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Exhibit 13
[LOGO-PIONEER STANDARD]
TM
SETTING THE standard
FOR TECHNOLOGY DISTRIBUTION
2000 ANNUAL REPORT
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
Pioneer-Standard Electronics, Inc. excels at working with suppliers to introduce
their technology to target markets. The Company works with customers to
incorporate that technology into their products and businesses, and offers
value-added services to help them go to market faster, and improve their
efficiency and profit opportunities. This strategy enables Pioneer-Standard to
"set the standard for technology distribution."
COMPANY PROFILE
Pioneer-Standard is one of the world's largest distributors of electronic
components and mid-range computer systems, with annual revenues of $2.6
billion. Company highlights include:
- - Pioneer-Standard is the technology distribution leader, creating demand
for suppliers' products and deploying the latest business tools to
provide customers with world-class service.
- - The Company is a strategic link in the technology industry's supply
chain by capitalizing on its core competencies in supply chain
management, eBusiness, logistics, computer systems integration and
other value-added services.
- - The Company is closely aligned with the fast-growing Internet and
communications markets and other applications for which electronic
components and mid-range computer systems are in high demand.
- - The Company has a 25 percent compounded annual growth rate over the
last five years, and has an exemplary record of delivering growth and
increasing market share.
- - Pioneer-Standard has a large and growing presence throughout North
America, and serves international customers through its equity partners
based in Europe and Asia.
For more information, visit the Company's web site at www.pioneerstandard.com
Contents
Financial Highlights 1
To Our Fellow Shareholders 2
About the Company 5
Industrial Electronics Division 6
Computer Systems Division 10
Building Global Momentum 14
Financial Review 15
Corporate Directory 35
Shareholder Information 36
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FINANCIAL HIGHLIGHTS
Fiscal years ended March 31 2000 1999 1998
- ------------------------------------------------------------------------------------
In thousands, except per share data
Net sales $2,550,685 $2,259,083 $1,685,265
Operating profit 101,454 84,921 72,950
Income before income taxes 77,225 60,668 52,233
Income taxes 31,210 24,018 21,624
Net income $ 40,145 $ 30,809 $ 30,497
- ------------------------------------------------------------------------------------
Per share data
Basic $ 1.52 $ 1.17 $ 1.16
Diluted 1.27 1.03 1.14
Dividends .12 .12 .12
Shareholders' equity 12.20 10.30 9.30
Weighted average shares outstanding
Basic 26,409 26,351 26,205
Diluted 36,178 35,711 26,949
- ------------------------------------------------------------------------------------
NET SALES
(billions of dollars)
96 97 98 99 00
1.1 1.5 1.7 2.3 2.6
NET INCOME
(millions of dollars)
96 97 98 99 00
25.3 23.3 30.5 30.8 40.1
DILUTED EARNINGS
PER SHARE
(dollars)
96 97 98 99 00
1.09 1.00 1.14 1.03 1.27
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SETTING THE STANDARD FOR TECHNOLOGY
TO OUR FELLOW SHAREHOLDERS
Fiscal 2000 was a year of outstanding financial results and strategic successes
for Pioneer-Standard. We posted record results in revenues, earnings and
earnings per share in each of the four quarters and for the full year. At the
same time, we increased market share, expanded our eBusiness and supply chain
management capabilities, reached out to many new customers, and enhanced our
global reach. We are well-positioned for growth and expansion in fiscal 2001 and
beyond.
For the full year, we achieved record sales of $2.6 billion, a 13 percent
increase from fiscal 1999; record earnings of $40.1 million, a 30 percent
increase; and a record $1.27 in diluted earnings per share, which represents a
23 percent increase. Both business segments -- Industrial Electronics and
Computer Systems -- made major contributions to our revenue and earnings growth
during the year. We take pride in our well-balanced business, with each segment
posting more than $1.2 billion in annual sales. Both segments continue to
benefit from their close alignment with the fast-growing Internet and
communications markets.
After three-plus years of semiconductor overcapacity, the electronic
components market has become particularly strong. In fiscal 2000, our
semiconductor sales were up more than 20 percent over the previous year, with
demand accelerating faster during the second half of the year.
STANDING OUT FROM THE CROWD
More than anything else, fiscal 2000 was a strong validation of our
differentiated business strategy as a demand-creating technology distributor. We
are "setting the standard for technology distribution" through our ongoing
commitment to support our suppliers, provide customers with the best
technology solutions, and improve our own productivity.
This strategy served us very well in fiscal 2000 and is central to our
ongoing commitment to deliver growth and expansion.
KEYS TO SUCCESS IN 2000
While fiscal 2000 was an excellent year for us in many regards, it wasn't
without some challenges. As we moved into fiscal 2000, the semiconductor market
was struggling due to overcapacity, which was adversely affecting margins. Y2K
also loomed and was projected to have an effect on the computer systems
business. Nonetheless, we managed the business well and were successful
throughout the year.
The implementation of our eBusiness strategy was one of our most significant
successes. During the year, we tapped the power of the Internet and made major
strides to
[PHOTO] [PHOTO]
ARTHUR RHEIN JAMES L. BAYMAN
President and Chairman and
Chief Operating Officer Chief Executive Officer
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More than anything else, fiscal 2000 was a strong validation of our
differentiated business strategy as a demand-creating technology distributor.
[PHOTO]
build the best eBusiness and interactive marketing tools in the industry. Our
dedicated extranets and online customer service tools enable suppliers and
customers to independently access our services and information, which makes us
more effective and efficient in meeting their needs.
In November 1999, PC Week magazine recognized us as having the third-best
B2B eBusiness program in all of North America -- positioning us alongside some
of the nation's most respected companies and way ahead of everyone else in our
industry. Since then, we have been upgrading our online services to offer our
customers a higher level of personalization, with services specifically
designed for each of our customer groups. We have also enhanced the investor
relations portion of our web site at www.pioneerstandard.com to include
webcasting of our quarterly conference calls and same-day posting of the con-
ference call script.
Customer satisfaction is a corporate-wide priority. We track it regularly,
publish the results internally, and share best practices. Based on these
statistics, customer satisfaction reached an all-time high in fiscal 2000 and
we expect continuous improvement in subsequent years.
BUILDING FOR THE FUTURE
During 2000, we took a number of strategic steps that position us well for 2001:
- - Expanded our supply chain management capabilities by entering into an
exclusive marketing agreement with Supplystream, Inc. With
Supplystream's supply chain management software tools, we can help
customers analyze and reduce their total acquisition costs, and
quantify the benefits of our value-added services.
- - Added suppliers such as Level One Communications, T.sqware and ZiLOG to
our Industrial Electronics line card. These suppliers specifically
chose us because of our expertise in demand creation, eBusiness and
supply chain management, and our alignment with the high-growth
Internet and communications markets.
- - Realigned our Computer Systems sales management team to focus on two
distinct customer groups: resellers and corporate end users. As a
result, our KeyLink Systems unit and our Enterprise Sales Group are
able to provide an enhanced level of support and customer service.
- - Enhanced our global reach, including increasing our investments in
World Peace Industrial Co. Ltd. of Taiwan, and Eurodis Electron PLC of
the U.K.
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
We enter fiscal 2001 with some of the best eBusiness, supply chain management
and customer service tools in the industry, and we intend to continue investing
in them and deploying them rapidly.
Early in fiscal 2001, the Company made a strategic equity investment in
Germany-based Magirus AG, a leading European distributor of mid-range computer
systems. The partnership between Pioneer-Standard and Magirus creates one of the
largest Compaq enterprise and IBM mid-range value-added computer distributors
worldwide.
As a result of all of these activities, we were able to grow our top line
and improve our bottom line. In addition, we exceeded our goal of generating $1
million in revenue per employee for the first time in our history.
BUSINESS OUTLOOK
As we move into fiscal 2001, we are expecting another strong year in both of our
business segments.
The electronic components market continues to enjoy record demand, spurred
by the proliferation of Internet and communications applications. By creating
new demand for our suppliers and enhancing our relationships with customers, we
are on the leading edge in capitalizing on these growth markets.
The mid-range computer systems market is also doing well, and continues to
benefit from explosive growth in the Internet and Web-related applications. We
expect increasing demand for information storage products from Web hosting
companies, e-commerce providers and e-businesses to be a significant growth
driver throughout the year. We are also benefiting from strong demand for new
server technology from our established legacy systems customers.
We enter fiscal 2001 with some of the best eBusiness, supply chain
management and customer service tools in the industry, and we intend to continue
investing in them and deploying them rapidly. We also have the best people in
the industry, and they are doing an excellent job.
All of us at Pioneer-Standard are committed to continuously increasing
shareholder value. We are pleased with our accomplishments in fiscal 2000 and
look forward to sharing many future successes with you. Thank you for your
continued support.
/s/ James L. Bayman /s/ Arthur Rhein
JAMES L. BAYMAN ARTHUR RHEIN
Chairman and Chief Executive Officer President and Chief Operating Officer
[PHOTO]
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ABOUT THE COMPANY
ELECTRONIC COMPONENTS AND COMPUTER SYSTEMS DISTRIBUTION IS A DYNAMIC,
FAST-GROWING BUSINESS, DRIVEN BY THE INTERNET AND COMMUNICATIONS MARKETS. AS THE
PACE OF INNOVATION CONTINUES TO ACCELERATE AND BUSINESSES DEMAND EFFICIENT
SUPPLY CHAINS, TECHNOLOGY DISTRIBUTORS HAVE BECOME THE STRATEGIC LINK BETWEEN
SUPPLIERS AND CUSTOMERS.
Pioneer-Standard Electronics, Inc. is the leader in technology distribution.
Pioneer-Standard's focused business strategy demands exceptional implementation
of the "Three I's": Introduce, Incorporate and Improve, which commits the
Company to:
- - INTRODUCE suppliers' technology to target markets.
- - INCORPORATE that technology into customers' products and businesses.
- - IMPROVE customers' profit opportunities.
The Company has specific expertise in deploying leading-edge eBusiness
tools, supply chain management services, logistics expertise and technical
solutions to help suppliers and customers reduce their time to market and total
acquisition costs, while improving Pioneer-Standard's own efficiency. Fiscal
2000 was especially notable in the eBusiness area, as PC Week magazine
recognized Pioneer-Standard as having the third-best eBusiness program in North
America. Later in the year, the Company introduced mypioneer.com to further
personalize its eBusiness programs for customers.
Pioneer-Standard has two business segments:
- - The INDUSTRIAL ELECTRONICS DIVISION provides a comprehensive offering of
semiconductors, power products, and interconnect, passive and
electromechanical components.
- - The COMPUTER SYSTEMS DIVISION is a leading distributor of mid-range computer
systems, information storage products and software from companies such as
Compaq, IBM, Intel and Oracle.
Both divisions benefit from their close alignment with the high-growth
Internet and communications markets, which are driving demand for the products
that Pioneer-Standard distributes to record levels.
Pioneer-Standard continues to expand its global reach through strategic
investments in three overseas companies: World Peace Industrial Co. Ltd. of
Taiwan; Eurodis Electron PLC of the U.K.; and Magirus AG of Germany. These
equity partners enable Pioneer-Standard to support its customers and suppliers
globally, while continuing to grow and meet the needs of its North American
constituents.
[3 PHOTOS]
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
INDUSTRIAL ELECTRONICS DIVISION
Driven by rapid growth in the Internet and communications markets, worldwide
demand for electronic components is at record levels. The Industrial Electronics
Division is using its expertise in demand creation, supply chain management,
value-added services and eBusiness to capitalize on these extraordinary growth
opportunities.
Explosive Growth
Pioneer-Standard's Industrial Electronics Division provides a comprehensive
offering of semiconductors, power products, and interconnect, passive and
electromechanical (IPE) components -- more than 386,000 products from 100
leading manufacturers. Fiscal 2000 was the best revenue-producing year ever for
the Industrial Electronics Division, spurred by its strong semiconductor and IPE
sales, which grew more than 20 percent over the previous year.
