<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994.
------------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to__________________.
Commission file number 05734
------
Pioneer-Standard Electronics, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0907152
- - ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 East 131st Street, Cleveland, OH 44105
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 587-3600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
Common Shares, as of the latest practical date: COMMON SHARES, WITHOUT PAR
VALUE, AS OF NOVEMBER 8, 1994: 14,910,646.
<PAGE> 2
PART I - FINANCIAL INFORMATION
<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
September 30, 1994 March 31, 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash $ 7,797 $ 5,954
Accounts receivable - net 106,935 81,155
Merchandise inventory 109,417 85,754
Prepaid expenses 1,312 919
Deferred income taxes 4,698 4,391
-------- --------
Total current assets 230,159 178,173
Investment in 50% - owned company 15,319 14,463
Other assets 5,532 1,831
Property and equipment, at cost 48,530 45,817
Accumulated depreciation 21,526 20,245
-------- --------
Net 27,004 25,572
-------- --------
$278,014 $220,039
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 8,500 $ 2,000
Accounts payable 83,173 68,585
Accrued liabilities 19,924 19,400
Long-term debt due within
one year 3,013 3,056
-------- --------
Total current liabilities 114,610 93,041
Long-term debt 47,169 22,272
Deferred income taxes 2,054 1,986
Shareholders' equity
Common stock, at stated value 6,627 6,609
Capital in excess of stated value 16,305 15,806
Retained earnings 91,145 80,325
Currency translation adjustments 104 -
-------- ----------
Total shareholders' equity 114,181 102,740
-------- --------
$278,014 $220,039
======== ========
</TABLE>
2
<PAGE> 3
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Quarter ended Six months ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $194,423 $137,278 $378,255 $271,787
Costs and expenses:
Cost of goods sold 156,990 109,203 305,667 216,352
Warehouse, selling and
administrative expense 27,115 20,705 52,437 41,440
------- ------- -------- --------
Operating profit 10,318 7,370 20,151 13,995
Interest expense 944 683 1,645 1,351
Equity in earnings of
50%-owned company 183 914 856 1,946
------- ------- -------- --------
Income before income taxes 9,557 7,601 19,362 14,590
Provision for income taxes 3,908 2,811 7,748 5,331
------- ------- -------- --------
Net income $ 5,649 $ 4,790 $ 11,614 $ 9,259
======= ======= ======== ========
Average shares outstanding 15,248,432 15,127,404 15,245,004 15,050,295
Shares outstanding at end of period 14,909,046 14,693,998 14,909,046 14,693,998
Earnings per share $.37 $.31 $.76 $.61
Dividends per share $.03 $.02 $.053 $.04
</TABLE>
3
<PAGE> 4
PIONEER-STANDARD ELECTRONICS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Six months ended
September 30,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $11,614 $9,259
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,245 2,797
Undistributed earnings of affiliate (856) (1,946)
Increase in operating working capital (26,976) (11,863)
Increase in other assets (1,451) (67)
Deferred taxes (232) 91
------- -------
Total adjustments (26,270) (10,988)
------- -------
Net cash used in
operating activities (14,656) (1,729)
Cash flows from investing activities:
Acquisition of business (10,068) ---
Additions to property and equipment (4,429) (2,746)
------- ------
Net cash used in investing activities (14,497) (2,746)
Cash flows from financing activities:
Increase in short-term financing 6,500 ---
Increase in revolving credit borrowings 30,000 17,000
Decrease of revolving credit borrowings (5,000) (13,000)
Decrease in other long-term
debt obligations (146) (197)
Issuance of common shares under company
stock option plan 517 22
Dividends paid (794) (586)
------- ------
Net provided by financing activities 31,077 3,239
Effect of exchange rate changes on cash (81) ---
------- ------
Net increase (decrease) in cash 1,843 (1,236)
Cash at beginning of period 5,954 1,864
------- ------
Cash at end of period $ 7,797 $ 628
======= ======
</TABLE>
4
<PAGE> 5
NOTES - Pioneer-Standard Electronics, Inc.
1. PER SHARE DATA
Net income per common share is computed using the weighted average common
shares and common share equivalents outstanding during the quarters and
six-month periods ended September 30, 1994 and 1993. Common share equivalents
consist of shares exercisable of stock options computed by using the treasury
stock method.
2. STOCK SPLIT
On June 23, 1994, the Board of Directors declared a three-for-two stock split
effected in the form of a 50% share dividend of the Company's common shares
payable August 1, 1994 to shareholders of record July 6, 1994. The share and
per share data have been restated for the periods presented to reflect the
stock split.
