<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
August 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 7,740,511
------------------------------- ------------------
Class Outstanding Shares
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
INDEX
-----
Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - August 31, 1995
(unaudited) and February 28, 1995 3.
Consolidated Condensed Statements of Income (unaudited)
- Six Months and Three Months Ended August 31, 1995
and 1994 4.
Consolidated Condensed Statements of Cash Flows (unaudited)
- Six Months Ended August 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. - 11.
PART II. Other Information
ITEM 4. Submission of Matters to a Vote of Security Holders 12.
ITEM 6. Exhibits and Reports on Form 8-K 12.
SIGNATURES 13.
INDEX TO EXHIBITS 14.
Exhibit 10.13 - Agreement dated September 22, 1995, between
the Company and Paul Durando
Exhibit 11 - Computation of Earnings per Common Share
Exhibit 27 - Financial Data Schedules
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
-ASSETS-
--------
<TABLE>
<CAPTION>
AUGUST FEBRUARY
31, 1995 28, 1995
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash (including time deposits) $ 2,347,307 $ 498,919
Accounts receivable-net of allowance for doubtful
accounts of $1,302,163 and $898,359 for August
31, 1995 and February 28, 1995, respectively 26,432,187 20,786,943
Inventories 29,139,628 22,255,545
Prepaid expenses and other current assets 1,258,781 1,637,611
----------- -----------
TOTAL CURRENT ASSETS 59,177,903 45,179,018
PROPERTY, PLANT AND EQUIPMENT - NET (Note 2) 3,401,994 3,141,054
OTHER ASSETS 3,655,256 3,652,534
----------- -----------
66,235,153 $51,972,606
=========== ===========
</TABLE>
-LIABILITIES AND SHAREHOLDERS' EQUITY-
--------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 9,984,463 $ 6,286,579
Accrued expenses 2,026,019 2,201,006
Current portion of long-term debt 270,034 311,063
Income taxes 148,454 7,743
Other current liabilities 5,915 43,686
----------- -----------
TOTAL CURRENT LIABILITIES 12,434,885 8,850,077
----------- -----------
DEFERRED INCOME TAXES 976,424 585,209
----------- -----------
REVOLVING CREDIT LINE (Note 3) 11,250,000 4,400,000
----------- -----------
LONG-TERM DEBT 466,898 595,404
----------- -----------
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; 7,740,511 and 7,732,051 shares
issued and outstanding for August 31, 1995
and February 28, 1995, respectively 51,087 51,032
Additional paid-in capital 10,744,522 10,726,727
Retained earnings 15,801,162 11,764,157
----------- -----------
26,596,771 22,541,916
Less: loan to ESOP 489,825 -
----------- -----------
26,106,946 22,541,916
----------- -----------
$66,235,153 $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 SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
AUGUST AUGUST AUGUST AUGUST
31, 1995 31, 1994 31, 1995 31, 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $94,807,858 $59,776,531 $50,091,805 $31,014,574
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 72,600,251 45,065,304 38,192,979 23,452,551
Operating expenses 14,487,541 10,122,107 7,360,793 5,312,914
Interest expense 934,661 508,585 481,277 300,587
Interest income (2,534) (12,006) (424) (430)
----------- ----------- ----------- -----------
88,019,919 55,683,990 46,034,625 29,065,622
----------- ----------- ----------- -----------
INCOME BEFORE PRO-
VISION FOR INCOME
TAXES 6,787,939 4,092,541 4,057,180 1,948,952
Provision
for income taxes 2,750,934 1,679,156 1,651,272 799,232
----------- ----------- ----------- -----------
NET INCOME $ 4,037,005 $ 2,413,385 $ 2,405,908 $ 1,149,720
=========== =========== =========== ===========
NET INCOME
PER SHARE (Note 5):
Primary $ .51 $ .31 $ .30 $ .15
=========== =========== =========== ===========
Fully diluted $ .43 $ .30 $ .25 $ .14
=========== =========== =========== ===========
</TABLE>
See notes to interim consolidated condensed financial statements
4
<PAGE>
Page 1 of 2
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
(Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $ 88,638,864 $ 56,538,189
Cash paid to suppliers and employees (89,527,433) (65,474,671)
Interest received 2,534 18,906
Interest paid (934,661) (508,585)
Income taxes paid (1,859,826) (3,544,344)
------------ ------------
Net cash (used in)
operating activities (3,680,522) (12,970,505)
------------ ------------
Cash flows (used in) investing activities:
Capital expenditures (609,605) (180,643)
Purchase of stock for ESOP (559,800) -
------------ ------------
Net cash (used in) investing
activities (1,169,405) (180,643)
------------ ------------
Cash flows from financing activities:
Borrowings under revolving credit line 25,800,000 45,690,000
Repayments under revolving credit line (18,950,000) (48,390,000)
Principal payments of long-term debt (169,535) (146,174)
Proceeds from stock options and
warrants 17,850 26,809
Proceeds from subordinated debt - 15,000,000
------------ ------------
Net cash provided by financing activities 6,698,315 12,180,635
------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,848,388 (970,513)
Cash and cash equivalents, beginning
of year 498,919 2,124,307
------------ ------------
Cash and cash equivalents, end of period $ 2,347,307 $ 1,153,794
============ ============
</TABLE>
