United States
Washington, D.C. 20549
FOR ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
COMMISSION FILE NO. 0-5734
Registrant’s telephone number, including area code: (440) 720-8500
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K Annual Report or any amendment to this Form 10-K. Yes x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
The aggregate market value of Common Shares held by non-affiliates as of September 30, 2002 (the last business day of the registrant’s most recently completed second fiscal quarter) was $190,466,836 computed on the basis of the last reported sale price per share ($7.24) of such shares on the NASDAQ National Market.
As of May 1, 2003, the Registrant had the following number of Common Shares outstanding: 32,105,614
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 29, 2003 are incorporated by reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 2003.
PIONEER-STANDARD ELECTRONICS, INC.
TABLE OF CONTENTS
Item 1. Business
Overview
History and significant events
In April 2003, the Company entered into a new three-year Revolving Credit Agreement that provides the Company with the ability to borrow, on an unsecured basis, up to $100 million limited by certain borrowing base calculations, and the Company repurchased, below face value, approximately $18.3 million of its Mandatorily Redeembable Convertible Trust Preferred Securities.
Industry
Products distributed and sources of supply
The loss of either of the top two suppliers or a combination of certain other suppliers could have a material adverse effect on the Company’s business, results of operations and financial condition unless alternative products manufactured by others are available to the Company. In addition, although the Company believes that its relationships with suppliers are good, there can be no assurance that the Company’s suppliers will continue to supply products on terms acceptable to the Company. Through distributor agreements with its suppliers, Pioneer-Standard is authorized to sell all or some of the suppliers’ products. The authorization with each supplier is subject to specific terms and conditions regarding such items as product return privileges, price protection policies, purchase discounts and supplier incentive programs such as purchase incentives, sales volume incentives and cooperative advertising reimbursements. A substantial portion of the Company’s advertising and marketing program expenses are reimbursed through cooperative advertising reimbursement programs. These cooperative advertising programs are at the discretion of the supplier. From time to time, suppliers may terminate the right of the Company to sell some or all of their products or change these terms and conditions or reduce or discontinue the incentives or programs offered. Any such termination or implementation of such changes could have a material negative impact on the Company’s results of operations.
Inventory
Customers
Uneven sales patterns and seasonality
Backlog
Competition
distributors as well as with some of its suppliers. Several of the Company’s largest distribution competitors are significantly larger and have national and international distribution presence. Also, it is possible that certain suppliers may decide to distribute products directly, which would further heighten competitive pressures.
Growth through acquisitions
Employees
Distribution
Access to information
Item 2. Properties
The Company’s major leases contain renewal options for periods of up to 10 years. For information concerning the Company’s rental obligations, see Note 6 to the Consolidated Financial Statements contained in Part IV hereof. The Company believes that its distribution and office facilities are well maintained, are suitable and provide adequate space for the operations of the Company.
Item 3. Legal proceedings
Item 4. Submission of matters to a vote of security holders
Item 4A. Executive officers of the registrant
executive officers of the company
Item 5. Market for registrant’s common equity and related shareholder matters
As of May 1, 2003, there were 32,105,614 Common Shares (including 3,589,940 subscribed Common Shares) of Pioneer-Standard Electronics, Inc. outstanding, and there were 2,734 shareholders of record. The closing price of the Common Shares on May 1, 2003, was $9.83.
Item 6. Selected consolidated financial and operating data
Item 7. Management’s discussion and analysis of financial condition and results of operations
Overview of Fiscal 2003
Current economic environment
Critical accounting policies and estimates
based on factors including an analysis of historical sales of products, the age of the inventory and return provisions provided by the distribution agreements. Actual amounts could be different from those estimated.
Recently issued accounting standards
No. 02-16, “Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Products).” In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” A discussion of these new standards is included in Note 1 to the Consolidated Financial Statements. The Company has not yet determined the impact of these accounting standards on its financial position and results of operations.
Results of operations
Net sales
Gross margin
Operating expenses
Restructuring and impairment charges
that were inconsistent with the Company’s strategic plan and were no longer required. As a result of this restructuring, the Company recorded restructuring charges totaling $20.7 million, classified in the Fiscal 2003 Consolidated Statement of Operations as “Restructuring Charges.”
Other (income) expense, interest expense and income taxes
Other income, net in 2003 primarily consisted of $1.7 million of equity and dividend income earned from the Company’s investments in affiliates, partially offset by foreign currency exchange losses. Other income, net in 2002 consisted of $1.8 million of equity and dividend income earned from the Company’s investments in affiliates, combined with foreign currency exchange gains and other income. This income was partially offset by an investment write-off of $0.8 million combined with a $1.0 million charge associated with ineffectiveness of the Company’s previously held interest rate swap. Other income, net in 2001 consisted of foreign currency exchange losses offset by $0.9 million of equity and dividend income earned from investments in affiliates.
