<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended Commission file number
May 31, 1995 1-8798
- ----------------- ----------------------
Nu Horizons Electronics Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2621097
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6000 New Horizons Blvd., Amityville, New York 11701
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 226-6000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
Common Stock - Par Value $.0066 7,738,751
------------------------------- ------------------
Class Outstanding Shares
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page(s)
<S> <C>
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets -
May 31, 1995 (unaudited) and February 28, 1995 3.
Consolidated Condensed Statements of Income (unaudited) -
Three Months Ended May 31, 1995 and 1994 4.
Consolidated Condensed Statements of Cash Flows (unaudited) -
Three Months Ended May 31, 1995 and 1994 5. - 6.
Notes to Interim Consolidated Condensed Financial
Statements (unaudited) 7. - 8.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9. - 10.
PART II. Other Information 11.
SIGNATURES 12.
INDEX TO EXHIBITS
Exhibit 11 - Computation of Earnings per Common Share
Exhibit 27 - Financial Data Schedules
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------------------
-ASSETS-
--------
<TABLE>
<CAPTION>
MAY FEBRUARY
31, 1995 28, 1995
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash (including time deposits) $ 1,575,345 $ 489,919
Accounts receivable-net of allowance for doubt-
ful accounts of $1,268,175 and $898,359 for May
31, 1995 and February 28, 1995, respectively 24,418,753 20,786,943
Inventories 25,169,264 22,255,545
Prepaid expenses and other current assets 1,117,356 1,637,611
----------- -----------
TOTAL CURRENT ASSETS 52,280,718 45,179,018
PROPERTY, PLANT AND EQUIPMENT - NET (Note 2) 3,375,922 3,141,054
OTHER ASSETS 3,565,691 3,652,534
----------- -----------
$59,222,331 $51,972,606
=========== ===========
<CAPTION>
-LIABILITIES AND SHAREHOLDERS' EQUITY-
--------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 8,684,475 $ 6,286,579
Accrued expenses 1,475,590 2,201,006
Current portion of long-term debt 293,050 311,063
Income taxes 124,795 7,743
Other current liabilities 6,226 43,686
----------- -----------
TOTAL CURRENT LIABILITIES 10,584,136 8,850,077
----------- -----------
DEFERRED INCOME TAXES 714,407 585,209
----------- -----------
REVOLVING CREDIT LINE (Note 3) 8,750,000 4,400,000
----------- -----------
LONG-TERM DEBT 520,887 595,404
----------- -----------
SUBORDINATED CONVERTIBLE NOTES (Note 4) 15,000,000 15,000,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares
authorized; none issued or outstanding - -
Common stock, $.0066 par value, 20,000,000 shares
authorized; 7,738,751 and 7,732,051 shares issued
and outstanding for May 31, 1995 and
February 28, 1995, respectively 51,076 51,032
Additional paid-in capital 10,740,821 10,726,727
Retained earnings 13,395,254 11,764,157
----------- -----------
24,187,151 22,541,916
Less: loan to ESOP 534,250 -
----------- -----------
23,652,901 22,541,916
----------- -----------
$59,222,331 $51,972,606
=========== ===========
</TABLE>
See notes to interim consolidated condensed financial statements
3
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------
MAY 31, 1995 MAY 31, 1994
------------ ------------
<S> <C> <C>
NET SALES $44,716,053 $28,761,957
----------- -----------
COSTS AND EXPENSES:
Cost of sales 34,407,272 21,612,753
Operating expenses 7,126,748 4,809,193
Interest expense 453,384 207,998
Interest income (2,110) (11,576)
----------- -----------
41,985,294 26,618,368
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,730,759 2,143,589
Provision for income taxes 1,099,662 879,924
----------- -----------
NET INCOME $ 1,631,097 $ 1,263,665
=========== ===========
NET INCOME PER SHARE (Note 5):
Primary $.21 $.16
==== ====
Fully diluted $.18 $.15
==== ====
</TABLE>
See notes to interim consolidated condensed financial statements
4
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------
MAY 31, 1995 MAY 31, 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $ 40,666,743 $ 26,408,209
Cash paid to suppliers and employees (42,306,713) (33,570,515)
Interest received 2,110 1,376
Interest paid (453,384) (207,998)
Income taxes paid (139,232) (2,328,428)
------------ ------------
Net cash (used in) operating activities (2,230,476) (9,697,356)
------------ ------------
Cash flows from investing activities:
Capital expenditures (404,906) (153,736)
Purchase of stock for ESOP (559,800) -
------------ ------------
