<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NU HORIZONS ELECTRONICS CORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NU HORIZONS ELECTRONICS CORP.
-----------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 19, 1997
-----------------------------------
To the Stockholders of
NU HORIZONS ELECTRONICS CORP.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NU
HORIZONS ELECTRONICS CORP. will be held on Friday, September 19, 1997 at the
Company's Corporate Headquarters, 70 Maxess Road, Melville, New York at 10:00
a.m. (the "Annual Meeting"), for the following purposes:
1.) To elect two directors comprising the Class I Directors to serve until the
2000 Annual Meeting of Stockholders or until their respective successors
have been duly elected and qualified;
2.) To consider and act upon such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of record at the close of business on August 1, 1997
shall be entitled to vote at the Annual Meeting.
IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY IN ORDER THAT YOUR SHARES MAY BE VOTED FOR YOU AS SPECIFIED.
By Order of the Board of Directors,
Richard S. Schuster
Secretary
Dated: Amityville, New York
August 18, 1997
<PAGE>
NU HORIZONS ELECTRONICS CORP.
70 Maxess Road
Melville, New York 11747
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
September 19, 1997
---------------------------
PROXY STATEMENT
The Annual Meeting of Stockholders of NU HORIZONS ELECTRONICS CORP. (the
"Company") will be held on Friday, September 19, 1997 at the Company's Corporate
Headquarters, 70 Maxess Road, Melville, New York at 10:00 a.m. for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. This
statement is furnished in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting and at any and all
adjournments of such meetings.
If a proxy in the accompanying form is duly executed and returned, the
shares represented by such proxy will be voted as specified. Any person
executing the proxy may revoke it prior to its exercise either by letter
directed to the Company or in person at the Annual Meeting.
This Proxy Statement has been mailed on or about August 18, 1997 to all
stockholders as of the Record Date.
VOTING RIGHTS
On August 1, 1997 (the "Record Date"), the Company had outstanding
8,732,299 shares of one class of voting securities, namely shares of Common
Stock, $.0066 par value. Stockholders are entitled to one vote for each share
registered in their names at the closed of business on the Record Date. The
affirmative vote of a majority of the votes cast at the meeting is required for
approval of each matter to be submitted to a vote of the shareholders. For
purposes of determining whether proposals have received a majority vote,
abstentions will not be included in the vote totals and, in instances where
brokers are prohibited from exercising discretionary authority for beneficial
owners who have not returned a proxy (so called "broker non-votes"), those votes
will not be included in the vote totals. Therefore, abstentions and broker non-
votes will have no effect on the vote, but will be counted in the determination
of a quorum.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date certain information
with regard to ownership of the Company's Common Stock by (i) each shareholder
owning of record or beneficially 5% or more of the Company's Common Stock, (ii)
each director individually, and (iii) all officers and directors of the Company
as a group:
Name Shares Percent
---- ------ -------
Paul Durando 27,373 (1)(2) *
Herbert M. Gardner 36,195 (3) *
Harvey R. Blau 30,408 (3) *
Irving Lubman 189,286 (4)(5) 1.7%
Arthur Nadata 447,940 (4)(5)(6) 4.1%
Richard S. Schuster 461,858 (4)(5) 4.3%
All Directors and Officers
as a Group (6 Persons) 1,193,060 11.0%
- ----------------------------
NOTES:
(*) Less than 1% of the Company's outstanding stock.
(1) Includes options exercisable within 60 days for 22,500 shares of common
stock under the Company's Key Employees Stock Option Plan and the 1994
Stock Option Plan.
(2) Includes 4,873 shares of fully vested common stock owned through the
Employees Stock Ownership Plan, which include voting power.
(3) Includes options exercisable within 60 days for 30,000 shares of common
stock under the Company's Outside Director Stock Option Plan.
(4) Includes options exercisable within 60 days for 161,488 shares of common
stock under the Company's Key Employees Stock Option Plan and the 1994
Stock Option Plan.
(5) Includes 14,754 shares of fully vested common stock owned through the
Employees Stock Ownership Plan, which include voting power. These Officers
are also Trustees of the Plan.
(6) Includes 45,398 shares held by his children as to which Mr. Nadata
disclaims beneficial ownership.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors consisting of not less than three nor more than eleven directors,
classified into three classes as nearly equal in number as possible, whose terms
of office expire in successive years. The following table sets forth the
directors of the Company.
Class I Class II Class III
(To Serve Until the (To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of Annual Meeting of
Stockholders in 1997) Stockholders in 1998) Stockholders in 1999)
--------------------- --------------------- ---------------------
Paul Durando Harvey Blau (1) Irving Lubman
Herbert Gardner (1) Richard S. Schuster Arthur Nadata
(1) Member of Compensation and Audit Committees.
The two directors in Class I are to be elected to hold office until the
Annual Meeting of Stockholders in 2000 or until their successors are chosen and
qualified. Shares represented by executed proxies in the form enclosed will be
voted, unless otherwise indicated, for the election as directors of the
aforesaid nominees, unless any such nominee shall be unavailable, in which event
such shares my be voted for a substitute nominee designated by the Board of
Directors. The Board of Directors has no reason to believe that any of the
nominees will be unavailable or, if elected, will decline to serve.
2
<PAGE>
The following information is submitted with respect to the nominees for election
at the Annual Meeting:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- --------------------- -----
<S> <C> <C> <C>
Paul Durando 53 Vice President, Finance 1994
of the Company
Herbert M. Gardner 57 Senior Vice President 1984
Janney Montgomery Scott Inc.
and Chairman of the Board
of Supreme Industries, Inc.
</TABLE>
The following information is submitted with respect to the five directors
who are not nominees at the Annual Meeting:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- -----
<S> <C> <C> <C>
Irving Lubman 58 Chairman of the Board and 1982
Chief Operating Officer
of the Company
Arthur Nadata 51 President and
Chief Executive Officer
of the Company 1982
Richard S. Schuster 48 Vice President and Secretary 1982
of the Company; President of NIC
Components Corp.
Harvey R. Blau 61 Chairman of the Board 1984
of Griffon Corporation and
Aeroflex Incorporated
</TABLE>
PRESENT OCCUPATIONS OF DIRECTORS
IRVING LUBMAN has been Chairman of the Board since October 1982 and Chief
Operating Officer since September 1996. Mr. Lubman was Chief Executive Officer
from October 1982 to September 1996. Mr. Lubman has been actively involved in
electronic components distribution since 1957, when he joined Milgray
Electronics Corp., holding the position of sales manager until 1968. From 1968
through October 1982, when he joined the Company, Mr. Lubman was corporate vice
president of Diplomat Electronics Corp., also a distributor of electronic
components.
ARTHUR NADATA has been President and a Director since October 1982 and
Chief Executive Officer since September 1996. Mr. Nadata was also the Treasurer
of the Company from October 1982 to September 1996. Prior to joining the
Company in October 1982, Mr. Nadata worked for eighteen years for Diplomat
Electronics Corp. in various operational and sales positions of increasing
responsibility, eventually becoming corporate vice president of sales and
marketing.
RICHARD S. SCHUSTER has been Vice President, Secretary and a Director since
October 1982. For the seven years prior to joining the Company in November
1982, Mr. Schuster served as manager of Capar Components Corp., an importer and
distributor of passive components, and a wholly-owned subsidiary of Diplomat
Electronics Corp. For the six years prior to 1975, Mr. Schuster was employed by
International Components Corp., responsible for production, engineering and
sales of imported semiconductor and passive components.
3
<PAGE>
PAUL DURANDO has been Vice President, Finance since joining the Company in
March 1991, Treasurer since September 1996 and has been a Director since
September 1994. Prior to joining the Company in March 1991, Mr. Durando served
for six years as Executive Vice President of Sigma Quality Foods, Inc. From
1977 to 1984, he was Vice President, Operations of the Wechsler Coffee Corp.
Mr. Durando was also associated with Deloitte Haskins & Sells for seven years.
HERBERT M. GARDNER has been a Director of the Company since May 1984. For
more than the past five years, Mr. Gardner has been Senior Vice President of
Janney Montgomery Scott Inc., investment bankers and Underwriter of the
Company's May 1984 public offering. Mr. Gardner is Chairman of the Board of
Supreme Industries Inc. and a director of Transmedia Network, Inc., TGC
Industries Inc., Shelter Components Corp., Hirsch International Corp., The
Western Systems Corp. and Inmark Enterprises, Inc.
HARVEY R. BLAU has been a director of the Company since May 1984. Mr. Blau
has been a practicing attorney in the State of New York since 1961, and is a
member of the law firm of Blau, Kramer, Wactlar & Lieberman, P.C., Jericho, New
York, counsel to the Company. Mr. Blau is Chairman of the Board of Griffon
Corporation and Aeroflex Incorporated and is a Director of Reckson Associates
Realty Corp.
MANAGEMENT
OFFICERS OF THE COMPANY
The Company's executive officers are as follows:
NAME POSITION HELD WITH THE COMPANY
---- ------------------------------
Irving Lubman .................... Chief Operating Officer and Chairman
of the Board
Arthur Nadata..................... President and Chief Executive Officer
Richard S. Schuster............... Vice President and Secretary
Paul Durando...................... Vice President, Finance and
Treasurer
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its Chief
Executive Officer and each of the three remaining executive officers for the
fiscal years ended February 28, 1997, February 29, 1996 and February 28, 1995.
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation (1) Compensation
Securities
Name of Principal Fiscal Underlying All Other (2)
and Position Year Salary Bonus Options Compensation
------------ ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Irving Lubman 1997 $229,893 $446,843 100,000 $ 9,697
COO, Chairman 1996 226,545 586,608 50,000 11,412
of the Board 1995 214,022 275,709 148,650 11,673
Arthur Nadata 1997 $229,893 $446,843 100,000 $13,597
President and 1996 226,545 586,608 50,000 17,497
CEO 1995 214,022 275,709 148,650 9,464
Richard Schuster 1997 $229,893 $446,843 100,000 $11,612
Vice President, 1996 226,545 586,608 50,000 13,053
Secretary and 1995 214,022 275,709 148,650 12,249
President, NIC
Components Corp.
Paul Durando 1997 $130,000 $ 33,514 20,000 $ 1,500
Vice President, 1996 125,000 45,000 20,000 1,250
Finance and Treasurer 1995 115,000 10,000 10,000 850
</TABLE>
- --------------------
(1) No Other Annual Compensation is shown because the amounts of
perquisites and other non-cash benefits provided by the Company do not
exceed the lesser of $50,000 or 10% of the total annual base salary
and bonus disclosed in this table for the respective officer.
(2) The amounts disclosed in this column include the Company's
contributions on behalf of the named executive officer to the
Company's 401(k) retirement plan in amounts equal to a maximum of 1%
of the executive officer's annual salary.
- --------------------
EMPLOYMENT CONTRACTS
The Company has signed employment contracts (the "Contracts"), as amended,
with three of its senior executives for a six year period expiring February 28,
2001. The Contracts specify a base salary of $200,000 for each officer, which
shall be increased each year by the change in the consumer price index, and also
entitles each of the officers to an annual bonus equal to 3.33% (10% in the
aggregate) of the Company's consolidated earnings before income taxes. Benefits
are also payable upon the occurrence of either a change in control of the
Company, as defined, or the termination of the officer's employment, as defined.
In the event the employee terminates his employment within six months after a
change in control of the Company, he will receive a lump sum payment equal to
three quarters of the remaining compensation under his employment agreement.