Accounts Receivable Securitization financing the Company completed in October 2001 and favorable overall market interest rates.
Discontinued operations
Severance costs relate to the severance and other employee benefit costs to be paid to approximately 525 employees previously employed by IED and not re-hired by the purchaser. Facilities costs represent the present value of qualifying exit costs, offset by an estimate for future sublease income, for approximately 30 vacated locations no longer required as a result of the sale. The asset impairment charge represents the write-down to fair value of assets that were abandoned or classified as “held-for-sale,” as a result of the disposition and discontinuance of IED and Aprisa, respectively. This write-down was for assets that were not included in the IED sale transaction.
turing charges consisted of approximately $3.3 million for qualifying exit costs for one service center and eleven regional office facilities with leases expiring through 2006 and severance and other employee benefits to be paid to approximately 80 personnel. In addition, the restructuring charges included provisions related to inventory valuation adjustments of $7.6 million for excess and obsolete inventory primarily associated with the Company’s decision, as part of the restructuring plan, to close its Electronics Manufacturing Resources and Services facility and to terminate certain supplier and customer relationships. The majority of the severance costs were paid out by March 31, 2003.
Cumulative effect of change in accounting principle — goodwill
Liquidity and capital resources
$9.6 million. Also in Fiscal 2001, the Company increased its existing investment in Eurodis by approximately $4.3 million.
interest rates. Prior to October 2002, the interest rate exposure was managed by an interest rate swap used to fix the interest on a portion of the Revolver. This interest rate swap was terminated in October 2002. During Fiscal 2003, total interest-bearing debt on the Facilities decreased by $29.0 million. The decrease primarily represents the repayment of borrowings against the Asset Securitization with cash generated from working capital. The lower borrowing level can be primarily attributed to lower working capital needs. The Company fully anticipates that borrowings on the 2003 Revolver will increase when the Company begins to expand its business and when the economy begins to recover.
Capital expenditures were $8.4 million in 2003 and primarily reflected ongoing initiatives designed to improve efficiencies through IT enhancements. Management estimates that capital expenditures will be approximately $6.0 to $8.0 million in Fiscal 2004.
The Company anticipates that cash on hand, funds from current operations, the 2003 Revolver, and access to capital markets will provide adequate funds to finance acquisitions, capital spending and working capital needs and to service its obligations and other commitments arising during the foreseeable future. The Company does not maintain any off-balance sheet financing arrangements.
Risk control and effects of foreign currency and inflation
Forward-looking information
Item 7A. Quantitative and qualitative disclosures about market risk
Effective December 2001, the interest rate swap held became an ineffective hedge. In Fiscal 2002, a charge of $1.0 million was recognized when the Company reclassified $1.0 million from “Accumulated other comprehensive loss” into operations to realize the deferred loss from the previously effective interest rate hedge. The swap agreement had an immaterial impact on the Company’s results of operations for the fiscal years ended 2003 and 2002.Item 8. Financial statements and supplementary data" -->
Item 8. Financial statements and supplementary data
Item 9. Changes in and disagreements with accountants on accounting and financial disclosure
part III
Item 10. Directors and executive officers of the registrant
Item 11. Executive compensation
Item 12. Security ownership of certain beneficial owners and management and related shareholder matters
Item 13. Certain relationships and related transactions
Item 14. Controls and procedures
Evaluation of disclosure controls and procedures
Changes in internal controls
part IV
Item 15. Exhibits, financial statement schedules and reports on Form 8-K
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Pioneer-Standard Electronics, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, on June 19, 2003.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of June 19, 2003.
I, Arthur Rhein, certify that:
Date: June 19, 2003
I, Steven M. Billick, certify that:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
report of independent auditors
Shareholders and the Board of Directors of
We have audited the accompanying Consolidated Balance Sheets of Pioneer-Standard Electronics, Inc. and Subsidiaries as of March 31, 2003 and 2002, and the related Consolidated Statements of Operations, Shareholders’ Equity and Cash Flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
/S/ ERNST AND YOUNG LLP
Cleveland, Ohio
report of management
The consolidated financial statements of Pioneer-Standard Electronics, Inc. have been prepared by the Company, which is responsible for their integrity and objectivity. These statements have been prepared in accordance with accounting principles generally accepted in the United States and include amounts that are based on informed judgments and estimates. The Company also prepared the other information in the annual report and is responsible for its accuracy and consistency with the consolidated financial statements.
