PIONEER STANDARD ELECTRONICS INC
10-Q, 1995-08-14
ELECTRONIC PARTS & EQUIPMENT, NEC
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<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 June 30, 1995.
                               -------------
                                       OR

                    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
        -----       OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _________________.

Commission file number 0-5734
                       ------

                      Pioneer-Standard Electronics, Inc.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

            Ohio                                       34S0907152       
----------------------------------        ------------------------------------
(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 phone number, including area code:  (216) 587-3600
                                                 ---------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  X      No
   -----      -----

Indicate the number of shares outstanding of each of the issuer's classes of
Common Shares, as of the latest practical date:  COMMON SHARES, WITHOUT PAR
VALUE, AS OF AUGUST 1, 1995:  14,953,921.
<PAGE>   2
PART I - FINANCIAL INFORMATION
                                      
                      PIONEER-STANDARD ELECTRONICS, INC.
                         CONSOLIDATED BALANCE SHEETS
                            (Dollars in Thousands)
                                      

<TABLE>
<CAPTION>
                                                                         June 30, 1995
                                                                          (Unaudited)                    March 31, 1995
                                                                        ---------------                  --------------
<S>                                                                      <C>                             <C>
ASSETS

Current assets
  Cash                                                                    $  16,454                       $   9,598
  Accounts receivable - net                                                 129,518                         133,987
  Merchandise inventory                                                     147,172                         123,008
  Prepaid expenses                                                            2,278                           1,623
  Deferred income taxes                                                       5,708                           5,708
                                                                           --------                        --------
    Total current assets                                                    301,130                         273,924

Investment in 50% - owned company                                            17,415                          16,963
Other assets                                                                  5,636                           5,599

Property and equipment, at cost                                              57,549                          55,396
Accumulated depreciation                                                     22,712                          24,467
                                                                           --------                        --------
  Net                                                                        34,837                          30,929
                                                                           --------                        --------
                                                                          $ 359,018                       $ 327,415
                                                                          =========                       =========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Notes payable to banks                                                  $   3,000                       $   7,000
  Accounts payable                                                          113,450                         106,905
  Accrued liabilities                                                        26,771                          25,625
  Long-term debt due within
    one year                                                                  2,894                           2,956
                                                                           --------                        --------
    Total current liabilities                                               146,115                         142,486
                                                                                                                   
Long-term debt                                                               77,316                          56,318
Deferred income taxes                                                         2,232                           2,196

Shareholders' Equity
  Common stock, at stated value                                               6,646                           6,630
  Capital in excess of stated value                                          16,702                          16,318
  Retained earnings                                                         109,940                         103,646
  Foreign currency translation adjustment                                        67                            (179)
                                                                           --------                        --------
  Retained earnings                                                         133,355                         126,415
                                                                           --------                        --------
                                                                          $ 359,018                       $ 327,415

<FN>
See accompanying notes.
</TABLE>

                                       2
<PAGE>   3
                      PIONEER-STANDARD ELECTRONICS, INC.
                                      
                      CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)
               (Dollars in Thousands Except Per Share Amounts)
                                      


<TABLE>
<CAPTION>
                                                       Quarter ended
                                                         June 30,
                                               1995                   1994
                                               ----                   ----
<S>                                         <C>                   <C>
 Net sales                                  $  224,724             $  183,832

 Cost and expenses:
  Cost of goods sold                           181,114                148,677
  Warehouse, selling and
   administrative expense                       31,148                 25,322 
                                            ----------             ----------
 Operating profit                               12,462                  9,833

 Interest expense                                1,449                    701
 Equity in earnings of
    50% -owned company                             451                    673 
                                            ----------             ----------

 Income before income taxes                     11,464                  9,805

 Provision for income taxes                      4,648                  3,840
                                            ----------             ----------
 Net income                                   $  6,816             $    5,965 
                                            ==========             ==========

 Average shares outstanding                 15,390,234             15,241,422

 Shares outstanding at end of period        14,951,821             14,895,384

 Earning per share                          $      .44             $      .39

 Dividends per share                        $     .035             $     .023

<FN>
See accompanying notes.
</TABLE>

                                       3
<PAGE>   4
                      PIONEER-STANDARD ELECTRONICS, INC.
                                      