The contracts also provide for certain payments of the executives' salaries,
performance bonuses and other benefits in the event of death or disability of
the officers for the balance of the period covered by the agreement.
5
<PAGE>
The following table sets forth certain information with respect to stock
options granted to the officers named in the Summary Compensation Table during
the fiscal year ended February 28, 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
% OF AT ASSUMED
TOTAL ANNUAL RATES
OPTIONS EXERCISE OF STOCK PRICE
OPTIONS GRANTED TO PRICE EXPIRATION APPRECIATION FOR
GRANTED(1) EMPLOYEES ($ PER SHARE) DATE ENTIRE TERM (2) (3)
---------- --------- ------------- ---- -------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
I. Lubman 100,000 22.2% 8.13 9/13/01 $225,000 $496,000
A. Nadata 100,000 22.2% 8.13 9/13/01 225,000 496,000
R. Schuster 100,000 22.2% 8.13 9/13/01 225,000 496,000
P. Durando 20,000 4.3% 8.13 9/13/01 45,000 99,200
Increase in market value of the Company's 5% 10%
Common Stock for all stockholders at (to $11.81/share) (to $14.90/share)
assumed annual rates of stock price
appreciation over five-year period
used in the table above (4) $22,353,920 $49,335,800
</TABLE>
- --------------------
(1) Options were granted for a term of five years, subject to earlier
termination on termination of employment. Options become exercisable in
four equal annual installments commencing one year from the date of grant.
(2) These amounts represent assumed rates of appreciation which may not
necessarily be achieved. The actual gains, if any, are dependent on the
market value of the Company's stock at a future date as well as the option
holder's continued employment throughout the vesting period. Appreciation
reported is net of exercise price.
(3) Potential Realizable Value is based on the assumed annual growth rates for
the five-year option term. Annual growth of 5% results in a stock price of
$10.38 per share and 10% results in a price of $13.09 per share for Messrs.
Lubman, Nadata, Schuster and Durando on the shares granted at $8.13. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the stock as well as the option holder's continued
employment throughout the vesting period. There can be no assurance that
the amounts reflected in this table will be achieved. Appreciation reported
is net of exercise price.
(4) These amounts represent the increase in the market value of the Company's
outstanding shares (approximately 8.732 million) as of February 28, 1997,
that would result from the same stock price assumptions used to show the
Potential Realizable Value for the named executive.
- --------------------
6
<PAGE>
The following table sets forth certain information as to each exercise of
stock options during the fiscal year ended February 28, 1997 by the persons
named in the Summary Compensation Table and the fiscal year end value of
unexercised options:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY END (2) AT FY END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED (1) UNEXERCISABLE UNEXERCISABLE
-------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Irving Lubman 24,805 $374,062 111,488 $255,614
187,162 274,702
Arthur Nadata 24,805 371,728 111,488 255,614
187,162 274,702
Richard Schuster 24,805 371,728 111,488 255,614
187,162 274,702
Paul Durando 6,250 62,365 16,250 16,225
35,000 49,688
</TABLE>
- --------------------
(1) Market value less exercise price, before payment of applicable federal or
state taxes.
(2) The share quantities in this column give effect to 5% stock dividends
declared by the Company on March 6, 1993 and a 3
for 2 stock split declared by the Company on September 7, 1993.
Directors who are not employees of the Company receive a fee of $500 for
each Board of Directors or Committee meeting attended. There were three
meetings of the Board of Directors during the fiscal year ended February 28,
1997. Each director attended or participated in all of the meetings of the
Board of Directors and the committees thereof on which he served.
For the fiscal year ended February 28, 1997, there was one meeting of the Audit
Committee and one meeting of the Compensation Committee. The Company's Audit
Committee is involved in discussions with the Company's independent public
accountants with respect to the scope and results of the Company's year-end
audit, the Company's internal accounting controls and the professional services
furnished by the independent auditors to the Company. During fiscal 1997, the
Company had no standing Nominating Committee or any committee performing similar
functions.
7
<PAGE>
KEY EMPLOYEES STOCK INCENTIVE PLAN:
The Company has a Key Employees Stock Incentive Plan ("Plan"), approved by
the stockholders in 1984, as amended in September 1987, which presently covers
712,765 shares of Common Stock. Options are currently outstanding for 223,227
shares and no shares are currently available for grant. The Plan is intended to
provide an additional means of inducing executives and other "key salaried
employees" of the Company (which is defined under Section 422A of the Internal
Revenue Code) to join and remain with the Company by offering them a greater
share of the Company's stock and a greater identification with the Company.
The Board of Directors or a Committee which may be appointed and maintained
by the Board shall have the power to administer the Plan. The Board or
Committee has full power and authority: (i) to designate participants; (ii) to
designate options or any portion thereof as Incentive Stock Options ("ISO");
(iii) to determine the terms and provisions of respective option agreements
(which need not be identical) including, but not limited to, provisions
concerning the time or times when and the extent to which the stock options
("Options") and Stock Appreciation Rights ("SARs") may be exercised and the
nature and duration of restrictions as to transferability or constituting
substantial risk forfeiture; (iv) to accelerate the right of an optionee to
exercise in whole or in part any previously granted ISO including any options
modified to qualify as ISO's; and (v) to interpret the provisions and supervise
the administration of the Plan. The Board has appointed the Compensation
Committee to administer the Plan.
The purchase price of each share subject to an Option or any portion
thereof which has been designated by the Board or the Committee as an ISO shall
not be less than 100% (or 110%, if at the time of grant the optionee owns more
than 10% of the voting stock of the Company) in the case of options designated
as ISOs or 85% in case of options not designated as ISOs, of the fair market
value of such shares on the date the option is granted. In no event shall the
option price be less than the par value of the stock.
1994 STOCK OPTION PLAN:
In September 1994, the Company's stockholders approved the 1994 Stock
Option Plan (the "Plan"), as amended in September 1996, under which key
employees and officers of the company, its subsidiaries and affiliates may be
granted options to purchase an aggregate of 1,100,000 shares of the Company's
Common Stock. The Plan is administered by the Compensation Committee,
consisting of at least two members of the Board of Directors. The Compensation
Committee, subject to provisions in the Plan, has the authority to designate, in
its discretion, which persons are to be granted options, the number of shares
subject to each option, and the period of each option. Each recipient must be
an employee of the Company at the time of grant and throughout the period ending
on the day three months before the date of exercise. Under the terms of the
Plan, the exercise price of the shares subject to each option granted will be
not less than 85% nor more than 100% of the fair market value at the date of
grant, or 110% of such fair market value for options granted to any employee or
director who owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company. Adjustments will
be made to the purchase price in the event of stock dividends, corporate
reorganizations, or similar events. During fiscal 1997, 441,500 options were
granted under the Plan at an exercise price of $8.125. Options are currently
outstanding for 1,019,000 shares and 81,000 options are currently available for
grant. No options to purchase shares granted under the 1994 Plan have been
exercised.
The Compensation Committee of the Board of Directors will have the
responsibility and authority to administer and interpret the provisions of the
Stock Option Plan. The Compensation Committee shall appropriately adjust the
number of shares for which awards may be granted pursuant to the 1994 Stock
Option Plan in the event of reorganization, recapitalization, stock split,
reverse stock split, stock dividend, exchange or combination of shares, merger,
consolidation, rights offering or any change in capitalization. The Board may,
from time to time, amend, suspend or terminate any or all of the provisions of
the Plan, provided that, without the Participant's approval, no change may be
made which would prevent an ISO granted under the Plan from qualifying as an ISO
under Section 422A of the Internal Revenue Code of 1986, as amended (the "Code")
or results in a modification of the ISO under Section 425(h)
8
<PAGE>
of the Code or otherwise alter or impair any right theretofore granted to any
Participant; and further provided that, without the consent and approval of the
holders of a majority of the outstanding shares of Common Stock of the Company
present at that meeting at which a quorum exists, neither the Board not the
Committee may make any amendment which (i) changes the class of persons eligible
for options; (ii) increases (except as provided under Section 1.6 of the 1994
Stock Option Plan) the total number of shares or other securities reserved for
issuance under the 1994 Stock Option Plan; (iii) decreases the minimum option
prices stated in Section 2.2 of the 1994 Stock Option Plan (other than to change
the manner of determining Fair Market Value to conform to any then applicable
provision of the Code or any regulation thereunder); (iv) extends the expiration
date of the 1994 Stock Option Plan, or the limit on the maximum term of Options;
or (v) withdraws the administration of the 1994 Stock Option Plan from a
committee consisting of two or more members, each of whom is a Disinterested
Person. With the consent of the Participant affected thereby, the Committee may
amend or modify any outstanding Option in any manner not inconsistent with the
terms of the 1994 Stock Option Plan.
OUTSIDE DIRECTOR STOCK OPTION PLAN:
In September 1994, the Company's stockholders approved the Outside
Directors Stock Option Plan (the "Director Plan") which covers 150,000 shares of
the Company's Common Stock. The primary purposes of the Director Plan are to
attract and retain well-qualified persons for service as directors of the
Company and to provide such outside directors with the opportunity to increase
their proprietary interest in the Company's continued success and further align
their interests with the interests of the stockholders of the Company through
the grant of options to purchase shares of the Company's Common Stock.
All directors of the Company who are not employees of the Company, of which
there are presently two, are eligible to participate in the Director Plan. None
of the non-employee directors are eligible to participate in any of the other
compensation plans of the Company.
The Board of Directors of the Company may amend the Director Plan from time to
time in such manner as it may deem advisable. The provisions of the Director
Plan relating to (i) which directors shall be granted Options; (ii) the amount
of Shares subject to Options granted; (iii) the price at which Shares subject to
Options may be purchased; and (iv) the timing of grants of Options shall not be
amended more than once every six (6) months, other than to comport with changes
in the Code or the Employee Retirement Income Security Act of 1974, as amended.
No amendment to the Director Plan shall adversely affect any outstanding Option,
however, without the consent of the Optionee that holds such Option.
The Compensation Committee of the Board of Directors has the responsibility
and authority to administer and interpret the provisions of the Director Plan.
The Compensation Committee shall appropriately adjust the number of shares for
which awards may be granted pursuant to the Director Plan in the event of
reorganization, recapitalization, stock split, reverse stock split, stock
dividend, exchange or combination of shares, merger, consolidation, rights
offering, or any change in capitalization.
Under the Director Plan, each non-employee Director ("Outside Director")
received options to purchase 10,000 shares of Common Stock at a price of $8.25
per share (the price of shares of Common Stock on June 1, 1994) and on the June
1 of each subsequent year each Outside Director has or will be granted options
to purchase 10,000 shares of Common Stock at a price equal to the closing price
of the Common Stock on a national securities exchange upon which the Company's
stock is listed or the average of the mean between the last reported "bid" and
"asked" prices if the Common Stock is not so listed for the five business days
immediately preceding the date of grant. Options awarded to each Outside
Director vest in three equal installments over a period of two years, subject to
forfeiture under certain conditions and shall be exercisable by the Outside
Director upon vesting.
9
<PAGE>
SUMMARY OF FISCAL 1997 STOCK OPTION GRANTS:
During fiscal 1997, the Company granted options to purchase 441,500 shares
at a price of $8.125 per share. Messrs. Lubman, Nadata and Schuster each
received options to purchase 100,000 shares at a price of $8.125 per share. Mr.
Durando received options to purchase 20,000 shares at price of to $8.125 per
share.
EMPLOYEE STOCK OWNERSHIP PLAN:
In January 1987, the Company adopted an Employee Stock Ownership Plan
("ESOP" or "Plan"), which covers substantially all of the Company's employees.
