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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
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For the quarterly period ended June 30, 1994.
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OR
---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 05734
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Pioneer-Standard Electronics, Inc.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 587-3600
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
Common Shares, as of the latest practical date: COMMON SHARES, WITHOUT PAR
VALUE, AS OF AUGUST 8, 1994: 14,903,908 (SHARES OUTSTANDING REFLECT EFFECTS OF
A THREE-FOR-TWO STOCK SPLIT PAYABLE AUGUST 1, 1994 TO SHAREHOLDERS OF RECORD
JULY 6, 1994).
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<TABLE>
PART I - FINANCIAL INFORMATION
PIONEER-STANDARD ELECTRONICS, INC.
BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
June 30, 1994 March 31, 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash $ 10,413 $ 5,954
Accounts receivable - net 99,855 81,155
Merchandise inventory 110,139 85,754
Prepaid expenses 1,312 919
Deferred income taxes 4,391 4,391
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Total current assets 226,110 178,173
Investment in 50% - owned company 15,136 14,463
Other assets 5,581 1,831
Property and equipment, at cost 45,833 45,817
Accumulated depreciation 19,896 20,245
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Net 25,937 25,572
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$272,764 $220,039
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 9,000 $ 2,000
Accounts payable 87,715 68,585
Accrued liabilities 24,111 19,400
Long-term debt due within
one year 3,018 3,056
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Total current liabilities 123,844 93,041
Long-term debt 38,208 22,272
Deferred income taxes 2,040 1,986
Shareholders' equity
Common stock, at stated value 6,625 6,609
Capital in excess of stated value 16,104 15,806
Retained earnings 85,943 80,325
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Total shareholders' equity 108,672 102,740
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$272,764 $220,039
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</TABLE>
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<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Quarter ended
June 30,
1994 1993
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<S> <C> <C>
Net sales $183,832 $134,509
Costs and expenses:
Cost of goods sold 148,677 107,149
Warehouse, selling and
administrative expense 25,322 20,735
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Operating profit 9,833 6,625
Interest expense 701 668
Equity in earnings of
50%-owned company 673 1,032
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Income before income taxes 9,805 6,989
Provision for income taxes 3,840 2,520
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Net income $ 5,965 $ 4,469
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Average shares outstanding 15,241,422 14,972,493
Shares outstanding at end of period 14,895,384 14,690,061
Earnings per share $.39 $.30
Dividends per share $.023 $.02
<FN>
NOTE: All share and per share data have been restated for all periods to
reflect the three-for-two stock split effected in the form of a 50%
share dividend payable August 1, 1994 to shareholders of record
July 6, 1994. Prior to effects of the stock split, average shares
outstanding were 10,160,948 and 9,981,622 and shares outstanding at
the end of each period were 9,930,256 and 9,793,374 in 1994 and
1993, respectively. Comparable earnings per share were $.59 and
$.45 and dividends per share were $.035 and $.03 in 1994 and 1993,
respectively.
</TABLE>
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<TABLE>
PIONEER-STANDARD ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Three months ended
June 30,
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,965 $4,469
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,605 1,399
Undistributed earnings of affiliate (673) (1,032)
Increase in operating working capital (13,007) (14,332)
Increase in other assets (1,590) (1)
Deferred taxes 54 2
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Total adjustments (13,611) (13,964)
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Net cash used in
operating activities (7,646) (9,495)
Cash flows from investing activities:
Acquisition of business (9,009) ---
Additions to property and equipment (1,751) (1,029)
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Net cash used in investing activities (10,760) (1,029)
Cash flows from financing activities:
Increase in short-term financing 7,000 10,000
Increase in revolving credit borrowings 20,000 3,000
Decrease of revolving credit borrowings (4,000) (3,000)
Decrease in other long-term
debt obligations (102) (135)
Issuance of common shares under company
stock option plan 314 ---
Dividends paid (347) (294)
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Net provided by financing activities 22,865 9,571
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Net increase (decrease) in cash 4,459 (953)
Cash at beginning of period 5,954 1,864
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Cash at end of period $10,413 $ 911
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</TABLE>
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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. 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 two quarters 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 ended June 30, 1994 and 1993. The results of
operations for the three-month periods are not necessarily indicative of
results which may be expected for a full year.
5
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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. The Company paid $12.5 million Cdn. ($9.0 million
U.S.) to Westburne on June 1, 1994. Contract terms provide for the balance of
the estimated purchase price, $2.1 million Cdn. to be paid to Westburne after
September 14, 1994.
Current assets increased by $47.9 million and current liabilities increased by
$30.8 million during the three-month period ended June 30, 1994, resulting in
an increase of $17.1 million of working capital. The current ratio was 1.8:1
at June 30, 1994, compared with 1.9:1 at year-end, March 31, 1994.
During the first three months of the current year, total interest-bearing debt
increased by $22.9 million. The ratio of interest-bearing debt to
capitalization was 32% at June 30, 1994 compared with 21% at March 31, 1994.
The increase in capital requirements is attributable to the working capital
needs arising from increased sales volume and the investment in Zentronics
described above. Current quarter sales of $183.8 million are 37% ahead of last
year's first quarter sales and up 16% from the trailing fiscal fourth quarter
sales volume.
