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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
ON FORM 10-K
Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
February 28, 2002 1-8798
- ----------------------------------------- ------------------------------------
Nu Horizons Electronics Corp.
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(Exact name of registrant as specified in its charter)
Delaware 11-2621097
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
70 Maxess Road, Melville, New York 11747
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(Address of principal executive offices) (Zip Code)
(631) 396-5000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
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(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock Par Value $.0066 Per Share NASDAQ National Market System
- ----------------------------------------- ------------------------------------
- ----------------------------------------- ------------------------------------
(Title of class)
Indicate by check mark whether the registrant; (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
-
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 1-K or any amendment to this
Form 10K [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of May 1, 2001.
Common Stock - Par Value $.0066 16,609,005
- ----------------------------------------- ------------------------------------
Class Outstanding Shares
Aggregate Market Value of Non-Affiliate Stock at May 1, 2002 - approximately
$157,287,277
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NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I:
ITEM 1. Business Pages 3 - 6
ITEM 2. Properties Pages 7
ITEM 3. Legal Proceedings Page 7
ITEM 4. Submission of Matters to a Vote of Security Holders Page 7
PART II:
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters Page 8
ITEM 6. Selected Financial Data Page 9
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations Pages 10 - 14
ITEM 7A Market and Other Business Risks Page 14
ITEM 8. Financial Statements and Supplementary Data Pages F1 - F19
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures Page 15
PART III:
ITEM 10. Directors and Executive Officers of the Company Pages 15 - 16
ITEM 11. Executive Compensation Pages 17 - 25
ITEM 12. Security Ownership of Certain Beneficial Owners and Management Page 26
ITEM 13. Certain Relationships and Related Transactions Page 26
PART IV:
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Pages 27 - 34
Signatures Page 30
Exhibit Index
Page 2
PART I.
ITEM 1. BUSINESS
GENERAL:
Except for historical information contained herein, the matters set
forth herein 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, the 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.
Nu Horizons Electronics Corp. (the "Company") and its wholly
owned subsidiaries, NIC Components Corp. ("NIC"), Titan Logistics
Corp. ("Titan"), Nu Horizons Eurotech Ltd. ("NUE"), and its majority
owned subsidiaries NIC Components Asia PTE. LTD. ("NIA"), NIC Eurotech
Ltd. ("NIE") and Nu Horizons Asia PTE. LTD. ("NUA") are engaged in the
distribution of high technology active and passive electronic
components. Nu Horizons International Corp. ("International"), another
wholly owned subsidiary, is an export distributor of electronic
components.
NUV Inc. ("NUV" or "Nu Visions"), is currently an inactive wholly
owned subsidiary of the Company, and was a contract assembler of
circuit boards and related electromechanical devices for various
original equipment manufacturers, or OEMs, until the sale of its
assets on August 23, 2001.
All references herein to the Company shall, unless the context
otherwise requires, be deemed to refer to the Company and its
subsidiaries.
Active components distributed by the Company, principally to OEMs
in the United States, include mainly commercial semiconductor products
such as memory chips, microprocessors, digital and linear circuits,
microwave, RF and fiber-optic components, transistors and diodes.
Passive components distributed by NIC, principally to OEMs and other
distributors nationally, consist of a high technology line of chip and
leaded components including capacitors, resistors and related
networks.
The active and passive components distributed by the Company are
utilized by the electronics industry and other industries in the
manufacture of sophisticated electronic products including: industrial
instrumentation, computers and peripheral equipment, consumer
electronics, telephone and telecommunications equipment, satellite
communications equipment, cellular communications equipment, medical
equipment, automotive electronics, and audio and video electronic
equipment.
Manufacturers of electronic components augment their marketing
programs through the use of independent distributors and contract
assemblers such as the Company, upon which the Company believes they
rely to a considerable extent to market their products. Distributors
and assemblers, such as the Company, offer their customers the
convenience of diverse inventories and rapid delivery, design and
technical assistance, and the availability of product in smaller
quantities than generally available from manufacturers. Generally,
companies engaged in the distribution of active and passive electronic
components, such as the Company, are required to maintain a relatively
significant investment in inventories and accounts receivable. To meet
these requirements, the Company, and other companies in the industry,
typically depend on internally generated funds as well as external
borrowings.
Page 3
ITEM 1. BUSINESS (Continued):
Management's policy is to manage, maintain and control the bulk
of its inventories from its principal headquarters and stocking
facility in Melville, Long Island, New York and stocking facility in
San Jose, California. As additional franchise line opportunities
become available to the Company, the need for branch level inventories
may be necessary and desirable in order to better serve the specific
needs of local markets.
Semiconductor Products (Active Components):
The Company is a distributor of a broad range of semiconductor
products to commercial and military OEM's, principally in the United
States. The Company is a franchised distributor of active components
for approximately thirty product lines. Significant franchised product
lines include Allegro, Elantec, Exar, Hitachi Semiconductor,
Integrated Circuit Systems, Intersil Corporation, Marvel, Pericom, ST
Microelectronics, Sun Microsystems, TDK Semiconductor, Vitesse
Semiconductor and Xilinx among others.
The Company's franchise agreements authorize it to sell all or
part of the product line of a manufacturer on a non-exclusive basis.
Under these agreements, each manufacturer will generally grant credits
for any subsequent price reduction by such manufacturer and inventory
return privileges whereby the Company can return to each such
manufacturer for credit or exchange a percentage ranging from 5% to
20% of the inventory purchased from said manufacturer during a
semi-annual period. The franchise agreements generally may be
cancelled by either party upon written notice. The Company
anticipates, in the future, entering into additional franchise
agreements and increasing its inventory levels in accordance with
business demands.
Passive Components and Relationship with Nippon:
NIC has been the exclusive outlet in North America for Nippon
Industries Co. Ltd.'s (Japan) ("Nippon") brand of passive components
with a license for the use of the Nippon brand. The Company has a
License Agreement with Nippon dated as of September 1, 2000 under
which the Company has been granted an exclusive license to use the
Nippon brand in the United States, Mexico, Central and South America
and the Caribbean. The License Agreement has an initial term of ten
years and automatically renews for successive one year periods unless
the Company or Nippon terminates the License Agreement 90 days prior
to the end of the initial or any renewal term.
Due to certain market situations, NIC, with Nippon's assent, has
also established several manufacturing associations with U.S. and
Taiwan based manufacturers to supply NIC with a portion of its product
requirements under the NIC brand. NIC intends to continue to give
Nippon priority, however, in acquiring Nippon's products whenever
Nippon's technology and pricing are commensurate market requirements.
Sales and Marketing:
Management's strategy for long-term success has been to focus the
Company's sales and marketing efforts towards the following industry
segments, both domestically and abroad: industrial, telecom/datacom,
medical instrumentation, microwave and RF, fiber-optic, consumer
electronics, security and protection devices, office equipment,
computers and computer peripherals, factory automation and robotics.
In order to help achieve these goals, the Company may enter into new
franchise agreements for a broad base of commodity semiconductor
products including those used in the key niche industries referred to
above.
As of February 28, 2002, the Company had approximately 15,000
customers. All sales are made through customers' purchase orders.
Semiconductors are sold primarily via telephone by the Company's
in-house staff of approximately 80 salespersons, and by a field sales
force of approximately 100 salespersons. The Company maintains branch
sales facilities located as follows:
Page 4
ITEM 1. BUSINESS (Continued):
Sales and Marketing (continued):
EAST COAST
----------
Massachusetts - Boston
New York - Melville (Long Island) and Rochester
New Jersey - Mt. Laurel (Philadelphia) and Pine Brook
Ohio - Cleveland
Maryland - Columbia
North Carolina - Raleigh
Georgia - Atlanta
Alabama - Huntsville
Florida - Ft. Lauderdale, Orlando and Tampa
MIDWEST WEST COAST
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Arizona - Phoenix California - Irvine, Los Angeles,
Colorado - Denver Sacramento, San Diego and San Jose
Illinois - Chicago Oregon - Portland
Minnesota - Minneapolis Washington - Redmond
Texas - Austin and Dallas
CANADA ASIA EUROPE
------ ---- ------
Montreal Singapore Buckingham, England
Ottowa
Toronto
NIC's passive components are marketed through the services of a
national network of approximately 20 independent sales representative
organizations, employing over 200 salespersons, as well as through
NIC's in-house sales and engineering personnel. The independent
representative organizations do not represent competing product lines
but sell other related products. Commissions to such organizations
generally range from 2 to 3% of all sales in a representative's
exclusive territory.
