<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
-----
of the Securities Exchange Act of 1934 (Fee required)
For the fiscal year ended MARCH 31, 1994
or Transition Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
Commission File No. 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 iden-
incorporation or organization) tification no.)
4800 East 131st Street, Cleveland, Ohio 44105
- - - --------------------------------------- ------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (216) 587-3600
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- - - ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
--------------------------------
(Title of class)
Common Share Purchase Rights
----------------------------
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
----
The aggregate market value of voting shares of the Registrant held by
non-affiliates (which excludes voting shares held by officers and Directors of
the Registrant) was $216,859,018 as of June 1, 1994, computed on the basis of
the last reported sale price per share ($23.75) of such shares on the NASDAQ
National Market System.
The number of Common Shares outstanding as of June 1, 1994 was 9,930,256.
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Shareholders to be held on July 26, 1994
are incorporated by reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Annual Report on
Form 10-K is as of March 31, 1994.
The Common Share information contained in this Form 10-K does not reflect a
three-for-two share split effected in the form of a 50% share dividend declared
on June 23, 1994 payable on August 1, 1994 to shareholders of record on July 6,
1994.
PART I
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Item 1. Business
- - - -----------------
(a) Pioneer-Standard Electronics, Inc. was organized as an Ohio corporation
in 1963 and maintains its principal office at 4800 East 131st Street,
Cleveland, Ohio 44105 (telephone number (216) 587-3600). The Company first
offered its securities to the public in 1971. In November, 1982, the Company
purchased substantially all of the assets of the Electronics and Military
divisions of The Harvey Group, Inc., a New York corporation. On December 28,
1990, the Company purchased from Lex Electronics, Inc., a New York corporation,
certain assets of Lex's Computer Systems Division. On June 1, 1994,
Pioneer-Standard Canada Inc., a newly-formed Canadian subsidiary of the
Company, purchased from United Westburne Inc., a Canadian corporation, certain
of the assets and assumed certain liabilities of Westburne's Zentronics
Division ("Zentronics"), which the Company believes is one of the largest
distributors of electronic components and computer products in Canada. There
have not been any material changes in the nature of the business done by the
Company since April 1, 1993. Except as otherwise stated, the term "Company" as
used herein shall mean Pioneer-Standard Electronics, Inc.
(b) The Company is engaged in the distribution of industrial and end-user
electronic products, which business comprises only one basic industry segment.
(c) The following is a description of various aspects of the Company's
business:
INDUSTRIAL AND END-USER DISTRIBUTION - The Company distributes a broad range
of electronic components and computer products manufactured by others. These
products are sold to original equipment manufacturers, value-added resellers,
research laboratories, government agencies, and end-users, including
manufacturing
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<PAGE> 3
companies, and service and other non-manufacturing organizations. These
products are classified into three broad categories: semiconductors, computer
products, and passive and electromechanical components. During 1994,
semiconductor products accounted for 41% of the Company's sales compared with
37% in 1993 and 36% in 1992. These products include microprocessors, memory
devices, programmable logic devices, analog and digital integrated circuits and
other semiconductor devices. During fiscal 1994, computer products accounted
for 33% of the Company's sales compared with 39% in 1993 and 42% in 1992.
These products include computers (primarily mini and personal), display
terminals, disk drives, development systems, modems and networking products.
During 1994, passive and electromechanical products accounted for 24% of the
Company's sales, up from 21% in 1993 and 19% in 1992. These products include
capacitors, connectors, resistors, relays, potentiometers, switches, wire and
cable, and power conditioning equipment.
As a part of its distributor operations, the Company provides value-added
services including systems integration, just-in-time kitting operations, memory
and logic device programming and connector assemblies to customer
specifications. Sales amounts for these services are included among the three
broad categories discussed above.
Miscellaneous products accounted for 2% of sales in 1994 and for 3% of sales
in 1993 and 1992.
PIONEER TECHNOLOGIES GROUP, INC. - The Company owns 50% of the outstanding
common stock of Pioneer Technologies Group, Inc. ("Pioneer Technologies"), a
Maryland corporation headquartered in Gaithersburg, Maryland. The business of
Pioneer Technologies is substantially the same as that of the Company. The
companies have an agreement which provides, among other things, that they have
the right to buy each other's products at cost of the product plus handling.
In addition, Pioneer Technologies utilizes the Company's data processing system
for processing order, warehousing, accounting and administrative information,
for which it is charged a monthly fee. For further information as to
transactions between the companies, including certain first right of refusal
agreements concerning the Company's 50% ownership of Pioneer Technologies, see
Note 9 (Pioneer Technologies Group, Inc.) of Notes to Financial Statements of
the Company.
PRODUCTS DISTRIBUTED AND SOURCES OF SUPPLY - The Company (together with
Pioneer Technologies) is the third largest of the approximately 1,500
electronics distributors in the United States in terms of total sales. The
Company currently has approximately 135,000 items produced by over 100
manufacturers in its product file. A majority of the Company's revenues comes
from products sourced by relatively few suppliers. During the 1994 fiscal
year, products purchased from the Company's five largest suppliers accounted
for 72% of total sales volume, with Digital Equipment
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<PAGE> 4
Corporation and Intel Corporation being the largest two suppliers. The loss of
any one of the top five suppliers and/or a combination of certain other
suppliers could have a material adverse effect on the Company's sales and
earnings unless alternative products manufactured by others are available to
the Company. The majority of the products sold by the Company are purchased
pursuant to distributor agreements which generally provide for inventory return
privileges by the Company upon cancellation of a distributor agreement. The
distributor agreements also typically provide protection to the Company for
product obsolescence and price erosion. The Company believes it has good
relationships with its suppliers.
CUSTOMERS - The Company serves over 15,800 customers in many major markets of
the United States. No single customer accounted for more than five percent of
the Company's total sales for the fiscal year ended March 31, 1994.
BACKLOG - The Company historically has not had a significant backlog of
orders, although some shipments may be scheduled for delivery over an extended
period of time. There was not a significant backlog during the last fiscal
year.
COMPETITION - The sale and distribution of industrial electronic components
and computer products are highly competitive, primarily with respect to price
and product availability, but also with respect to service, variety and
availability of products carried, number of locations and promptness of
service. Many of the distributors with whom the Company competes are regional
or local distributors. However, several of the Company's strongest competitors
have national and international distribution businesses. The Company also
experiences competition from manufacturers, including some of the Company's
suppliers, who may sell directly to the industrial and end-user account base.
EMPLOYEES - The Company currently has 1,078 employees, with approximately
1,060 of these persons employed on a full-time basis and the balance on a
part-time basis. The number of employees does not include the employees the
Company obtained through the acquisition of Zentronics. The Company is not a
party to any collective bargaining agreement, has had no strikes or work
stoppages and considers its employee relations to be excellent.
(d) The distribution of the Company's products has been primarily in the
United States. The Company gained a West Coast presence through its March,
1989 acquisition of the assets of Compumech Electronics, Inc. and its December,
1990 acquisition of certain assets of the Lex Computer Systems Division of Lex
Electronics, Inc. In addition, the Company entered the Canadian market through
its June, 1994 acquisition of certain assets of Zentronics. The Company is not
significantly involved in export sales.
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<TABLE>
Item 2. Properties
- - - -------------------
The Company's major distribution facilities are set forth below:
<CAPTION>
Owned or Expiration Date
Location Sq. Ft. Leased of Lease (1)
-------- ------- -------- --------------
<S> <C> <C> <C>
Chicago, Illinois 11,300 Leased April 14, 1998
Cleveland, Ohio (2) 87,000 Owned
Dallas, Texas 13,500 Leased October 31, 1994
Dayton, Ohio 60,800 Owned
Eden Prairie, Minnesota 12,800 Leased August 31, 1997
Freemont, California 12,000 Leased March 14, 1999
Irvine, California 14,700 Leased February 28, 1997
Lexington, Massachusetts 26,400 Owned
Solon, Ohio 86,300 Leased March 31, 1996
Solon, Ohio 30,000 Leased October 31, 1994
Solon, Ohio (3) 44,700 Leased May 31, 1999
Twinsburg, Ohio (4) 106,000 Owned
Woodbury, New York 35,600 Leased September 30, 1997
- - - ---------------
<FN>
(1) The major leases contain renewal options for periods ranging
from one to twenty years.
(2) Corporate headquarters.
(3) Systems and Services Division facility.
(4) Corporate Distribution Center.
The Company also has entered into various leases for distribution
facilities of 10,000 square feet or less. The list of properties set forth
above does not include the properties the Company obtained through the
acquisition of Zentronics.
</TABLE>
Item 3. Legal Proceedings
- - - --------------------------
As of March 31, 1994, the Company was not a party to any material
pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
- - - ------------------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended March 31, 1994.
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<PAGE> 6
Executive Officers of the Company(1)
- - - ---------------------------------
The name, age and positions of each executive officer of the Company
as of June 1, 1994 are as follows:
Name Age Position
---- --- --------
Preston B. Heller, Jr. 64 Chairman of the Board and Chief
Executive Officer of the Company since
June, 1984.
James L. Bayman 57 President and Chief Operating
Officer of the Company since June, 1984.
Arthur Rhein 48 Senior Vice President of the Company
since April, 1993 and Vice President -
Marketing of the Company from 1986 to
April, 1993. Prior thereto, Vice
President - Northeast Division of the
Company from 1984 to 1986.
John V. Goodger 58 Vice President, Treasurer, and
Assistant Secretary of the Company
since February, 1990. Prior thereto,
Vice President, Treasurer and Assistant
Secretary of Ferro Corporation from
1987 to 1990 and Vice President and
Treasurer of Ferro Corporation from
1984 to 1990.
Janice M. Margheret 39 Senior Vice President of the Company
since April, 1993 and Vice President
and Controller of the Company from July,
1987 to April, 1993. Prior thereto,
Group Controller of the Company from
1983 to 1987.
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<PAGE> 7
William A. Papenbrock 55 Secretary of the Company since 1986.
Mr. Papenbrock is a partner of the
law firm of Calfee, Halter &
Griswold(2).
__________________________
(1) The description of Executive Officers called for in this Item
is included pursuant to Instruction 3 to Section (b) of Item
401 of Regulation S-K.
(2) The law firm of Calfee, Halter & Griswold serves as counsel to
the Company.
There is no relationship by blood, marriage or adoption among the
above-listed officers. Messrs. Heller, Bayman, Rhein, and Goodger and Ms.
Margheret have entered into Amended and Restated Employment Agreements with the
Company, all of which are included as Exhibits hereto. Messrs. Heller, Bayman,
Rhein, and Goodger and Ms. Margheret hold office until terminated as set forth
in their Amended and Restated Employment Agreements. Mr. Papenbrock holds
office until his successor is elected by the Board of Directors.
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<PAGE> 8
PART II
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Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
- - - ------- --------------------------------------------------------------------
The Company's Common Shares, without par value, are traded on the
NASDAQ National Market System. Common Share prices are quoted daily under the
symbol PIOS. The high and low sales prices for the Common Shares, and the cash
dividends paid on the Common Shares, for each quarter of the two most recent
fiscal years and additional information required by this Item is included under
Exhibit 99(c) to this Form 10-K Annual Report.
Cash dividends are payable quarterly, upon authorization of the Board
of Directors. Regular payment dates are the 1st day of August, November,
February and May. The Company maintains a Dividend Reinvestment Plan whereby
cash dividends, and a maximum of an additional $5,000 per month, may be
invested in the Company's Common Shares at no commission cost.
On April 25, 1989, the Company adopted a Common Share Purchase Rights
Plan. For further information about the Common Share Purchase Rights Plan, see
Note 6 (Common Share Purchase Rights Plan) of Notes to Financial Statements of
the Company.
Item 6. Selected Financial Data
- - - ------- -----------------------
The information required by this Item, is included under Exhibit 99(d)
to this Form 10-K Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
- - - ------- ---------------------------------------------------------------
Results of Operations
- - - ---------------------
The information required by this Item is included under Exhibit 99(e)
to this Form 10-K Annual Report.
Item 8. Financial Statements and Supplementary Data
- - - ------- -------------------------------------------
The information required by this Item is included under Exhibit 99(f)
to this Form 10-K Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- - - ------- ---------------------------------------------------------------
Financial Disclosure
- - - --------------------
Not applicable.
-8-
<PAGE> 9
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- - - -------- --------------------------------------------------
Information required by this item as to the Directors of the Company
appearing under the caption "Nominees for Election" and "Directors Continuing
in Office" in the Company's Proxy Statement to be used in connection with the
Annual Meeting of Shareholders to be held on July 26, 1994 (the "1994 Proxy
Statement") is incorporated herein by reference. Information required by this
item as to the executive officers of the Company is included in Part I of this
Annual Report on Form 10-K.
Item 11. Executive Compensation
- - - -------- ----------------------
The information required by this item is incorporated herein by
reference to "Compensation of Executive Officers" in the 1994 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- - - -------- --------------------------------------------------------------
The information required by this item is incorporated herein by
reference to "Share Ownership" in the 1994 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
- - - -------- ----------------------------------------------
The information required by this item is incorporated herein by
reference to "Certain Transactions" in the 1994 Proxy Statement.
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<PAGE> 10
PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports on
- - - -------- -------------------------------------------------------
Form 8-K
--------
(a) The following financial statements and schedules are filed as part of
this report on Exhibit 99(f) as indicated:
Page in
Exhibit 99(f)
-------------
(1) Financial Statements and Schedules
----------------------------------
Pioneer-Standard Electronics, Inc.
----------------------------------
Report of independent auditors 11
Balance sheet as of March 31, 1994 and 1993 2
For the years ended March 31, 1994, 1993
and 1992:
Statements of income 3
Statements of shareholders' equity 4
Statements of cash flows 5
Notes to financial statements 6
Report of independent auditors 12
Schedules for years ended March 31, 1994,
1993 and 1992:
II - Amounts receivable from related
parties and underwriters, promoters,
and employees other than related
parties 13
VIII - Valuation and qualifying
accounts 14
IX - Short-term borrowings 15
Quarterly Financial Data 16
Pioneer Technologies Group, Inc.
--------------------------------
Report of independent auditors 19
Balance sheet as of March 31, 1994 and 1993 20
For the years ended March 31, 1994, 1993
and 1992:
Statements of income and
retained earnings 22
Statements of cash flows 23
Notes to financial statements 24
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<PAGE> 11
Schedules for years ended March 31, 1994,
1993 and 1992:
VIII - Valuation and qualifying
accounts 31
IX - Short-term borrowings 32
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
(2) Exhibits
--------
See the Index to Exhibits at page E-1 of this Form 10-K.
(b) Reports on Form 8-K
-------------------
No Current Reports on Form 8-K were filed during the quarter ended March 31,
1994.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: June 28, 1994 By: /s/ Preston B. Heller, Jr.
--------------------------
Preston B. Heller, Jr.,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature and Title Date
- - - ------------------- ----
/s/ Preston B. Heller, Jr. Chairman of the )
- - - -------------------------- Board and Chief )
Preston B. Heller, Jr. Executive Officer )
)
/s/ John V. Goodger Vice President, )
- - - -------------------------- Treasurer and )
John V. Goodger Assistant Secretary )
)
/s/ Janice M. Margheret Senior Vice )
- - - -------------------------- President )
Janice M. Margheret )
)
/s/ James L. Bayman Director )
- - - -------------------------- )
James L. Bayman )
)
/s/ Frederick A. Downey Director )
- - - -------------------------- ) June 28, 1994
Frederick A. Downey )
)
/s/ Victor Gelb Director )
- - - -------------------------- )
Victor Gelb )
)
/s/ Gordon E. Heffern Director )
- - - -------------------------- )
Gordon E. Heffern )
)
/s/ Arthur Rhein Director )
- - - -------------------------- )
Arthur Rhein )
)
/s/ Edwin Z. Singer Director )
- - - -------------------------- )
Edwin Z. Singer )
)
/s/ Thomas C. Sullivan Director )
- - - -------------------------- )
Thomas C. Sullivan )
)
/s/ Karl E. Ware Director )
- - - -------------------------- )
Karl E. Ware )
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<PAGE> 13
Pioneer-Standard Electronics, Inc.
Exhibit Index
Sequential
Exhibit No. Description Page No.
- - - ----------- ----------- ----------
3.(a) Amended Articles of Incorporation of
Pioneer-Standard Electronics, Inc., which
is incorporated herein by reference from
the Company's Annual Report on Form 10-K
for the year ended March 31, 1982. N/A
(b) Amended Code of Regulations, as amended,
which is incorporated herein by reference
from the Company's Annual Report on
Form 10-K for the year ended March 31,
1988. N/A
4.(a) Credit Agreement dated as of January 23,
1992 by and among the Company and three
banks, which is incorporated herein by
reference from the Company's Annual
Report on Form 10-K for the year ended
March 31, 1992. N/A
(b) Amendment Agreement, dated as of June 30, 1993,
by and among the Company, National City Bank,
Society National Bank (successor in interest
to Ameritrust Company National Association)
and Star Bank, N.A. 16
(c) Second Amendment Agreement, dated as of
May 27, 1994, by and among the Company,
National City Bank, Society National Bank
(successor in interest to Ameritrust Company
National Association) and Star Bank, N.A. and
National City Bank, as Agent. 17
(d) Rights Agreement dated as of April 25, 1989
by and between the Company and AmeriTrust
Company National Association, which is
incorporated herein by reference from the
Company's Annual Report on Form 10-K for
the year ended March 31, 1989. N/A
(e) Note Purchase Agreement dated as of October
31, 1990 by and between the Company and
Teachers Insurance and Annuity Association
of America, which is incorporated herein
by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1990. N/A
(f) Amendment No. 1 to Note Purchase Agreement
dated as of November 1, 1991 by and between
the Company and Teachers Insurance and
Annuity Association of America, which is
incorporated herein by reference from the
Company's Annual Report on Form 10-K for
the year ended March 31, 1993. N/A
E-1
<PAGE> 14
Sequential
Exhibit No. Description Page No.
