Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
February 28, 2003
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(Date of earliest event reported)
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 jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation) Identification No.)
6065 Parkland Boulevard, Mayfield Heights, Ohio 44124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 720-8500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 28, 2003, Pioneer-Standard Electronics, Inc.
("Pioneer-Standard" or "the Company") completed the sale of
substantially all of the assets and liabilities of its Industrial
Electronics Division ("IED") to Arrow Electronics, Inc., ("Arrow") for
estimated pre-tax proceeds of $240 million of which approximately $230
million was received on the closing date. The estimated pre-tax
proceeds related to the sale are subject to adjustment on the basis of
an audit of the assets and liabilities sold. The terms of the
transaction were agreed upon through arm's length negotiations.
The terms of the sale as well as a description of the assets and
liabilities sold are more fully explained in the Purchase Agreement
dated as of January 13, 2003 by and between Arrow Electronics, Inc.,
Arrow Europe GmbH, Arrow Electronics Canada Ltd., and Pioneer-Standard
Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard
Minnesota, Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard
Canada, Inc., a copy of which is attached as Exhibit 2.1.
In conjunction with the sale, the operations associated with the
remaining assets and liabilities of IED and Aprisa, Inc., the Company's
majority owned software business, were discontinued.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
None.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial
statements present pro forma financial information for Pioneer-Standard
giving effect to the February 28, 2003 sale of certain IED assets and
liabilities to Arrow Electronics, Inc.; the discontinuance of
operations associated with the remaining assets and liabilities of IED
and the Company's majority owned software business; and the use of
proceeds from the sale to redeem debt, as described in this Current
Report on Form 8-K.
The December 31, 2002 Unaudited Pro Forma Condensed Consolidated
Balance Sheet is presented as if the sale, the discontinuance and the
redemption of debt were effective December 31, 2002. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations for the nine
months ended December 31, 2002, and for each of the years in the three
year period ended March 31, 2002 assume the sale, the discontinuance
and the redemption of debt were effective as of the beginning of the
fiscal year ended March 31, 2000.
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with the consolidated financial
statements and related footnotes included in Pioneer-Standard's 2002
Annual Report on Form 10-K and Pioneer-Standard's Quarterly Reports on
Form 10-Q for the quarters ended June 30, 2002, September 30, 2002 and
December 31, 2002.
2
THE FOLLOWING UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION IS PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT
NECESSARILY AN INDICATION OF THE FUTURE FINANCIAL POSITION OR RESULTS
OF OPERATIONS OF PIONEER-STANDARD.
3
PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
Pro forma Adjustments
-------------------------------
Sale
(Dollars In Thousands) Historical Transaction Other Pro Forma
------------- -------------- ------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 70,274 $ 234,938 (a) $(157,500)(e) $ 147,712
Accounts receivable, net 369,661 (76,593)(a) (991)(b) 292,077
Inventories, net 220,232 (123,478)(a) (36,242)(b) 60,512
Deferred income taxes 15,039 (7,019)(a) (1,411)(b) 6,609
Prepaid expenses 1,651 (24)(a) (83)(b) 1,544
Assets of discontinued operations - - 47,399 (b) 47,399
------------- -------------- ------------- ------------
Total current assets 676,857 27,824 (148,828) 555,853
Goodwill & intangible assets, net 118,993 - (1,522)(b)(c) 117,471
Investments in affiliated companies 32,406 (11,400)(a) - 21,006
Other assets 14,531 (129)(a) - 14,402
Property and equipment, net 71,827 (3,394)(a) (12,943)(b)(c) 55,490
