-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AO+Ie430nIe/97lGcs6Sx1qM3pltmxeSvfp43DBm5VzD3a6q69ZiFJ29G0jXgSQ9 mqkliK3oZwED5qGmh0YQLQ== 0000950152-96-006111.txt : 19961118 0000950152-96-006111.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950152-96-006111 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05734 FILM NUMBER: 96664043 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 10-Q 1 PIONEER 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) X OF THE SECURITIES EXCHANGE ACT OF 1934 --- For the quarterly period ended September 30, 1996. ------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _________________. Commission file number 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 Identification No.) incorporation or organization) 4800 East 131st Street, Cleveland, OH 44105 - ------------------------------------- ----- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (216) 587-3600 -------------- 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 the number of shares outstanding of each of the issuer's classes of Common Shares, as of the latest practical date: COMMON SHARES, WITHOUT PAR VALUE, AS OF NOVEMBER 1, 1996: 27,572,104. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
September 30, 1996 (Unaudited) March 31, 1996 ----------- -------------- ASSETS Current assets Cash $ 21,446 $ 24,440 Accounts receivable - net 184,959 189,296 Merchandise inventory 256,323 238,370 Prepaid expenses 1,525 2,922 Deferred income taxes 11,454 11,454 --------- -------- Total current assets 475,707 466,482 Intangible assets 41,865 42,446 Other assets 1,385 1,503 Property and equipment, at cost 85,974 84,024 Accumulated depreciation 36,628 35,345 --------- -------- Net 49,346 48,679 --------- -------- $ 568,303 $559,110 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $ 8,000 $ 21,000 Accounts payable 151,446 184,946 Accrued liabilities 30,776 32,825 Long-term debt due within one year 2,889 2,871 --------- -------- Total current liabilities 193,111 241,642 Long-term debt 212,474 164,447 Deferred income taxes 2,328 2,328 Shareholders' equity Common stock, at stated value 8,208 6,667 Capital in excess of stated value 72,347 17,221 Retained earnings 135,840 126,506 Deferred compensation (56,250) -- Foreign currency translation adjustment 245 299 --------- -------- Net 160,390 150,693 --------- -------- $ 568,303 $559,110 ========= ========
See Accompanying notes. 2 3 PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts)
Quarter ended Six months ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $357,683 $234,913 $732,839 $459,637 Cost and expenses: Cost of goods sold 296,397 189,557 605,387 370,671 Warehouse, selling and administrative expense 48,264 32,690 99,612 63,838 -------- -------- -------- -------- Operating profit 13,022 12,666 27,840 25,128 Interest expense 4,641 1,516 8,545 2,965 Equity in earnings of 50% -owned company -- 458 -- 909 -------- -------- -------- -------- Income before income taxes 8,381 11,608 19,295 23,072 Provision for income taxes 3,848 4,903 8,611 9,551 -------- -------- -------- -------- Net income $ 4,533 $ 6,705 $ 10,684 $ 13,521 ======== ======== ======== ======== Average shares outstanding 23,041,992 23,252,372 23,083,026 23,178,946 Shares outstanding at end of period 27,572,104 22,451,135 27,572,104 22,451,135 Earnings per share - primary and fully diluted $.20 $.29 $.46 $.58 Dividends per share $.03 $.023 $.06 $.047
See accompanying notes. 3 4 PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Six months ended September 30, 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 10,684 $ 13,521 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 7,292 4,334 Undistributed earnings of affiliate --- (909) Increase in operating working capital (47,806) (30,269) Decrease in other assets 118 --- Deferred taxes --- 72 ------- -------- Total adjustments (40,396) (26,772) -------- -------- Net cash used in operating activities (29,712) (13,251) Cash flows from investing activities: Additions to property and equipment (7,389) (10,961) ------- -------- Net cash used in investing activities (7,389) (10,961) Cash flows from financing activities: Increase (decrease) in short-term financing (13,000) 10,000 Revolving credit borrowings - net (102,000) 24,000 Proceeds of senior notes 150,000 --- Increase (decrease) in other long-term debt obligations 55 (88) Issuance of common shares under company stock option plan 417 589 Dividends paid (1,351) (1,046) ------ ------ Net cash provided by financing activities 34,121 33,455 Effect of exchange rate changes on cash (14) 4 ------- -------- Net increase (decrease) in cash (2,994) 9,247 Cash at beginning of period 24,440 9,598 -------- -------- Cash at end of period $ 21,446 $ 18,845 ======== ========