The ESOP is managed by three Trustees, Messrs. Lubman, Nadata and Schuster (the
"Trustees"), who vote the securities held by the Plan (other than securities of
the Company which have been allocated to employees' accounts).
The annual contributions to the Plan are to be in such amounts as the Board
of Directors in its sole discretion shall determine. Each employee who
participates in the Plan has a separate account and the annual contribution by
the Company to an employee's account is not permitted to exceed the lesser of
$30,000 (or such other limit as may be the maximum permissible pursuant to the
provisions of Section 415 of the Internal Revenue Code and Regulations issued
hereunder) or 25% of such employee's annual compensation, as defined under the
Plan. No contributions are required of, nor shall any be accepted from, any
employee.
All contributions to the Plan are invested in the Company's securities
(except for temporary investments), the Trustees having the right to purchase
the Company's securities on behalf of employees. The Trustees are considered
the stockholder for the purpose of exercising all owners' and stockholders'
rights, with respect to the Company's securities held in the Plan, except for
voting rights which insure to the benefit of each employee who can vote all
shares held in his account, even if said shares are not vested. Vesting is
based upon an employee's years of service, employees generally becoming fully
vested after six years.
Benefits are payable to employees at retirement or upon death, disability
or termination of employment, with payments commencing no later than sixty days
following the last day of the Plan year in which such event occurred. Subject
to the right of the employee to demand payment in the form of the Company's
Common Stock, all benefits are payable in cash or in Common Stock, at the
discretion of the Trustees.
The Trustees are empowered to borrow funds for the purpose of purchasing
the Company's securities. The securities so purchased are required to be held
in an acquisition indebtedness account, to be released and made available for
reallocation as principal is repaid. In May 1988 the Company, on behalf of the
ESOP, entered into a revolving credit agreement with its bank which provides for
a $2,000,000 revolving line of credit at a percentage of the bank's prime rate
until April 8, 2000. Direct borrowings under this line of credit are payable in
forty-eight equal monthly installments commencing with the fiscal period
subsequent to such borrowings. At February 28, 1997, the ESOP owned 341,017
shares at an average price of approximately $2.45 per share.
401(k) SAVINGS PLAN
The Company sponsors a retirement plan intended to be qualified under
Section 401(k) of the Code. All non-union employees over age 21 who have been
employed by the Company for at least six months are eligible to participate in
the plan. Employees may contribute to the plan on a tax deferred basis up to
15% of their total annual salary, but in no event more than the maximum
permitted by the Code ($9,500 in calendar 1996). Company contributions are
discretionary. Effective with the plan year ended February 28, 1995, the
Company has elected to make matching contributions at the rate of $.25 per
dollar contributed by each employee up to a maximum of 1% of an employee's
salary vesting at the cumulative rate of 20% per year of service starting one
year after commencement of
10
<PAGE>
service and, accordingly, after five years of any employee's service with
Company, matching contributions by the Company are fully vested. As of February
28, 1997, approximately 211 employees had elected to participate in the plan.
For the fiscal year ended February 28, 1997, the Company contributed
approximately $111,585 to the plan, of which $6,000 was a matching contribution
of $1,500 for each of Mr. Lubman, Mr. Nadata, Mr. Schuster and Mr. Durando.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consisted during fiscal 1997 of
Messrs. Gardner (Chairman) and Blau. Mr. Gardner is Senior Vice President of
Janney Montgomery Scott, Inc., investment bankers, which acted as placement
agent in connection with the Company's $15 million private placement of
convertible subordinated notes in August 1994. Mr. Blau is a partner in the law
firm of Blau, Kramer, Wactlar & Lieberman, P.C. The Company has utilized, and
anticipates that it will continue to utilize, the services of Blau, Kramer,
Wactlar & Lieberman, P.C. as its general counsel.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Compensation Committee
Report on Executive Compensation" and "Company Stock Performance" will not be
deemed to be filed or to be proxy soliciting material or incorporated by
reference in any prior or future filings by the Company under the Securities Act
of 1933 or the Securities Exchange Act of 1934.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers generally is
determined by the Compensation Committee of the Board of Directors. Each member
of the Compensation Committee is a Director who is not an employee of the
Company or any of its affiliates. The following report with respect to certain
compensation paid or awarded to the Company's executive officers during fiscal
1997 is furnished by the Compensation Committee.
GENERAL POLICIES
The Company's compensation programs are intended to enable the Company to
attract, motivate, reward and retain management talent required to achieve
aggressive corporate objectives in a rapidly changing industry, and thereby
increase stockholder value. It is the Company's policy to provide incentives to
its senior management to achieve both short-term and long-term objectives and to
reward exceptional performance and contributions to the development of the
Company's business. To attain these objectives, the Company's executive
compensation program includes a competitive base salary, coupled with, with
respect to certain executives, a substantial cash bonus which is "at risk" based
on the Company's earnings.
Many of the Company's employees, including its executive officers, also are
eligible to be granted stock options periodically in order to more directly
align their interests with the long-term financial interests of the Company's
stockholders.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE
The Compensation Committee annually establishes, subject to any applicable
employment agreements, the salaries which will be paid to the Company's
executive officers during the coming year. In setting salaries, the Board of
Directors takes into account several factors, including competitive compensation
data, the extent to which an individual may participate in the stock option plan
maintained by the Company and its affiliates, and qualitative factors bearing on
an individual's experience, responsibilities, management and leadership
abilities, and job performance.
Stock options are granted to key employees, including the Company's
executive officers, by the Compensation Committee of the Board of Directors
under the Plans. Among the Company's executive officers, the number of shares
subject to to options granted to each individual generally depends upon his or
her base salary and the level of that officer's management responsibility.
11
<PAGE>
During fiscal 1997, 10,000 options were granted to each outside director
under the Company's Outside Director Stock Option Plan. Options to purchase
100,000 shares each were granted to Messrs. Lubman, Nadata and Schuster and
options to purchase 20,000 shares were granted to Mr. Durando under the
Company's 1994 Stock Option Plan. Bonuses were paid to three executive
officers, as set forth in the Summary Compensation Table, pursuant to the terms
of their employment agreements with the Company and on a discretionary basis to
Paul Durando, the Company's Vice President, Finance and Director. This latter
bonus was determined to be appropriate by the Compensation Committee in light of
Mr. Durando's contributions to the Company's performance, his base salary level
and the level of his management responsibilities.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Company has entered into an employment agreement with Arthur Nadata,
the Company's President and Chief Executive Officer, pursuant to which Mr.
Nadata receives a base salary of $200,000, adjusted for CPI index increases, and
an incentive bonus equal to three and thirty-three one-hundreths percent (3.33%)
of the Company's consolidated pre-tax earnings. In this way, Mr. Nadata's cash
compensation is tied directly to the Company's profitability. In fiscal 1997,
the Company granted Mr. Nadata's options to purchase 100,000 shares of Common
Stock at an exercise price of $8.125 per share, which represented the market
price of the Common Stock on the date of grant. In this way, Mr. Nadata's
interest are directly aligned with the interests of the Company's stockholders.
The Compensation Committee
Herbert Gardner
Harvey Blau
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent of a registered
class of the Company's equity securities ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC") and the National Association of Securities
Dealers (the "NASD"). These Reporting Persons are required by SEC regulation to
furnish the Company with copies of all Forms 3, 4 and 5 they file with the SEC
and NASD.
Based solely on the Company's review of the copies of the forms it has
received, the Company believes that all Reporting Persons complied on a timely
basis with all filing requirements applicable to them with respect to
transactions during fiscal year 1997, except that Irving Lubman, Chairman of the
Board; Arthur Nadata, President and Chief Executive Officer and Director;
Richard Schuster, Vice President, Secretary and Director and Paul Durando, Vice
President Finance, Treasurer and Director, each failed to timely file one Form 4
relating to the vesting of shares of Common Stock under the Company's Employees
Stock Ownership Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended February 28, 1997, the Company received an aggregate
$2,889,449 in respect to various electronic components sold to Procomponents,
Inc. and PCI Manufacturing, two corporations in which Mitchell Lubman, Mr.
Lubman's brother, is an officer and owns greater than ten percent equity
interest.
For the fiscal year ended February 28, 1997, the Company received an
aggregate $647,992 in respect of various electronic components sold to Brevan
Electronics, a corporation in which Stuart Schuster, Mr. Schuster's brother, is
an officer and owns a greater than ten percent equity interest.
12
<PAGE>
COMPANY STOCK PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
stockholder return on its Common Stock for a five year period (February 28, 1991
to February 28, 1997) with the cumulative total return of the NASDAQ Market
Index (which includes the Company) and a peer group of companies selected by the
Company for purposes of the comparison. Dividend reinvestment has been assumed
and, with respect to companies in the Peer Group, the returns of each such
company have been weighted to reflect relative stock market capitalization.
[LINE GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG NU HORIZONS ELECTRONICS CORP., NASDAQ MARKET INDEX AND PEER GROUP **
<CAPTION>
Measurement period
(Fiscal year Covered) NU Horizons Peer Group NASDAQ Market Index
- --------------------- ----------- ---------- -------------------
<S> <C> <C> <C>
Measurement PT -
3/01/92 $ 100.00 $ 100.00 $ 100.00
FYE 2/28/93 $ 206.06 $ 138.44 $ 100.16
FYE 2/28/94 $ 451.84 $ 190.04 $ 127.62
FYE 2/28/95 $ 381.38 $ 182.63 $ 121.85
FYE 2/29/96 $ 795.49 $ 245.88 $ 168.25
FYE 2/28/97 $ 470.93 $ 278.59 $ 201.94
</TABLE>
Assumes $100 Invested on March 1, 1992 in Nu Horizons Electronics Common Stock,
NASDAQ market Index and Peer Group. Peer group includes All American
Semiconductor, Arrow Electronics Inc., Avnet Inc.,Bell Industries Inc., Bell
Microproducts, Inc., Jaco Electronics Inc., Kent Electronics Corp., Marshall
Industries, Pioneer Standard Electronics, Repron Electronics, Inc., Sterling
Electronics Corp., Western Microtechnology and Wyle Laboratories Inc.
* Total Return Assumes Reinvestment of Dividends
** Fiscal Year Ending February 28 and 29.
13
<PAGE>
INDEPENDENT AUDITORS
Lazar, Levine & Company LLP acted as the Company's independent auditors for
the fiscal year ended February 28, 1997 and has been selected by the Board of
Directors, upon the recommendation of the Audit Committee, to continue to act as
the Company's independent auditors in the Company's 1998 fiscal year.
A representative of Lazar, Levine & Company LLP plans to be present at the
Annual Meeting with the opportunity to make a statement if he desires to do so,
and will be available to respond to appropriate questions.
FINANCIAL STATEMENTS
A copy of the Company's Annual Report of Stockholders for the fiscal year
ended February 28, 1997 has been provided to all stockholders as of the Record
Date. Stockholders are referred to the report for financial and other
information about the Company, but such report is not incorporated in this proxy
statement and is not a part of the proxy soliciting material.
ADDITIONAL INFORMATION
The Board of Directors does not have a standing nominating committee. The
Board of Directors does not intend to present to the meeting any matters not
referred to in the form of proxy. If any proposal not set forth in this Proxy
Statement should be presented for action at the meeting, and is a matter which
should come before the meeting, it is intended that the shares represented by
proxies will be voted with respect to such matters in accordance with the
judgment of the persons voting them.