See notes to interim consolidated condensed financial statements
5
<PAGE>
Page 2 of 2
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
(Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Net income $ 4,037,005 $ 2,413,385
----------- ------------
Adjustments to reconcile net income to
net cash (used in) operating
activities:
Depreciation and amortization 555,169 360,052
Contribution to ESOP 69,975 17,063
Bad debt provision 523,750 150,000
Changes in assets and liabilities:
(Increase) in accounts receivable (6,168,994) (3,238,342)
(Increase) in inventories (6,884,083) (7,483,493)
Decrease (increase) in prepaid expenses
and other current assets 378,830 (886,084)
(Increase) in goodwill - (2,353,874)
(Increase) in other assets (209,226) (285,206)
Increase (decrease) in accounts payable
and accrued expenses 3,485,126 (451,677)
Increase (decrease) in income taxes 140,711 (1,381,166)
Increase in deferred income taxes 391,215 168,837
----------- ------------
Total adjustments (7,717,527) (15,383,890)
----------- ------------
Net cash (used in) operating activities $(3,680,522) $(12,970,505)
=========== ============
</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 August 31, 1995 and February 28, 1995 and
the results of its operations for the six and three month periods ended
August 31, 1995 and 1994 and cash flows for the six month periods ended
August 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 six and three month periods ended August
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>
AUGUST FEBRUARY
31, 1995 28, 1995
-------- --------
<S> <C> <C>
Land $ 266,301 $ 266,301
Building and improvements 1,680,770 1,574,435
Furniture, fixtures and office
equipment 1,812,616 1,512,926
Computer equipment 2,124,356 1,920,776
Assets held under capitalized
leases 919,834 919,834
---------- ----------
6,803,877 6,194,272
Less: accumulated depreciation
and amortization 3,401,883 3,053,218
---------- ----------
$3,401,994 $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
$11,250,000 at August 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:
Six Months Ended Three Months Ended
August 31, August 31,
1995 1994 1995 1994
---- ---- ---- ----
Primary 7,950,562 7,834,620 8,009,707 7,843,336
Fully diluted 10,323,729 8,112,295 10,339,609 8,127,962
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 subsidiary of the Company, is a contract assembler of circuit boards,
harnesses and related electromechanical devices for various OEM's.
The financial information presented herein includes: (i) Balance sheets as of
August 31, 1995 and February 28, 1995; (ii) Statements of income for the six
and three month periods ended August 31, 1995 and 1994 and (iii) Statements of
cash flows for the six month periods ended August 31, 1995 and 1994.
Results of Operations:
----------------------
Sales for the six and three month periods ended August 31, 1995 were
$94,807,858 and $50,091,805 as compared to $59,776,531 and $31,014,574 for the
comparable periods of the prior year, increases of approximately 59% and 62%,
respectively. Management attributes the increase in sales for the six month
period to the following reasons: Approximately $2,930,000 or 8% of the
overall increase is attributable to a full six months of sales by the new
"Merit" subsidiary in San Jose, California as compared to five months in the
prior year. Approximately $1,871,000 or 5% of the overall increase resulted
from incremental sales increases achieved at the Nu Visions Manufacturing
subsidiary. The balance of the increase, approximately $30,231,000 or 87% 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.
Gross profit margins for the six and three month period ended August 31, 1995
were 23.4% and 23.8% as compared to 24.6% and 24.4% for the comparable periods
of the prior year. Management attributes this lower profit margin primarily
to a downward correction of selling prices in the marketplace during the
period ended August 31, 1995 and a greater volume of larger orders at lower
gross profit margins.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued):
--------------------------------------
Results of Operations (Continued):
----------------------------------
Operating expenses have increased from approximately $10,122,000 for the six
months ended August 31, 1994 to approximately $14,488,000 for the six months
ended August 31, 1995 or by approximately $4,366,000. For the three months
ended August 31, 1995 as compared to the three months ended August 31, 1994
operating expenses increased from approximately $5,313,000 to $7,361,000, or
approximately $2,048,000. As a percentage of net sales operating expenses for
the three and six month periods decreased from 17% and 16.9% respectively to
14.6% and 15.2% respectively. This decrease was due to sales increasing at a
faster rate than expenses. The dollar increases in operating expenses were
due to increases in the following expense categories: Approximately
$2,765,000 of the increase for the six month period and approximately
$1,610,000 of the increase for the three month period, were for personnel
related costs - commissions, salaries, travel, fringe benefits and the
addition of the San Jose, California branch and other facilities. The
increases were needed to produce the increased sales which were achieved in
these periods.