------------- -------------- ------------- ------------
Total Assets $ 914,614 $ 12,901 $(163,293) $ 764,222
============= ============== ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 270,988 $ (34,605)(a) $ (17,600)(b) $ 218,783
Accrued salaries, wages, commissions and
benefits 12,440 (689)(a) (5,779)(b) 5,972
Other accrued liabilities 19,550 - 8,735 (b)(d) 28,285
Liabilities of discontinued operations - - 18,594 (b) 18,594
------------- -------------- ------------- ------------
Total current liabilities 302,978 (35,294) 3,950 271,634
Long-Term Debt 150,032 - (150,000)(e) 32
Deferred Income Taxes 11,106 (90)(a) (353)(b) 10,663
Other Long-Term Liabilities 4,151 - 1,003 (b) 5,154
Mandatorily Redeemable Convertible Trust
Preferred Securities 143,675 - - 143,675
Shareholders' Equity 302,672 48,285 (a) (17,893)(c)(d)(e) 333,064
------------- -------------- ------------- ------------
Total Liabilities and Shareholders'
Equity $ 914,614 $ 12,901 $(163,293) $ 764,222
============= ============== ============= ============
4
PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended December 31, 2002
Pro forma Adjustments
--------------------------------------------
Other
Sale Discontinued
(Dollars In Thousands, Except Transaction Operations
Share and Per Share Data) Historical (f) (g) Other Pro forma
--------------- -------------- --------------- --------- -------------
Net Sales $ 1,542,277 $ (631,985) $ - $ - $ 910,292
Cost of Goods Sold 1,320,918 (525,513) - - 795,405
--------------- -------------- --------------- --------- -------------
Gross Margin 221,359 (106,472) - - 114,887
Warehouse, Selling and
Administrative Expenses 199,381 (89,669) (6,508) (85)(h) 103,119(i)
--------------- -------------- --------------- --------- -------------
Operating Income (Loss) 21,978 (16,803) 6,508 85 11,768
Other (Income) Expense
Other (Income) Expense (1,417) 947 - - (470)
Interest Expense 13,180 (6,125) (368) (5,467)(h) 1,220
--------------- -------------- --------------- --------- -------------
Income (Loss) Before Income Taxes 10,215 (11,625) 6,876 5,552 11,018
Provision (Benefit) for Income
Taxes 2,248 (2,589) 2,407 2,133 4,199
Minority Interest Income (1,073) - 1,073 - -
Distributions on Mandatorily
Redeemable Convertible
Preferred Securities,
net of tax 5,673 (1,073) - (100) 4,500
--------------- -------------- --------------- --------- -------------
Income (Loss) from Continuing
Operations $ 3,367 $ (7,963) $ 3,396 $ 3,519 $ 2,319
=============== ============== =============== ========= =============
PER SHARE DATA:
Income (Loss) from Continuing
Operations - basic $ 0.12 $ 0.09
Income (Loss) from Continuing
Operations - diluted $ 0.12 $ 0.08
Weighted Average Shares
Outstanding:
Basic 27,270,774 27,270,774
Diluted 27,698,764 27,698,764
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PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 2002
Pro forma Adjustments
-------------------------------------------
Other
Sale Discontinued
(Dollars In Thousands, Except Transaction Operations
Share and Per Share Data) Historical (f) (f) Other Pro forma
--------------- -------------- -------------- ------------- -----------------
Net Sales $ 2,323,593 $ (1,029,271) $ - $ - $ 1,294,322
Cost of Goods Sold 2,007,618 (883,779) - - 1,123,839
--------------- -------------- -------------- ------------- -----------------
Gross Margin 315,975 (145,492) - - 170,483
Warehouse, Selling and
Administrative Expenses 293,903 (134,186) (5,035) (4,194)(h)(j) 150,488(i)
Restructuring Expense 3,796 (3,323) - - 473
--------------- -------------- -------------- ------------- -----------------
Operating Income (Loss) 18,276 (7,983) 5,035 4,194 19,522
Other (Income) Expense
Other (Income) Expense (721) (152) - - (873)
Interest Expense 22,046 (10,718) (71) (7,286)(h) 3,971
--------------- -------------- -------------- ------------- -----------------
Income (Loss) Before Income Taxes (3,049) 2,887 5,106 11,480 16,424
Provision (Benefit) for Income
Taxes (1,256) 1,283 1,591 3,835 5,453
Minority Interest Income (450) - 450 - -
Distributions on Mandatorily
Redeemable Convertible
Preferred Securities, net
of tax 5,704 533 - (79) 6,158
