<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1993.
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 05734
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 4, 1994: 9,814,824.
<PAGE> 2
PART I - FINANCIAL INFORMATION
PIONEER-STANDARD ELECTRONICS, INC.
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31, 1993 March 31, 1993
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash $ 1,863 $ 1,864
Accounts receivable - net 76,240 62,347
Merchandise inventory 84,437 67,101
Prepaid expenses 1,048 773
Deferred income taxes 4,234 3,471
-------- --------
Total current assets 167,822 135,556
Investment in 50% - owned company 13,813 11,462
Other assets 1,711 1,683
Property and equipment, at cost 42,927 40,794
Accumulated depreciation (19,158) (17,635)
-------- --------
Net 23,769 23,159
-------- --------
$207,115 $171,860
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities
Notes payable to banks $ 5,000 $ 2,500
Accounts payable 54,623 46,019
Accrued liabilities 16,676 15,994
Long-term debt due within
one year 195 262
-------- --------
Total current liabilities 76,494 64,775
Long-term debt 31,135 21,328
Deferred income taxes 1,977 1,640
Shareholders' equity
Common stock, at stated value 6,543 6,529
Capital in excess of stated value 15,827 15,665
Retained earnings 75,139 61,923
-------- --------
Total shareholders' equity 97,509 84,117
-------- --------
$207,115 $171,860
======== ========
</TABLE>
2
<PAGE> 3
PIONEER-STANDARD ELECTRONICS, INC.
STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
December 31, December 31,
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $149,814 $109,706 $421,601 $311,933
Costs and expenses:
Cost of goods sold 120,807 86,141 337,159 244,250
Warehouse, selling and
administrative expense 20,627 18,502 62,067 52,560
------- ------- -------- -------
Operating profit 8,380 5,063 22,375 15,123
Interest expense 662 628 2,013 2,947
Equity in earnings of
50%-owned company 404 658 2,350 2,016
------- ------- -------- -------
Income before income taxes 8,122 5,093 22,712 14,192
Provision for income taxes 3,235 1,794 8,566 4,930
------- ------- -------- -------
Net income $ 4,887 $ 3,299 $ 14,146 $ 9,262
======= ======= ======== =======
Average shares outstanding
Primary 10,100,355 9,944,115 10,056,548 8,928,148
Fully diluted --- --- --- 9,970,363
Shares outstanding at end of period 9,814,449 9,773,317 9,814,449 9,773,317
Earnings per share
Primary $.48 $.33 $1.41 $1.04
Fully diluted --- --- --- $.97
Dividends per share $.035 $.027 $.095 $.08
</TABLE>
3
<PAGE> 4
PIONEER-STANDARD ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine months ended
December 31,
1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,146 $ 9,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,164 3,392
Undistributed earnings of affiliate (2,350) (2,016)
Decrease (increase) in operating working capital (22,218) 1,219
Decrease (increase) in other assets (67) 256
Deferred taxes (426) ---
-------- -------
Total adjustments (20,897) 2,851
-------- -------
Net cash (used in) provided by
operating activities (6,751) 12,113
Cash flows from investing activities:
Additions to property and equipment (4,736) (2,508)
------- ------
Net cash used in investing activities (4,736) (2,508)
Cash flows from financing activities:
Increase in short-term financing 2,500 500
Increase in revolving credit borrowings 25,000 8,000
Decrease of revolving credit borrowings (15,000) (17,000)
Decrease in other long-term
debt obligations (260) (1,490)
Debenture retirement --- (916)
Issuance of common shares under company
stock option plan 176 242
Dividends paid (930) (697)
-------- ------
Net provided by (used in)
financing activities 11,486 (11,361)
-------- -------
Net decrease in cash (1) (1,756)
Cash at beginning of period 1,864 1,887
-------- ------
Cash at end of period $ 1,863 $ 131
======== ======
</TABLE>
4
<PAGE> 5
NOTES - Pioneer-Standard Electronics, Inc.