The cost of soliciting proxies in the accompanying form has been or will be
paid by the Company. In addition to solicitations by mail, arrangements may be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to their principals, and the Company may reimburse them for
their expenses in so doing. To the extent necessary in order to assure
sufficient representation, officers and regular employees of the Company may
request the return of proxies personally, by telephone or telegram. The extent
to which this will be necessary depends entirely upon how promptly proxies are
received, and stockholders are urged to send in their proxies without delay.
Stockholder proposals with respect to the Company's next Annual Meeting of
Stockholders must be received by the Company no later than June 1, 1998 to be
considered for inclusion in the Company's next Proxy Statement.
A copy of the Annual Report has been mailed to every stockholder of record.
The Annual Report is not considered proxy soliciting material.
By Order of the Board of Directors,
Richard S. Schuster
Secretary
Dated: Melville, New York
August 18, 1997
14
<PAGE>
NU HORIZONS ELECTRONICS CORP.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING - SEPTEMBER 19, 1997
The undersigned hereby appoints Arthur Nadata and Richard S. Schuster or
either of them, attorneys and Proxies with full power of substitution in each of
them, in the name and stead of the undersigned to vote as Proxy all the stock of
the undersigned in NU HORIZONS ELECTRONICS CORP., a Delaware corporation, at the
Annual Meeting of Stockholders scheduled to be held September 19, 1997 and any
adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
1. Election of the following nominees, as set forth in the proxy statement:
[_] FOR all nominees listed below (except as marked to the contrary below)
PAUL DURANDO
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
HERBERT GARDNER
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
--------------------------------------------------
2. To consider and act upon such other business as may properly come before the
meeting or any adjournment thereof.
(Continued and to be signed on reverse side)
<PAGE>
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING, SHAREHOLDERS MAY WITHHOLD THE VOTE FOR ONE OR MORE
NOMINEE(S) BY WRITING THE NOMINEE(S) NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE
PROPOSAL SET FORTH ON THE REVERSE HEREOF.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
Dated: , 1997
[L.S.]
_____________________________
[L.S.]
_____________________________
(Note: Please sign exactly as your name appears hereon.
Executors, administrators, trustees, etc. should so
indicate when signing, giving full title as such. If
signer is a corporation, execute in full corporate name
by authorized officer. If shares are held in the name of
two or more persons, all should sign.)
<PAGE>
[DESCRIPTION OF ART TO COME]
NU HORIZONS ELECTRONICS CORP.
1997 ANNUAL REPORT
<PAGE>
IN 1997, NU HORIZONS
ELECTRONICS CORP., relocated
its headquarters to a new
80,000 square foot facility in
Melville, Long Island, NY.
Left to Right: [PHOTO]
Irving Lubman, Chairman
and COO, Arthur Nadata,
President and CEO and
Richard Schuster, Vice
President and Secretary,
pictured in front of the new
corporate headquarters and
distribution facility.
1997
milestones
. New Corporate Headquarters
. New major distributor agreements
. One of America's 100 fastest growing
companies
<PAGE>
<TABLE>
<CAPTION>
SELECTED financial data
- ----------------------------------------------------------------------------------------------------------------
For The Year Ended
- ----------------------------------------------------------------------------------------------------------------
FEBRUARY February February February February
28, 1997 29, 1996 28, 1995 28, 1994 28, 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $216,612,707 $202,803,184 $130,251,554 $92,418,038 $60,507,620
Gross profit on sales 48,488,124 48,201,148 30,913,305 24,950,478 15,390,022
Gross profit percentage 22.4% 23.8% 23.7% 27.0% 25.4%
Income before provision for
income taxes 11,921,256 15,799,592 7,444,147 8,549,534 2,564,335
Net income 7,073,560 9,396,301 4,421,823 5,044,225 1,489,658
Earnings per common share:
Primary $ .78 $ 1.14 $ .56 $ .65 $ .20
Fully diluted $ .69 $ .97 $ .52 $ .65 $ .19
<CAPTION>
FEBRUARY February February February February
28, 1997 29, 1996 28, 1995 28, 1994 28, 1993
- ----------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Working capital $ 51,941,472 $ 57,954,434 $ 36,328,941 $23,792,512 $17,523,791
Total assets 74,783,314 75,459,586 51,972,606 37,448,040 26,083,687
Long-term debt 15,523,483 27,094,030 20,580,613 9,339,195 8,079,590
Shareholders' equity 46,950,735 37,617,703 22,541,916 18,051,985 12,679,681
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
CORPORATE profile
- --------------------------------------------------------------------------------
Nu Horizons Electronics Corp., listed on the NASDAQ National Market (NUHC),
together with its wholly owned subsidiary Nu Horizons/Merit Electronics Corp.,
is a leading distributor of high technology active components including memory
chips, microprocessors, digital and linear circuits, diodes and transistors, to
a wide variety of commercial original equipment manufacturers. Nu Horizons is a
franchised distributor of components manufactured by many major semiconductor
manufacturers.
NIC Components Corp. is a wholly-owned subsidiary of Nu Horizons and is the
exclusive North American sales and marketing outlet for the extensive line of
passive components manufactured by Nippon Industries Co., Ltd., a leading
Japanese component manufacturer. NIC has also established several other
manufacturing associations as well as a nationwide network of distributors and
is "designed-in" as a qualified source of passive components by over seven
thousand original equipment manufacturers.
Nu Horizons International Corp., another wholly-owned subsidiary, is a worldwide
export distributor of electronic components.
Nu Visions Manufacturing, Inc., located in Springfield, Massachusetts, a wholly-
owned subsidiary of the Company, is a contract assembler of circuit boards, and
related electromechanical devices for various OEMs.
CUSTOMER mix
----------------------------------
[PIE CHART]
Segment Percentage
------- ----------
Military 3%
Medical 6%
Industrial 19%
Export 8%
Contract Manufacturing 18%
Consumer 10%
Computer 5%
Communications 29%
Other 2%
<PAGE>
We believe that our strategy for growth encompasses the elements required for
continued success. Efforts made toward geographical expansion over the last
several years have resulted in our becoming a national distributor with nineteen
sales offices, two stocking locations (East and West coasts), over four hundred
employees and three additional sales locations planned for fiscal 1998.
LETTER
TO SHAREHOLDERS
Calendar 1996 proved to be a difficult period for the electronics component
industry in general and for the distribution segment in particular. While unit
shipments of semiconductors continued to grow at double digit rates, the well
publicized oversupply at the manufacturer level resulted in a sharp decline in
average selling prices as well as reduced profit margins, which in turn caused a
shortfall in substantial volume growth.
Nu Horizons was not immune to these overall market developments. The Company did
manage to achieve a 6% growth rate for fiscal 1997 with sales of $216.6 million,
$13.8 million greater than the $202.8 million registered for fiscal 1996.
Earnings, however, suffered a decline from the record achieved in the prior year
due mainly to continuing pressures on gross margin levels. Net income for fiscal
1997 was $7,073,560 ($.69 per share) down from $9,396,301 $(.97 per share) for
fiscal 1996.
On a more positive note, our balance sheet continued to strengthen as a result
of our operating performance. At year end, the Company enjoyed a current ratio
of 5.2:1 with working capital of approximately $51.9 million. Shareholder equity
increased to a record $46.9 million as compared to $37.6 million for the prior
year.
Nu Visions Manufacturing Inc. , our sub-contract manufacturing subsidiary,
experienced its first profitable fiscal year with operating income of
approximately $600,000 and pre tax income of approximately $275,000. This
milestone provides the company with a renewed confidence and expectation level
for future growth and profitability in this segment of the business.
Despite the difficulties encountered in the semiconductor segment in fiscal 1997
and early fiscal 1998, we continue to believe that substantial new opportunities
will present themselves to companies that are prepared to take advantage of
them.
Nu Horizons experienced growth of over 40 percent in each of the fiscal years
ended February, 1993, 1994, 1995 and 1996, with sales rising from $42.2 million
in fiscal 1993 to $202.8 million in fiscal 1996. This accelerated growth placed
substantial strains on the Company's physical infrastructure
2
<PAGE>
[GRAPHIC DEPICTING A MAP OF THE CONTINENTAL UNITED STATES]
NU HORIZONS
BRANCH LOCATIONS
- -----------------------
EAST COAST
. Massachusetts
Boston and Springfield
. New York
Melville (Corporate Offices) and
Rochester
. New Jersey
Mt. Laurel (Philadelphia) and
Pine Brook
. Ohio
Cleveland
. Maryland
Columbia
. North Carolina
Raleigh
. Georgia
Atlanta
. Alabama
Huntsville
. Florida
Ft. Lauderdale and Orlando
MIDWEST
. Minnesota
Minneapolis
. Texas
Austin and Dallas
WEST COAST
. California
Irvine, Los Angeles, San Diego and
San Jose
BRANCHES PLANNED
- -------------------
. Chicago, Illinois
. Portland, Oregon
. Denver, Colorado
as well as its management and staffing requirements. While fiscal 1997 proved to
be disappointing in terms of financial performance we used this period to re-
invest in our physical distribution capabilities, re-position and revitalize our
staffing functions and re-evaluate marketing strategies.
Nu Horizons' corporate headquarters, in Amityville, NY, served the company well
since January of 1986 but had become inadequate to sustain the growth expected
in the future. In May of 1996 the company contracted for a new 80,000 square
foot corporate headquarters and distribution center, located in Melville, NY,
consisting of 30,000 square feet of office space and a 50,000 square foot fully
automated, state of the art, distribution facility designed to take the company
well into the 21st Century. Planning, design and installation of equipment
culminated with the relocation of our corporate offices in the spring of 1997.
Our second distribution and branch facility in San Jose, California also became
a candidate for upgrading and modernization. The facility was doubled in size
from 12,000 to 24,000 square feet and the distribution segment of the building
is in the process of being automated at this time.
In summary, fiscal 1997 was a challenging period for the Company and the
Industry in general. During this period our goals were to maintain a focus on
long term results by enhancing the Company's ability to sustain future growth
from a position of strength in both sales and physical distribution
capabilities. We believe those goals have been achieved.
/s/Irving Lubman
Irving Lubman
Chairman of the Board
/s/Arthur Nadata
Arthur Nadata
President and CEO and Director
/s/Richard Schuster
Richard Schuster
Vice President, Secretary and Director
3
<PAGE>
[PHOTOGRAPH OF AN OFFICE WORK AREA AND EMPLOYEES]
OUR NEW 30,000 SQUARE FOOT SALES, MARKETING, FINANCE AND
EXECUTIVE OFFICE FACILITIES SIGNIFICANTLY
ENHANCE THE COMPANY'S DISTRIBUTION SUPPORT CAPABILITIES.
Electronic components have become pervasive in an ever widening array of
products so numerous they cannot all be listed here. This trend, coupled with
the increasing use of computers and interactive media applications, has resulted
in growth for the industry.
Successive record sales for Nu Horizons Electronics Corp. over the past
five years reflect the result of carefully developed operating strategies
designed to maximize the Company's participation in this impressive industry
development.
First and foremost is the Company's ability to aggressively react to the
complete product and technical needs of its customers. Furthermore, strong
franchised product lines, technical expertise, a physical presence nationwide,
diversity and depth of inventory and a knowledge of specific product
availability or satisfactory alternatives have rewarded Nu Horizons with an
exceptional reputation among end-users.
This is management's business philosophy, diligently employed throughout
many years in the industry, and one that will continue to be the cornerstone of
the Company's future operating policy.
