<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended Commission file number
May 31, 2000 1-8798
------------------------------------- -----------------------------------
Nu Horizons Electronics Corp.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter
Delaware 11-2621097
------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
70 Maxess Road, Melville, New York 11747
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(631) 396-5000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO___
-
Indicated the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - Par Value $ .0066 10,379,254
------------------------------------- -----------------------------------
Class Outstanding Shares
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PART I. Financial Information Page(s)
<S> <C> <C>
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets -
May 31, 2000 (unaudited) and February 29, 2000 3.
Consolidated Condensed Statements of Income (unaudited) -
Three Months Ended May 31, 2000 and 1999 4.
Consolidated Condensed Statements of Cash Flows (unaudited) -
Three Months Ended May 31, 2000 and 1999 5. - 6.
Notes to Interim Consolidated Condensed Financial
Statements (unaudited) 7. - 8.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9. - 11.
PART II. Other Information 12.
SIGNATURES 13.
INDEX TO EXHIBITS 14.
Exhibit 11 - Computation of Earnings per Common Share
Exhibit 27 - Financial Data Schedule
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
-ASSETS-
--------
<TABLE>
<CAPTION>
MAY FEBRUARY
31, 2000 29, 2000
------------------ ------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash (including time deposits) $ 843,335 $ 1,496,805
Accounts receivable-net of allowance for doubtful
accounts of $4,254,342 and $3,447,072 for May 31,
2000 and February 29, 2000, respectively 77,407,211 64,709,037
Inventories 93,135,782 69,544,396
Prepaid expenses and other current assets 2,420,131 1,817,718
------------------ ------------------
TOTAL CURRENT ASSETS 173,806,459 137,567,956
PROPERTY, PLANT AND EQUIPMENT - NET (Note 2) 7,701,832 7,319,138
OTHER ASSETS:
Cost in excess of net assets acquired-net 1,399,253 1,438,484
Other assets 1,227,108 1,211,567
------------------ ------------------
$184,134,652 $147,537,145
================== ==================
-LIABILITIES AND SHAREHOLDERS' EQUITY-
--------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 34,949,764 $ 20,558,054
Accrued expenses 12,717,019 9,337,943
Income taxes payable 2,392,556 3,623,248
------------------ ------------------
TOTAL CURRENT LIABILITIES 50,059,339 33,519,245
------------------ ------------------
LONG TERM LIABILITIES:
Deferred income taxes 892,253 507,319
Revolving credit line (Note 3) 47,100,000 37,800,000
------------------ ------------------
TOTAL LONG-TERM LIABILITIES 47,992,253 38,307,319
------------------ ------------------
MINORITY INTEREST (NOTE 5) 403,294 249,398
------------------ ------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares authorized; none
issued or outstanding - -
Common stock, $ .0066 par value, 20,000,000 shares authorized;
10,379,254 and 10,018,652 shares issued and outstanding for
May 31, 2000 and February 29, 2000, respectively 68,512 66,122
Additional paid-in capital 32,162,003 29,455,741
Retained earnings 53,863,443 46,438,636
------------------ ------------------
86,093,958 75,960,499
Less: loan to ESOP 414,192 499,316
------------------ ------------------
85,679,766 75,461,183
------------------ ------------------
$184,134,652 $147,537,145
================== ==================
</TABLE>
See notes to interim consolidated condensed financial statements
3
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------------------------
MAY 31, 2000 MAY 31, 1999
------------------- -------------------
<S> <C> <C>
NET SALES $147,539,299 $74,141,612
------------------- -------------------
COSTS AND EXPENSES:
Cost of sales 115,185,914 59,167,472
Operating expenses 19,431,609 11,988,784
Interest expense 861,428 418,073
------------------- -------------------
135,478,951 71,574,329
------------------- -------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 12,060,348 2,567,283
AND MINORITY INTERESTS
Provision for income taxes 4,481,645 1,040,436
------------------- -------------------