NIC has developed a national network of approximately 75 regional
distributor locations, which market passive components on a
non-exclusive basis. Approximately 35 of the regional distributors
have entered into agreements with NIC whereby they are required to
purchase from NIC a prescribed initial inventory. These distributors
are protected by NIC against price reductions and are granted certain
inventory return and other privileges. Due to the efforts of NIC and
its distributors, NIC's passive components have been tested and
"designed in" as a prime source of qualified product by over 7,000
OEMs in the United States.
No single customer accounted for more than 3% of the Company's
consolidated sales for the year ended February 28, 2002. The Company's
sales practice is to require payment within thirty days of delivery.
Source of Supply:
The Company inventories an extensive stock of active and passive
components, however, if the Company's customers order products for
which the Company does not maintain inventory, the Company's marketing
strategy is to obtain such products from its franchise manufacturers,
or, if a product is unobtainable, to identify and recommend
satisfactory interchangeable alternative components. For this purpose,
the Company devotes considerable efforts to familiarizing itself with
component product movement throughout the industry, as well as to
constant monitoring of its own inventories.
Page 5
ITEM 1. BUSINESS (Continued):
Source of Supply (continued):
As of February 28, 2002, there were three manufacturers that
represented more than 10% of the Company's inventory on a consolidated
basis. Those suppliers accounted for approximately $45,577,000 of
total inventory. Electronic components distributed by the Company
generally are presently readily available; however, from time to time
the electronics industry has experienced a shortage or surplus of
certain electronic products.
For the year ended February 28, 2002, the Company purchased
inventory from two suppliers that was in excess of 10% of the
Company's total purchases. Purchases from these suppliers were
approximately $34,906,000 and $40,457,000 for the fiscal year.
Competition and Regulation:
The Company competes with many companies that distribute
semiconductor and passive electronic components and, to a lesser
extent, companies that manufacture such products and sell them
directly to OEMs and other distributors. Many of these companies have
substantially greater assets and possess greater financial and
personnel resources than those of the Company. In addition, certain of
these companies possess independent franchise agreements to carry
semiconductor product lines which the Company does not carry, but
which it may desire to have. Competition is based primarily upon
inventory availability, quality of service, knowledge of product and
price. The Company believes that the distribution of passive
electronic components under its own label is a competitive advantage.
The Company's competitive ability to price its imported active
and passive components could be adversely affected by increases in
tariffs, duties, changes in the United States' trade treaties with
Japan, Taiwan or other foreign countries, transportation strikes and
the adoption of Federal laws containing import restrictions. In
addition, the cost of the Company's imports could be subject to
governmental controls and international currency fluctuations. Because
imports are paid for with U.S. dollars, the decline in value of United
States currency as against foreign currencies would cause increases in
the dollar prices of the Company's imports from Japan and other
foreign countries. Although the Company has not experienced any
material adverse effect to date in its ability to compete or maintain
its profit margins as a result of any of the foregoing factors, no
assurance can be given that such factors will not have a material
adverse effect in the future.
Backlog:
The Company defines backlog as orders, believed to be firm,
received from customers and scheduled for shipment, no later than 60
days for active components and no later than 90 days for passive
components from the date of the order. As of May 1, 2002, the
Company's backlog was approximately $36,685,000 as compared to a
backlog of approximately $46,973,000 at May 1, 2001.
Employees:
As of February 28, 2002, the Company employed approximately 471
persons: 12 in management, 327 in sales and sales support, 24 in
product and purchasing, 26 in finance, accounting and human resources,
19 in MIS, 25 in operations and 38 in quality control, shipping,
receiving and warehousing. The Company believes that its employee
relations are satisfactory.
Page 6
ITEM 2. PROPERTIES
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. The lease term is
from December 17, 1996, to December 16, 2008 at an annual base rental
of $601,290 and provides for a 4% annual escalation in each of the
last ten years of the term.
On May 1, 1996, the Company leased approximately 25,000 square
feet of warehouse and office space for its San Jose, California
operation. This facility serves as the Company's West Coast regional
sales and distribution headquarters. The lease term is from May 1,
2001 to April 30, 2006 at an annual base rental of $540,000.
On August 1, 2000, the Company leased approximately 10,000 square
feet of office space in Melville, Long Island, New York to serve as
the executive offices of it's NIC Components subsidiary. The lease
term is from April 1, 2001 to December 31, 2008 at an annual base
rental of $285,700 and provides for a 4% annual escalation in each
subsequent year of the lease.
The Company also leases space for thirty-two (32) branch sales
offices, which range in size from 1,000 square feet to 9,300 square
feet, with lease terms that expire between July 2002 and June 2008.
Annual base rentals range from $21,600 to $199,400 with aggregate base
rentals approximating $1,530,000. The Company believes it can obtain
extensions of the leases scheduled to expire in fiscal 2003 on
substantially similar terms to those currently in effect.
ITEM 3. LEGAL PROCEEDINGS:
No material legal proceeding is pending to which the Company is a
party or to which any of its property is or may be subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matters were submitted during the fourth quarter of the fiscal
year ended February 28, 2002 to a vote of security holders through the
solicitation of proxies or otherwise.
Page 7
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
a) The Company's common stock is traded on the NASDAQ National Market
System under the symbol "NUHC". The following table sets forth, for
the periods indicated, the high and low closing prices for the
Company's common stock as adjusted for a 3-for-2 stock split
declared on September 11, 2000, as reported by the NASDAQ National
Market System.
FISCAL YEAR 2001: HIGH LOW
---- ---
First Quarter $16.50 $ 9.25
Second Quarter 22.68 10.67
Third Quarter 21.25 7.88
Fourth Quarter 13.37 6.56
FISCAL YEAR 2002:
First Quarter $12.51 $ 8.98
Second Quarter 11.23 8.39
Third Quarter 9.22 7.75
Fourth Quarter 10.92 8.50
FISCAL YEAR 2003:
First Quarter (Through May 1, 2002) $10.00 $ 8.35
b) As of May 1, 2002, the Company's common stock was owned by
approximately 400 holders of record and 9,500 beneficial holders.
c) The Company has never paid a cash dividend on its common stock. The
Company's current revolving credit line agreement permits dividends
of up to 25% of the Company's consolidated net income.
Page 8
ITEM 6. SELECTED FINANCIAL DATA:
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 2002 28, 2001 29, 2000 28, 1999 28, 1998
-------- -------- -------- -------- --------
INCOME STATEMENT
DATA:
Continuing
Operations
Net sales $281,912,508 $634,009,953 $364,069,562 $243,514,672 $221,217,251
Gross profit on
sales 60,222,426 139,502,597 76,456,311 53,016,248 48,028,412
Gross profit
percentage 21.4% 22.0% 21.0% 21.8% 21.7%
Net income (loss)
before provision
for income taxes
and minority
interests (2,797,157) 58,515,268 20,694,140 7,668,406 8,088,372
Net income (loss) (2,762,566) 33,561,085 11,903,786 4,608,127 4,743,948
Net income (loss)
from discontinued
operations 4,982,242 1,791,000 (205,000) (63,296) 554,043
Total net income $ 2,219,676 $ 35,352,085 $ 11,698,786 $ 4,544,831 $ 5,297,991
Earnings per common
share:
Basic $ .13 $ 2.18 $ .87 $ .35 $ .41
Diluted $ .13 $ 1.99 $ .67 $ .29 $ .35
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 2002 28, 2001 29, 2000 28, 1999 28, 1998
-------- -------- -------- -------- --------
BALANCE SHEET
DATA:
Working capital $120,790,159 $201,732,737 $106,903,383 $71,343,379 $ 77,046,418
Total assets 151,318,461 247,830,999 136,625,266 94,340,725 95,580,832
Long-term debt 2,731,598 85,181,496 38,307,319 22,377,852 32,790,395
Shareholders'
equity 126,473,177 124,361,211 75,461,183 56,337,068 51,542,045
Page 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Introduction:
Nu Horizons Electronics Corp. and its wholly owned subsidiaries, NIC
Components Corp. ("NIC"), Nu Horizons Eurotech Limited ("NUE"), Titan
Logistics Corp. ("TITAN") and Nu Horizons International Electronics
Corp. ("International") and its majority owned subsidiaries NIC
Components Asia PTE. LTD. ("NIA"), NIC Eurotech Limited ("NIE") and Nu
Horizons Asia PTE. LTD. ("NUA") 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 fiber-optic components, transistors and diodes.
