-----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, JR0jsFh4gj6fpfkkYNjH3pJeN9Yh5gKjM0hoBTJBRGdZYgC/TwEExxv0doweaUb7 W5KHcfKR2CS9MzZTEohAcg== 0000950152-98-001122.txt : 19980218 0000950152-98-001122.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950152-98-001122 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 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: SEC FILE NUMBER: 000-05734 FILM NUMBER: 98539008 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 10-Q 1 PIONEER STANDARD ELECTRONICS, INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997. 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 3, 1998: 26,327,179. (Excludes 4,780,000 Common Shares subscribed by the Pioneer Stock Benefit Trust.) 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) December 31, 1997 (Unaudited) March 31, 1997 ----------- -------------- ASSETS Current assets Cash $ 27,290 $ 28,116 Accounts receivable - net 233,175 209,086 Merchandise inventory 351,925 243,940 Prepaid expenses 6,986 6,633 Deferred income taxes 11,185 10,282 --------- --------- Total current assets 630,561 498,057 Intangible assets 38,383 39,260 Other assets 9,054 2,602 Property and equipment, at cost 117,189 91,681 Accumulated depreciation 45,555 39,087 --------- --------- Net 71,634 52,594 --------- --------- $ 749,632 $ 592,513 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $ 2,500 $ 20,500 Accounts payable 188,510 144,277 Accrued liabilities 36,550 31,867 Long-term debt due within one year 2,880 2,878 --------- --------- Total current liabilities 230,440 199,522 Long-term debt 275,707 173,587 Deferred income taxes 5,492 5,425 Shareholders' equity Common stock, at stated value 9,249 9,228 Capital in excess of stated value 134,557 121,489 Retained earnings 167,906 147,055 Unearned compensation (72,895) (63,750) Foreign currency translation adjustment (824) (43) --------- --------- Net 237,993 213,979 --------- --------- $ 749,632 $ 592,513 ========= =========
See accompanying notes to consolidated financial statements. 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, 1997 1996 1997 1996 ---- ---- ---- ---- Net sales $ 424,148 $ 384,385 $ 1,251,696 $ 1,117,224 Cost and expenses: Cost of goods sold 348,406 319,461 1,032,753 924,848 Warehouse, selling and administrative expense 56,279 50,713 164,300 150,325 ----------- ----------- ----------- ----------- Operating profit 19,463 14,211 54,643 42,051 Interest expense 5,490 4,781 14,809 13,326 ----------- ----------- ----------- ----------- Income before income taxes 13,973 9,430 39,834 28,725 Provision for income taxes 5,534 3,805 16,631 12,416 ----------- ----------- ----------- ----------- Net income $ 8,439 $ 5,625 $ 23,203 16,309 =========== =========== =========== =========== Weighted average shares - basic 26,312,441 22,572,952 26,163,514 22,542,714 Weighted average shares outstanding - diluted 26,994,629 23,052,739 26,782,500 23,037,580 Earnings per share: Basic $.32 $.25 $.89 $.72 Diluted $.31 $.24 $.87 $.71 Dividends per share $.03 $.03 $.09 $.09
See accompanying notes to consolidated financial statements. 3 4 PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Nine months ended December 31, 1997 1996 Cash flows from operating activities: Net income $ 23,203 $ 16,309 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 8,661 7,670 Amortization 3,662 2,371 Increase in operating working capital (84,248) (31,716) Decrease (Increase) in other assets (6,452) 118 Deferred taxes (836) -- --------- --------- Total adjustments (79,213) (21,557) Net cash used in operating activities (56,010) (5,248) Cash flows from investing activities: Additions to property and equipment (30,486) (10,634) --------- --------- Net cash used in operating (30,486) (10,634) Cash flows from financing activities: Decrease in short-term financing (18,000) (21,000) Revolving credit borrowings - net 105,000 (97,000) Proceeds of senior notes -- 150,000 Decrease in other long-term debt obligations (2,878) (3,853) Proceeds from sale of common shares under the Pioneer Stock Benefit Trust 3,308 -- Issuance of common shares under company stock option plan 637 432 Dividends paid (2,352) (2,028) --------- --------- Net cash provided by financing activities 85,715 26,551 Effect of exchange rate changes on cash (45) (67) Net increase (decrease) in cash (826) 10,602 Cash at beginning of period 28,116 24,440 --------- --------- Cash at end of period $ 27,290 $ 35,042 ========= =========
See accompanying notes to consolidated financial statements 4 5 Notes to Consolidated Financial Statements 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three quarters ended December 31, 1997 are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended March 31, 1997. 2. ACCOUNTING CHANGES The Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" (FAS 130), and Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information" (FAS 131). FAS 130 establishes standards for reporting comprehensive income and FAS 131 requires reporting certain information about operating segments. These statements, which must be adopted by the Company no later than fiscal year 1999, are not expected to have a material effect on the financial statements. 3. PER SHARE DATA The Company has adopted Financial Accounting Standards Statement No. 128 "Earnings Per Share" at the end of the third quarter of fiscal 1998. The calculation of Basic and Diluted earnings per share follows:
Quarter ended Nine months ended December 31, December 31, (in thousands except Share and Per Share Amounts) 1997 1996 1997 1996 ---- ---- ---- ---- Net Income $8,439 $5,625 $23,203 $16,309 Net Income Weighted average shares - basic 26,312,441 22,572,952 26,163,514 22,542,714 Effect of dilutive securities Employee stock options 682,188 479,787 618,986 494,866 ----------- ----------- ----------- ----------- Adjusted weighted average shares and assumed conversions - assuming dilution 26,994,629 23,052,739 26,782,500 23,037,580 Basic earnings per share $.32 $.25 $.89 $.72 Diluted earnings per share $.31 $.24 $.87 $.71
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 $132.5 million and current liabilities increased by $ 30.9 million during the nine-month period ended December 31, 1997, resulting in an increase of $101.6 million in working capital. The increase in current assets is primarily attributable to an increase in inventory of $108.0 million and a $24.1 million increase in accounts receivable. In addition to the incremental working capital required to support a higher level of sales activity, the increase in inventory primarily reflects a combination of increased stocking levels for both recent product line additions as well as certain of the Company's existing product lines for the purpose of improving customer satisfaction. The current ratio was 2.7:1 at December 31, 1997 compared with 2.5:1 at year-end, March 31, 1997. During the first nine months of the current fiscal year, total interest-bearing debt increased by $84.1 million. The increase in debt is primarily attributable to funding working capital for inventory and capital expenditures. The ratio of interest-bearing debt to capitalization was 54% at December 31, 1997 compared with 48% at March 31, 1997. On September 5, 1997 the Company completed the sale of 220,000 Common Shares which were allocated from the Pioneer Stock Benefit Trust. The net proceeds of $3.3 million were used to fund Company obligations under certain employee benefit plans. On January 15, 1998 the Company entered into a definitive agreement to acquire Dickens Data Systems, Inc. a privately held company located in Roswell, Georgia, for approximately $121 million in cash. The transaction, expected to close within 90 days of the date of the agreement, is subject to standard governmental regulatory reviews and customary closing conditions. The Company intends to fund the acquisition primarily through the issuance of debt and equity-related securities. Dickens Data Systems, Inc. is primarily a distributor of IBM computer systems, peripherals and services and had approximately $340 million in sales for the year ended December 31, 1997. During the third fiscal quarter, the Company purchased a minority equity interest in World Peace Industrial Company Ltd. of Taiwan, an industrial electronic components distributor for the Asia-Pacific region. This purchase was substantially all of the $6.5 million increase in other assets. Management estimates that capital expenditures for the fiscal year 1998 will approximate $35 million ($30.4 million of which has been expended in the first nine months of the current fiscal year). The expected increase in capital expenditures for fiscal 1998 is mainly due to the acceleration of outlays for the Company's Information Systems platform from the Company's fiscal quarter ended in June 1998 to the fourth fiscal quarter for the year ended March 31, 1998. Under present business conditions, it is anticipated that funds from current operations, 6 7 available credit facilities, and short term borrowings will be sufficient to finance both capital spending and working capital needs for the balance of the current fiscal year. The Company is currently engaged in discussions with its lenders to expand its credit facilities to provide funds to finance expected internal growth and certain needs arising from the acquisition of Dickens Data Systems, Inc. YEAR 2000 COMPLIANCE As background for the Year 2000 issue, many existing computer systems and software programs currently in use are coded to accept only two digit entries in the date code field. These systems and programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. The Company is currently in the process of implementing a new core business process system on a company-wide basis which it believes is fully Year 2000 compliant. In addition, the Company has identified other applications used by the Company and is modifying or replacing them in order to be Year 2000 compliant. Although the Company believes that it is taking appropriate precautions against disruption of its systems due to the Year 2000 issue, there can be no assurance that the Company will identify all Year 2000 problems in advance of their occurrence, or that the Company will be able to successfully remedy any problems that are discovered. Furthermore, there can be no assurance that the Company's suppliers and customers will not be adversely affected by the Year 2000. While the Company does not believe that expenditures for the Year 2000 will have a material adverse effect, any resulting systems failures or interruptions at the Company or its suppliers or customers could have a material adverse effect on the Company's business, financial condition and operating results. 