- - - ----------- ----------- ----------
10.(a) Amended and Restated Employment Agreement
effective as of April 1, 1993 by and between
the Company and Preston B. Heller, Jr., which
is incorporated herein by reference from the
Company's Annual Report on Form 10-K for the
year ended March 31, 1993. N/A
(b) Amended and Restated Employment Agreement
effective as of April 1, 1993 by and between
the Company and James L. Bayman, which is
incorporated herein by reference from the
Company's Annual Report on Form 10-K for the
year ended March 31, 1993. N/A
(c) Amended and Restated Employment Agreement
effective as of April 1, 1993 by and
between the Company and Janice M. Margheret,
which is incorporated herein by reference
from the Company's Annual Report on Form 10-K
for the year ended March 31, 1993. N/A
(d) Amended and Restated Employment Agreement
effective as of April 1, 1993 by and between
the Company and Arthur Rhein, which is
incorporated herein by reference from the
Company's Annual Report on Form 10-K for the
year ended March 31, 1993. N/A
(e) Amended and Restated Employment Agreement
effective as of April 1, 1994 by and between
the Company and John V. Goodger. 22
(f) Stock Purchase Agreement dated July 24, 1986
among Pioneer-Standard Electronics, Inc.
and the other shareholders of
Pioneer Technologies Group, Inc., which
is incorporated herein by reference from
the Company's Current Report on Form 8-K
dated July 24, 1986. N/A
(g) 1982 Incentive Stock Option Plan, as amended,
which is incorporated by reference from the
Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1988. N/A
(h) Amended and Restated 1991 Stock Option Plan. 37
(i) Asset Purchase Agreement dated April 22, 1994
between Pioneer-Standard Electronics, Inc. and
Westburne Industrial Enterprises Ltd., which
is incorporated herein by reference from the
Company's Current Report on Form 8-K dated
June 1, 1994. N/A
11. Statement regarding computation of per share
earnings. 43
21. Subsidiaries of the Registrant. 44
24. Consents of Ernst & Young, Independent Auditors. 45
E-2
<PAGE> 15
Sequential
Exhibit No. Description Page No.
- - - ----------- ----------- ----------
99.(a) Certificate of Insurance Policy effective
November 1, 1993 between Chubb Group of
Insurance Companies and Pioneer-Standard
Electronics, Inc. 47
99.(b) Forms of Amended and Restated Indemnification
Agreement entered into by and between the
Company and each of its Directors and
Executive Officers. 48
99.(c) Dividend Information and Price Range of
Common Shares 52
99.(d) Selected Financial Data 53
99.(e) Management's Discussion and Analysis of
Financial Condition and Results of Operations. 54
99.(f) Financial Statements and Schedules listed
under Item 14(a) 61
431/15154HZF.458
E-3
<PAGE> 1
[Pioneer Logo]
Exhibit 4(b)
June 30, 1993
National City Bank
Society National Bank
Star Bank, N.A.
Re: Extension of Subject Commitments under
Credit Agreement dated January 23, 1992
Gentlemen:
Reference is made to the Credit Agreement by and among you, the
undersigned (Borrower) and National City Bank as your agent which provides
for, among other things, subject commitments aggregating $30,000,000 and
available to Borrower, upon certain terms and conditions, on a revolving basis
until January 1, 1996 (the conversion date now in effect) and on an amortizing
basis thereafter until January 1, 2000 subject, however, in either case to
earlier reduction or termination pursuant to the credit agreement.
Borrower hereby requests that the credit agreement be amended by
deleting the date "January 1, 1996" from subsection 2A.02 (captioned "TERM"),
as amended, and by substituting for that deleted date the date "January 1,
1997".
In all other respects the credit agreement shall remain in full effect.
This letter has been executed and delivered to each of you in
triplicate. If you assent to the extension, kindly send two signed copies of
your assent to your agent who will, if the extension becomes effective, forward
one such copy to Borrower and inform you of the extension.
Pioneer-Standard Elecnonics, Inc.
By: /s/ John V. Goodger
---------------------------------
The undersigned hereby assents to the foregoing.
National City Bank Society National Bank
By: /s/ By: /s/
-------------------------------- ----------------------------------
Star Bank, N.A.
By: /s/
--------------------------------
<PAGE> 1
lgw40160.am2
05/26/94
Exhibit 4(c)
SECOND AMENDMENT AGREEMENT
Second Amendment Agreement (this "Amendment") made as of May 27, 1994,
by and among Pioneer-Standard Electronics, Inc. (Borrower), National City Bank,
Society National Bank (successor in interest to Ameritrust Company National
Association) and Star Bank, N.A. (together "banks") and National City Bank in
its capacity as agent of those three banks ("NCB-Agent") for the purposes of
the Credit Agreement referred to below and the related writings:
Whereas, the parties have entered into a Credit Agreement dated January 23,
1992, as amended by Amendment Agreement dated as of June 30, 1993 (as amended,
the "Credit Agreement") which sets forth the terms and conditions upon which
Borrower may obtain (a) loans "subject loans" on a revolving basis until the
"conversion date" (originally January 1, 1995 but now January 1, 1997), as that
term is defined in the Credit Agreement, and on an amortizing basis thereafter
and (b) "subject BAs"; AND each term defined in the Credit Agreement shall
have the same meaning in this Amendment as is ascribed thereto in the Credit
Agreement;
Whereas, the parties desire to amend certain provisions of the Credit Agreement
as provided below:
THEREFORE, in consideration of the premises above and the mutual promises below
and for other considerations, the parties agree as follows:
1. Subsection 2A.01 of the Credit Agreement is hereby amended in its entirety
to read as follows:
2A.01 AMOUNTS -- The aggregate amount of the subject
commitments shall be thirty-five million dollars ($35,000,000), but
that amount may be reduced from time to time pursuant to subsection
2A.03 or 2A.04 and the subject commitments may be terminated pursuant
to section 5B. The amount of each bank's subject commitment (subject
to such reduction or termination), and the proportion (expressed as a
percentage) that it bears to all of the subject commitments, is set
forth opposite the bank's name below, to-wit:
<TABLE>
<S> <C> <C>
$17,500,000 50% National City Bank
10,500,000 30% Society National Bank
7,000,000 20% Star Bank, N.A.
----------- ---
$35,000,000 100% Total
</TABLE>
2. Borrower agrees to cause its subsidiary, Pioneer-Standard Canada Inc.,
to comply with all the provisions of sections 3A, 3B, 3C and 3D of the Credit
Agreement and agrees that all references to financial information in section 3A
shall be deemed to be references to financial information of Borrower and its
subsidiaries on a consolidating and consolidated basis; PROVIDED,
<PAGE> 2
that Pioneer-Standard Canada Inc. shall not be required to comply with the
provisions of subsection 3D.06 (captioned "DIVIDENDS").
3. Subsections 3B.01, 3B.02, 3B.03, 3B.04 and 3B.05 of the Credit Agreement
are hereby amended their entirety to read as follows:
3B.01 NET WORTH -- Borrower will not suffer or permit the sum of the
consolidated net worth of the companies at any time to be less than the
then required minimum amount. The required minimum amount shall be
eighty-nine million dollars ($89,000,000) EXCEPT that the required minimum
amount shall be permanently increased
(a) on June 30, 1994 and on each quarterly date thereafter by
an amount equal to the sum of fifty percent (50%) of the consolidated
net income of the companies, if any, for the quarter-annual period
then ending plus
(b) upon each issuance or other sale by Borrower of any of its
equity securities by an amount equal to the net proceeds (after costs
and expenses) thereof.
3B.02 LEVERAGE -- Borrower will not suffer or permit the total
liabilities of the companies at any time to exceed an amount equal to two
hundred twenty-five percent (225%) of the sum of the net worth of the
companies, all as determined on a consolidated basis.
3B.03 WORKING CAPITAL -- Borrower will not suffer or permit the
companies' aggregate working capital at any time to fall below sixty
million dollars ($60,000,000).
3B.04 CURRENT RATIO -- Borrower will not suffer or permit the current
assets of the companies at any time to fall below an amount equal to one
and seven-tenths (1.7) times the amount of their current liabilities, all
as determined on a consolidated basis.
3B.05 FIXED CHARGE COVERAGE -- Borrower will not suffer or permit the
aggregate of
(a) the aggregate net income of the companies (EXCEPT
Borrower's equity in any income or loss of PTGI) plus
(b) the aggregate interest expense of the companies plus
(c) the aggregate federal, state and local income taxes of the
companies plus
(d) the aggregate operating lease expense of the companies
for any four-quarter period to be less than an amount equal to one
hundred eighty percent (180%) of the sum of
-2-
<PAGE> 3
(a) the aggregate interest expense of the companies plus
(b) the aggregate operating lease expense of the companies
for that four-quarter period, all as determined on a consolidated
basis.
4. Subsection 3D.01 of the Credit Agreement is hereby amended by replacing
the period at the end thereof with the word "or" and by adding to the end
thereof the following new clause (iii):
(iii) Borrower's investment in Pioneer-Standard Canada Inc. (exclusive
of retained earnings of Pioneer-Standard Canada Inc.) so long as the
aggregate amount of such investments does not exceed ten million eight
hundred thousand dollars ($10,800,000).
5. Subsection 3D.02 of the Credit Agreement is hereby amended by replacing
the period at the end thereof with the word "or" and by adding to the end
thereof the following new clause (v):
(v) any advance or loan to, or guaranty of the obligations of,
Pioneer-Standard Canada Inc., so long as the aggregate amount of all such
advances, loans and guaranties does not exceed eighteen million five
hundred thousand dollars ($18,500,000) at any one time.
6. The following new definition is hereby added to section 9 ofthe Credit
Agreement:
COMPANY refers to Borrower or to a subsidiary of Borrower, as the case
may be;
7. It is a condition of this Amendment that prior to or at the execution of
this Amendment Borrower shall have delivered, or caused to be delivered, to
NCB-Agent the following:
(a) a promissory note in favor of each bank, in the form of Exhibit B
to this Amendment, it being agreed that from and after the date of this
Amendment the form of promissory note attached hereto as Exhibit B shall be
deemed to be Exhibit B to the Credit Agreement; and
(b) a guaranty of Borrower's obligations under the Credit Agreement, in
form and substance satisfactory to banks, executed by Pioneer-Standard
Canada Inc.
8. Borrower hereby represents and warrants to cach of the other parties to this
Amendment that
(1) none of the representations and warranties made in subsections
4B.01 through 4B.08 of the Credit Agreement has ceased to be true and
complete in any material respect; and
(2) no "default under this Agreement" has occurred that is continuing.
-3-
<PAGE> 4
9. In all other respects the Credit Agreement and each of the related writings
shall remain in full effect and be unaffected hereby. Each reference to the
Credit Agreement (whether made in the Credit Agreement or any related writings
or elsewhere) shall hereafter be deemed to be a reference to the Credit
Agreement as amended hereby. This Amendment may be executed in counterparts,
each counterpart to be executed by one or more or all of the parties but
collectively to constitute but one agreement.
National City Bank, Agent Pioneer-Standard Electronics, Inc.
By: /s/ Phillip Marshall By: /s/ John V. Goodger
------------------------------ --------------------------------
Title: Asst. Vice President Title: Vice President, Treasurer
--------------------------- -----------------------------
National City Bank Star Bank, N.A.
By: /s/ Phillip Marshall By: John D. Barett
------------------------------ --------------------------------
Title: Asst. Vice President Title: Vice President
--------------------------- -----------------------------
Society National Bank
By: /s/
-----------------------------
Title: Vice President
--------------------------
- 4 -
<PAGE> 5
NOTE
----
$ _________________ Cleveland, Ohio ______________ , 1994
FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc.
(BORROWER), an Ohio corporation, promises to pay to the order of
_______________________ , at the main office of National City Bank (NCB),
Cleveland, Ohio, the principal sum of
____________________________________ DOLLARS
(or, if less, the aggregate unpaid principal balance from time to time
shown on the reverse side), together with interest computed in the manner
provided in the Credit Agreement referred to below, which principal and
interest is payable in accordance with provisions in the Credit Agreement.
This note is issued pursuant to an Agreement dated January 23, 1992, as amended
from time to time (as amended, the "Credit Agreement") by and among Borrower,
three banks and NCB (as agent of the banks for the purposes of the Credit
Agreement) which establishes "subject commitments" (one by each bank)
aggregating thirty-five million dollars ($35,000,000) pursuant to which
Borrower may obtain subject loans from the banks upon certain terms and
conditions.
Reference is made to the Credit Agreement for the definitions of certain terms,
for provisions governing the making of subject loans, the acceleration of the
maturity thereof, rights of prepayment, and for other provisions to which this
note is subject. Any endorsement by the payee on the reverse side of this note
(or any allonge thereto) shall be presumptive evidence of the data so endorsed.
Address: Pioneer-Standard Electronics, Inc.
4800 East 131st Street
Cleveland, Ohio 44105 By: _______________________________
EXHIBIT B
<PAGE> 1
Exhibit 10(e)
EXECUTION COPY
--------------
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC.
AND
JOHN V. GOODGER
May 20, 1994
<PAGE> 2
<TABLE>
Table of Contents
-----------------
<CAPTION>
Page
----
<S> <C> <C>
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Period of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Position, Duties, Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Compensation, Compensation Plans, Perquisites . . . . . . . . . . . . . . . . . . . . 2
5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Effect of Death or Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Amendment or Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 11
16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
17. Successors to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
AMENDED AND RESTATED EMPLOYMENT AGREEMENT between
PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and
JOHN V. GOODGER ("Goodger"), dated May ___, 1994, effective April 1, 1994.
W I T N E S S E T H:
WHEREAS: The Company and Goodger have given consideration to
an employment agreement providing for the services of Goodger as Vice
President, Treasurer and Assistant Secretary; and
WHEREAS: This agreement is deemed necessary at the present
time to meet the need for a continued strong management without substantial
change; and
WHEREAS: Together with other officers of the Company, Goodger
has been responsible for the success of the business of the Company;
NOW, THEREFORE, it is hereby agreed by and between the Company
and Goodger as follows:
1 . Employment
----------
The Company hereby agrees to continue to employ Goodger, and
Goodger hereby agrees to remain in the employ of the Company, for the period
set forth in Section 2 below (the "Period of Employment"), in the position and
with the duties and responsibilities set forth in Section 3 below, and upon the
other terms and conditions hereinafter stated.
2 . Period of Employment
--------------------
For the purposes of this Agreement, the Period of Employment,
subject only to the provisions of Section 6 below (relating to Death or
Disability), shall continue until termination of employment as set forth in
Section 7 (relating to Termination).
3 . Position, Duties, Responsibilities
----------------------------------
3.01 (a) During the Period of Employment, Goodger shall serve
as Vice President, Treasurer and Assistant Secretary of the Company reporting
to the Chairman of the Board of the Company and shall have the authority,
power, and duties with regard to his position as may from time to time be
assigned by the President, Chairman of the Board, or the Board of Directors of
the Company. His duties shall exclude the Company's affiliate, Pioneer/
Technologies Group, Inc. ("Technologies").
3.01 (b) At all times during the Period of Employment,
Goodger shall hold a position of responsibility and importance and a position
of scope, with the functions, duties and
<PAGE> 4
responsibilities attached thereto, at least equal in responsibility and
importance and in scope to and commensurate with his position on the date of
this Agreement described in general terms in paragraph 3.01(a) above.
3.02. Throughout the Period of Employment Goodger shall
devote his full time and undivided attention during normal business hours to
the business and affairs of the Company, except for reasonable vacations
afforded the Company's executive officers consistent with past practices and
except for illness or incapacity, but nothing in this Agreement shall preclude
Goodger from devoting reasonable time required for serving as a director or
member of an advisory committee of any organization involving no conflict of
interest with the interests of the Company, from engaging in charitable and
community activities, and from managing his personal investments, provided that
such activities do not materially interfere with the regular performance of his
duties and responsibilities under this Agreement.
3.03. Goodger's office shall be located at the corporate
offices of the Company in the Greater Cleveland Area, State of Ohio, and
Goodger shall not be required to locate his office elsewhere without his prior
written consent, nor shall he be required to be absent therefrom on travel
status or otherwise more than a total of sixty (60) days in any calendar year
nor more than fifteen (15) consecutive days at any one time.