The electronic components market is expanding rapidly due to the increasing
pervasiveness of electronics -- for Internet and communications applications,
industrial controls, and automotive electronics. The Industrial Electronics
Division is closely aligned with high-growth markets such as computers and
communications and serves them with dedicated sales, technical support and
marketing communications teams. In addition, the division's Electronic
Manufacturing Services organization features a dedicated sales team to meet the
specific needs of contract manufacturers, the fastest-growing customer segment.
DEMAND CREATION
The Industrial Electronics Division excels at creating demand for suppliers'
technology, helping customers incorporate that technology into their products,
and driving volume sales for suppliers and the division. As a result of this
engineering-based strategy, the division is increasing market share with all of
its major suppliers.
During the fiscal year, the Industrial Electronics Division added several
key suppliers to its line card. These suppliers specifically chose
Pioneer-Standard because of the Industrial Electronics Division's expertise in
demand creation, eBusiness and supply chain management:
- - Level One Communications, an Intel company that provides connectivity
solutions for high-speed telecommunications and networking applications.
[PHOTO]
Supplystream puts the tools of professional supply chain management at
everyone's fingertips to streamline the purchasing process and reduce total
acquisition costs for customers.
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Value-added 98 25%
services as
a percentage 99 33%
of division
sales > 00 42%
01 50%
(est.)
- - ZiLOG, which offers advanced embedded semiconductors for use in Internet,
networking and "smart" home appliance applications.
- - T.sqware, which manufactures high-end microprocessors for computers and
communications equipment.
SUPPLY CHAIN MANAGEMENT
The Industrial Electronics Division continues to expand its leadership in supply
chain management, positioning itself as the strategic link between suppliers and
customers.
In fiscal 2000, the division and its global partners -- World Peace
Industrial Co. Ltd. in Asia and Eurodis Electron PLC in Europe -- enhanced their
supply chain management collaboration and worked with multi-geography customers
to reduce their total acquisition costs.
Also during the fiscal year, the division became the exclusive marketing
partner for Supplystream's software. Supplystream is the leader in developing
tools for professional supply chain management, which can be used to measure
internal transaction costs, optimize asset utilization, and analyze the
materials management process based on total cost of acquisition versus
piece-part pricing. The division is marketing the software to help customers
determine the optimal combination of value-added services that will reduce their
time-to-manufacture and time-to-market.
VALUE-ADDED SERVICES
As customers and suppliers continue to outsource their non-core competencies,
the Industrial Electronics Division is seizing an opportunity to offer an
increasing variety of value-added services, ranging from inventory management,
logistics services and power solutions to device programming and component
kitting and assembly. With expertise in targeted high-growth markets, the
division's technical engineering staff specializes in delivering unique customer
solutions. During fiscal 2000, the division upgraded and expanded its
value-added services centers to meet the growing needs of customers throughout
North America.
[PHOTO]
Top left: Computer chips on a silicon wafer. Bottom left: Users of
mypioneer.com have online access to personalized tools and infor-
mation for online purchasing and order tracking. Above: Electronics
are an integral part of people's everyday lives.
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
Award-winning Web programs enable customers to go online to Learn, Find, Buy and
receive after-sale Support.
The value-added services expertise and investments have established the
Industrial Electronics Division as a supply chain management and technology
distribution leader. The initiatives have also been financially beneficial, as
42 percent of the division's fiscal 2000 revenues included value-added services,
compared with 25 percent just two years earlier. The goal for fiscal 2001 is to
reach 50 percent.
eBusiness
The Industrial Electronics Division embraces the Internet as an information-rich
solutions provider that is helping customers and suppliers be more effective and
the Company more efficient in meeting their needs. Award-winning Web programs
enable customers to go online to Learn, Find, Buy and receive after-sale
Support. Through mypioneer.com, the division has more than 1,000 dedicated
extranets, which include customer-specific information such as contract pricing,
bonded and available inventories, shipping details, access to order histories,
and online technical support.
In November 1999, PC Week magazine recognized Pioneer-Standard as having one
of the best eBusiness programs in all of North America, due in part to the
Company's extranets and programs for online collaboration with customers and
suppliers. Since then, the division has introduced additional personalization
and customization features to provide customers fast, easy access to the most
relevant information for their particular situation.
OUTLOOK
The Industrial Electronics Division expects fiscal 2001 to be another strong
year, especially as the communications market and contract manufacturers
continue to drive demand for semiconductors and other electronic components. The
division expects its continued focus on demand creation, supply chain
management, value-added services and eBusiness will provide significant
opportunities for growth and expansion throughout the year. The technology
distribution market is dynamic and strong, and the Industrial Electronics
Division is capitalizing on those market conditions.
[PHOTO]
Top: Contract manufacturers represent the electronic
components industry's fastest-growing customer
segment. Bottom: The robust industrial controls mar-
ket is also helping to drive component demand to
record levels.
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eBUSINESS FAQS: INDUSTRIAL ELECTRONICS DIVISION
- - HOW IS THE INDUSTRIAL ELECTRONICS DIVISION INTEGRATING eBUSINESS INTO ITS
BUSINESS?
We see the Internet as an essential tool for success today and it is a growing
part of our business. In 1998, we began building the infrastructure necessary to
provide broad online support to our customers and suppliers. We developed our
strategy around the principles of Learn, Find, Buy and Support. Today,
leading-edge capabilities are in place throughout our Web-based programs, and we
are continuously innovating and improving.
Our strategy is to use the Web as the ultimate customer service and supply
chain management tool. We want customers and suppliers to be able to
independently access our information and services anytime, anywhere, which makes
them more effective and us more efficient in meeting their needs.
- - HOW IS THE DIVISION USING mypioneer.com TO SERVE CUSTOMERS?
Under the banner of mypioneer.com, we are providing an increased level of
personalized service for engineers and purchasers. This service enables
customers to personalize their page views to buy online at their negotiated
contract pricing, view bonded and available inventories, place buys for future
dates, manage custom part numbers, conduct multiple-part searches, sign up for
automated shipping notification, utilize sophisticated order tracking tools,
and access order history. The division's dedicated customer extranets have been
recognized by PC Week and Electronic Engineering Times as among the most
innovative in all of North America. For an exclusive online tour of the features
available at mypioneer.com, visit the Web site at mypioneer.com/eLeader.
- - WHAT ADDITIONAL ONLINE FEATURES WILL YOU BE INTRODUCING?
Our Web strategies and tactics are consistently updated based on input from our
suppliers and customers, who are asking for advanced work flow management tools.
We continue to expand the personalization features to reduce the number of
clicks for customers to get the information they want.
One-to-one permission marketing is becoming an important part of our Web
strategy. For example, we are introducing a "push" education service called
Product Spotlight to keep engineers abreast of the latest technology releases
and product life cycle information. Engineers will choose which technologies
they wish to receive updates about via email.
- - TO WHAT EXTENT DO YOU PARTICIPATE IN INDUSTRY PORTALS?
Pioneer-Standard is an equity partner in ChipCenter, a premier portal Web site
widely visited by the engineering community. ChipCenter provides us instant
access to a technical customer base, which we channel directly to our elec-
tronic catalog for online purchasing.
- - WHAT ARE THE RESULTS OF THE eBUSINESS PROGRAMS?
Demand for our dedicated customer extranets increased significantly throughout
fiscal 2000, with more than 1,000 such sites currently online. eBusiness is a
major reason the Company exceeded its goal of $1 million in sales per employee
for fiscal 2000 -- an accomplishment that positions us ahead of the industry.
The Pioneer-Standard Web site receives more than 10,000 user sessions per day
and more than 250,000 catalog part searches per month. Eighty percent of our
site visitors are engineers, and these statistics are growing at a rate of 10
to 15 percent per month, with additional acceleration expected as new services
are introduced.
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
COMPUTER SYSTEMS DIVISION
With Internet applications continuing to proliferate, the mid-range computer
systems market is the fastest-growing sector of the computer industry.
Pioneer-Standard's Computer Systems Division provides customers with the
technology, products, services and support to fuel the information-intensive
New Economy.
Market Focus
Pioneer-Standard's Computer Systems Division is one of the world's largest
distributors of computer products and software from companies such as Compaq,
IBM, Intel and Oracle. The division is very focused and experienced in serving
two distinct customer groups: KeyLink Systems, the distribution business unit,
focuses on resellers; the Enterprise Sales Group sells to corporate end users.
The five primary growth industries the division serves are: communications,
manufacturing, distribution, financial services and Internet companies.
Growth Drivers
In recent years, the enterprise and mid-range computer systems sector has
grown at double-digit rates as companies require increasingly powerful computer
servers and networks to manage their new applications and Internet/Intranet
capabilities. Demand for information storage products and systems with 24/7
capabilities has been especially strong among Web hosting companies,
e-commerce providers and e-businesses.
The Computer Systems Division is also benefiting from increasing demand for
software and services. During fiscal 2000, the division realigned its software
business with focused sales specialists to complement its hardware offerings and
reinforce its solutions marketing program. KeyLink Systems has established a
dedicated practice focused on marketing e-business solutions to the ISP/ASP and
"dot-com" market space. In the services area, the division has expanded its
offering of programs in server system design implementation, performance tuning,
automated backup and recovery, and data migrations.
[PHOTO]
The Underground site provides direct online access to the Computer Systems
Division's customer relationship management tools.
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The five primary growth industries for the division are: communications,
manufacturing, distribution, financial services and Internet companies.
KEYLINK SYSTEMS(R)
KeyLink Systems is the business unit within the Computer Systems Division that
sells to resellers located throughout North America. Resellers are a large and
growing part of the computer systems market. They provide technology solutions
to their end-user customers, many of whom are on the cutting edge of the
information economy.
Through high-level partnerships with Compaq, IBM, Intel and Oracle, KeyLink
Systems provides resellers with the technology to offer their customers
state-of-the-art solutions. KeyLink Systems combines that technology with
systems integration, logistics, business consulting and marketing support to
help resellers expand their market reach and serve their customers better.
KeyLink Systems is committed to the continual development of its current
reseller customer base, helping them establish new growth opportunities for
their businesses, and recruiting new growth-oriented resellers.
ENTERPRISE SALES GROUP
The Enterprise Sales Group focuses on identifying and implementing information
technology solutions directly for large and mid-sized end-user customers. Its
customer base includes some of the world's largest and best-known electronic
commerce and information technology companies. This group provides hardware,
software and services in four key technical areas: server consolidation to
maximize information technology infrastructure; eBusiness for keeping
companies in touch with their customers, suppliers and employees; high
availability for non-stop computing functionality; and storage solutions to
manage and retrieve mission-critical data quickly.
OPERATIONAL EXCELLENCE
For both its reseller and enterprise customers, the Computer Systems Division
brings distinct advantages in operational excellence, customer relationship
management, eBusiness and value-added services to the markets it serves.
As part of its continuing program in operational excellence, the division
has standardized on best business practices across the division and
consolidated its vendor and customer service programs. Customer relationship
management (CRM) is a major focus, with the division integrating data from
internal and external knowledge bases into a single online environment where
employees and customers can share and use the information efficiently. For
example, Pioneer-Standard's secure Underground
[PHOTO]
Top: The new Systems Integration Value Added Center features state-of-the-art
software configuration and setup, system testing, burn-in and other
integration services. Bottom: KeyLink Systems works with resellers to provide
technology solutions to their end-user customers.
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
Mid-range servers (top) enable customers such as Web site development firms
(bottom) to design innovative e-business capabilities for their clients.
[PHOTO]
site features custom tools and commerce modules for customers to personalize
information. In a shopping cart format, customers are able to browse the
catalog, configure and price quotes, order online, and check order status. The
Underground also features vendor information such as specification sheets,
product presentations and training. Using the Internet to deliver these
services enables the division to provide best-in-class service.