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                            (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                               Three months ended
                                                                                     June 30,
                                                                           1995                      1994
                                                                           ----                      ----
<S>                                                                       <C>                       <C>
Cash flows from operating activities:
  Net income                                                              $  6,816                  $  5,965

  Adjustments to reconcile net income to net cash
    used in operating activities:
      Depreciation and amortization                                          2,173                     1,605
      Undistributed earnings of affiliate                                     (451)                     (673)
      Increase in operating working capital                                (12,491)                  (13,007)
      Increase in other assets                                                   1                    (1,590)
      Deferred taxes                                                            36                        54
                                                                          --------                  --------
        Total adjustments                                                  (10,732)                  (13,611)
                                                                          --------                  --------

        Net cash used in
          operating activities                                              (3,916)                   (7,646)

Cash flows from investing activities:
  Acquisition of business                                                      ---                    (9,009)
  Additions to property and equipment                                       (6,018)                   (1,751)
                                                                          --------                  --------
    Net cash used in investing activities                                   (6,018)                  (10,760)

Cash flows from financing activities:
  Increase (decrease) in short-term financing                               (4,000)                    7,000
  Increase in revolving credit borrowings                                   27,000                    20,000
  Prepayment of revolving credit borrowings                                 (6,000)                   (4,000)
  Decrease in other long-term
    debt obligations                                                           (64)                     (102)
  Issuance of common shares under company
    stock option plan                                                          400                       314
  Dividends paid                                                              (522)                     (347)
                                                                          --------                  --------
    Net cash provided by financing activities                               16,814                    22,865

Effect of exchange rate changes on cash                                        (24)                      ---
                                                                          --------                  --------

Net increase in cash                                                         6,856                     4,459

Cash at beginning of period                                                  9,598                     5,954
                                                                          --------                  --------
Cash at end of period                                                     $ 16,454                  $ 10,413
                                                                          ========                  ========
<FN>
See accompanying notes.
</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.  Common
share equivalents consist of shares exercisable for stock options computed by
using the treasury stock method.

2.  STOCK SPLIT

On July 25, 1995, 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 September 6, 1995 to shareholders of record August 16, 1995.  The share
and per share data have not been restated for the two quarters presented to
reflect the stock split.

3.  MANAGEMENT OPINION

The information furnished herein reflects all normal and recurring 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, 1995 and 1994.
The results of operations for the three-month periods are not necessarily
indicative of results which may be expected for a full year.





                                      5
<PAGE>   6
                      PIONEER-STANDARD ELECTRONICS, INC.
                                      
                   Management's Discussion and Analysis of
                Financial Condition and Results of Operations



FINANCIAL CONDITION

Current assets increased by $27.2 million and current liabilities increased by
$3.6 million during the three-month period ended June 30, 1995, resulting in an
increase of $23.6 million of working capital.  The current ratio was 2.1:1 at
June 30, 1995, compared with 1.9:1 at year-end, March 31 1995.

During the first three months of the current year, total interest-bearing debt
increased by $16.9 million.  The ratio of interest-bearing debt to
capitalization was 38% at June 30, 1995 compared with 34% at March 31, 1995.

The increase in capital requirements is attributable to the working capital
needs arising from an increased level of business activity.  As indicated in
the following narrative, current quarter sales of $224.7 million are 22% ahead
of last year's first quarter sales.

Effective August 3, 1995, 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 $65.0 million to $100.0 million and
allows for an increase in the maximum short-term borrowings outside of the
Credit Agreement to be outstanding at any one time from $20.0 million to $30.0
million.  In addition, the maturity date of the facility was extended to July
31, 1998.  As of June 30, 1995, Credit Agreement borrowings were $62.0 million
and short-term borrowings outside of the Credit Agreement were $3.0 million.