3. MANAGEMENT OPINION
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to provide a fair statement of the results of
operations for the quarters and six months ended September 30, 1994 and 1993.
The results of operations for the three and six month periods are not
necessarily indicative of results which may be expected for a full year.
5
<PAGE> 6
PIONEER-STANDARD ELECTRONICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
FINANCIAL CONDITION
On June 1, 1994, the Company acquired certain of the assets of the Zentronics
Division of Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian
corporation and assumed certain of Westburne's liabilities. The transaction
was completed by Pioneer Standard Canada Inc., a newly-formed Canadian
subsidiary of the Company by payment of an aggregate of approximately $13.9
million Cdn. (approximately $10.1 million U.S.) to Westburne in the first
six-month period of the current fiscal year.
Current assets increased by $52.0 million and current liabilities increased by
$21.6 million during the six-month period ended September 30, 1994, resulting
in an increase of $30.4 million of working capital. The current ratio was
2.0:1 at September 30, 1994, compared with 1.9:1 at year-end, March 31, 1994.
During the first six months of the current year, total interest-bearing debt
increased by $31.4 million. The ratio of interest-bearing debt to
capitalization was 34% at September 30, 1994 compared with 21% at March 31,
1994.
The increase in financing requirements is attributable to the working capital
needs arising from increased sales volume and the investment in the Zentronics
business described above. The most recent six-month sales are up 22% from the
trailing fiscal six-month sales volume.
Effective October 28, 1994, the Company amended its Credit Agreement with three
banks to increase the credit lines available to the Company. This amendment
provides for an increase in borrowings from $35.0 million to $45.0 million and
permits an increase in the maximum short-term borrowings outside of the Credit
Agreement to be outstanding at any one time from $15.0 million to $20.0
million. As of September 30, 1994, Credit Agreement borrowings were $29.0
million and short-term borrowings outside of the Credit Agreement were $8.5
million. In addition, pursuant to provisions of the Credit Agreement and upon
consent of the parties thereto, the maturity date of the facility was extended
for one additional year, resulting in a $45.0 million revolving credit facility
with a maturity date of January 1, 1998, to be followed by a four-year term
loan amortized in equal quarterly installments.
Management estimates that capital spending plans relating to ongoing
initiatives designed to improve efficiencies through computer enhancement of
operating processes, as well as meeting normal expansion needs of the business
for the current year, will approximate $10.0 million ($4.4 million was expended
in the first six months of the current year). Under present business
conditions, it is anticipated that funds from current operations and available
debt facilities will be sufficient to finance both capital spending and working
capital needs for the balance of the current fiscal year.
6
<PAGE> 7
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH
THE SIX MONTHS ENDED SEPTEMBER 30, 1993
Net sales for the six-month period ended September 30, 1994 of $378.3 million
were 39% greater than sales of the prior year six-month period of $271.8
million. The increase in sales reflects continuing strong demand for
electronic components and computer systems and, in addition, sales of the
newly-acquired Zentronics business accounted for 5% of this increase. During
the first six months of 1994, semiconductor products accounted for 38% of the
Company's sales compared with 39% in the prior year. Computer systems products
accounted for 37% of sales in 1994 and 36% in 1993. Passive and
electromechanical products accounted for 22% of sales in 1994 and 23% in 1993.
Miscellaneous products accounted for 3% of sales in 1994 and 2% in 1993.
The percentage increase in cost of goods sold of 41% resulted in a gross margin
of 19.2% in the first six months of the current year compared with 20.4% a year
ago. A principal reason for the reduced gross margin in 1994 compared with the
prior period is attributable to the incremental increase in sales volume of
microprocessors earning a relatively low gross profit margin and which are
marketed through an efficient, low-cost sales channel.
Warehouse, selling and administrative expenses of $52.4 million increased by
27% as compared with the $41.4 million incurred during the prior year six-month
period. This resulted in a ratio of these expenses to sales of 13.9% for the
1994 period compared with 15.2% for the 1993 first six months.
The resulting operating profit of $20.2 million in 1994 was 5.3% of sales
compared with $14.0 million in 1993 which was 5.1% of sales. Current year
results reflect the increase in sales and effective cost containment.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $856,000 for the 1994 six-month period compared
with $1,946,000 for the same period last year; net sales of the affiliate for
the current year period of $185.9 million were 18% less than the sales of the
prior year period of $226.0 million. This reduction is attributable to a lower
volume of microprocessor sales. Notwithstanding this reduction, a significant
portion of the affiliate's sales during the six-month period was still
attributable to highly concentrated sales of certain microprocessors in large
quantities, the sales volume 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.