Interest expense increased from $508,585 to $934,661 when comparing the six
month periods ended August 31, 1994 and 1995. For the three months ended
August 31, 1995, interest expense was $481,277 as compared to $300,587 for
the corresponding period of the prior year. These increases were primarily
the result of higher average borrowings primarily due to the increase in the
Company's accounts receivable and inventory resulting from the incremental
sales volume mentioned above.
Net income for the six month period ended August 31, 1995 was $4,037,005 or
$.51 per share as compared to $2,413,385 or $.31 per share for the six month
period ended August 31, 1994. Net income for the three month period ended
August 31, 1995 was $2,405,908 or $.30 per share as compared to $1,149,720 or
$.15 per share for the corresponding period of the prior year. Management
attributes the increased earnings to the incremental sales and gross profit
dollars net of the increase in operating and interest expenses as described
above.
Liquidity and Capital Resources:
--------------------------------
At August 31, 1995 the Company's current ratio was 4.76:1 as compared to 5.1:1
for the fiscal year ended February 28, 1995. Working capital increased from
approximately $36,329,000 as of February 28, 1995 to approximately $46,743,000
at August 31, 1995 while cash increased from February 28, 1995 to August 31,
1994 by approximately $1,848,000. The primary reasons for the increase in
both working capital and the current ratio was the increase in cash and an
increase in accounts receivable and inventories financed primarily through
long term debt during the current period. These increases were required to
support the increased sales activity.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued):
--------------------------------------
Liquidity and Capital Resources (Continued):
--------------------------------------------
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 of $9.00 per share. The
Company has registered, under the Securities Act of 1933, for the resale by
the holders thereof, 333,333 shares of common stock, representing the number
of shares of common stock obtainable by such holders upon conversion of 20% of
the outstanding principal amount of such notes. No assurance can be given
that the notes will be converted or that the shares of common stock underlying
the notes will be sold by the holders thereof.
The Company anticipates that its capital 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 ensuing 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.
11
<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
(a) The Registrant held its Annual Meeting of Stockholders on
September 22, 1995. The following proposals were adopted by the
votes indicated.
(b)(c)(1) Two directors were elected at the Annual Meeting to serve until
the Annual Meeting of Stockholders in 1998, in addition to the five
other Directors, Herbert Gardner, Paul Durando, David Siegel,
Irving Lubman and Arthur Nadata, whose term of office continued
after the meeting. The names of these Directors and votes cast in
favor of their election and shares withheld are as follows:
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
Harvey Blau 6,424,454 59,566
Richard Schuster 6,424,454 59,566
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports:
(a) Exhibits:
10.13. Agreement dated September 22, 1995 between
the Company and Paul Durando
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
12
<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: October 11, 1995 Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
------------------------------------
Date: October 11, 1995 Paul Durando, Vice President-Finance
and Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
Exhibit 10.13. Agreement dated September 22, 1995 between
the Company and Paul Durando
Exhibit 11. See Notes to Financial Statements, Note 5, regarding
computation of per share earnings
Exhibit 27. Financial Data Schedule
14
<PAGE>
EXHIBIT 10.13
NU HORIZONS ELECTRONICS CORP.
AGREEMENT DATED SEPTEMBER 22, 1995 BETWEEN THE COMPANY AND PAUL DURANDO
-----------------------------------------------------------------------
AGREEMENT made as of the 22nd day of September, 1995 by and between NU
HORIZONS ELECTRONICS CORP. a Delaware corporation (hereinafter called the
"Company") and PAUL DURANDO, residing at 31 Marlin Lane, Port Washington, New
York 11050 (hereinafter called the "Employee").
WITNESSETH:
WHEREAS, the Company desires to continue to employ the Employee, and
the Company acknowledges that its entering into this agreement is a condition to
the Employee's willingness to continue such employment; and
WHEREAS, Employee desires to continue to be employed by the Company,
and the Employee acknowledges that his entering into this agreement is a
condition to the Company's willingness to continue such employment;
NOW, THEREFORE, it is agreed as follows:
1. Prior Agreements Superseded. This Agreement supersedes any
----------------------------
employment or consulting agreements, oral or written, entered into between
Employee and the Company prior to the date of this Agreement.