Nu Horizons Electronics Corp. is divided into five operating divisions. Nu
Horizons and its wholly owned subsidiary, Nu Horizons/Merit Electronics Corp.,
distribute a wide variety of semiconductor (active) components to commercial
original equipment manufacturers (OEM's). NIC Components Corp., a wholly owned
subsidiary, is the exclusive outlet in North America for Nippon Industries Co.,
Ltd.'s line of passive components. Combined, the product mix of these three
divisions represent nearly two-thirds of the electronic components that are
available throughout the industry. Nu Horizons International Corp., another
wholly owned subsidiary, markets electronic products directly to overseas
customers. Nu Visions Manufacturing, Inc., a wholly owned subsidiary, provides
complete electronic industrial contract manufacturing services.
NU HORIZONS
Nu Horizons and Nu Horizons/Merit distribute semiconductor components
throughout the United States with sales facilities in nineteen locations and
stocking facilities on both the East and West coasts. The Company intends to
continue its aggressive sales and marketing approach in fulfilling its
commitment to become a leading national distributor through the continued
expansion of the Company's sales force, engineering staff, product support
personnel and geographic presence.
Nu Horizons has franchise agreements with over forty manufacturers
covering both commodity type semiconductors as well as specialty niche advanced
technology products emphasizing low power, high speed and small packages. The
Company's franchise agreements authorize it to sell all or part of the products
4
<PAGE>
of a manufacturer on a non-exclusive basis. A franchise agreement may be
cancelled by either party upon written notice.
NU HORIZONS INTERNATIONAL
Nu Horizons International Corp. is an export distributor of active
electronic components. International's sales are made through authorized sales
representatives and by in-house sales personnel.
NIC COMPONENTS CORP.
NIC Components Corp. is a leading supplier of passive components, including
capacitors, resistors, magnetics, circuit protection devices and diodes. NIC's
brand of product has achieved recognition for quality, technology and
competitive pricing. NIC effectively uses a combination of in-house salespeople,
independent sales representatives and approximately 50 distributors to service
thousands of OEM's. By providing catalogs,samples, engineering kits and
personalized technical support to engineers at the end-users' design centers,
over 10,000 companies have put NIC on their approved vendors' roster. New and
improved NIC products are introduced through the Internet, trade publications,
newsletters and our many professional sales rep organizations. Many of our
specialty products are being purchased by Fortune 1000 companies, many of which
are recognized names in computer communications, controls, instrumentation,
security apparatus and appliances. NIC has a direct presence in New York,
Florida, California and Washington, including an East Coast and West Coast
warehouse. The introduction of higher density memory devices and higher speed
circuits will increase the volume of passive components needed to support these
new enhanced products. As a result of the introduction of these products, NIC as
an established supplier, should have excellent prospects for continued steady
growth.
NU VISIONS MANUFACTURING
Nu Visions Manufacturing, Inc., located in a state-of-the-art facility in
Springfield, Massachusetts, provides complete turnkey or kitted assembly
services to various OEM's. Surface mount circuit board assembly equipment
includes state-of-the-art automatic screening, pick and place and reflow
convection oven equipment.
Automatic through-hole circuit board insertion equipment includes parts
sequencing, DIP insertion, axial lead component insertion, dual wave soldering
and aqueous cleaning.
In addition, full GenRad test and repair facilities offer our customers
quality and reliability in their finished goods.
Nu Visions offers its contract assembly services to all of Nu Horizon's
existing distribution customers, as well as separate contract assembly
customers. As a result, this is expected to facilitate increasing our market
penetration to all segments of the electronics industry.
NU HORIZONS' INVESTMENT IN A 50,000 SQUARE FOOT SOPHISTICATED,
STATE-OF-THE-ART, MATERIAL HANDLING AND DISTRIBUTION FACILITY FURTHER POSITIONS
THE COMPANY AS A WORLD CLASS ELECTRONIC COMPONENT DISTRIBUTOR.
[PHOTOGRAPH OF THE FACILITY'S INTERIOR]
5
<PAGE>
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 ("OEM's") 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 OEM's 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" or "Nu Visions") 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 February 28, 1997 and February 29, 1996; (ii) Statements of income for the
twelve month periods ended February 28, 1997, February 29, 1996 and February 28,
1995 (iii) Statements of cash flows for the twelve month periods ended February
28, 1997, February 29, 1996 and February 28, 1995; (iv) Consolidated changes in
shareholders' equity for the twelve month periods ended February 28, 1997,
February 29, 1996 and February 28, 1995.
FISCAL YEAR 1997 VERSUS 1996
RESULTS OF OPERATIONS:
Net sales for the year ended February 28, 1997 aggregated $216,612,707 as
compared to $202,803,184 for the year ended February 29, 1996, an increase of
6.8%. Management attributes this moderate increase in sales for the period
entirely to the core semiconductor distribution business which experienced
excess inventory levels at the semiconductor manufacturing (supplier) level
which resulted in reduced unit pricing and lower overall sales volume.
Management believes that this situation is temporary and is now in the process
of correction; however, no assurance can be given in this regard.
Gross profit margin as a percentage of net sales was approximately 22.4%
for the year ended February 28, 1997 as compared to 23.8% for the year ended
February 29, 1996. Management attributes this lower profit margin primarily to
a general downward correction of selling prices in the marketplace, for both
semiconductors and passive components, during the period and a greater volume of
larger orders at lower gross profit margins. Although the Company expects that
these conditions will not continue, as long as current market trends prevail, no
assurances can be given in this regard.
Operating expenses increased by $4,496,530 to $34,873,910 for the year
ended February 28, 1997 from $30,377,380 for the year ended February 29, 1996,
an increase of approximately 14.8%. The dollar increase in operating expenses
was due to increases in the following expense categories: Approximately
$3,740,000 or approximately 83% of the increases were for personnel related
costs - commissions, salaries, travel and fringe benefits. The remaining
increase of approximately $756,000 or approximately 17% of the total increment
is a result of increases in various other operating expenses. Toward the latter
part of fiscal 1996 and early in fiscal 1997, the Company decided to pursue a
policy of upgrading and enlarging its sales and sales support staff to support
anticipated future growth in the near as well as more distant future. increased
sales levels in the second, third and fourth quarters of fiscal 1997 did not
meet expectations. The Company continues to believe in this strategy for long
term growth and expects market conditions to undergo a correction in the near
future although no assurances can be given in this regard.
Interest expense decreased by $325,625 from $2,026,717 for the year ended
February 29, 1996 to $1,701,092 for the year ended February 28, 1997. This
decrease was primarily due to the interest on higher average levels of bank debt
being more than offset by the lower amount of outstanding subordinated
convertible debt (see Note 7 of the Consolidated Financial Statements).
- ------------------------------------------------------------
INTEREST COSTS For The Fiscal Years Ended
February February
28, 1997 29, 1996
- ------------------------------------------------------------
Revolving Bank Credit $1,116,340 $ 916,226
Sub. Convert. Notes 584,752 1,110,491
---------- ----------
Total Interest Expense $1,701,092 $2,026,717
- ------------------------------------------------------------
Net income for the year ended February 28, 1997 was $7,073,560or $.69 per
share, fully diluted, as compared to $9,396,301 or $.97 per share fully diluted,
for the year ended February 29, 1996. The decrease in earnings is primarily due
to increased operating expenses and the lack of commensurate increased sales
volume.
FISCAL YEAR 1996 VERSUS 1995
RESULTS OF OPERATIONS:
Net sales for the year ended February 29, 1996 aggregated $202,803,184 as
compared to $130,251,554 for the year ended February 28, 1995, an increase of
56%. Management attributes the increase in sales for the period to the
following reasons: Approximately $3,303,000 or 4.6% of the overall increase
resulted from incremental sales at the Nu Visions subsidiary. Approximately
$12,807,000 or 17.6% of the overall increase resulted from incremental sales
relative to the new California segment of the distribution business which the
Company owned for ten months during fiscal 1995. The balance of the overall
increase, approximately $56,441,000 or 77.8%, resulted from incremental sales
generated by the East Coast core distribution business and NIC passive component
business as a whole, through greater market penetration and continued economic
strength in the electronic component industry.
Gross profit margin as a percentage of net sales was 23.8% for the year
ended February 29, 1996 as compared to 23.7% for the year ended February 28,
1995. Management attributes the relative stabilization of profit margins during
these periods primarily to a settling effect in the marketplace subsequent to
the downward adjustment in calendar 1994. Although the Company expects that
these conditions will continue, as long as current market trends prevail, no
assurances can be given in this regard.
Operating expenses increased by $8,283,222 to $30,377,380 for the year
ended February 29, 1996 from $22,094,158 for the year ended February 28, 1995,
an increase of approximately 37%. As a percentage of net sales, operating
expenses declined from 17% in fiscal 1995 to 15% in fiscal 1996, as sales grew
more rapidly than operating expenses. The dollar increase in operating expenses
was due to increases in the following expense categories: Approximately
$7,319,000 or approximately 88% of the increases were for personnel related
costs - commissions, salaries, travel and fringe benefits. These increases were
required to produce the increased sales which were achieved during the past
fiscal year. The remaining increase of approximately $964,000 or
6
<PAGE>
approximately 12% of the total increment is a result of increases in various
other operating costs to support the increase in net sales for the period.
Interest expense increased by $639,698 from $1,387,019 for the year ended
February 28, 1995 to $2,026,717 for the year ended February 29, 1996. This
increase was primarily due to higher average borrowings resulting from an
increase in the Company's inventory and accounts receivable required to support
the 56% increase in sales volume mentioned above. See the liquidity and capital
resources discussion below.
- ----------------------------------------------------------------
INTEREST COSTS For The Fiscal Years Ended
February February
29, 1996 28,1995
- ----------------------------------------------------------------
Revolving Bank Credit $ 916,226 $ 716,707
Sub. Convert. Notes 1,110,491 670,312
---------- ----------
Total Interest Expense $2,026,717 $1,387,019
- ----------------------------------------------------------------
Net income for the year ended February 29, 1996 was $9,396,301 or $.97 per
share, fully diluted, as compared to $4,421,823 or $.52 per share fully diluted,
for the year ended February 28, 1995. The increase in earnings is primarily due
to increased sales volume net of higher operating expenses.
FISCAL YEAR 1997 VERSUS 1996
LIQUIDITY AND CAPITAL RESOURCES:
The Company ended its 1997 fiscal year with working capital and cash
aggregating approximately $51,941,000 and $946,000, respectively at February 28,
1997 as compared to approximately $57,954,000 and $874,000 respectively, at
February 29, 1996. The Company's current ratio at February 28, 1997 was 5.2:1.
The Company believes that its financial position at February 28, 1997 will
enable it to take advantage of any new opportunities that may arise.
On April 8, 1996, the Company entered into an amended and restated
unsecured revolving line of credit, which currently provides for maximum
borrowings of $25,000,000 through April 8, 2000. At February 28, 1997,
$8,000,000 was outstanding under this line of credit as compared to $17,300,000
at February 29, 1996. On May 23, 1997, subsequent to the balance sheet date,
the Company entered into a new unsecured revolving line of credit with new
banks, which currently provides for maximum borrowings of $35,000,000 through
May 23, 2001.
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. The
Company has registered, under the Securities Act of 1933, for the resale by the
holders thereof, 117,666 shares of common stock, representing the number of
shares of common stock obtainable by such holders upon conversion of $1,059,000
of the outstanding principal amount of such notes. As of February 28, 1997,
$7,941,000 of the notes have been converted into 882,333 shares of common stock
and $7,059,000 principal amount of subordinated convertible notes remained
outstanding and are due in increments of $2,353,000 on August 31, 2000, 2001 and
2002. 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 resources provided by 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.
