-----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, CcyqmC3CAZzpwqca9yPWlvd0SKzdV6093rkp34FSjsycnXKTtnf9qsByaw4bLuR0 /ZUjNLO71Ye7CdqhHw6Y1g== 0000950152-97-001016.txt : 19970314 0000950152-97-001016.hdr.sgml : 19970314 ACCESSION NUMBER: 0000950152-97-001016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05734 FILM NUMBER: 97533892 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 10-Q 1 PIONEER-STANDARD ELECTRONICS, INC. 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 December 31, 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 FEBRUARY 10, 1997: 22,579,229. (Excludes 5,000,000 Common Shares subscribed by the Share Subscription Agreement and Trust.) 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
December 31, 1996 (Unaudited) March 31, 1996 ----------- -------------- ASSETS Current assets Cash $ 35,042 $ 24,440 Accounts receivable - net 195,377 189,296 Merchandise inventory 247,405 238,370 Prepaid expenses 2,237 2,922 Deferred income taxes 11,454 11,454 --------- --------- Total current assets 491,515 466,482 Intangible assets 41,562 42,446 Other assets 1,385 1,503 Property and equipment, at cost 88,046 84,024 Accumulated depreciation 37,930 35,345 --------- --------- Net 50,116 48,679 --------- --------- $584,578 $ 559,110 ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $ -- $ 21,000 Accounts payable 158,143 184,946 Accrued liabilities 42,469 32,825 Long-term debt due within one year 2,878 2,871 --------- --------- Total current liabilities 203,490 241,642 Long-term debt 213,587 164,447 Deferred income taxes 2,328 2,328 Shareholders' equity Common stock, at stated value 8,210 6,667 Capital in excess of stated value 81,735 17,221 Retained earnings 140,786 126,506 Deferred compensation (65,625) --- Foreign currency translation adjustment 67 299 --------- ---------- Net 165,173 150,693 --------- ---------- $ 584,578 $ 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 Nine months ended December 31, December 31, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $384,385 $263,940 $1,117,224 $723,577 Cost and expenses: Cost of goods sold 319,461 216,390 924,848 587,061 Warehouse, selling and administrative expense 50,713 36,455 150,325 100,293 -------- -------- -------- -------- Operating profit 14,211 11,095 42,051 36,223 Interest expense 4,781 2,067 13,326 5,032 Equity in loss of 50% -owned company -- (1,082) -- (173) -------- -------- -------- -------- Income before income taxes 9,430 7,946 28,725 31,018 Provision for income taxes 3,805 3,857 12,416 13,408 -------- -------- -------- -------- Net income $ 5,625 $ 4,089 $ 16,309 $ 17,610 ======== ======== ======== ======== Weighted average shares outstanding 22,982,606 23,108,433 23,037,580 23,156,263 Earnings per share - primary and fully diluted $.24 $.18 $.71 $.76 Dividends per share $.03 $.03 $.09 $.077
See accompanying notes. 3 4 PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Nine months ended December 31, 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 16,309 $ 17,610 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 10,041 6,679 Undistributed earnings of affiliate --- 173 Increase in operating working capital (31,716) (30,397) Increase (decrease) in other assets 118 (8,400) ------ ------ Total adjustments (21,557) (31,945) ------ ------ Net cash used in operating activities (5,248) (14,335) Cash flows from investing activities: Purchase of remaining 50% of affiliate net of cash acquired --- (49,883) Additions to property and equipment (10,634) (15,269) ------ ------ Net cash used in investing activities (10,634) (65,152) Cash flows from financing activities: Decrease in short-term financing (21,000) (7,000) Revolving credit borrowings - net (97,000) 49,000 Letter of credit commitment secured by revolving credit agreement --- 50,000 Proceeds of senior notes 150,000 --- Decrease in other long-term debt obligations (3,853) (3,468) Issuance of common shares under company stock option plan 432 589 Dividends paid (2,028) (1,720) ------ ------ Net cash provided by financing activities 26,551 87,401 Effect of exchange rate changes on cash (67) 34 ------ ------ Net increase in cash 10,602 7,948 Cash at beginning of period 24,440 9,598 ------ ------ Cash at end of period $ 35,042 $ 17,546 ======== ========
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 nine-month periods ended December 31, 1996 and 1995. Common share equivalents consist of shares issuable upon exercise of stock options computed by using the treasury stock method. Due to the application of treasury stock method, the 5,000,000 shares subscribed for by the trust (see note 2) have no effect on earning per share. 2. SHARE SUBSCRIPTION AGREEMENT AND TRUST On July 2, 1996 the Company entered into a Share Subscription Agreement and Trust (the "Trust") with Wachovia Bank of North Carolina N.A., as Trustee, and 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 Trust will be used to fund company obligations under various benefit plans. As of December 31, 1996 no shares have been released from the Trust. The following details the fair market value of the 5,000,000 shares subscribed for by the Trust reflected in Shareholders Equity at December 31, 1996:
Common stock at stated value (5,000,000 @ $.30) $ 150,000 Capital in excess of stated value (5,000,000 shares) $65,475,000 Deferred compensation (5,000,000 shares @ $13.125 fair market value) ($65,625,000) ------------- Net effect on shareholders equity $ 0 ============
3. 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 nine months ended December 31, 1996 and 1995. The results of operations for the three and nine 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 $25.0 million and current liabilities decreased by $38.2 during the nine-month period ended December 31, 1996, resulting in an increase of $63.2 million of working capital. The decrease in liabilities is primarily attributable to a $26.8 million reduction in accounts payable levels reflecting timing differences and to a $21.0 million reduction of short-term bank borrowings. The current ratio was 2.4:1 at December 31, 1996 compared with 1.9:1 at year-end, March 31, 1996. During the first nine months of the current year, total interest-bearing debt increased by $28.1 million. The increase in debt is attributable to funding working capital requirements and capital expenditures. The ratio of interest-bearing debt to capitalization was 57% at December 31, 1996 compared with 56% at March 31, 1996. Management estimates that capital expenditures for the current fiscal year will approximate $15 million ($10.6 million was expended in the first nine 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. 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 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. As of December 31, 1996, $55.0 million was borrowed under the bank revolving credit facility. In addition, the Company has unsecured short-term lines of credit aggregating $40 million available for use. At December 31, 1996, the Company had an aggregate of $110.0 million available for use under these combined credit facilities. In addition to the bank credit facilities, the Company has $50 million remaining under the Shelf Form S-3 Registration Statement filed in July, 1996 to offer to the public in the form of either debt or equity: However, due to market conditions and other factors which may be beyond the Company's control, there can be no assurances that the Company will complete such a transaction. 6 7 RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 1995 Net sales for the three-month period ended December 31, 1996 of $384.4 million increased 46% over sales of the prior year three-month period of $263.9 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 $384.4 million from $324.0 million a year ago, or a 19% 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 39% of sales in 1996 versus 42% last year. Passive and electromechanical products were 16% of the Company's business in 1996 compared with 19% a year earlier. Miscellaneous products accounted for 3% of the Company's business in both 1996 and 1995. Cost of goods sold increased 48% compared with the prior year quarter, resulting in a gross margin of 16.9% in the current quarter compared with 18.0% 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. Typically, semiconductor products have the highest gross margin percentage of the three product categories, but the increased sales of high volume, low margin products, such as microprocessors in the semiconductor category, rank the gross margin percentage of semiconductors below the other two product categories. Passives had the highest gross margin percentage. Warehouse, selling and administrative expenses of $50.7 million increased by 39% over the $36.5 million incurred during the prior year three-month period. This resulted in a ratio of these expenses to sales of 13.2% for the current quarter compared with 13.8% a year ago, reflecting expense controls and efficiencies. The operating profit resulting from the activity described above of $14.2 million, or 3.7% of sales, in the current period rose by 28% compared with $11.1 million, or 4.2% of sales a year ago. Interest expense was $4.8 million in the current quarter compared with $2.1 million a year ago. The higher interest expense is due to increased debt incurred in connection with 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 results for the same period in 1995 included a net loss of 1.1 million, representing the Company's 50% equity interest in Pioneer Maryland's net loss for the two months ended November and the consolidated operating results for December. The net loss for Pioneer Maryland for the two-month period in 1995 included an after-tax non-recurring discontinuance charge of $2.4 million recorded by Pioneer Maryland to conform to the Company's methods of accounting. 