2. Confidential Information. Employee recognizes and acknowledges
-------------------------
that confidential information of various kinds, including information with
respect to the properties, customers and vendors, as they may exist from time to
time, of the Company are valuable, special and unique assets of its business.
Accordingly, Employee will not, during or after the term of this Agreement,
except in the performance of his services hereunder or with the consent of the
Company, disclose any such confidential information to any individual or entity
for any reason or purpose whatsoever and will not use any such confidential
information for his own benefit. The provisions of this paragraph 2 will not
apply to information available in trade or other publications, information known
to Employee at the time he entered the employ of the Company, and information
which presently is or shall become available without committing a tortious act.
3. Non-Competition; Proprietary Information; Property. (a) Employee
---------------------------------------------------
agrees that, during the term of this Agreement, he will not, without the prior
written approval of the Company, directly or indirectly, through any other
individual or entity, (i) become an officer or employee of, or render any
services, including consulting services, to any competitor of the Company, (ii)
solicit, raid, entice or induce any customer of the company to cease purchasing
goods or services from the Company or to become a customer of any competitor of
the Company, and Employee will not approach any customer for any such purpose or
authorize the taking of any such actions by any other individuals or entity, or
(iii) solicit, raid, entice or induce any employee of the Company, and Employee
will not approach any such employee for any such purpose or authorize the taking
of any such action by any other individual or entity. However, nothing
contained in this paragraph 3 shall be construed as preventing Employee from
investing his assets in such form or manner as will not require him to become an
officer or employee of, or render any services, including consulting services,
to any competitor of the Company.
Page 1 of 4
<PAGE>
(b) Employee agrees that Employee will, at all times, promptly disclose to
the Company in such form and manner as the Company may reasonably require, any
inventions, improvements or procedural methodological innovations, programs,
methods, forms, systems, services, designs, marketing ideas, products or
processes (whether or not capable of being trademarked, copyrighted or patented)
conceived or developed or created by Employee during or in connection with
Employee's retention hereunder and which relate to the business of the Company
("Intellectual Property"). Employee agrees that all such Intellectual Property
shall be the sole property of the Company, and hereby assigns, conveys and
transfers to the Company all of the Employee's right, title and interest therein
to the Company. Employee further agrees that Employee will execute such
instruments and perform such acts as may reasonably be requested by the Company
to transfer to an perfect in the Company all legally protectable rights in such
Intellectual Property.
(c) All written materials, records and documents made by Employee or
coming into Employee's possession during Employee's retention by the Company
concerning any products, processes or equipment manufactured, used developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company shall be the sole property of
the Company, and upon termination of Employee's retention by the company or upon
request of the company during Employee's retention by the Company, Employee
shall promptly deliver the same to the Company. In addition, upon termination
of Employee's retention by the company, Employee will deliver to the company all
other Company property in Employee's possession or under Employee's control,
including, but not limited to, tangible property, financial statements,
marketing and sales data, customer and supplier lists, database information and
other documents, and any Company credit cards.
4. Change of Control. (a) In the event there shall be a Change in present
------------------
Control of the company, as hereinafter defined, or in any person directly or
indirectly presently controlling the Company, as hereinafter defined, Employee
shall have the option, exercisable within six (6) months of his becoming aware
of such event, to terminate this Agreement forthwith. Upon such termination, or
if the employee's employment by the Company has been terminated by the Company
within six (6) months prior to such Change in Control, Employee shall have the
right to receive payment of an amount equal to three times the average of the
total compensation paid to the Employee during the immediately preceding five
(5) full fiscal years, less $1.00. Such amount shall be paid at the time and in
the manner in which the Company regularly pays its executive officers.
(b) For purposes of the Agreement, a Change in Control of the Company,
or in any person directly or indirectly controlling the Company, shall mean:
(i) a Change in Control as such term is presently defined in Regulation
240.12b-2 under the Securities and Exchange Act of 1934 ("Exchange Act"); or
(ii) if any "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act) other than the Company or any "person" who on the date of this
Agreement is a director or officer of the Company, becomes the "beneficial
owner" (as defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty percent (20%) of
the Voting power of the Company's then outstanding securities; or
Page 2 of 4
<PAGE>
(iii) if during any period of two (2) consecutive years during the term of
this Agreement, individuals who at the beginning of such period constitute the
Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election of each director who is not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds (2/3) of the directors then in office who were directors at
the beginning of the period.
