-----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, KlSOjYmeUa7zgF3xsSak5fkomFcCjwtVDJKlWR8RfSF9DW+fyNd9wE7Vo/lwtasM RmCvQAJebvXy6hnmjeNl2A== 0000950152-98-006791.txt : 19980817 0000950152-98-006791.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950152-98-006791 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 98688418 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 MAIL ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 10-Q 1 PIONEER-STANDARD ELECTRONICS, INC. 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 June 30, 1998. 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 August 1, 1998: 26,348,554. (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)
June 30, 1998 (Unaudited) March 31, 1998 ------------- -------------- ASSETS Current assets Cash $ 32,486 $ 31,999 Accounts receivable - net 325,604 303,599 Merchandise inventory 354,311 349,100 Prepaid expenses 5,076 5,799 Deferred income taxes 8,507 10,113 --------- --------- Total current assets 725,984 700,610 Intangible assets 158,517 154,908 Other assets 22,494 14,258 Property and equipment, at cost 146,570 135,803 Accumulated depreciation 58,879 48,076 --------- --------- Net 87,691 87,727 --------- --------- $ 994,686 $ 957,503 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 212,464 $ 197,167 Accrued liabilities 33,840 38,893 Long-term debt due within one year 3,106 3,101 --------- --------- Total current liabilities 249,410 239,161 Long-term debt 341,183 336,234 Other long-term liabilities 11,368 12,112 Mandatorily redeemable convertible trust preferred securities 143,750 125,000 Shareholders' equity Common stock, at stated value 9,256 9,256 Capital in excess of stated value 107,320 120,465 Retained earnings 179,199 174,411 Unearned compensation (45,410) (58,555) Foreign currency translation adjustment (1,390) (581) --------- --------- Net 248,975 244,996 --------- --------- $ 994,686 $ 957,503 ========= =========
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 June 30, 1998 1997 ----------- ----------- Net sales $ 544,327 $ 396,264 Cost and expenses: Cost of goods sold 457,857 327,553 Warehouse, selling and administrative expense 68,414 51,423 ----------- ----------- Operating profit 18,056 17,288 Interest expense 6,754 4,324 ----------- ----------- Income before income taxes 11,302 12,964 Provision for income taxes 4,268 5,659 Distributions on mandatorily redeemable convertible trust preferred securities, net of tax 1,455 -- ----------- ----------- Net income $ 5,579 $ 7,305 =========== =========== Weighted average shares outstanding Basic 26,348,554 26,049,777 Diluted 35,792,921 26,498,936 Earnings per share: Basic $ .21 $ .28 Diluted $ .20 $ .28 Dividends per share $ .03 $ .03
See accompanying notes to consolidated financial statements. 3 4 PIONEER-STANDARD ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three months ended June 30, 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 5,579 $ 7,305 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 3,707 3,012 Amortization 2,283 1,434 Increase in operating working capital (18,856) (46,885) (Increase) decrease in other assets (4,412) 30 Deferred taxes 1,606 360 -------- -------- Total adjustments (15,672) (42,049) Net cash used in operating activities (10,093) (37,744) Cash flows from investing activities: Additions to property and equipment (4,769) (3,115) Investment in affiliate (7,433) -- -------- -------- Net cash used in operating activities (12,202) (3,115) Cash flows from financing activities: Decrease in short-term financing -- (3,000) Decrease in revolving credit borrowings 5,000 30,000 Decrease in other long-term debt obligations (51) (8) Issuance of common shares under company Stock option plan -- 380 Proceeds from issuance of mandatorily redeemable Convertible trust preferred securities 18,750 Dividends paid (790) (781) -------- -------- Net cash provided by financing activities 22,909 26,591 Effect of exchange rate changes on cash (127) (35) Net increase in cash 487 11,303 Cash at beginning of period 31,999 28,116 -------- -------- Cash at end of period $ 32,486 $ 16,813 ======== ========
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 quarter ended June 30, 1998 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, 1998. 2. ACCOUNTING CHANGES The Financial Accounting Standards Board has issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information" (FAS 131). FAS 131 requires reporting certain information about operating segments. This statement, which must be adopted by the Company no later than fiscal year end 1999, is currently being analyzed by management for the potential effects of the adoption of this statement. Effective April 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" which requires disclosure of comprehensive income defined as the aggregate change in shareholders' equity excluding changes in ownership interests. The components of comprehensive income are as follows:
Quarter ended June 30, (in thousands) 1998 1997 Net income $ 5,579 $ 7,305 Foreign currency translation adjustment (809) 42 ------- ------- Comprehensive income $ 4,770 $ 7,347 ======= =======
5 6 3. NET INCOME PER SHARE DATA Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted computations include dilutive common share equivalents of outstanding stock options and assumed conversion of company-obligated mandatorily redeemable convertible trust preferred securities and the elimination of related distributions, net of income taxes. The computation of basic and diluted earnings per common share for the quarters ended June 30, 1998 and June 30, 1997 is shown below:
Quarter ended June 30, 1998 1997 ----------- ----------- Basic Net income applicable to common shareholders $ 5,579,000 $ 7,305,000 Weighted average shares outstanding 26,348,554 26,049,777 Basic earnings per share $ .21 $ .28 Diluted Net income applicable to common shareholders $ 5,579,000 $ 7,305,000 Add back: Distributions on mandatorily redeemable convertible trust preferred securities, net of tax 1,455,000 -- ----------- ----------- Net income applicable to common shareholders $ 7,034,000 $ 7,305,000 =========== =========== Weighted average shares outstanding 26,348,554 26,049,777 Effect of diluted securities: Common share equivalents of outstanding stock options 375,931 449,159 Common shares issuable upon conversion of mandatorily redeemable convertible trust preferred securities 9,068,436 -- ----------- ----------- Diluted weighted average shares outstanding 35,792,921 26,498,936 =========== =========== Diluted earnings per share $ .20 $ .28