--------------- -------------- -------------- ------------- -----------------
Income (Loss) from Continuing
Operations $ (7,047) $ 1,071 $ 3,065 $ 7,724 $ 4,813
=============== ============== ============== ============= =================
PER SHARE DATA:
Income (Loss) from Continuing
Operations - basic $ (0.26) $ 0.18
Income (Loss) from Continuing
Operations - diluted $ (0.26) $ 0.17
Weighted Average Shares
Outstanding:
Basic 27,040,171 27,040,171
Diluted 27,040,171 27,608,010
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PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 2001
Pro forma Adjustments
---------------------------------------------
Other
Sale Discontinued
(Dollars In Thousands, Except Transaction Operations
Share and Per Share Data) Historical (f) (g) Other Pro forma
-------------- --------------- ------------ ------------- -----------------
Net Sales $ 2,901,353 $ (1,469,515) $ - $ - $ 1,431,838
Cost of Goods Sold 2,468,571 (1,214,940) - - 1,253,631
-------------- --------------- ------------ ------------- -----------------
Gross Margin 432,782 (254,575) - - 178,207
Warehouse, Selling and
Administrative Expenses 318,400 (154,139) (1,079) (4,203)(h)(j) 158,979(i)
Write-down of IT system assets 14,200 - - - 14,200
-------------- --------------- ------------ ------------- -----------------
Operating Income (Loss) 100,182 (100,436) 1,079 4,203 5,028
Other (Income) Expense
Other (Income) Expense (480) (99) 100 - (479)
Interest Expense 34,349 (16,635) (16) (7,098)(h) 10,600
-------------- --------------- ------------ ------------- -----------------
Income (Loss) Before Income Taxes 66,313 (83,702) 995 11,301 (5,093)
Provision (Benefit) for Income
Taxes 25,823 (29,990) 220 3,606 (341)
Distributions on Mandatorily
Redeemable Convertible
Preferred Securities,
net of tax 5,914 391 - - 6,305
-------------- --------------- ------------ ------------- -----------------
-
Income (Loss) from Continuing
Operations $ 34,576 $ (54,103) $ 775 $ 7,695 $ (11,057)
============== =============== ============ ============= =================
PER SHARE DATA:
Income (Loss) from Continuing
Operations - basic $ 1.29 $ (0.41)
Income (Loss) from Continuing
Operations - diluted $ 1.11 $ (0.41)
Weighted Average Shares
Outstanding:
Basic 26,793,457 26,793,457
Diluted 36,615,950 26,793,457
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PIONEER-STANDARD ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 2000
Pro forma Adjustments
---------------------------------------------------
Other
Sale Discontinued
(Dollars In Thousands, Except Transaction Operations
Share and Per Share Data) Historical (f) (g) Other Pro forma
---------------- ---------------- ------------- ----------- -----------------
Net Sales $ 2,560,711 $ (1,341,222) $ - $ - $ 1,219,489
Cost of Goods Sold 2,170,684 (1,129,627) - - 1,041,057
---------------- ---------------- ------------- ----------- -----------------
Gross Margin 390,027 (211,595) - - 178,432
Warehouse, Selling and
Administrative Expenses 289,631 (133,652) - (4,134)(h)(j) 151,845(i)
---------------- ---------------- ------------- ----------- -----------------
Operating Income (Loss) 100,396 (77,943) - 4,134 26,587
Other (Income) Expense
Other (Income) Expense (1,058) - - - (1,058)
Gain on Sale of Assets (1,845) - - - (1,845)
Interest Expense 26,074 (12,825) - (6,613)(h) 6,636
---------------- ---------------- ------------- ----------- -----------------
Income (Loss) Before Income Taxes 77,225 (65,118) - 10,747 22,854
Provision (Benefit) for Income
Taxes 31,210 (24,356) - 3,512 10,366
Distributions on Mandatorily
Redeemable Convertible
Preferred Securities, net
of tax 5,870 334 - - 6,204
---------------- ---------------- ------------- ----------- -----------------
Income (Loss) from Continuing
Operations $ 40,145 $ (41,096) $ - $ 7,235 $ 6,284
================ ================ ============= =========== =================
PER SHARE DATA:
Income (Loss) from Continuing
Operations - basic $ 1.52 $ 0.24
Income (Loss) from Continuing
Operations - diluted $ 1.27 $ 0.23
Weighted Average Shares
Outstanding:
Basic 26,409,156 26,409,156
Diluted 36,178,307 27,051,323