7 8 RESULTS OF OPERATIONS (cont'd) THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 1995 The effective tax rate for the current year three-month period was 40.3% compared with 48.5% for the same period a year ago. In the prior year, the equity in the net loss of the Company's former 50%-owned affiliate of $1.1 million was included in pre-tax income in accordance with the equity basis of accounting. This is the 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 December 31, 1996 of $5.6 million was $1.5 million greater than the $4.1 million earned a year earlier. NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THE NINE MONTHS ENDED DECEMBER 31, 1995 Net sales for the nine-month period ended December 31, 1996 of $1,117.2 million were 54% greater than sales of the prior year nine-month period of $723.6 million. The current nine-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 $1,117.2 million from $943.3 million a year ago, or an 18% increase. During the first nine 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 38% of the Company's sales in 1996 and 40% in 1995. Passive and electromechanical products accounted for 17% of the Company's sales in 1996 and 22% 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 58% resulted in a gross margin of 17.2% in the first nine months of the current year compared with 18.9% 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. Typically, semiconductor products have the highest gross margin percentage of the three product categories, but the increased sales of high volume, low margin products, such as microprocessors in the semiconductor category, rank the gross margin percentage of semiconductors below the other two product categories. Passives had the highest gross margin percentage. Warehouse, selling and administrative expenses of $150.3 million increased by 50% as compared with the $100.3 million incurred during the prior year nine-month period. This resulted in a ratio of these expenses to sales of 13.5% for the current nine months compared with 13.9% a year ago, reflecting expense controls and efficiencies. The operating profit resulting from the activity described above of $42.1 million in 1996 or 3.8% of sales rose by 16% compared with $36.2 million or 5.0% of sales a year ago. Interest expense was $13.3 million in the current nine-month period compared with $5.0 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. 8 9 NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THE NINE MONTHS ENDED DECEMBER 31, 1995 (cont'd) The consolidated statement of income for the nine-month period of the current year includes the operating results of Pioneer Maryland, whereas the same period in 1995 included a net loss of 1.1 million, representing the Company's 50% equity interest in Pioneer Maryland's net loss for the eight months through November and the consolidated operating results for December. The net loss for Pioneer Maryland for the eight-month period in 1995 included an after-tax non-recurring discontinuance charge of $2.4 million recorded by Pioneer Maryland to conform to the Company's methods of accounting. The effective tax rate was 43.2% in both nine-month periods. Primarily as a result of the factors noted above, the Company's net income for the nine-month period ending December 31, 1996 of $16.3 million was $1.3 million lower than the $17.6 million earned a year ago. 9 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Number Description ------ ----------- 11 Calculation of Primary Earnings Per Share 27 Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIONEER-STANDARD ELECTRONICS, INC. Date: February 13, 1996 James L. Bayman ------------------- ----------------------------------- Chairman, President and CEO Date: February 13, 1996 John V. Goodger ------------------- ----------------------------------- Vice President & Treasurer 10 EX-11 2 EXHIBIT 11 1 Exhibit 11 CALCULATION OF PRIMARY EARNINGS PER SHARE (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended Nine months ended December 31, December 31, 1996 1995 1996 1995 ---- ---- ---- ---- Weighted average common shares and common share equivalents outstanding 22,982,606 23,108,433 23,037,580 23,156,263 Net income $5,625 $4,089 $16,309 $17,610 Earnings per share - primary and fully diluted $.24 $.18 $.71 $.76
EX-27 3 EXHIBIT 27
5 1,000 9-MOS MAR-31-1997 DEC-31-1996 35,042 0 202,851 7,474 247,405 491,515 88,046 37,930 584,578 203,490 213,587 8,210 0 0 156,963 584,578 1,117,224 1,117,224 924,848 924,848 150,325 0 13,326 28,725 12,416 16,309 0 0 0 16,309 .71 .71
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