OTHER:
Except for historical information contained herein, the matters set forth
above are forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ from those in the
forward-looking statements. Potential risks and uncertainties include such
factors as the level of business and consumer spending for electronic products,
the amount of sales of the Company's products, the competitive environment
within the electronics industry, the ability of the Company to continue to
expand its operations, the level of costs incurred in connection with the
Company's expansion efforts, economic conditions in the semiconductor industry
and the financial strength of the Company's customers and suppliers. Investors
are also directed to consider other risks and uncertainties discussed in
documents filed by the Company with the Securities and Exchange Commission.
REPORT OF MANAGEMENT
The management of Nu Horizons Electronics Corp. is responsible for the
preparation of the consolidated financial statements in accordance with
generally accepted accounting principles and for the integrity and objectivity
of all the financial data included in this annual report. In preparing the
financial statements, management makes informed judgements and estimates as to
the expected effects of events and transactions currently being reported.
To meet this responsibility, the Company maintains a system of internal
accounting controls to provide reasonable assurance that assets are safeguarded,
and that transactions are properly executed and recorded. The system includes
policies and procedures, and reviews by officers of the Company.
The Board of Directors, through its Audit Committee, is responsible for
determining that management fulfills its responsibility with respect to the
Company's financial statements and the system of internal accounting controls.
The Audit Committee is composed solely of outside directors. The Committee
meets periodically and, when appropriate, separately with representatives of the
independent accountants and officers of the Company to monitor the activities of
each.
Lazar, Levine & Company LLP, the independent accountants, have been
selected by the Board of Directors to examine the Company's financial
statements. Their report appears herein.
/s/Paul Durando /s/Arthur Nadata
PAUL DURANDO ARTHUR NADATA
Vice President, Finance and President and
Treasurer Chief Executive Officer
7
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED balance sheets NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------
FEBRUARY February
28, 1997 29, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (including time deposits) $ 946,084 $ 874,267
Accounts receivable-net of allowance for
doubtful accounts of $2,192,079 and $1,509,802
for 1997 and 1996, respectively 30,636,645 30,005,182
Inventories 29,764,570 36,808,915
Prepaid expenses and other current assets 2,903,269 1,013,923
- --------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 64,250,568 68,702,287
PROPERTY, PLANT, AND EQUIPMENT - NET (NOTES 3 AND 6) 7,550,356 3,439,804
OTHER ASSETS
Costs in excess of net assets acquired-net 1,909,256 2,066,180
Other assets (Note 4) 1,073,134 1,251,315
- --------------------------------------------------------------------------------------------------------
$74,783,314 $75,459,586
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,931,500 $ 7,898,757
Accrued expenses 4,186,802 2,254,878
Current portion of long-term debt (Note 6) 190,794 373,930
Income taxes (Note 9) - 220,288
- --------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 12,309,096 10,747,853
- --------------------------------------------------------------------------------------------------------
Long Term Liabilities
Deferred income taxes (Note 9) 222,148 115,577
Revolving credit line (Notes 5 and 15) 8,000,000 17,300,000
Long-term debt (Note 6) 242,335 678,453
Subordinated convertible notes (Note 7) 7,059,000 9,000,000
- --------------------------------------------------------------------------------------------------------
TOTAL LONG TERM LIABILITIES 15,523,483 27,094,030
- --------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 5, 10, 11 AND 12)
SHAREHOLDERS' EQUITY (Note 8):
Preferred stock, $1 par value, 1,000,000
shares authorized; none issued or outstanding - -
Common stock, $.0066 par value, 20,000,000
shares authorized; 8,732,299 and
8,423,137 shares issued and outstanding
for 1997 and 1996, respectively 57,633 55,593
Additional paid-in capital 18,938,984 16,821,502
Retained earnings 28,234,018 21,160,458
- --------------------------------------------------------------------------------------------------------
47,230,635 38,037,553
Less: loan to ESOP (Notes 6 and 10) 279,900 419,850
- --------------------------------------------------------------------------------------------------------
46,950,735 37,617,703
- --------------------------------------------------------------------------------------------------------
$74,783,314 $75,459,586
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED statements of income NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
For The Year Ended
- -------------------------------------------------------------------------------------------------------------------------
February February February
28, 1997 29, 1996 28, 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $216,612,707 $202,803,184 $130,251,554
- -------------------------------------------------------------------------------------------------------------------------
Cost and Expenses:
Cost of sales (Note 12) 168,124,583 154,602,036 99,338,249
Operating expenses 34,873,910 30,377,380 22,094,158
Interest expense 1,701,092 2,026,717 1,387,019
Interest income (8,134) (2,541) (12,019)
- -------------------------------------------------------------------------------------------------------------------------
204,691,451 187,003,592 122,807,407
- -------------------------------------------------------------------------------------------------------------------------
Income Before Provision For Income Taxes 11,921,256 15,799,592 7,444,147
Provision for income taxes (Note 9 ) 4,847,696 6,403,291 3,022,324
- -------------------------------------------------------------------------------------------------------------------------
Net Income $ 7,073,560 $ 9,396,301 $ 4,421,823
- -------------------------------------------------------------------------------------------------------------------------
Earnings Per Share (Note 2i):
Primary $ .78 $1.14 $ .56
- -------------------------------------------------------------------------------------------------------------------------
Fully diluted $ .69 $ .97 $ .52
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED statements of changes in shareholders' equity NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Paid-In Retained Loan To Shareholders'
Shares Stock Capital Earnings ESOP Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
February 28, 1994 7,713,634 $50,910 $10,699,407 $ 7,342,334 $ (40,666) $18,051,985
Exercise of stock options 18,417 122 27,320 -- -- 27,442
Repayment from ESOP -- -- -- -- 40,666 40,666
Net income -- -- -- 4,421,823 -- 4,421,823
- -------------------------------------------------------------------------------------------------------------------------
Balance at
February 28, 1995 7,732,051 51,032 10,726,727 11,764,157 -- 22,541,916
Exercise of stock options 24,420 161 99,175 -- -- 99,336
Conversion of subordinated
convertible notes 666,666 4,400 5,995,600 -- -- 6,000,000
Loan to ESOP -- -- -- -- (559,800) (559,800)
Repayment from ESOP -- -- -- -- 139,950 139,950
Net income -- -- -- 9,396,301 -- 9,396,301
- -------------------------------------------------------------------------------------------------------------------------
Balance at
February 29, 1996 8,423,137 55,593 16,821,502 21,160,458 (419,850) 37,617,703
EXERCISE OF STOCK OPTIONS 93,495 617 177,905 -- -- 178,522
CONVERSION OF SUBORDINATED
CONVERTIBLE NOTES 215,667 1,423 1,939,577 -- -- 1,941,000
REPAYMENT FROM ESOP -- -- -- -- 139,950 139,950
NET INCOME -- -- -- 7,073,560 -- 7,073,560
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT
FEBRUARY 28, 1997 8,732,299 $57,633 $18,938,984 $28,234,018 $(279,900) $46,950,735
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
10
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED statements of cash flows NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
For The Year Ended
- -------------------------------------------------------------------------------------------------------------------------
February February February
28, 1997 29, 1996 28, 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Cash received from customers $ 215,279,744 $ 192,949,945 $ 125,991,043
Cash paid to suppliers and employees (197,159,875) (196,045,525) (124,980,742)
Interest received 8,134 2,541 18,991
Interest paid (1,701,092) (2,026,717) (1,387,019)
Income taxes paid (1,677,850) (6,034,790) (5,770,418)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 14,749,061 (11,154,546) (6,128,145)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (4,936,512) (1,055,558) (602,746)
Purchase of stock for ESOP -- (559,800) --
Purchase of Merit Electronics -- Net of cash acquired -- -- (5,753,022)
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (4,936,512) (1,615,358) (6,355,768)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings under revolving credit line 21,150,000 65,000,000 66,090,000
Repayments under revolving credit line (30,450,000) (52,100,000) (69,790,000)
Principal payments of long-term debt (619,254) (413,884) (468,917)
Proceeds from exercise of employee stock options 178,522 99,336 27,442
Proceeds from long-term debt -- 559,800 --
Proceeds from subordinated debt -- -- 15,000,000
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (9,740,732) 13,145,252 10,858,525
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 71,817 375,348 (1,625,388)
Cash and cash equivalents, beginning of year 874,267 498,919 2,124,307
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 946,084 $ 874,267 $ 498,919
- -------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH FROM BY OPERATING ACTIVITIES:
Net income $ 7,073,560 $ 9,396,301 $ 4,421,823
- -------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 1,238,967 1,169,816 886,235
Bad debts 701,500 635,000 442,500
Contribution to ESOP (compensation) 139,950 139,950 40,666
Changes in assets and liabilities:
(Increase) in accounts receivable (1,332,963) (9,853,239) (4,260,511)
Decrease (increase) in inventories 7,044,345 (14,553,370) (3,566,701)
(Increase) decrease in prepaid expenses and other current assets (1,889,346) 623,688 (1,183,805)
(Increase) in other assets (77,902) (77,969) (1,277,857)
Increase (decrease) in accounts payable and accrued expenses 1,964,667 1,666,050 (354,525)
(Decrease) increase in income taxes (220,288) 212,545 (1,625,045)
Increase (decrease) in other current liabilities -- (43,686) 34,361
(Decrease) increase in deferred taxes 106,571 (469,632) 314,714
- -------------------------------------------------------------------------------------------------------------------------
Total adjustments 7,675,501 (20,550,847) (10,549,968)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities $ 14,749,061 $ (11,154,546) $ (6,128,145)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NON-CASH FINANCING ACTIVITIES
During the year ended February 29, 1996 the subordinated debt-holder (see
Note 7) converted $6,000,000 of debt into 666,666 shares of the Company's common
stock.
During the year ended February 28, 1997, the subordinated debt-holder (see
Note 7) converted $1,941,000 of debt into 215,667 shares of the Company's common
stock.
See notes to consolidated financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NOTES to consolidated financial statements NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 1997
</TABLE>
1. ORGANIZATION
- --------------------------------------------------------------------------------
Nu Horizons Electronics Corp. and its subsidiaries, NIC Components Corp.,
and Nu Horizons International Corp., were incorporated in the State of New York
on October 22, 1982, November 8, 1982, and December 8, 1986, respectively. Nu
Visions Manufacturing, Inc. was incorporated in the State of Massachusetts on
August 9, 1991. On April 15, 1987, Nu Horizons Electronics Corp. was
reincorporated in the State of Delaware. On April 18, 1994, Nu Horizons/Merit
Electronics Corp. was incorporated in the State of Delaware, for the express
purpose of acquiring the business of Merit Electronics, Inc. All companies are
wholesale distributors throughout the United States or export distributors of
electronic components, except for Nu Visions Manufacturing, which is a contract
assembler of circuit boards and various electromechanical devices.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Nu Horizons
Electronics Corp., (the "Company") and its wholly-owned subsidiaries, NIC
Components Corp. ("NIC"), Nu Horizons/Merit Electronics Corp. ("NUM"), Nu
Visions Manufacturing, Inc. ("NUV") and Nu Horizons International Corp.
("International"). All material intercompany balances and transactions have
been eliminated.
b. USE OF ESTIMATES:
In preparing financial statements in accordance with generally accepted
accounting principles, management makes certain estimates and assumptions, where
applicable, that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as reported amounts of revenues and expenses during the
reporting period. While actual results could differ from those estimates,
management does not expect such variances, if any, to have a material effect on
the financial statements.
c. CONCENTRATION OF CREDIT RISK/FAIR VALUE:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable.