Net cash (used in) investing activities (964,706) (153,736)
------------ ------------
Cash flows from financing activities:
Borrowings under revolving credit line 11,350,000 19,450,000
Repayments under revolving credit line (7,000,000) (10,140,000)
Principal payments of long-term debt (92,530) (74,861)
Proceeds from stock options 14,138 4,772
------------ ------------
Net cash provided by financing
activities 4,271,608 9,239,911
------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,076,426 (611,181)
Cash and cash equivalents, beginning
of year 498,919 2,124,307
------------ ------------
Cash and cash equivalents, end of period $ 1,575,345 $ 1,513,126
============ ============
</TABLE>
See notes to interim consolidated condensed financial statements
5
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------
MAY 31, 1995 MAY 31, 1994
------------- ------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Net income $ 1,631,097 $ 1,263,665
----------- -----------
Adjustments to reconcile net income to
net cash (used in) operating
activities:
Depreciation and amortization 273,289 156,289
Contribution to ESOP 25,550 11,813
Bad debt provision 417,500 -
Changes in assets and liabilities:
(Increase) in accounts receivable (4,049,310) (2,353,748)
(Increase) in inventories (2,913,719) (4,127,543)
Decrease in prepaid expenses
and other current assets 520,255 147,298
(Increase) in other assets (16,408) (2,623,176)
Increase (decrease) in accounts
payable and accrued expenses 1,672,480 (822,401)
Increase (decrease) in income taxes 117,052 (1,440,371)
(Decrease) in other current liabilities (37,460) -
Increase in deferred taxes 129,198 90,818
----------- -----------
Total adjustments (3,861,573) (10,961,021)
----------- -----------
Net cash (used in) operating activities ($2,230,476) ($9,697,356)
=========== ===========
</TABLE>
See notes to interim consolidated condensed financial statements
6
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------
(unaudited)
1. In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Nu Horizons Electronics
Corp. (the "Company") and its subsidiaries (Nu Horizons/Merit Electronics
Corp., NIC Components Corp., Nu Horizons International Corp. and Nu Visions
Manufacturing, Inc.) contain all adjustments necessary to present fairly
the Company's financial position as of May 31, 1995 and February 28, 1995
and the results of its operations and cash flows for the three month
periods ended May 31, 1995 and 1994.
The accounting policies followed by the Company are set forth in Note 2 to
the Company's consolidated financial statements included in its Annual
Report on Form 10-K for the year ended February 28, 1995, which is
incorporated herein by reference. Specific reference is made to this
report for a description of the Company's securities and the notes to
consolidated financial statements included therein.
The results of operations for the three month period ended May 31, 1995 are
not necessarily indicative of the results to be expected for the full year.
2. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MAY FEBRUARY
31, 1995 28, 1995
---------- ----------
<S> <C> <C>
Land $ 266,301 $ 266,301
Building and improvements 1,675,446 1,574,435
Furniture, fixtures and office
equipment 1,710,914 1,512,926
Computer equipment 2,026,683 1,920,776
Assets held under capitalized
leases 919,834 919,834
---------- ----------
6,599,178 6,194,272
Less: accumulated depreciation
and amortization 3,223,256 3,053,218
---------- ----------
$3,375,922 $3,141,054
========== ==========
</TABLE>
3. BANK LINE OF CREDIT:
In February, 1988 the Company entered into a revolving credit agreement, as
amended, with its bank which provides for an $18,000,000 unsecured revolving
line of credit at the bank's prime rate with payments of interest only
through May 1, 1997. Direct borrowings under the line of credit were
$8,750,000 at May 31, 1995 and $4,400,000 at February 28, 1995.
7
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------
(unaudited)
4. SUBORDINATED CONVERTIBLE NOTES:
In a private placement completed on August 31, 1994, the Company issued $15
million principal amount of Subordinated Convertible Notes, which are due
in $5,000,000 increments on August 31, 2000, 2001 and 2002. The notes are
subordinate in right of payment to all existing and future senior
indebtedness of the Company. The notes bear interest at 8.25%, payable
quarterly on November 15, February 15, May 15 and August 15. The notes are
convertible into shares of common stock at a conversion price of $9.00 per
share. The cost of issuing these notes was $521,565 and is being amortized
over the life of the notes.