consolidated statements of operations
Pioneer-Standard Electronics, Inc. and Subsidiaries
See accompanying Notes to Consolidated Financial Statements.
consolidated balance sheets
consolidated statements of shareholders’ equity
consolidated statements of cash flows
notes to consolidated financial statements
1
Operations — Pioneer-Standard Electronics, Inc. and its subsidiaries (the “Company” or “Pioneer-Standard”) distributes and resells a broad range of enterprise computer systems products, including servers, storage, software and services. These products are sold to value-added resellers and commercial end-users. The Company has operations in North America and strategic investments in the United States and Europe.
separate component of “Accumulated other comprehensive income (loss)” in Shareholders’ Equity. Gains or losses resulting from realized foreign currency transactions are included in operations.
are designated as cash flow hedges. As of March 31, 2003, the Company held no interest rate swap agreements. However, prior to December 2001, the Company held two interest rate swaps, each with a notional amount of $25 million. The terms of the interest rate swap agreements required the Company to receive a variable interest rate and pay a fixed interest rate. Both interest rate swap agreements qualified as fully effective cash flow hedges against the Company’s floating interest rate risk. Hedge effectiveness was measured by offsetting the change in fair value of the long-term debt with the change in fair value of the interest rate swap. Cash flows related to these interest rate swap agreements were included in “Interest expense, net” over the term of the agreements. During 2001, one of the swaps expired. At that same time, the remaining swap became ineffective and the unrealized loss of $1.0 million previously included in “Accumulated other comprehensive loss” was charged to operations. During October 2002, this interest rate swap was terminated for a nominal gain.
The Company evaluates the recoverability of its long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the net book value of the assets exceeds the future undiscounted cash flows attributable to such assets.
The fair market value of stock option grants is estimated using the Black-Scholes option-pricing model with the following assumptions:
Earnings Per Share — Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of Common Shares outstanding. Diluted earnings (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Securities or other contracts to issue common shares are included in the per share calculations where the effect of their inclusion would be dilutive.
some of the implementation issues related to SFAS No. 121. SFAS No. 144 also broadens the presentation of discontinued operations to include more disposal transactions. The Company adopted this Statement effective April 1, 2002, as required. In accordance with this Statement, the Company measures impairment when events or circumstances indicate an asset’s carrying value may not be recoverable. The estimate of an asset’s fair value used in the measuring for impairment is based on the best available evidence at the time, which may include broker quotes, values of similar transactions and/or discounting the probability-weighted future cash flows expected to be generated by the asset. This statement was used as a basis for reporting the Company’s discontinued operations and calculating the asset impairments occurring as a result of the disposal. See further discussion of the impact of this Statement on the Company’s financial position and results of operations in Notes 2 and 3.
On April 1, 2001, Pioneer-Standard adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” SFAS No. 133 and 138 establish accounting and reporting standards for derivative instruments and for hedging activities. They require companies to recognize all derivatives on the balance sheet as assets and liabilities, measured at fair value. The adoption of SFAS No. 133 resulted in a charge to “Accumulated other comprehensive loss” of $0.2 million, net of $0.1 million tax benefit for a change in accounting relating to the Company’s derivative instruments.
2
On February 28, 2003, the Company completed the sale of substantially all of the assets and liabilities of its Industrial Electronics Division (“IED”), which distributed semiconductors, interconnect, passive and electromechanical components, power supplies and embedded computer products in North America and Germany. In addition, as of the sale date, the Company announced its strategic transformation to focus solely on its enterprise computer systems business. Cash proceeds from the sale of IED are estimated to total $240 million, subject to purchase price adjustments, of which approximately $227 million has been collected as of March 31, 2003. The assets sold consisted primarily of accounts receivable and inventories and the Company’s shares of common stock in World Peace Industrial Co. Ltd, (“WPI”), an Asian distributor of electronic components. The buyer also assumed certain liabilities.
Severance costs relate to the severance and other employee benefit costs to be paid to approximately 525 employees previously employed by IED and not re-hired by the purchaser. Facilities costs represent the present value of qualifying exit costs, offset by an estimate for future sublease income provided by external brokers, for approximately 30 vacated locations no longer required as a result of the sale. These leases have expiration dates extending to 2010.
The asset impairment charge represents the write-down to fair value of assets that were abandoned or classified as “held-for-sale,” as a result of the disposition and discontinuance of IED and Aprisa, respectively. This write-down was for assets that were not included in the IED sale transaction.