Management estimates that capital expenditures for the current year will
approximate $20.0 million ($6.0 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, 1995 COMPARED WITH
THE THREE MONTHS ENDED JUNE 30, 1994

Net sales for the three-month period ended June 30, 1995 of $224.7 million
increased 22% over sales of the prior year three-month period of $183.8
million.  The increase in sales reflects continuing strong demand for
electronic components and computer and peripheral products.  Semiconductor
products accounted for 34% of the Company's sales in the current quarter,
compared with 38% a year ago.  Computer systems products were 40% of sales in
1995 versus 36% last year.  Passive and electromechanical products were 24% of
the Company's business in 1995 compared with 23% a year earlier.  Miscellaneous
products accounted for 2% of sales in 1995 and 3% in 1994.





                                      6
<PAGE>   7
Cost of goods sold increased 22%, resulting in a gross margin of 19.4% in the
first quarter of the current year compared with 19.1% a year ago.

Warehouse, selling and administrative expenses of $31.1 million increased by
23% over the $25.3 million incurred during the prior year three-month period.
This resulted in a ratio of these expenses to sales of 13.9% for the 1995
period compared with 13.8% for the 1994 quarter.

The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $451,000 for the 1995 three-month period compared
with $673,000 for the same period last year; net sales of the affiliate for the
three-month period ended June 30, 1995 of $79.8 million were 17% less than
sales of the prior three-month period of $95.7 million.  Lower 1995 net sales
reflected a reduced volume of microprocessor sales which earn a relatively low
gross profit margin.  This reduction in sales impacted current year net income.
Notwithstanding lower microprocessor sales volume during the current quarter, a
significant portion of the affiliate's total sales involved highly concentrated
sales of certain microprocessors in large quantities which might not be
sustainable in future periods and the effect of which could result in a
significant impact on the net income of the affiliate.

The effective tax rate for the current year three-month period was 40.5%
compared with 39.2% a year ago.

Primarily as a result of the factors above, the Company's net income for the
three-month period ending June 30, 1995 of $6.8 million was $.8 million greater
than the $6.0 million earned a year ago.





                                      7
<PAGE>   8
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>
                                                                        June 30, 1995
                                                                         (Unaudited)                   March 31, 1995
                                                                       ---------------                 --------------
<S>                                                                   <C>                            <C>
ASSETS

Current assets
  Cash                                                                  $        10                    $          9
  Accounts receivable - net                                                  37,068                          36,378
  Merchandise inventory                                                      62,668                          46,895
  Prepaid expenses                                                              300                             494
  Deferred income taxes                                                       1,075                           1,246
  Shareholder notes receivable                                                   69                              63
                                                                           --------                         -------
    Total current assets                                                    101,190                          85,085

Property and equipment, at cost                                              11,078                          10,697
Accumulated depreciation                                                     (5,660)                         (5,289)
                                                                           --------                         -------
  Net                                                                         5,418                           5,408

Shareholder notes receivable                                                    192                             193
Other assets                                                                    208                             272
                                                                           --------                         -------
                                                                           $107,008                       $  90,958
                                                                           ========                       =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Accounts payable                                                        $  36,293                       $  34,711
  Accrued liabilities                                                         5,533                           4,170
                                                                           --------                         -------
    Total current liabilities                                                41,826                          38,881

Long-term debt                                                               30,352                          18,148

Shareholders' Equity
  Common stock $.10 par value                                                    10                              10
  Capital in excess of par value                                                 90                              90
  Retained earnings                                                          34,730                          33,829
                                                                           --------                         -------
    Total shareholders' equity                                               34,830                          33,929
                                                                           --------                         -------
                                                                           $107,008                         $90,958
                                                                           ========                         =======
</TABLE>





                                       8
<PAGE>   9
                       PIONEER TECHNOLOGIES GROUP, INC.
                                      
                             STATEMENTS OF INCOME
                                 (Unaudited)
               (Dollars in Thousands Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                           Three months ended
                                                                                 June 30,
                                                                      1995                      1994
                                                                      ----                      ----
<S>                                                                <C>                        <C>

Net Sales                                                           $  79,809                  $  95,742

Costs and expenses:
   Cost of goods sold                                                  66,206                     81,352
   Selling and
     administrative expense                                            11,295                     11,658
                                                                    ---------                  ---------
Operating profit                                                        2,308                      2,732