5. NET INCOME PER SHARE:
Net income per share has been computed on the basis of the weighted
average number of common shares and common equivalent shares outstanding
during each period presented. Fully diluted earnings per share has been
computed assuming conversion of all dilutive stock options.
The following average shares were used in the computation of primary and
fully diluted earnings per share:
<TABLE>
<CAPTION>
May May
31, 1995 31, 1994
---------- ----------
<S> <C> <C>
Primary 7,852,309 7,856,465
Fully diluted 10,309,609 8,188,493
</TABLE>
All per share amounts have been retroactively restated as a result of stock
dividends and a three for two stock split.
A detailed computation of earnings per common share appears in Exhibit 11
of this Form 10-Q.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS:
--------------------------
Introduction:
-------------
Nu Horizons Electronics Corp. (the "Company") and its wholly-owned
subsidiaries, Nu Horizons/Merit Electronics Corp. ("Merit"), NIC Components
Corp. ("NIC") and Nu Horizons International Corp. ("International"), are
engaged in the distribution of high technology active and passive electronic
components to a wide variety of original equipment manufacturers ("OEMs") of
electronic products. Active components distributed by the Company include
semiconductor products such as memory chips, microprocessors, digital and
linear circuits, microwave/RF and fiberoptic components, transistors and
diodes. Passive components distributed by NIC, principally to OEMs and other
distributors nationally, consist of a high technology line of chip and leaded
components including capacitors, resistors and related networks.
Nu Visions Manufacturing, Inc. ("NUV") located in Springfield, Massachusetts,
another wholly-owned subsidiary of the Company, is a contract assembler of
circuit boards and related electromechanical devices for various OEM's.
The financial information presented herein includes: (i) Balance sheets as of
May 31, 1995 and February 28, 1995; (ii) Statements of income for the three
month periods ended May 31, 1995 and 1994 and (iii) Statements of cash flows
for the three month periods ended May 31, 1995 and 1994.
Results of Operations:
----------------------
Sales for the three month period ended May 31, 1995 were $44,716,053 as
compared to $28,761,957 for the comparable period of the prior year, an
increase of approximately 55%. Management attributes the increase in sales to
the following sales categories: Approximately $872,000 or 5% of the overall
increase resulted from incremental sales achieved at the Nu Visions
Manufacturing subsidiary. The balance of the increase, approximately
$15,082,000 or 95% of the overall increase, resulted from incremental sales
generated by the core distribution business through greater market penetration
and continuing economic strength in the electronic industry.
The gross profit margin for the quarter ended May 31, 1995 was 23.1% as
compared to 24.9% for the quarter ended May 31, 1994. Management attributes
this lower profit margin primarily to a downward correction of selling prices
in the marketplace during the period ended May 31, 1995 and a greater volume
of larger orders at lower gross profit margins.
Operating expenses were approximately $4,809,000 for the three months ended
May 31, 1994 as compared to $7,127,000 for the three months ended May 31,
1995, an increase of approximately $2,318,000 or 48%. As a percentage of net
sales, operating expenses declined from 16.7% to 15.9% for the comparable
period of the prior year. The dollar increase in operating expenses was due
to increases in the following expense categories: Approximately $1,480,000 or
64% of the increase was for personnel related costs - new sales people,
commissions, salaries, travel and fringe benefits. These increases were
required to produce the increased sales which were achieved during the
quarter. Approximately $418,000 or 18% of the total increment was an increase
in accounts receivable reserves required to support larger receivable balances
resulting from the incremental sales. The remaining increase of $420,000 or
18% of the total increment was a result of increases in various other
operating costs required to support the increase in sales for the period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued):
--------------------------------------
Results of Operations (Continued):
----------------------------------
Interest expense increased from approximately $208,000 for the three months
ended May 31, 1994 to approximately $453,000 for the three months ended May
31, 1995. This increase was primarily due to higher average borrowings
resulting from an increase in the Company's accounts receivable and inventory
resulting from the increase in sales volume and higher interest rates during
the period.
Net income for the three month period ended May 31, 1995 was $1,631,097 or
$.21 per share as compared to $1,263,665 or $.16 per share for the three
month period ended May 31, 1994. Management attributes the increased earnings
to the increase in sales and gross profit dollars net of the increase in
operating and interest expenses as described above.