1. PER SHARE DATA
Net income per common share is computed using the weighted average common
shares outstanding during the quarters and nine-month periods ended December
31, 1993 and 1992. Fully diluted net income per common share was computed on
the same basis as above with the assumption that all of the 9% Subordinated
Convertible Debentures were converted into common shares and that the related
interest expense, net of income taxes, was added to net income. See Note 2.
2. CONVERSION OF 9% SUBORDINATED CONVERTIBLE DEBENTURES
During the second quarter of 1992, the Company's 9% Subordinated Convertible
Debentures due in 1998 were retired. As a result of a combination of a call
to satisfy the sinking fund installment balance due August 1, 1992,
voluntary conversions of Debentures during the quarter 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.
3. STOCK SPLIT
All share and per share data have been restated to reflect the three-for-two
stock split effective March 15, 1993.
4. MANAGEMENT OPINION
The information furnished herein reflects all 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, 1993 and
1992. 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
<PAGE> 6
PIONEER-STANDARD ELECTRONICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION
Current assets increased by $32.2 million and current liabilities increased
by $11.7 million during the nine-month period ended December 31, 1993,
resulting in an increase of $20.5 million of working capital. The current
ratio was 2.2:1 at December 31, 1993, compared with 2.1:1 at year-end, March
31, 1993.
During the first nine months of the current year, total interest-bearing debt
increased by $12.2 million. The ratio of interest-bearing debt to
capitalization (interest-bearing debt plus equity) was 27% at December 31, 1993
compared with 22% at March 31, 1993.
The increase in capital requirements is attributable to expenditures for
property and equipment and working capital needs arising from increased
sales volume in the first nine months of the current year with sales of $421.6
million compared with the trailing fiscal nine months sales of $327.7 million.
During the second fiscal quarter, pursuant to the provisions of the Company's
$30.0 million revolving credit agreement and upon consent of the parties
thereto, the maturity date of the facility was extended for one additional
year to January 1, 1997, to be followed by a four-year term loan amortized in
equal quarterly installments.
Management estimates that capital spending plans for the current year will
approximate $6.0 million ($4,736,000 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 debt facilities will be
sufficient to finance both capital spending and working capital needs for the
balance of the current fiscal year.
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1993 COMPARED WITH
THE NINE MONTHS ENDED DECEMBER 31, 1992
Net sales for the nine-month period ended December 31, 1993 of $421.6 million
were 35% greater than sales of the prior year nine-month period of $311.9
million. The increase in sales reflects continuing strong demand for
electronic components and computer systems. During the first nine months of
1993, semiconductor products accounted for 41% of the Company's sales
compared with 37% in the prior year. Computer systems products comprised
34% of 1993 sales compared with 40% a year earlier. Passive and
electromechanical products were 23% of the Company's 1993 sales, up from 20%
the prior year. Miscellaneous products accounted for 2% and 3% of sales in
1993 and 1992, respectively.
The percentage increase in cost of goods sold of 38% resulted in a gross
margin of 20.0% in the first nine months of the current year compared with
21.7% a year ago. Regarding the Company's three major product categories;
computer systems products have the highest average line item value and
lowest gross margin percent, whereas passive and electromechanical products
have the lowest average line item value and higher gross margin percent.
6
<PAGE> 7
Warehouse, selling and administrative expenses of $62.1 million increased by
18% as compared with the $52.6 million incurred during the prior year
nine-month period. This resulted in a ratio of these expenses to sales of
14.7% for the 1993 period compared with 16.8% for the 1992 first nine
months.
The resulting operating profit of $22.4 million in 1993 was 5.3% of sales
compared with $15.1 million in 1992 which was 4.8% of sales.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $2,350,000 for the 1993 nine-month period
compared with $2,016,000 for the same period last year; net sales of the
affiliate for the current year period of $329.4 million were 60% greater
than the sales of the prior year period of $206.3 million. The affiliate's
increase in sales was attributable to highly concentrated sales of certain
microprocessors in large quantities, the sales of which might not be
sustainable in future periods which could result in a significant impact on
net income of the affiliate.