See accompanying notes. 4 5 NOTES - Pioneer-Standard Electronics, Inc. 1.PER SHARE DATA Net income per common share is computed using the weighted average common shares and common share equivalents outstanding during the quarters and six-month periods ended September 30, 1996 and 1995. Common share equivalents consist of shares issuable upon exercise of stock options computed by using the treasury stock method. 2.MANAGEMENT OPINION The information furnished herein reflects all normal and recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of the results of operations for the quarters and six months ended September 30, 1996 and 1995. The results of operations for the three and six month periods are not necessarily indicative of results which may be expected for a full year. 5 6 PIONEER-STANDARD ELECTRONICS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Current assets increased by $9.2 million and current liabilities decreased by $48.5 during the six-month period ended September 30, 1996, resulting in an increase of $57.7 million of working capital. The decrease in liabilities is primarily attributable to a $33.5 million reduction in accounts payable levels reflecting timing differences and to a $13.0 million reduction of short-term bank borrowings. The current ratio was 2.5:1 at September 30, 1996 compared with 1.9:1 at year-end, March 31, 1996. During the first six months of the current year, total interest-bearing debt increased by $35.0 million. The increase in debt is attributable to funding working capital requirements and capital expenditures. The ratio of interest-bearing debt to capitalization was 58% at September 30, 1996 (51% when including equity credit for the market value of the subscribed shares of the Share Subscription Agreement and Trust referred to below) compared with 56% at March 31, 1996. Effective July 2, 1996, the Company entered into a Share Subscription Agreement and Trust with Wachovia Bank of North Carolina, N.A., as Trustee, pursuant to which the Trustee subscribed for 5,000,000 Common Shares of the Company which will be paid for over the 15 year term of the Trust. The proceeds from the sale or direct use of the Common Shares over the life of the Trust will be used to fund Company obligations under various employee benefit plans. On August 12, 1996, the Company completed a public offering of $150 million principal amount of 8.50% Senior Notes due 2006. Net proceeds from the sale of the Notes were applied to the repayment of a portion of the borrowings under the Company's bank revolving credit facility. As of September 30, 1996, $50.0 million was borrowed under the bank revolving credit facility. Also, as of August 12, 1996, the Company's $200 million bank revolving credit facility was replaced with a three-year $125 million facility with the Company's banks. In addition, the Company has unsecured short-term lines of credit aggregating $40 million available for use. At September 30, 1996, the Company had $107.0 million available for use under these combined credit facilities. In addition to the bank credit facilities, the Company has $50 million remaining under the Form S-3 Registration Statement filed in July, 1996 to offer to the public in the form of either debt or equity, however, there can be no assurances that the Company will complete such a transaction. Management estimates that capital expenditures for the current fiscal year will approximate $15 million ($7.4 million was expended in the first six months of the current year). Under present business conditions, it is anticipated that funds from current operations and available credit facilities will be sufficient to finance both capital spending and working capital needs for the balance of the current fiscal year. 6 7 RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the three-month period ended September 30, 1996 of $357.7 million increased 52% over sales of the prior year three-month period of $234.9 million. The current quarter sales include the sales of Pioneer-Standard of Maryland, Inc., the Company's former 50%-owned affiliate which Pioneer acquired in November, 1995. Including the former affiliate's sales on a pro forma basis for the prior year period, net sales increased to $357.7 million from $315.2 million a year ago, or a 13% increase. Semiconductor products accounted for 42% of the Company's sales in the current quarter, compared with 36% a year ago. Computer systems products were 37% of sales in 1996 versus 39% last year. Passive and electromechanical products were 18% of the Company's business in 1996 compared with 22% a year earlier. Miscellaneous products accounted for 3% in both 1996 and 1995. Cost of goods sold increased 56% compared with the prior year