The Company maintains, at times, deposits in federally insured financial
institutions in excess of federally insured limits. Management attempts to
monitor the soundness of the financial institution and believes the Company's
risk is negligible.
Concentrations with regard to accounts receivable are limited due to the
Company's large customer base.
The carrying amount of cash, accounts receivable, accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
items. The carrying amount of long-term debt also approximates fair value since
the interest rates on these instruments approximate market interest rates.
d. INVENTORIES:
Inventories, which consist primarily of goods held for resale, are stated
at the lower of cost (first-in, first-out method) or market.
e. DEPRECIATION:
Depreciation is provided using the straight-line method as follows:
- ----------------------------------------------------
Building and improvements 25 years
Office equipment 5 years
Furniture and fixtures 5 years
Computer equipment 5 years
- ----------------------------------------------------
Leasehold improvements are amortized over the term of the
lease. Maintenance and repairs are charged to operations and major improvements
are capitalized. Upon retirement, sale or
other disposition, the associated cost and accumulated deprecia
tion are eliminated from the accounts and any resulting gain or loss
is included in operations.
f. INCOME TAXES:
The Company has elected to file a consolidated federal income tax return
with its subsidiaries. The Company utilizes Financial Accounting Standards
Board Statement No. 109 (SFAS 109) "Accounting for Income Taxes". SFAS 109
requires use of the asset and liability approach of providing for income taxes.
Deferred income taxes are provided for on the timing differences for certain
items which are treated differently for tax and financial reporting purposes.
These items include depreciation of fixed assets, inventory capitalization
valuations and the recognition of bad debt expense.
International has elected under Section 995 of the Internal Revenue Code to
be taxed as an "Interest Charge Disc". Based upon these rules, income taxes are
paid when International distributes its income to the parent company. Until
distributions are made, the parent company pays interest only on the deferred
tax liabilities. International's untaxed income at February 28, 1997
approximates $2,400,000.
g. GOODWILL:
Costs in excess of net assets acquired are being amortized on a straight-
line basis over fifteen years. As of February 28, 1997, accumulated
amortization of goodwill aggregated $444,618.
The Company periodically reviews the valuation and amortization of goodwill
to determine possible impairment by comparing the carrying value to the
undiscounted future cash flows of the related assets, in accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of.
h. CASH AND CASH EQUIVALENTS:
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
i. EARNINGS PER COMMON SHARE:
Primary earnings 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. All shares held by the Employee Stock Ownership Plan
(see Note 10) are included in outstanding shares. Fully diluted earnings per
common share has been computed assuming conversion of all dilutive stock options
and convertible debt.
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NOTES to consolidated financial statements (continued) NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 1997
</TABLE>
The following average shares were used for the computation of primary and fully
diluted earnings per share:
1997 1996 1995
- --------------------------------------------------------------------------------
Primary 9,089,772 8,236,249 7,847,677
Fully diluted 10,818,859 10,410,699 9,279,297
j. RECLASSIFICATIONS:
Certain prior year information has been reclassified to conform to the
current year's reporting presentation.
k. STOCK-BASED COMPENSATION:
SFAS No. 123 "Accounting for Stock Based Compensation", effective January
1, 1996, requires the Company to either record compensation expense or to
provide additional disclosures with respect to stock awards and stock option
grants made after December 31, 1994. The accompanying Notes to Consolidated
Financial Statements include the disclosures required by SFAS No. 123. No
compensation expense is recognized pursuant to the Company's stock option plans
under SFAS No. 123 which is consistent with prior treatment under APB No. 25.
3. PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
Property, plant and equipment, which is reflected at cost,
consists of the following:
1997 1996
- --------------------------------------------------------------------------------
Land $ 266,301 $ 266,301
Building and improvements 1,747,930 1,747,930
Furniture, fixtures and office equipment 5,791,946 2,037,183
Computer equipment 2,476,185 2,278,582
Assets held under capitalized
leases 919,834 919,834
Leasehold improvements 984,146 --
- --------------------------------------------------------------------------------
12,186,342 7,249,830
Less: accumulated depreciation
and amortization 4,635,986 3,810,026
- --------------------------------------------------------------------------------
$ 7,550,356 $3,439,804
- --------------------------------------------------------------------------------
Depreciation expense including depreciation of capitalized leases for the
years ended February 28, 1997, February 29, 1996 and February 28, 1995
aggregated $825,960, $756,808 and $615,356, respectively.
The Company has entered into a contract to sell the land and building which
served as its corporate headquarters. The sales price aggregates approximately
$1,175,000 and the Company expects to close the transaction in July 1997.
4. OTHER ASSETS
- --------------------------------------------------------------------------------
Other assets as of February 28, 1997 and February 29, 1996 consists of the
following:
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Net cash surrender value -- life insurance $ 869,473 $ 793,537
Debt issue costs -- net (Note 7) 151,359 407,443
Other 52,302 50,335
- --------------------------------------------------------------------------------
$1,073,134 $1,251,315
- --------------------------------------------------------------------------------
5. REVOLVING CREDIT LINE:
- --------------------------------------------------------------------------------
In February, 1988 the Company entered into an agreement with its bank,
which as amended, provided for a $25,000,000 unsecured revolving line of credit
at the bank's prime rate (8.25 % at February 28, 1997) with payments of interest
only through April 8, 2000. Direct borrowings under lines of credit were
$8,000,000 and $17,300,000 at February 28, 1997 and February 29, 1996,
respectively. The credit agreement contained various covenants including a
restriction on the payment of cash dividends without the bank's consent. As of
the end of the fiscal year, the Company met all of the required covenants.
6. LONG TERM DEBT:
- --------------------------------------------------------------------------------
Long-term debt consists of the following:
1997 1996
- --------------------------------------------------------------------------------
Mortgage payable to bank, due in quarterly
installments of $26,552 plus interest at
88% of the bank's prime rate (8.25% at
February 28, 1997) $ -- $ 398,276
Term loan payable to bank, due in monthly
installments of $9,321 plus interest at
the bank's prime rate to March 31, 2000 354,182 447,388
Various capitalized equipment leases,
interest rates ranging from 6.78% to 8.38%,
maturing in 1997 and 1998. Gross lease
obligations aggregate $85,134 and $34,748,
for each of the next two fiscal years,
with interest thereon aggregating $40,935 78,947 206,719
- --------------------------------------------------------------------------------
433,129 1,052,383
Less: current portion 190,794 373,930
- --------------------------------------------------------------------------------
$ 242,335 $ 678,453
- --------------------------------------------------------------------------------
The mortgage payable was collateralized by land, building, and
substantially all furniture and fixtures. The term loan payable is secured by a
pledge of the shares of the common stock of the Company purchased with the
proceeds of the loans (See Note 10). Other equipment loans are secured by the
specific equipment acquired.
Long-term debt of the Company matures as follows:
1998 $ 190,794
1999 111,852
2000 111,852
2001 18,631
- --------------------------------------------------------------------------------
$ 433,129
- --------------------------------------------------------------------------------
7. 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.
As of February 28, 1997, $7,941,000 of the notes have been converted into
882,333 shares of common stock and $7,059,000 principal amount of subordinated
convertible notes remained outstanding which are due in increments of $2,353,000
on August 31, 2000, 2001 and 2002.
13
<PAGE>
8. Stock Options
- --------------------------------------------------------------------------------
Stock options granted to date under the Company's Key Employees Stock
Incentive Plan and the 1994 Stock Option Plan generally expire five years after
date of grant and become exercisable in four equal annual installments
commencing one year from date of grant. Stock options granted under the
Company's Outside Director Stock Option Plan expire ten years after the date of
grant and become exercisable in three equal annual installments on the date of
grant and the succeeding two anniversaries thereof.
A summary of options granted and related information for the two years
ended February 28, 1997 is as follows:
Weighted Average
Options Exercise Price
- --------------------------------------------------------------------------------
Outstanding, February 28, 1995 717,415 $ 6.46
Granted 323,000 9.33
Exercised (24,420) 4.07
Canceled (23,023) 2.86
--------
Outstanding, February 29, 1996 992,972 7.54
Weighted average fair value of options
granted during the year $4.50
-----
Granted 471,500 8.56
Exercised (93,495) 1.91
Canceled (68,750) 10.36
----------
Outstanding, February 28, 1997 1,302,227 8.16
----------
Weighted average fair value of options
granted during the year $4.39
-----
Options exercisable:
February 28, 1995 13,305 $ 5.96
February 29, 1996 159,945 7.35
February 28, 1997 381,377 7.86
Exercise prices for options outstanding as of February 28, 1997 ranged from
$2.11 to $14.83. The weighted-average remaining contractual life of these
options is approximately 5 years. Outstanding options at February 28, 1997 are
held by 44 individuals.
The Company applies APB 25 and related Interpretations in accounting for
the Option Plan. Accordingly, no compensation cost has been recognized for the
Option Plan. Had compensation cost for the Option Plan been determined using
the fair value based method, as defined in SFAS 123, the Company's net earnings
and earnings per share would have been adjusted to the pro forma amounts
indicated below:
1997 1996
- --------------------------------------------------------------------------------
Net earnings:
As reported $7,073,560 $9,396,301
Pro forma 7,051,451 7,996,865
Primary earnings per share:
As reported $.78 $1.14
Pro forma .78 .97
Fully diluted earnings per share:
As reported $.69 $ .97
Pro forma .68 .83
The fair value of each option grant was estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions for 1997 and 1996, respectively: expected volatility of 48.3% and
39.8%, respectively; risk free interest rate of 6.5%; and expected lives of 3 to
5 years.
The effects of applying SFAS 123 in the above pro forma disclosures are not
indicative of future amounts as they do not include the effects of awards
granted prior to 1995. Additionally, future amounts are likely to be affected
by the number of grants awarded since additional awards are generally expected
to be made at varying amounts.
9. INCOME TAXES:
- --------------------------------------------------------------------------------
The provision for income taxes is comprised of the following:
FEBRUARY February February
28, 1997 29, 1996 28, 1995
- --------------------------------------------------------------------------------
Current:
Federal $4,213,767 $5,082,876 $2,436,377
State and local 900,193 1,107,016 461,816
Deferred:
Federal (221,867) 178,923 120,704
State (44,397) 34,476 3,427
$4,847,696 $6,403,291 $3,022,324
The components of the net deferred income tax liability, pursuant to SFAS
109, as of February 28, 1997 and February 29, 1996 are as follows:
1997 1996
- --------------------------------------------------------------------------------
Deferred Tax Assets:
Accounts Receivable $ 679,600 $ 614,188
Inventory 162,400 146,448
- --------------------------------------------------------------------------------
Total Deferred Tax Assets 842,000 760,636
- --------------------------------------------------------------------------------
Deferred Tax Liabilities:
Fixed Assets (112,148) (8,136)
Income of Interest Charge DISC (952,000) (868,077)
- --------------------------------------------------------------------------------
Total Deferred Tax Liabilities (1,064,148) (876,213)
- --------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ (222,148) $(115,577)
- --------------------------------------------------------------------------------
The following is a reconciliation of the maximum statutory federal tax rate
to the Company's effective tax rate:
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 34.0%
State and local taxes 7.0 6.5 6.4
Other (1.3) (1.0) .2
- --------------------------------------------------------------------------------
Effective tax rate 40.7% 40.5% 40.6%
- --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS:
On January 13, 1987, the Company's Board of Directors approved the
termination of the Company's pension plan and approved the adoption of an
employee stock ownership plan (ESOP) to replace the terminated pension plan.