The Computer Systems Division has also enhanced its technical service
capabilities, with the April 1999 opening of the new Systems Integration Value
Added Center, one of the largest and most advanced integration facilities in
North America. The paperless, fully automated operation offers software
configuration and setup, system testing, burn-in and other integration services.
Outlook
The Computer Systems Division offers the hardware, software and services that
its reseller and enterprise customers need for increasingly sophisticated Web
and information technology applications. According to one estimate,
approximately 85 percent of the computer servers needed by 2003 have not yet
been purchased or deployed by customers -- a significant growth opportunity for
the division, which has the strategic partnerships, eBusiness tools, customer
relationship management and value-added services expertise to continue to
deliver growth.
Early in fiscal 2001, Pioneer-Standard announced a strategic equity
investment in Magirus AG, a leading computer systems distributor in Europe. The
combination of KeyLink Systems and Magirus creates one of the largest Compaq
enterprise and IBM mid-range distributors spanning North America and Europe.
KeyLink Systems and Magirus share a strong commitment to serve the reseller
community and, together, have an enhanced ability to serve global enterprise
customers.
Worldwide online 97 100
population > 98 151
(in millions of
people by end of 99 259
the calendar year)
00 375
02 490
05 765
The explosion of the World Wide Web is a significant growth driver for the
Computer Systems Division. The number of Web users worldwide is projected to
reach 375 million people by the end of calendar year 2000 and 765 million people
by 2005. An estimated 85 percent of the servers and storage systems needed to
accommodate the growth through 2003 have not yet been sold or created.
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eBUSINESS FAQS: COMPUTER SYSTEMS DIVISION
- - HOW ARE THE COMPUTER SYSTEMS DIVISION'S EBUSINESS PROGRAMS HELPING
CUSTOMERS?
The Web allows us to partner with our suppliers and customers very
efficiently, and makes us the strategic link between the two groups. Our
award-winning eBusiness programs are tailored to meet the needs of our two
distinct customer groups -- KeyLink Systems resellers and Enterprise Sales Group
customers. We can design and launch fully operational Web storefronts for our
reseller customers to use to market themselves. We are making it hard for
customers to live without us and giving our people the tools they need to serve
customers better.
- - WHAT IS THE DIVISION DOING IN CUSTOMER RELATIONSHIP MANAGEMENT?
We have been offering Web-based customer relationship management (CRM) for about
a year, providing extensive real-time information for and about our customers.
CRM is one-to-one marketing, and the Web enables us to personalize information
for customers to help them maximize the benefits of partnering with us. With
electronic CRM, we can "seize the data" to target customers who want to receive
vendor and system-specific technology updates.
- - WHAT IS THE UNDERGROUND?
The Underground is a secure, Web-based subscriber service that is the
foundation of our online CRM program for our customers. Here, customers can sign
up for all of our automated online services, including email notification of
their order status, subscriptions to information services, marketing support,
sales histories, and maintenance and warranty information. Of particular value
to KeyLink Systems resellers is a complete sales and marketing tool kit through
The Underground's MarketLink service, which features ready-to-use templates of
reseller marketing materials for direct mail, brochures and advertising.
- - WHAT ADDITIONAL FEATURES ARE YOU INTRODUCING?
We are always looking for ways to enhance our customer service, and eBusiness is
an essential part of that effort. We have many new Web-based tools rolling out
this year to serve our customers and prospects. The Undeground soon will have
modules in place that allow users to further custom-configure their experience
with product bundles, storefronts and a data warehouse system-- all in a secure,
user-defined environment unique to each organization's business needs. Fiscal
2000 was a significant year for the introduction of new services, and fiscal
2001 will be just as important.
- - HOW IS THE DIVISION USING "PUSH" TECHNOLOGY
Through the KeyMail system, the division provides customers with technology
updates, special promotions from vendors, and order status and shipping
information. Through the Underground Informer, users can choose from a variety
of vendor and product subscription options to receive update information via
e-mail. "Push" technology streamlines and simplifies the purchasing process
for customers, who receive all of the benefits of eBusiness without having to
check the Web site several times a day or even be online.
- - WHAT ARE THE RESULTS OF THE EBUSINESS PROGRAMS?
More than 70 percent of our customer transactions have some eBusiness component
- -- whether searching for a new product, tracking an order, or using the
MarketLink materials for resellers. The division conducts quarterly surveys to
monitor customer satisfaction at all touch points of the business, including
eBusiness, field sales, inside sales, financial services, warehousing, technical
support and management. The resulting customer satisfaction ratings have been
increasing steadily over the past three years and reached their highest level
ever by the end of fiscal 2000. The eBusiness effort is one of the reasons most
often cited for the high level of satisfaction. We have incorporated such a
vigorous self-serve philosophy that we are able to perform at this high level
while increasing our own efficiency.
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SETTING THE STANDARD FOR TECHNOLOGY DISTRIBUTION
BUILDING GLOBAL MOMENTUM
PIONEER-STANDARD SUPPORTS ITS SUPPLIERS AND CUSTOMERS WHEREVER THEY DO BUSINESS,
AND, IN TODAY'S WORLD, THAT MEANS HAVING A GLOBAL REACH. IN RECENT YEARS,
PIONEER-STANDARD HAS BEEN BUILDING GLOBAL MOMENTUM, AND WILL CONTINUE TO PURSUE
SUCH GROWTH OPPORTUNITIES IN FISCAL 2001 AND BEYOND.
In addition to having a large and growing direct presence throughout North
America, Pioneer-Standard holds strategic investments in three partners located
in Asia and Europe: World Peace Industrial Co. Ltd. (WPI) of Taiwan; Eurodis
Electron PLC of the U.K.; and Magirus AG of Germany. These investments provide a
platform for Pioneer-Standard and its equity partners to serve the North
American, Asian and European markets in an integrated, efficient manner. The
three markets have many of the same strong growth drivers, notably the Internet
and communications markets.
COMPONENTS IN ASIA AND EUROPE
During fiscal 2000, Pioneer-Standard increased its investments in both WPI and
Eurodis, which distribute electronic components. Over the year, the three
partners worked together extensively to enhance their sales, marketing,
logistics support and worldwide brand recognition. In addition, the companies
continue to collaborate on their eBusiness and supply chain management
capabilities to offer seamless service to global customers and suppliers.
Coordination with the global partners has enabled Pioneer-Standard to win
business with North American contract manufacturers and OEMs that require global
sourcing. At the same time, Pioneer-Standard and its partners retain their
ability to manage their own businesses and best serve local customers.
The Asian semiconductor market in particular is booming, with growth in the
30 percent range during calendar year 1999 and Asia once again accounting for 25
percent of the world-wide semiconductor market. Worldwide, Pioneer-Standard,
WPI and Eurodis are all benefiting from the increased demand for semiconductors
and other components.
COMPUTER SYSTEMS IN EUROPE
The equity investment in Magirus early in fiscal 2001 gives Pioneer-Standard a
significant computer systems presence in Europe. The combination of KeyLink
Systems and Magirus creates one of the largest Compaq enterprise and IBM
mid-range computer distributors worldwide, which enhances Pioneer-Standard's
relationship with these key suppliers. The organizations share a strong
commitment to serving resellers and enterprise customers that require global
sourcing.
Pioneer-Standard invests in carefully selected partners to ensure that they
have similar values and complementary business objectives, and offer good
growth potential. These investments in locally based distributors enable
Pioneer-Standard to expand its global reach while continuing to meet the needs
of its core market in North America.
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WWW.PIONEERSTANDARD.COM
FINANCIAL REVIEW
FISCAL 2000
Management's Discussion and Analysis 16
Financial Statements 20
Notes to Financial Statements 24
Five-Year Summary of Operations 34
Corporate Directory 35
Shareholder Information 36
[3 PHOTOS]
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Fiscal 2000 Compared with Fiscal 1999
CONSOLIDATED SALES
Fiscal 2000 was the 14th consecutive year of record sales and the 28th year in
the 29 years the Company has been public in which sales increased. Net sales for
the year ended March 31, 2000, of $2,550.7 million increased 13 percent over
sales of the prior year of $2,259.1 million. Both of the Company's segments
contributed to the increase in sales.
SEGMENT SALES
The Company's business is classified into two operating segments:
Computer Systems products include mid-range computer systems and high-end
platforms, storage subsystems, software, servers, personal computers, display
terminals and networking products.
Computer systems accounted for 48 percent of the Company's sales in fiscal
2000 compared with 50 percent a year ago. Sales of computer systems increased 8
percent in fiscal 2000.
Industrial Electronics products are comprised of semi-conductors, and
interconnect, passive and electromechanical products. Semiconductors are the
building blocks of computer chips and include microprocessors, memory devices,
programmable logic devices, and analog and digital integrated circuits.
Interconnect, passive and electro-mechanical products are devices that move or
use an electrical signal and include capacitors, connectors, resistors,
potentiometers, switches and power conditioning equipment.
Industrial electronics accounted for 52 percent of sales in fiscal 2000
compared with 50 percent a year ago. The increase in industrial electronics
sales of 18 percent in fiscal 2000 is primarily attributable to the increased
demand for semiconductors from the Internet and communications markets.
GROSS MARGINS
Gross margin for the consolidated operations decreased to 15.5 percent for
fiscal 2000 from 15.6 percent in the prior year.
The gross margin for computer systems declined to 14.8 percent of sales in
fiscal 2000 from 16.4 percent a year ago. The decrease is primarily attributable
to continued pricing pressures within the market.
The gross margin for industrial electronics increased to 16.2 percent in
fiscal 2000 from 14.8 percent a year ago. The increase is attributable primarily
to the industry's strengthening demand versus supply, positively impacting
average selling prices.
Management expects overall gross margin pressure to continue in the next
fiscal year.
OPERATING EFFICIENCIES
Warehouse, selling and administrative expenses for consolidated operations
were 11.5 percent of sales in fiscal 2000, down from 11.8 percent of sales in
the prior year. During 2000, the improvements came from operating efficiencies,
coupled with the effects of cost controls.
Efficiencies were realized through improved employee productivity and
working capital management. Sales per employee increased to $1,038,000 from
$879,000 in 1999, which represents a gain of approximately 18 percent. Accounts
receivable remained at 44 days in 2000. Inventory turnover of 6.1 times
increased from 5.5 times in the prior year.
The resulting consolidated operating profit of $101.5 million was up 19
percent from $84.9 million in 1999. Consolidated operating profit was 4.0
percent of sales in 2000 compared with 3.8 percent of sales in 1999, reflecting
the operating expense improvement in fiscal 2000.
Operating profit margin for computer systems of 3.1 percent decreased from
4.4 percent in fiscal 1999 primarily due to pricing pressures.
Operating profit margin for industrial electronics increased to 4.8 percent
from 3.1 percent in fiscal 1999 primarily because of the improvement in gross
margin due to increased demand in relationship to supply.
OTHER INCOME
In fiscal 2000, the Company recorded a pre-tax gain of $1.8 million related to
the sale and disposal of assets no longer required in the business.
INTEREST EXPENSE
Interest expense was $26.1 million, net of $0.8 million capitalized, in fiscal
2000 compared with $24.3 million a year ago. The increased interest expense is
primarily attributable to the additional debt to fund working capital and
capital expenditures needed to support the ongoing growth needs of the business.
16
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TAXES
The effective tax rate for fiscal 2000 was 40.4 percent compared with 39.6
percent a year ago. The tax rate increase was primarily due to the unrecognized
tax benefits associated with the current year operating loss of the Company's
Canadian subsidiary.
NET INCOME
Primarily as a result of the factors noted above, the Company's net income for
fiscal 2000 reached a record high of $40.1 million, an increase of 30 percent,
or $9.3 million, over fiscal 1999 income of $30.8 million.
Diluted earnings per share for fiscal 2000 increased to $1.27 from $1.03 in the
previous year.
