (20%) or more of such Common Shares, each Right will en- title its holder (other than such person or members of such group) to purchase, at the Right's then- current exercise price, a number of the Company's Common Shares having a market value of twice the Right's then-exercise price. Prior to the acquisition by a person or group of beneficial ownership of twenty percent (20%) or more of the Company's Common Shares, the Rights are redeemable for $.007 per Right at the option of the Board of Directors. The Rights will expire May 10, 1999. 7 STOCK OPTIONS - - - -------------------------------------------------- The Company has stock option plans which pro- vide for the granting of options to purchase its Common Shares. These plans provide for non-qualified or incen- tive stock options. The options are priced at 100% of fair market value at date of grant and expire ten years from date of grant. No charges are made against income in account- ing for stock options. Any tax benefits arising 8 9 from the exercise of options are recognized when realized and credited to capital in excess of stated value. Transactions involving the stock option plans are summarized as follows:
- - - --------------------------------------------------- Number Average Option Price of Shares Per Share - - - --------------------------------------------------- Outstanding at March 31, 1993 291,075 $ 6.61 Exercised (141,450) $ 5.75 Granted 300,000 $13.75 Forfeited (1,000) $13.75 - - - ---------------------------- Outstanding at March 31, 1994 448,625 $11.64 ============================ Exercisable at March 31, 1994 122,625 $ 7.25 ============================ Available for grant at March 31, 1994 576,000 ============================
8 ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS - - - ------------------------------------------------- The carrying amounts and estimated fair values of the Company's financial instruments are as follows:
1994 - - - ----------------------------------------------------- Carrying Fair Amount Value - - - ----------------------------------------------------- Cash $ 5,954,000 $ 5,954,000 Notes payable to banks 2,000,000 2,000,000 Long-term debt: 9.79% Senior Notes 20,000,000 22,569,000 Revolving credit borrowings 4,000,000 4,000,000
1993 - - - ----------------------------------------------------- Carrying Fair Amount Value - - - ----------------------------------------------------- Cash $ 1,864,000 $ 1,864,000 Notes payable to banks 2,500,000 2,500,000 Long-term debt: 9.79% Senior Notes 20,000,000 23,454,000
The carrying amount of cash, notes payable to banks and revolving credit borrowings approx- imates fair value. The fair value of the Senior Notes is estimated using rates currently available for securities with similar terms and remaining maturities. 9 PIONEER TECHNOLOGIES GROUP. INC. - - - ----------------------------------------------------- Pioneer-Standard Electronics, Inc. owns 50% of the common stock of Pioneer Technologies Group, Inc. Included in the Company's retained earnings are undistributed earnings of Pioneer Technologies Group, Inc. in the amount of $14,408,000 at March 31, 1994, $11,407,000 at March 31, 1993 and $8,902,000 at March 31, 1992. In accordance with accounting principles in effect at the time, the Company has not provided deferred income taxes on $11,407,000 of undistributed earnings of Pioneer Technologies Group, Inc. No dividends have been paid by Pioneer Technologies Group, Inc. from date of incorporation in 1964 to March 31, 1994. Pioneer-Standard Electronics, Inc. may not sell, assign, give, transfer, exchange, or otherwise dispose of its share ownership without allowing Pioneer Technologies Group, Inc. the first option to purchase the shares at the then current book value. If Pioneer Technologies Group, Inc. does not exercise this option, then shareholders representing the other 50% of the common stock of Pioneer Technologies Group, Inc. have the right and option to purchase all the shares at the then current book value. In the event of a "change in control," as de- fined, of Pioneer-Standard Electronics, Inc., or upon the occurrence of certain events, Pioneer Technologies Group, Inc. has the right to purchase all shares of its stock owned by Pioneer-Standard Electronics, Inc. at the then current book value. If Pioneer Technologies Group, Inc. does not exer- cise the right, the remaining shareholders repre- senting the other 50% of the common shares of Pioneer Technologies Group, Inc. have the right and option to purchase all the shares at the then current book value. Comparative financial information of Pioneer Technologies Group, Inc. at March 31, 1994, 1993 and 1992 and for the years then ended is summarized as follows: 9 10
