<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended Commission file number
August 31, 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 10,853,156
------------------------------ ----------
Class Outstanding Shares
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
INDEX
-----
PART I. Financial Information Page(s)
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets August 31, 2000
(unaudited) and February 29, 2000 3
Consolidated Condensed Statements of Income (unaudited) -
Six Months and Three Months Ended August 31, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows (unaudited) -
Six Months Ended August 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
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
Exhibit 11 - Schedule re: Computation of Per Share Earnings
(See Notes to Consolidated Financial Statements
Note 4)
Exhibit 27 - Financial Data Schedule
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
-ASSETS-
--------
<TABLE>
<CAPTION>
AUGUST FEBRUARY
31, 2000 29, 2000
------------ ------------
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 5,728,655 $ 1,496,805
Accounts receivable-net of allowance for doubtful
accounts of $4,786,429 and $3,447,072 for August 31, 2000
and February 29, 2000, respectively 98,387,594 64,709,037
Inventories 105,361,931 69,544,396
Prepaid expenses and other current assets 3,387,559 1,817,718
------------------- --------------------
TOTAL CURRENT ASSETS 212,865,739 137,567,956
PROPERTY, PLANT AND EQUIPMENT- NET (Note 2) 8,563,801 7,319,138
OTHER ASSETS
Cost in excess of net assets acquired-net 1,360,022 1,438,484
Other assets 1,329,340 1,211,567
------------------- --------------------
$224,118,902 $147,537,145
=================== ====================
</TABLE>
-LIABILITIES AND SHAREHOLDERS' EQUITY-
--------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 25,559,235 $ 20,558,054
Accrued expenses 26,742,292 9,337,943
Income taxes payable 9,008,765 3,623,248
------------------- --------------------
TOTAL CURRENT LIABILITIES 61,310,292 33,519,245
------------------- --------------------
LONG TERM LIABILITIES:
Deferred income taxes 1,288,024 507,319
Revolving credit line (Note 3) 61,700,000 37,800,000
------------------- --------------------
62,988,024 38,307,319
------------------- --------------------
MINORITY INTEREST (NOTE 5) 496,394 249,398
------------------- --------------------
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;
10,853,156 and 10,018,652 shares issued and outstanding for
August 31, 2000 and February 29, 2000 71,633 66,122
Additional paid-in capital 35,681,199 29,455,741
Retained earnings 63,900,118 46,438,636
------------------- --------------------
99,652,950 75,960,499
Less: loan to ESOP 328,758 499,316
------------------- --------------------
99,324,192 75,461,183
$224,118,902 $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 SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
--------------------------------------- ------------------------------------------------
AUGUST AUGUST AUGUST AUGUST
<S> <C> <C> <C> <C>
31, 2000 31, 1999 31, 2000 31, 1999
------------ ------------ ------------ -----------
NET SALES $326,684,476 $163,013,007 $179,145,177 $88,871,395
------------ ------------ ------------ -----------
COSTS AND EXPENSES:
Cost of sales 255,458,867 130,074,835 140,272,953 70,907,363
Operating expenses 39,243,418 25,617,773 19,811,809 13,628,989
Interest expense 1,890,837 1,007,780 1,029,409 589,707
------------ ------------ ------------ -----------
296,593,122 156,700,388 161,114,171 85,126,059
------------ ------------ ------------ -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES AND MINORITY INTEREST
30,091,354 6,312,619 18,031,006 3,745,336
Provision for income taxes 12,382,876 2,576,023 7,901,231 1,535,587
------------ ------------ ------------ -----------
INCOME BEFORE MINORITY INTERESTS
------------ ------------ ------------ -----------
17,708,478 3,736,596 10,129,775 2,209,749
MINORITY INTEREST IN EARNINGS OF SUBSIDIARY 246,996 - 93,100 -
------------ ------------ ------------ -----------
NET INCOME $ 17,461,482 $ 3,736,596 $ 10,036,675 $ 2,209,749
============ ============ ============ ===========
NET INCOME PER SHARE (Note 4):
Basic $ 1.64 $ .42 $ .92 $ .25
============ ============ ============ ===========
Fully diluted $ 1.41 $ .34 $ .81 $ .20
============ ============ ============ ===========
</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 SIX MONTHS ENDED
----------------------------------------------
AUGUST AUGUST
31, 2000 31, 1999
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 291,597,195 $ 157,494,369
Cash paid to suppliers and employees (302,185,040) (169,680,097)
Interest paid (1,890,837) (1,007,780)
Income taxes paid (11,421,163) (922,363)
------------- -------------
Net cash (used in) operating activities (23,899,845) (14,115,871)
------------- -------------
Cash flows from investing activities:
Capital expenditures (1,999,274) (482,032)
------------- -------------
Net cash (used in) investing activities (1,999,274) (482,032)
------------- -------------
Cash flows from financing activities:
Borrowings under revolving credit line 91,350,000 64,805,000
Repayments under revolving credit line (67,450,000) (49,705,000)
Proceeds from stock options 6,230,969 -
------------- -------------
Net cash provided by financing activities 30,130,969 15,100,000
------------- -------------
Net increase in cash and cash equivalents 4,231,850 502,097
Cash and cash equivalents, beginning of year 1,496,805 504,320
------------- -------------
Cash and cash equivalents, end of period $ 5,728,655 $ 1,006,417
============= =============
</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 SIX MONTHS ENDED
----------------------------------
AUGUST 31, 2000 AUGUST 31, 1999
---------------- ----------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Net income $ 17,461,482 $ 3,736,596
------------ ------------
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation and amortization 833,074 737,406
Contribution to ESOP 170,557 170,232
Bad debt provision 1,408,724 442,500
Changes in assets and liabilities:
(Increase) in accounts receivable (35,087,281) (5,518,638)
(Increase) in inventories (35,817,535) (19,926,272)
(Increase) decrease in prepaid expenses and other
current assets (1,569,841) 1,514,969
(Increase) in other assets (117,773) (41,312)
Increase in accounts payable and
accrued expenses 22,405,530 4,315,309
Increase in income taxes 5,385,517 333,217
Increase in deferred income taxes 780,705 120,122
Increase in minority interest 246,996 -
------------ ------------
Total Adjustments (41,361,327) (17,852,467)
------------ ------------
Net cash (used in) operating activities $(23,899,845) $(14,115,871)
============ ============
</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. BASIS OF PRESENTATION
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 Components Eurotech Limited, Titan
Logistics Corp. and Nu Visions Manufacturing, Inc.) and NIC Components
Components Asia PTE.LTD. of which the company owns 70%, contain all adjustments
necessary to present fairly the Company's financial position at August 31, 2000
and February 29, 2000 and the results of its operations for the six and three
month periods ended August 31, 2000 and 1999 and cash flows for the six month
periods ended August 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 six and three month periods ended August 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>
<CAPTION>
AUGUST FEBRUARY
31, 2000 29, 2000
---------- ----------
<S> <C> <C> <C>
Furniture, fixtures and office equipment $10,587,132 $8,802,458
Computer equipment 4,442,699 4,088,302
Assets held under capitalized leases 919,834 919,834
Leasehold improvements 1,254,364 1,394,161
---------- ----------
17,204,029 15,204,755
Less: accumulated depreciation and amortization 8,640,228 7,885,617
---------- ----------
$8,563,801 $7,319,138
========== ==========
</TABLE>
3. BANK LINE OF CREDIT
On July 12, 2000, the Company entered into a new unsecured revolving line of
credit with five banks, which currently provides for maximum borrowings of
$80,000,000 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 July 12, 2004.
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 SFAS
No. 128.
The following average shares were used in the computation of primary and fully
diluted earnings per share:
Six Months Ended Three Months Ended
August 31, August 31,
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Basic 10,853,156 8,753,076 10,616,205 8,753,076
Diluted 12,378,362 11,492,359 12,378,362 11,492,359
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 Components"), Nu Horizons International Corp.
("International"), Nu Horizons Eurotech Limited, NIC Components Eurotech Limited
and Titan Logistics Corp., and its majority owned subsidiary NIC Components
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 OEMs.
The financial information presented herein includes: (i) Consolidated Condensed
Balance Sheets as of August 31, 2000 and February 29, 2000; (ii) Consolidated
Condensed Statements of Income for the six and three month periods ended August
31, 2000 and 1999 and (iii) Consolidated Condensed Statements of Cash Flows for
the six month periods ended August 31, 2000 and 1999.
Results of Operations:
----------------------
Sales for the six-month period ended August 31, 2000 were $326,684,476 as
compared to $163,013,007 for the comparable period of the prior year, an
increase of approximately $163,670,000 or 100%. Sales for the three-month period
ended August 31, 2000 were $179,145,177 as compared to $88,871,395 for the
comparable period of the prior year, an increase of approximately $90,274,000 or
102%. Management attributes this increase in sales entirely to the core
semiconductor distribution business which experienced substantially increased
unit sales. Management believes that the ability to generate greater market
penetration to a larger account base coupled with an increased focus on fewer
product lines, has contributed to the substantial increase in sales performance
for both the three month and six month year to year periods. While the Company
believes it can continue to successfully implement this approach, no assurances
can be given in this regard.