Liquidity and Capital Resources:
--------------------------------
At May 31, 1995 the Company's current ratio was 4.9:1 as compared to 5.1:1 at
February 28, 1995. Working capital increased from approximately $36,329,000
at February 28, 1995 to approximately $41,697,000 at May 31, 1995 while cash
increased from February 28, 1995 to May 31, 1995 by approximately $1,076,000.
The primary reasons for the increase in working capital was an increase in
accounts receivable and inventories financed primarily through long term debt
during the current period. These increases were required to support increased
sales activity.
In February 1988, the Company entered into an unsecured revolving line of
credit agreement, as amended, which provides for maximum borrowings of
$18,000,000 at the bank's prime rate with payments of interest only through
May 1, 1997.
In a private placement completed on August 31, 1994, the Company issued $15
million principal amount of Subordinated Convertible Notes, which are due in
$5,000,000 increments on August 31, 2000, 2001 and 2002. The notes are
subordinate in right of payment to all existing and future senior indebtedness
of the Company. The notes bear interest at 8.25%, payable quarterly on
November 15, February 15, May 15 and August 15. The notes are convertible
into shares of common stock at a conversion price $9.00 per share.
The Company anticipates that its resources provided from its cash flow from
operations and its bank line of credit will be sufficient to meet its
financing requirements for at least the next twelve month period.
Inflationary Impact:
--------------------
Since the inception of operations, inflation has not significantly affected
the operating results of the Company. However, inflation and changing
interest rates have had a significant effect on the economy in general and
therefore could affect the operating results of the Company in the future.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no material legal proceedings against the Company or in which
any of their property is subject.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports:
(a) Exhibits:
11. See Exhibit 11 and Notes to Financial Statements, Note 5,
regarding computation of per share earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nu Horizons Electronics Corp.
-----------------------------
Registrant
/s/ Arthur Nadata
----------------------------------------
Date: July 13, 1995 Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
----------------------------------------
Date: July 13, 1995 Paul Durando, Vice President-Finance
and Chief Financial Officer
12
<PAGE>
EXHIBIT 11
NU HORIZONS ELECTRONICS CORP.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------
MAY MAY
31, 1995 31, 1994
----------- ----------
<S> <C> <C>
PRIMARY EARNINGS:
- ----------------
NET INCOME $ 1,631,097 $1,263,665
----------- ----------
SHARES:
Weighted average
number of common
shares and common
share equivalents
outstanding 7,852,309 7,856,465
----------- ----------
PRIMARY EARNINGS PER
COMMON SHARE $.21 $.16
==== ====
FULLY DILUTED EARNINGS:
- ----------------------
Net Income $ 1,631,097 $1,263,665
Net (after tax)
interest expense
related to
convertible debt 182,457 -
----------- ----------
NET INCOME AS ADJUSTED $ 1,813,554 $1,263,665
=========== ==========
SHARES:
Weighted average
number of common
shares and common
share equivalents
outstanding 7,852,309 7,856,465
Additional options
not included above 790,634 332,028
Assuming conversion
of convertible debt 1,666,666 -
----------- ----------
Weighted average
number of common
shares outstanding
as adjusted 10,309,609 8,188,493
=========== ==========
FULLY DILUTED EARNINGS
PER COMMON SHARE $.18 $.15
==== ====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MAY 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 1,575,345
<SECURITIES> 0
<RECEIVABLES> 25,686,928
<ALLOWANCES> 1,268,175
<INVENTORY> 25,169,264
<CURRENT-ASSETS> 52,280,718
<PP&E> 6,599,178
<DEPRECIATION> 3,223,256
<TOTAL-ASSETS> 59,222,331
<CURRENT-LIABILITIES> 10,584,136
<BONDS> 0
<COMMON> 51,076
0
0
<OTHER-SE> 23,601,825
<TOTAL-LIABILITY-AND-EQUITY> 59,222,331
<SALES> 44,716,053
<TOTAL-REVENUES> 44,716,053
<CGS> 34,407,272
<TOTAL-COSTS> 7,126,748
<OTHER-EXPENSES> 451,274
<LOSS-PROVISION> 417,500
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,730,759
<INCOME-TAX> 1,099,662
<INCOME-CONTINUING> 1,631,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,631,097
<EPS-PRIMARY> .21
<EPS-DILUTED> .18
</TABLE>