Fiscal 1999 Compared with Fiscal 1998
SALES
Fiscal 1999 consolidated net sales of $2,259.1 million increased 34 percent over
sales in the prior year of $1,685.3 million. The increase was primarily
attributable to higher sales volume of computer systems resulting from the
acquisition of Dickens Data Systems, Inc. ("Dickens") on March 31, 1998.
Including the sales of Dickens with the prior year on a pro forma basis, fiscal
1999 sales increased 10 percent compared with fiscal 1998.
Computer systems sales increased 68 percent in fiscal 1999 primarily due to
added sales resulting from the Dickens acquisition discussed above. This segment
accounted for 50 percent of sales in fiscal 1999 compared with 40 percent in the
prior year.
Industrial electronics net sales increased 12 percent in fiscal 1999
primarily attributable to the increased sales of the high-volume, low-margin
semiconductor products.
GROSS MARGINS
The fiscal 1999 consolidated gross margin of 15.6 percent decreased from 17.7
percent in the prior year. Both operating segments experienced declines in
gross margin in fiscal 1999 as described below.
Computer systems gross margin decreased to 16.4 percent from 18.7 percent
primarily due to the Dickens sales earning a lower gross margin compared with
the other computer systems sales. The gross margin for industrial electronics
declined to 14.8 percent in fiscal 1999 from 17.1 percent in 1998. The
decrease was attributable primarily to the increase in sales of high-volume,
low-margin products and to the industry's excess semiconductor supply versus
demand.
OPERATING EFFICIENCIES
Warehouse, selling and administrative consolidated expenses were 11.8 percent
of sales in fiscal 1999 and 13.4 percent in 1998. During 1999, gains resulted
from improvements due to leveraging expenses on higher sales volume, coupled
with the effects of implementing cost controls.
Efficiencies were realized through improved employee productivity and
inventory turnover. Sales per employee increased to $879,000 from $766,000 in
1998. Receivable collections were 44 days in 1999 and 1998. Inventory turnover
of 5.5 times in 1999 increased from 4.4 times in the prior year.
The resulting consolidated operating profit of $84.9 million was up 16
percent from $73.0 million in 1998. Consolidated operating profit was 3.8
percent of sales in 1999 compared with 4.3 percent of sales in 1998,
reflecting the gross margin erosion in fiscal 1999 discussed above.
Computer systems operating profit as a percent of sales decreased to 4.4
percent in 1999 from 5.4 percent in 1998, primarily due to the integration of
Dickens.
Industrial Electronics operating profit as a percent of sales declined to
3.1 percent in 1999 from 3.6 percent in 1998 primarily due to the gross margin
erosion from the excess capacity in the semiconductor industry.
INTEREST EXPENSE
Interest expense was $24.3 million in fiscal 1999 compared with $20.7 million in
fiscal 1998. The increased interest expense is attributable to additional debt
incurred to fund working capital and capital expenditure requirements neces-
sary to support the ongoing growth needs of the business, as well as the effect
of the acquisition of Dickens.
TAXES
The effective tax rate was 39.6 percent for fiscal 1999 compared with 41.4
percent in fiscal 1998. The tax rate decrease was primarily due to the
utilization of the operating loss carryforward of the Canadian subsidiary and
lower effective state tax rates.
NET INCOME
Primarily as a result of the factors noted above, the Company reported net
income for fiscal 1999 of $30.8 million - an increase of $0.3 million,
or 1 percent over fiscal 1998 net income of $30.5 million.
Diluted earnings per share for fiscal 1999 decreased to $1.03 from $1.14 in
the previous year. The average diluted shares outstanding increased to 35.7
million in fiscal 1999 from 26.9 million the prior year primarily due to the
issuance of convertible trust preferred securities a year ago.
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RISK CONTROL
The Company has assets, liabilities and cash flows in foreign currencies
creating foreign exchange risk with the primary foreign currency being the
Canadian dollar. Systems are in place for continuous measurement and evaluation
of foreign exchange exposures so that timely action can be taken when considered
desirable. Reducing exposure to foreign currency fluctuations is an integral
part of the Company's risk management program. Financial instruments in the form
of forward exchange contracts are employed as one of the methods to reduce such
risk. At March 31, 2000, one forward exchange contract in the amount of $2.7
million existed with a maturity of 30 days. The foreign exchange contracts have
had an immaterial impact on the Company's results of operations for the fiscal
years ended 2000, 1999 and 1998.
The Company has entered into several interest rate swap agreements for
purposes of serving as a hedge of the Company's variable rate credit agreement
borrowings. The effect of the swaps is to establish fixed rates on the variable
rate debt and to reduce exposure to interest rate fluctuations. At March 31,
2000, the Company had interest rate swaps with a notional amount of $70 million.
Pursuant to these agreements, the Company pays interest at a weighted average
fixed rate of 5.47 percent. The weighted average LIBOR rates applicable to these
agreements were 6.11 percent at March 31, 2000. The swap agreements have had an
immaterial impact on the Company's results of operations for the fiscal years
ended 2000, 1999 and 1998.
The Company is exposed to interest rate risk from the revolving credit
facility's various floating rate pricing mechanisms. This interest rate
exposure is managed by the interest rate swaps to fix the interest rate on a
portion of the debt and the use of multiple maturity dates. If interest rates
were to increase 100 basis points (1 percent) from March 31, 2000 rates, and
assuming no changes in debt from March 31, 2000 levels, the additional
annualized net expense would be approximately $1.2 million or $.02 per diluted
share.
The Company is exposed to credit loss in the event of nonperformance by the
other party to the derivative financial instruments. The Company limits this
exposure by entering into agreements with major financial institutions that meet
credit standards established by the Company and that are expected to satisfy
fully their obligations under the contracts.
The Company extends credit based on customers' financial conditions, and
generally, collateral is not required. The Company obtains credit insurance in
certain circumstances to protect its interests. Credit losses are provided for
in the financial statements when collections are in doubt.
Inflation has had a nominal effect on the Company's operations.
NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which requires all derivatives to be recognized on the
balance sheet at fair value. This statement is effective for fiscal years
beginning after June 15, 2000. Derivatives that are not hedges must be adjusted
to fair value through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of the derivative will either be
offset against the change in fair value of the hedged assets, liabilities or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. Management is in the process of
analyzing and assessing the impact of the adoption of SFAS 133 on the
Company's consolidated results of operations and financial position. The Company
must adopt the statement no later than April 1, 2001.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements,"
which summarizes the staff's views regarding the application of generally
accepted accounting principles to selected revenue recognition issues and is
effective July 1, 2000. The Company is currently assessing the impact SAB 101
will have on the Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Current assets including cash increased by $124.5 million and current
liabilities increased by $99.3 million for the year ended March 31, 2000,
resulting in an increase of $25.2 million of working capital. Increased sales
in the fourth quarter of fiscal 2000 compared with the same quarter a year ago,
and the weighting of sales within the fourth quarter resulted in increased
current asset needs. The increase in current liabilities is primarily
attributable to increased inventory funding requirements. The Company's
current ratio was 2.7:1 at March 31, 2000, and 3.4:1 at year-end March 31, 1999.
The Company's revolving credit facility has a total capacity of $260.0
million, all of which may be borrowed as of March 31, 2000 in accordance with
availability requirements which are subject to meeting certain minimum ratios.
As of March 31, 2000, $170.0 million was borrowed under the facility. A year
ago, such borrowings aggregated $160.0 million.
Capital expenditures were $36.0 million in fiscal 2000 compared with $22.2
million in 1999. This spending reflects ongoing initiatives designed to improve
efficiencies through computer enhancement of operating processes as well as
expanded facilities. Management estimates that capital expenditures will be in
the range of $25.0 million in fiscal 2001.
18
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During fiscal 2000, the Company made additional investments in World Peace
Industrial Co. Ltd., Eurodis Electron PLC and two other investments in the
United States totaling $13.9 million. These investments further the Company's
growth strategy by offering access to an extensive distribution network in the
Asia-Pacific region, Europe and markets within the United States. Subsequent to
year end, in May 2000, the Company purchased a minority equity interest in
Magirus AG, a leading European computer systems distributor. Headquartered in
Stuttgart, Magirus employs more than 300 people in Germany, Austria, France,
Italy, Spain and Switzerland.
During fiscal 2000, total interest-bearing debt increased by $23.3 million.
The increase in debt is primarily attributable to funding working capital
requirements. The ratio of interest-bearing debt to capitalization was 43
percent at March 31, 2000 compared with 44 percent a year ago.
The Company believes that cash generated from operations and amounts
available under its credit facility are sufficient to fund its working capital
and capital expenditure requirements.
INFORMATION TECHNOLOGY SYSTEMS
The Company capitalized approximately $34.2 million in fiscal 1998 and 1999 in
connection with the acquisition and installation of an enterprise-wide
information technology "IT" system. Amounts representing approximately $11.5
million of these expenditures were operational in fiscal 1999 and $8.5 million
are planned to become operational in fiscal 2001. The balance of $14.2 million
represents work-in-process components which are not yet operational. The
Company is evaluating these components and presently has no reason to believe
that they will not become operational. In addition, management believes there
would be no material adverse effect on the financial condition or results of
operations of the Company should such components require further
modification or replacement. It is contemplated that implementation for
completing the balance of the IT system installation will commence in fiscal
2001.
YEAR 2000
The Company completed its year 2000 remediation efforts and, since the turn of
the century, has not experienced any significant problems internally or with
suppliers and customers in connection with this event. Nevertheless, there
still remain some future dates that could potentially cause computer system
problems. The Company continues to monitor these dates and address any necessary
remediation but does not anticipate any major impact on its operations.
OTHER EVENTS
On May 13, 1999, ProGen Technologies, Inc. "ProGen", one of the Company's major
customers, filed for protection under Chapter 11 of the U.S. Bankruptcy Code in
the Central District of the State of California. On June 18, 1999, ProGen made a
motion, which was granted, to convert its Chapter 11 proceeding to a Chapter 7
proceeding. At the time of the bankruptcy filing, ProGen owed the Company
approximately $9.3 million. The bankruptcy court has appointed a Trustee who has
proceeded with liquidation of the assets of ProGen. The Company continues to
assert its security interest and rights in the bankruptcy proceedings. At this
time, management believes, due to the Company's status in the bankruptcy
proceedings, any effects resulting from this matter will not have a material
adverse effect on the consolidated financial condition or results of operations
of the Company.
On February 11, 2000, the Company experienced a fire at its Twinsburg, Ohio
distribution center. This event affected approximately 3 percent of the
Company's inventory but caused no structural damage or major disruption. The
Company believes it has adequate insurance coverage to offset any property
loss or business impact resulting from the fire.
FORWARD-LOOKING INFORMATION
Portions of this report contain current management expectations which may
constitute forward-looking information. The Company's performance may differ
materially from that contemplated by such statements for a variety of reasons,
including, but not limited to: competition, dependence on the computer market,
inventory obsolescence and technology changes, dependence on key suppliers,
effects of industry consolidation, risks and uncertainties involving
acquisitions, instability in world financial markets, downward pressure on gross
margins, uneven patterns of inter-quarter and intra-quarter sales, and
management of growth of the business.