The gross profit margins for both the three and six months ended August 31, 2000
were approximately 21.7% and 21.8% as compared to 20.2% and 20.2% for the
comparable periods of the prior year. This substantial increase in gross margin
compared to the prior periods, results from a tightened inventory availability
at the supplier level coupled with continued strong customer demand. The
Company expects relative margin stability for the foreseeable future, however,
no assurances can be given in this regard.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS (Continued):
--------------------------
Results of Operations (Continued):
----------------------------------
Operating expenses have increased from approximately $25,618,000 for the six
months ended August 31, 1999 to approximately $39,243,000 for the six months
ended August 31, 2000, an increase of 53% or approximately $13,625,000. For the
three months ended August 31, 2000 as compared to the three months ended August
31, 1999 operating expenses increased from approximately $13,629,000 to
$19,812,000, an increase of 45%, or approximately $6,183,000. The dollar
increases in operating expenses were due to increases in the following expense
categories: Approximately $ 10,785,000 or 79%, of the increase for the six-month
period and approximately $4,983,000 or 81%, of the increase for the three-month
period, were for personnel related costs such as commissions, salaries, travel,
fringe benefits. The remaining increase of approximately $2,840,000 or 21%, for
the six- month period and approximately $1,200,000 or 19%, for the three-month
period were a result of increases in various other selling, general, and
administrative expenses. Management is encouraged by the fact that sales volume
is increasing at a greater rate than operating expenses which it believes is
beginning to provide the economies of scale required to produce an enhanced
bottom line performance. 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 from approximately $1,008,000 for the six months
ended August 31, 1999 to approximately $1,891,000 for the six months ended
August 31, 2000 and from approximately $589,000 for the three-month period ended
August 31, 1999 to $1,029,000 for the three-month period ended August 31, 2000.
These increases were primarily due to higher average borrowing levels resulting
from an increase in the Company's inventories and accounts receivable levels
needed to support the substantial increased sales activities, net of a reduction
in subordinated convertible note interest due to the notes being converted to
equity.
INTEREST EXPENSE
----------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
------------------------ --------------------------
AUGUST AUGUST AUGUST AUGUST
31, 2000 31, 1999 31, 2000 31, 1999
---------- ---------- ---------- ---------
Revolving Bank Credit $1,890,837 $ 716,596 $1,029,409 $ 444,115
Sub. Convert. Notes - 291,184 - 145,592
---------- ---------- ---------- ---------
Total Interest Expense $1,890,837 $1,007,780 $1,029,409 $ 589,707
========== ========== ========== =========
Net income for the six-month period ended August 31, 2000 was $17,461,482 or
$1.41 per share diluted as compared to $3,736,596 or $.34 per share diluted for
the six-month period ended August 31, 1999. Net income for the three-month
period ended August 31, 2000 was $10,036,675 or $.81 per share diluted as
compared to $2,209,749 or $.20 per share diluted for the corresponding period of
the prior year. Management attributes the increase in earnings to increased
sales volume and profit margins net of higher operating expenses for the periods
in 2000 as compared to 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS (Continued):
--------------------------
Liquidity and Capital Resources:
--------------------------------
At August 31, 2000, the Company's current ratio was 3.5:1 as compared to 4.1:1
at the fiscal year ended February 29, 2000. Working capital increased from
approximately $104,000,000 as of February 28, 1999 to approximately $152,000,000
at August 31, 2000 while cash increased from February 29, 2000 to August 31,
2000 by approximately $4,200,000. The primary reasons for the increase in
working capital was the increase in accounts receivable and inventories financed
primarily through long term debt during the current period. This increase was
required to support the increased sales activity over the six-month period.
On July 12, 2000, the Company entered into a new unsecured revolving line of
credit with five banks, which , currently provides for maximum borrowings of
$80,000,000 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 July 12, 2004.
The Company is in the process of negotiating a new unsecured revolving line of
credit with six banks which will provide for maximum borrowings of $120,000,000
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
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.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. Legal Proceedings
There are no material legal proceedings against the Company to which
any its property is subject.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its Annual Meeting of Stockholders on
September 12, 2000. The following proposals were adopted by
the votes indicated.
(b) (c) (1) Three directors were elected at the Annual Meeting to serve
until the Annual Meeting of Stockholders in 2003, in
addition to the five other Directors, Richard Schuster,
Paul Durando, Harvey Blau, Herbert Gardner and Dominic
Polimeni, whose term of office continued after the meeting.
The names of these Directors and votes cast in favor of
their election and shares withheld are as follows:
NAME VOTES FOR VOTES WITHHELD
----------------- ---------- --------------
Paul Durando 10,120,778 44,205
Herbert Gardner 10,120,778 44,205
David Siegel 10,120,778 44,205
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.
Nu Horizons Electronics Corp.
-------------------------------------
Registrant
/s/ Arthur Nadata
-------------------------------------
Date: October 12, 2000 Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
-------------------------------------
Date: October 12, 2000 Paul Durando, Vice President-Finance
and Chief Financial Officer
13
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
EXHIBIT INDEX
To
FORM 10-Q
FOR THE FISCAL QUARTER ENDED AUGUST 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
---------- ------------
10.12 Revolving Credit Agreement dated July 12, 2000 between
the Company and five banks: Mellon Bank, N.A., European
American Bank, HSBC Bank USA, Fleet Bank and The Chase
Manhattan Bank
11 Computation of Per Share Earnings
27 Financial Data Schedule