Passive components distributed by NIC, principally to OEMs and other
distributors nationally, consist of a high technology line of chip and
leaded components, including capacitors, resistors and related networks.
All references in this report to "the Company," "we," "our" and "us" are
to Nu Horizons Electronics Corp. and its subsidiaries.
As of August 23, 2001 the Company sold the assets of Nu Visions
Manufacturing Inc. ("Nu Visions"), a wholly owned subsidiary of the
Company, which was a contract assembler of circuit boards and related
electromechanical devices for various OEM's.
The financial information presented herein includes: (i) Balance sheets
as of February 28, 2002, and February 28, 2001; (ii) Statements of
income for the twelve month periods ended February 28, 2002, February
28, 2001 and February 29, 2000; (iii) Statements of cash flows for the
twelve month periods ended February 28, 2002, February 28, 2001 and
February 29, 2000; and (iv) Consolidated changes in shareholders' equity
for the twelve month periods ended February 28, 2002, February 28, 2001
and February 29, 2000.
Critical Accounting Policies and Estimates
------------------------------------------
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the
Company to make significant estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. The Company
evaluates its estimates, including those related to bad debts,
inventories, intangible assets, income taxes and contingencies and
litigation, on an ongoing basis. The Company bases its estimates on
historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
The Company believes the following critical accounting policies, among
others, involve the more significant judgments and estimates used in the
preparation of its consolidated financial statements:
- The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). Under SAB 101, revenue is recognized when the title and risk of
loss have passed to the customer, there is persuasive evidence of an
arrangement, delivery has occurred or services have been rendered, the
sales price is determinable and collectibility is reasonably assured.
The Company recognizes revenues at time of shipment of its products and
sales are recorded net of discounts and returns.
- The Company maintains allowances for doubtful accounts for estimated
bad debts. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their inability to make
payments, additional allowances might be required.
- Inventories are recorded at the lower of cost or market. Write-downs
of inventories to market value are based upon product franchise
agreements governing price protection, stock rotation and obsolescence,
as
Page 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued):
well as assumptions about future demand and market conditions. If
assumptions about future demand/or actual market conditions are less
favorable than those projected by management, additional write-downs of
inventories could be required.
Fiscal Year 2002 versus 2001
----------------------------
Results of Continuing Operations:
---------------------------------
Net sales for the year ended February 28, 2002 aggregated $281,913,000
as compared to $634,010,000 for the year ended February 28, 2001, a
decrease of $352,097,000 or approximately 56%. Management attributes
this decrease in sales for the period to the core semiconductor and
passive component distribution business, which experienced substantially
decreased demand. Toward the latter part of the fourth quarter of our
prior fiscal year, we and the market place overall began to experience a
significant decline in demand for electronic components. This reduced
demand has continued throughout fiscal 2002. Management believes and
expects that the current slowdown has stabilized but will extend at
least through the first half of fiscal 2003. As a result, we expect
revenues to continue to range from flat to a moderate upside potential
through the first three quarters of fiscal 2003.
Gross profit margin as a percentage of net sales was 21.4% for the year
ended February 28, 2002 as compared to 22.0% for the year ended February
28, 2001. It should also be noted that the gross profit margin for the
fourth quarter of the current year was 20.1%. This continuing decrease
in gross margin reflects decreasing prices due to increased competitive
pressures resulting from the industry wide decline in demand coupled
with an oversupply of product in the marketplace. As a result management
believes that there could be some continued margin pressure in the first
half of fiscal 2003, with a return to relative margin stability in the
second half of fiscal 2003, however, no assurances can be given in this
regard.
Operating expenses decreased by $15,747,000 to $60,378,000 for the year
ended February 28, 2002 from $76,125,000 for the year ended February 28,
2001, a decrease of approximately 21%. The dollar decrease in operating
expenses was due to decreases in the following expense categories:
approximately $11,290,000 or approximately 72% of the decrease was for
personnel related costs - commissions, salaries, travel and fringe
benefits. The remaining decrease of approximately $4,457,000 or
approximately 28% of the total is a result of decreases in various other
general and administrative expenses. Operating expenses as a percentage
of sales, however, increased to 21.4% of sales as compared to 12.0% for
the prior year. The sharp reduction in sales has resulted in higher
operating expenses as a percentage of sales and a loss of the economies
of scale the Company enjoyed in its prior fiscal year. Management has
decided to endure this higher rate of operating expenses in order to be
prepared for what we believe will be an inevitable rebound for the
industry, although no assurances can be given as to the timing or size
of any rebound.
Interest expense decreased by $3,345,000 from $4,862,000 for the year
ended February 28, 2001 to $1,517,000 for the year ended February 28,
2002. This decrease was primarily due to the lower average levels of
bank debt during the year resulting from the decrease in the Company's
inventory and accounts receivable levels required to support reduced
sales activity, repayment of indebtedness with the proceeds of the sale
of the Nu Visions Manufacturing (NUV) subsidiary and substantially lower
interest rates overall.
Page 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued):
Net loss from continuing operations for the year ended February 28, 2002
was $2,763,000 or $ .17 per basic and$.16 per diluted share, as compared
to income of $33,561,000 or $2.07 per basic share and $1.89 per diluted
share, for the year ended February 28, 2001. Management attributes
$1,638,000 of the loss for fiscal 2002 to reduced sales volumes,
resulting in a greater decrease in gross profit margin dollars than in
operating expenses. The remaining loss of $1,125,000, is attributable to
a one-time charge for the impairment of the value of goodwill, which had
previously been amortized over a fifteen-year period.
Discontinued Operations:
------------------------
On August 23, 2001, the Company completed the sale of the assets of its
contract-manufacturing subsidiary, Nu Visions. The selling price was
paid with a $2,000,000 Subordinated Note and $29,563,000 in cash.
Net income from the discontinued operation for the year ended February
28, 2002 was $799,000 or $.05 per basic and diluted share as compared to
$1,791,000 or $.11 per basic share and $.10 per diluted share the year
before. The net gain on the sale of the subsidiary resulted in an after
tax profit of $4,184,000 or $.25 per basic share and $.24 per diluted
share for the current year. This resulted in total net income from the
discontinued operation for the year ended February 28, 2002 of
$4,982,000 or $.30 per basic share and $.29 per diluted share as
compared to $1,791,000 or $.11 per basic share and $.10 per diluted in
the prior year.
Combined Net Income:
--------------------
Net income from both continuing and discontinued operations combined for
the year ended February 28, 2002 was $2,220,000 or $.13 per diluted
share as compared to $35,352,000 or $1.99 per diluted share the year
before.
Fiscal Year 2001 versus 2000
----------------------------
Results of Continuing Operations:
---------------------------------
Net sales for the year ended February 28, 2001 aggregated $634,010,000
as compared to $364,070,000 for the year ended February 29, 2000, an
increase of approximately 74%. Management attributes this increase in
sales for the period to the core semiconductor and passive component
distribution business, which experienced substantially increased demand.
Management believes that the ability to generate greater market
penetration to a larger account base coupled with an increased focus on
fewer product lines, contributed to the substantial increase in sales
performance. Toward the latter part of the fourth quarter of fiscal 2001
we and the market place overall began to experience a significant
decline in demand for electronic components.
Gross profit margin as a percentage of net sales was 22.0% for the year
ended February 28, 2001 as compared to 21.0% for the year ended February
29, 2000. This increase in gross margin percentage compared to the prior
period resulted from tightened inventory availability at the supplier
level coupled with continued strong customer demand through the third
quarter.
