<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
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
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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 AUGUST 1, 1997: 26,058,469 . (Excludes 5,000,000 Common Shares
subscribed by the Share Subscription Agreement and Trust.)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, 1997
(Unaudited) March 31, 1997
----------- --------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 16,813 $ 28,116
Accounts receivable - net 220,258 209,086
Merchandise inventory 269,613 243,940
Prepaid expenses 8,413 6,633
Deferred income taxes 10,285 10,282
--------- ---------
Total current assets 525,382 498,057
Intangible assets 39,011 39,260
Other assets 2,572 2,602
Property and equipment, at cost 89,962 91,681
Accumulated depreciation 38,195 39,087
--------- ---------
Net 51,767 52,594
--------- ---------
$ 618,732 $ 592,513
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks $ 17,500 $ 20,500
Accounts payable 128,639 144,277
Accrued liabilities 39,433 31,867
Long-term debt due within
one year 2,880 2,878
--------- ---------
Total current liabilities 188,452 199,522
Long-term debt 203,577 173,587
Deferred income taxes 5,788 5,425
Shareholders' equity
Common stock, at stated value 9,235 9,228
Capital in excess of stated value 125,570 121,489
Retained earnings 153,578 147,055
Unearned compensation (67,500) (63,750)
Foreign currency translation adjustment 32 (43)
--------- ---------
Net 220,915 213,979
--------- ---------
$ 618,732 $ 592,513
========= =========
</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
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 396,264 $ 375,156
Cost and expenses:
Cost of goods sold 327,553 308,990
Warehouse, selling and
administrative expense 51,423 51,348
----------- -----------
Operating profit 17,288 14,818
Interest expense 4,324 3,904
----------- -----------
Income before income taxes 12,964 10,914
Provision for income taxes 5,659 4,763
----------- -----------
Net income $ 7,305 $ 6,151
=========== ===========
Weighted average shares outstanding 26,432,555 23,138,433
Earnings per share - primary and
fully diluted $ .28 $ .27
Dividends per share $ .03 $ .03
</TABLE>
See accompanying notes.
3
<PAGE> 4
PIONEER-STANDARD ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,305 $ 6,151
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,446 3,554
Increase in operating working capital (46,885) (56,132)
Decrease in other assets 30 15
Deferred taxes 360 --
-------- --------
Total adjustments (42,049) (52,563)
-------- --------
Net cash used in
operating activities (34,744) (46,412)
Cash flows from investing activities:
Additions to property and equipment (3,115) (2,554)
-------- --------
Net cash used in investing activities (3,115) (2,254)
Cash flows from financing activities:
Increase (decrease) in short-term financing (3,000) 8,500
Increase in revolving credit borrowings 30,000 48,000
Increase (decrease) in other long-term
debt obligation (8) 51
Issuance of common shares under company
stock option plan 380 304
Dividends paid (781) (675)
-------- --------
Net cash provided by financing activities 26,591 56,180
Effect of exchange rate changes on cash (35) 59
-------- --------
Net increase in cash (11,303) 7,273
Cash at beginning of period 28,116 24,440
-------- --------
Cash at end of period $ 16,813 $ 31,713
======== ========
</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 June 30, 1997 and
1996. Common share equivalents consist of shares issuable upon exercise of stock
options computed by using the treasury stock method.
2. 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, 1997 and 1996. The
results of operations for the three month period are not necessarily indicative
of results which may be expected for a full year.
5
<PAGE> 6
PIONEER-STANDARD ELECTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Current assets increased by $27.3 million and current liabilities decreased by
$11.1 during the three-month period ended June 30, 1997, resulting in an
increase of $38.4 million in working capital. The current ratio was 2.8:1 at
June 30, 1997 compared with 2.5:1 at year-end, March 31, 1997.
During the first three months of the current year, total interest-bearing debt
increased by $27.0 million. The increase in debt is attributable to funding
working capital and capital expenditure needs. The ratio of interest-bearing
debt to capitalization was 50% at June 30, 1997 compared with 48% at March 31,
1997.
Management estimates that capital expenditures for the fiscal year 1998 will
approximate $28 million. Capital expenditures in the first three months of the
current year were $3.1 million. Under present business conditions, it is
anticipated that funds from current operations and available credit facilities
will be sufficient to finance both capital spending and working capital needs
for the balance of the current fiscal year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH
THE THREE MONTHS ENDED JUNE 30, 1996
Net sales for the three-month period ended June 30, 1997 of $396.3 million
increased 6% over sales of the prior year three-month period of $375.2 million.
The increase in net sales reflect strong demand for computer products which more
than offset the weaker sales comparisons experienced by the Company's two other
product lines, semiconductors and interconnect, passive, and electromechanical
products. Semiconductor products accounted for 34% of the Company's sales in the
current quarter, compared with 41% a year ago. Computer systems products
represented 46% of sales in 1997 versus 38% last year. Interconnect, passive and
electromechanical products were 18% of the Company's sales in 1997 and 1996.
Miscellaneous products accounted for 2% and 3% of sales in 1997 and 1996,
respectively.
Cost of goods sold increased 6% compared with the prior year quarter, resulting
in a gross margin of 17.3% in the current quarter compared with 17.6% a year
ago. The shift in product mix described above was the principal factor impacting
current year margins.
Warehouse, selling and administrative expenses were $51.4 million, compared to
the $51.3 million incurred during the prior year three-month period. This
resulted in a ratio of these expenses to sales of 13.0% for the current quarter
compared with 13.7% a year ago.
The operating profit resulting from the activity described above of $17.3
million, or 4.4% of sales in the current period was up 17% compared with $14.8
million, or 3.9% of sales a year ago.