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The pro forma adjustments to the December 31, 2002 Unaudited Condensed
Consolidated Balance Sheet include the effects of the receipt of cash at the
closing date of the sale as if the closing date was December 31, 2002, a
receivable of approximately $12 million for the estimated remaining sales
proceeds that have been held back until audited results are available, disposal
of assets and liabilities sold, discontinuance of the remaining IED assets and
liabilities and the Company's majority owned software business, redemption of
debt and recording of related transaction and debt redemption costs. Included in
Shareholders' Equity is the estimated gain on sale, after tax. The actual gain
from the sale when recorded in the fourth quarter of Fiscal 2003 will differ
based on the audited carrying value of the net assets as of February 28, 2003
and determination of final transaction costs.
(a) To adjust for the assets and liabilities sold, the related taxes
and receipt of the sales proceeds.
(e) To adjust for assets and liabilities of the discontinued operations not
sold to Arrow.
(c) To adjust the value of the Company's majority owned software company
and other impaired assets. Intangible assets and Property and
equipment, net were adjusted by approximately $1.2 million and $4.6
million, respectively.
(d) To reflect transaction costs of the sale of approximately $4.6 million.
(e) To adjust for the redemption of debt and related costs.
The estimated gain on sale, loss on redemption of debt and asset impairments
have been excluded from the Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the nine months ended December 31, 2002, and each
of the years in the three year period ended March 31, 2002.
(f) To eliminate the sales and operating costs of IED as if the disposition
and discontinuance had occurred at the beginning of the fiscal year
ended March 31, 2000.
(g) To eliminate the operating costs of Aprisa, Inc., the Company's
majority owned software business, as if the discontinuance had occurred
at the beginning of the fiscal year ended March 31, 2000.
(h) To eliminate interest expense and other related debt costs as if the
redemption had occurred at the beginning of the fiscal year ended March
31, 2000.
(i) Operating expenses do not reflect the impact of restructuring the
Company. Had the Company been restructured beginning in fiscal year
2000, pro forma operating expenses may have been reduced by
approximately $5.1 million for the nine months ended December 31, 2002,
and approximately $10.0 million, $9.5 million and $8.7 million for each
of the years in the three year period ended March 31, 2002.
(j) Effective April 1, 2002, the Company discontinued amortization of its
goodwill in accordance with Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets". This adjustment is to
eliminate goodwill amortization of $4.1 million for the fiscal years
ended March 31, 2002 and 2001 and $4.0 million for the fiscal year
ended March 31, 2000, assuming the adoption of this Statement occurred
at the beginning of the fiscal year ended March 31, 2000.
9
(c) Exhibits.
2.1 Purchase Agreement dated as of January 13, 2003 by and between
Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics
Canada Ltd., and Pioneer-Standard Electronics, Inc.,
Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota,
Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard
Canada Inc.
99.1 Press release of Pioneer-Standard Electronics, Inc. dated
March 3, 2003.
SIGNATURE
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.
By: /s/ Steven M. Billick
--------------------------------------------------
Steven M. Billick
Executive Vice President and
Chief Financial Officer
Date: March 17, 2003
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
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2.1 Purchase Agreement dated as of January 13, 2003 by and between
Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics
Canada Ltd., and Pioneer-Standard Electronics, Inc.,
Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota,
Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard
Canada Inc.
99.1 Press release of Pioneer-Standard Electronics, Inc. dated
March 3, 2003.
11