Operating expenses increased by $22,497,000 to $76,125,000 for the year
ended February 28, 2001 from $53,628,000 for the year ended February 29,
2000, an increase of approximately 42%. The dollar increase in operating
expenses was due to increases in the following expense categories:
Approximately $15,073,000 or approximately 67% of the increases were for
personnel related costs - commissions, salaries, travel and fringe
benefits. The remaining increase of approximately $7,424,000 or
approximately 33% of the total increment is a result of increases in
various other operating expenses including, but not limited to, freight
out, rent, telephone, computer expenses and various general and
administrative expenses. While operating expenses, expressed in dollars,
for fiscal 2001 increased approximately 42% over fiscal 2000, those same
expenses, as a percentage of sales dollars, decreased from 14.7% for the
prior year to
Page 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued):
12.0% for the fiscal 2001 year. Management was encouraged by the fact
that sales volume increased at a greater rate than operating expenses,
which it believed provided the economies of scale that were required to
produce an enhanced bottom line performance.
Interest expense increased by $2,727,000 from $2,135,000 for the year
ended February 29, 2000 to $4,862,000 for the year ended February 28,
2001. This increase was primarily due to the higher average levels of
bank debt during the year resulting from an increase in the Company's
inventories and accounts receivable levels needed to support increased
sales activity coupled with higher interest rates overall.
INTEREST COSTS
FOR THE FISCAL
YEAR ENDED
February February
28, 2001 29, 2000
------------------------------
Revolving Bank Credit $4,862,000 $1,575,000
Sub. Convert. Notes 0 560,000
------------------------------
Total Interest Expense $4,862,000 $2,135,000
=============================
Discontinued Operations:
-----------------------
On August 23, 2001, the Company completed the sale of the assets of its
contract-manufacturing subsidiary, Nu Visions. The selling price was
paid with a $2,000,000 Subordinated Note and $29,563,000 in cash.
Net income from discontinued operations was $1,791,000 or $.11 per
diluted share, for the year ended February 28, 2001. For the year ended
February 29, 2000, there was a net loss from discontinued operations of
$205,000, or $.01 per basic and diluted share.
Combined Net Income:
--------------------
Net income for the year ended February 28, 2001 (from both continuing
and discontinued operations) was $35,352,000 or $1.99 per share diluted,
as compared to $11,699,000 or $.67 per share diluted, for the year ended
February 29, 2000. Management attributes the increase in earnings to
increased sales volume net of higher operating expenses for the year
ended in 2001 as compared to 2000.
Liquidity and Capital Resources:
--------------------------------
Fiscal Year 2002 versus 2001
----------------------------
The Company ended its 2002 fiscal year with working capital and cash
aggregating approximately $120,790,000 and $2,690,000, respectively, as
compared to approximately $201,732,000 and $558,000 respectively, at
February 28, 2001. The Company's current ratio at February 28, 2002, was
6.8:1 as compared to 6.4:1 at February 28, 2001. The Company believes
that its financial position at February 28, 2002, will enable it to take
advantage of any new opportunities that may arise.
On October 18, 2000, the Company entered into a new unsecured revolving
line of credit with six banks, which currently provides for maximum
borrowings of $120,000,000 at either (i) the lead bank's prime rate or
(ii) LIBOR plus 87.5 to 147.5 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 October 18, 2004.
Borrowings under this line of credit decreased from $85,000,000 at
February 28, 2001 to $2,500,000 at February 28, 2002. The primary reason
for the decrease was lower borrowings needed due to reductions in
inventories and receivables as a result of the significant decline in
sales and repayment of amounts outstanding under the line of credit from
the proceeds of the sale of the Nu Visions Manufacturing subsidiary. The
Company does not expect a fluctuation in interest rates to have a
material effect on its financial results.
Page 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued):
The Company has contacted the lead bank under its loan agreement to
discuss an amendment to the current loan agreement to address the
Company's reduced need for credit and to amend certain of the financial
covenants contained therein. The Company is currently in full
compliance with all of the covenants contained in its loan agreement.
However, the Company believes that there is a risk that, due to the
overall decline in sales in the electronic components market, without
an amendment to the loan agreement, commencing in August 2002, the
Company may violate the covenant related to EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization). The lead bank has
advised the Company that all of the lenders under the Company's loan
agreement are willing to enter into an amendment to the loan agreement
that would enable the Company to remain in compliance with all
covenants, as revised, for the foreseeable future. There can be no
assurances that the Company and its lenders will actually enter into
such an agreement.
The Company anticipates that its resources provided by its cash flow
from operations and its bank lines of credit, as amended, 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.
Forward Looking Statement Disclaimer:
-------------------------------------
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 amounts of sales of the
Company's products, the competitive environment within the electronic
industry, the ability of the Company to continue to expand its
operations and the level of costs incurred in connection therewith,
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.
ITEM 7A. MARKET AND OTHER BUSINESS RISKS:
The Company's credit facility bears interest based on interest rates
tied to the prime or LIBOR rate, either of which may fluctuate over
time based on economic conditions. As a result, the Company is subject
to market risk for changes in interest rates and could be subjected to
increased or decreased interest payments if market rates fluctuate. If
market rates increase, the impact could have a material adverse effect
on the Company's financial results.
The Company has several foreign subsidiaries and acquires certain
inventory from foreign suppliers and as such, faces risk due to adverse
movements in foreign currency exchange rates. These risks could have a
material impact on the Company's financial results in future periods.
The electronic component industry is cyclical which can cause
significant fluctuations in sales, gross margins and profits, from year
to year. For example, during calendar 2001, the industry experienced a
severe decline in the demand for electronic components, which caused
sales to decrease by 56%. The prior year reflected a 74% increase in
net sales. It is difficult to predict the timing of the changing cycles
in the electronic component industry.
Page 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
To The Board of Directors and Shareholders
Nu Horizons Electronics Corp.
Melville, New York
We have audited the accompanying consolidated balance sheets of Nu
Horizons Electronics Corp. and subsidiaries as of February 28, 2002 and February
28, 2001, and the consolidated statements of income, changes in shareholders'
equity and cash flows for the three years in the period ended February 28, 2002.
Our audits also included the financial statement schedule listed in the index at
Item 14(a). 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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, 2002 and February
28, 2001, and the results of their operations and their cash flows for each of
the three years in the period ended February 28, 2002 in conformity with
accounting principles generally accepted in the United States of America.