4 . Compensation, Compensation Plans, Perquisites
----------------------------------------------
4.01 (a) For all services rendered by Goodger in any capacity
during the Period of Employment, Goodger shall be paid as compensation:
(i) A base salary, payable not less
often than monthly, at the rate of no less than $10,833 per month, with such
increases in such rate as shall be awarded from time to time in accordance with
the Company's regular administrative practices of salary increases applicable
to executives of the Company in effect on the date of this Agreement; and
(ii) A cash incentive bonus equal to the
product of 15/100 of 1% of the sum of the "actual operating income" of the
Company plus its equity earnings in profits/losses from Technologies,
multiplied by the ratio of the Company's "actual return on capital" to 22.0%,
or such equivalent successor bonus plan as may be adopted by the Company with
Goodger's written consent. The term "actual operating income" shall be defined
as the income before income tax (state and federal income tax), interest, and
the Company's equity earnings in profits/losses from Technologies. The term
"actual return on capital" shall be defined as the Company's "actual operating
income" divided by the sum of its interest-bearing debt, plus equity, less the
Company's equity investment in Technologies (the denominator shall be
calculated for each fiscal year as the average of such amounts as at the end of
-2-
<PAGE> 5
each of the Company's four (4) fiscal quarters). The Company shall calculate
and pay 75% of such bonus to Goodger at the end of each of the first three (3)
fiscal quarters. After April 1 and before June 16 of the next fiscal year, and
after audited financial statements are available to the Company, the Company
shall pay Goodger the balance of any bonus due Goodger based on the full year
calculation less payments made for the first three (3) fiscal quarters, which
payment shall be vested in the event of termination by reason of Death or
Disability (Section 6), Change of Control, (Section 7.02), or Without Cause
(Section 7.04), but shall be forfeited in the event of termination For Cause
or Voluntary Termination (Section 7.03).
(b) Any increase in salary or bonus or other
compensation shall in no way diminish any other obligation of the Company under
this Agreement, unless specifically agreed to in writing by Goodger.
4.02. During the Period of Employment Goodger shall be and
continue to be a full participant in the Company's Employees' Profit Sharing
Plan or any equivalent successor plan that may be adopted by the Company.
4.03. During the Period of Employment Goodger shall be
entitled to perquisites, including without limitation, an office, secretarial
and clerical staff, and to fringe benefits comparable to those enjoyed by the
other executive officers of the Company, but in each case at least equal to
those attached to his office on the date of this Agreement, as well as to
reimbursement, upon proper accounting, of reasonable expenses and disbursements
incurred by him in the course of his duties.
5 . Employee Benefit Plans
----------------------
5.01. The compensation, together with other matters provided
for in Section 4 above, is in addition to the benefits provided for in this
Section 5.
5.02. Goodger, his dependents, beneficiaries and estate shall
be entitled to all payments and benefits and service credit for benefits during
the Period of Employment to which executive officers of the Company, their
dependents and beneficiaries are entitled as the result of the employment of
such executive officers during the Period of Employment under the terms of
employee plans and practices of the Company, including, without limitation, the
Company's retirement program consisting of its Employees' Profit Sharing Plan,
its group life insurance plan, its accidental death and dismemberment
insurance, disability, medical and health and welfare plans, any key person
individual life and disability policies, automobile expense reimbursement, club
membership fees and dues, and other present or equivalent successor plans and
practices of the Company, its subsidiaries and divisions, for which officers,
their dependents and beneficiaries are eligible, and to all payments or other
benefits under any such plan or practice
-3-
<PAGE> 6
after the Period of Employment as a result of participation in such plan or
practice during the Period of Employment.
5.03. Goodger shall be eligible to participate in the
Company's 1991 Stock Option Plan (which, together with any successor stock
option plan or plans that may be adopted by the Company, is referred to herein
as the "Option Plan"). The Company has granted Goodger stock options
("Options") at an option price equal to the fair market value of the Company's
Common Shares at the date of grant. The terms and conditions of exercise of
Goodger's Options shall be as is set forth in Goodger's Stock Option Agreements
(the "Option Agreements") with the Company; provided, however, that in the
event of a Change in Control, as defined in paragraph 18.02 below, then
notwithstanding the provisions of said Option Agreements, all options
(including those granted to him under the 1982 Incentive Stock Option Plan)
shall immediately be 100% vested and Goodger shall have the immediate right of
exercise with respect to all Options and their underlying Common Shares covered
by said Option Agreements. In the event that Goodger's employment is
terminated as a result of a Change in Control, as defined in paragraph 18.02
below, Goodger shall have the period of one (1) year after the date of such
termination to exercise his Options or the remainder of the term of such
Options, whichever is shorter, and any such exercise shall be irrevocable.
6 . Effect of Death or Disability
-----------------------------
6.01. In the event of the death of Goodger during the Period
of Employment, the Period of Employment shall be deemed to have ended as of the
close of business on the last day of the month in which death shall have
occurred, and his legal representative shall be entitled to (i) the
compensation provided for in paragraph 4.01(a)(i) above for the month in which
death shall take place at the rate being paid at the time of death, (ii) any
cash bonus payable for the fiscal quarter in which the Period of Employment
shall be deemed to have terminated due to death, plus the balance of any bonus
due Goodger for any prior fiscal quarters in accordance with, and payable at
the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits
provided pursuant to paragraph 5.02 hereof which are payable pursuant to the
terms of the applicable plan or practice.
6.02 (a) The term "Disability," as used in this Agreement,
shall mean an illness or accident which prevents Goodger from performing his
duties under this Agreement for a period of three (3) consecutive months. The
Period of Employment shall be deemed to have ended as of the close of business
on the last day of such three (3) months' period but without prejudice to any
payments due Goodger in respect of disability.
(b) In the event of the Disability of Goodger
during the Period of Employment, Goodger shall be entitled to (i) the
compensation provided for in paragraph 4.01(a)(i) above, at the rate being paid
at the time of the commencement of Disability,
-4-
<PAGE> 7
for the period of such Disability but not in excess of three (3) months, (ii)
any cash bonus payable for the fiscal quarter in which the Period of Employment
shall be deemed to have terminated due to Disability, plus the balance of any
bonus due Goodger for any prior fiscal quarters in accordance with, and payable
at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits
provided pursuant to paragraph 5.02 hereof which are payable pursuant to the
terms of the applicable plan or practice.
(c) The amount of any payments due under this
paragraph 6.02 shall be reduced by any payments to which Goodger may be paid
for the same period under any disability plan of the Company or of any
subsidiary or affiliate thereof.
7. Termination
-----------
7.01. GENERAL. The Company may terminate Goodger with or
without cause at any time during the Period of Employment, subject to the
provisions of this Section 7.
7.02. CHANGE OF CONTROL. Within one (1) year of a Change of
Control of the Company, as defined in paragraph 18.02, Goodger shall have the
right to terminate his employment with the Company and there shall be paid or
provided to Goodger, his dependents, beneficiaries and estate, as liquidated
damages or severance pay, or both, the following:
(a) The compensation provided for in paragraph
4.01(a)(i) above for the month in which Termination shall have occurred at the
rate being paid at the time of Termination; and an amount equal to his previous
twenty four (24) months of base salary plus an amount equal to the incentive
cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2)
previously completed fiscal years. Such amount shall be paid to Goodger in one
payment, immediately upon Termination. Goodger shall also receive any cash
bonus payable for the fiscal quarter in which the Period of Employment shall be
deemed to have terminated due to Change of Control, plus the balance of any
bonus due Goodger for any prior fiscal quarters in accordance with, and payable
at the times set forth in, paragraph 4.01(a)(ii) above.
(b) For two (2) years following the date of
Termination, Goodger, his dependents, beneficiaries and estate, shall continue
to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which
are payable pursuant to the terms of the applicable plan or practice, and
service credit for benefits under all employee benefit plans of the Company,
including, without limitation, the Company's profit sharing plan referred to in
paragraph 5.02 above, upon the same basis as immediately prior to Termination
and, to the extent that such benefits or service credit for benefits shall not
be payable or provided under any such plans to Goodger, his dependents,
beneficiaries and estate, by reason of his no longer being an employee of the
Company as the result of Termination, or any such plan, program or arrangement
is
-5-
<PAGE> 8
discontinued or the benefits thereunder are materially reduced, the Company
shall itself arrange to provide benefits substantially similar to those which
Goodger, his dependents and beneficiaries were entitled to receive under such
plans, programs and arrangements immediately prior to termination to Goodger,
his dependents, beneficiaries and estate.
Any termination by the Company within the period of ninety
(90) days prior to the execution of a letter of intent or a definitive
agreement which could lead to a Change of Control and the closing of the
transaction actually resulting in the Change of Control, as defined in
paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02.
An election by Goodger to terminate his employment under the provisions of this
paragraph 7.02 shall not be deemed a Voluntary Termination of employment by
Goodger under paragraph 7.03 of this Agreement or any plan or practice of the
Company.
7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of
any provision of this Agreement, the termination of Goodger's employment shall
be deemed to have been For Cause only if:
(a) termination of his employment shall have been
the result of Goodger's conviction of any of the following: (i) embezzlement;
(ii) misappropriation of money or other property of the Company; or (iii) any
felony; or
(b) there has been a breach by Goodger during the
Period of Employment of the provisions of paragraph 3.02 above, relating to
devotion of full time to the affairs of the Company, Section 8 relating to
Competition, Section 9 relating to Confidential Information, or Section 10
relating to Noninterference, and such breach results in demonstrably material
injury to the Company, and with respect to any alleged breach of paragraph 3.02
hereof, Goodger shall have failed to remedy such proven breach within thirty
(30) days from his receipt of written notice from the Company.
If Goodger's employment is terminated by the Company For
Cause, or if Goodger shall Voluntarily Terminate his employment with the
Company, Goodger shall be entitled to the compensation provided for in
paragraph 4.01(a)(i) through the date of such termination. Goodger shall not
be entitled to any additional compensation or benefits (except for any vested
benefits), and shall continue to be bound by the provisions of Section 8 of
this Agreement (relating to Competition), the provisions of Section 9 of this
Agreement (relating to Confidential Information), and the provisions of Section
10 (relating to Noninterference).
7.04. WITHOUT CAUSE. Subject to compliance by Goodger with
the provisions of Section 8 of this Agreement (relating to Competition), the
provisions of Section 9 of this Agreement (relating to Confidential
Information), and the provisions of
-6-
<PAGE> 9
Section 10 of this Agreement (relating to Noninterference), if the Company
shall terminate Goodger's employment, Without Cause, there shall be paid or
provided to Goodger, his dependents, beneficiaries and estate, as liquidated
damages or severance pay, or both, the compensation provided for in paragraph
4.01(a)(i) above for the month in which termination shall have occurred at the
rate being paid at the time of such termination, and the amount (the "Payment
Amount") per month, which shall consist of 1/24th of the total of an amount
equal to his previous twenty-four (24) months of base salary plus an amount
equal to the incentive cash bonus referred to in paragraph 4.01(a)(ii) above
for the two (2) previously completed fiscal years. Such Payment Amount shall
be paid to Goodger or, in case of his prior death, to his legal representative,
in monthly installments at the end of each month commencing with the month next
following that in which such termination shall have occurred, and continuing
for a period of six (6) months. Goodger shall also receive any cash bonus
payable for the fiscal quarter in which the Period of Employment shall be
deemed to have terminated due to termination Without Cause, plus the balance of
any bonus due Goodger for any prior fiscal quarters in accordance with, and
payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any
benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant
to the terms of the applicable plan or practice. In the event the Company
fails to make such payments when due, then the remaining payments shall become
due and payable immediately.
7.05. ARBITRATION. In the event that Goodger's employment
shall be terminated by the Company during the Period of Employment or the
Company shall withhold payments or provision of benefits because Goodger is
alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this
Agreement or for any other reason, Goodger shall have the right, in addition to
all other rights and remedies provided by law, at his election either to seek
arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the
American Arbitration Association by serving a notice to arbitrate upon the
Company or to institute a judicial proceeding, in either case within one
hundred and twenty (120) days after having received notice of termination of
his employment or within such longer period as may reasonably be necessary for
Goodger to take action in the event that his illness or incapacity should
preclude his taking such action within such one hundred and twenty (120) day
period.
8. Competition
-----------
There shall be no obligation on the part of the Company to
make any further payments provided for in paragraph 7.04 above if Goodger
shall, during the six (6) months following termination of Goodger's employment
for any reason except Change of Control as described in paragraph 7.02, engage
in Competition with the Company as hereinafter defined. The word "Competition"
for purposes of this Section 8 and any other provision of this Agreement shall
mean taking any employment or consulting position with or control of one
-7-
<PAGE> 10
of the Company's top twenty-five (25) competitors as listed in the most current
issue at the date of termination of ELECTRONIC BUYER'S NEWS and/or ELECTRONIC
NEWS; provided, however, that in no event shall ownership of less than 5% of
the outstanding capital stock entitled to vote for the election of directors of
a corporation with a class of equity securities held of record by more than 500
persons be deemed Competition with the Company within the meaning of this
Section 8.
9 . Confidential Information
------------------------
9.01. Except for information which is already in the public
domain, or which is publicly disclosed by persons other than Goodger, or which
is required by law or court order to be disclosed, or information given to
Goodger by a third party not bound by any obligation of confidentiality,
Goodger shall at all times during and after his employment with the Company
hold in strictest confidence any and all confidential information within his
knowledge and which is material to the business of the Company (whether
acquired prior to or during his employment with the Company) concerning the
inventions, products, processes, methods of distribution, customers, services,
business, suppliers or trade secrets of the Company, except that Goodger may,
in connection with the performance of his duties to the Company, divulge
confidential information to the directors, officers, employees and shareholders
of the Company and to the advisors, accountants, attorneys or lenders of the
Company or such other individuals as deemed prudent in the course of business
to carry out the responsibilities and duties of his position. Such
confidential information includes, without limitation, financial information,
sales information, price lists, marketing data, the identity and lists of
actual and potential customers and technical information, all to the extent
that such information is not intended by the Company for public dissemination.
9.02. Goodger also agrees that upon leaving the Company's
employ he will not take with him, without the prior written consent of an
officer authorized to act in the matter by the Board of Directors of the
Company, any Company document, contract, internal financial or management
reports, customers list, product list, price list, catalog, employee list,
procedures, software, MIS data, drawing, blueprint, specification or other
document of the Company, its subsidiaries, affiliates and divisions, which is
of a confidential nature relating to the Company, its subsidiaries, affiliates
and divisions, or, without limitation, relating to its or their methods of
purchase or distribution, or any description of any trade secret, formulae or
secret processes.
10. Noninterference
---------------
Except for Change of Control as described in paragraph 7.02,
Goodger shall not, at any time during or within six (6) months after his
employment is terminated with the Company, without the prior written consent of
the Company, directly or indirectly, induce or attempt to induce any key
employee, key agent or other
-8-
<PAGE> 11
key representative or associate of the Company to terminate his or her
relationship with the Company, or in any way directly or indirectly interfere
with such a relationship or any relationship between the Company and any of its
top fifty (50) suppliers or top two hundred fifty (250) customers, both in
terms of the Company's sales volume, provided that purchasing goods from a
supplier to the Company or making a sale to any of the Company's customers
shall not be deemed to be interference.
11. Remedy
------
Goodger acknowledges that Sections 8, 9 and 10 hereof were
negotiated at arms length and are required for the fair and reasonable
protection of the Company. Goodger and the Company further acknowledge and
agree that a breach of those obligations and agreements will result in
irreparable and continuing damage to the Company for which there will be no
adequate remedy at law and, therefore, Goodger and the Company agree that in
the event of any breach of said obligations and agreements the Company, and its
successors and assigns, shall be entitled to injunctive relief and such other
and further relief, including monetary damages, as is proper in the
circumstances. It is further agreed that the running of the periods provided
above in Sections 8 and 10, shall be tolled during any period which Goodger
shall be adjudged to have been in violation of any of his obligations under
such Sections.
12. Withholding
-----------
Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to Goodger or his estate or
beneficiaries, shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other provisions to
the end that it has sufficient funds to pay all taxes required by law to be
withheld in respect of such payments or any of them.
13. Notices
-------
All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail or personally delivered to the party entitled thereto at the
address stated below or to such changed address as the addressee may have given
by a similar notice:
To the Company: Pioneer-Standard Electronics, Inc.
4800 East 131st Street
Cleveland, Ohio 44105
Attention: Secretary or
Assistant Secretary
-9-
<PAGE> 12
To Goodger: John V. Goodger
2996 Falmouth Road
Shaker Heights, Ohio 44122
14. General Provisions
------------------
14.01. There shall be no right of set-off or counter claim,
in respect any claim, debt or obligation, against payments to Goodger, his
dependents, beneficiaries or estate provided for in this Agreement.
14.02. No right or interest to or in any payments shall be
assignable by Goodger; provided, however, that this provision shall not
preclude him from designating one or more beneficiaries to receive any amount
that may be payable after his death and shall not preclude the legal
representative of his estate from assigning any right hereunder to the person
or persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to
his estate. The term "beneficiaries" as used in this Agreement shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of Goodger's
estate.
14.03. No right, benefit or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment, encumbrance, charge,
pledge, hypothecation, or set-off in respect of any claim, debt or obligation,
or to execution, attachment, levy or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any action
specified in the immediately preceding sentence shall, to the full extent
permitted by law, be null, void and of no effect.
14.04. In the event of Goodger's death or a judicial
determination of his incompetence, reference in this Agreement to Goodger shall
be deemed, where appropriate, to refer to his legal representative or, where
appropriate, to his beneficiary or beneficiaries.