Interest expense                                                          568                        452
                                                                    ---------                  ---------
Income before
   income taxes                                                         1,740                      2,280

Provision for
   income taxes                                                           838                        935
                                                                    ---------                  ---------
Net income                                                          $     902                  $   1,345
                                                                    =========                  =========

Average shares outstanding                                            100,000                    100,000

Earnings per share                                                  $    9.02                     $13.45

Dividends per share                                                        --                         --
</TABLE>





                                       9
<PAGE>   10
                       PIONEER TECHNOLOGIES GROUP, INC.
                                      
                           STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                            (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                            Three months ended
                                                                                  June 30,
                                                                       1995                      1994
                                                                       ----                      ----
<S>                                                                  <C>                       <C>
Cash flows from operating activities:
  Net income                                                          $    902                  $  1,345
  Adjustments to reconcile net income to net cash
    used in operating activities:
      Items not affecting cash                                              406                      253
      Increase in operating working capital                             (13,330)                 (10,464)
      Decrease (increase) in other assets                                   235                      (33)
                                                                      ---------                 ---------
        Total adjustments                                               (12,689)                 (10,244)
                                                                      ---------                 ---------
        Net cash used in
          operating activities                                          (11,787)                  (8,899)

Cash flows from investing activities:
  Additions to property and equipment                                      (416)                    (261)
                                                                      ---------                 ---------
    Net cash used in investing activities                                  (416)                    (261)
Cash flows from financing activities:
  Increase in long-term debt                                             12,204                    9,160
                                                                      ---------                 ---------
    Net cash provided by
      financing activities                                               12,204                    9,160

Net change in cash                                                            1                       --
Cash at beginning of period                                                   9                         8
                                                                      ---------                 ---------
Cash at end of period                                                 $      10                 $       8
                                                                      =========                 =========
</TABLE>



       10
<PAGE>   11
PART II - OTHER INFORMATION


ITEM 1.       OTHER INFORMATION
              Effective August 3, 1995, the Company amended its Credit 
              Agreement providing for an increase in borrowings from $65.0
              million to $100.0 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 $20.0 million to $30.0
              million.  See Management's Discussion - Financial Condition 
              for addition details.
          
ITEM 2.       EXHIBITS AND REPORTS ON FORM 8-K
              (a)    EXHIBITS
<TABLE>
<CAPTION>
              Number    Description
              ------    -----------
              <S>       <C>
              10        Consolidated Amendment No. 3 to the Credit Agreement, 
                        dated as of  August 3, 1995.  
              11        Calculation of Primary Earnings Per Share
              27        Financial Data Schedule
</TABLE>
              (b)    FORM 8-K    There were no reports on Form 8-k filed
                     during the three-month period ended June 30, 1995.



                                   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, 1995                      James L. Bayman
       ---------------            ----------------------------------
                                           President and CEO

Date:  August 11, 1995                       John V. Goodger
       ---------------            ----------------------------------
                                      Vice President & Treasurer


                                      11

<PAGE>   1
                                                                      Exhibit 10


                          CONSOLIDATED AMENDMENT NO. 3
                                       TO
                                CREDIT AGREEMENT



     This Consolidated Amendment No. 3 to Credit Agreement (this "Amendment"),
dated as of August 3, 1995, 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 Amendment Agreement dated as of June 30, 1993 (the "First
Amendment"), Second Amendment Agreement dated as of May 27, 1994 (the "Second
Amendment"), Consolidated Amendment No. 1 dated as of October 28, 1994 and
Consolidated Amendment No. 2 dated as of February 28, 1995 (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, 1998), 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
sixty-five million dollars ($65,000,000) to one hundred million dollars
($100,000,000), (b) extend the term of the subject commitments from January 1,
1998 until July 31, 1998, (c) delete the bankers acceptance financing option 
and (d) amend certain covenants; and

     WHEREAS, in light of the fact that certain previous amendments set forth 
in the First Amendment, the Second Amendment, Consolidated Amendment No. 1
and/or Consolidated Amendment No. 2 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:





                                      12
<PAGE>   2
SECTION I - 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 one hundred million dollars ($100,000,000), 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>
             $ 53,500,000          53.5%                   National City Bank
               33,500,000          33.5%                Society National Bank
               13,000,000          13.0%                      Star Bank, N.A.
           --------------        -------            -------------------------
             $100,000,000         100.0%                                Total
</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 July 31, 1998 (the "expiration date") EXCEPT that a later
         expiration 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 any earlier termination pursuant to section 5B.