The effective tax rate for the current six-month period was 41.9% of income
before the Company's equity in its affiliate's earnings, compared with 42.2% a
year ago; these effective tax rates include .4% and 1.2% for accrued taxes on
the unremitted earnings of the affiliate for 1994 and 1993.
Primarily as a result of the factors noted above, the Company's net income for
the six-month period ending September 30, 1994 of $11.6 million was $2.3
million higher than the $9.3 million earned a year ago.
7
<PAGE> 8
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH
THE THREE MONTHS ENDED SEPTEMBER 30, 1993
Net sales for the three-month period ended September 30, 1994 of $194.4 million
increased 42% over sales of the prior year three-month period of $137.3
million. The increase in sales reflects continuing strong demand for
electronic components and computer and peripheral products, especially for
those products tied to the rapidly growing personal computer industry. In
addition, sales of the newly-acquired Zentronics business accounted for
approximately 9% of this increase. Semiconductor products accounted for 38% of
the Company's sales during the second fiscal quarter compared with 40% in the
comparable quarter a year ago. Computer systems products were 37% during the
quarter compared with 35% a year ago. Passive and electromechanical products
were 22% during the quarter compared with 23% a year ago. Miscellaneous
products accounted for 3% of sales in 1994 and 2% in 1993.
The percentage increase in cost of goods sold of 44% resulted in a gross margin
of 19.3% in the second quarter of the current year compared with 20.5% a year
ago. A principal reason for the reduced gross margin in 1994 compared with the
prior period is attributable to the incremental increase in sales volume of
microprocessors earning a relatively low gross profit margin and which are
marketed through an efficient low cost sales channel.
Warehouse, selling and administrative expenses of $27.1 million increased by
31% over the $20.7 million incurred during the prior year three- month period.
This resulted in a ratio of these expenses to sales of 13.9% for the 1994
period compared with 15.1% for the 1993 quarter.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $183,000 for the 1994 three-month period compared
with $914,000 for the same period last year; net sales of the affiliate for the
three-month period ended September 30, 1994 of $90.1 million were 31% less than
the sales of the prior year three-month period of $130.6 million. This
reduction is attributable to a lower volume of microprocessor sales.
Notwithstanding this reduction, a significant portion of the affiliate's sales
during the quarter was primarily still attributable to highly concentrated
sales of certain microprocessors in large quantities, the sales volume 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.
The effective combined tax rate for the current year three-month period was
41.7% of income before the Company's equity in its affiliate's earnings
compared with 42.0% a year ago; these effective tax rates include .2% and 1.0%
for accrued taxes on the unremitted earnings of the affiliate for 1994 and
1993, respectively.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending September 30, 1994 of $5.6 million was $.8 million
greater than the $4.8 million earned a year ago.
8
<PAGE> 9
Pioneer-Standard Electronics, Inc. owns 50% of the outstanding common stock of
Pioneer Technologies Group, Inc. The investment is accounted for by the equity
method in the Company's financial statements via the balance sheet caption of
"Investment in 50%-owned company" and via the statements of income caption of
"Equity in earnings of 50%-owned company".
<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
September 30, 1994 March 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 9 $ 8
Accounts receivable - net 33,246 29,213
Merchandise inventory 51,613 60,690
Prepaid expenses 529 405
Deferred income taxes 2,077 2,077
Shareholder notes receivable 13 52
------- -------
Total current assets 87,487 92,445
Property and equipment, at cost 10,647 10,401
Accumulated depreciation 5,050 4,746
------- -------
Net 5,597 5,655
Shareholder notes receivable 231 231
Other assets 445 262
------- -------
$93,760 $98,593
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $33,185 $44,072
Accrued liabilities 5,739 4,895
------- -------
Total current liabilities 38,924 48,967
Long-term debt 24,195 20,698
Shareholders' equity
Common stock $.10 par value 10 10
Capital in excess of par value 90 90
Retained earnings 30,541 28,828
------- -------
Total shareholders' equity 30,641 28,928
------- -------
$93,760 $98,593
======= =======
</TABLE>
9
<PAGE> 10
PIONEER TECHNOLOGIES GROUP, INC.