The ESOP covers all eligible employees and contributions are determined by the
Board of Directors. Contributions are in the form of cash which is utilized to
acquire the Company's common stock for the benefit of participating employees.
Contributions to the Plan for the years ended February 28, 1997, February 29,
1996 and February 28, 1995 aggregated $139,950, $139,950 and $40,666,
respectively.
In May 1988, the Company, on behalf of the ESOP, entered into an additional
credit agreement with a bank which provides for a $2,000,000 revolving line of
credit at the bank's prime rate until April 8, 2000. Direct borrowings under
this line of credit are payable in forty-eight equal monthly installments
commencing with the fiscal period subsequent to such borrowings. At February 28,
1997, the ESOP owned 360,810 shares at an average price of approximately
14
<PAGE>
<TABLE>
<S> <C>
NOTES to consolidated financial statements (continued) NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 1997
</TABLE>
$2.52 per share. At February 28, 1997, direct borrowings outstanding under the
ESOP line of credit were $354,182.
In January 1991, the Company also established a 401-K profit sharing plan
to cover all eligible employees. The Company's contributions to the plan are
discretionary, but may not exceed 1% of compensation. Contributions to the plan
for the three years ended February 28, 1997 were $111,585, $90,243 and $61,519,
respectively.
11. COMMITMENTS
(a) The Company signed employment contracts (the "Contracts"), as amended,
with three of its senior executives for a six year period expiring February 28,
2001. The Contracts specify a base salary of $200,000 for each officer, which
shall be increased each year by the change in the consumer price index, and also
entitles each of the officers to an annual bonus equal to 3.33% (10% in the
aggregate) of the Company's consolidated earnings before income taxes. Benefits
are also payable upon the occurrence of either a change in control of the
Company, as defined, or the termination of the officer's employment, as defined.
The contracts also provide for certain payments of the executive's salaries,
performance bonuses and other benefits in the event of death or disability of
the officer for the balance of the period covered by the agreement.
(b) In December 1996, the Company leased an approximately 80,000 square
foot facility in Melville, Long Island, New York to serve as its executive
offices and main distribution center. In April 1997, subsequent to the balance
sheet date, the Company moved its executive offices to the facility and is in
the process of moving its distribution operation with a completion date of June
1997. The lease term is from December 17, 1996 to December 16, 2008 at an
annual base rental of $601,290 and provision for a 4% annual escalation in each
of the last ten years of the term. The Company also leases certain other
office, warehouse and other properties which leases include various escalation
clauses, renewal options, etc. Aggregate minimum rental commitments under
noncancellable operating leases are as follows:
- ------------------------------------------
Fiscal 1998 $1,354,547
Fiscal 1999 1,315,188
Fiscal 2000 1,262,713
Fiscal 2001 1,171,665
Fiscal 2002 878,190
Thereafter 5,691,328
- ------------------------------------------
Rent expense was $712,548, $587,079 and $450,201 for each of the three years in
the period ending February 28, 1997.
(c)The Company has signed a four year consulting agreement with the former
owner of Merit Electronics which commenced on April 29, 1994. The agreement
provides for the consultant to perform advisory services to Nu Horizons/Merit
and to receive consulting fees of approximately $665,000 per annum.
12. MAJOR SUPPLIERS
- --------------------------------------------------------------------------------
For the year ended February 28, 1997 the Company purchased inventory from
one supplier that was in excess of 10% of the Company's total purchases.
Purchases from this supplier aggregated approximately $21,385,000.
For the year ended February 29, 1996 the Company purchased inventory from
two suppliers that were each in excess of 10% of the Company's total purchases.
Purchases from these suppliers aggregated approximately $33,505,000.
For the year ended February 28, 1995, the Company purchased inventory from
one supplier that was in excess of 10% of the Company's total purchases.
Purchases from this supplier aggregated approximately $12,400,000.
13. BUSINESS SEGMENT INFORMATION
- --------------------------------------------------------------------------------
The Company's operations have been classified into two business segments:
Electronic component distribution and industrial contract manufacturing. The
component distribution segment includes the resale of active and passive
components to various original equipment manufacturers and distributors. The
industrial contract manufacturing segment consists of a subsidiary which
provides electronic circuit board and harness assembly services to original
equipment manufacturers. This segment began operations in September 1991.
Summarized financial information by business segment for fiscal 1997 and
1996 is as follows:
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Net sales:
Electronic Component Distribution $206,417,667 $195,929,559
Industrial Contract Manufacturing 10,195,040 6,873,625
- --------------------------------------------------------------------------------
$216,612,707 $202,803,184
- --------------------------------------------------------------------------------
Operating income (loss):
Electronic Component Distribution $ 13,019,791 $ 18,038,688
Industrial Contract Manufacturing 594,423 (214,920)
- --------------------------------------------------------------------------------
$ 13,614,214 $ 17,823,768
- --------------------------------------------------------------------------------
Total assets:
Electronic Component Distribution $ 70,577,102 $ 71,653,755
Industrial Contract Manufacturing 4,206,212 3,805,831
- --------------------------------------------------------------------------------
$ 74,783,314 $ 75,459,586
- --------------------------------------------------------------------------------
Depreciation and amortization:
Electronic Component Distribution $ 978,684 $ 920,827
Industrial Contract Manufacturing 260,283 248,989
- --------------------------------------------------------------------------------
$ 1,238,967 $ 1,169,816
- --------------------------------------------------------------------------------
Capital expenditures (including capital leases):
Electronic Component Distribution $ 4,566,196 $ 659,163
Industrial Contract Manufacturing 370,316 396,395
- --------------------------------------------------------------------------------
$ 4,936,512 $ 1,055,558
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Ended
February November August May
28, 1997 30, 1996 31, 1996 31, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $54,198,484 $53,958,639 $50,783,044 $57,672,540
- ---------------------------------------------------------------------------------------------------------------
Cost of Sales 42,071,313 41,894,971 39,411,875 44,746,424
- ---------------------------------------------------------------------------------------------------------------
Other Operating Expenses 9,517,539 9,138,969 9,103,283 8,807,077
- ---------------------------------------------------------------------------------------------------------------
Provision for Income Taxes 1,084,131 1,182,805 916,658 1,664,102
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 1,525,501 $ 1,741,894 $ 1,351,228 $ 2,454,937
- ---------------------------------------------------------------------------------------------------------------
Primary Earnings Per Share $.17 $.20 $.15 $.27
- ---------------------------------------------------------------------------------------------------------------
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 8,896,514 8,887,610 8,974,574 9,130,000
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Month Period Ended
February November August May
29, 1996 30, 1995 31, 1995 31, 1995
- ---------------------------------------------------------------------------------------------------------------
Net Sales $52,928,682 $55,066,644 $50,091,805 $44,716,053
- ---------------------------------------------------------------------------------------------------------------
Cost of Sales 40,017,844 41,983,941 38,192,979 34,407,272
- ---------------------------------------------------------------------------------------------------------------
Other Operating Expenses 8,737,554 8,244,334 7,841,646 7,578,022
- ---------------------------------------------------------------------------------------------------------------
Provision for Income Taxes 1,648,131 2,004,226 1,651,272 1,099,662
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 2,525,153 $ 2,834,143 $ 2,405,908 $ 1,631,097
- ---------------------------------------------------------------------------------------------------------------
Primary Earnings Per Share $.29 $.34 $.30 $.21
- ---------------------------------------------------------------------------------------------------------------
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 8,874,371 8,310,144 8,009,707 7,852,309
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
15. SUBSEQUENT EVENTS:
- --------------------------------------------------------------------------------
On May 23, 1997, subsequent to the balance sheet date, the Company entered
into a new unsecured revolving line of credit with two banks, which currently
provides for maximum borrowings of $35,000,000 at either (i) the lead bank's
prime rate or (ii) LIBOR plus 57.5 to 112.5 basis points depending on the ratio
of the Company's debt to its earnings before interest, taxes, depreciation and
amortization, at the option of the Company, through May 23, 2001.
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Nu Horizons Electronics Corp.
Amityville, New York
We have audited the accompanying consolidated financial statements of Nu
Horizons Electronics Corp. and subsidiaries. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nu Horizons
Electronics Corp. and subsidiaries at February 28, 1997 and February 29, 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended February 28, 1997 in conformity with generally
accepted accounting principles.
LAZAR, LEVINE & COMPANY LLP
New York, New York
May 23, 1997
16
<PAGE>
MARKET for the company's common equity
and related stockholder matters
- --------------------------------------------------------------------------------
(a) The Company's common stock is traded on the NASDAQ National Market
System under the symbol ONUHCO. The following table sets forth, for the periods
indicated, the high and low closing prices for the Company's common stock, as
reported by the NASDAQ National Market System.
High Low
- -----------------------------------------------------------
Fiscal Year 1996:
First Quarter $ 9.38 $ 6.50
Second Quarter 11.50 7.13
Third Quarter 17.25 10.50
Fourth Quarter 18.88 13.00
- -----------------------------------------------------------
Fiscal Year 1997:
First Quarter 17.25 12.63
Second Quarter 14.75 7.25
Third Quarter 11.13 7.88
Fourth Quarter 10.00 7.88
- -----------------------------------------------------------
Fiscal Year 1998:
First Quarter (Through May 19, 1997) 9.25 6.75
(b) As of May 19, 1997, the Company's common stock was owned by
approximately 4,500 holders of record.
(c) The Company has never paid a cash dividend on its common stock. In
addition, the Company's prior revolving credit line agreement prohibited,
without the bank's consent, the payment of cash dividends. The Company's
existing revolving credit line agreement only permits dividends of up to 25% of
the Company's consolidated net income.
CORPORATE Information
- --------------------------------------------------------------------------------
OFFICERS & DIRECTORS
IRVING LUBMAN
Chairman of the Board of Directors and
Chief Operating Officer
ARTHUR NADATA
President, Chief Executive Officer and Director
RICHARD S. SCHUSTER
Vice President, Secretary, Director and President --
NIC Components Corp.
PAUL DURANDO
Vice President, Finance, Treasurer and Director
HARVEY R. BLAU
Director
Attorney at Law -- Blau, Kramer, Wactlar & Lieberman P.C.
Chairman of the Board -- Griffon Corporation and Aeroflex Incorporated
HERBERT M. GARDNER
Director
Senior Vice President -- Janney Montgomery Scott Inc.
Chairman of the Board -- Supreme Industries, Inc.
ROBERT VALONE
Vice President -- Sales
MARTIN DRUCKER
Vice President -- Sales -- Nu Horizons International Corp.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street, New York, New York 10005
CORPORATE COUNSEL
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Turnpike, Jericho, New York 11753
INDEPENDENT AUDITORS
Lazar, Levine & Company LLP
350 Fifth Avenue, New York, New York 10118
ANNUAL MEETING
The Annual Meeting of Shareholders will be held on
September 19, 1997 at 10:00 AM at the Company's Corporate Headquarters,
70 Maxess Rd., Melville, New York
FORM 10-K
The Company's report on Form 10-K as filed with the Securities and Exchange
Commission is available upon written request to:
Office of the Secretary, Nu Horizons Electronics Corp.
70 Maxess Rd., Melville, New York, 11747
STOCK TRADED:
NASDAQ National Market (NUHC)
<PAGE>
NU HORIZONS Electronics Corp.
- --------------------------------
70 Maxess Road
Melville, New York 11747
(516) 396-5000
Web: http//www.nuhorizons.com/