/s/ LAZAR LEVINE & FELIX LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
May 3, 2002
Page F-1
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
-ASSETS-
------
February February
CURRENT ASSETS: 28, 2002 28, 2001
----------------------------
Cash $ 2,689,978 $ 558,176
Accounts receivable - net of allowance for doubtful accounts
of $4,445,901 and $5,590,675 for 2002 and 2001, respectively 40,018,469 87,250,544
Inventories 95,076,198 119,005,965
Prepaid expenses and other current assets 3,726,568 7,717,332
Net assets of discontinued subsidiary -- 24,397,341
----------------------------
TOTAL CURRENT ASSETS 141,511,213 238,929,358
PROPERTY, PLANT AND EQUIPMENT - NET 6,145,476 6,018,619
OTHER ASSETS:
Costs in excess of net assets acquired - net of amortization -- 1,281,560
Subordinated note receivable 2,000,000 --
Other assets 1,661,772 1,601,462
----------------------------
$151,318,461 $247,830,999
============================
-LIABILITIES AND SHAREHOLDERS' EQUITY-
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 13,637,730 $ 29,418,411
Accrued expenses 7,083,324 7,778,210
----------------------------
TOTAL CURRENT LIABILITIES 20,721,054 37,196,621
----------------------------
LONG-TERM LIABILITIES:
Deferred income taxes 231,598 181,496
Revolving credit line 2,500,000 85,000,000
----------------------------
TOTAL LONG-TERM LIABILITIES 2,731,598 85,181,496
----------------------------
MINORITY INTERESTS 1,392,632 1,091,671
----------------------------
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;
16,609,005 and 16,501,840 shares issued and outstanding for 2002
and 2001, respectively 109,619 108,912
Additional paid-in capital 42,600,827 41,798,615
Retained earnings 84,010,397 81,790,721
Other accumulated comprehensive income (loss) (247,666) 821,807
----------------------------
126,473,177 124,520,055
Less: loan to ESOP -- 158,844
----------------------------
TOTAL SHAREHOLDERS' EQUITY 126,473,177 124,361,211
----------------------------
$151,318,461 $247,830,999
============================
See notes to consolidated financial statements
Page F-2
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEAR ENDED
--------------------------------------------
FEBRUARY FEBRUARY FEBRUARY
28, 2002 28, 2001 29, 2000
------------ ------------ ------------
NET SALES $281,912,508 $634,009,953 $364,069,562
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 221,690,082 494,507,356 287,613,251
Operating expenses 60,377,685 76,125,482 53,627,525
Impairment of goodwill 1,124,636 -- --
Interest expense 1,517,262 4,861,847 2,134,646
------------ ------------ ------------
284,709,665 575,494,685 343,375,422
------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTERESTS (2,797,157) 58,515,268 20,694,140
Provision (credit) for income taxes (503,742) 24,110,598 8,647,909
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS (2,293,415) 34,404,670 12,046,231
Minority interest in earnings of subsidiary 469,151 843,585 142,445
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (2,762,566) 33,561,085 11,903,786
------------ ------------ ------------
DISCONTINUED OPERATIONS:
Income (loss) from operations of contract manufacturing
subsidiary disposed of - net of income taxes 798,735 1,791,000 (205,000)
Gain on sale of contract manufacturing subsidiary - net
of income taxes 4,183,507 -- --
------------ ------------ ------------
4,982,242 1,791,000 (205,000)
------------ ------------ ------------
NET INCOME $ 2,219,676 $ 35,352,085 $ 11,698,786
============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE - BASIC:
Continuing operations $ (.17) $ 2.07 $ .88
Discontinued operations .30 .11 (.01)
------------ ------------ ------------
$ .13 $ 2.18 $ .87
============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE-
DILUTED:
Continuing operations $ (.16) $ 1.89 $ .68
Discontinued operations .29 .10 (.01)
------------ ------------ ------------
$ .13 $ 1.99 $ .67
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 16,574,911 16,213,084 13,511,545
Diluted 17,430,332 17,746,075 17,547,789
See notes to consolidated financial statements
Page F-3
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE LOAN TO SHAREHOLDERS'
SHARES STOCK CAPITAL EARNINGS INCOME ESOP EQUITY
---------- -------- ------------ ------------ ------------- ------------ -------------
Balance at February 28, 1999 8,753,076 $ 57,770 $ 19,042,230 $ 38,076,840 $ - $ (839,772) $ 56,337,068
Stock dividend distributed 437,638 2,888 3,334,102 (3,336,990) - - -
Exercise of stock options 4,388 29 25,844 - - - 25,873
Conversion of subordinated
convertible notes 823,550 5,435 7,053,565 - - - 7,059,000
Repayment from ESOP - - - - - 340,456 340,456
Net income - - - 11,698,786 - - 11,698,786
---------- -------- ------------ ------------ ------------- ------------ -------------
Balance at February 29, 2000 10,018,652 66,122 29,455,741 46,438,636 - (499,316) 75,461,183
Three-for-two stock split 5,437,364 35,887 (35,887) - - - -
Exercise of stock options 1,045,824 6,903 7,310,016 - - - 7,316,919
Income tax benefit from stock
options exercised - - 5,068,745 - - - 5,068,745
Repayment from ESOP - - - - - 340,472 340,472
Foreign currency translation - - - - 821,807 - 821,807
Net income - - - 35,352,085 - - 35,352,085
---------- -------- ------------ ------------ ------------- ------------ -------------
Balance at February 28, 2001 16,501,840 108,912 41,798,615 81,790,721 821,807 (158,844) 124,361,211
Exercise of stock options 107,165 707 490,616 - - - 491,323
Income tax benefit from stock
options exercised - - 311,596 - - - 311,596
Repayment from ESOP - - - - - 158,844 158,844
Foreign currency translation - - - - (1,069,473) - (1,069,473)
Net income - - - 2,219,676 - - 2,219,676
---------- -------- ------------ ------------ ------------- ------------ -------------
Balance at February 28, 2002 16,609,005 $109,619 $ 42,600,827 $ 84,010,397 $ (247,666) $ - $ 126,473,177
========== ======== ============ ============ ============= ============ =============
See notes to consolidated financial statements
Page F-4
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR ENDED
---------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY
28, 2002 28, 2001 29, 2000
--------------- ----------------- ---------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $ 358,499,244 $ 637,588,990 $ 355,352,590
Cash paid to suppliers and employees (275,441,710) (659,196,422) (368,622,165)
Interest paid (1,517,262) (5,559,847) (2,837,646)
Income taxes paid (2,987,904) (29,847,868) (4,134,402)
--------------- ----------------- ---------------
Net cash provided (used) by operating activities 78,552,368 (57,015,147) (20,241,623)
--------------- ----------------- ---------------
Cash flows from investing activities:
Capital expenditures (1,393,184) (4,330,953) (1,691,765)
Proceeds from sale of subsidiary 29,563,000 - -
Net assets of subsidiary sold (18,217,706) - -
Expenses related to sale of subsidiary (3,606,122) - -
--------------- ----------------- ---------------
Net cash provided (used) by investing activities 6,345,988 (4,330,953) (1,691,765)
--------------- ----------------- ---------------
Cash flows from financing activities:
Borrowings under revolving credit line 81,300,000 210,775,000 95,785,000
Repayments under revolving credit line (163,800,000) (163,575,000) (72,885,000)
Proceeds from exercise of stock options 802,919 12,385,664 25,873
--------------- ----------------- ---------------
Net cash provided (used) by financing activities (81,697,081) 59,585,664 22,925,873
--------------- ----------------- ---------------
Effect of exchange rate changes (1,069,473) 821,807 -
--------------- ----------------- ---------------
Net increase (decrease) in cash and cash equivalents 2,131,802 (938,629) 992,485
Cash and cash equivalents, beginning of year 558,176 1,496,805 504,320
--------------- ----------------- ---------------
Cash and cash equivalents, end of year $ 2,689,978 $ 558,176 $ 1,496,805
=============== ================= ===============
See notes to consolidated financial statements
Page F-5
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------
FOR THE YEAR ENDED
--------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY
28, 2002 28, 2001 29, 2000
-------------- ---------------- ----------------
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES
NET INCOME $ 2,219,676 $ 35,352,085 $ 11,698,786
Adjustments:
Gain on sale of subsidiary (4,183,507) - -
Depreciation and amortization 1,416,235 2,007,864 1,660,345
Impairment of goodwill 1,124,636 - -
Contribution to ESOP (compensation) 158,844 340,472 340,456
Bad debt provision 86,982 2,793,468 1,097,338
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 54,850,081 (33,039,963) (23,885,972)
Decrease (increase) in inventories 40,047,471 (65,579,273) (24,430,502)
Decrease (increase) in prepaid expenses
and other current assets 4,230,329 (5,907,296) 537,537
(Increase) in other assets (2,045,742) (404,463) (72,746)
(Decrease) increase in accounts payable
and accrued expenses (19,703,700) 10,528,757 8,852,022
Increase (decrease) in income taxes 50,102 (3,949,071) 3,711,715
Increase in minority interest 300,961 842,273 249,398
-------------- ---------------- ----------------
Net cash provided (used) by operating activities $ 78,552,368 $ (57,015,147) $ (20,241,623)
============== ================ ================
See notes to consolidated financial statements
Page F-6
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
1. ORGANIZATION:
Nu Horizons Electronics Corp. and its subsidiaries, (both wholly and
majority owned) are wholesale and export distributors of semiconductor
and passive electronic components throughout the United States, Asia
and Europe.
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 International
Corp. ("International"), Nu Horizons Eurotech ("NUE"), and Titan
Logistics Corp. ("Titan") and its majority owned subsidiaries, NIC
Eurotech Limited ("NIE"), Nu Horizons Asia PTE. LTD. ("NUA") and NIC
Components Asia PTE. LTD ("NIA"). All material intercompany balances
and transactions have been eliminated. See also Note 3.
b. Use of Estimates:
In preparing financial statements, in accordance with accounting
principles generally accepted in the United States of America,
management makes certain estimates and assumptions, where applicable,
that affect the reported amounts of assets, 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 amounts 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. Cash and Cash Equivalents:
For purposes of the statements of cash flows, the Company considers
all highly liquid investments purchased with a remaining maturity of
three months or less to be cash equivalents.