As part of the Purchase and Sale Agreement, certain severance costs are reimbursed by the purchaser. Therefore, a corresponding receivable to the aforementioned accrual has been established in “Assets from Discontinued Operations” in the accompanying Consolidated Balance Sheet at March 31, 2003. Approximately $10.9 million of the remaining reserve balance is expected to be spent before the end of Fiscal 2004, with $3.5 million reimbursed by the Purchaser.
3
In the fourth quarter of Fiscal 2003, resulting from the sale of the Industrial Electronics Division, the Company announced that it would restructure its remaining business and facilities to reduce overhead and eliminate assets that were inconsistent with the Company’s strategic plan and were no longer required. As a result of this restructuring, the Company recorded restructuring charges totaling $20.7 million, classified in the Fiscal 2003 Consolidated Statement of Operations as “Restructuring Charges,” for the impairment of facilities and other assets no longer required, and severance, incentives and other employee benefit costs, including amounts accrued for payments that are to be made pursuant to certain tax “gross up” provisions of the restricted stock award agreements discussed in Note 14, incurred in connection with downsizing the corporate structure.
Approximately $6.5 million of the remaining balance is expected to be spent before the end of Fiscal 2004.
4
On April 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” This Statement, among other things, eliminates the amortization of goodwill and other intangibles that have indefinite lives but requires annual tests for determining impairment of those assets. All other intangible assets continue to be amortized over their estimated useful lives. Effective April 1, 2002, the Company discontinued amortization of its goodwill in accordance with SFAS No. 142.
Under the required transitional provisions of SFAS No. 142, the Company identified and evaluated its reporting units for impairment as of April 1, 2002, the first day of the Company’s fiscal year 2003, using a two-step process and engaged an independent valuation consultant to assist in this process. The first step involved identifying the reporting units with carrying values, including goodwill, in excess of fair value. The fair value of goodwill was estimated using a combination of a discounted cash flow valuation model, incorporating a discount rate commensurate with the risks involved for each reporting unit, and a market approach of guideline companies in similar transactions. As a result of completing the first step of the process, it was determined that there was an impairment of goodwill at the date of adoption. This was due primarily to market conditions and relatively low levels of sales. In the second step of the process, the implied fair value of the affected reporting unit’s goodwill was compared with its carrying value in order to determine the amount of impairment, that is, the amount by which the carrying amount exceeded the fair value. As a result, the Company recorded an impairment charge of $36.7 million, before tax, which was recorded as a cumulative effect of change in accounting principle in the first quarter of Fiscal 2003 and is reflected in the accompanying Consolidated Statement of Operations for the year ended March 31, 2003. The goodwill impairment was comprised of $25.6 million for IED and $11.0 million for the operations of Aprisa. Both of these businesses are reported as discontinued operations.
5
The Company has investments in affiliates accounted for using the equity method and equity securities accounted for using the cost method. At March 31, 2003 and 2002, Investments in Affiliated Companies consisted of the following:
The Company holds publicly traded equity securities in Eurodis, a European distributor of electronic components headquartered in London, England. This investment was acquired as a strategic investment and is accounted for as an available-for-sale security. Management continually monitors the change in the value of its
available-for-sale investment to determine whether declines in market value below cost are other-than-temporary. The Company makes such a determination based upon criteria that include the extent to which cost exceeds market value, the duration of the market decline, and the financial condition of and specific prospects of the issuer. In addition, the Company evaluates its intent to retain the investment over a period of time which would be sufficient to allow for any recovery in market value. As of March 31, 2003 and 2002, the market value of Pioneer-Standard’s investment in Eurodis was $2.4 million and $12.6 million, respectively, as compared with a cost basis of approximately $17.0 million.
6
The Company leases certain office and warehouse facilities and equipment under non-cancelable operating leases which expire at various dates through 2017. Certain facilities and equipment leases contain renewal options for periods up to 10 years. Future minimum lease payments at March 31, 2003 under all non-cancelable operating leases, exclusive of real estate taxes, insurance and leases related to facilities closed as a result of the divestiture and restructuring of the Company are: $4.9 million in 2004; $4.3 million in 2005; $3.7 million in 2006; $2.5 million in 2007; $2.1 million in 2008; and $14.0 million thereafter. Minimum rental commitments for leases related to facilities closed as a result of the divestiture and restructuring are $3.6 million in 2004; $2.8 million in 2005; $1.6 million in 2006; $1.1 million in 2007; $0.4 million in 2008; and $9.0 million thereafter.