14.05. The titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
14.06. This Agreement shall be binding upon and shall inure
to the benefit of (a) Goodger and, subject to the provisions of paragraphs
14.02 and 14.03, his heirs and legal representatives, and (b) the Company and
its successors as provided in Section 17 hereof.
-10-
<PAGE> 13
15. Amendment or Modification; Waiver
----------------------------------
No provision of this Agreement may be amended or waived unless
such amendment or waiver is authorized by the Board of Directors of the Company
or any authorized committee of the Board of Directors and is agreed to in
writing, signed by Goodger and by an officer of the Company thereunto duly
authorized by either the Board of Directors or the Compensation Committee.
Except as otherwise specifically provided in this Agreement, no waiver by
either party hereto of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any prior or
subsequent time.
16. Severability
------------
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions and portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
17. Successors to the Company
-------------------------
Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the Company and any successor of the
Company, including, without limitation, any corporation which acquires directly
or indirectly all or substantially all of the assets of the Company whether by
merger, consolidation, sale or otherwise (and such successor shall thereafter
be deemed "the Company" for the purposes of this Agreement), but shall not
otherwise be assignable by the Company.
18. Operation of Agreement
----------------------
18.01. This Agreement is effective as of April 1, 1994, and
supersedes the Amended and Restated Employment Agreement, dated June 23, 1993
and effective April 1, 1993, between Goodger and the Company.
18.02. For the purpose of this Agreement, the term "Change in
Control" of the Company shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement; provided that, without limitation, such a
change in control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d) (2) of the Securities
Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly,
of securities of the Company
-11-
<PAGE> 14
representing 20% or more of the combined voting power of the Company's then
outstanding securities or (b) during any period of twelve (12) consecutive
months, commencing before or after the date of this Agreement, individuals who,
at the beginning of such twelve (12) month period were directors of the Company
for whom Goodger, as a shareholder, shall have voted, cease for any reason to
constitute at least a majority of the Board of Directors of the Company.
19. Enforcement Costs
-----------------
The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause
or attempt to cause the Company to refuse to comply with its obligations under
this Agreement, or may cause or attempt to cause the Company to institute, or
may institute, litigation seeking to have this Agreement declared
unenforceable, or may take, or attempt to take, other action to deny Goodger
the benefits intended under this Agreement. In these circumstances, the
purpose of this Agreement could be frustrated. It is the intent of the Company
that Goodger not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from
the benefits intended to be extended to Goodger hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of incurring such
expenses. Accordingly, if following a Change in Control it should appear to
Goodger that the Company has failed to comply with any of its obligations under
this Agreement or in the event that the Company or any other person takes any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to recover from,
Goodger, or in the event the Company fails or refuses to comply with the
obligations under this Agreement, the benefits intended to be provided to
Goodger hereunder, and that Goodger has complied with all of his obligations
under this Agreement, the Company irrevocably authorizes Goodger from time to
time to retain counsel of his choice at the expense of the Company as provided
in this Section 19, to represent Goodger in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any Director, officer, shareholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to Goodger entering into an attorney-client relationship
with such counsel, and in that connection the Company and Goodger agree that a
confidential relationship shall exist between Goodger and such counsel. The
reasonable fees and expenses of counsel selected from time to time by Goodger
as hereinabove provided shall be paid or reimbursed to Goodger by the Company
on a regular, periodic basis upon presentation by Goodger of a statement or
-12-
<PAGE> 15
statements prepared by such counsel in accordance with its customary practices,
up to a maximum aggregate amount of $500,000.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ATTEST: PIONEER-STANDARD ELECTRONICS, INC.
/s/ Colleen M. Simon By /s/ Preston B. Heller
- - - --------------------------- -----------------------------
Preston B. Heller, Jr.
Chairman of the Board
ATTEST:
/s/ Beverly M. Fisher /s/ John V. Goodger
- - - --------------------------- -----------------------------
John V. Goodger
431/15154ELC.350
-13-
<PAGE> 1
EXHIBIT 10(h)
PIONEER-STANDARD ELECTRONICS, INC.
AMENDED AND RESTATED
1991 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The Plan is intended to provide a method of providing key employees of
Pioneer-Standard Electronics, Inc. (the "Company") and its subsidiaries with
greater incentive to serve and promote the interests of the Company and its
shareholders. The premise of the Plan is that, if such key employees acquire a
proprietary interest in the business of the Company or increase such
proprietary interest as they may already hold, then the incentive of such key
employees to work toward the Company's continued success will be commensurately
increased. Accordingly, the Company will, from time to time during the
effective period of the Plan, grant to such employees as may be selected to
participate in the Plan options to purchase Common Shares, without par value
("Shares"), of the Company on the terms and subject to the conditions set forth
in the Plan.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Executive Committee of the Board
of Directors or by such other Committee composed of no fewer than three (3)
disinterested members of the Board of Directors of the Company as may be
designated by the Board of Directors (the "Committee"), provided that the
Committee shall not include any person who has been granted or awarded equity
securities under the Plan or under any other plan of the Company entitling the
participants therein to acquire Shares or options to purchase Shares of the
Company at any time within the twelve (12) month period immediately preceding
the date on which such person becomes a member of the Committee. A majority of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by all of the members, shall be the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the employees
to be granted options under the Plan, (b) to determine the number of Shares
subject to each option, (c) to determine the time or times at which options
will be granted, (d) to determine the option price of the Shares subject to
each option, which price shall not be less than the minimum specified in
Section 6 of the Plan, (e) to determine the time or times when each option
becomes exercisable and the duration of the exercise period, (f) to prescribe
the form or forms of the agreements evidencing any options granted under the
Plan (which forms shall be consistent with the Plan), (g) to adopt, amend and
rescind such rules and regulations as, in the Committee's opinion, may be
advisable in the
<PAGE> 2
administration of the Plan, and (h) to construe and interpret the Plan, the
rules and regulations and the agreements evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken in good faith by
the Committee in connection with the administration, interpretation, and
implementation of the Plan and of its rules and regulations, shall, to the
extent permitted by law, be conclusive and binding upon all optionees under the
Plan and upon any person claiming under or through such an optionee, and no
member of the Board of Directors shall be liable for any such decision made or
action taken by the Committee.
3. SHARES AVAILABLE FOR OPTIONS
Subject to the provisions of Section 9 of the Plan, the aggregate
number of Shares for which options may be granted under the Plan shall not
exceed seven hundred fifty thousand (750,000).
The Shares to be delivered under exercise of options under the Plan
shall be made available, at the discretion of the Board of Directors, either
from the authorized but unissued Shares of the Company or from Shares held by
the Company as treasury shares, including Shares purchased in the open market.
If an option granted under the Plan shall expire or terminate
unexercised as to any Shares covered thereby, such Shares shall thereafter be
available for the granting of other options under the Plan.
Options granted under the Plan shall constitute either incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), hereinafter referred to as "incentive stock options", or
non-qualified stock options as the Committee shall determine with respect to
each option granted on or after such date.
4. ELIGIBILITY
Options will be granted only to persons who are employees of the
Company, of a subsidiary of the Company, or of the Company's fifty percent
(50%) - owned affiliate. The term "subsidiary" as used herein shall mean any
corporation, a majority of the stock of which having normal voting rights is
owned directly or indirectly by the Company. The term "employees" shall
include officers as well as all other employees of the Company and its
subsidiaries and shall include Directors who are also employees of the Company
or of a subsidiary of the Company. Neither the members of the Committee nor
any other member of the Board of Directors who is not an employee of the
Company (or of a subsidiary of the Company) shall be eligible to receive an
option under the Plan. Each grant of an option shall be evidenced by an
agreement executed on behalf of the
-2-
<PAGE> 3
Company by the Chairman of the Board or another executive officer and delivered
to and accepted by the optionee.
In selecting the persons to whom options shall be granted under the
Plan, as well as in determining the number of Shares subject to and the type
and terms and provisions of each option, the Committee shall weigh such factors
as it shall deem relevant to accomplish the purpose of the Plan, namely, to
enhance the incentive of those key employees of the Company and its
subsidiaries who exert authority over and are responsible for the management
and conduct of the Company's business. A person who has been granted an option
under the Plan may be granted an additional option or options if the Committee
shall so determine.
5. TERM OF OPTIONS
The full term of each option granted under the Plan shall be such
period as the Committee shall determine, but shall not be more than ten (10)
years from the date of granting thereof; provided, however, that if an employee
to whom an incentive stock option is granted is at the time of grant of the
incentive stock option an owner as defined in Section 425(d) of the Code of
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any subsidiary corporation (hereinafter referred to
as a "Substantial Shareholder") no incentive stock option granted to such an
employee shall be exercisable after the expiration of five (5) years from the
date of grant of such option.
Each option shall be subject to earlier termination as provided in
Paragraphs (c) and (d) of Section 8.
6. OPTION PRICE
The option price shall be determined by the Committee at the time any
option is granted but shall not be less than one hundred percent (100%) of the
fair market value of the Shares covered thereby at the time the option is
granted, such fair market value to be determined in accordance with procedures
to be established by the Committee; provided, however, that if an employee to
whom an incentive stock option is granted is at the time of the grant of the
incentive stock option a Substantial Shareholder, the option price shall be
determined by the Committee from time to time but shall never be less than one
hundred ten percent (110%) of the fair market value of the Company's Shares on
the date such option is granted.
7. NON-TRANSFERABILITY OF OPTION
No option granted under the Plan shall be transferable by the optionee
otherwise than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code; and such option may
be exercised during the
-3-
<PAGE> 4
optionee's lifetime only by the optionee or by his guardian or legal
representative.
8. EXERCISE OF OPTIONS
(a) Each option granted under the Plan shall be exercisable on
such date or dates and during such period and for such number of Shares as
shall be set forth in the agreement evidencing such option.
(b) A person electing to exercise an option shall give written
notice to the Company of such election and the number of Shares such person has
elected to purchase and shall, at the time of exercise, tender the full
purchase price of the Shares such person has elected to purchase. The purchase
price may be paid either in cash or in the Company's Shares (excluding
fractional shares), or a combination thereof; provided, however, that the
practice known as "Pyramiding", which involves successive option exercises
using Shares received from a preceding exercise to immediately exercise another
option and so on, shall not be permitted. Shares delivered in payment of the
purchase price shall be valued at the fair market value of such Shares on the
date immediately preceeding the exercise of the option. Until such person has
been issued a certificate or certificates for the Shares so purchased, such
person shall possess no rights of a record holder with respect to any such
Shares.
(c) No option shall be affected by any change of duties or
position of the optionee (including transfer to or from a subsidiary), so long
as such optionee continues to be an employee of the Company or one of its
subsidiaries. If an optionee shall cease to be an employee for any reason
other than death, the options held by such optionee shall thereafter be
exercisable only to the extent of the purchase rights, if any, which had
accrued as of the date of such cessation, provided that the Committee may
provide in the agreement evidencing any option that the Committee may in its
absolute discretion, upon any such cessation of employment, determine (but
shall be under no obligation to determine) that such accrued purchase rights
shall be deemed to include additional Shares covered by such option. Upon any
such cessation of employment, such accrued rights to purchase shall in any
event terminate upon the earlier of (A) the expiration of the full term of the
option or (B) the expiration of thirty (30) days from the date of such
cessation of employment if by reason of discharge or if by reason of voluntary
quit. The agreements evidencing options granted under the Plan may contain
such provisions as the Committee shall approve with reference to the effect of
approved leaves of absence. Nothing in the Plan or in any option granted
hereunder shall confer upon any optionee any right to continue in the employ of
the Company or any of its subsidiaries, or to limit or interfere in any way
with the right of the Company or its subsidiaries to terminate such optionee's
employment at any time, with or without cause.
-4-
<PAGE> 5
(d) Should an optionee die while in the employ of the Company or
one of its subsidiaries or within thirty (30) days after cessation of such
employment, such person as shall have acquired, by will or by the laws of
descent and distribution (the "personal representative"), the right to exercise
any option theretofore granted such optionee may, in either case, exercise such
option at any time prior to expiration of its full term or one (1) year from
the date of death of the optionee, whichever is earlier, provided that any such
exercise shall be limited to the purchase rights which had accrued as of the
date when the optionee ceased to be an employee, whether by death or otherwise,
and provided further, however, that the Committee may provide in the agreement
evidencing any option that all Shares covered by such option shall become
subject to purchase immediately upon the death of the optionee.
(e) In the case of incentive stock options, the aggregate fair
market value (determined as of the date the option is granted) of the Shares
with respect to which options are exercisable for the first time by any
individual during any calendar year (under this Plan and all such plans of the
Company and any parent or subsidiary corporation) shall not exceed $100,000.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event of any change in the number of outstanding Shares through
the declaration of share dividends, share splits, or consolidations, through
recapitalizations, or by reason of any other increase or decrease in the number
of outstanding Shares effected without receipt of consideration by the Company,
the number of Shares available and reserved for options which may thereafter be
granted, the number of Shares reserved for and subject to any options
outstanding but unexercised, and the price per share payable on the exercise of
any options outstanding but unexercised, shall be adjusted as the Committee
considers appropriate, and all such adjustments by the Committee shall be
conclusive and binding upon all optionees under the Plan and upon any person
claiming under or through such an optionee.
10. ISSUANCE OF SUBSTITUTE OPTIONS
The Committee may also make a determination, subject to approval and
authorization by the Board of Directors, to issue options having terms and
provisions which vary from those specified herein, provided that any options
issued pursuant to this Section are issued in substitution for, or in
connection with the assumption of, existing options issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation in which the Company or a subsidiary is a party.
-5-
<PAGE> 6
11. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN
The Board of Directors may at any time terminate or from time to time
amend or suspend the Plan; provided, however, that no such amendment shall,
without approval of the shareholders of the Company, except as provided in
Section 9 hereof, (a) increase the aggregate number of Shares as to which
options may be granted under the Plan; (b) change the minimum option exercise
price; (c) increase the maximum period during which options may be exercised;
(d) extend the effective period of the Plan; (e) modify the requirements for
participation in the Plan; or (f) permit the granting of options to members of
the Committee. No option may be granted during any suspension of the Plan or
after the Plan has been terminated and no amendment, suspension or termination
shall, without the optionee's consent, alter or impair any of the rights or
obligations under any option theretofore granted to such person under the Plan.
12. EFFECTIVE DATE AND DURATION OF PLAN
This Plan shall become effective upon its approval by the affirmative
vote of the holders of a majority of the outstanding Shares present in person
or by proxy and entitled to vote on this Plan at the Annual Meeting of the
Shareholders of the Company on July 23, 1991, or any adjournment thereof. No
options may be granted under this Plan subsequent to July 22, 2001.
431/15154HDA.354
-6-
<PAGE> 1
<TABLE>
Exhibit 11
PIONEER-STANDARD ELECTRONICS, INC.
CALCULATION OF EARNINGS PER SHARE
Years Ended March 31, 1994, 1993, and 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Primary
Weighted average Common
Shares and Common
Share equivalents
outstanding 10,078,682 9,188,512 8,204,623
Net income $19,676,000 $12,913,000 $5,327,000
=========== =========== ==========
Earings per share $1.95 $1.41 $.65
===== ====
Fully diluted
Weighted average Common
Shares and Common
Share equivalents
outstanding 10,112,512 9,221,018 8,279,137
Assumed conversion of 9%
convertible debentures -- 756,651 1,636,775
----------- ----------- ----------
Total 10,112,592 9,977,669 9,915,912
=========== =========== ==========
Net income $19,676,000 $12,913,000 $5,327,000
Add 9% convertible
debenture interest,
net of federal income
tax effect -- 399,000 865,000
----------- ----------- ----------
Total net income as
adjusted $19,676,000 $13,312,000 $6,192,000
=========== =========== ==========
Earnings per share $1.95 $1.33 $.63
===== ===== ====
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Pioneer-Standard Canada Inc.
<PAGE> 1
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Pioneer-Standard Electronics, Inc. of our report dated May 4, 1994 included
in the 1994 Annual Report to Shareholders of Pioneer-Standard Electronics, Inc.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the
1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and in
the related Prospectuses and in the Registration Statement (Form S-8 No.
33-18790) pertaining to the 1982 Incentive Stock Option Plan of
Pioneer-Standard Electronics, Inc. and in the related Prospectus of our reports
dated May 4, 1994 with respect to the financial statements and schedules of
Pioneer-Standard Electronics, Inc. incorporated by reference and included in
this Annual Report (Form 10-K) for the year ended March 31, 1994.
ERNST & YOUNG
Cleveland, Ohio
June 27, 1994
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the 1991
Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and (Form S-8
No. 33-18790) pertaining to the 1982 Incentive Stock Option Plan of
Pioneer-Standard Electronics, Inc., of our report dated April 29, 1994 with
respect to the financial statements and schedules of Pioneer Technologies
Group, Inc. included in this Annual Report (Form 10-K) for the year ended March
31, 1994.
ERNST & YOUNG
Washington, DC
June 23, 1994
<PAGE> 1
<TABLE>
Exhibit 99(a)
ACORD CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY)
PRODUCER 5093 / / 6-JUN-1994
Willis Corroon Corporation of Northern Ohio, Inc.