7 8 RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 1996 Net sales for the three-month period ended December 31, 1997 of $424.1 million increased 10% over the net sales of $384.4 million for the same period in 1996. The increase in net sales reflects strong demand for computer products and passive products. Semiconductor products accounted for 36% of the Company's sales in the current quarter, compared with 42% a year ago. Computer systems products represented 43% of sales in 1997 versus 39% last year. Interconnect, passive and electromechanical products were 19% of the Company's sales in 1997 and 16% in 1996. Miscellaneous products accounted for 2% and 3% of sales in 1997 and 1996, respectively. Cost of goods sold for the three-month period ended December 31, 1997 increased 9% compared to same period in 1996, resulting in a gross margin of 17.9% in the current quarter compared with 16.9% a year ago. Sales mix within the semiconductor products was a primary factor in the increased gross margin percent. Warehouse, selling and administrative expenses of $56.3 million increased 11% over the $50.7 million incurred during the same period in 1996. This resulted in a ratio of these expenses to sales of 13.3% for the current quarter compared with 13.2% a year ago. The operating profit for the third quarter of $19.5 million, constituting 4.6% of sales, increased 37% over the $14.2 million operating profit, constituting 3.7% of sales for the same period in 1996. Interest expense was $5.5 million in the current quarter compared with $4.8 million a year ago. The higher interest expense is mainly attributable to increased bank debt to fund working capital needs to support the ongoing growth of the business. The effective tax rate for the current year three-month period was 39.6% compared with 40.3% for the same period a year ago. Primarily as a result of the factors above, the Company's net income for the three-month period ending December 31, 1997 of $8.4 million represents an increase of 50% compared to the $5.6 million earned a year earlier. 8 9 NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE NINE MONTHS ENDED DECEMBER 31, 1996 Net sales for the nine-month period ended December 31, 1997 of $1,251.7 million were 12% greater than net sales of $1,117.2 million for the same period in 1996. The increase in net sales reflects a strong demand for computer products and passive products which more than offset the weaker sales comparisons experienced by the Company's semiconductor lines. During the first nine months of 1997, semiconductor products accounted for 35% of the Company's sales compared with 42% in the prior year. Computer systems products accounted for 45% of the Company's sales in 1997 and 38% in 1996. Passive and electromechanical products accounted for 18% of the Company's sales in 1997 and 17% in 1996. Miscellaneous products accounted for 2% of sales in 1997 and 3% a year earlier. Cost of goods sold for the nine-month period ending December 31, 1997 increased 12% compared to the same period in 1996 resulting in a gross margin of 17.5% in the current nine months compared to 17.2% a year ago. Sales mix within the semiconductor products was a primary factor in the increased gross margin percent. Warehouse, selling and administrative expenses of $164.3 million increased 9% as compared with the $150.3 million incurred during the same period in 1996. This resulted in a ratio of these expenses to sales of 13.1% for the current nine months compared with 13.5% a year ago, reflecting the Company's efforts to reduce operating costs as a percentage of sales. The operating profit for the nine months of $54.6 million, constituting 4.4% of sales, increased 30% over the $42.1 million operating profit, constituting 3.8% of sales for the same period in 1996. Interest expense was $14.8 million in the current nine-month period compared with $13.3 million a year ago. The higher interest expense is mainly attributable to increased debt to fund working capital needs to support the ongoing growth of the business. The effective tax rate for the current nine-month period was 41.8% compared with 43.2% a year ago. Primarily as a result of the factors noted above, the Company's net income for the nine-month period ending December 31, 1997 of $23.2 million was $6.9 million greater than the $16.3 million earned a year ago, an increase of 42%. Portions of this report contain current management expectations which may constitute forward-looking information. The Company's performance may differ materially from that contemplated by such statements for a variety of reasons, including, but not limited to: competition, dependence on the computer market and platform market, cyclical nature of the semiconductor market, inventory obsolescence and technology changes, and dependence on key suppliers. 9 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Number Description ------ ----------- 27 Financial Data Schedule 10 11 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, 1998 James L.Bayman ---------------------------- --------------------------------------- Chairman and CEO Date: February 13, 1998 John V. Goodger ---------------------------- --------------------------------------- Vice President & Treasurer 11 EX-27 2 EXHIBIT 27
5 1,000 9-MOS MAR-31-1998 APR-01-1997 DEC-31-1997 27,290 0 240,731 7,556 351,925 630,561 117,189 45,555 749,632 230,440 275,707 0 0 9,249 237,993 749,632 1,251,696 1,251,696 1,032,753 1,032,753 164,300 0 14,809 39,834 16,631 23,203 0 0 0 23,203 .89 .87
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