Page F-7
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
e. Inventories:
Inventories, which consist primarily of goods held for resale, are
stated at the lower of cost (first-in, first-out method) or market.
f. Depreciation:
Depreciation is provided using the straight-line method as follows:
Office equipment 5 years
Furniture and fixtures 5 - 12 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 depreciation are
eliminated from the accounts and any resulting gain or loss is
included in operations.
g. Goodwill:
Costs in excess of net assets acquired are amortized on a
straight-line basis over fifteen years. As of the end of fiscal 2002
and 2001, accumulated amortization of goodwill aggregated $1,229,238
and $1,072,314, respectively.
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." As a result of this review, the
Company identified certain conditions as indicators of asset
impairment and accordingly, recognized full impairment of the
remaining goodwill, recording a one-time charge of $1,124,636, as of
February 28, 2002.
h. Income Taxes:
The Company has elected to file a consolidated federal income tax
return with its domestic subsidiaries. The Company utilizes SFAS 109
"Accounting for Income Taxes", which 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, 2002 approximates $2,500,000.
Page F-8
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
i. Revenue Recognition/Shipping and Handling Costs:
Revenue is recognized when products are shipped to customers in
accordance with SEC Staff Accounting Bulletin No. 101, ("Revenue
Recognition in Financial Statements"). Amounts related to shipping and
handling that are billed to customers as part of sales transactions
are reflected as a reduction of operating expenses and aggregated
$130,328, $279,181 and $203,819 for the fiscal years ended 2002, 2001
and 2000, respectively. Shipping and handling costs incurred by the
Company, are included in costs of sales and aggregated $1,042,052,
$2,454,242, and $1,313,014 for the fiscal years ended 2002, 2001 and
2000, respectively.
j. Advertising and Promotion Costs:
Advertising and promotion costs, which are included in general and
administrative expenses, are expensed as incurred. For the fiscal
years ended 2002, 2001 and 2000, such costs aggregated $424,490,
$1,295,465 and $662,646 respectively.
k. Earnings Per Common Share:
Basic and diluted earnings per share have been computed in accordance
SFAS No. 128. The number of average shares for each period has been
adjusted to reflect the 3-for-2 stock split in October, 2000.
l. Stock-Based Compensation:
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations, in accounting for employee stock options. As such,
compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise
price. Compensation expense related to stock options granted to
non-employees is accounted for under SFAS No. 123 "Accounting for
Stock Based Compensation", whereby compensation expense is recognized
over the vesting period based on the fair value of the options on the
date of grant.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation" (FIN 44). FIN 44 provides guidance for issues
arising in applying APB Opinion No. 25. FIN 44 applies specifically to
new awards, exchanges of awards in a business combination,
modification to outstanding awards, and changes in grantee status that
occur on or after July 1, 2000, except for the provisions related to
repricings and the definition of an employee which apply to awards
issued after December 15, 1998. Application of FIN 44 did not have a
material effect on the Company's financial reporting.
Page F-9
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
m. Foreign Currency Translation/Other Comprehensive Income:
Assets and liabilities of the Company's foreign subsidiaries are
translated at current exchange rates, while income and expenses are
translated at average rates for the period. Translation gains and
losses are reported as a component of accumulated other comprehensive
income on the statement of shareholders' equity in accordance with
SFAS No. 130. "Reporting Comprehensive Income".
n. Reclassifications:
Certain prior years information has been reclassified to conform to
the current year's reporting presentation.
o. New Accounting Pronouncements:
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations", effective for fiscal years beginning after
December 15, 2001. Under SFAS 141, the pooling of interests method of
accounting is no longer allowed for business combinations. The Company
does not believe that the effect of the adoption of this statement
will have a material impact on its financial statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." On March 1, 2002, the company adopted this
statement, which among other things, eliminates the amortization of
goodwill and requires annual tests for determining impairment of
goodwill. The company had previously written off all of its remaining
goodwill and as such, the adoption of this statement will not have an
impact on its financial statements. Management of the Company has
determined that prior year pro forma information regarding
amortization of goodwill is not material to these financial
statements.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses the financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the related asset retirement costs. SFAS No. 143
requires that the fair value of a liability for an asset retirement
obligation be recorded in the period incurred and the related asset
retirement costs be capitalized. The Company is required to adopt this
statement in the first quarter of fiscal 2003 and has not yet
completed its evaluation of the effect, if any, on its consolidated
financial position and results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
the financial accounting and reporting for the impairment or disposal
of long-lived assets, including business segments accounted for as
discontinued operations. The Company is required to adopt this
statement in the first quarter of fiscal 2003 and has not yet
completed its analysis to determine the effect, if any, on its
consolidated financial position and results of operations.
Page F-10
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
3. SALE OF SUBSIDIARY:
On August 23, 2001, the Company completed the sale of the assets of its
contract-manufacturing subsidiary, Nu Visions Manufacturing, Inc. ("Nu
Visions"). The selling price of $31,563,000 consisted of $2,000,000 in
a subordinated note (see below) and $29,563,000 in cash.
Operating results of Nu Visions were as follows:
2002 2001 2000
------------------ --------------- ----------------
Net sales $21,736,655 $36,620,000 $15,169,000
Income (loss) before income taxes 1,331,226 3,036,000 (325,000)
Income tax provision (benefit) 798,735 1,791,000 (205,000)
Pursuant to the sale of this subsidiary, the Company received a
$2,000,000 Junior Subordinated Note, dated August 23, 2001 and issued
by the buyer as part of the purchase price. The note has a maturity
date of May 14, 2007 and is subordinate in right of payment to all
existing and future indebtedness of the issuer. The note bears interest
from the issue date, on the principal amount, to, and including the
maturity date, at a rate of 8% per annum. Interest shall be payable on
the maturity date and shall compound quarterly as of each anniversary
of the issue date. Prepayment of the note and interest accrued is
permitted if and when certain conditions in the subordination agreement
have been met.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment which is reflected at cost, consists of
the following:
2002 2001
------------ ------------
Furniture, fixtures and equipment $ 7,755,003 $ 7,200,192
Computer equipment 5,405,976 4,709,830
Leasehold improvements 1,254,364 1,126,667
------------ ------------
14,415,343 13,036,689
Less: accumulated depreciation and amortization 8,269,867 7,018,070
------------ ------------
$ 6,145,476 $ 6,018,619
============ ============
Depreciation expense for the years ended February 28, 2002, February
28, 2001 and February 29, 2000 aggregated $1,259,248, $1,131,169,and
$1,050,635 respectively.
5. OTHER ASSETS:
Other assets consists of the following:
2002 2001
------------ ------------
Net cash surrender value - life insurance $1,218,691 $1,155,155
Other 443,081 446,307
------------ ------------
$1,661,772 $1,601,462
============ ============
Page F-11
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
6. REVOLVING CREDIT LINE:
On October 18, 2000, the Company entered into a new unsecured revolving
line of credit with six banks, which currently provides for maximum
borrowings of $120,000,000 at either (i) the lead bank's prime rate or
(ii) LIBOR plus 87.5 to 147.5 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 October 18,
2004. Direct borrowings under the line of credit were $2,500,000 and
$85,000,000 at February 28, 2002 and 2001, respectively. As of the end
of the fiscal years, the Company had met all of the required covenants.
7. CAPITAL STOCK AND STOCK OPTIONS:
On September 13, 2000, the Company's Board of Directors declared a
three-for -two stock split of the Company's common stock, to be
distributed on October 23, 2000, to all holders of record at the close
of business on October 2, 2000. As a result of the stock split,
5,437,364 shares were distributed. All shares and per share data for
all periods presented have been restated to reflect this stock split.
On September 23, 1999, the Board of Directors approved a 5% stock
dividend payable on November 4, 1999 to shareholders of record on
November 19, 1999. As a result of the stock dividend, 437,638 shares
were distributed, common stock was increased by $2,888, additional paid
in capital was increased by $ 3,334,102 and retained earnings was
decreased by $3,336,990.