19
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CONSOLIDATED BALANCE SHEETS
March 31, 2000 and 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 34,253,000 $ 28,898,000
Accounts receivable, less allowance for doubtful accounts
(2000 - $5,681,000, 1999 - $6,035,000) 407,309,000 323,461,000
Merchandise inventory 348,120,000 314,362,000
Prepaid expenses 2,871,000 2,475,000
Deferred income taxes 9,178,000 8,049,000
- --------------------------------------------------------------------------------------------------------------
Total current assets 801,731,000 677,245,000
INVESTMENT AND OTHER ASSETS:
Intangible assets 150,503,000 154,405,000
Investments in affiliated companies 46,030,000 13,964,000
Other assets 8,055,000 7,898,000
PROPERTY AND EQUIPMENT, AT COST:
Land 572,000 828,000
Building 8,997,000 10,264,000
Furniture and equipment 100,564,000 87,000,000
Software 60,054,000 53,310,000
Leasehold improvements 22,439,000 12,200,000
- --------------------------------------------------------------------------------------------------------------
192,626,000 163,602,000
Less accumulated depreciation and amortization 86,729,000 72,645,000
- --------------------------------------------------------------------------------------------------------------
Net property and equipment 105,897,000 90,957,000
- --------------------------------------------------------------------------------------------------------------
$ 1,112,216,000 $ 944,469,000
==============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 240,229,000 $ 155,705,000
Note payable 26,086,000 9,674,000
Income taxes 673,000 1,216,000
Accrued salaries, wages and commissions 13,456,000 8,649,000
Other accrued liabilities 16,702,000 22,550,000
Long-term debt due within one year 3,052,000 3,104,000
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 300,198,000 200,898,000
Long-term debt 320,205,000 313,240,000
Deferred income taxes and other 23,998,000 15,078,000
Company obligated mandatorily redeemable convertible
preferred securities of trust, holding solely 6 3/4% convertible
subordinated debentures of the Company 143,750,000 143,750,000
SHAREHOLDERS' EQUITY:
Serial preferred shares, without par value: authorized 5,000,000;
issued and outstanding - none -- --
Common shares, without par value, $.30 stated value:
authorized 80,000,000 shares; 31,349,751 outstanding
shares (including 4,056,202 subscribed-for shares) in
2000 and 31,134,741 shares (including 4,780,000
subscribed-for shares) in 1999 9,323,000 9,258,000
Capital in excess of stated value 137,092,000 93,324,000
Retained earnings 238,968,000 202,056,000
Unearned employee benefits (63,885,000) (31,369,000)
Unearned compensation on restricted stock (7,526,000) --
Accumulated other comprehensive income (loss) 10,093,000 (1,766,000)
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 324,065,000 271,503,000
- --------------------------------------------------------------------------------------------------------------
$ 1,112,216,000 $ 944,469,000
=============================================================================================================
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2000, 1999 and 1998 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Net sales $2,550,685,000 $2,259,083,000 $1,685,265,000
Operating costs and expenses:
Cost of goods sold 2,154,932,000 1,906,657,000 1,386,666,000
Warehouse, selling and administrative expenses 294,299,000 267,505,000 225,649,000
- ------------------------------------------------------------------------------------------------------------------------
2,449,231,000 2,174,162,000 1,612,315,000
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 101,454,000 84,921,000 72,950,000
Other income 1,845,000 -- --
Interest expense 26,074,000 24,253,000 20,717,000
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 77,225,000 60,668,000 52,233,000
Provision for income taxes:
Federal
Current 26,302,000 14,825,000 13,584,000
Deferred 1,229,000 5,655,000 5,124,000
- ------------------------------------------------------------------------------------------------------------------------
27,531,000 20,480,000 18,708,000
State 3,679,000 3,538,000 2,916,000
- ------------------------------------------------------------------------------------------------------------------------
31,210,000 24,018,000 21,624,000
Distributions on mandatorily redeemable convertible trust
preferred securities, net of tax 5,870,000 5,841,000 112,000
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 40,145,000 $ 30,809,000 $ 30,497,000
- ------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic $ 1.52 $ 1.17 $ 1.16
Diluted $ 1.27 $ 1.03 $ 1.14
========================================================================================================================
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended March 31, 2000, 1999 and 1998
- -----------------------------------------------------------------------------------------------
Stated value Capital in Unearned
Common of common excess of Retained employee
shares shares stated value earnings benefits
- -----------------------------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1997 31,034,545 $9,228,000 $121,489,000 $147,055,000 $(63,750,000)
Net income 30,497,000
Unrealized translation
adjustment
Total comprehensive income
Shares sold by trust 504,000 2,805,000
Value change in
subscribed-for shares (2,390,000) 2,390,000
Cash dividends
($.12 per share) (3,141,000)
Shares issued upon
exercise of stock options 94,009 28,000 737,000
Tax benefit related to
exercise of stock options 125,000
- -----------------------------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1998 31,128,554 9,256,000 120,465,000 174,411,000 (58,555,000)
Net income 30,809,000
Unrealized translation
adjustment
Total comprehensive income
Value change in
subscribed-for shares (27,186,000) 27,186,000
Cash dividends
($.12 per share) (3,164,000)
Shares issued upon
exercise of stock options 6,187 2,000 36,000
Tax benefit related to
exercise of stock options 9,000
- -----------------------------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1999 31,134,741 9,258,000 93,324,000 202,056,000 (31,369,000)
Net income 40,145,000
Unrealized translation
adjustment
Unrealized gain on securities
Total comprehensive income
Shares transferred from trust (723,798) (217,000) (9,553,000) 9,770,000
Value change in
subscribed-for shares 42,286,000 (42,286,000)
Cash dividends
($.12 per share) (3,233,000)
Shares issued upon
exercise of stock options 215,010 65,000 1,186,000
Tax benefit related to
exercise of stock options 296,000
Restricted stock awards 723,798 217,000 9,553,000
Amortization of unearned
compensation
- -----------------------------------------------------------------------------------------------
BALANCE AT
MARCH 31, 2000 31,349,751 $9,323,000 $137,092,000 $238,968,000 $(63,885,000)
- -----------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Unearned Accumulated
compensation other
on restricted comprehensive
stock income (loss) Total
- ---------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1997 -- $ (43,000) $ 213,979,000
Net income 30,497,000
Unrealized translation
adjustment (538,000) (538,000)
----------
Total comprehensive income 29,959,000
Shares sold by trust 3,309,000
Value change in
subscribed-for shares --
Cash dividends
($.12 per share) (3,141,000)
Shares issued upon
exercise of stock options 765,000
Tax benefit related to
exercise of stock options 125,000
- ---------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1998 -- (581,000) 244,996,000
Net income 30,809,000
Unrealized translation
adjustment (1,185,000) (1,185,000)
-----------
Total comprehensive income 29,624,000
Value change in
subscribed-for shares --
Cash dividends
($.12 per share) (3,164,000)
Shares issued upon
exercise of stock options 38,000
Tax benefit related to
exercise of stock options 9,000
- ---------------------------------------------------------------------------
BALANCE AT
MARCH 31, 1999 -- (1,766,000) 271,503,000
Net income 40,145,000
Unrealized translation
adjustment 833,000 833,000
Unrealized gain on securities 11,026,000 11,026,000
----------
Total comprehensive income 52,004,000
Shares transferred from trust --
Value change in
subscribed-for shares --
Cash dividends
($.12 per share) (3,233,000)
Shares issued upon
exercise of stock options 1,251,000
Tax benefit related to
exercise of stock options 296,000
Restricted stock awards $(9,770,000) --
Amortization of unearned
compensation 2,244,000 2,244,000
- ---------------------------------------------------------------------------
BALANCE AT
MARCH 31, 2000 $(7,526,000) $10,093,000 $324,065,000
- ---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
22
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2000, 1999 and 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,145,000 $ 30,809,000 $ 30,497,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 14,661,000 14,379,000 11,193,000
Amortization 11,682,000 8,611,000 3,788,000
Gain on sale of property and equipment (1,845,000) -- --
Increase in operating working capital (33,638,000) (33,110,000) (115,151,000)
Decrease in other assets and other liabilities (727,000) (796,000) (7,068,000)
Deferred taxes 1,229,000 5,655,000 5,124,000
- ---------------------------------------------------------------------------------------------------------------------------
Total adjustments (8,638,000) (5,261,000) (102,114,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 31,507,000 25,548,000 (71,617,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (36,030,000) (22,137,000) (44,283,000)
Acquisition of businesses, net of cash acquired -- -- (123,253,000)
Investments in affiliated companies (13,908,000) (7,433,000) (6,531,000)
Proceeds from sale of property and equipment 2,712,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (47,226,000) (29,570,000) (174,067,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term financing 16,412,000 9,674,000 (20,500,000)
Increase (decrease) in revolving credit borrowings 10,000,000 (20,000,000) 146,859,000
Principal payments under long-term debt obligations (3,087,000) (2,991,000) (2,883,000)
Proceeds from sale of trust securities -- -- 3,309,000
Proceeds from issuance of mandatorily redeemable
convertible trust preferred securities -- 18,750,000 125,000,000
Issuance of common shares under stock option plans 1,251,000 38,000 765,000
Tax benefit related to exercise of stock options 296,000 9,000 125,000
Dividends paid (3,233,000) (3,164,000) (3,141,000)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 21,639,000 2,316,000 249,534,000
EFFECT OF EXCHANGE RATE CHANGES ON CASH (565,000) (1,395,000) 33,000
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,355,000 (3,101,000) 3,883,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 28,898,000 31,999,000 28,116,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 34,253,000 $ 28,898,000 $ 31,999,000
===========================================================================================================================
See accompanying notes to consolidated financial statements
23
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
The Company distributes a broad range of electronic components and computer
systems products manufactured by others. These products are sold to original
equipment manufacturers, value-added resellers, research laboratories,
government agencies and end users, including manufacturing companies and service
and other non-manufacturing organizations. The Company has operations in the
United States, Canada and affiliates in United States, Europe and the Asia
Pacific region.
The Company maintains the following significant accounting policies:
Principles of Consolidation The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
Cash Equivalents The Company considers highly liquid instruments with a
maturity of 90 days or less at date of purchase to be cash equivalents.
Merchandise Inventory Inventory is stated at the lower of cost (first-in,
first-out basis) or market. The Company's inventory is constantly monitored for
obsolescence. This review considers such factors as turnover, technical
obsolescence, right of return status to suppliers and price protection offered
by suppliers. Reserves for slow-moving and obsolete inventory at March 31 were
$6,770,000 in 2000 and $5,397,000 in 1999.
Investments in Affiliated Companies The Company`s investments in affiliated
companies include equity securities, accounted for using the cost method, which
are classified as available-for-sale. These investments are stated at their
estimated fair value of $40,280,000 and $13,964,000 at March 31, 2000 and 1999,
respectively, based upon market quotes. Unrealized gains and losses, net of tax,
are reported as a separate component of accumulated other comprehensive income
in shareholders' equity until realized. Other investments of $5,750,000 at March
31, 2000, are carried at cost as there are no quoted market prices available for
these securities. A decline in the value of any investment below cost that is
deemed to be other than temporary is charged to earnings.
Long-Lived Assets Property and equipment are recorded at cost. The Company
capitalizes costs associated with the development and installation of internal
use software in accordance with Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." Accordingly,
internal use software costs are expensed or capitalized depending on whether
they are incurred in the preliminary project stage, application development
stage, or the post-implementation/operation stage. Amounts capitalized are
amortized over the estimated useful lives of the software, ranging from 5 to 7
years, beginning with the project's completion. All reengineering costs are
expensed as incurred. The Company capitalizes interest cost on capital projects.
Depreciation and amortization is computed using the straight-line method based
on the estimated useful lives of the assets as follows: buildings, 40 years;
furniture, 10 years; equipment, 5 to 10 years; software, 5 to 7 years; and
leasehold improvements over the applicable lease periods.
The Company capitalized approximately $34.2 million in fiscal 1998 and 1999
in connection with the acquisition and installation of an enterprise-wide
information technology "IT" system. Amounts representing approximately $11.5
million of these expenditures were operational in fiscal 1999 and $8.5 million
are planned to become operational in fiscal 2001. The balance of $14.2 million
represents work-in-process components which are not yet operational. The Company
is evaluating these components and presently has no reason to believe that they
will not become operational. In addition, management believes there would be no
material adverse effect on the financial condition or results of operations of
the Company should such components require further modification or replacement.
It is contemplated that implementation for completing the balance of the IT
system installation will commence in fiscal 2001.