6 7 PIONEER-STANDARD ELECTRONICS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1997 Net sales for the three-month period ended June 30, 1998 of $544.3 million increased 37% over the prior year three-month period of $396.3 million. All three product categories contributed to the increase in sales with comparable quarter sales up 14% over last year, net of the effects of the March 31, 1998 acquisition of Dickens Data Systems, Inc. Semiconductor products accounted for 30% of the Company's sales in the current quarter, compared with 34% a year ago. Computer systems products represented 54% of sales in 1998 versus 46% last year. Interconnect, passive and electromechanical products were 15% of the Company's sales in 1998 versus 18% in 1997. Miscellaneous products accounted for 1% and 2% of sales in 1998 and 1997, respectively. Cost of goods sold increased 40% compared to the prior year quarter, resulting in a gross margin of 15.9% in the current quarter compared with 17.3% a year ago. The industry excess semiconductor supply versus demand conditions adversely impacting average selling prices and the increased percentage of sales of computer systems with lower gross margins were the primary factors contributing to the decrease in the gross margin percent. Warehouse, selling and administrative expenses were $68.4 million compared to $51.4 million incurred during the prior year three-month period. This resulted in a ratio of these expenses to sales of 12.6% for the current quarter compared with 13.0% a year ago. The reduction in the ratio of these expenses is due to the lower ratio of selling expenses associated with computer system sales and ongoing cost containment programs. The operating profit resulting from the activity described above of $18.1 million, or 3.3% of sales in the current period, was up 4% compared with $17.3 million, or 4.4% of sales a year ago. Interest expense was $6.8 million in the current quarter compared with $4.3 million a year ago. The increased interest expense is primarily attributable to the additional debt to fund working capital and capital expenditure requirements necessary to support the ongoing growth needs of the business as well as the effect of the acquisition of Dickens Data Systems, Inc. The effective tax rate for the current year three-month period was 37.8% compared with 43.7% for the same period a year ago. The tax rate decrease was primarily due to the recognization of the tax benefit associated with previous operating losses of the Canadian subsidiary and lower effective state tax rates. Distributions on the recently issued mandatorily redeemable convertible trust preferred securities, net of tax, were $1.5 million for the current year three month period. 7 8 Primarily as a result of the factors above, the Company's net income for the three-month period ending June 30, 1998 of $5.6 million was $1.7 million less than the $7.3 million earned in the prior year. FINANCIAL CONDITION Current assets increased by $25.4 million and current liabilities increased by $10.3 million during the three-month period ended June 30, 1998, resulting in an increase of $15.1 million in working capital. The current ratio was 2.9:1 at June 30, 1998 and at year-end March 31, 1998. In April 1998, the Company purchased a minority equity interest in Eurodis Electron PLC ("Eurodis"), a pan-European distributor of electronic components. This purchase furthers the Company's growth strategy by offering it access to what management believes is a very broad industrial electronic components market, as well as one of the world's largest telecommunication markets. Headquartered near London, Eurodis employs 1,100 people in 13 countries and has operating centers in the United Kingdom, Austria, the Netherlands, Belgium, France, Germany, Italy, Switzerland and Eastern Europe. In April 1998, the Company issued an additional $18.7 million of mandatorily redeemable convertible trust preferred securities which were sold upon exercise of the overallotment option. During the first three months of the current year, total interest-bearing debt increased by $5.0 million. The increase in debt is primarily attributable to funding working capital and capital expenditure needs. The ratio of interest-bearing debt to capitalization was 47% at June 30, 1998 compared with 48% at March 31, 1998. Management estimates that capital expenditures for the fiscal year 1999 will approximate $45 million. Capital expenditures in the first three months of the current year were $4.8 million. 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. OTHER MATTERS 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's core business process system is currently undergoing remediation to meet Year 2000 compliance. Remediation of the core business process is anticipated to be completed by October 1998. 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 8 9 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. 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, cyclical nature of 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 5. PROPOSALS BY SHAREHOLDERS Proposals by shareholders for the 1999 annual meeting must be received by May 15, 1999. If a proponent fails to notify the Company by May 15, 1999, the management proxies may use their discretionary voting authority when the proposal is raised at the annual meeting, without any discussion of the matter in the proxy statement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Number Description 27 Financial Data Schedule (b) Reports on Form 8-K During the quarter ended June 30, 1998, the following Current Reports on Form 8-K were filed:
Date of Report Item Reported -------------- ------------- April 13, 1998 Financial Statements of business acquired (Dickens Data Systems, Inc.) and pro forma financial statements of Pioneer-Standard Electronics, Inc. and Dickens Data Systems, Inc. June 19, 1998 Financial Statements of business acquired (Dickens Data Systems, Inc.) and pro forma financial statements of Pioneer-Standard Electronics, Inc. and Dickens Data Systems, Inc.
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: August 14, 1998 /S/ James L Bayman ------------------------ ------------------------------- James L. Bayman Chairman and CEO Date: August 14, 1998 /S/ John V. Goodger ------------------------ ------------------------------- John V. Goodger Vice President & Treasurer 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1998 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS MAR-31-1998 JUN-30-1998 1 32,486 0 334,596 8,992 354,311 725,984 146,570 58,879 994,686 249,410 484,933 0 0 9,256 239,719 994,686 554,327 544,327 457,857 457,857 68,414 0 6,754 11,302 4,268 5,579 0 0 0 5,579 .21 .21
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