Current year results reflect the increase in sales, effective cost containment
and earnings contribution of the affiliate.
The Company adopted the Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes", in the quarter ended June 30, 1993.
Pursuant to these provisions, the Company is required to accrue taxes on its
portion of the unremitted earnings of its affiliate; the increase in the
effective tax rate, from 40.5% a year ago to 42.1% for the current period,
is primarily attributable to this factor. The effect of the adoption of
this standard on the Company's financial position and results of operations
was not material. Adoption of this standard had no effect on the Company's
cash position.
Primarily as a result of the factors noted above, the Company's net income for
the nine-month period ending December 31, 1993 of $14.1 million was $4.8
million higher than the $9.3 million earned a year ago.
THREE MONTHS ENDED DECEMBER 31, 1993 COMPARED WITH
THE THREE MONTHS ENDED DECEMBER 31, 1992
Net sales for the three-month period ended December 31, 1993 of $149.8 million
increased 37% over sales of the prior year three-month period of $109.7
million. The increase in sales reflects a strong demand for electronic
components and computer systems. During the third fiscal quarter of 1993,
semiconductor products accounted for 44% of the Company's sales compared
with 37% in the prior year. Computer systems products comprised 33% of
1993 sales compared with 42% a year earlier. Passive and electromechanical
products were 21% of the Company's 1993 sales, up from 18% the prior year.
Miscellaneous products accounted for 2% and 3% of sales in 1993 and 1992,
respectively.
The percentage increase in cost of goods sold of 40% resulted in a gross
margin of 19.4% in the third quarter of the current year compared with 21.5% a
year ago. Regarding the Company's three major product categories; computer
systems products have the highest average line item value and lowest gross
margin percent, whereas passive and electromechanical products have the lowest
average line item value and higher gross margin percent.
7
<PAGE> 8
Warehouse, selling and administrative expenses of $20.6 million increased by
11% over the $18.5 million incurred during the prior year three- month
period. This resulted in a ratio of these expenses to sales of 13.8% for the
1993 period compared with 16.9% for the 1992 quarter.
The Company's share of net income of the affiliate Company, Pioneer
Technologies Group, Inc., was $404,000 for the 1993 three-month period
compared with $658,000 for the same period last year. The decline in the
current year quarter is attributable to the affiliate's product mix. Net
sales of the affiliate for the three-month period ended December 31, 1993 of
$103.4 million were 52% greater than the sales of the prior year three-month
period of $68.1 million. The affiliate's increase in sales was
attributable to highly concentrated sales of certain microprocessors in
large quantities, the sales of which might not be sustainable in future
periods which could result in a significant impact on net income of the
affiliate.
Current year results reflect the increase in sales, effective cost containment
and the earnings contribution of the affiliate.
The Company adopted the Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes", in the quarter ended June 30, 1993.
Pursuant to these provisions, the Company is required to accrue taxes on its
portion of the unremitted earnings of its affiliate; the increase in the
effective tax rate, from 40.5% in last year's quarter to 41.9% for the
current quarter, is primarily attributable to this factor.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending December 31, 1993 of $4.9 million was $1.6 million
greater than the $3.3 million earned a year ago.
8
<PAGE> 9
Pioneer-Standard Electronics, Inc. owns 50% of the outstanding common stock
of Pioneer Technologies Group, Inc. The investment is accounted for by the
equity method in the Company's financial statements via the balance sheet
caption of "Investment in 50%-owned company" and via the statements of income
caption of "Equity in earnings of 50%-owned company".