Stock options granted to date under the Company's 1994 Stock Option
Plan generally expire five years after date of grant and become
exercisable in four equal annual installments, respectively, commencing
one year from date of grant. Stock options granted to date under each
of the Company's 1998 and 2000 Stock Option Plans generally expire ten
years after the date of grant and become exercisable in two equal
annual installments commencing one year from date of grant. To date, no
options have been granted under the Company's 2000 Key Employee Stock
Option Plan. Stock options granted under the Company's Outside Director
Stock Option Plan and 2000 Outside Directors' 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.
Page F-12
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
7. CAPITAL STOCK AND STOCK OPTIONS (Continued):
A summary of options granted and related information for the three
years ended February 28, 2002 is as follows:
-----------------------------------------------------------------------------------------------------
Weighted Average
Options Exercise Price
------- --------------
Outstanding, February 28, 1999 1,734,450 $ 8.20
Stock dividend (5%) 98,698 -
Granted 833,950 6.27
Exercised (4,388) 5.90
Cancelled (595,500) 7.69
------------
Outstanding, February 29, 2000 2,067,210 3.02
Weighted average fair value of options granted during the year $ 3.20
======
Stock split (3-for-2) 762,063 $ -
Granted 479,750 14.62
Exercised (1,045,824) 7.00
Cancelled (14,420) 4.70
------------
Outstanding February 28, 2001 2,248,779 5.88
Weighted average fair value of options granted during the year $ 8.15
======
Granted 99,000 $10.00
Exercised (103,304) 4.77
Cancelled (43,763) 8.46
------------
Outstanding February 28, 2002 2,200,712 6.07
============
Weighted average fair value of options granted during the year $ 9.99
======
Options exercisable at the end of each fiscal year:
February 29, 2000 1,328,770 $ 5.07
February 28, 2001 996,890 4.35
February 28, 2002 1,818,621 5.04
Exercise prices for options outstanding as of February 28, 2002 ranged
from $2.93 to $18.33. The weighted-average remaining contractual life
of these options is approximately 5 years. Outstanding options at
February 28, 2002 are held by approximately 70 individuals.
Page F-13
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
7. CAPITAL STOCK AND STOCK OPTIONS (Continued):
The Company applies APB 25 and related Interpretations in accounting
for the Option Plans. Accordingly, no compensation cost has been
recognized for its Option Plans. Had compensation cost for the Option
Plans 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:
2002 2001 2000
------------------- ------------------- -------------------
Net earnings:
As reported $2,219,676 $35,352,085 $11,698,786
Pro forma 1,230,375 34,344,329 11,004,402
Basic earnings per share:
As reported $ .13 $ 2.18 $ 0.87
Pro forma $ .07 $ 2.12 $ 0.81
Diluted earnings per share:
As reported $ .13 $ 1.99 $ 0.67
Pro forma $ .07 $ 1.94 $ 0.63
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 the fiscal years ended 2002, 2001 and
2000, respectively: expected volatility of 38.9%, 49.8%, and 51.7%,
respectively; risk free interest rate of 4.9%, 5.5%, and 5.9%,
respectively; and expected lives of 1 to 10 years.
The effects of applying SFAS 123 in the above pro forma disclosures are
not indicative of future amounts, as they are likely to be affected by
the number of grants awarded since additional awards are generally
expected to be made at varying amounts.
8. MINORITY INTERESTS IN SUBSIDIARY:
Minority interests represents the liability related to the 30% minority
interest in NIC Components Asia PTE. LTD., the 20% minority interest in
NIC Eurotech Limited and the 10% minority interest in Nu Horizons Asia
PTE. LTD.
9. INCOME TAXES:
The provision for income taxes from continuing operations is comprised
of the following:
2002 2001 2000
---------------- ----------------- -----------------
Current:
Federal $(256,833) $17,127,570 $6,733,018
State and local (60,907) 4,194,653 1,826,424
Foreign 267,956 1,022,644 -
Deferred:
Federal (341,362) 1,390,836 69,889
State (112,596) 374,895 18,578
---------------- ----------------- -----------------
$(503,742) $24,110,598 $8,647,909
================ ================= =================
Page F-14
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
9. INCOME TAXES (Continued):
The tax benefits associated with the disqualifying disposition of stock
acquired with incentive stock options reduced taxes currently payable
as shown above by $311,596 for 2002 and $5,068,745 for 2001. Such
benefits are credited to additional paid-in capital.
The components of the net deferred income tax liability, pursuant to
SFAS 109, are as follows:
2002 2001
--------------- ----------------
Deferred tax assets:
Accounts receivable $ 1,552,706 $ 2,139,409
Inventory 94,482 289,416
Goodwill 139,812 -
--------------- ----------------
Total deferred tax assets 1,787,000 2,428,825
--------------- ----------------
Deferred tax liabilities:
Fixed assets (1,248,636) (1,680,000)
Income of Interest Charge DISC (769,962) (930,321)
--------------- ----------------
Total deferred tax liabilities (2,018,598) (2,610,321)
--------------- ----------------
Net deferred tax liabilities $ (231,598) $ (181,496)
=============== ================
The following is a reconciliation of the maximum statutory federal tax
rate to the Company's effective tax rate:
2002 2001 2000
------------------- ------------------- -------------------
Statutory rate (34.0)% 34.0% 34.0%
State and local taxes (7.8) 8.6 8.9
Foreign and other 23.8 (1.4) (1.1)
----- ---- ----
Effective tax rate (18.0)% 41.2% 41.8%
===== ==== ====
10. EMPLOYEE BENEFIT PLANS:
On January 13, 1987, the Company's Board of Directors approved the
adoption of an employee stock ownership plan (ESOP). The ESOP covers
all eligible employees and contributions are determined by the Board of
Directors. The ESOP purchases shares of the Company's common stock
using loan proceeds. As the loan is repaid, a pro rata amount of common
stock is released for allocation to eligible employees. The Company
makes cash contributions to the ESOP to meet its obligations.
Contributions to the ESOP for the three years ended February 28, 2002
aggregated $158,844 for 2002, $340,472 for 2001 and $340,456 for 2000.
At February 28, 2002 the ESOP owned 550,789 shares of the Company's
common stock at an average price of approximately $1.71 per share.
Page F-15
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
10. EMPLOYEE BENEFIT PLANS (Continued):
On October 28, 1999, the Company, on behalf of the ESOP, entered into
an additional credit agreement with a bank, which provides for a
$3,000,000 revolving line of credit at the bank's prime rate until
October 28, 2003. 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, 2002 there
were no direct borrowings outstanding under the ESOP line of credit.
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, 2002
were $145,947, $117,968 and $115,401, respectively.
11. COMMITMENTS AND CONTINGENCIES:
Leases:
On September 13, 1996, the Company signed employment contracts (the
"Contracts"), as amended, with three of its senior executives for a
continually renewing five-year term. The Contracts specified a base
salary of $226,545 for each officer, which shall be increased each year
by the change in the consumer price index, and also entitle two of the
three officers to an annual bonus equal to 3.33% and the third officer
to 2.33% (9% 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 executives' salaries, performance
bonuses and other benefits in event of death or disability of the
officer for the balance of the period covered by the agreement.
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 mid- 1997, the
Company moved its executive offices and distribution operation to the
facility. The lease term is from December 17, 1996 to December 16, 2008
at an annual base rental of $601,290 and provides 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, and other
provisions. Aggregate minimum rental commitments under noncancelable
operating leases are as follows:
Fiscal 2003 $3,145,665
Fiscal 2004 2,863,775
Fiscal 2005 2,633,861
Fiscal 2006 2,173,577
Fiscal 2007 1,179,215
Thereafter 1,914,015
Rent expense was $2,956,569, $2,464,878, and $2,175,834 for each of the
three years in the period ending February 28, 2002.
Litigation:
At times the company is involved in various lawsuits incidental to its
business. At February 28, 2002, management does not believe that any
matter is material to its financial statements.
Page F-16
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
12. MAJOR SUPPLIERS:
For the year ended February 28, 2002, the Company purchased inventory
from two suppliers that was in excess of 10% of the Company's total
purchases. Purchases from these suppliers were approximately
$34,906,000 and $40,457,000 for the fiscal year.