- - - ----------------------------------------------------------------------------------------------------- 1994 1993 1992 - - - ----------------------------------------------------------------------------------------------------- Net sales $422,001,000 $284,008,000 $189,908,000 Gross profit 49,409,000 44,854,000 34,217,000 Net income 6,002,000 5,010,000 1,309,000 ==================================================== Total current assets $ 92,445,000 $ 74,964,000 $ 63,256,000 Net fixed and other assets 6,148,000 4,077,000 4,403,000 ---------------------------------------------------- Total assets $ 98,593,000 $ 79,041,000 $ 67,659,000 ==================================================== Total current liabilities $ 48,967,000 $ 24,242,000 $ 24,711,000 Total long-term liabilities 20,698,000 31,873,000 25,032,000 Total shareholders' equity 28,928,000 22,926,000 17,916,000 ---------------------------------------------------- Total liabilities and shareholders' equity $ 98,593,000 $ 79,041,000 $ 67,659,000 ====================================================
10 OPERATING WORKING CAPITAL CHANGES AND SUPPLEMENTAL INFORMATION FOR THE STATEMENTS OF CASH FLOWS - - - ----------------------------------------------------------------- THE COMPONENTS OF THE CHANGES IN OPERATING WORKING CAPITAL WERE:
- - - ------------------------------------------------------------------------------------------------------- 1994 1993 1992 - - - ------------------------------------------------------------------------------------------------------- Accounts receivable $(18,808,000) $(12,343,000) $ 780,000 Merchandise inventory (18,653,000) (6,118,000) (4,002,000) Prepaid expenses (146,000) 12,000 (378,000) Accounts payable 22,566,000 12,934,000 (334,000) Income taxes (31,000) 2,778,000 (1,073,000) Accrued salaries, wages and commissions 2,073,000 1,551,000 100,000 Other accrued liabilities 1,364,000 2,718,000 (1,176,000) ---------------------------------------------------- (Increase) decrease in operating working capital $(11,635,000) 1,532,000 $ (6,083,000) ====================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
- - - ------------------------------------------------------------------------------------------------------- 1994 1993 1992 - - - ------------------------------------------------------------------------------------------------------- Cash paid or received during the year for: Interest paid $ 2,623,000 $ 3,488,000 $ 4,437,000 Income taxes paid 12,659,000 4,768,000 4,053,000 ==================================================== Non-cash investing and financing activities: Common shares issued upon conversion of subordinated debentures $ -- $ 14,306,000 $ -- Common shares retired 614,000 -- -- ====================================================
11 EMPLOYEE RETIREMENT PLAN - - - ----------------------------------------------------- The Company maintains a defined contribution profit-sharing and thrift plan which qualifies under Section 401(k) of the Internal Revenue Code for all employees meeting certain service require- ments. The plan allows eligible employees to con- tribute up to 10% of their compensation, with the Company matching 50% of up to 4% of compen- sation. The Company may also make contributions dependent on profits each year for the benefit of all eligible employees under the plan. Total profit sharing and Company matching contributions were $1,899,000, $1,218,000 and $881,000 for 1994, 1993 and 1992, respectively. 10 11 REPORT OF INDEPENDENT AUDITORS - - - ------------------------------------------------------------------ The Board of Directors and Shareholders Pioneer-Standard Electronics, Inc. We have audited the accompanying balance sheets of Pioneer-Standard Electronics, Inc. as of March 31, 1994 and 1993 and the related statements of in- come, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1994. These financial statements are the respon- sibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those stan- dards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate- ment. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presen- tation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pioneer-Standard Electronics, Inc. at March 31, 1994 and 1993 and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1994, in conformity with generally accepted accounting principles. /s/ Ernst & Young - - - ----------------------------- Cleveland, Ohio May 4, 1994 11 12 REPORT OF INDEPENDENT AUDITORS We have audited the financial statements of Pioneer-Standard Electronics, Inc. as of March 31, 1994 and 1993 and for each of the three years in the period ended March 31, 1994 and have issued our report thereon dated May 4, 1994 [incorporated by reference elsewhere in this Annual Report (Form 10-K)]. Our audits also included the financial statement schedules of Pioneer-Standard Electronics, Inc. as of March 31, 1994 and 1993 and for each of the three years in the period ended March 31, 1994, listed in item 14(a) of this Annual Report (Form 10-K). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG Cleveland, Ohio May 4, 1994 12 13 PIONEER-STANDARD ELECTRONICS, INC. SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES Years ended March 31, 1994, 1993 and 1992
Year Ended March 31, 1994 ---------------------------------------------------------------------------- Balance at Balance at Name of Beginning End of Debtor of Period Addition Deductions Period - - - ------ --------- -------- ---------- ---------- Walter E. York, Sr., $-0- $190,000(1) $-0- $190,000 Dayton Branch Manager of the Company Arthur Rhein $-0- -0- -0- -0- Senior Vice President and Director of the Company
Year Ended March 31, 1993 ---------------------------------------------------------------------------- Balance at Balance at Name of Beginning End of Debtor of Period Addition Deductions Period - - - ------ --------- -------- ---------- ---------- Arthur Rhein $-0- $-0- $-0- $-0- Senior Vice President and Director of the Company
Year Ended March 31, 1992 ---------------------------------------------------------------------------- Balance at Balance at Name of Beginning End of Debtor of Period Addition Deductions Period - - - ------ --------- -------- ---------- ---------- Arthur Rhein $260,000 $-0- $260,000(2) $-0- Senior Vice President and Director of the Company (1) In connection with Mr. York's relocation to Dayton, Ohio in fiscal 1994, the Company advanced $190,000 to Mr. York, of which $164,830 represented an interest free loan payable upon sale of Mr. York's Indiana residence and the balance of $25,170 represented an interest free advance. The loan and advance were repaid in full in fiscal 1995. (2) In connection with Mr. Rhein's relocation to Cleveland, in fiscal 1991, the Company advanced $260,000 to Mr. Rhein, of which $220,000 represented an interest-free loan payable upon sale of Mr. Rhein's New York residence and the balance of $40,000 represented an interest-free advance. The loan and advance were repaid in full in fiscal 1992.
13 14 PIONEER-STANDARD ELECTRONICS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Years ended March 31, 1994, 1993 and 1992
Balance at Charged Deductions - Balance beginning to costs net write-offs at end of of period and expenses (Net recoveries) period ---------- ------------ ---------------- --------- Description - - - ----------- 1994: Allowance for $1,713,000 $1,808,000 $ 652,000 $2,869,000 doubtful accounts Inventory valuation $2,659,000 $1,995,000 $2,114,000 $2,540,000 reserve 1993: Allowance for $1,226,000 $1,672,000 $1,185,000 $1,713,000 doubtful accounts Inventory valuation $2,190,000 $1,738,000 $1,269,000 $2,659,000 reserve 1992: Allowance for $1,350,000 $ 613,000 $ 737,000 $1,226,000 doubtful accounts Inventory valuation $2,232,000 $1,351,000 $1,393,000 $2,190,000 reserve
14 15 PIONEER-STANDARD ELECTRONICS, INC. SCHEDULE IX - SHORT-TERM BORROWINGS Years ended March 31, 1994, 1993 and 1992
Maximum amount Average Weighted Weighted outstanding amount average Balance average at any month outstanding interest at end of interest end during during the rate during period rate the period period period --------- -------- -------------- ----------- ----------- 1994 $2,000,000 5.75% $12,500,000 $5,791,667 4.0% 1993 $2,500,000 5.0% $ 5,500,000 $3,166,167 4.1% 1992 $2,500,000 4.8% $ 6,000,000 $3,791,667 5.7% Notes payable represents the amount of borrowings against unsecured lines of credit with the Company's banks. The lines, which may by withdrawn at the option of the banks, permit the Company to borrow at varying interest rates. The average amount outstanding for each period was computed by averaging the month-end balances during the year. The weighted average interest rate for each period was computed by multiplying the month-end balances by the applicable interest rate and dividing by the total of the month-end balances outstanding.