1700 Bond Court Building
1300 East Ninth Street
Cleveland OH 44114-1503
(216) 861-9100
Contact: Linda M. Dowdy
INSURED
Pioneer Standard Electronics, Inc.
4800 East 131st Street
Cleveland OH 44105
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES
NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
COMPANIES AFFORDING COVERAGE
COMPANY
LETTER A Federal Insurance Company
COMPANY
LETTER B Any person who, with intent to defraud or
knowing that he is faclitating a fraud against an
COMPANY insurer, submits an application or files a claim
LETTER C containing a false or deceptive statement is
guilty of insurance fraud.
COMPANY
LETTER D
COMPANY
LETTER E
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
<CAPTION>
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
<S> <C> <C> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY GENERAL AGGREGATE $
PRODUCTS-COMP/OP AGG. $
/ / COMMERCIAL GENERAL LIABILITY PERSONAL & ADV. INJURY $
/// / / CLAIMS MADE / / OCCUR. EACH OCCURENCE $
/ / OWNER'S & CONTRACTOR'S PROT. FIRE DAMAGE (Any one fire) $
/ / _____________________________ MED. EXPENSE (Any one person) $
- - - ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT $
/ / ANY AUTO BODILY INJURY (Per person) $
/ / ALL OWNED AUTOS
/ / SCHEDULED AUTOS BODILY INJURY (Per accident) $
/ / HIRED AUTOS
/ / NON-OWNED AUTOS PROPERTY DAMAGE $
/ / GARAGE LIABILITY
/ /
- - - ------------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURENCE $
/ / UMBRELLA FORM AGGREGATE $
/ / OTHER THAN UMBRELLA FORM //////////////////////////////////
- - - ------------------------------------------------------------------------------------------------------------------------------------
WORKER'S COMPENSATION / / STATUTORY LIMITS ////
AND EACH ACCIDENT $
EMPLOYER'S LIABILITY DISEASE-POLICY LIMIT $
DISEASE-EACH EMPLOYEE $
- - - ------------------------------------------------------------------------------------------------------------------------------------
OTHER Directors & Officers Liab.
A Executive Risk 8102-64-55F 01-NOV-1993 01-NOV-1994 $10,000,000. Each Loss
$10,000,000. Ea. Policy Year
- - - ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Deductible - $250,000. Insured Organization
- - - ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30
DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT
FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF
ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESNETATIVES.
_________________________________________________________________________
AUTHORIZED REPRESENTATIVE Willis Corroon Corp. of N. Ohio
By: /s/ Linda Dowdy
ACORD 25-S (7/90) (C) ACORD CORPORATION 1990
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99(b)
SECOND AMENDMENT TO INDEMNIFICATION AGREEMENT
---------------------------------------------
THIS SECOND AMENDMENT is made and entered into on this _____
day of __________, 1994 at Cleveland, Ohio, by and between PIONEER-STANDARD
ELECTRONICS, INC., an Ohio corporation ("Corporation"), and _______________
("Officer").
WITNESSETH THAT:
WHEREAS, Officer is an executive officer of Corporation and in
such capacity is performing a valuable service for Corporation and its
shareholders; and
WHEREAS, Corporation and Officer entered into a certain
Indemnification Agreement, dated as of _________ __, 199_, as amended on July
24, 1990 (the "Indemnification Agreement"); and
WHEREAS, it is the desire of Corporation and Officer to amend
the Indemnification Agreement in accordance with the terms hereof (the "Second
Amendment"); and
WHEREAS, on January 25, 1994, the Board of Directors of
Corporation approved in good faith the Second Amendment in accordance with the
requirements of paragraph 14(c) of the Indemnification Agreement; and
WHEREAS, since the Board of Directors of Corporation approved
in good faith the Second Amendment, paragraph 14(c) of the Indemnification
Agreement sets forth that the Second Amendment need not be submitted to the
shareholders for subsequent approval or ratification; and
WHEREAS, paragraph 14(c) of the Indemnification Agreement also
requires that any Amendment to the Indemnification Agreement be in writing and
properly executed;
NOW, THEREFORE, in consideration of the premises and the
mutual understandings of the parties, IT IS AGREED, as follows:
1. Section 1 of the Indemnification Agreement shall be deleted in
its entirety and replaced as follows:
1. INDEMNITY OF OFFICER. Corporation hereby
agrees to indemnify and hold harmless Officer from loss or
liability, including any and all fees and expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid
in settlement actually and reasonably incurred by Officer or
his or her spouse in connection with any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise
(including specifically an action by or in the right of the
Corporation) to which Officer is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the
fact that Officer is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was
serving or at any time serves at the request of Corporation as
a director, officer, employee, trustee, or agent of another
corporation, partnership, joint venture, trust or other
enterprise, to the maximum extent now authorized or permitted
by the provisions of the Regulations and
<PAGE> 2
Ohio Statute, or by any subsequent amendment(s) thereto or
other Regulations or statutory provisions authorizing or
permitting such indemnification which are adopted after the
date hereof by the shareholders of the Corporation or the
State of Ohio, respectively. It is the intent of this
Agreement that the Officer shall be fully and completely
indemnified by either the Corporation or the D&O Insurance (or
a combination thereof) to the absolute maximum permitted by
law and except to the extent absolutely prohibited by law on
the grounds of illegality as finally determined by a court of
competent jurisdiction after all presumptions are made in
favor of the Officer and from which no appeal is or can be
taken by Officer.
2. Section 3 of the Indemnification Agreement shall be deleted in
its entirety and replaced as follows:
3. ADDITIONAL INDEMNITY. "Loss to or liability
of Officer" as used in this Agreement shall include any and
all fees and expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement actually and
reasonably incurred by Officer or his or her spouse in
connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (including specifically an action
by or in the right of the Corporation) to which Officer is,
was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Officer is, was or at
any time becomes a director, officer, employee or agent of
Corporation, or is or was serving or at any time serves at the
request of Corporation as a director, officer, employee,
trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise.
3. EFFECTIVE DATE. The effective date of this Second Amendment
shall be ______________ __, 1994.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to the Indemnification Agreement on the date and at the place first
above written.
ATTEST: PIONEER-STANDARD ELECTRONICS, INC.
_______________________________ By:_____________________________
ATTEST:
________________________________ _____________________________
431/15154FUB.418
-2-
<PAGE> 3
EXHIBIT 99(b)
SECOND AMENDMENT TO INDEMNIFICATION AGREEMENT
---------------------------------------------
THIS SECOND AMENDMENT is made and entered into on this _____
day of __________, 1994 at Cleveland, Ohio, by and between PIONEER-STANDARD
ELECTRONICS, INC., an Ohio corporation ("Corporation"), and _______________
("Director").
WITNESSETH THAT:
WHEREAS, Director is a member of the Board of Directors of
Corporation and in such capacity is performing a valuable service for
Corporation and its shareholders; and
WHEREAS, Corporation and Director entered into a certain
Indemnification Agreement, dated as of _________ __, 199_, as amended on July
24, 1990 (the "Indemnification Agreement"); and
WHEREAS, it is the desire of Corporation and Director to amend
the Indemnification Agreement in accordance with the terms hereof (the "Second
Amendment"); and
WHEREAS, on January 25, 1994, the Board of Directors of
Corporation approved in good faith the Second Amendment in accordance with the
requirements of paragraph 14(c) of the Indemnification Agreement; and
WHEREAS, since the Board of Directors of Corporation approved
in good faith the Second Amendment, paragraph 14(c) of the Indemnification
Agreement sets forth that the Second Amendment need not be submitted to the
shareholders for subsequent approval or ratification; and
WHEREAS, paragraph 14(c) of the Indemnification Agreement also
requires that any Amendment to the Indemnification Agreement be in writing and
properly executed;
NOW, THEREFORE, in consideration of the premises and the
mutual understandings of the parties, IT IS AGREED, as follows:
1. Section 1 of the Indemnification Agreement shall be deleted in
its entirety and replaced as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby
agrees to indemnify and hold harmless Director from loss or
liability, including any and all fees and expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid
in settlement actually and reasonably incurred by Director or
his or her spouse in connection with any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise
(including specifically an action by or in the right of the
Corporation) to which Director is, was or at any time becomes
a party, or is threatened to be made a party, by reason of the
fact that Director is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was
serving or at any time serves at the request of Corporation as
a director, officer, employee, trustee, or agent of another
corporation, partnership, joint venture, trust or other
enterprise, to the maximum extent now authorized or permitted
by the provisions of the Regulations and
<PAGE> 4
Ohio Statute, or by any subsequent amendment(s) thereto or
other Regulations or statutory provisions authorizing or
permitting such indemnification which are adopted after the
date hereof by the shareholders of the Corporation or the
State of Ohio, respectively. It is the intent of this
Agreement that the Director shall be fully and completely
indemnified by either the Corporation or the D&O Insurance (or
a combination thereof) to the absolute maximum permitted by
law and except to the extent absolutely prohibited by law on
the grounds of illegality as finally determined by a court of
competent jurisdiction after all presumptions are made in
favor of the Director and from which no appeal is or can be
taken by Director.
2. Section 3 of the Indemnification Agreement shall be deleted in
its entirety and replaced as follows:
3. ADDITIONAL INDEMNITY. "Loss to or liability
of Director" as used in this Agreement shall include any and
all fees and expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement actually and
reasonably incurred by Director or his or her spouse in
connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (including specifically an action
by or in the right of the Corporation) to which Director is,
was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Director is, was or
at any time becomes a director, officer, employee or agent of
Corporation, or is or was serving or at any time serves at the
request of Corporation as a director, officer, employee,
trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise.
3. EFFECTIVE DATE. The effective date of this Second Amendment
shall be ______________ __, 1994.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to the Indemnification Agreement on the date and at the place first
above written.
ATTEST: PIONEER-STANDARD ELECTRONICS, INC.
_______________________________ By:______________________________
ATTEST:
________________________________ ______________________________
431/15154FVA.418
-2-
<PAGE> 1
Exhibit 99(c)
DIVIDEND INFORMATION AND PRICE RANGE OF COMMON SHARES
- - - ------------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
<CAPTION>
==============================================================================
Fiscal Year First Second Third Fourth
Ending March 31 Quarter Quarter Quarter Quarter Year
- - - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
High $17.75 $24.00 $24.75 $28.25 $28.25
Low 12.00 16.75 18.75 18.50 12.00
Dividends paid .03 .03 .035 .035 .13
- - - ------------------------------------------------------------------------------
1993
High $8.33 $12.67 $18.17 $20.00 $20.00
Low 7.00 7.33 11.33 14.50 7.00
Dividends paid .027 .027 .027 .03 .11
- - - ------------------------------------------------------------------------------
</TABLE>
As of April 6, 1994 there were 9,912,906 Common Shares of Pioneer-Standard
Electronics, Inc. outstanding, and there were 535 shareholders of record.
The market price of Pioneer-Standard Electronics, Inc. Common Shares at the
close of business May 20, 1994 was $24.375.
See Note 3 for information regarding dividend restrictions.
<PAGE> 1
Exhibit 99(d)
SUMMARY OF OPERATIONS/FISCAL YEARS ENDED MARCH 31
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
===========================================================================================================================
For the Year 1994 1993 1992 1991 1990
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Combined Sales
(Pioneer-Standard Electronics, Inc. and
Pioneer Technologies Group, Inc.) $ 1,002,758 $ 714,021 $ 552,294 $ 501,834 $ 473,850
Pioneer-Standard Electronics, Inc.
Net Sales 580,757 430,013 362,386 345,064 319,908
Interest Expense 2,687 3,581 4,505 4,748 4,946
Income from Continuing Operations before
Income Taxes and Equity in Earnings of
Pioneer Technologies Group, Inc. 28,702 17,480 7,888 12,673 9,025
Equity in Earnings of Pioneer Technologies
Group, Inc. 3,001 2,505 654 703 490
Income Taxes 12,027 7,072 3,215 5,084 3,771
lncome from Continuing Operations 19,676 12,913 5,327 8,292 5,744
Net Income* 19,676 12,913 5,327 8,292 5,744
- - - ---------------------------------------------------------------------------------------------------------------------------
Year-End Position
Accounts Receivable 81,155 62,347 50,004 51,378 51,256
Inventory 85,754 67,101 60,983 56,981 56,786
Working Capital 85,132 70,781 69,325 66,553 64,399
Net Property and Equipment 25,572 23,159 23,579 22,534 21,329
Total Assets* 220,039 171,860 150,871 146,348 145,006
Long-Term Debt* 22,272 21,328 44,717 44,306 49,374
Shareholders' Equity* 102,740 84,117 57,455 52,855 44,795
Weighted Average Shares Outstanding 10,078,682 9,188,512 8,204,623 8,122,585 8,102,898
Average Number of Employees 1,003 940 937 917 906
- - - ---------------------------------------------------------------------------------------------------------------------------
Per Share Data
Income Per Share from Continuing Operations 1.95 1.41 .65 1.02 .71
Net Income Per Share* 1.95 1.41 .65 1.02 .71
Cash Dividends Paid Per Share* .13 .11 .107 .10 .093
Shareholders' Equity Per Share* 10.36 8.59 7.00 6.45 5.53
Price Range of Common Shares*
High 28.25 20.00 11.83 10.33 7.00
Low 12.00 7.00 6.67 4.83 4.75
- - - ---------------------------------------------------------------------------------------------------------------------------
Measurement Data
Gross Margin Percent of Sales 19.8 21.7 21.4 22.5 22.7
Income from Continuing Operations Percent
of Sales 3.4 3.0 1.5 2.4 1.8
Net Income Percent of Average Shareholders' Equity 21.1 18.2 9.7 17.0 13.6
Sales Per Employee 579 457 387 376 353
Accounts Receivable Days Outstanding at Year-End 43 45 47 50 48
Turns on Annual Average Inventory 6.1 5.3 4.8 4.7 4.2
Interest Bearing Debt Percent of Equity Plus Debt* 21.0 22.3 46.4 45.9 54.6
- - - ---------------------------------------------------------------------------------------------------------------------------
<F/N>
Notes:
*All data are for continuing operations unless marked with an asterisk.
1 Price range covers the period when the stock was first publicly traded, January 7, 1971 through March 31, 1972.
</TABLE>
<PAGE> 1
Exhibit (99e)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- - - -------------------------------------------------------------------------------
COMBINED SALES UP 40 PERCENT
Combined sales of Pioneer-Standard and
its 50%-owned affiliate, Pioneer Technol-
ogies Group, Inc., rose to a record $1.0
billion, 40 percent above the $714.0 million
of 1993 which in turn was 29 percent above
the $552.3 million of 1992. Pioneer Tech-
nologies sales are combined with those of
Pioneer-Standard for industry ranking pur-
poses only. Combined sales of the Company
and its affiliate ranked third in the industry
in calendar 1993, up from fourth in 1992
and fifth in 1991. This was accomplished en-
tirely by internal growth, there were no
acquisitions.
Sales of the Company and its affiliate in
both fiscal 1994 and 1993 benefited from the
strong demand for electronic components and
computer products. The combined companies
realized significant gains in market share in
each of the two years. Combined calendar
1993 sales represented 7.3 percent of the
$12.95 billion North American industrial
electronics market, up from 6.6 percent in
1992 which was up from 5.8 percent in 1991.
<PAGE> 2
The sales performance of the Company
and its affiliate in 1994 and 1993 reflected a
number of positive factors including geo-
graphical expansion, emphasis on technical
support of customers, focus on customer ser-
vice and adding value, marketing products
from the nation's leading electronic manufac-
turers and beneficial effects of FutureStart,
the Company's total quality management in-
itiative. Also evidence of the Company's pro-
gress, Pioneer-Standard received International
Organization for Standardization (ISO) 9002
Certification in July, 1993.
PIONEER-STANDARD SALES
UP 35 PERCENT
Fiscal 1994 was the eighth consecutive
year of record Pioneer-Standard sales and the
22nd year in the 23 years the Company has
been public that sales increased. The year's
sales were $580.8 million, up 35 percent
from $430.0 million in 1993 and 60 percent
above $362.4 million in 1992.
All three of the Company's major prod-
uct categories contributed to sales growth this
past year. During 1994, semiconductor pro-
ducts accounted for 41 percent of Pioneer-
Standard's sales. This compares to 37
percent and 36 percent in 1993 and I992,
respectively. Computer systems products
comprised 33 percent of fiscal 1994 sales
compared with 39 percent in 1993 and 42
percent in 1992. Passive and electro-
mechanical products were 24 percent of
Pioneer-Standard's fiscal 1994 sales, 21
percent in 1993 and 19 percent in 1992.
Miscellaneous products accounted for 2 per-
cent in 1994 and 3 percent in 1993 and 1992.
The 1994 gross margin was 19.8 percent
compared to 21.7 percent in 1993 and 21.4
percent in 1992. A principal reason for the
reduced gross margin percent in 1994 is
attributable to a change in product mix, par-
ticularly with respect to the increase in sales
volume of microprocessors earning a rela-
tively low gross profit margin and which are
marketed through an efficient low cost sales
channel. During this past year, computer
system products had the highest line item
value and passive and electromechanical pro-
ducts had the lowest average line item value,
with the gross margin percent of passives
<PAGE> 3
being the higher of these two products. The
gross margin percent of the semiconductor
products was below that of the other two
categories primarily due to the effect of the
microprocessor sales described above.