<TABLE>
STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Quarter ended Six months ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $90,133 $130,636 $185,875 $225,971
Costs and expenses:
Cost of goods sold 78,331 117,341 159,683 198,823
Selling and
administrative expense 10,626 9,985 22,284 20,142
------- ------- ------- -------
Operating profit 1,176 3,310 3,908 7,006
Interest expense 554 264 1,006 518
------- ------- ------- -------
Income before
income taxes 622 3,046 2,902 6,488
Provision for
income taxes 255 1,218 1,190 2,595
------- ------- ------- -------
Net income $ 367 $ 1,828 $ 1,712 $ 3,893
======= ======= ======= =======
Average shares outstanding 100,000 100,000 100,000 100,000
Earnings per share $3.67 $18.28 $17.12 $38.93
Dividends per share --- --- --- ---
</TABLE>
10
<PAGE> 11
PIONEER TECHNOLOGIES GROUP, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Six months ended
September 30,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,712 $ 3,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Items not affecting cash 670 535
Decrease (increase) in operating working capital (5,084) 18,311
Decrease (increase) in other assets (182) 53
------- -------
Total adjustments (4,596) 18,899
------- -------
Net cash provided by (used in)
operating activities (2,884) 22,792
Cash flows from investing activities:
Additions to property and equipment (612) (919)
------ -------
Net cash used in
investing activities (612) (919)
Cash flows from financing activities:
Increase (decrease) in long-term debt 3,497 (21,873)
------- -------
Net cash provided by (used in)
financing activities 3,497 (21,873)
------- -------
Net increase in cash 1 ---
Cash at beginning of period 8 7
------- -------
Cash at end of period $ 9 $ 7
======= =======
</TABLE>
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on July 27, 1993
(the "Annual Meeting"), the shareholders voted to amend the
Company's Amended Articles of Incorporation to increase the
number of authorized Common Shares of the Company from
20,000,000 to 40,000,000 Common Shares. The proposal was
passed by a vote of 7,237,942 shares for, 1,265,042 shares
against, 17,764 shares abstained and there were no broker
non-votes.
At the Annual Meeting, shareholders also voted to elect
Preston B. Heller, Jr., Arthur Rhein and Thomas C. Sullivan
to additional three-year terms as Directors of the Company.
Following is a summary of the voting:
<TABLE>
<CAPTION>
Preston B. Arthur Thomas C.
Votes Heller, Jr. Rhein Sullivan
----- -------------- ---------- -------------
<S> <C> <C> <C>
For 8,156,269 8,158,792 8,157,819
Withheld 364,479 361,956 362,929
Broker Non-Votes 0 0 0
</TABLE>
ITEM 5. OTHER INFORMATION
Effective October 28, 1994, the Company amended its Credit
Agreement providing for an increase in borrowings from $35.0
million to $45.0 million and permitting for an increase in
the maximum short-term borrowings outside of the Credit
Agreement to be outstanding at any one time from $15.0
million to $20.0 million. See Management's Discussion -
Financial Condition for addition details.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
------ -----------
10 Consolidated Amendment No. 1 to the Credit
Agreement, dated as of October 28, 1994,
together with an Amended and Restated
Promissory Note
11 Calculation of Primary Earnings Per Share
27 Financial Data Schedule
(b) FORM 8-K There were no reports on Form 8-K filed
during the three-month period ended September 30, 1994.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER-STANDARD ELECTRONICS, INC.
Date: November 10, 1994 Preston B. Heller, Jr.
------------------- -----------------------------------------------
Chairman of the Board and
Chief Executive Officer
Date: November 10, 1994 John V. Goodger
------------------- -----------------------------------------------
Vice President, Treasurer
and Assistant Secretary
13
<PAGE> 1
Exhibit 10
CONSOLIDATED AMENDMENT NO. 1
TO
CREDIT AGREEMENT
This Consolidated Amendment No. 1 to Credit Agreement (this
"Amendment"), dated as of October 28, 1994, is entered into 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 the banks ("NCB-Agent") for the purposes of the Credit
Agreement referred to below and the related writings.
