<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, 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 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 1, 1995: 22,451,135. --------------------------
- ------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, 1995
(Unaudited) March 31, 1995
----------------- ----------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 18,845 $ 9,598
Accounts receivable - net 128,127 133,987
Merchandise inventory 137,352 123,008
Prepaid expenses 2,667 1,623
Deferred income taxes 5,708 5,708
----------- ---------
Total current assets 292,699 273,924
Investment in 50% - owned company 17,872 16,963
Other assets 5,684 5,599
Property and equipment, at cost 62,466 55,396
Accumulated depreciation 24,775 24,467
----------- ---------
Net 37,691 30,929
----------- ---------
$ 353,946 $ 327,415
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 17,000 $ 7,000
Accounts payable 89,082 106,905
Accrued liabilities 22,260 25,625
Long-term debt due within
one year 2,873 2,956
----------- ----------
Total current liabilities 131,215 142,486
Long-term debt 80,313 56,318
Deferred income taxes 2,268 2,196
Shareholders' equity
Common stock, at stated value 6,653 6,630
Capital in excess of stated value 16,884 16,318
Retained earnings 116,121 103,646
Foreign currency translation adjustment 492 (179)
----------- ----------
Retained earnings 140,150 126,415
----------- ----------
$353,946 $ 327,415
=========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 3
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter ended Six months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $234,913 $194,423 $459,637 $378,255
Cost and expenses:
Cost of goods sold 189,557 156,990 370,671 305,667
Warehouse, selling and
administrative expense 32,690 27,115 63,838 52,437
-------- -------- -------- --------
Operating profit 12,666 10,318 25,128 20,151
Interest expense 1,516 944 2,965 1,645
Equity in earnings of
50% -owned company 458 183 909 856
-------- -------- -------- --------
Income before income taxes 11,608 9,557 23,072 19,362
Provision for income taxes 4,903 3,908 9,551 7,748
------- ------- ------- -------
Net income $ 6,705 $ 5,649 $ 13,521 $ 11,614
======== ======= ======== =========
Average shares outstanding 23,252,372 22,872,648 23,178,946 22,867,506
Shares outstanding at end of period 22,451,135 22,363,569 22,451,135 22,363,569
Earning per share $.29 $.25 $.58 $.51
Dividends per share $.023 $.02 $.047 $.035
</TABLE>
See accompanying notes.
3
<PAGE> 4
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six months ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,521 $ 11,614
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,334 3,245
Undistributed earnings of affiliate (909) (856)
Increase in operating working capital (30,269) (26,976)
Increase in other assets - (1,451)
Deferred taxes 72 (232)
--------- ---------
Total adjustments (26,772) (26,270)
--------- ---------
Net cash used in
operating activities (13,251) (14,656)
Cash flows from investing activities:
Acquisition of business - (10,068)
Additions to property and equipment (10,961) (4,429)
--------- ---------
Net cash used in investing activities (10,961) (14,497)
Cash flows from financing activities:
Increase in short-term financing 10,000 6,500
Increase in revolving credit borrowings 62,000 30,000
Repayment of revolving credit borrowings (38,000) (5,000)
Decrease in other long-term
debt obligations (88) (146)
Issuance of common shares under company
stock option plan 589 517
Dividends paid (1,046) (794)
--------- ---------
Net cash provided by financing activities 33,455 31,077
Effect of exchange rate changes on cash 4 (81)
--------- ---------
Net increase in cash 9,247 1,843
Cash at beginning of period 9,598 5,954
--------- --------
Cash at end of period $18,845 $ 7,797
========= ========
</TABLE>
See accompanying notes.
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, 1995 and 1994. Common share equivalents
consist of shares exercisable of 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 been restated for the periods 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 and six months ended September
30, 1995 and 1994. 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
Current assets increased by $18.8 million and current liabilities decreased by
$11.3 million during the six-month period ended September 30, 1995, resulting
in an increase of $30.1 million of working capital. The decrease in current
liabilities is attributable to timing variations of accounts payable payments.
The current ratio was 2.2:1 at September 30, 1995, compared with 1.9:1 at
year-end, March 31, 1995.
During the first six months of the current year, total interest-bearing debt
increased by $33.9 million. The ratio of interest-bearing debt to
capitalization was 42% at September 30, 1995 compared with 34% at March 31,
1995.