Pioneer Technologies sales for fiscal
1994 were a record $422.0 million, up from
$284.0 million in 1993 and $189.9 million
in 1992. The sales increase in 1994 was par-
tially attributable to highly concentrated sales
of certain microprocessors in large quantities,
the sales of which might not be sustainable in
future periods and the effect of which could
result in a significant impact on net income
of the affiliate. In 1993, microprocessor sales
represented a major factor in the affiliate's
growth, representing a significant portion of
that year's sales increase.
<PAGE> 4
OPERATING EFFICIENCIES CONTRIBUTE
As was the case in fiscal 1993, Pioneer-
Standard's operating profit in 1994 increased
at rates greater than sales. Operating profit
amounted to $31.4 million, 49 percent ahead
of the $21.1 million of fiscal 1993 which
was 70 percent greater than the $12.4 million
of 1992.
The increased operating profit is directly
attributable to operating efficiencies. Ware-
house, selling and administrative expenses in
1994 were 14.4 percent of sales, down
substantially from the 16.8 percent of 1993
or the 18.0 percent of 1992. The improve-
ments in 1994 and 1993 reflect to some
extent the greater sales volume, and to a
larger extent the many efficiencies promul-
gated through FutureStart, the Company's
total quality management initiative. Operating
expenses in all three years included outlays
for geographic expansion of sales operations.
Sales per employee rose to a record
$579,000, up from $457,000 in 1993 and
$387,000 in 1992. Turns on annual average
inventory were 6.1. This compares to 5.3 in
1993, 4.8 in 1992 and 3.9 as recently as five
years ago.
The gain resulting from operating effi-
ciencies more than offset the effect of
reduced gross profit margins. Operating
profit amounted to $31.4 million, or 5.4 per-
cent of net sales in 1994 compared with 4.9
percent in 1993 and 3.4 percent in 1992.
The Company benefited in both 1994
and 1993 from lower interest expense. This
in large measure reflects the retirement in the
second quarter of fiscal 1993 of the 9%
Subordinated Convertible Debentures in the
principal amount of $15.2 million, of which
$14.3 million was converted to shareholders'
<PAGE> 5
equity. Interest expense totaled $2,687,000
in 1994, $3,581,000 in 1993 and $4,505,000
in 1992.
The Company's equity interest in the net
income of its 50%-owned affiliate, Pioneer
Technologies, was $3,001,000 in fiscal 1994.
This compares to $2,505,000 in 1993 and
$654,000 in 1992.
The Company adopted Financial
Accounting Standard No. 109 (FAS 109),
"Accounting for Income Taxes," in the first
quarter of fiscal 1994. Adoption of this Stan-
dard was not material to quarterly or annual
results. See Footnote 1 for additional infor-
mation. The increase in the effective tax rate
from 35.4 percent a year ago to 37.9 percent
in 1994 is primarily attributable to a 1.0%
increase in the statutory rate and the accrual
of taxes on the Company's unremitted earn-
ings of its affiliate as required by FAS 109.
Primarily due to the factors outlined
above, fiscal 1994 net income was a record
$19.7 million, up 52 percent from $12.9
million of 1993 which was 142 percent
greater than the $5.3 million earned in 1992.
Earnings per share were a record $1.95,
and compare with fully diluted $1.33 per
share in 1993 and 63 cents fully diluted in
1992.
Inflation has had little effect on the
Company's operations.
The Company extends credit based on an
evaluation of customers' financial condition,
and generally collateral is not required.
Credit losses are provided for in the financial
statements when collectibility is in doubt.
<PAGE> 6
CAPITAL AND LIQUIDITY
Pioneer-Standard has a strong financial
position with excellent liquidity. Current
assets at fiscal 1994 year-end were $178.2
million, 1.9 times current liabilities. Of
significance, the sales have increased 92
percent in the past five years with only a
17 percent increase in working capital
requirements.
Reflective of sales and earnings progress,
the Company increased the annual dividend
rate from 12 cents per share to 14 cents per
share, a 17 percent increase during the past
year. This marks the sixth consecutive year
of a dividend increase and the 18th increase
in the 23 years the Company's stock has
been publicly traded.
The Company also has invested in pro-
grams designed to stimulate and support
future growth. Capital expenditures were
$7,626,000 in 1994, $4,160,000 in 1993 and
$5,110,000 in 1992. The Company plans to
incur approximately $9,950,000 of capital
expenditures in 1995. Prior year expenditures
and those planned for 1995 relate to ongoing
initiatives designed to improve efficiencies
through computer enhancement of operating
processes as well as meeting normal expan-
sion needs of the business.
In addition to excellent liquidity, the
Company has available credit facilities to fi-
nance its growth. The Company has a $30.0
million unsecured revolving credit facility,
$26.0 million of which was available for use
as of March 31, 1994. The revolving credit
facility capacity was subsequently increased
to $35.0 million on May 27, 1994. Addition-
ally, the Company has unsecured short-term
lines of credit available whereby a maximum
of $15.0 million may be borrowed at any
one time. At year-end 1994, borrowings pur-
suant to these lines totaled $2,000,000.
In April 1994, the Company entered into
a purchase agreement with United Westburne
Inc. to acquire certain assets and to assume
certain liabilities of Zentronics, the Canadian
electronics distribution division of West-
burne. The asset acquisition was completed
on June 1, 1994 for approximately $12
million. Zentronics had annual sales of ap-
proximately $71.0 million (Cdn.) or $54.0
million (U.S.).
Considering the available credit lines and
funds derived from current operations plus
the financing flexibility provided by the
conservative debt to capitalization ratio of 21
percent, the Company has alternative re-
sources available to finance its growth needs.
<PAGE> 1
Exhibit 99(f)
PIONEER-STANDARD ELECTRONICS, INC.
FINANCIAL STATEMENTS AND SCHEDULES
PIONEER-TECHNOLOGIES GROUP, INC.
FINANCIAL STATEMENTS AND SCHEDULES
1
<PAGE> 2
BALANCE SHEETS
- - - --------------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
<CAPTION>
MARCH 31, 1994 AND 1993
- - - --------------------------------------------------------------------------------------------------------
ASSETS 1994 1993
- - - --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 5,954,000 $ 1,864,000
Accounts receivable, less allowance for doubtful accounts
(1994-$2,869,000, 1993-$1,713,000) 81,155,000 62,347,000
Merchandise inventory 85,754,000 67,101,000
Prepaid expenses 919,000 773,000
Deferred income taxes 4,391,000 3,471,000
- - - --------------------------------------------------------------------------------------------------------
Total current assets 178,173,000 135,556,000
INVESTMENT AND OTHER ASSETS:
Investment in 50%-owned company 14,463,000 11,462,000
Other assets 1,831,000 1,683,000
PROPERTY AND EQUIPMENT, AT COST:
Land 1,070,000 1,070,000
Buildings 12,706,000 12,076,000
Furniture and equipment 30,165,000 25,557,000
Leasehold improvements 1,876,000 2,091,000
- - - --------------------------------------------------------------------------------------------------------
45,817,000 40,794,000
Less accumulated depreciation and amortization 20,245,000 17,635,000
- - - --------------------------------------------------------------------------------------------------------
Net property and equipment 25,572,000 23,159,000
- - - --------------------------------------------------------------------------------------------------------
$220,039,000 $171,860,000
===================================
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - --------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 2,000,000 $ 2,500,000
Accounts payable 68,585,000 46,019,000
Income taxes 3,088,000 3,119,000
Accrued salaries, wages and commissions 6,835,000 4,762,000
Other accrued liabilities 9,477,000 8,113,000
Long-term debt due within one year 3,056,000 262,000
- - - --------------------------------------------------------------------------------------------------------
Total current liabilities 93,041,000 64,775,000
LONG-TERM DEBT 22,272,000 21,328,000
DEFERRED INCOME TAXES 1,986,000 1,640,000
SHAREHOLDERS' EQUITY:
Common shares, without par value, $.67 stated value: authorized
20,000,000 shares; outstanding 9,912,906 shares in 1994
and 9,793,374 shares in 1993 6,609,000 6,529,000
Capital in excess of stated value 15,806,000 15,665,000
Retained earnings 80,325,000 61,923,000
- - - --------------------------------------------------------------------------------------------------------
Total shareholders' equity 102,740,000 84,117,000
- - - --------------------------------------------------------------------------------------------------------
$220,039,000 $171,860,000
===================================
<FN>
See accompanying notes.
</TABLE>
2
<PAGE> 3
STATEMENTS OF INCOME
- - - ------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, 1994, 1993 AND 1992
- - - -----------------------------------------------------------------------------------------------
1994 1993 1992
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $580,757,000 $430,013,000 $362,386,000
Operating costs and expenses:
Cost of goods sold 465,614,000 336,589,000 284,897,000
Warehouse, selling and administrative expenses 83,754,000 72,363,000 65,096,000
- - - -----------------------------------------------------------------------------------------------
549,368,000 408,952,000 349,993,000
- - - -----------------------------------------------------------------------------------------------
Operating profit 31,389,000 21,061,000 12,393,000
Equity in earnings of 50%-owned company 3,001,000 2,505,000 654,000
Interest expense (2,687,000) (3,581,000) (4,505,000)
- - - -----------------------------------------------------------------------------------------------
Income from operations before
income taxes 31,703,000 19,985,000 8,542,000
Provision for income taxes:
Federal
Current 9,946,000 6,267,000 2,082,000
Deferred (574,000) (811,000) 418,000
- - - -----------------------------------------------------------------------------------------------
9,372,000 5,456,000 2,500,000
State 2,655,000 1,616,000 715,000
- - - -----------------------------------------------------------------------------------------------
12,027,000 7,072,000 3,215,000
- - - -----------------------------------------------------------------------------------------------
NET INCOME $ 19,676,000 $ 12,913,000 $ 5,327,000
===============================================================================================
INCOME PER COMMON SHARE:
Primary $1.95 $1.41 $.65
Fully diluted 1.95 1.33 .63
===============================================================================================
<FN>
See accompanying notes.
</TABLE>
3
<PAGE> 4
STATEMENTS OF SHAREHOLDERS' EOUITY
- - - --------------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, 1994, 1993 AND 1992
- - - ---------------------------------------------------------------------------------------------------------------
Stated value Capital in
of common excess of Retained
shares stated value earnings Total
- - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1991 $5,458,000 $ 1,849,000 $45,548,000 $ 52,855,000
Net income 5,327,000 5,327,000
Cash dividends ($.107 per share) (875,000) (875,000)
Shares issued upon exercise of stock options 13,000 106,000 119,000
Tax benefit related to exercise of stock
options 29,000 29,000
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1992 5,471,000 1,984,000 50,000,000 57,455,000
Net income 12,913,000 12,9I3,000
Cash dividends ($.11 per share) (990,000) (990,000)
Shares issued upon conversion of debentures 1,026,000 13,280,000 14,306,000
Shares issued upon exercise of stock options 32,000 344,000 376,000
Tax benefit related to exercise of stock
options 57,000 57,000
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1993 6,529,000 15,665,000 61,923,000 84,117,000
Net income 19,676,000 19,676,000
Cash dividends ($.13 per share) (1,274,000) (1,274,000)
Shares issued upon exercise of stock options 95,000 719,000 814,000
Tax benefit related to exercise of stock
options 21,000 21,000
Shares retired (15,000) (599,000) (614,000)
- - - ---------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1994 $6,609,000 $15,806,000 $80,325,000 $102,740,000
===============================================================================================================
<FN>
See accompanying notes.
</TABLE>
4
<PAGE> 5
STATEMENTS OF CASH FLOWS
- - - -------------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, 1994, 1993 AND 1992
============================================================================================================
1994 1993 1992
- - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,676,000 $ 12,913,000 $ 5,327,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,264,000 4,646,000 4,127,000
Undistributed earnings of affiliate (3,001,000) (2,505,000) (654,000)
(Increase) decrease in operating working capital (11,635,000) 1,532,000 (6,083,000)
(Increase) decrease in other assets (199,000) 140,000 (802,000)
Deferred taxes (574,000) (622,000) 535,000
- - - ------------------------------------------------------------------------------------------------------------
Total adjustments (10,145,000) 3,191,000 (2,877,000)
- - - ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,531,000 16,104,000 2,450,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (7,626,000) (4,160,000) (5,110,000)
Acquisition of business -- -- (2,125,000)
- - - ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,626,000) (4,160,000) (7,235,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term financing (500,000) -- 2,500,000
Borrowings under revolving credit 25,000,000 8,000,000 22,000,000
Repayment under revolving credit (21,000,000) (17,000,000) (19,000,000)
Purchase of subordinated debt -- (916,000) --
Principal payments under long-term debt obligations (262,000) (1,494,000) (575,000)
Issuance of common shares under stock option plan 200,000 376,000 119,000
Tax benefit related to exercise of stock options 21,000 57,000 29,000
Dividends paid (1,274,000) (990,000) (875,000)
- - - ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 2,185,000 (11,967,000) 4,198,000
- - - ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 4,090,000 (23,000) (587,000)
CASH AT BEGINNING OF YEAR 1,864,000 1,887,000 2,474,000
- - - ------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 5,954,000 $ 1,864,000 $ 1,887,000
============================================================================================================
<F/N>
See accompanying notes.
</TABLE>
5
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
- - - -------------------------------------------------------------------------------
PIONEER-STANDARD ELECTRONICS, INC.
1 ACCOUNTING POLICIES
- - - ---------------------------------------------------
The Company is a distributor of electronic com-
ponents and computer products and maintains the
following accounting policies:
CASH EQUIVALENTS--The Company considers highly
liquid instruments with a maturity of ninety days
or less at date of purchase to be cash equivalents.
MERCHANDISE INVENTORY--Inventory is stated at the
lower of cost (first-in, first-out basis) or market.
Reserves for slow-moving and obsolete inventory
at March 31, were $2,540,000 in 1994 and
$2,659,000 in 1993.
AFFILIATED COMPANY--The Company owns 50% of
the outstanding common stock of Pioneer Technol-
ogies Group, Inc. The investment is accounted for
by the equity method.
OTHER ASSETS--Other assets include the excess of
cost over value assigned to net assets of a pur-
chased business, which is being amortized on the
straight-line method over 40 years; cash surrender
value of life insurance; security deposits; and
certain deferred charges.
PROPERTY AND EQUIPMENT--The Company
capitalizes costs associated with software developed
for its own use. Depreciation and amortization is
computed using principally the straight-line
method. Accelerated methods are used for tax
reporting purposes.
INCOME TAXES--Effective April 1, 1993, the Com-
pany adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income
Taxes." This statement requires the use of the
liability method in accounting for income taxes.
Under this method, deferred tax assets and
liabilities are determined based on differences be-
tween financial reporting and tax bases of assets
and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the
adoption of Statement No. 109, income tax ex-
pense was determined using the deferred method.
Deferred tax expense was based on items of in-
come and expense that were reported in different
years in the financial statements and tax returns
and were measured at the tax rate in effect in the
year the difference originated.
As permitted by Statement No. 109, the Com-
pany has elected not to restate the financial
statements of any prior years. Adoption of this
statement was not material to quarterly or annual
results in the current year.
STOCK SPLIT--On January 26, 1993, the Board of
Directors declared a three-for-two stock split ef-
fected in the form of a 50% share dividend of the
Company's Common Shares payable March 15,
1993 to shareholders of record February 12, 1993.
All share and per share data have been restated for
all periods presented to reflect the stock split.
COMMON SHARES AND NET INCOME PER COMMON
SHARE--Net income per common share is com-
puted using the weighted average common shares
and common share equivalents outstanding during
the year of 10,078,682 in 1994, 9,188,512 in
1993, and 8,204,623 in 1992. Common share
equivalents consists of shares issuable upon exer-
cise of stock options computed by using the
treasury stock method.
Fully diluted net income per common share is
computed on the same basis as above with the
assumption that all of the 9% Subordinated Con-
vertible Debentures were converted into common
shares and that the related interest expense, net of
income taxes, was added to net income. The
number of shares used for this computation was
9,977,669 and 9,915,912 in 1993 and 1992,
respectively.
2 SUBSEQUENT EVENT--ACQUISITION
- - - --------------------------------------------------------
In April, 1994, the Company entered into a pur-
chase agreement with United Westburne Inc. to ac-
quire certain assets and to assume certain liabilities
of Zentronics, the Canadian electronics distribution
division of Westburne, subject to satisfactory com-
pletion of due diligence. The purchase price,
dependent upon values as of the closing scheduled
for June 1, is estimated to be $12,000,000. Zen-
tronics had annual sales of approximately
$71,000,000 (Cdn.) or $54,000,000 (U.S.).
6
<PAGE> 7
3 LOAN AGREEMENTS
- - - -------------------------------------------------
Short-Term:
The Company has unsecured short-term lines of
credit aggregating $20,000,000 available for use.
Terms of the Company's revolving credit agree-
ment limit the aggregate borrowings against these
unsecured lines to a maximum of $15,000,000.
The unsecured lines, which may be withdrawn at
the option of the revolving credit lendors, permit
the Company to borrow at varying interest rates.
There were $2,000,000 of borrowings against
these lines at March 31, 1994.