Intangible assets represent the excess of cost over value assigned to net
assets of purchased businesses, which is being amortized on the straight-line
method over 40 years. Accumulated amortization at March 31 was $11,961,000 in
2000 and $7,827,000 in 1999. Impairment of long-lived assets and related
intangible assets is recognized when events or changes in circumstances indicate
that the carrying amount of the asset, or related groups of assets, may not be
recoverable. If the future undiscounted cash flows are not sufficient to recover
the carrying value of the asset, the assets are adjusted to the then fair value.
Derivative Financial Instruments Derivative financial instrument contracts
are utilized by the Company to manage interest rate and foreign exchange risks.
The Company has established a control environment which includes policies and
procedures for risk assessment. Company policy prohibits holding or issuing
derivative financial instruments for trading purposes.
Interest Rate Contracts -The differentials to be received or paid are
recognized in income over the life of the contracts as adjustments to interest
expense.
Foreign Exchange Contracts - Gains and losses on foreign exchange contracts
are included in net income.
Revenue Recognition Revenue is recognized when customers' orders are
complete and shipped.
Foreign Currency The assets and liabilities of foreign operations are
translated into U.S. dollars at the exchange rates in effect at the balance
sheet date, whereas income statement accounts are translated at the weighted
average
24
27
exchange rates for the year. The gains or losses resulting from these
translations are recorded as a separate component of accumulated other
comprehensive income (loss). Gains or losses resulting from realized foreign
currency transactions are included in net income.
Comprehensive Income The components of accumulated other comprehensive
income at March 31, 2000, consisted of foreign currency translation losses of
$933,000 and unrealized gains on securities of $11,026,000, net of income taxes
of $7,132,000. At March 31, 1999, accumulated other comprehensive loss consisted
of $1,766,000 of foreign currency translation losses.
Advertising Promotion All costs associated with advertising and promoting
products are expensed in the year incurred. Advertising and promotion expense
was $2,746,000 in 2000, $3,214,000 in 1999, and $2,784,000 in 1998.
Stock-Based Compensation The Company accounts for stock-based employee
compensation in accordance with the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Use of Estimates The financial statements are prepared in conformity with
generally accepted accounting principles and, accordingly, include management's
best estimates and judgments where applicable. Actual results could differ from
those estimates.
Reclassification Certain 1999 and 1998 amounts have been reclassified to
conform with the 2000 presentation.
New Accounting Standards In 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No.133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
all derivatives to be recognized on the balance sheet at fair value. This
statement is effective for fiscal years beginning after June 15, 2000.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of the derivative will either be offset against the change in
fair value of the hedged assets, liabilities or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. Management is in the process of analyzing and assessing
the impact of the adoption of SFAS 133 on the Company's consolidated results of
operations and financial position. The Company must adopt the statement no
later than April 1, 2001.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements,"
which summarizes the staff's views regarding the application of generally
accepted accounting principles to selected revenue recognition issues and is
effective July 1, 2000. The Company is currently assessing the impact SAB 101
will have on the Company's results of operations.
NOTE 2
ACQUISITION
On March 31, 1998, the Company acquired 100 percent of the outstanding capital
stock of Dickens Data Systems, Inc. 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 Systems, Inc. are included in the
consolidated balance sheet at their estimated fair value as of March 31, 1998.
The excess of the purchase price over the fair value of the net assets acquired
approximated $119.1 million and is being amortized over 40 years.
The following unaudited pro forma information presents a summary of
consolidated results of operations for the Company and Dickens Data Systems,
Inc. for the fiscal year 1998 (incorporating Dickens Data Systems, Inc.
financial statements for the year ended March 31, 1998) as if the acquisition
had occurred at the beginning of the fiscal year, with pro forma adjustments to
give effect to amortization of goodwill, interest expense on acquisition debt
and certain other adjustments, together with related income tax effects:
1998
- --------------------------------------------------------------
Net sales $2,052,405,000
Net income 32,665,000
Net income per share
Basic $1.25
Diluted $1.22
- --------------------------------------------------------------
NOTE 3
NOTES PAYABLE AND LONG-TERM DEBT
NOTES PAYABLE:
The Company has a note payable with a financing company for the purchase of
certain inventory extending the terms beyond normal accounts payable terms.
Amounts outstanding at March 31, 2000 and 1999, were $26,086,000 and $9,674,000,
respectively. The note is not interest-bearing if amounts are paid in accordance
with terms of the financing agreement.
LONG-TERM DEBT:
Long-term debt at March 31, 2000 and 1999, consisted of the following:
2000 1999
- -------------------------------------------------------------
Revolving credit facility $170,000,000 $160,000,000
8.5% Senior Notes 150,000,000 150,000,000
9.79% Senior Notes 2,840,000 5,700,000
Other 417,000 644,000
- -------------------------------------------------------------
323,257,000 316,344,000
Less amounts due
within one year 3,052,000 3,104,000
- -------------------------------------------------------------
$320,205,000 $313,240,000
=============================================================
25
28
The Company has a revolving credit facility with various banks providing for
up to an aggregate amount of $260 million of unsecured borrowings on a revolving
credit basis for an initial term until March 27, 2003. The weighted average
interest rate on borrowings under this facility at March 31, 2000 and 1999, were
7.32 percent and 6.08 percent, respectively. In addition, on an annual basis,
the facility may be extended for a one-year period with the consent of all
members of the bank group. Interest rates on borrowings are based on various
floating rate alternative pricing mechanisms. There is a fee ranging from .25
percent to .375 percent on the amount of the total facility, and there is no
pre-payment penalty.
The Company has entered into several interest rate swap agreements for
purposes of hedging the Company's variable rate credit agreement borrowings. The
effect of the swaps is to establish fixed rates on the variable rate debt and to
reduce exposure to interest rate fluctuations. At March 31, 2000, the Company
had interest rate swaps with a notional amount of $70 million. Pursuant to these
agreements, the Company pays interest at a weighted average fixed rate of 5.47
percent. The weighted average LIBOR rates applicable to these agreements were
6.11 percent at March 31, 2000.
The Company has $150 million principal amount of 8.5 percent Senior Notes
due August 2006. Interest is payable semi-annually. The net proceeds from the
sale of the Notes were applied to the repayment of a portion of the borrowings
under the Company's revolving credit facility. The indenture under which the
Notes were issued limits the creation of liens; sale and leaseback transactions;
consolidations, mergers and transfers of all or substantially all of the
Company's assets; and indebtedness of the Company's restricted subsidiaries. The
Notes are subject to mandatory repurchase by the Company at the option of the
holders in the event of a change in control of the Company.
A principal payment of $2.84 million is due November 1, 2000, on the 9.79
percent Senior Notes. Interest is payable semi-annually.
The terms of the credit agreement and 9.79 percent Senior Note Purchase
Agreement provide for, among other things, restrictions regarding the payment of
cash dividends and purchase of the Company's Common Shares, limitations
on other borrowings and capital expenditures, minimum working capital
requirements, and the maintenance of certain financial ratios. Unrestricted
retained earnings available for dividends at March 31, 2000, under the most
restrictive covenants are $49 million.
Aggregate maturities of long-term debt for the next five fiscal years are:
2001-$3,052,000; 2002-$146,000; 2003- $170,059,000; 2004-$0 and 2005-$0.
NOTE 4
LEASE COMMITMENTS
The Company is committed to lease agreements ranging up to 10 years, which
contain renewal options for periods up to 10 years, for certain facilities and
equipment.
Future minimum lease payments for operating leases at March 31, 2000, are:
2001-$7,945,000; 2002-$6,519,000; 2003-$5,676,000; 2004-$4,978,000;
2005-$4,070,000; and thereafter $10,598,000.
Rental expense for operating leases was $11,588,000, $9,200,000 and
$6,602,000 for 2000, 1999 and 1998, respectively.
NOTE 5
INCOME TAXES
The following is a reconciliation of the Company's effective income tax rate to
the federal statutory rate:
2000 1999 1998
- ------------------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
Provision for state taxes 3.1 3.8 3.6
Foreign losses with
unrecognized
(recognized) tax benefits 1.1 (.3) 1.2
Non-deductible and other 1.2 1.1 1.6
- ------------------------------------------------------------------
Effective rate 40.4% 39.6% 41.4%
==================================================================
Deferred tax assets and liabilities as of March 31, 2000 and 1999, are
presented below:
2000 1999
- ------------------------------------------------------------------
Deferred tax assets:
Capitalized inventory costs $ 2,723,000 $ 2,697,000
Accrued expenses 1,978,000 1,908,000
Allowance for doubtful accounts 1,819,000 1,616,000
Inventory valuation reserve 2,271,000 1,233,000
Foreign 1,867,000 1,048,000
Other 387,000 595,000
- ------------------------------------------------------------------
11,045,000 9,097,000
Less valuation allowance (1,867,000) (1,048,000)
- ------------------------------------------------------------------
Total net deferred tax assets 9,178,000 8,049,000
Deferred tax liabilities:
Depreciation expense 484,000 865,000
Software amortization 11,555,000 11,324,000
Goodwill 3,444,000 1,782,000
Available for sale securities 7,132,000 --
Other 846,000 --
- ------------------------------------------------------------------
Total deferred tax liabilities 23,461,000 13,971,000
- ------------------------------------------------------------------
Net deferred tax liabilities $ 14,283,000 $ 5,922,000
==================================================================
26
29
NOTE 6
BUSINESS SEGMENT INFORMATION
The Company operates in two business segments: Computer Systems and Industrial
Electronics. These reportable business segments are managed separately based on
the product and market differences.
Computer Systems products include mid-range computer systems and high-end
platforms, personal computers, display terminals and networking products.
Industrial Electronics products include semiconductors, and interconnect,
passive and electromechanical products.
The Company evaluates performance and allocates resources based on return on
capital and profitable growth. Specifically, the Company measures segment profit
or loss based on operating profit. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. Corporate assets and capital expenditures include costs of
certain centralized functions not directly attributable to the individual
segments. Geographic sales are recognized by shipping destination.
(in thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------
SALES
Computer Systems $1,215,117 $1,125,383 $ 669,604
Industrial Electronics 1,335,568 1,133,700 1,015,661
- ------------------------------------------------------------------------------------
Total Sales $2,550,685 $2,259,083 $1,685,265
OPERATING PROFIT
Computer Systems $ 37,238 $ 49,810 $ 36,158
Industrial Electronics 64,216 35,111 36,792
- ------------------------------------------------------------------------------------
Total Operating Profit $ 101,454 $ 84,921 $ 72,950
RECONCILIATION TO INCOME BEFORE INCOME TAXES
Other Income $ 1,845 $ -- $ --
Interest expense 26,074 24,253 20,717
- ------------------------------------------------------------------------------------
Income Before Income Taxes $ 77,225 $ 60,668 $ 52,233
IDENTIFIABLE ASSETS
Computer Systems $ 541,926 $ 522,959 $ 496,563
Industrial Electronics 519,779 395,175 438,390
Corporate 50,511 26,335 22,550
- ------------------------------------------------------------------------------------
Total Assets $1,112,216 $ 944,469 $ 957,503
CAPITAL EXPENDITURES
Computer Systems $ 21,626 $ 10,801 $ 6,277
Industrial Electronics 14,154 7,551 15,456
Corporate 250 3,785 22,550
- ------------------------------------------------------------------------------------
Total Capital Expenditures $ 36,030 $ 22,137 $ 44,283
DEPRECIATION AND AMORTIZATION EXPENSE
Computer Systems $ 13,430 $ 11,530 $ 4,792
Industrial Electronics 12,913 11,460 10,189
- ------------------------------------------------------------------------------------
Total Depreciation and Amortization $ 26,343 $ 22,990 $ 14,981
GEOGRAPHIC AREAS
Net sales
United Sates $2,381,540 $2,107,099 $1,574,006
Foreign 169,145 151,984 111,259
- ------------------------------------------------------------------------------------
Total $2,550,685 $2,259,083 $1,685,265
LONG-LIVED ASSETS
United States $ 118,973 $ 97,931 $ 94,368
Foreign 41,009 14,888 7,617
- ------------------------------------------------------------------------------------
Total $ 159,982 $ 112,819 $ 101,985
====================================================================================
27
30
NOTE 7
MANDATORILY REDEEMABLE CONVERTIBLE TRUST
PREFERRED SECURITIES
In March 1998 and April 1998, Pioneer-Standard Financial Trust (the "trust")
issued $143.7 million of 6 3/4 percent Mandatorily Redeemable Convertible Trust
Preferred Securities (the "trust preferred securities"). Pioneer-Standard
Financial Trust, a statutory business trust, is a wholly owned consolidated
subsidiary of the Company, with its sole asset being $148.2 million aggregate
principal amount of 6 3/4 percent Junior Convertible Subordinated Debentures
due March 31, 2028 of Pioneer-Standard Electronics, Inc. (the "Trust
Debenture").