15 16 QUARTERLY FINANCIAL DATA PIONEER-STANDARD ELECTRONICS, INC.
(UNAUDITED) ======================================================================================= Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - - - --------------------------------------------------------------------------------------- 1994 Net sales $134,509,000 $137,278,000 $149,814,000 $159,156,000 $580,757,000 Gross profit 27,360,000 28,075,000 29,007,000 30,701,000 115,143,000 Net income 4,469,000 4,790,000 4,887,000 5,530,000 19,676,000 Income per share: Primary .45 .47 .48 .55 1.95 - - - --------------------------------------------------------------------------------------- 1993 Net sales $102,315,000 $99,912,000 $109,706,000 $118,080,000 $430,013,000 Gross profit 22,132,000 21,986,000 23,565,000 25,741,000 93,424,000 Net income 3,066,000 2,897,000 3,299,000 3,651,000 12,913,000 Income per share: Primary .37 .34 .33 .37 1.41 Fully diluted .33 .31 -- -- 1.33 - - - ---------------------------------------------------------------------------------------
16 17 Financial Statements Pioneer Technologies Group, Inc. MARCH 31, 1994 AND 1993, AND YEARS ENDED MARCH 31, 1994, 1993 AND 1992 WITH REPORT OF INDEPENDENT AUDITORS 17 18 Pioneer Technologies Group, Inc. Financial Statements March 31, 1994 and 1993, and years ended March 31, 1994, 1993 and 1992 CONTENTS Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Audited Financial Statements Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3 Statements of Income and Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12
18 19 [Letterhead] Report of Independent Auditors The Board of Directors Pioneer Technologies Group, Inc. We have audited the accompanying balance sheets of Pioneer Technologies Group, Inc. as of March 31, 1994 and 1993, and the related statements of income and retained earnings and cash flows for each of the three years in the period ended March 31, 1994. Our audits also included the financial statement schedules of Pioneer Technologies Group, Inc. listed in the Index at Item 14(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pioneer Technologies Group, Inc. at March 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 8 to the financial statements, in 1994 the Company changed its method of accounting for income taxes. Ernst & Young Washington, D.C. April 29, 1994 19 20 Pioneer Technologies Group, Inc. Balance Sheets
MARCH 31 1994 1993 ---------------------------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents $ 8 $ 7 Receivables: Trade accounts, less allowance for doubtful accounts of $2,682 in 1994 and $2,250 in 1993 (NOTE 3) 28,873 30,404 Other (NOTE 2) 340 501 Total receivables 29,213 30,905 ---------------------------- Merchandise inventory, less allowance for inventory obsolescence of $2,156 in 1994 and $1,463 in 1993 (NOTE 3) 60,690 42,450 Prepaid expenses 405 110 Deferred income taxes (NOTE 8) 2,077 1,443 Shareholder notes receivable (NOTE 2) 52 49 ---------------------------- Total current assets 92,445 74,964 Property and equipment, at cost: Furniture and office equipment 6,786 4,663 Demonstration equipment 965 1,025 Leasehold improvements 2,650 1,638 ---------------------------- 10,401 7,326 Less accumulated depreciation and amortization 4,746 3,748 ---------------------------- Net property and equipment 5,655 3,578 Shareholder notes receivable (NOTE 2) 231 295 Other assets 262 204 ---------------------------- $98,593 $79,041 ============================
20 21
MARCH 31 1994 1993 ------------------------------ (IN THOUSANDS) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable: Trade $43,736 $19,819 Affiliate (NOTE 2) 336 395 Accrued employee compensation 2,484 2,014 Other accrued liabilities 1,967 1,716 Income taxes payable 444 298 ------------------------------ Total current liabilities 48,967 24,242 Long-term debt (NOTE 3) 20,698 31,873 ------------------------------ Total liabilities 69,665 56,115 Commitments and contingencies (NOTE 7) Shareholders' equity (NOTE 4): Common stock, $.10 par value; 100,000 shares authorized, issued and outstanding 10 10 Capital in excess of par value 90 90 Retained earnings 28,828 22,826 ------------------------------ Total shareholders' equity 28,928 22,926 ------------------------------ $98,593 $79,041 ============================== SEE ACCOMPANYING NOTES.