Pioneer Technologies Group, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31, 1993 March 31, 1993
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 8 $ 7
Accounts receivable - net 33,594 31,052
Merchandise inventory 52,064 42,450
Prepaid expenses 592 110
Deferred income taxes 1,713 1,443
Shareholder notes receivable 10 49
-------- -------
Total current assets 87,981 75,111
Property and equipment, at cost 9,052 7,326
Accumulated depreciation (4,580) (3,748)
-------- -------
Net 4,472 3,578
Other assets 539 499
-------- -------
$ 92,992 $79,188
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $40,248 $20,361
Accrued liabilities 3,792 4,028
------- -------
Total current liabilities 44,040 24,389
Long-term debt 21,325 31,873
Shareholders' equity
Common stock $.10 par value 10 10
Capital in excess of par value 90 90
Retained earnings 27,527 22,826
------- -------
Total shareholders' equity 27,627 22,926
------- -------
$ 92,992 $79,188
======== =======
</TABLE>
9
<PAGE> 10
PIONEER TECHOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
December 31, December 31,
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $103,437 $68,057 $329,408 $206,250
Costs and expenses:
Cost of goods sold 91,944 56,165 290,767 172,154
Selling and
administrative expense 9,819 9,376 29,961 26,205
-------- -------- -------- --------
Operating profit 1,674 2,516 8,680 7,891
Interest expense 307 252 825 941
-------- -------- -------- --------
Income before
income taxes 1,367 2,264 7,855 6,950
Provision for
income taxes 559 949 3,154 2,918
-------- -------- -------- --------
Net income $ 808 $ 1,315 $ 4,701 $ 4,032
======== ======== ======== ========
Average shares outstanding 100,000 100,000 100,000 100,000
Earnings per share $8.08 $13.15 $47.01 $40.32
Dividends per share --- --- --- ---
</TABLE>
10
<PAGE> 11
PIONEER TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine months ended
December 31,
1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,701 $ 4,032
Adjustments to reconcile net income to net cash
provided by operating activities:
Items not affecting cash 834 677
Decrease (increase) in operating working capital 6,782 (1,599)
Decrease (increase) in other assets (40) 36
------- -------
Total adjustments 7,576 (886)
------- -------
Net cash provided by
operating activities 12,277 3,146
Cash flows from investing activities:
Additions to property and equipment (1,728) (566)
------- -------
Net cash used in
investing activities (1,728) (566)
Cash flows from financing activities:
Decrease in long-term debt (10,548) (5,063)
------- -------
Net cash used in financing activities (10,548) (5,063)
------- -------
Net increase (decrease) in cash 1 (2,483)
Cash at beginning of period 7 2,490
------- -------
Cash at end of period $ 8 $ 7
====== =======
</TABLE>
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS Exhibit 11, statement regarding computation of per
share earnings is included herein.
(b) FORM 8-K There were no reports on Form 8-K filed during the
three-month period ended December 31, 1993.
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.
<TABLE>
<S> <C> <C>
Date: February 10, 1994 Preston Heller, Jr.
----------------- -------------------------------------------------------------
Chairman of the Board and
Chief Executive Officer
Date: February 10, 1994 John V. Goodger
----------------- ----------------------------------------------------------
Vice President, Treasurer
and Assistant Secretary
</TABLE>
12
<PAGE> 1
Exhibit 11
PIONEER-STANDARD ELECTRONICS, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Weighted average Common Shares
and Common Share
equivalents outstanding 10,100,355 9,944,115 10,056,548 8,928,148
Net income $4,887,000 $3,299,000 $14,146,000 $9,262,000
========== ========== =========== ==========
Earnings per share $.48 $.33 $1.41 $1.04
FULLY DILUTED
Weighted average Common Shares
and Common Share
equivalents outstanding 8,965,623
Assumed conversion of
9% convertible debentures 1,004,740
----------
Total 9,970,363
==========
Net income $9,262,000
Add 9% convertible debenture
interest, net of federal
income tax effect 399,000
----------
Total net income as adjusted $9,661,000
==========
Earnings per share $.97
</TABLE>
13
