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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 19, 1998
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PIONEER-STANDARD ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
Ohio 0-5734 34-0907152
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
4800 EAST 131ST STREET, CLEVELAND, OHIO 44108
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 587-3600
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Dickens Data Systems, Inc. Unaudited Condensed Consolidated
Financial Statements for the Three Months Ended March 31,
1998 and March 31, 1997
Unaudited Condensed Consolidated Statements of
Operations for the Three Months Ended March 31, 1998
and March 31, 1997
Unaudited Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31, 1998 and
March 31, 1997
Notes to Condensed Consolidated Financial Statements
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Statement of
Operations for the Fiscal Year Ended March 31, 1998,
including notes thereto
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DICKENS DATA SYSTEMS, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
3/31/98 3/31/97
<S> <C> <C>
Net Sales $ 91,402 $ 69,369
Cost of Goods Sold 77,576 59,435
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Gross Margin 13,826 9,934
Selling, General, and Administrative Expenses 9,906 7,984
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Operating Income 3,920 1,950
Interest Expense, Net 205 266
Other Income (1) 4
---------- --------------
Net Income $ 3,714 $ 1,688
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated statements.
<PAGE> 4
DICKENS DATA SYSTEMS, INC.
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
3/31/98 3/31/97
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,714 $ 1,688
Adjustments to reconcile net income to net cash
(used in) provided by operations:
Depreciation and amortization 442 346
Changes in operating assets and liabilities:
Accounts receivable, net 6,632 (3,870)
Inventories 4,031 (4,480)
Prepaid expenses and other assets (1,120) (365)
Accounts payable, accrued and other
liabilities (25,403) 8,174
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Total adjustments (15,418) (195)
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Net cash (used in) provided by
operating activities (11,704) 1,493
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,028) (500)
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Net cash used in investing activities (1,028) (500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt --- (7)
Long-term debt proceeds 420 ---
Net borrowings from revolving lines of credit 15,642 (3,719)
Distribution to shareholders (4,300) (241)
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Net cash used in financing activities 11,762 (3,967)
NET DECREASE IN CASH AND CASH EQUIVALENTS (970) (2,974)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,114 3,077
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 144 $ 103
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated statements.
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DICKENS DATA SYSTEMS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated statements of operations and
cash flows of Dickens Data Systems, Inc. and subsidiaries ("Dickens Data") have
been prepared in accordance with generally accepted accounting principles for
interim financial information. They do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full fiscal
year.
For further information refer to Dickens Data's consolidated financial
statements and footnotes thereto for the year ended December 31, 1997 appearing
in Pioneer-Standard Electronics, Inc. ("Pioneer") Form 8-K filed with the
Securities and Exchange Commission on February 27, 1998.
On March 31, 1998, 100 percent of the outstanding stock of Dickens Data was
acquired by Pioneer for $121.0 million in cash. The acquisition was accounted
for using the purchase method of accounting. Accordingly the assets and
liabilities of Dickens Data were included in Pioneer's consolidated balance
sheet at their estimated fair value as of March 31, 1998.
2. NATURE OF BUSINESS
The accompanying consolidated financial statements include the accounts of
Dickens Data and its subsidiaries. All significant intercompany transactions
and accounts have been eliminated in consolidation.
Dickens Data is a value-added system integrator and services provider that
markets, distributes, and integrates information technology products and
services directly and indirectly (through authorized resellers) to business
institutions and governments primarily within the United States and Canada. The
technology products and services marketed and sold by Dickens Data include
midrange computer hardware and software, workstations, networking equipment,
storage devices, systems solutions, and various technological services,
including operating system support, installation, integration, and education.
The majority of the technology products marketed by Dickens Data are
manufactured by International Business Machines Corporation, and essentially
all of Dickens Data's revenues are associated with the distribution of these
products.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
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Distribution of products is recorded as revenue upon shipment. Revenues from
custom programming, training, and other services are recognized as provided.
Market Development Funds
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Primary vendors provide Dickens Data with market development funds ("MDF") in
the amount that is generally based on purchases of the vendors' products and
services. These funds typically range from 1% to 3% of such purchases and are
required to be used to market and promote the vendors' products and services.