Management estimates that capital spending plans for the current year will
approximate $10.0 million ($1.8 million was expended in the first three 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.
THREE MONTHS ENDED JUNE 30, 1994 COMPARED WITH
THE THREE MONTHS ENDED JUNE 30, 1993
Net sales for the three-month period ended June 30, 1994 of $183.8 million
increased 37% over sales of the prior year three-month period of $134.5
million. The increase in sales reflects continuing strong demand for
electronic components and computer and peripheral products, especially
microprocessors. Semiconductor products accounted for 38% of the Company's
sales during both the first fiscal quarters of 1994 and 1993. Computer systems
products comprised 36% of sales in both quarters. Passive and
electromechanical products were 23% of the Company's business in 1994 compared
with 24% a year earlier. Miscellaneous products accounted for 3% of sales in
1994 and 2% in 1993.
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The percentage increase in cost of goods sold of 39% resulted in a gross margin
of 19.1% in the first quarter of the current year compared with 20.3% a year
ago. A principal reason for the reduced gross margin in 1994 is attributable
to a change in product mix, particularly with respect to the 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 $25.3 million increased by
22% over the $20.7 million incurred during the prior year three-month period.
This resulted in a ratio of these expenses to sales of 13.8% for the 1994
period compared with 15.4% for the 1993 quarter.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $673,000 for the 1994 three-month period compared
with $1,032,000 for the same period last year; net sales of the affiliate for
the three-month period ended June 30, 1994 of $95.7 million were nominally
greater than the sales of the prior year three-month period of $95.3 million.
A large portion of the affiliate's sales was primarily 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.
The effective combined tax rate for the current year three-month period was
42.0% of income before the Company's equity in its affiliate's earnings in 1994
compared with 42.3% a year ago; this effective tax rate includes .6% and 1.4%
for accrued taxes on the unremitted earnings of the affiliate for 1994 and
1993, respectively.
Results in the quarter included one month of Zentronics operations, the new
Canadian electronics distribution unit acquired on June 1, 1994, which had an
immaterial effect on the overall results.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending June 30, 1994 of $6.0 million was $1.5 million
greater than the $4.5 million earned a year ago.
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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.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
June 30, 1994 March 31, 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash $ 8 $ 8
Accounts receivable - net 34,711 29,213
Merchandise inventory 52,291 60,690
Prepaid expenses 233 405
Deferred income taxes 2,077 2,077
Shareholder notes receivable 57 52
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Total current assets 89,377 92,445
Property and equipment, at cost 10,729 10,401
Accumulated depreciation 5,066 4,746
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Net 5,663 5,655
Shareholder notes receivable 231 231
Other assets 295 262
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$95,566 $98,593
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $29,845 $44,072
Accrued liabilities 5,590 4,895
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Total current liabilities 35,435 48,967
Long-term debt 29,858 20,698
Shareholders' equity
Common stock $.10 par value 10 10
Capital in excess of par value 90 90
Retained earnings 30,173 28,828
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Total shareholders' equity 30,273 28,928
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$95,566 $98,593
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</TABLE>
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<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Three months ended
June 30,
1994 1993
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<S> <C> <C>
Net sales $95,742 $95,335
Costs and expenses:
Cost of goods sold 81,352 81,482
Selling and
administrative expense 11,658 10,157
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Operating profit 2,732 3,696
Interest expense 452 254
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Income before
income taxes 2,280 3,442
Provision for
income taxes 935 1,377
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Net income $ 1,345 $ 2,065
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Average shares outstanding 100,000 100,000
Earnings per share $13.45 $20.65
Dividends per share --- ---
</TABLE>
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<TABLE>
PIONEER TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Three months ended
June 30,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,345 $ 2,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Items not affecting cash 253 251
Decrease (increase) in operating working capital (10,464) 13,903
Decrease (increase) in other assets (33) 71
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Total adjustments (10,244) 14,225
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Net cash provided by (used in)
operating activities (8,899) 16,290
Cash flows from investing activities:
Additions to property and equipment (261) (362)
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Net cash used in
investing activities (261) (362)
Cash flows from financing activities:
Increase (decrease) in long-term debt 9,160 (15,928)
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Net cash (used in) provided by
financing activities 9,160 (15,928)
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Net change in cash --- ---
Cash at beginning of period 8 7
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Cash at end of period $ 8 $ 7
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</TABLE>
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) FORM 8-K A current report on Form 8-K, dated June 1, 1994, was
filed to report that on June 1, 1994 Pioneer-Standard Electronics,
Inc. acquired certain assets of the Zentronics Division of
Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian
corporation, and assumed certain of Westburne's liabilities
pursuant to an Asset Purchase Agreement, a copy of which was filed
as an exhibit thereto. The transaction was completed by
Pioneer-Standard Canada Inc., a newly-formed Canadian subsidiary
of the Company.
There were no other reports on Form 8-K during the three-month
period ending June 30, 1994.
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: August 11, 1994 Preston B. Heller, Jr.
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Chairman
Date: August 11, 1994 John V. Goodger
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Vice President & Treasurer
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