21 22 Pioneer Technologies Group, Inc. Statements of Income and Retained Earnings (In thousands, except per common share amounts)
YEAR ENDED MARCH 31 1994 1993 1992 ------------------------------------------ Net sales $422,001 $284,008 $189,908 Operating costs and expenses: Cost of goods sold 372,592 239,154 155,691 Selling and administrative 38,256 34,965 29,982 ------------------------------------------ 410,848 274,119 185,673 ------------------------------------------ Operating profit 11,153 9,889 4,235 Interest expense 1,171 1,253 2,063 ------------------------------------------ Income before income taxes and other items 9,982 8,636 2,172 Provision for income taxes (NOTE 8) 3,980 3,626 863 ------------------------------------------ Net income 6,002 5,010 1,309 Retained earnings, beginning of year 22,826 17,816 16,507 ------------------------------------------ Retained earnings, end of year $ 28,828 $ 22,826 $ 17,816 ========================================== Net income per common share $ 60.02 $ 50.10 $ 13.09 ========================================== SEE ACCOMPANYING NOTES.
22 23 Pioneer Technologies Group, Inc. Statements of Cash Flows YEAR ENDED MARCH 31 1994 1993 1992 ------------------------------------------ (IN THOUSANDS) OPERATING ACTIVITIES Net income $ 6,002 $ 5,010 $ 1,309 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 1,149 985 929 Deferred income taxes (365) (345) (653) Provision for losses on receivables and inventory 1,950 2,511 1,427 Decrease (increase) in accounts and notes receivable 1,192 (7,443) (3,437) Increase in merchandise inventory (19,629) (9,403) (6,623) (Increase) decrease in prepaid expenses (295) 250 (288) Decrease in refundable taxes - - 122 (Increase) decrease in other assets (58) (9) 203 Increase (decrease) in accounts payable 23,858 (1,266) 4,818 Increase in accrued liabilities 721 1,289 899 Decrease (increase) in income taxes payable (123) (201) 790 ----------------------------------------- Net cash provided by (used in) operating activities 14,402 (8,622) (504) INVESTING ACTIVITIES Net additions to property and equipment (3,226) (702) (497) FINANCING ACTIVITIES Net (payments) borrowings under line of credit agreements (11,175) 6,841 3,396 ----------------------------------------- Net increase (decrease) in cash and cash equivalents 1 (2,483) 2,395 Cash and cash equivalents at beginning of year 7 2,490 95 ----------------------------------------- Cash and cash equivalents at end of year $ 8 $ 7 $ 2,490 ========================================= SEE ACCOMPANYING NOTES.