INCOME BEFORE MINORITY INTERESTS 7,578,703 1,526,847
MINORITY INTEREST IN EARNINGS OF SUBSIDIARY 153,896 -
------------------- -------------------
NET INCOME $ 7,424,807 $ 1,526,847
=================== ===================
NET INCOME PER SHARE (Note 4):
Basic $ .72 $ .17
=================== ===================
Diluted $ .60 $ .14
=================== ===================
</TABLE>
See notes to interim consolidated condensed financial statements
4
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------------------
MAY 31, 2000 MAY 31, 1999
-------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $ 133,993,625 $ 70,729,661
Cash paid to suppliers and employees (137,283,464) (79,334,731)
Interest paid (861,428) (418,073)
Income taxes paid (7,772,043) (1,002,650)
-------------------- -------------------
Net cash (used in) operating activities (11,923,310) (10,025,793)
-------------------- -------------------
Cash flows from investing activities:
Capital expenditures (738,812) (167,217)
-------------------- -------------------
Net cash (used in) investing activities (738,812) (167,217)
-------------------- -------------------
Cash flows from financing activities:
Borrowings under revolving credit line 41,900,000 35,700,000
Repayments under revolving credit line (32,600,000) (25,100,000)
Proceeds from stock options 2,708,652 -
-------------------- -------------------
Net cash provided by financing activities 12,008,652 10,600,000
-------------------- -------------------
Net (decrease) increase in cash and cash equivalents (653,470) 406,990
Cash and cash equivalents, beginning of year 1,496,805 504,320
-------------------- -------------------
Cash and cash equivalents, end of period $ 843,335 $ 911,310
==================== ===================
</TABLE>
See notes to interim consolidated condensed financial statements
5
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
-----------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------
MAY 31, 2000 MAY 31, 1999
--------------- ----------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Net income $ 7,424,807 $ 1,526,847
---------------- ----------------
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation and amortization 395,349 355,522
Contribution to ESOP 85,124 85,116
Bad debt provision 847,500 120,000
Changes in assets and liabilities
(Increase) in accounts receivable (13,545,674) (3,411,951)
(Increase) in inventories (23,591,386) (11,011,343)
(Increase) in prepaid expenses and other current assets (602,413) (656,764)
Decrease (increase) in other assets (15,541) 24,430
Increase in accounts payable and accrued expenses 17,770,786 120,000
(Decrease) increase in income taxes (999,307) 255,975
Increase in minority interest 153,896 -
Increase in deferred taxes 153,549 63,903
---------------- ----------------
Total Adjustments (19,348,117) (11,552,640)
---------------- ----------------
Net cash (used in) operating activities $(11,923,310) $(10,025,793)
================ ================
</TABLE>
See notes to interim consolidated condensed financial statements
6
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------
(unaudited)
1. In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Nu Horizons Electronics
Corp. (the "Company"), its wholly owned subsidiaries (NIC Components Corp.,
Nu Horizons International Corp, Nu Horizons Eurotech Limited, NIC Eurotech
Limited, Titan Logistics Corp. and Nu Visions Manufacturing, Inc.) and NIC
Components Asia PTE.LTD. of which the company owns 70%, contain all
adjustments necessary to present fairly the Company's financial position as
of May 31, 2000 and February 29, 2000 and the results of its operations and
cash flows for the three month periods ended May 31, 2000 and 1999.
The accounting policies followed by the Company are set forth in Note 2 to
the Company's consolidated financial statements included in its Annual
Report on Form 10-K for the year ended February 29, 2000, which is
incorporated herein by reference. Specific reference is made to this report
for a description of the Company's securities and the notes to consolidated
financial statements included therein.
The results of operations for the three-month period ended May 31, 2000 are
not necessarily indicative of the results to be expected for the full year.
2. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
<TABLE>
May February
31, 2000 29, 2000
------------------- -------------------
<S> <C> <C>
Furniture, fixtures and office equipment $ 9,179,752 $ 8,802,458
Computer equipment 4,443,574 4,088,302
Assets held under capitalized leases 919,834 919,834
Leasehold improvements 1,400,407 1,394,161
------------------- -------------------
15,943,567 15,204,755
Less: accumulated depreciation and amortization 8,241,735 7,885,617
------------------- -------------------
$ 7,701,832 $ 7,319,138
=================== ===================
</TABLE>
3. BANK LINE OF CREDIT:
On October 28, 1999, the Company entered into an unsecured revolving line
of credit with three banks, which currently provides for maximum borrowings
of $57,000,000 at either (i) the lead bank's prime rate or (ii) LIBOR plus
57.5 to 125.0 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 October, 23, 2003.
7
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
------------------------------------------------------------------------
(unaudited)
4. NET INCOME PER SHARE:
Basic and diluted earnings per share have been computed in accordance with
the adoption of SFAS No. 128.
The following average shares were used in the computation of basic and
diluted earnings per share:
May May
31, 2000 31, 1999
--------------- ---------------
Basic 10,379,254 8,753,076
Diluted 12,378,362 11,462,359
A detailed computation of earnings per common share appears in Exhibit 11
to this Form 10-Q.
5. MINORITY INTEREST IN SUBSIDIARY:
Represents the liability related to the 30% minority interest in NIC
Components Asia PTE. LTD. which is included in the Company's consolidated
condensed financial statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- ---------------------------------------------------------------
RESULTS OF OPERATIONS:
---------------------
Introduction:
-------------
Nu Horizons Electronics Corp. (the "Company") and its wholly-owned
subsidiaries, NIC Components Corp. ("NIC"), Nu Horizons International
Corp. ("International"), Nu Horizons Eurotech Limited, NIC Eurotech
Limited and Titan Logistics Corp., and its majority owned subsidiary
NIC Components ASIA PTE LTD, are engaged in the distribution of high
technology active and passive electronic components to a wide variety
of original equipment manufacturers ("OEMs") of electronic products.
Active components distributed by the Company include semiconductor
products such as memory chips, microprocessors, digital and linear
circuits, microwave/RF and fiberoptic components, transistors and
diodes. Passive components distributed by NIC, principally to OEMs and
other distributors nationally, consists of a high technology line of
chip and leaded components including capacitors, resistors and related
networks.
Nu Visions Manufacturing, Inc. ("NUV") located in Springfield,
Massachusetts, another wholly-owned subsidiary of the Company, is a
contract assembler of circuit boards and related electromechanical
devices for various OEM's.
The financial information presented herein includes: (i) Consolidated
Condensed Balance Sheets as of May 31, 2000 and February 29, 2000;
(ii) Consolidated Condensed Statements of Income for the three month
periods ended May 31, 2000 and 1999 and (iii) Consolidated Condensed
Statements of Cash Flows for the three month periods ended May 31,
2000 and 1999.
Results of Operations:
----------------------
Sales for the three-month period ended May 31, 2000 were $147,539,299
as compared to $74,141,612 for the comparable period of the prior
year, an increase of approximately 100%, and as compared to
$115,402,898 for the immediately preceding quarter ended February 29,
2000, a sequential increase of approximately 28%. Management
attributes these increases to the core semiconductor distribution
business. The ability to generate a greater market penetration to a
larger account base, providing larger orders, coupled with an
increased focus on fewer product lines, has contributed to the
Company's ability to increase sales performance by substantial amounts
for both the year-to-year and sequential comparisons. While the
Company believes it can continue to successfully implement this
approach, no assurances can be given in this regard.
The gross profit margin for the quarter ended May 31, 2000 was 22% as
compared to 20.2% for the quarter ended May 31, 1999 and 22% for the
immediately preceding quarter ended February 29, 2000. The sequential
stability in profit margins and substantial increase in profit margins
over the year ago quarter, results from a tightened inventory
availability at the supplier level coupled with continued strong
customer demand. The Company expects this relative stability to
continue for the foreseeable future, however, no assurances can be
given in this regard.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (Continued):
---------------------------------
Results of Operations (Continued):
----------------------------------
Operating expenses were approximately $19,432,000 for the three months
ended May 31, 2000 as compared to $11,989,000 for the three months
ended May 31, 1999, an increase of approximately $7,443,000 or 62%.