The trust preferred securities are non-voting (except in limited
circumstances), pay quarterly distributions at an annual rate of 6 3/4 percent,
carry a liquidation value of $50 per share and are convertible into the
Company's Common Shares at any time prior to the close of business on March 31,
2028, at the option of the holder. The trust preferred securities are
convertible into Common Shares at the rate of 3.1746 per Common Share for each
trust preferred security (equivalent to a conversion price of $15.75 per Common
Share). The Company has executed a guarantee with regard to the trust preferred
securities. The guarantee, when taken together with the Company's obligations
under the trust debenture, the indenture pursuant to which the trust debenture
was issued and the applicable trust document, provides a full and unconditional
guarantee of the trust's obligations under the trust preferred securities.
After March 31, 2002, the trust preferred securities are redeemable, at the
option of the Company, for a redemption price of 104.05 percent of par reduced
annually by .675 percent to a minimum of $50 per trust preferred security. The
trust preferred securities are subject to mandatory redemption on March 31,
2028, at a redemption price of $50 per trust preferred security.
Pioneer-Standard may cause the trust to delay payment of distributions on
the trust preferred securities for 20 consecutive quarters. During such deferral
periods, distributions, to which holders of the trust preferred securities are
entitled, will compound quarterly, and the Company may not declare or pay any
dividends on its Common Shares.
NOTE 8
SHAREHOLDERS' EQUITY
The Company has a Share Subscription Agreement and Trust (the "Trust") with
Wachovia Bank of North Carolina, N.A., as Trustee, whereby the Trustee
subscribed for 5,000,000 Common Shares of the Company, which will be paid for
over the 15-year term of the Trust. The proceeds from the sale or direct use of
the Common Shares over the life of the Trust are used to fund Company
obligations under various compensation and benefit plans. For financial
reporting purposes, the Trust is consolidated with the Company. The shares
subscribed for by the Trust are recorded in the contra equity account,"Unearned
Employee Benefits," and adjusted to market value at each reporting period, with
an offsetting adjustment to "Capital in Excess of Stated Value." There have been
943,798 shares released from the Trust as of March 31, 2000. The following
details the fair market value of the 4,056,202 Common Shares subscribed for by
the Trust, reflected in shareholders' equity at March 31, 2000:
Common Shares at stated value
(4,056,202 @ $.30) $ 1,217,000
Capital in excess of stated value
(4,056,202 shares) 62,668,000
Unearned employee benefits
(4,056,202 shares @ $15.75 fair market value) (63,885,000)
- --------------------------------------------------------------
Net effect on shareholders' equity $ --
==============================================================
During fiscal 2000, restricted stock awards for 723,798 shares of the
Company's common stock were granted at a market value of $13.50 per share to
certain officers under the 1999 Restricted Stock Plan. All eligible shares under
this plan have been granted. Unvested shares are restricted as to disposition
and subject to forfeiture under certain circumstances. The cost of these awards,
determined as the market value of the shares at the date of grant, is being
amortized over the restriction periods. In fiscal 2000, $2,244,000 was charged
to expense for these restricted stock awards.
On April 27, 1999, the Company's Board of Directors approved a new
Shareholder Rights Plan, which became effective upon expiration of the existing
plan on May 10, 1999. A dividend of one Right per Common Share was distributed
to shareholders of record as of May 10, 1999. Each Right, upon the occurrence of
certain events, entitles the holder to buy from the Company one-tenth of a
Common Share at a price of $4.00, or $40.00 per whole share, subject to
adjustment. The Rights may be exercised only if a person or group acquires 20
percent or more of the Company's Common Shares, or announces a tender offer for
at least 20 percent of the Company's Common Shares. Each Right will entitle its
holder (other than such person or members of such group) to purchase, at the
Right's then-current exercise price, a number of the Company's Common Shares
having a market value of twice the Right's then-exercise price. The Rights trade
with the Company's Common Shares until the Rights become exercisable.
If the Company is acquired in a merger or other business combination
transaction, each Right will entitle its holder to purchase, at the Right's
then-exercise price, a number of the acquiring company's common shares (or other
securities) having a market value at the time of twice the Right's then-current
exercise price. Prior to the acquisition by a person or group of beneficial
ownership of 20 percent or more of the Company's Common Shares, the Rights are
redeemable for $.001 per Right at the option of the Board of Directors. The
Rights will expire May 10, 2009.
28
31
NOTE 9
EARNINGS PER SHARE
For the years ended March 31
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
Basic
Net income $40,145,000 $30,809,000 $30,497,000
Weighted average shares outstanding 26,409,156 26,350,690 26,204,520
Basic earnings per share $1.52 $1.17 $1.16
============================================================================================================================
Diluted
Net income $40,145,000 $30,809,000 $30,497,000
Add back:
Distributions on mandatorily redeemable convertible
trust preferred securities, net of tax 5,870,000 5,841,000 112,000
- ----------------------------------------------------------------------------------------------------------------------------
Net income for computation of diluted earnings per share $46,015,000 $36,650,000 $30,609,000
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 26,409,156 26,350,690 26,204,520
Effect of diluted securities:
Common share equivalents 642,167 243,485 570,863
Common shares issuable upon conversion of mandatorily
redeemable convertible trust preferred securities 9,126,984 9,117,199 173,950
- ----------------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares outstanding 36,178,307 35,711,374 26,949,333
Diluted earnings per share $1.27 $1.03 $1.14
============================================================================================================================
Due to the application of the treasury stock method, shares subscribed for
by the "Trust," which is more fully described in Note 8 to the consolidated
financial statements, have no effect on earnings per share until they are
released from Trust.
NOTE 10
STOCK OPTIONS
The Company has stock option plans which provide for the granting of options to
employees and directors to purchase its Common Shares. These plans provide for
nonqualified or incentive stock options.
Options are granted at the fair market value of the Company's Common
Shares on the date of grant and expire 10 years from date of grant. The Company
makes no recognition of the options in the financial statements until they are
exercised. Pro forma disclosures are provided for 2000, 1999 and 1998 as if the
Company adopted the cost recognition requirements under Financial Accounting
Standard No.123 ("SFAS 123") - "Accounting for Stock-Based Compensation."
Transactions involving the stock option plans are summarized as follows:
Number Average option
of shares price per share
- -------------------------------------------------------------------
Outstanding at March 31, 1997 1,482,986 $ 9.24
Exercised (94,009) $ 8.13
Granted 266,800 $ 12.43
Forfeited (57,855) $ 13.74
----------
Outstanding at March 31, 1998 1,597,922 $ 9.68
Exercised (6,187) $ 6.11
Granted 1,244,500 $ 10.36
Forfeited (75,024) $ 12.89
----------
Outstanding at March 31, 1999 2,761,211 $ 9.91
Exercised (215,010) $ 5.81
Granted 142,500 $ 9.39
Forfeited (30,600) $ 10.89
----------
Outstanding at March 31, 2000 2,658,101 $ 10.20
==========
Exercisable at March 31, 2000 1,394,398 $ 10.18
Available for grant at March 31, 2000 620,152
29
32
Options Outstanding and Exercisable by Price Range as of March 31, 2000:
Options Outstanding
- ----------------------------------------------------------------
Weighted-
average
Outstanding remaining Weighted-
Range of as of contractual average
exercise prices 3/31/2000 life exercise price
- ----------------------------------------------------------------
$ 3.00 - $ 5.50 62,100 1.1 $ 4.52
$ 5.50 - $ 8.00 547,944 4.0 $ 6.26
$ 8.00 - $10.50 657,500 8.8 $ 8.75
$10.50 - $13.00 1,139,057 6.6 $12.22
$13.00 - $15.50 251,500 6.7 $14.81
================================================================
2,658,101 6.5 $10.20
Options Exercisable
- ----------------------------------------------------------------
Exercisable
Range of as of Weighted-average
exercise prices 3/31/2000 exercise price
- ----------------------------------------------------------------
$ 3.00 - $ 5.50 62,100 $ 4.52
$ 5.50 - $ 8.00 375,144 $ 6.11
$ 8.00 - $10.50 174,866 $ 8.75
$10.50 - $13.00 610,654 $12.24
$13.00 - $15.50 171,634 $15.28
================================================================
1,394,398 $10.18
The fair market value of each option granted during 2000, 1999, and 1998 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:
2000 1999 1998
- ----------------------------------------------------------------
Dividend yield 1.0% 1.0% 1.0%
Expected volatility 46.6% 39.0% 33.1%
Risk-free interest rate 6.25% 5.25% 5.60%
Expected life 7.5 years 8.2 years 7.3 years
The weighted average fair value of options granted during 2000, 1999, and
1998 was $5.05, $5.00 and $5.29, respectively.
If compensation expense had been recognized for the 2000, 1999 and 1998
grants for stock-based compensation plans in accordance with provisions of SFAS
123, the Company would have recorded net income and diluted earnings per share
of $37,542,000 and $1.20, respectively, in 2000; and $28,457,000 and $.96,
respectively, in 1999; and $29,851,000 and $1.11, respectively, in 1998.
The impact of applying SFAS 123 in this pro forma disclosure is not
indicative of future amounts. Additional grants in future years are anticipated.
NOTE 11
FINANCIAL INSTRUMENTS AND ESTIMATED FAIR VALUES
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
2000 1999
- ------------------------------------------------------------------------------------------------
Carrying amount Fair value Carrying amount Fair value
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 34,253,000 $ 34,253,000 $ 28,898,000 $ 28,898,000
Note payable 26,086,000 26,086,000 9,674,000 9,674,000
Long-term debt:
8.5% Senior Notes 150,000,000 143,250,000 150,000,000 151,500,000
9.79% Senior Notes 2,840,000 2,875,000 5,700,000 5,877,000
Revolving credit borrowings 170,000,000 170,000,000 160,000,000 160,000,000
Interest rate swaps - asset -- 2,153,000 -- 227,948
Foreign exchange contracts 2,700,000 2,700,000 1,200,000 1,200,000
Mandatorily redeemable convertible
trust preferred securities 143,750,000 163,156,000 143,750,000 100,625,000
The fair value of the 9.79 percent Senior Notes is estimated using rates
currently available for securities with similar terms and remaining maturities.
The fair value of the interest rate swaps and foreign exchange contracts is the
amount at which they could be settled, based on market estimates. No collateral
is held in relationship to the interest rate swaps or foreign exchange
contracts. The fair value of the 8.5 percent Senior Notes and the Mandatorily
Redeemable Convertible Trust Preferred Securities is based on quoted market
prices.