23 24 Pioneer Technologies Group, Inc. Notes to Financial Statements March 31, 1994, 1993 and 1992 (Dollars in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The 1992 financial statements include the accounts of Pioneer Technologies Group, Inc. (the Company), and its then-wholly owned subsidiaries, Mini Computer Associates, Inc. (MCA) and The Technology Factory, Inc. (TTF). On April 1, 1992, TTF and MCA ceased doing business as separate legal entities. TTF continued business as an operating division of the Company and MCA was dissolved. All intercompany accounts and transactions were eliminated in prior years' consolidations. Certain balance sheet amounts in the 1993 financial statements have been reclassified to conform to the 1994 presentation. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, deposits at financial institutions and overnight repurchase agreements. Cash disbursements for interest and income taxes were as follows:
1994 1993 1992 ----------------------------------- Interest $1,171 $1,363 $1,913 Income taxes $4,468 $4,172 $ 596
MERCHANDISE INVENTORY Inventory is stated at the lower of cost (first-in, first-out) or market. DEPRECIATION AND AMORTIZATION Depreciation of furniture, office equipment and computer equipment is determined by using the straight-line method over estimated useful lives of seven, five and three years, respectively. Depreciation of demonstration equipment is determined using accelerated 24 25 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEPRECIATION AND AMORTIZATION (CONTINUED) methods over an estimated useful life of five years. Amortization of leasehold improvements is determined using the straight-line method over the life of the related lease. INCOME TAXES Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND OBSOLETE INVENTORY The Company estimates losses for doubtful accounts and inventory obsolescence based on periodic evaluations by management. The Company sells computer equipment and electronic components to companies in diversified industries primarily located in the Mid-Atlantic/Southeast and West regions of the United States. Seventeen percent of net sales in 1994 were to one customer. Management performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Accounts receivable are generally due within thirty days. 2. RELATED PARTY TRANSACTIONS Pioneer-Standard Electronics, Inc. (Pioneer-Standard) owns 50% of the outstanding common stock of the Company. The companies have an agreement which provides, among other things, that they have the right to acquire each other's products at cost. Such transactions are recorded as intercompany transfers of inventory. Net transfers of inventory from Pioneer-Standard to the Company were $2,488 in 1994, $2,539 in 1993, 25 26 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 2. RELATED PARTY TRANSACTIONS (CONTINUED) and $4,589 in 1992. The Company utilizes Pioneer-Standard's data processing facilities for processing certain accounting and operating information. Amounts charged to operations were $1,794 in 1994, $1,794 in 1993 and $1,653 in 1992. The Company has various notes receivable and advances to certain shareholders, officers and employees of the Company as follows:
1994 1993 --------------------- Subscription notes receivable from shareholders, payable in ten consecutive annual installments, with final payment due November 1999, interest at 9% per annum. $283 $344 Other receivables 177 47 --------------------- $460 $391 =====================
3. LONG-TERM DEBT The Company has revolving lines of credit from three banks aggregating $45,000 which are secured by accounts receivable and inventory. The expiration date for the revolving lines of credit is October 31, 1995. Interest is payable under either short-term fixed or variable rates of interest based on LIBOR, the prime rate or certificates of deposit rates at the Company's option. The terms of the revolving lines of credit agreements provide for the maintenance of certain financial ratios and also effectively restrict the payment of any retained earnings as dividends. 4. COMMON STOCK Under a stock purchase agreement among Pioneer-Standard and the Other Shareholders of the Company, as defined in the agreement, the Other Shareholders have the first right and option to purchase any shares offered for sale by other members of that group at book value. If the Other Shareholders do not exercise this option, the Company is obligated to purchase the shares at book value. Should the Company acquire any shares, Pioneer-Standard is required to sell a like number of shares to the Company at book value. Pioneer-Standard may not sell, assign, give, transfer, exchange or otherwise dispose of its share ownership without allowing the Company the first option to purchase the shares at 26 27 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 4. COMMON STOCK (CONTINUED) book value. If the Company does not exercise this option, the Other Shareholders have the option to purchase all the shares at book value. In the event of a change in control, as defined, of Pioneer-Standard, or upon the occurrence of certain events, the Company has the right to purchase all shares of its stock owned by Pioneer-Standard at the current book value. If the Company does not exercise the right, the Other Shareholders have the right and option to purchase all the shares at the current book value. 