5. Consolidation or Merger. In the event of any consolidation or merger
------------------------
of the Company into or with any other corporation during the term of the
Agreement, or the sale of all or substantially all of the assets of the company
to another corporation, person or entity during the term of this Agreement, such
successor corporation shall assume this Agreement and become obligated to
perform all of the terms and provisions hereof applicable to the Company, and
Employee's obligations hereunder shall continue in favor of such successor
corporation.
6. Notices. Any notice to be given to the Company hereunder shall be
--------
deemed sufficient if addressed to the Company in writing and delivered or
mailed by certified or registered mail to its offices at 6000 New Horizons
Boulevard, Amityville, New York 11701, or such other address as the
Company may hereafter designate. Any notice to be given to Employee
hereunder shall be delivered or mailed by certified or registered mail to
him at: 31 Marlin Lane, Port Washington, New York 11050 or such other
address as he may hereafter designate.
7. Successors and Assigns. This agreement shall be binding upon and inure
-----------------------
to the benefit of the successors and assignees of the Company, and unless
clearly inapplicable, all references herein to the Company shall be deemed
to include any such successor. In addition, this Agreement shall be
binding upon and inure to the benefit of the Employee and his heirs,
executors, legal representatives and assigns; provided, however that the
obligations of Employee hereunder may not be delegated without the prior
written approval of the Board of Directors of the Company.
8. Amendments. This Agreement may not be altered, modified, amended or
-----------
terminated except by a written instrument signed by each of the parties
hereto.
9. Applicable Law. This Agreement shall be governed by, construed and
---------------
enforced in accordance with the laws of the State of New York, without
regard to conflicts of laws.
10. No Right to Employment. This Agreement shall not be construed to grant
-----------------------
to the Employee any right to continue to be employed by the Company.
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NU HORIZONS ELECTRONICS CORP.
/s/ Arthur Nadata
-----------------------------
Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
------------------------------------
Paul Durando, Vice President-Finance
and Chief Financial Officer
Page 4 of 4
<PAGE>
EXHIBIT 11
NU HORIZONS ELECTRONICS CORP.
COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
------------------------ --------------------------
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS:
- -----------------
NET INCOME $ 4,037,005 $2,413,385 $ 2,405,908 $1,149,720
=========== =========== =========== ===========
SHARES:
Weighted average
number of common
shares and common
share equivalents
outstanding 7,950,562 7,834,620 8,009,707 7,843,336
=========== =========== =========== ===========
PRIMARY EARNINGS PER
COMMON SHARE $ .51 $ .31 $ .30 $ .15
=========== =========== =========== ===========
FULLY DILUTED EARNINGS:
- -----------------------
Net Income $ 4,037,005 $2,413,385 $ 2,405,908 $1,149,720
Net (after tax)
interest expense
related to
convertible debt 365,062 - 182,531 -
----------- ----------- ----------- -----------
NET INCOME AS ADJUSTED $ 4,402,067 $2,413,385 $ 2,588,439 $1,149,720
=========== =========== =========== ===========
SHARES:
Weighted average
number of common
shares and common
share equivalents
outstanding 7,950,562 7,834,620 8,009,707 7,843,336
Additional options
not included above 706,501 277,675 663,236 284,626
Assuming conversion
of convertible debt 1,666,666 - 1,666,666 -
----------- ----------- ----------- -----------
Weighted average
number of common
shares outstanding
as adjusted 10,323,729 8,112,295 10,339,609 8,127,962
=========== =========== =========== ===========
FULLY DILUTED EARNINGS
PER COMMON SHARE $ .43 $ .30 $ .25 $ .14
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SECOND QUARTER ENDED AUGUST
31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 2,347,307
<SECURITIES> 0
<RECEIVABLES> 27,734,350
<ALLOWANCES> 1,302,163
<INVENTORY> 29,139,628
<CURRENT-ASSETS> 59,177,903
<PP&E> 6,803,877
<DEPRECIATION> 3,401,883
<TOTAL-ASSETS> 66,235,153
<CURRENT-LIABILITIES> 12,434,885
<BONDS> 0
<COMMON> 51,087
0
0
<OTHER-SE> 26,055,859
<TOTAL-LIABILITY-AND-EQUITY> 66,235,153
<SALES> 94,807,858
<TOTAL-REVENUES> 94,807,858
<CGS> 72,600,251
<TOTAL-COSTS> 14,487,541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 523,750
<INTEREST-EXPENSE> 934,661
<INCOME-PRETAX> 6,787,939
<INCOME-TAX> 2,750,934
<INCOME-CONTINUING> 4,037,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,037,005
<EPS-PRIMARY> .51
<EPS-DILUTED> .43
</TABLE>