B.  Subsection 2A.04 of the Credit Agreement is hereby deleted in its entirety 
and replaced with the following:

         2A.04 [RESERVED]

C.  Subsection 2B.04 of the Credit Agreement is hereby deleted in its entirety 
and replaced with the following:

         2B.04 [RESERVED]

D.  The introductory language and clause (c) of subsection 2B.05 of the Credit
Agreement are hereby amended in their entirety to read as follows:

         2B.05  CONTRACT PERIODS -- Each series of fixed-rate loans shall have
         applicable thereto a contract period to be duly elected by Borrower in
         the credit request therefor.  Each contract period shall begin on the
         date of borrowing and shall end on such date, not later than the
         expiration date, as Borrower may select subject, however, to the
         following:

            (c)  Borrower shall never elect a contract period for any series 
                 of fixed-rate loans the term of which extends beyond the 
                 expiration date.



                                      13
<PAGE>   3
E. Subsection 2B.06 of the Credit Agreement is hereby amended in its entirety to
read as follows:

         2B.06 MATURITIES -- The stated maturity of each RR loan shall be the
         expiration date.  The stated maturity of each fixed-rate loan shall be
         the last day of the contract period applicable thereto.  In no event,
         however, shall the stated maturity of any fixed-rate loan be later
         than the expiration date.

F. Clause (b) of subsection 2B.09 of the Credit Agreement is hereby amended in 
its entirety to read as follows:

         (b)  Prior to maturity each LIBOR loan shall bear interest during each 
              contract period applicable to it at a rate equal to the LIBOR 
              pre-margin rate in effect at the start of the contract period 
              plus six hundred twenty-five/one-thousandths of one percent 
              (.625%) per annum.

G. Clause (d) of subsection 2B.10 of the Credit Agreement is hereby amended in 
its entirety to read as follows:

         (d)   No prepayment shall of itself reduce any subject commitment.

H. Subsection 2C.02 of the Credit Agreement is hereby deleted in its entirety 
and all other references in the Credit Agreement to "subject BA" shall be of no
further force or effect.

I. 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
         consolidated net worth of the companies at any time to be less than
         the then required minimum amount.  The required minimum amount
         shall be one hundred five million dollars ($105,000,000) EXCEPT that
         the required minimum amount shall be permanently increased

                  (a)  on June 30, 1995 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' consolidated working capital at any time to fall below one
         hundred million dollars ($100,000,000).





                                      14
<PAGE>   4
         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 consolidated net income of the companies (EXCEPT
                  Borrower's equity in any income or loss of PTGI) plus

                  (b)  the consolidated interest expense of the companies plus

                  (c)  the consolidated federal, state and local income taxes
                  of the companies plus

                  (d)  the consolidated operating lease expense of the companies

         for any four-quarter period to be less than amount equal to one
         hundred seventy-five percent (175%) of the sum of

                  (a)  the consolidated interest expense of the companies plus

                  (b)  the consolidated operating lease expenses of the
                  companies plus

                  (c)  the consolidated principal payments of funded
                  indebtedness of the companies which are payable within twelve
                  (12) months after the date as of which this ratio is
                  determined

         for that four-quarter period, all as determined on a fully
         consolidated basis.

J. 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 clauses (iii) and (iv):

         (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 ($10,800,000) or

         (iv)  any acquisition of the assets or stocks of any corporation if
         the aggregate of the consideration paid by Borrower for such
         acquisition does not exceed twelve million dollars ($12,000,000).