Interest expense was $4.3 million in the current quarter compared with $3.9
million a year ago.
The effective tax rate for the current year three-month period was 43.7%
compared with 43.6% for the same period a year ago.
Primarily as a result of the factors above, the Company's net income for the
three-month period ending June 30, 1997 of $7.3 million was $1.1 million greater
than the $6.2 million earned in the prior year.
6
<PAGE> 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
------ -----------
4 Amendment No. 1 to Rights Agreement, dated as of
May 16, 1997, by and between Pioneer-Standard
Electronics, Inc. and National City Bank
11 Calculation of Primary Earnings Per Share
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER-STANDARD ELECTRONICS, INC.
Date: August 14, 1997 James L. Bayman
----------------- ------------------------------
Chairman and CEO
Date: August 14, 1997 John V. Goodger
----------------- ------------------------------
Vice President & Treasurer
7
<PAGE> 1
EXHIBIT 4
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 to the Rights Agreement (the "Rights
Agreement") dated as of April 25, 1989 between AmeriTrust Company, National
Association ("AmeriTrust") and Pioneer-Standard Electronics, Inc. (the
"Company") is dated as of May 16, 1997 between National City Bank ("National
City") and the Company.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Key Bank National Association ("Key Bank"), successor
in interest to AmeriTrust under the Rights Agreement, has indicated to the
Company its intention to resign as Rights Agent under the Rights Agreement
effective as of May 19, 1997; and
WHEREAS, the Company has appointed National City, and National
City has agreed to serve as, the successor Rights Agent under the Rights
Agreement effective immediately upon the termination of Key Bank's services as
Right Agent; and
WHEREAS, the parties wish to evidence the appointment of
National City as the successor Rights Agent under the Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing, and the
mutual covenants and promises herein contained, and on the terms and subject to
the conditions herein set forth, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Rights Agreement.
2. APPOINTMENT OF SUCCESSOR RIGHTS AGENT. The Company hereby
appoints National City the successor Rights Agent to Key Bank, to act as agent
for the Company and the holders of the Rights in accordance with the terms and
conditions of the Rights Agreement, and the Rights Agent hereby accepts such
appointment.
3. EFFECTIVENESS OF APPOINTMENT. The appointment of National
City as the Rights Agent shall become effective immediately upon the termination
of Key Bank's services as Rights Agent, but in any event no later than May 19,
1997.
4. AMENDMENT OF RIGHTS AGREEMENT AND RIGHT CERTIFICATES. The
Rights Agreement and the Right Certificates are hereby amended as appropriate to
reflect the appointment of National City as the Rights Agent under the Rights
Agreement.
5. COUNTERPARTS. This Amendment No. 1 may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
<PAGE> 2
6. GOVERNING LAW. This Amendment No. 1 shall be governed by,
and construed in accordance with, the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and attested, all as of the day and year
first above written.
PIONEER-STANDARD ELECTRONICS,
INC.
Attest:
By /s/ Colleen M. Simon By /s/ John V. Goodger
-------------------------------- --------------------------------
Title: Executive Assistant Title: Vice President -
Treasurer
NATIONAL CITY BANK
Attest:
By By
-------------------------------- --------------------------------
Title: Title:
Acknowledged by:
KEY BANK NATIONAL ASSOCIATION
By
--------------------------------
Title:
<PAGE> 3
6. GOVERNING LAW. This Amendment No. 1 shall be governed by,
and construed in accordance with, the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and attested, all as of the day and year
first above written.
PIONEER-STANDARD ELECTRONICS,
INC.
Attest:
By By
-------------------------------- --------------------------------
Title: Title:
NATIONAL CITY BANK
Attest:
By /s/ H. E. Cockrell By /s/ J. Dean Presson
-------------------------------- --------------------------------
Title: Senior Vice President Title: Vice President
Acknowledged by:
KEY BANK NATIONAL ASSOCIATION
By
--------------------------------
Title:
<PAGE> 4
6. GOVERNING LAW. This Amendment No. 1 shall be governed by,
and construed in accordance with, the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and attested, all as of the day and year
first above written.
PIONEER-STANDARD ELECTRONICS,
INC.
Attest:
By By
-------------------------------- --------------------------------
Title: Title:
NATIONAL CITY BANK
Attest:
By By
-------------------------------- --------------------------------
Title: Title:
Acknowledged by:
KEY BANK NATIONAL ASSOCIATION
By /s/ B. William Bedy
--------------------------------
Title:
<PAGE> 1
Exhibit 11
CALCULATION OF PRIMARY EARNINGS PER SHARE
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Weighted average common shares
and common share equivalents
outstanding 26,452,555 23,138,433
Net income $ 7,305 $ 6,151
Earnings per share - primary and
fully diluted $ .28 $ .27
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 16,813
<SECURITIES> 0
<RECEIVABLES> 227,838
<ALLOWANCES> 7,580
<INVENTORY> 269,613
<CURRENT-ASSETS> 525,382
<PP&E> 89,962
<DEPRECIATION> 38,195
<TOTAL-ASSETS> 618,732
<CURRENT-LIABILITIES> 188,452
<BONDS> 203,577
<COMMON> 9,235
0
0
<OTHER-SE> 211,680
<TOTAL-LIABILITY-AND-EQUITY> 618,732
<SALES> 396,264
<TOTAL-REVENUES> 369,264
<CGS> 327,553
<TOTAL-COSTS> 327,553
<OTHER-EXPENSES> 51,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,324
<INCOME-PRETAX> 12,964
<INCOME-TAX> 5,659
<INCOME-CONTINUING> 7,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,305
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