Management estimates that capital expenditures for the current year will
approximate $20.0 million ($11.0 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.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
THE THREE MONTHS ENDED SEPTEMBER 30, 1994
Net sales for the three-month period ended September 30, 1995 of $234.9 million
increased 21% over sales of the prior year three-month period of $194.4
million. The increase in sales reflects continuing strong demand for
electronic components and computer and peripheral products. Semiconductor
products accounted for 36% of the Company's sales in the current quarter,
compared with 38% a year ago. Computer systems products were 39% of sales in
1995 versus 36% last year. Passive and electromechanical products were 22% of
the Company's business in 1995 compared with 23% a year earlier. Miscellaneous
products accounted for 3% of sales in both 1995 and 1994.
Cost of goods sold increased 21% compared with the prior year quarter,
resulting in a gross margin of 19.3% in the second quarters of both years.
Warehouse, selling and administrative expenses of $32.7 million increased by
21% over the $27.1 million incurred during the prior year three-month period.
This resulted in a ratio of these expenses to sales of 13.9% for both quarters.
The Company's share of net income of the affiliated company, Pioneer
Technologies Group, Inc., was $458,000 for the 1995 three-month period compared
with $183,000 for the same period last year; net sales of the affiliate for the
three-month period ended September 30, 1995 of $80.6 million were 11% less than
sales of the prior three-month period of $90.1 million. Lower 1995 net sales
reflect a reduced volume of
6
<PAGE> 7
microprocessor sales which earn a relatively low gross profit margin.
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 42.2%
compared with 40.8% a year ago.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending September 30, 1995 of $6.7 million was $1.1 million
greater than the $5.6 million earned a year ago.
SIX MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE SIX MONTHS ENDED
SEPTEMBER 30, 1994
Net sales for the six-month period ended September 30, 1995 of $459.6 million
were 22% greater than sales of the prior year six-month period of $378.3
million. The increase in sales reflects continuing strong demand for
electronic components and computer systems. During the first six months of
1995, semiconductor products accounted for 35% of the Company's sales compared
with 38% in the prior year. Computer systems products accounted for 39% of the
Company's sales in 1995 and 36% in 1994. Passive and electromechanical
products accounted for 23% of sales in both 1995 and in 1994. Miscellaneous
products accounted for 3% of sales in both 1995 and 1994.
The percentage increase in cost of goods sold of 21% resulted in a gross margin
of 19.4% in the first six months of the current year compared with 19.2% a year
ago. Warehouse, selling and administrative expenses of $63.8 million increased
by 22% as compared with the $52.4 million incurred during the prior year
six-month period. This resulted in a ratio of these expenses to sales of 13.9%
for both the 1995 and 1994 periods.
The resulting operating profit of $25.1 million in 1995 was 5.5% of sales
compared with $20.2 million in 1994, which was 5.3% 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 $909,000 for the 1995 six-month period compared
with $856,000 for the same period last year; net sales of the affiliate for the
current year period of $160.4 million were 14% less than the sales of the prior
year period of $185.9 million. This reduction is attributable to a lower
volume of microprocessor sales.
7
<PAGE> 8
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 41.4% compared with
40.0% a year ago.
Primarily as a result of the factors noted above, the Company's net income for
the six-month period ending September 30, 1995 of $13.5 million was $1.9
million higher than the $11.6 million earned a year ago.
8
<PAGE> 9
Pioneer-Standard Electronics, Inc. owns 50% of the outstanding common stock of
Pioneer Technologies Group, Inc. The investment is accounted for by the equity
method in the Company's financial statements via the balance sheet caption of
"Investment in 50%-owned company" and via the statements of income caption of
"Equity in earnings of 50%-owned company."
PIONEER TECHNOLOGIES GROUP, INC.
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, 1995
(Unaudited) March 31, 1995
--------------- --------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 10 $ 9
Accounts receivable - net 42,829 36,378
Merchandise inventory 58,685 46,895
Prepaid expenses 630 494
Deferred income taxes 1,075 1,246
Shareholder notes receivable 14 63
---------- ----------
Total current assets 103,243 85,085
Property and equipment, at cost 11,360 10,697
Accumulated depreciation (6,046) (5,289)
---------- ---------
Net 5,314 5,408
Shareholder notes receivable 192 193
Other assets 186 272
---------- ----------
$108,935 $ 90,958
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 26,779 $ 34,711
Accrued liabilities 2,693 4,170
---------- ----------
Total current liabilities 29,472 38,881
Long-term debt 43,717 18,148
Shareholders' equity
Common stock $.10 par value 10 10
Capital in excess of par value 90 90
Retained earnings 35,646 33,829
---------- ----------
Total shareholders' equity 35,746 33,929
---------- ----------
$108,935 $90,958
========== ==========
</TABLE>
9
<PAGE> 10
PIONEER TECHNOLOGIES GROUP, INC.
STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter ended Six months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 80,587 $ 90,133 $ 160,396 $ 185,875
Costs and expenses:
Cost of goods sold 67,326 78,331 133,532 159,683
Selling and
administrative expense 10,985 10,626 22,280 22,284
------- ------ ------- -------
Operating profit 2,276 1,176 4,584 3,908
Interest expense 745 554 1,313 1,006
-------- -------- -------- --------
Income before
income taxes 1,531 622 3,271 2,902
Provision for
income taxes 616 255 1,454 1,190
-------- -------- ------- --------
Net income $ 915 $ 367 $ 1,817 $ 1,712
========= ========= ======== =========
Average shares outstanding 100,000 100,000 100,000 100,000
Earnings per share $9.15 $ 3.67 $18.17 $17.12
Dividends per share -- -- -- --
</TABLE>
10
<PAGE> 11
PIONEER TECHNOLOGIES GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six months ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,817 $ 1,712
Adjustments to reconcile net income to net cash
used in operating activities:
Items not affecting cash 833 670
Increase in operating working capital (27,737) (5,084)
Decrease (increase) in other assets 258 (182)
---------- ----------
Total adjustments (26,646) (4,596)
Net cash used in
operating activities (24,829) (2,884)
Cash flows from investing activities:
Additions to property and equipment (739) (612)
---------- ----------
Net cash used in investing activities (739) ( 612)
Cash flows from financing activities:
Increase in long-term debt 25,569 3,497
---------- ----------
Net cash provided by
financing activities 25,569 3,497
Net change in cash 1 1
Cash at beginning of period 9 8
---------- ----------
Cash at end of period $ 10 $ 9
========== ==========
</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 25, 1995 (the "Annual
Meeting"), the shareholders voted to elect Frederick A. Downey,
Victor Gelb and Edwin Z. Singer to additional three-year terms as
Directors of the Company. Following is a summary of the voting:
<TABLE>
<CAPTION>
Frederick A. Victor Edwin Z.
Votes Downey Gelb Singer
----- ------ ---- ------
<S> <C> <C> <C>
For 12,964,416 12,966,179 12,961,224
Withheld 52,388 50,625 55,580
</TABLE>
The term of office of the following Directors of the Company continued after
the Annual Meeting of Shareholders: James L. Bayman; Gordon E. Heffern;
Preston B. Heller, Jr.; Arthur Rhein; Thomas C. Sullivan and Karl E. Ware.
In addition, at the Annual Meeting of Shareholders, the 1995 Stock Option Plan
for Outside Directors was approved by the Shareholders; 11,834,446 votes were
cast in favor of the Plan, 943,372 votes were cast against the Plan, 235,236
votes abstained from voting on the Plan, and there were 3,749 broker non-votes
concerning the Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
------ ------------
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, 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: November 10, 1995 James L. Bayman
------------------- -----------------------------------
President and CEO
Date: November 10, 1995 John V. Goodger
------------------- -----------------------------------
Vice President & Treasurer
12
<PAGE> 1
Exhibit 11
CALCULATION OF PRIMARY EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
and common share equivalents
outstanding 23,252,372 22,872,648 23,178,946 22,867,506
Net income $6,705 $5,649 $13,521 $11,614
Earnings per share $.29 $.25 $.58 $.51
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 18,845
<SECURITIES> 0
<RECEIVABLES> 132,903
<ALLOWANCES> 4,776
<INVENTORY> 137,352
<CURRENT-ASSETS> 292,699
<PP&E> 62,466
<DEPRECIATION> 24,775
<TOTAL-ASSETS> 353,946
<CURRENT-LIABILITIES> 131,215
<BONDS> 80,313
<COMMON> 6,653
0
0
<OTHER-SE> 133,497
<TOTAL-LIABILITY-AND-EQUITY> 353,946
<SALES> 459,637
<TOTAL-REVENUES> 459,637
<CGS> 370,671
<TOTAL-COSTS> 370,671
<OTHER-EXPENSES> 63,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,965
<INCOME-PRETAX> 23,072
<INCOME-TAX> 9,551
<INCOME-CONTINUING> 13,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,521
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
</TABLE>