Long-Term:
Long-term debt at March 31, 1994 and 1993
consists of the following:
<TABLE>
<CAPTION>
- - - -----------------------------------------------------
1994 1993
- - - -----------------------------------------------------
<S> <C> <C>
Revolving credit $ 4,000,000 $ --
9.79% Senior Notes 20,000,000 20,000,000
Obligations under capital
leases 1,328,000 1,590,000
--------------------------
25,328,000 21,590,000
--------------------------
Less amounts due within
one year 3,056,000 262,000
--------------------------
$22,272,000 $21,328,000
==========================
</TABLE>
Terms of the Company's revolving credit agree-
ment provide for up to an aggregate of $30,000,000
of unsecured borrowings on a revolving credit
basis until January 1, 1997 after which time any
outstanding borrowings are convertible into a four-
year term loan amortized in equal quarterly in-
stallments. The agreement contains a provision
whereby annually, upon consent of the parties, the
maturity date may be extended for one additional
year resulting in a remaining three-year revolving
credit and four-year term loan facility. At the
choice of the Company, interest on borrowings is
payable at a floating prime rate or at other floating
rate options (certificate of deposit, LIBOR, or
banker's acceptance) plus 3/4%. There is a commit-
ment fee of 1/4% on the unborrowed amount.
Annual principal payments of $2,860,000 on the
9.79% Senior Notes will begin November 1, 1994
and continue through November 1, 2000 when the
last payment of $2,840,000 is due. Interest is pay-
able semi-annually.
The terms of both the revolving credit agreement
and Senior Note Purchase Agreement provide for,
among other things, restrictions regarding the pay-
ment of cash dividends, limitations on other bor-
rowings and capital expenditures, minimum work-
ing capital requirements and the maintenance of
certain financial ratios. Unrestricted retained earn-
ings available for dividends at March 31, 1994
under the most restrictive covenants are $5,244,000.
The Company's 9% Subordinated Convertible
Debentures due in 1998, aggregating $15,222,000,
were retired during fiscal 1993. As a result of a
combination of a call to satisfy the sinking fund in-
stallment balance due August 1, 1992, voluntary
conversions of Debentures 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.
Aggregate maturities of long-term debt for the
next five fiscal years are: 1995--$3,056,000;
1996--$2,953,000; 1997--$3,121,000;
1998--$3,873,000 and 1999--$3,874,000.
4 LEASE COMMITMENTS
- - - -----------------------------------------------------
The Company is committed under lease agree-
ments, which contain renewal options for periods
up to twenty years, for certain facilities and equip-
ment expiring at various dates to the year 2017.
Amounts for capitalized leases are included in
property and equipment at cost of $3,061,000 at
March 31, 1994 and 1993, less accumulated amor-
tization of $1,706,000 and $1,410,000 at March
31, 1994 and 1993, respectively.
Future minimum lease payments under capital
leases and operating leases at March 31, 1994 are
as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- - - -----------------------------------------------------
<S> <C> <C>
1995 $335,000 $1,603,000
1996 218,000 1,405,000
1997 132,000 972,000
1998 132,000 723,000
1999 132,000 585,000
Thereafter 2,442,000 58,000
- - - -----------------------------------------------------
Total minimum
lease payments 3,391,000 $5,346,000
==========
Less amount repre-
senting interest 2,063,000
----------
Present value of
minimum lease
payments $1,328,000
==========
</TABLE>
Rental expense for operating leases was
$2,166,000, $1,979,000 and $1,940,000 for 1994,
1993 and 1992, respectively.
7
<PAGE> 8
5 INCOME TAXES
- - - -------------------------------------------------
As discussed in Note 1, the Company adopted
SFAS No. 109, Accounting for Income Taxes, ef-
fective April 1, 1994.
The following is a reconciliation of the Corn-
pany's effective income tax rate to the statutory
rate:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
- - - ---------------------------------------------------
1994 1993 1992
- - - ---------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
Equity in undistributed
earnings of 50%-owned
company (2.6) (4.3) (2.6)
Provision for state taxes 5.4 5.3 5.5
Other items .1 .4 .7
-----------------------
Effective rate 37.9% 35.4% 37.6%
=======================
</TABLE>
Deferred tax assets and liabilities as of March 31,
1994 are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Capitalized inventory costs $1,373,000
Accrued expenses 1,105,000
Allowance for doubtful accounts 1,024,000
Inventory valuation reserve 445,000
Other 444,000
----------
Total deferred tax assets 4,391,000
----------
Deferred tax liabilities:
Depreciation expense 1,310,000
Other 676,000
----------
Total deferred tax liabilities 1,986,000
----------
Net deferred tax assets $2,405,000
==========
</TABLE>
The components of the provision for deferred in-
come taxes for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------
1993 1992
- - - --------------------------------------------------------
<S> <C> <C>
Depreciation and amortization $ 57,000 $ 213,000
Inventory valuation reserve (156,000) 4,000
Allowance for doubtful accounts (166,000) 42,000
Costs capitalized in inventory (235,000) (136,000)
State tax (123,000) 59,000
Excess of fair market value
over cost of assets acquired -- 199,000
Other (188,000) 37,000
----------------------
Deferred tax $(811,000) $ 418,000
======================
</TABLE>
6 COMMON SHARE
PURCHASE RIGHTS PLAN
- - - ------------------------------------------------------
The Company maintains a Common Share Pur-
chase Rights Plan whereby, until the occurrence of
certain events, each share of the Company's out-
standing common shares represents ownership of
one right (Right). The Rights may only be exer-
cised if a person or group acquires twenty percent
(20%) or more of the Company's Common Shares,
or announces a tender offer for at least twenty per-
cent (20%) of the Company's Common Shares.
The exercise price of each Right is $26.67 per
Common Share subject to adjustment in certain
events. The Rights trade with the Company's
Common Shares until the Rights become exer-
cisable.
If the Company is acquired in a merger or other
business combination transaction, each Right will
entitle its holder to purchase, at the Right's then-
exercise price, a number of the acquiring com-
pany's common shares (or other securities) having
a market value at the time of twice the Right's
then-current exercise price. In addition, if a person
or group acquires twenty percent (20%) or more
of the Company's Common Shares or certain
specified transactions occur while a person or
group beneficially owns twenty percent (20%) or
more of such Common Shares, each Right will en-
title its holder (other than such person or members
of such group) to purchase, at the Right's then-
current exercise price, a number of the Company's
Common Shares having a market value of twice
the Right's then-exercise price.
Prior to the acquisition by a person or group of
beneficial ownership of twenty percent (20%) or
more of the Company's Common Shares, the
Rights are redeemable for $.007 per Right at the
option of the Board of Directors. The Rights will
expire May 10, 1999.
7 STOCK OPTIONS
- - - --------------------------------------------------
The Company has stock option plans which pro-
vide for the granting of options to purchase its
Common Shares.
These plans provide for non-qualified or incen-
tive stock options. The options are priced at 100%
of fair market value at date of grant and expire ten
years from date of grant.
No charges are made against income in account-
ing for stock options. Any tax benefits arising
8
<PAGE> 9
from the exercise of options are recognized when
realized and credited to capital in excess of stated
value. Transactions involving the stock option
plans are summarized as follows:
<TABLE>
<CAPTION>
- - - ---------------------------------------------------
Number Average Option Price
of Shares Per Share
- - - ---------------------------------------------------
<S> <C> <C>
Outstanding at
March 31, 1993 291,075 $ 6.61
Exercised (141,450) $ 5.75
Granted 300,000 $13.75
Forfeited (1,000) $13.75
- - - ----------------------------
Outstanding at
March 31, 1994 448,625 $11.64
============================
Exercisable at
March 31, 1994 122,625 $ 7.25
============================
Available for grant
at March 31, 1994 576,000
============================
</TABLE>
8 ESTIMATED FAIR VALUES
OF FINANCIAL INSTRUMENTS
- - - -------------------------------------------------
The carrying amounts and estimated fair values of
the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1994
- - - -----------------------------------------------------
Carrying Fair
Amount Value
- - - -----------------------------------------------------
<S> <C> <C>
Cash $ 5,954,000 $ 5,954,000
Notes payable to banks 2,000,000 2,000,000
Long-term debt:
9.79% Senior Notes 20,000,000 22,569,000
Revolving credit
borrowings 4,000,000 4,000,000
</TABLE>
<TABLE>
<CAPTION>
1993
- - - -----------------------------------------------------
Carrying Fair
Amount Value
- - - -----------------------------------------------------
<S> <C> <C>
Cash $ 1,864,000 $ 1,864,000
Notes payable to banks 2,500,000 2,500,000
Long-term debt:
9.79% Senior Notes 20,000,000 23,454,000
</TABLE>
The carrying amount of cash, notes payable to
banks and revolving credit borrowings approx-
imates fair value. The fair value of the Senior
Notes is estimated using rates currently available
for securities with similar terms and remaining
maturities.
9 PIONEER TECHNOLOGIES GROUP. INC.
- - - -----------------------------------------------------
Pioneer-Standard Electronics, Inc. owns 50% of
the common stock of Pioneer Technologies Group,
Inc. Included in the Company's retained earnings
are undistributed earnings of Pioneer Technologies
Group, Inc. in the amount of $14,408,000 at
March 31, 1994, $11,407,000 at March 31, 1993
and $8,902,000 at March 31, 1992. In accordance
with accounting principles in effect at the time, the
Company has not provided deferred income taxes
on $11,407,000 of undistributed earnings of
Pioneer Technologies Group, Inc. No dividends
have been paid by Pioneer Technologies Group,
Inc. from date of incorporation in 1964 to March
31, 1994.
Pioneer-Standard Electronics, Inc. may not sell,
assign, give, transfer, exchange, or otherwise
dispose of its share ownership without allowing
Pioneer Technologies Group, Inc. the first option
to purchase the shares at the then current book
value. If Pioneer Technologies Group, Inc. does
not exercise this option, then shareholders
representing the other 50% of the common stock
of Pioneer Technologies Group, Inc. have the right
and option to purchase all the shares at the then
current book value.
In the event of a "change in control," as de-
fined, of Pioneer-Standard Electronics, Inc., or
upon the occurrence of certain events, Pioneer
Technologies Group, Inc. has the right to purchase
all shares of its stock owned by Pioneer-Standard
Electronics, Inc. at the then current book value. If
Pioneer Technologies Group, Inc. does not exer-
cise the right, the remaining shareholders repre-
senting the other 50% of the common shares of
Pioneer Technologies Group, Inc. have the right
and option to purchase all the shares at the then
current book value.
Comparative financial information of Pioneer
Technologies Group, Inc. at March 31, 1994,
1993 and 1992 and for the years then ended is
summarized as follows:
9
<PAGE> 10
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------
1994 1993 1992
- - - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $422,001,000 $284,008,000 $189,908,000
Gross profit 49,409,000 44,854,000 34,217,000
Net income 6,002,000 5,010,000 1,309,000
====================================================
Total current assets $ 92,445,000 $ 74,964,000 $ 63,256,000
Net fixed and other assets 6,148,000 4,077,000 4,403,000
----------------------------------------------------
Total assets $ 98,593,000 $ 79,041,000 $ 67,659,000
====================================================
Total current liabilities $ 48,967,000 $ 24,242,000 $ 24,711,000
Total long-term liabilities 20,698,000 31,873,000 25,032,000
Total shareholders' equity 28,928,000 22,926,000 17,916,000
----------------------------------------------------
Total liabilities and shareholders' equity $ 98,593,000 $ 79,041,000 $ 67,659,000
====================================================
</TABLE>
10 OPERATING WORKING CAPITAL CHANGES AND SUPPLEMENTAL INFORMATION
FOR THE STATEMENTS OF CASH FLOWS
- - - -----------------------------------------------------------------
THE COMPONENTS OF THE CHANGES IN OPERATING WORKING CAPITAL WERE:
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------------
1994 1993 1992
- - - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable $(18,808,000) $(12,343,000) $ 780,000
Merchandise inventory (18,653,000) (6,118,000) (4,002,000)
Prepaid expenses (146,000) 12,000 (378,000)
Accounts payable 22,566,000 12,934,000 (334,000)
Income taxes (31,000) 2,778,000 (1,073,000)
Accrued salaries, wages and commissions 2,073,000 1,551,000 100,000
Other accrued liabilities 1,364,000 2,718,000 (1,176,000)
----------------------------------------------------
(Increase) decrease in operating working capital $(11,635,000) 1,532,000 $ (6,083,000)
====================================================
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------------
1994 1993 1992
- - - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid or received during the year for:
Interest paid $ 2,623,000 $ 3,488,000 $ 4,437,000
Income taxes paid 12,659,000 4,768,000 4,053,000
====================================================
Non-cash investing and financing activities:
Common shares issued upon conversion of
subordinated debentures $ -- $ 14,306,000 $ --
Common shares retired 614,000 -- --
====================================================
</TABLE>
11 EMPLOYEE RETIREMENT PLAN
- - - -----------------------------------------------------
The Company maintains a defined contribution
profit-sharing and thrift plan which qualifies under
Section 401(k) of the Internal Revenue Code for
all employees meeting certain service require-
ments. The plan allows eligible employees to con-
tribute up to 10% of their compensation, with the
Company matching 50% of up to 4% of compen-
sation. The Company may also make contributions
dependent on profits each year for the benefit of
all eligible employees under the plan. Total profit
sharing and Company matching contributions were
$1,899,000, $1,218,000 and $881,000 for 1994,
1993 and 1992, respectively.
10
<PAGE> 11
REPORT OF INDEPENDENT AUDITORS
- - - ------------------------------------------------------------------
The Board of Directors and Shareholders
Pioneer-Standard Electronics, Inc.
We have audited the accompanying balance sheets of
Pioneer-Standard Electronics, Inc. as of March 31,
1994 and 1993 and the related statements of in-
come, shareholders' equity and cash flows for each
of the three years in the period ended March 31,
1994. These financial statements are the respon-
sibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those stan-
dards require that we plan and perform the audit to
obtain reasonable assurance about whether the
financial statements are free of material misstate-
ment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in
the financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well
as evaluating the overall financial statement presen-
tation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
financial position of Pioneer-Standard Electronics,
Inc. at March 31, 1994 and 1993 and the results
of its operations and its cash flows for each of the
three years in the period ended March 31, 1994,
in conformity with generally accepted accounting
principles.
/s/ Ernst & Young
- - - -----------------------------
Cleveland, Ohio
May 4, 1994
11
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS
We have audited the financial statements of Pioneer-Standard Electronics, Inc.
as of March 31, 1994 and 1993 and for each of the three years in the period
ended March 31, 1994 and have issued our report thereon dated May 4, 1994
[incorporated by reference elsewhere in this Annual Report (Form 10-K)]. Our
audits also included the financial statement schedules of Pioneer-Standard
Electronics, Inc. as of March 31, 1994 and 1993 and for each of the three years
in the period ended March 31, 1994, listed in item 14(a) of this Annual Report
(Form 10-K). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
ERNST & YOUNG
Cleveland, Ohio
May 4, 1994
12
<PAGE> 13
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
SCHEDULE II - AMOUNTS RECEIVABLE
FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN
RELATED PARTIES
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Year Ended March 31, 1994
----------------------------------------------------------------------------
Balance at Balance at
Name of Beginning End of
Debtor of Period Addition Deductions Period
- - - ------ --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Walter E. York, Sr., $-0- $190,000(1) $-0- $190,000
Dayton Branch Manager
of the Company
Arthur Rhein $-0- -0- -0- -0-
Senior Vice
President
and Director
of the Company
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1993
----------------------------------------------------------------------------
Balance at Balance at
Name of Beginning End of
Debtor of Period Addition Deductions Period
- - - ------ --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Arthur Rhein $-0- $-0- $-0- $-0-
Senior Vice
President
and Director
of the Company
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1992
----------------------------------------------------------------------------
Balance at Balance at
Name of Beginning End of
Debtor of Period Addition Deductions Period
- - - ------ --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Arthur Rhein $260,000 $-0- $260,000(2) $-0-
Senior Vice
President
and Director
of the Company
<FN>
(1) In connection with Mr. York's relocation to Dayton, Ohio in fiscal
1994, the Company advanced $190,000 to Mr. York, of which $164,830
represented an interest free loan payable upon sale of Mr. York's Indiana
residence and the balance of $25,170 represented an interest free advance.
The loan and advance were repaid in full in fiscal 1995.
(2) In connection with Mr. Rhein's relocation to Cleveland, in fiscal
1991, the Company advanced $260,000 to Mr. Rhein, of which $220,000
represented an interest-free loan payable upon sale of Mr. Rhein's
New York residence and the balance of $40,000 represented an
interest-free advance. The loan and advance were repaid in full in
fiscal 1992.