Dickens Data accrues these funds based on its purchases and offsets them
against direct costs of selling, general, and administrative expenses.
Income Taxes
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Dickens Data's shareholders had elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, no provision for federal
income taxes was recorded in Dickens Data's financial statements, and the
shareholders are personally liable for individual income taxes on their
respective portions of Dickens Data's taxable income.
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PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The accompanying unaudited pro forma condensed combined statement of
operations of Pioneer-Standard Electronics, Inc. ("Pioneer") for the year ended
March 31, 1998 gives effect to the purchase by Pioneer of all of the stock of
Dickens Data System, Inc. ("Dickens Data"), the spin-off of certain operations
to the former shareholders of Dickens Data, and the acquisition of a 51%
interest in a portion of the operations spun-off. The statement of operations
was prepared as if all the transactions had occurred on April 1, 1997.
This information is not necessarily indicative of future combined
operations and it should be read in conjunction with the separate historical
statements and related notes of the respective entities incorporated by
reference in Pioneer-Standard Electronics, Inc. Form 10-K for the year ended
March 31, 1998 and appearing in the Form 8-K dated February 27, 1998 filed with
the Securities and Exchange Commission.
<PAGE> 7
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PIONEER DICKENS DATA PRO FORMA
MARCH 31, MARCH 31, PRO FORMA AS
1998 (1) 1998 (1) SPIN-OFF(7) ADJUSTMENTS ADJUSTED
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,685,265 $ 369,692 $ (2,552) $ 2,052,405
Cost and expenses:
Cost of goods sold 1,386,666 318,278 (725) 1,704,219
Warehouse, selling and admin- $ 2,919 (2)
istrative expenses (1,187) (5)
225,649 36,240 (1,505) (448) (6) 261,668
------------ ---------- ---------- ------------ -----------
Operating profit 72,950 15,174 (322) (1,284) 86,518
Interest expense 20,717 1,130 (117) 8,849 (3) 30,579
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Income before taxes 52,233 14,044 (205) (10,133) 55,939
Provision for income taxes 21,624 1,538 (4) 23,162
Distributions on mandatorily redeemable
convertible trust preferred
securities - net of tax 112 112
------------ ----------- --------- ------------ -----------
Net Income $ 30,497 $ 14,044 $ (205) $ (11,671) $ 32,665
========== ========== ========= ============ ==========
Earnings per share:
Basic 1.16 1.25
Diluted 1.14 1.22
Weighted average common shares outstanding:
Basic 26,205 26,205
Diluted 26,949 26,949
</TABLE>
[FN]
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(1) The Unaudited Pro Forma Condensed Combined Statement of Operations for
the year ended March 31, 1998, gives effect to the acquisition of
Dickens Data as if it occurred at the beginning of the period by
combining the twelve-month period ended March 31, 1998 of Pioneer with
the unaudited twelve-month period ended March 31, 1998 of Dickens Data.
(2) Represents amortization of goodwill resulting from the application of
purchase accounting over a 40-year period using the straight-line
method. The amortization of goodwill is tax deductible.
(3) Reflects additional interest expense which would have been incurred by
Pioneer assuming the acquisition of Dickens Data had occurred at the
beginning of the period.
(4) Dickens Data was taxed under Subchapter S of the Internal Revenue Code
of 1986, as amended, and did not pay taxes on behalf of itself. The
income tax recorded reflects the amounts that would have been incurred
had the acquisition occurred at the beginning of the period.
(5) Reflects net compensation of certain former shareholders of Dickens
Data who did not continue as employees and will not be replaced.
(6) To record the 49% minority interest in the loss of the newly-formed
partnership which operates the professional source business of Dickens
Data.
(7) To record the spin-off of the software business and OEM business to
Dickens Data's current shareholders.
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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 hereunto duly authorized.
PIONEER-STANDARD ELECTRONICS, INC.
Date: June 19, 1998 By /s/ John V. Goodger
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John V. Goodger
Vice President and Treasurer