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NOTE 12
OPERATING WORKING CAPITAL CHANGES AND SUPPLEMENTAL INFORMATION FOR THE
STATEMENTS OF CASH FLOWS
The components of the changes in operating working capital are:
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------
Accounts receivable $ (83,107,000) $ (19,862,000) $ (29,921,000)
Merchandise inventory (33,498,000) 34,738,000 (78,450,000)
Prepaid expenses (393,000) 3,324,000 2,381,000
Accounts payable 84,216,000 (41,462,000) (7,908,000)
Income taxes (543,000) (59,000) (442,000)
Accrued salaries, wages and commissions 4,804,000 741,000 (3,618,000)
Other accrued liabilities (5,117,000) (10,530,000) 2,807,000
- ----------------------------------------------------------------------------------------------------------
Increase in operating working capital $ (33,638,000) $ (33,110,000) $(115,151,000)
==========================================================================================================
Supplemental cash flow information:
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------
Cash paid or received during the year for:
Interest $ 26,013,000 $ 23,675,000 $ 20,942,000
Income taxes 27,636,000 16,472,000 18,001,000
Distributions on mandatorily redeemable
convertible trust preferred securities 9,703,000 9,886,000 --
- ----------------------------------------------------------------------------------------------------------
Non-cash assets and liabilities of business acquired:
Working capital -- -- $ 23,456,000
Intangible assets -- -- 116,758,000
Other assets -- -- 2,912,000
Debt assumed and other -- -- (19,873,000)
==========================================================================================================
NOTE 13
EMPLOYEE RETIREMENT PLANS
The Company maintains various profit-sharing and thrift plans for all employees
meeting certain service requirements. Generally, the plans allow eligible
employees to con- tribute a portion of their compensation, with the Company
matching a percentage thereof. The Company may also make contributions each year
for the benefit of all eligible employees under the plans. Total profit sharing
and Company matching contributions were $4,875,000, $3,742,000 and $3,541,000
for 2000, 1999 and 1998, respectively.
NOTE 14
CONTINGENCIES
The Company is the subject of various threatened or pending legal actions and
contingencies in the normal course of conducting its business. The Company
provides for cost related to these matters when a loss is probable and the
amount is reasonably estimable. The effect of the outcome of these matters on
the Company's future results of operations and liquidity cannot be predicted
because any such effect depends on future results of operations and the amount
or timing of the resolution of such matters. While it is not possible to predict
with certainty, management believes that the ultimate resolution of such matters
will not have a material adverse effect on the consolidated financial position
or results of operations of the Company.
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REPORT OF INDEPENDENT AUDITORS
Shareholders and the Board of Directors
Pioneer-Standard Electronics, Inc.
We have audited the accompanying consolidated balance sheets of Pioneer-Standard
Electronics, Inc. as of March 31, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Pioneer-Standard Electronics, Inc. at March 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended March 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst and Young LLP
Cleveland, Ohio
May 8, 2000
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QUARTERLY FINANCIAL DATA
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
Fiscal year First Second Third Fourth
ended March 31 quarter quarter(a) quarter quarter Year
- ------------------------------------------------------------------------------------------------------------
2000
Net sales $ 575,973,000 $ 631,322,000 $ 668,342,000 $ 675,048,000 $2,550,685,000
Gross profit 89,274,000 96,218,000 102,725,000 107,536,000 395,753,000
Net income 7,709,000 10,298,000 10,806,000 11,332,000 40,145,000
Net income per share:
Basic .29 .39 .41 .43 1.52
Diluted .26 .32 .34 .35 1.27
============================================================================================================
1999
Net sales $ 544,327,000 $ 559,501,000 $ 595,985,000 $ 559,270,000 $2,259,083,000
Gross profit 86,470,000 85,477,000 92,477,000 88,002,000 352,426,000
Net income 5,579,000 6,339,000 9,433,000 9,458,000 30,809,000
Net income per share:
Basic .21 .24 .36 .36 1.17
Diluted .20 .22 .30 .31 1.03
============================================================================================================
(a)Included in the results of the second quarter of fiscal 2000 was a gain of
$1.8 million ($1.1 million after tax, or $.03 cents per share -- diluted) for
the disposal of assets no longer required in the business.
DIVIDEND INFORMATION
AND PRICE RANGE OF COMMON SHARES
- ----------------------------------------------------------------------
Fiscal year First Second Third Fourth
ended March 31 quarter quarter quarter quarter Year
- ----------------------------------------------------------------------
2000
High $ 12.56 $ 15.00 $ 15.38 $ 18.75 $ 18.75
Low 6.50 11.50 11.50 13.13 6.50
Close 12.00 14.44 14.44 15.75 15.75
Dividends paid .03 .03 .03 .03 .12
======================================================================
1999
High $ 13.19 $ 10.13 $ 11.38 $ 10.25 $ 13.19
Low 9.13 6.06 5.63 6.25 5.63
Close 9.63 6.31 9.38 6.56 6.56
Dividends paid .03 .03 .03 .03 .12
======================================================================
As of May 1, 2000, there were 31,480,803 Common Shares (including 4,056,202
subscribed Common Shares - see Note 8) of Pioneer-Standard Electronics, Inc.
outstanding, and there were 2,896 shareholders of record.
The market price of Pioneer-Standard Electronics, Inc. Common Shares at the
close of business May 1, 2000, was $15.69.
See Note 3 for information regarding dividend restrictions.
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FINANCIAL REVIEW
FIVE-YEAR SUMMARY OF OPERATIONS
(Dollars in thousands except per share amounts)
For the years ended March 31 2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Combined sales
(Pioneer-Standard Electronics, Inc. and
Pioneer-Standard of Maryland, Inc.) $ 2,550,685 $ 2,259,083 $ 1,685,265 $ 1,508,709 $ 1,325,047
Pioneer-Standard Electronics, Inc.
Net sales 2,550,685 2,259,083 1,685,265 1,508,709 1,105,281
Interest expense 26,074 24,253 20,717 17,066 8,136
Income before income taxes and equity in
earnings of Pioneer-Standard of Maryland, Inc. 77,225 60,668 52,233 40,321 43,812
Equity in earnings (loss) of
Pioneer-Standard of Maryland, Inc. -- -- -- -- (173)
Income taxes 31,210 24,018 21,624 17,067 18,387
Net income 40,145 30,809 30,497 23,254 25,252
- ---------------------------------------------------------------------------------------------------------------------------------
Year-end position
Accounts receivable 407,309 323,461 303,599 209,086 189,296
Inventory 348,120 314,362 349,100 243,940 238,370
Working capital 501,533 476,371 461,449 298,535 224,840
Net property and equipment 105,897 90,957 87,727 52,594 48,679
Total assets 1,112,216 944,469 957,503 592,513 559,110
Long-term debt 320,205 313,240 336,234 173,587 164,447
Shareholders' equity 324,065 271,503 244,996 213,979 150,693
Weighted shares outstanding
Basic 26,409,156 26,350,690 26,204,520 22,731,951 22,436,003
Diluted 36,178,307 35,711,374 26,949,333 23,235,870 23,127,486
Average number of employees 2,457 2,568 2,199 2,042 1,647
- ---------------------------------------------------------------------------------------------------------------------------------
Per share data
Basic net income per share 1.52 1.17 1.16 1.02 1.13
Diluted net income per share 1.27 1.03 1.14 1.00 1.09
Cash dividends paid per share .12 .12 .12 .12 .106
Shareholders' equity per share 12.20 10.30 9.30 8.22 6.70
Price range of common shares
High 18.75 13.19 18.25 16.50 19.25
Low 6.50 5.63 11.38 10.25 10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Measurement data
Gross margin percent of sales 15.5 15.6 17.7 17.2 18.3
Net income percent of sales 1.6 1.4 1.8 1.5 2.3
Net income percent of average shareholders' equity 13.6 11.9 13.3 14.2 18.2
Sales per employee 1,038 879 766 739 671
Accounts receivable days
outstanding at year end 44 44 44 47 45
Turns on annual average inventory 6.1 5.5 4.4 5.2 5.4
Interest bearing debt percent of equity plus debt
(including convertible trust preferred
securities as equity) 43 44 48 48 56
The Company acquired the remaining 50 percent of the common stock of
Pioneer-Standard of Maryland, Inc. on November 30, 1995.
The consolidated statements include the operating results of Maryland from the
date of acquisition. Prior to the acquisition, the Company accounted for its
investment in Maryland under the equity method of accounting.
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CORPORATE DIRECTORY
DIRECTORS
James L. Bayman (1)
Chairman and Chief Executive Officer
of the Company
Charles F. Christ (3)
Retired Vice President and General
Manager of Components Division,
Digital Equipment Corporation
(computer and office equipment)
Thomas A. Commes (2)
Retired President and
Chief Operating Officer,
Sherwin-Williams Company
(coatings and related products)
Victor Gelb (1, 2, 3)
President, Victor Gelb, Inc.
(industrial fibers)
Keith M. Kolerus
Consultant
Retired Chairman and President,
National Semiconductor - Japan
Retired Vice President,
National Semiconductor
(semiconductors and related devices)
Arthur Rhein
President and Chief Operating
Officer of the Company
Edwin Z. Singer (1,2,3)
Chairman of the Board,
Sandusco, Inc.
(wholesale merchandising, real estate)
Thomas C. Sullivan (1, 3)
Chairman of the Board and
Chief Executive Officer, RPM, Inc.
(specialty coatings and membranes)
Karl E. Ware (2)
Chairman and
Chief Executive Officer,
Ware Industries, Inc.
(metal wire forms and steel components)
CORPORATE OFFICERS
James L. Bayman
Chairman and Chief Executive Officer
Steven M. Billick
Senior Vice President and
Chief Financial Officer
Arthur Rhein
President and Chief Operating Officer
Lawrence N. Schultz
Secretary
Kathryn K. Vanderwist
General Counsel and
Assistant Secretary
CORPORATE OFFICES
Pioneer-Standard Electronics, Inc.
6065 Parkland Blvd.
Cleveland, Ohio 44124
Phone: (440) 720-8500
LEGAL COUNSEL
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
INDEPENDENT AUDITORS
Ernst & Young LLP
1300 Huntington Building
Cleveland, Ohio 44115
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
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SHAREHOLDER INFORMATION
Transfer Agent and Registrar
National City Bank
Corporate Trust Operations
P.O. Box 92301
Cleveland, Ohio 44139-0900
800-622-6757
COMMON SHARES
Nasdaq Symbol: PIOS
Quoted in the National
Market System
TRUSTEE 8.5 PERCENT SENIOR NOTES
Firstar
425 Walnut Street
P.O. Box 1118
Cincinnati, Ohio 45201-1118
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The plan allows for full or partial dividend reinvestment, and additional
monthly cash investment up to $5,000 per month, in Pioneer-Standard Common
Shares without brokerage commissions or service charges on stock purchases. If
you are interested in joining the Plan and need an authorization form and/or
more background information, please call National City Bank, Corporate Trust
Operations at 800-622-6757.
FORM 10-K
A copy of the Company's Form 10-K annual report, which is filed with the
Securities and Exchange Commission, may be obtained by writing Investor
Relations, Pioneer-Standard Electron- ics, Inc., 6065 Parkland Blvd., Cleve-
land, Ohio 44124.
ANNUAL MEETING
Shareholders and other interested persons are cordially invited to attend the
annual meeting of shareholders at 11 a.m. July 25, 2000, at Pioneer-Standard
Electronics, Inc. Computer Systems Division, 6675 Parkland Boulevard, Solon,
Ohio 44139.
AFFIRMATIVE ACTION
Policy Pioneer-Standard Electronics, Inc. is an equal opportunity and
affirmative action employer committed to a policy of equal employment
opportunity for all persons, regardless of race, color, sex, religion, national
origin, ancestry, age, marital status, disability or veteran status.
WORLD WIDE WEB SITE
www.pioneerstandard.com
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39
Design by Dix & Eaton, Inc.
40
PIONEER-STANDARD ELECTRONICS, INC.
6065 PARKLAND BLVD. CLEVELAND, OHIO 44124 TEL 440.720.8500 FAX 440.720.8501
WWW.PIONEERSTANDARD.COM
[PHOTOS]