</TABLE>
13
<PAGE> 14
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Balance at Charged Deductions - Balance
beginning to costs net write-offs at end of
of period and expenses (Net recoveries) period
---------- ------------ ---------------- ---------
<S> <C> <C> <C> <C>
Description
- - - -----------
1994: Allowance for $1,713,000 $1,808,000 $ 652,000 $2,869,000
doubtful accounts
Inventory valuation $2,659,000 $1,995,000 $2,114,000 $2,540,000
reserve
1993:
Allowance for $1,226,000 $1,672,000 $1,185,000 $1,713,000
doubtful accounts
Inventory valuation $2,190,000 $1,738,000 $1,269,000 $2,659,000
reserve
1992:
Allowance for $1,350,000 $ 613,000 $ 737,000 $1,226,000
doubtful accounts
Inventory valuation $2,232,000 $1,351,000 $1,393,000 $2,190,000
reserve
</TABLE>
14
<PAGE> 15
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Maximum amount Average Weighted
Weighted outstanding amount average
Balance average at any month outstanding interest
at end of interest end during during the rate during
period rate the period period period
--------- -------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994 $2,000,000 5.75% $12,500,000 $5,791,667 4.0%
1993 $2,500,000 5.0% $ 5,500,000 $3,166,167 4.1%
1992 $2,500,000 4.8% $ 6,000,000 $3,791,667 5.7%
Notes payable represents the amount of borrowings against unsecured lines of
credit with the Company's banks. The lines, which may by withdrawn at the
option of the banks, permit the Company to borrow at varying interest rates.
The average amount outstanding for each period was computed by averaging the
month-end balances during the year. The weighted average interest rate for
each period was computed by multiplying the month-end balances by the
applicable interest rate and dividing by the total of the month-end balances
outstanding.
</TABLE>
15
<PAGE> 16
<TABLE>
QUARTERLY FINANCIAL DATA
PIONEER-STANDARD ELECTRONICS, INC.
<CAPTION>
(UNAUDITED)
=======================================================================================
Fiscal Year First Second Third Fourth
Ending March 31 Quarter Quarter Quarter Quarter Year
- - - ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Net sales $134,509,000 $137,278,000 $149,814,000 $159,156,000 $580,757,000
Gross profit 27,360,000 28,075,000 29,007,000 30,701,000 115,143,000
Net income 4,469,000 4,790,000 4,887,000 5,530,000 19,676,000
Income per share:
Primary .45 .47 .48 .55 1.95
- - - ---------------------------------------------------------------------------------------
1993
Net sales $102,315,000 $99,912,000 $109,706,000 $118,080,000 $430,013,000
Gross profit 22,132,000 21,986,000 23,565,000 25,741,000 93,424,000
Net income 3,066,000 2,897,000 3,299,000 3,651,000 12,913,000
Income per share:
Primary .37 .34 .33 .37 1.41
Fully diluted .33 .31 -- -- 1.33
- - - ---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
Financial Statements
Pioneer Technologies Group, Inc.
MARCH 31, 1994 AND 1993, AND
YEARS ENDED MARCH 31, 1994, 1993 AND 1992
WITH REPORT OF INDEPENDENT AUDITORS
17
<PAGE> 18
<TABLE>
Pioneer Technologies Group, Inc.
Financial Statements
March 31, 1994 and 1993, and
years ended March 31, 1994, 1993 and 1992
CONTENTS
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3
Statements of Income and Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12
</TABLE>
18
<PAGE> 19
[Letterhead]
Report of Independent Auditors
The Board of Directors
Pioneer Technologies Group, Inc.
We have audited the accompanying balance sheets of Pioneer Technologies Group,
Inc. as of March 31, 1994 and 1993, and the related statements of income and
retained earnings and cash flows for each of the three years in the period
ended March 31, 1994. Our audits also included the financial statement
schedules of Pioneer Technologies Group, Inc. listed in the Index at Item 14(a).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pioneer Technologies Group,
Inc. at March 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended March 31, 1994, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 8 to the financial statements, in 1994 the Company changed
its method of accounting for income taxes.
Ernst & Young
Washington, D.C.
April 29, 1994
19
<PAGE> 20
<TABLE>
Pioneer Technologies Group, Inc.
Balance Sheets
<CAPTION>
MARCH 31
1994 1993
----------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8 $ 7
Receivables:
Trade accounts, less allowance for doubtful accounts
of $2,682 in 1994 and $2,250 in 1993 (NOTE 3) 28,873 30,404
Other (NOTE 2) 340 501
Total receivables 29,213 30,905
----------------------------
Merchandise inventory, less allowance for inventory
obsolescence of $2,156 in 1994 and $1,463
in 1993 (NOTE 3) 60,690 42,450
Prepaid expenses 405 110
Deferred income taxes (NOTE 8) 2,077 1,443
Shareholder notes receivable (NOTE 2) 52 49
----------------------------
Total current assets 92,445 74,964
Property and equipment, at cost:
Furniture and office equipment 6,786 4,663
Demonstration equipment 965 1,025
Leasehold improvements 2,650 1,638
----------------------------
10,401 7,326
Less accumulated depreciation and amortization 4,746 3,748
----------------------------
Net property and equipment 5,655 3,578
Shareholder notes receivable (NOTE 2) 231 295
Other assets 262 204
----------------------------
$98,593 $79,041
============================
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
MARCH 31
1994 1993
------------------------------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $43,736 $19,819
Affiliate (NOTE 2) 336 395
Accrued employee compensation 2,484 2,014
Other accrued liabilities 1,967 1,716
Income taxes payable 444 298
------------------------------
Total current liabilities 48,967 24,242
Long-term debt (NOTE 3) 20,698 31,873
------------------------------
Total liabilities 69,665 56,115
Commitments and contingencies (NOTE 7)
Shareholders' equity (NOTE 4):
Common stock, $.10 par value; 100,000 shares
authorized, issued and outstanding 10 10
Capital in excess of par value 90 90
Retained earnings 28,828 22,826
------------------------------
Total shareholders' equity 28,928 22,926
------------------------------
$98,593 $79,041
==============================
<FN>
SEE ACCOMPANYING NOTES.
</TABLE>
21
<PAGE> 22
<TABLE>
Pioneer Technologies Group, Inc.
Statements of Income and Retained Earnings
(In thousands, except per common share amounts)
<CAPTION>
YEAR ENDED MARCH 31
1994 1993 1992
------------------------------------------
<S> <C> <C> <C>
Net sales $422,001 $284,008 $189,908
Operating costs and expenses:
Cost of goods sold 372,592 239,154 155,691
Selling and administrative 38,256 34,965 29,982
------------------------------------------
410,848 274,119 185,673
------------------------------------------
Operating profit 11,153 9,889 4,235
Interest expense 1,171 1,253 2,063
------------------------------------------
Income before income taxes and other items 9,982 8,636 2,172
Provision for income taxes (NOTE 8) 3,980 3,626 863
------------------------------------------
Net income 6,002 5,010 1,309
Retained earnings, beginning of year 22,826 17,816 16,507
------------------------------------------
Retained earnings, end of year $ 28,828 $ 22,826 $ 17,816
==========================================
Net income per common share $ 60.02 $ 50.10 $ 13.09
==========================================
<FN>
SEE ACCOMPANYING NOTES.
</TABLE>
22
<PAGE> 23
<TABLE>
Pioneer Technologies Group, Inc.
Statements of Cash Flows
YEAR ENDED MARCH 31
1994 1993 1992
------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,002 $ 5,010 $ 1,309
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization 1,149 985 929
Deferred income taxes (365) (345) (653)
Provision for losses on receivables
and inventory 1,950 2,511 1,427
Decrease (increase) in accounts and
notes receivable 1,192 (7,443) (3,437)
Increase in merchandise inventory (19,629) (9,403) (6,623)
(Increase) decrease in prepaid expenses (295) 250 (288)
Decrease in refundable taxes - - 122
(Increase) decrease in other assets (58) (9) 203
Increase (decrease) in accounts payable 23,858 (1,266) 4,818
Increase in accrued liabilities 721 1,289 899
Decrease (increase) in income taxes payable (123) (201) 790
-----------------------------------------
Net cash provided by (used in) operating activities 14,402 (8,622) (504)
INVESTING ACTIVITIES
Net additions to property and equipment (3,226) (702) (497)
FINANCING ACTIVITIES
Net (payments) borrowings under line of
credit agreements (11,175) 6,841 3,396
-----------------------------------------
Net increase (decrease) in cash and cash equivalents 1 (2,483) 2,395
Cash and cash equivalents at beginning of year 7 2,490 95
-----------------------------------------
Cash and cash equivalents at end of year $ 8 $ 7 $ 2,490
=========================================
<FN>
SEE ACCOMPANYING NOTES.
</TABLE>
23
<PAGE> 24
Pioneer Technologies Group, Inc.
Notes to Financial Statements
March 31, 1994, 1993 and 1992
(Dollars in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The 1992 financial statements include the accounts of Pioneer Technologies
Group, Inc. (the Company), and its then-wholly owned subsidiaries, Mini
Computer Associates, Inc. (MCA) and The Technology Factory, Inc. (TTF). On
April 1, 1992, TTF and MCA ceased doing business as separate legal entities.
TTF continued business as an operating division of the Company and MCA was
dissolved. All intercompany accounts and transactions were eliminated in prior
years' consolidations.
Certain balance sheet amounts in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits at financial
institutions and overnight repurchase agreements. Cash disbursements for
interest and income taxes were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------
<S> <C> <C> <C>
Interest $1,171 $1,363 $1,913
Income taxes $4,468 $4,172 $ 596
</TABLE>
MERCHANDISE INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market.
DEPRECIATION AND AMORTIZATION
Depreciation of furniture, office equipment and computer equipment is
determined by using the straight-line method over estimated useful lives of
seven, five and three years, respectively. Depreciation of demonstration
equipment is determined using accelerated
24
<PAGE> 25
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION (CONTINUED)
methods over an estimated useful life of five years. Amortization of leasehold
improvements is determined using the straight-line method over the life of the
related lease.
INCOME TAXES
Effective April 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under Statement No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of Statement No.
109, income tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated.
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND OBSOLETE INVENTORY
The Company estimates losses for doubtful accounts and inventory obsolescence
based on periodic evaluations by management.
The Company sells computer equipment and electronic components to companies in
diversified industries primarily located in the Mid-Atlantic/Southeast and West
regions of the United States. Seventeen percent of net sales in 1994 were to
one customer. Management performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
Accounts receivable are generally due within thirty days.
2. RELATED PARTY TRANSACTIONS
Pioneer-Standard Electronics, Inc. (Pioneer-Standard) owns 50% of the
outstanding common stock of the Company. The companies have an agreement which
provides, among other things, that they have the right to acquire each other's
products at cost. Such transactions are recorded as intercompany transfers of
inventory. Net transfers of inventory from Pioneer-Standard to the Company
were $2,488 in 1994, $2,539 in 1993,
25
<PAGE> 26
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
and $4,589 in 1992. The Company utilizes Pioneer-Standard's data processing
facilities for processing certain accounting and operating information.
Amounts charged to operations were $1,794 in 1994, $1,794 in 1993 and $1,653 in
1992.
The Company has various notes receivable and advances to certain shareholders,
officers and employees of the Company as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------
<S> <C> <C>
Subscription notes receivable from shareholders, payable in ten
consecutive annual installments, with final payment due November
1999, interest at 9% per annum.
$283 $344
Other receivables 177 47
---------------------
$460 $391
=====================
</TABLE>
3. LONG-TERM DEBT
The Company has revolving lines of credit from three banks aggregating $45,000
which are secured by accounts receivable and inventory. The expiration date
for the revolving lines of credit is October 31, 1995. Interest is payable
under either short-term fixed or variable rates of interest based on LIBOR, the
prime rate or certificates of deposit rates at the Company's option. The terms
of the revolving lines of credit agreements provide for the maintenance of
certain financial ratios and also effectively restrict the payment of any
retained earnings as dividends.
4. COMMON STOCK
Under a stock purchase agreement among Pioneer-Standard and the Other
Shareholders of the Company, as defined in the agreement, the Other
Shareholders have the first right and option to purchase any shares offered for
sale by other members of that group at book value. If the Other Shareholders
do not exercise this option, the Company is obligated to purchase the shares at
book value. Should the Company acquire any shares, Pioneer-Standard is
required to sell a like number of shares to the Company at book value.
Pioneer-Standard may not sell, assign, give, transfer, exchange or otherwise
dispose of its share ownership without allowing the Company the first option to
purchase the shares at
26
<PAGE> 27
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
4. COMMON STOCK (CONTINUED)
book value. If the Company does not exercise this option, the Other
Shareholders have the option to purchase all the shares at book value.
In the event of a change in control, as defined, of Pioneer-Standard, or upon
the occurrence of certain events, the Company has the right to purchase all
shares of its stock owned by Pioneer-Standard at the current book value. If
the Company does not exercise the right, the Other Shareholders have the right
and option to purchase all the shares at the current book value.
5. PROFIT-SHARING PLAN
The Company has a qualified defined contribution profit-sharing plan covering
all full-time employees. Company contributions to the plan are a combination
of mandatory matching of employee contributions (up to a maximum of 2% of the
first 4% contributed by the employee) and an amount awarded solely at the
discretion of the Company's Board of Directors. Contributions to the plan were
$567 in 1994, $468 in 1993 and $238 in 1992, of which $268 in 1994, $219 in
1993 and $18 in 1992 were discretionary.
6. BONUSES
Certain executives of the Company receive bonuses ranging from 1/2% to 2% of
income before income taxes. Bonuses for certain other members of management
are based on agreements approved by the President. Total bonus expense was
$1,464 in 1994, $1,239 in 1993 and $916 in 1992.
7. COMMITMENTS AND CONTINGENCIES
The Company leases warehouse, office space and equipment under noncancellable
operating leases. The minimum future rental commitments (excluding renewal
options) under lease agreements aggregate $1,919 in 1995, $1,807 in 1996,
$1,626 in 1997, $1,453 in 1998, $1,463 in 1999 and $394 thereafter. The Company
is liable under certain leases for increases in rental payments based on the
annual increase in the consumer price index and in the lessors' operating
expenses. Rental expense was $2,165 in 1994, $2,296 in 1993 and $2,167 in
1992.
27
<PAGE> 28
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
8. INCOME TAXES
Effective April 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement No. 109, "Accounting for Income Taxes." As permitted under the new
rules, prior years' financial statements have not been restated. The effect of
adopting Statement No 109 was not material.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of March 31, 1994 are
as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $1,017
Inventory 766
Accrued liabilities 300
Other 114
------
Total deferred tax assets 2,197
Valuation allowance -
------
Deferred tax assets, net 2,197
Deferred tax liabilities:
Tax over book depreciation 120
------
Net deferred tax assets $2,077
======
</TABLE>
28
<PAGE> 29
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
8. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes are as follows for the
years ended March 31:
<TABLE>
<CAPTION>
LIABILITY
METHOD DEFERRED METHOD
----------------------------------------
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Current:
Federal $3,476 $3,286 $1,241
State 869 685 275
----------------------------------------
4,345 3,971 1,516
----------------------------------------
Deferred:
Federal (292) (279) (535)
State (73) (66) (118)
----------------------------------------
(365) (345) (653)
----------------------------------------
$3,980 $3,626 $ 863
========================================
</TABLE>
The components of the provision for deferred income taxes for the years ended
March 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
---------------------
<S> <C> <C>
Allowance for doubtful accounts $(428) $(139)
Allowance for inventory
valuation 213 (265)
Capitalized inventory costs (112) (180)
Depreciation and amortization (46) (94)
Other 28 25
---------------------
$(345) $(653)
=====================
</TABLE>
29
<PAGE> 30
Pioneer Technologies Group, Inc.
Notes to Financial Statements (continued)
(Dollars in thousands)
8. INCOME TAXES (CONTINUED)
The difference between the provision for income taxes and the amount determined
by applying the federal statutory rate follows:
<TABLE>
<CAPTION>
LIABILITY
METHOD DEFERRED METHOD
------------------------------------
1994 1993 1992
------------------------------------
<S> <C> <C> <C>
Federal statutory $3,394 $2,936 $738
State taxes, net of federal benefit 525 409 102
Nondeductible entertainment
expenses 48 34 23
Other 13 247 -
------------------------------------
Effective income tax $3,980 $3,626 $863
====================================
</TABLE>
30
<PAGE> 31
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Balance at Charged to Deductions - net Balance
beginning costs and write-offs at end of
Description of period expenses (Net recoveries) period
----------- ----------- ---------- ---------------- ---------
<S> <C> <C> <C> <C>
1994:
Allowance for
doubtful accounts $2,250,000 $ 561,000 $129,000 $2,682,000
Inventory valuation
reserve $1,463,000 $1,389,000 $696,000 $2,156,000
1993:
Allowance for
doubtful accounts $ 886,000 $1,356,000 $ (8,000) $2,250,000
Inventory valuation
reserve $1,060,000 $1,154,000 $751,000 $1,463,000
1992:
Allowance for
doubtful accounts $ 627,000 $ 441,000 $182,000 $ 886,000
Inventory valuation
reserve $ 376,000 $1,021,000 $337,000 $1,060,000
</TABLE>
31
<PAGE> 32
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
Years ended March 31, 1994, 1993 and 1992
<CAPTION>
Maximum amount Average Weighted
Weighted outstanding amount average
Balance average at any month outstanding interest
at end of interest end during during the rate during
period rate the period period period
--------- -------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994 $ - -% $ - $ - -%
1993 $ - -% $ - $ - -%
1992 $ - -% $9,175,000 $3,679,000 10%
The average amount outstanding for each period was computed by averaging the
month-end balances during the year. The weighted average interest rate for
each period was computed by multiplying the month-end balances by the
applicable rate and dividing by the total of the month-end balance outstanding.
</TABLE>
32