K. 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 twenty million
         dollars ($20,000,000) at any one time.

L. Subsection 3D.03(ii)(A) of the Credit Agreement is hereby amended by 
deleting the reference to "twenty million dollars ($20,000,000)" and
substituting in lieu thereof a reference to "thirty million dollars 
($30,000,000)".

M. Subsection 3D.05 of the Credit Agreement is hereby amended in its entirety to
read as follows: 



                                      15
<PAGE>   5
         3D.05  FIXED ASSETS -- Borrower will not invest (net after trade-ins,
         if any) in fixed assets and leasehold improvements during any fiscal
         year (commencing with the present year) more than the following
         amounts for the following periods:

<TABLE>
             <S>                                                <C>
             For the fiscal year ending March 31, 1996          $25,000,000
             For the fiscal year ending March 31, 1997          $15,000,000 
             For the fiscal year ending March 31, 1998          $15,000,000
</TABLE>

N. The definitions of "amortization date," "amortization payment" and 
"conversion date" are hereby deleted from the Credit Agreement and the 
following new definitions are hereby added to section 9 of the Credit Agreement:

         COMPANY refers to Borrower or to a subsidiary of Borrower, as the case
         may be;

         EXPIRATION DATE means the date referred to as such in subsection
         2A.02, except that in the event of  any extension pursuant to
         subsection 2A.06, "expiration date" shall mean the latest date to
         which the subject commitments shall have been so extended;

O. All references in the Credit Agreement to "conversion date" shall be
deemed to be references to the "expiration date."

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 shall have been
delivered 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;

         (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




                                      16
<PAGE>   6
         officers of Borrower signing this Amendment and each other document  
         to be delivered pursuant hereto;

         (D)     a separate agreement from Borrower in which Borrower has
         agreed to pay NCB-Agent, for its own account, certain fees; and

         (E)     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 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, 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 and after the effective date of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of
like import referring 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>   7
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, the Second Amendment, Consolidated Amendment No. 1 or Consolidated
Amendment No. 2 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.

         IN WITNESS WHEREOF, the Borrower, NCB-Agent and the banks have caused
this Amendment to be executed by their authorized officers as the date and year
first above written.


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: Vice President & 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: Lawrence A. Mack                         
   ---------------------------------         

Printed Name:  Lawrence A. Mack            
             -----------------------
Title:  Vice President                     
      ------------------------------       





                                      18

<PAGE>   1
<TABLE>

                                                                     Exhibit 11
                                      
                                      
                  CALCULATION OF PRIMARY EARNINGS PER SHARE
               (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                      


                                                    Three months ended
                                                         June 30,
                                                 1995                 1994
                                                 ----                 ----
<S>                                           <C>                   <C>
Weighted average common shares                          
   and common share equivalents                             
   outstanding                                 15,390,234            15,241,422
                                                         
                                                         
Net income                                          6,816                 5,965
                                                         
                                                         
Earnings per share                                   $.44                  $.39
                                                         
</TABLE>                                                 
                                                                  
                                                                  
                                                                  

                                      19

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          MAR-31-1996
<PERIOD-END>                               JUN-30-1995
<CASH>                                          16,454
<SECURITIES>                                         0
<RECEIVABLES>                                  134,542
<ALLOWANCES>                                     5,024
<INVENTORY>                                    147,172
<CURRENT-ASSETS>                               301,130
<PP&E>                                          57,549
<DEPRECIATION>                                  22,712
<TOTAL-ASSETS>                                 359,018
<CURRENT-LIABILITIES>                          146,115
<BONDS>                                         77,316
<COMMON>                                         6,646
                                0
                                          0
<OTHER-SE>                                     126,709
<TOTAL-LIABILITY-AND-EQUITY>                   359,018
<SALES>                                        224,724
<TOTAL-REVENUES>                               224,724
<CGS>                                          181,114
<TOTAL-COSTS>                                  181,114
<OTHER-EXPENSES>                                31,148
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               1,449
<INCOME-PRETAX>                                 11,464
<INCOME-TAX>                                     4,648
<INCOME-CONTINUING>                              6,816
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     6,816
<EPS-PRIMARY>                                      .44
<EPS-DILUTED>                                        0
        

</TABLE>


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