Operating expenses as a percentage of sales, however, dropped to 13.3%
for the quarter ended May 31, 2000, from 16.2% of sales for the
current quarter ended May 31, 1999. Management is encouraged by the
fact that sales volume is increasing at a greater rate than operating
expenses which has provided the economies of scale required to produce
an enhanced bottom line performance and lower operating expenses as a
percent of sales. Management believes that this trend should continue
through the remainder of the fiscal year, although no assurances can
be given in this regard.
Interest expense increased to $861,428 for the three months ended May
31, 2000 from $418,073 for the three months ended May 31, 1999. This
increase was primarily due to higher average borrowings resulting from
an increase in the Company's inventories and accounts receivable
levels needed to support increased sales activity, net of a reduction
in subordinated convertible note interest due to the notes being
converted to equity.
<TABLE>
<CAPTION>
INTEREST EXPENSE
FOR THE THREE MONTHS ENDED
----------------------------------------------
May May
31, 2000 31, 1999
------------------- -------------------
<S> <C> <C>
Revolving Bank Credit $ 861,428 $ 272,481
Sub. Convert. Notes -0- 145,592
------------------- -------------------
Total Interest Expense $ 861,428 $ 418,073
=================== ===================
</TABLE>
Net income for the three month period ended May 31, 2000 was
$7,424,807 or $ .72 per share as compared to $1,526,847 or $.17 per
share for the three month period ended May 31, 1999. Management
attributes the increase in earnings to increased sales volume and
profit margin net of higher operating expenses for the May 2000 period
as compared to the May 1999 period.
Liquidity and Capital Resources:
--------------------------------
At May 31, 2000, the Company's current ratio was 3.5:1 as compared to
4.1:1 at February 29, 2000. Working capital increased from
approximately $104,049,000 at February 29, 2000 to approximately
$123,747,000 at May 31, 2000, while cash decreased from February 29,
2000 to May 31, 2000 by approximately $654,000. The primary reasons
for the increase in working capital was an increase in inventories and
accounts receivable financed primarily through long term debt during
the current period.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- ---------------------------------------------------------------
RESULTS OF OPERATIONS (Continued):
---------------------------------
Liquidity and Capital Resources (Continued):
--------------------------------------------
On October 28, 1999, the Company entered into a unsecured revolving
line of credit with three banks, which, currently provides for maximum
borrowings of $57,000,000 at either (i) the lead bank's prime rate or
(ii) LIBOR plus 57.5 to 125.0 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
October 28, 2003.
The Company is in the process of negotiating a new unsecured revolving
line of credit with five banks which will provide for maximum
borrowings of $80,000,000 on substantially the same terms as its
existing line of credit. The Company anticipates that such capital
resources provided by 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 may be 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, 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.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no material legal proceedings against the Company or in
which any of their property is subject.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports:
(a) Exhibits:
11. Statement re: Computation of Per Share Earnings (See Notes
to Consolidated Financial Statements - Note 4)
27. Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
Nu Horizons Electronics Corp.
-------------------------------------------------
Registrant
/s/ Arthur Nadata
-------------------------------------------------
Date: June 30, 2000 Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
-------------------------------------------------
Date: June 30, 2000 Paul Durando, Vice President-Finance
and Chief Financial Officer
</TABLE>
13
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
EXHIBIT INDEX
To
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MAY 31, 2000
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT 1934
-------------------------------
NU HORIZONS ELECTRONICS CORP.
(Exact Name of Registrant as Specified in Its Charter)
EXHIBIT
NUMBER DESCRIPTION
--------------------------------------------------------------------------------
11 Computation of Per Share Earnings
27 Financial Data Schedule