7
Long-term debt at March 31, 2003 and 2002, consisted of the following:
In October 2001, the Company completed a three-year Accounts Receivable Securitization financing (the “Asset Securitization”) that provided for borrowings up to $150 million, limited to certain borrowing base calculations, and was secured by certain trade accounts receivable. Under the terms of the agreement, the Company transferred receivables to a wholly-owned consolidated subsidiary that in turn utilized the receivables to secure the borrowings, which were funded through a vehicle that issues commercial paper in the short-term market. The yield on the commercial paper, which is the commercial paper rate plus program fees, is considered a financing cost and included in “Interest expense, net” in the accompanying Consolidated Statements of Operations. In February 2003, the Company canceled the Asset Securitization, based on the Company’s strong liquidity position and low anticipated borrowing needs. There were no advances outstanding under the facility as of the termination date.
The Company’s debt outstanding as of March 31, 2003 primarily consists of approximately $131.0 million principal amount of 9.5% Senior Notes (the “Notes”) due August 2006. Interest is payable semi-annually. 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. The fair value of the Notes was $137.2 million and $141.0 million at March 31, 2003 and 2002, respectively.
8
The components of income (loss) before income taxes from continuing operations and provision for income taxes from continuing operations for the years ended March 31 are as follows:
A reconciliation of the federal statutory rate to the Company’s effective income tax rate for the years ended March 31 follows:
Deferred tax assets and liabilities as of March 31, 2003 and 2002 are presented below:
Long-term deferred tax assets of approximately $1.6 million are included in “Other Assets” in the accompanying Consolidated Balance Sheet at March 31, 2003.
9
The Company maintains various profit-sharing and thrift plans for all employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute 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 $2.3 million, $2.2 million and $4.9 million for 2003, 2002 and 2001, respectively.
10
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 costs related to these matters when a loss is probable and the amount can be reasonably estimated. 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.
11
In March and April 1998, Pioneer-Standard Financial Trust (the “Pioneer-Standard Trust”) issued 2,875,000 shares relating to $143.7 million of 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (the “Trust preferred securities”). The Pioneer-Standard 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 6.75% Junior Convertible Subordinated Debentures due March 31, 2028 of Pioneer-Standard Electronics, Inc. (the “Trust Debentures”).
12
Capital Stock — Holders of Common Shares are entitled to one vote for each share held of record on all matters to be submitted to a vote of the shareholders. At March 31, 2003 and 2002, there were no shares of Preferred Stock outstanding.
adjusted to market value at each reporting period, with an offsetting adjustment to “Capital in excess of stated value.” There were 943,798 shares released from the Trust prior to Fiscal 2001. In Fiscal 2002, 90,462 shares were transferred from the Trust to fund a portion of the Company’s 2001 profit sharing. During Fiscal 2003, 375,800 shares were transferred from the Trust for the restricted stock awards granted in February 2003.
Shareholder Rights Plan — 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% or more of the Company’s Common Shares, or announces a tender offer for at least 20% of the Company’s Common Shares. Each Right will entitle its holder (other than such acquiring person or members of such acquiring 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.
13
The following table sets forth the computation of basic and diluted earnings (loss) per share:
For the three years ended March 31, 2003, 2002 and 2001, 9,122,222, 9,123,396 and 9,126,984 Common Shares issuable upon conversion of the Trust preferred securities, respectively, that could potentially dilute earnings per share in the future were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
14
The Company has stock plans, which provide for the granting of restricted stock and options to employees and directors to purchase its Common Shares. These plans provide for nonqualified and incentive stock options. Stock options are granted to employees at an exercise price equal to the fair market value of the Company’s Common Shares at the date of grant. Options expire 10 years from the date of grant. Vesting periods are established by the Compensation Committee of the Board of Directors and vary.
15
The sale of IED and the related discontinuation of the operations of Aprisa in the fourth quarter of 2003 represent a disposal of a “component of an entity” as defined in SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” Accordingly, the first three quarters of Fiscal 2003 and all of Fiscal 2002 have been restated to reflect the results of operations of IED and Aprisa as discontinued operations.
No. 142 resulted in a charge of $34.8 million, net of tax, which was recorded as a cumulative effect of change in accounting principle in the first quarter of Fiscal 2003.
Included in the results of the fourth quarter of Fiscal 2002 are restructuring charges of $1.5 million ($1.0 million, after tax) consisting of inventory adjustments and a restructuring charge.
schedule ii — valuation and qualifying accounts
Pioneer-Standard Electronics, Inc.
exhibit index
* Denotes a management contract or compensatory plan or arrangement.