WITNESSETH:
WHEREAS, the parties have entered into a Credit Agreement dated January
23, 1992, as amended by a certain Amendment Agreement dated as of June 30, 1993
(the "First Amendment") and a certain Second Amendment Agreement dated as of
May 27, 1994 (the "Second Amendment") (as amended, the "Credit Agreement"; all
terms used in the Credit Agreement being used herein with the same meaning),
which sets forth the terms and conditions upon which Borrower may obtain (a)
"subject loans" on a revolving basis until the "conversion date" (originally
January 1, 1995 but previously extended until January 1, 1997), as that term is
defined in the Credit Agreement, and on an amortizing basis thereafter and (b)
"subject BAs"; and
WHEREAS, the parties desire to amend certain provisions of the Credit
Agreement to (a) increase the aggregate amount of the subject commitments from
thirty-five million dollars ($35,000,000) to forty-five million dollars
($45,000,000) and (b) extend the term of the subject commitments from January
1, 1997 until January 1, 1998; and
WHEREAS, in light of the fact that certain previous amendments set forth
in the First Amendment and/or the Second Amendment have been affected by later
amendments and/or will be affected by this Amendment and for ease of reference,
the parties also desire to restate and consolidate in this Amendment all
amendments to the Credit Agreement that are effective on and as of the date
hereof;
NOW, THEREFORE, in consideration of the premises above and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION 1 - AMENDMENTS TO CREDIT AGREEMENT
------------------------------
A. Subsections 2A.01 and 2A.02 of the Credit Agreement are hereby amended in
their entirety to read as follows:
2A.01 AMOUNTS -- The aggregate amount of the subject commitments shall
be forty-five million dollars ($45,000,000), 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
14
<PAGE> 2
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>
$22,500,000 50% National City Bank
13,500,000 30% Society National Bank
9,000,000 20% Star Bank, N.A.
------------ ----
$45,000,000 100%
</TABLE>
2A.02 TERM -- Each subject commitment shall commence as of the date of
this Agreement and shall remain in effect on a revolving basis until
January 1, 1998 (the "conversion date") and thereafter on an amortizing
basis until its expiration on the last amortizing date, EXCEPT that a
later conversion date may be established from time to time pursuant to
subsection 2A.06 and EXCEPT that the subject commitments shall end in
any event upon any earlier reduction thereof to zero pursuant to
subsection 2A.03 or 2A.04 or any earlier termination pursuant to section
5B.
B. Subsections 3B.01, 3B.02, 3B.03, 3B.04 and 3B.05 of the Credit Agreement
are hereby amended in 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
15
<PAGE> 3
(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
(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.
C. 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).
D. 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.
E. Subsection 3D.03(ii)(A) of the Credit Agreement is hereby amended by
deleting the reference to "fifteen million dollars ($15,000,000)" and
substituting in lieu thereof a reference to "twenty million dollars
($20,000,000)".
F. The following new definition is hereby added to section 9 of the Credit
Agreement:
COMPANY refers to Borrower or to a subsidiary of Borrower, as the case
may be:
SECTION II - CONDITIONS PRECEDENT
--------------------
It is a condition precedent to the effectiveness of this Amendment that,
prior to or on the date hereof, the following items hall have been delivred to
NCB-Agent (in form and substance acceptable to NCB-Agent):
(A) an Amended and Restated Promissory Note ("Amended Note") in favor
of each bank, in the form of EXHIBIT A to this Amendment, with
all blanks appropriately completed, duly executed by Borrower:
(B) an Acknowledgment of Receipt of a copy of, and Consent and
Agreement to the terms of, this Amendment and the Amended Notes
by Pioneer-Standard Canada Inc. with respect to a certain
Continuing Guaranty of Payment executed and delivered to
NCB-Agent by such entity and dated May 27, 1994;
16
<PAGE> 4
(C) a Certificate, dated as of the date hereof, of the secretary of
Borrower certifying (1) that Borrower's Articles of Incorporation
and Code of Regulations have not been amended since the execution
of the Credit Agreement (or certifying that true, correct and
complete copies of any amendments are attached), (2) that copies
of resolutions of the Board of Directors of Borrower are attached
with respect to the approval of this Amendment and of the matters
contemplated hereby and authorizing the execution, delivery and
performance by Borrower of this Amendment and each other document
to be delivered pursuant hereto and (3) as to the incumbency and
signatures of the officers of Borrower signing this Amendment and
each other document to be delivered pursuant hereto; and
(D) Such other documents as NCB-Agent may request to implement this
Amendment and the transactions contemplated hereby.
If NCB-Agent or banks shall consummate the transactions contemplated hereby
prior to the fulfillment of any of the conditions precedent set forth above,
the consummation of such transactions shall constitute only an extension of
time for the fulfillment of such conditions and not a waiver thereof. Upon
receipt of the properly completed and executed Amended Notes, banks agree to
return to Borrower the previously executed notes respecting the subject loans
and the same shall be marked "Replaced" or "Substituted" or with words of like
import.
SECTION III - AGREEMENTS CONCERNING PIONEER-STANDARD CANADA INC.