quarter, resulting in a gross margin of 17.1% in the current quarter compared with 19.3% a year ago. A shift in product mix, particularly with respect to a higher volume of lower gross margin products within the semiconductor line, such as microprocessors, was a principal factor impacting current year margins. Warehouse, selling and administrative expenses of $48.3 million increased by 48% over the $32.7 million incurred during the prior year three-month period. This resulted in a ratio of these expenses to sales of 13.5% for the current quarter compared with 13.9% a year ago. The operating profit resulting from the activity described above of $13.0 million, or 3.6% of sales, in the current period was up 3% compared with $12.7 million, or 5.4% of sales a year ago. Interest expense was $4.6 million in the current quarter compared with $1.5 million a year ago. The higher interest expense is due to increased debt resulting from the purchase of the Company's former 50%-owned affiliate and to fund working capital needs to support ongoing growth needs of the business. The consolidated statement of income for the three month period of the current year includes the operating results of Pioneer Maryland, whereas for the prior year three month period ended September 30, 1995, results included only the Company's 50% equity interest in Pioneer Maryland's net earnings which amounted to $.5 million. The effective tax rate for the current year three-month period was 45.9% compared with 42.2% for the same period a year ago. In the prior year, the equity in net earnings of the Company's former 50%-owned affiliate was included in pre-tax income in accordance with the equity basis of accounting. This is a primary factor causing the difference in the effective tax rates for the two periods. Primarily as a result of the factors above, the Company's net income for the three-month period ending September 30, 1996 of $4.5 million was $2.2 million less than the $6.7 million earned a year earlier. 7 8 SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE SIX MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the six-month period ended September 30, 1996 of $732.8 million were 59% greater than sales of the prior year six-month period of $459.6 million. The current six-month sales include the sales of Pioneer-Standard of Maryland, Inc., the Company's former 50%-owned affiliate, which Pioneer acquired in November, 1995. Including the former affiliate's sales on a pro forma basis for the prior year period, net sales increased to $732.8 million from $619.4 million a year ago, or a 18% increase. During the first six months of 1996, semiconductor products accounted for 42% of the Company's sales compared with 35% in the prior year. Computer systems products accounted for 37% of the Company's sales in 1996 and 39% in 1995. Passive and electromechanical products accounted for 18% of the Company's sales in 1996 and 23% of sales in 1995. Miscellaneous products accounted for 3% of sales in both 1996 and 1995. The percentage increase in cost of goods sold of 63% resulted in a gross margin of 17.4% in the first six months of the current year compared with 19.4% a year ago. A shift in product mix, particularly with respect to a higher volume of lower gross margin products within the semiconductor line was a principal factor impacting current year margins. Warehouse, selling and administrative expenses of $99.6 million increased by 56% as compared with the $63.8 million incurred during the prior year six-month period. This resulted in a ratio of these expenses to sales of 13.6% for the current six months compared with 13.9% a year ago. The operating profit resulting from the activity described above of $27.8 million in 1996 or 3.8% of sales was up 11% compared with $25.1 million or 5.5% of sales a year ago. Interest expense was $8.5 million in the current six-month period compared with $3.0 million a year ago. The higher interest expense is due to increased debt resulting from the purchase of the Company's former 50%-owned affiliate and to fund working capital needs to support ongoing growth needs of the business. The consolidated statement of income for the six month period of the current year includes the operating results of Pioneer Maryland, whereas for the prior six-month period ended September 30, 1995, results included only the Company's 50% equity interest in Pioneer Maryland's net earnings which amount to $.9 million. The effective tax rate for the current six-month period was 44.6% compared with 41.4% a year ago. In the prior year, the equity in net earnings of the Company's former 50%-owned affiliate was included in pre-tax income in accordance with the equity basis of accounting. This is a primary factor causing the difference in the effective tax rates for the two periods. Primarily as a result of the factors noted above, the Company's net income for the six-month period ending September 30, 1996 of $10.7 million was $2.8 million lower than the $13.5 million earned a year ago. 8 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The potential litigation discussed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 has been resolved. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders held on July 23, 1996 (the "Annual Meeting"), the shareholders voted to elect James L. Bayman, Gordon E. Heffern and Karl E. Ware each to an additional three-year term as Directors of the Company. Following is a summary of the voting:
James L. Gordon E. Karl E. Votes Bayman Heffern Ware ----- ------ ------- ---- For 18,188,324 18,202,215 18,235,827 Against 81,445 67,554 33,942
The term of office of the following Directors of the Company continued after the Annual Meeting: Frederick A. Downey; Victor Gelb; Preston B. Heller, Jr.; Arthur Rhein; Edwin Z. Singer; and Thomas C. Sullivan. In addition, at the Annual Meeting, an Amendment to the Company's Amended Articles of Incorporation to increase the number of authorized Common Shares from 40 million to 80 million was approved by the Shareholders; 17,409,881 Common Shares voted in favor of the Amendment, 827,164 Common Shares were cast against the Amendment, 32,724 Common Shares abstained from voting on the Amendment and there were no broker non-votes. ITEM 5. OTHER INFORMATION The Company has entered into various agreements with respect to its financing. See the discussion under "Financial Condition" for a summary of these agreements. These agreements were filed as exhibits to the Company's June 30, 1996 Form 10-Q. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Number Description ------ ----------- 3(a) Certificate of Amendment to Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc. 11 Calculation of Primary Earnings Per Share 27 Financial Data Schedule 9 10 (b) FORM 8-K A Form 8-K dated July 5, 1996 was filed for a Company press release announcing first quarter sales and earnings. SIGNATURES Pursuant to the requirements of the Securities and 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: November 13, 1996 James L. Bayman ------------------- ------------------------------------- Chairman, President and CEO Date: November 13, 1996 John V. Goodger ------------------- ------------------------------------- Vice President & Treasurer 10 EX-3.A 2 EXHIBIT 3(A) 1 EXHIBIT 3(a) CERTIFICATE OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION OF PIONEER-STANDARD ELECTRONICS, INC. Charter No. 317430 James L. Bayman, President, and John V. Goodger, Assistant Secretary, of Pioneer-Standard Electronics, Inc., an Ohio corporation, do hereby certify that a meeting of Shareholders of Pioneer-Standard Electronics, Inc. was duly called and held on July 23, 1996, at which meeting a quorum of such Shareholders was present in person or by proxy at all times, and that by the affirmative vote of the holders of shares entitling them to exercise at least two-thirds of the voting power of said corporation, the following resolutions were adopted for the purpose of amending Article FOURTH of the Amended Articles of Incorporation of said corporation: RESOLVED, that Article FOURTH of the Amended Articles of Incorporation shall be deleted and replaced by the following: "FOURTH: The authorized number of shares of the corporation is Eighty Million (80,000,000) shares, all of which shall be Common Shares, without par value." IN WITNESS WHEREOF, said James L. Bayman, President, and John V. Goodger, Assistant Secretary, of Pioneer-Standard Electronics, Inc., acting for and on behalf of said corporation, have hereunto subscribed their names this 29th day of July, 1996. /s/ James L. Bayman --------------------------------------- James L. Bayman, President /s/ John V. Goodger --------------------------------------- John V. Goodger, Assistant Secretary 11 EX-11 3 EXHIBIT 11 1 Exhibit 11 CALCULATION OF PRIMARY EARNINGS PER SHARE (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended Six months ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Weighted average common shares and common share equivalents outstanding 23,041,992 23,252,372 23,083,026 23,178,946 Net income $ 4,533 $ 6,705 $ 10,684 $ 13,521 Earnings per share - primary and fully diluted $ .20 $ .29 $ .46 $ .58
12 EX-27 4 EXHIBIT 27
5 1,000 6-MOS MAR-31-1997 SEP-30-1996 21,446 0 192,303 7,344 256,323 475,707 85,974 36,628 568,303 193,111 212,474 8,208 0 0 152,182 568,303 732,839 732,839 605,387 605,387 99,612 0 8,545 19,295 8,611 10,684 0 0 0 10,864 .46 .46
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