5. PROFIT-SHARING PLAN The Company has a qualified defined contribution profit-sharing plan covering all full-time employees. Company contributions to the plan are a combination of mandatory matching of employee contributions (up to a maximum of 2% of the first 4% contributed by the employee) and an amount awarded solely at the discretion of the Company's Board of Directors. Contributions to the plan were $567 in 1994, $468 in 1993 and $238 in 1992, of which $268 in 1994, $219 in 1993 and $18 in 1992 were discretionary. 6. BONUSES Certain executives of the Company receive bonuses ranging from 1/2% to 2% of income before income taxes. Bonuses for certain other members of management are based on agreements approved by the President. Total bonus expense was $1,464 in 1994, $1,239 in 1993 and $916 in 1992. 7. COMMITMENTS AND CONTINGENCIES The Company leases warehouse, office space and equipment under noncancellable operating leases. The minimum future rental commitments (excluding renewal options) under lease agreements aggregate $1,919 in 1995, $1,807 in 1996, $1,626 in 1997, $1,453 in 1998, $1,463 in 1999 and $394 thereafter. The Company is liable under certain leases for increases in rental payments based on the annual increase in the consumer price index and in the lessors' operating expenses. Rental expense was $2,165 in 1994, $2,296 in 1993 and $2,167 in 1992. 27 28 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES Effective April 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by Statement No. 109, "Accounting for Income Taxes." As permitted under the new rules, prior years' financial statements have not been restated. The effect of adopting Statement No 109 was not material. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of March 31, 1994 are as follows: Deferred tax assets: Allowance for doubtful accounts $1,017 Inventory 766 Accrued liabilities 300 Other 114 ------ Total deferred tax assets 2,197 Valuation allowance - ------ Deferred tax assets, net 2,197 Deferred tax liabilities: Tax over book depreciation 120 ------ Net deferred tax assets $2,077 ======
28 29 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES (CONTINUED) Significant components of the provision for income taxes are as follows for the years ended March 31:
LIABILITY METHOD DEFERRED METHOD ---------------------------------------- 1994 1993 1992 ---------------------------------------- Current: Federal $3,476 $3,286 $1,241 State 869 685 275 ---------------------------------------- 4,345 3,971 1,516 ---------------------------------------- Deferred: Federal (292) (279) (535) State (73) (66) (118) ---------------------------------------- (365) (345) (653) ---------------------------------------- $3,980 $3,626 $ 863 ========================================
The components of the provision for deferred income taxes for the years ended March 31, 1993 and 1992 are as follows:
1993 1992 --------------------- Allowance for doubtful accounts $(428) $(139) Allowance for inventory valuation 213 (265) Capitalized inventory costs (112) (180) Depreciation and amortization (46) (94) Other 28 25 --------------------- $(345) $(653) =====================
29 30 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES (CONTINUED) The difference between the provision for income taxes and the amount determined by applying the federal statutory rate follows:
LIABILITY METHOD DEFERRED METHOD ------------------------------------ 1994 1993 1992 ------------------------------------ Federal statutory $3,394 $2,936 $738 State taxes, net of federal benefit 525 409 102 Nondeductible entertainment expenses 48 34 23 Other 13 247 - ------------------------------------ Effective income tax $3,980 $3,626 $863 ====================================
30 31 PIONEER TECHNOLOGIES GROUP, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Years ended March 31, 1994, 1993 and 1992
Balance at Charged to Deductions - net Balance beginning costs and write-offs at end of Description of period expenses (Net recoveries) period ----------- ----------- ---------- ---------------- --------- 1994: Allowance for doubtful accounts $2,250,000 $ 561,000 $129,000 $2,682,000 Inventory valuation reserve $1,463,000 $1,389,000 $696,000 $2,156,000 1993: Allowance for doubtful accounts $ 886,000 $1,356,000 $ (8,000) $2,250,000 Inventory valuation reserve $1,060,000 $1,154,000 $751,000 $1,463,000 1992: Allowance for doubtful accounts $ 627,000 $ 441,000 $182,000 $ 886,000 Inventory valuation reserve $ 376,000 $1,021,000 $337,000 $1,060,000
31 32 PIONEER TECHNOLOGIES GROUP, INC. SCHEDULE IX - SHORT-TERM BORROWINGS Years ended March 31, 1994, 1993 and 1992
Maximum amount Average Weighted Weighted outstanding amount average Balance average at any month outstanding interest at end of interest end during during the rate during period rate the period period period --------- -------- -------------- ----------- ----------- 1994 $ - -% $ - $ - -% 1993 $ - -% $ - $ - -% 1992 $ - -% $9,175,000 $3,679,000 10% The average amount outstanding for each period was computed by averaging the month-end balances during the year. The weighted average interest rate for each period was computed by multiplying the month-end balances by the applicable rate and dividing by the total of the month-end balance outstanding.
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