--------------------------------------------------
Borrower agrees to cause is 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, that
Pioneer-Standard Canada Inc. shall not be required to comply with the
provisions of subsection 3D.06 (captioned "DIVIDENDS").
SECTION IV - REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to each of the other parties to
this Amendment that
(A) 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 as of the date hereof; and
(B) as of the date hereof no "default under this Agreement" has
occurred that is continuing.
SECTION V - ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS
--------------------------------------------
Borrower acknowledges and agrees that, as of the date hereof, all of
Borrower's outstanding loan obligations to banks are owed without any offset,
deduction, defense or counterclaim of any nature whatsoever.
SECTION VI - REFERENCES
----------
On or after the effective date of this Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", or words of like
import referred to the Credit Agreement, and in the subject notes or other
related writings to the "Credit Agreement", "thereof", or words of like import
17
<PAGE> 5
referring to the Credit Agreement shall mean and refer to the Credit Agreement
as amended hereby. The Credit Agreement, as amended by this Amendment, is and
shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects. To the extent any amendment set forth in the First
Amendment or the Second Amendment is omitted from this Amendment, the same
shall be deemed eliminated as between Borrower and the other parties hereto as
of the date hereof. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
NCB-Agent or banks under the Credit Agreement or constitute a waiver of any
provision of the Credit Agreement except as specifically set forth herein.
From and after the date of this Amendment references in the Credit Agreement to
EXHIBIT B shall be deemed to be references to the form of the Amended Note
attached hereto as EXHIBIT A.
SECTION VII - COUNTERPARTS AND GOVERNING LAW
------------------------------
This Amendment may be executed in any number of counterparts, each
counterpart to be executed by one or more of the parties but, when taken
together, all counterparts shall constitute one agreement. This Amendment, and
the respective rights and obligations of the parties hereto shall be construed
in accordance with and governed by Ohio law.
IT WITNESS WHEREOF, the Borrower, NCB-Agent and the banks have caused
this Amendment to be executed by their authorized officers as of the date and
year first above written.
<TABLE>
<S> <C> <C>
National City Bank, Agent Pioneer-Standard Electronics, Inc.
By: Janice E. Focke By: John V. Goodger
Printed Name: Janice E. Focke Printed Name: John V. Goodger
Title: Vice President Title: V.P., Treasurer
National City Bank Star Bank, N.A.
By: Janice E. Focke By: John D. Barrett
Printed Name: Janice E. Focke Printed Name: John D. Barrett
Title: Vice President Title: Vice President
Society National Bank
By: Michael J. Jackson
Printed Name: Michael J. Jackson
Title: Vice President
</TABLE>
18
<PAGE> 6
AMENDED AND RESTATED PROMISSORY 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 forty-five million dollars ($45,000,000) pursuant to which Borrower
may obtain subject loans from the banks upon certain terms and conditions.
This note is issued in substitution for that certain $_________________ Note
dated ____________, 19__ (the "Old Note"). This Note is not intended as a
novation of the obligations of Borrower under the Old Note but rather is merely
a restatement of the obligations thereunder after giving effect to the most
recent amendment to the Credit Agreement.
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: _______________________
Printed Name: _______________________
Title: _______________________
EXHIBIT A
19
<PAGE> 1
Exhibit 11
<TABLE>
CALCULATION OF PRIMARY EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three months ended Six months ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
and common share equivalents
outstanding 15,248,432 15,127,404 15,245,004 15,050,295
Net income $5,649 $4,790 $11,614 $9,259
Earnings per share $.37 $.31 $.76 $.61
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 7,797
<SECURITIES> 0
<RECEIVABLES> 111,178
<ALLOWANCES> 4,243
<INVENTORY> 109,417
<CURRENT-ASSETS> 230,159
<PP&E> 48,530
<DEPRECIATION> 21,526
<TOTAL-ASSETS> 278,014
<CURRENT-LIABILITIES> 114,610
<BONDS> 47,169
<COMMON> 6,627
0
0
<OTHER-SE> 107,554
<TOTAL-LIABILITY-AND-EQUITY> 278,014
<SALES> 378,255
<TOTAL-REVENUES> 378,255
<CGS> 305,667
<TOTAL-COSTS> 305,667
<OTHER-EXPENSES> 52,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,645
<INCOME-PRETAX> 19,362
<INCOME-TAX> 7,748
<INCOME-CONTINUING> 11,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,614
<EPS-PRIMARY> .76
<EPS-DILUTED> 0
</TABLE>