For the year ended February 28, 2001, the Company purchased inventory
from two suppliers that was in excess of 10% of the Company's total
purchases. Purchases from these suppliers were approximately
$86,997,000 and $86,317,000 for the fiscal year.
For the year ended February 29, 2000 the Company purchased inventory
from two suppliers that was in excess of 10% of the Company's total
purchases. Purchases from these suppliers were approximately
$49,816,000 and $57,230,000 for the fiscal year.
13. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION:
Since the sale of the Company's contract manufacturing subsidiary,
management believes that the Company is once again operating in a
single business segment, distribution of electronic components, in
accordance with the rules of SFAF No. 131 ("Disclosure About Segments
of an Enterprise and Related Information").
Inasmuch as the Company's business is primarily conducted in the United
States, operations are also carried out overseas through our foreign
subsidiaries in different geographic areas.
Revenues, by geographic area, for the fiscal years are as follows:
2002 2001 2000
------------------- ------------------- -------------------
Americas $248,668,150 $584,751,399 $345,831,844
Europe 16,640,422 31,227,496 14,655,234
Asia/Pacific 16,603,936 18,031,058 3,582,484
------------------- ------------------- -------------------
$281,912,508 $634,009,953 $364,069,562
------------------- ------------------- -------------------
Total assets, by geographic area, at the end of the fiscal years are as
follows:
2002 2001 2000
------------------- ------------------- -------------------
Americas $132,283,894 $223,830,846 $121,409,125
Europe 9,897,388 13,909,529 10,887,524
Asia/Pacific 9,137,179 10,090,624 4,328,617
------------------- ------------------- -------------------
$151,318,461 $247,830,999 $136,625,266
------------------- ------------------- -------------------
Page F-17
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE YEARS ENDED FEBRUARY 28, 2002
-----------------------------------
14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited):
THREE MONTH PERIOD ENDED
-----------------------------------------------------------
FEBRUARY NOVEMBER AUGUST MAY
28, 2002 30, 2001 31, 2001 31, 2001
------------ ------------ ------------ ------------
Continuing Operations
Net sales $ 64,002,942 $ 58,217,629 $ 69,947,370 $ 89,744,567
------------ ------------ ------------ ------------
Cost of sales 51,135,344 46,007,268 53,895,457 70,652,013
Operating expenses 14,048,358 14,288,424 14,798,207 17,242,696
Impairment of goodwill 1,124,636 -- -- --
Interest expense 179,773 191,685 190,980 954,824
------------ ------------ ------------ ------------
Net income (loss) - continuing
operations (2,259,132) (1,382,191) 436,641 442,116
Discontinued Operations
Net income -- -- 256,800 541,935
Gain on sale -- 1,606,275 2,577,232 --
------------ ------------ ------------ ------------
Net income (loss) $ (2,259,132) $ 224,084 $ 3,270,673 $ 984,051
============ ============ ============ ============
Basic (Loss) Earnings per Share $ (.13) $ .01 $ .20 $ .06
============ ============ ============ ============
Weighted average number of common
and common equivalent shares
outstanding 16,609,005 16,580,927 16,562,583 16,547,130
============ ============ ============ ============
THREE MONTH PERIOD ENDED
-----------------------------------------------------------
FEBRUARY NOVEMBER AUGUST MAY
28, 2001 30, 2000 31, 2000 31, 2000
------------ ------------ ------------ ------------
Continuing Operations
Net sales $141,911,707 $180,994,992 $170,080,695 $141,022,559
------------ ------------ ------------ ------------
Cost of sales 109,618,800 141,657,347 133,234,715 109,996,494
Operating expenses 19,681,234 18,960,869 18,858,865 18,624,514
Interest expense 1,930,108 1,358,902 870,409 702,428
------------ ------------ ------------ ------------
Net income - continuing
operations 6,075,755 10,830,055 9,361,810 7,293,465
Discontinued Operations
Net income 768,949 215,844 674,865 131,342
------------ ------------ ------------ ------------
Net income $ 6,844,704 $ 11,045,899 $ 10,036,675 $ 7,424,807
============ ============ ============ ============
Basic Earnings per Share $ .41 $ .67 $ .63 $ .48
============ ============ ============ ============
Weighted average number of common
and common equivalent shares
outstanding 16,501,860 16,479,565 15,924,308 15,568,881
============ ============ ============ ============
Page F-18
REPORT OF MANAGEMENT
The management of Nu Horizons Electronics Corp. is responsible for the
preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America and for
the integrity and objectivity of all the financial data included in this annual
report. In preparing the financial statements, management makes informed
judgments 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 & Felix LLP, the independent accountants, have been selected by the
Board of Directors to examine the Company's financial statements. Their report
appears herein.
BY: /s/ PAUL DURANDO BY: /s/ ARTHUR NADATA
--------------------------- -----------------------
Paul Durando Arthur Nadata
Vice President, Finance and President and
Treasurer Chief Executive Officer
Page F-19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES:
The Company had no disagreements on accounting or financial disclosure
matters with its accountants, nor did it change accountants, during the
three-year period ending February 28, 2002.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY:
NAME AGE POSITION
---- --- --------
Irving Lubman 63 Chief Operating Officer and Chairman of the Board
Arthur Nadata 56 President, Chief Executive Officer and Director
Richard S. Schuster 53 Vice-President, Secretary and Director
Paul Durando 58 Vice President - Finance, Treasurer and Director
Harvey R. Blau 66 Director
Herbert M. Gardner 67 Director
Dominic A. Polimeni 55 Director
David Siegel 76 Director
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 2003) Stockholders in 2004) Stockholders in 2002)
--------------------- --------------------- ---------------------
Paul Durando Harvey Blau Irving Lubman
Herbert Gardner (1)(2) Dominic A. Polimeni (1)(2) Arthur Nadata
David Siegel(1)(2) Richard S. Schuster
(1) Member of Compensation Committee
(2) Member of Audit Committee
All officers serve at the discretion of the Board. There are no
family relationships among the directors and officers.
Irving Lubman has been our Chairman of the Board since October
1982 and Chief Operating Officer since September 1996. Mr. Lubman was
our 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 our 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.
Page 15
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (Continued):
Richard S. Schuster has been our 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.
Paul Durando has been our 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.
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 for more
than five years. For more than the past five years, Mr. Blau has been
Chairman of the Board of Griffon Corporation, a diversified industrial
company that produces garage doors, specialty plastic films and
electronic information and communications systems, and Aeroflex
Incorporated, a company that designs, develops and manufactures
microelectronics, integrated circuit, interconnect and testing
solutions. Until April 1, 2002, Mr. Blau was a Director of Reckson
Associates, landlord for the Company's executive offices and
distribution center in Melville, Long Island, New York.
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 LLC, investment bankers. Mr.
Gardner is Chairman of the Board of Supreme Industries Inc. and a
director of iDine Rewards Network, Inc., TGC Industries Inc., Hirsch
International Corp., Co-Active Marketing Group, Inc. Rumson-Fair Haven
Bank and Trust Company and Chase Packaging Corp.
Dominic A. Polimeni has been a Director of the Company since
September 1997. Mr. Polimeni has over 26 years experience in the
distribution and Inventory Logistics Management ("ILM") businesses and
has been responsible for evaluating and negotiating over 50
acquisitions of distribution and ILM businesses. He has been a Director
of Questron Technology, Inc. a publicly held company based in Boca
Raton, Florida, since March 1995, and Chairman and Chief Executive
Officer of Questron since February 1996. Questron sold its business and
assets to the General Electric Company, through a Chapter 11 Section
363 sale under the U.S. Bankruptcy Code, in May 2002. Mr. Polimeni has
also been a Managing Director of Gulfstream Financial Group, Inc., a
privately held financial consulting and investment-banking firm since
August 1990. Prior to that he held the position of Chief Financial
Officer of Arrow Electronics, Inc. (over $10.0 billion in sales in
2001) from 1986 to 1990. He also held several other positions,
including general management positions, with Arrow over an eight-year
period. Mr. Polimeni began his career as a certified public accountant
in the New York office of Arthur Young & Company.
David Siegel has been a Director of the Company since June 2000.
For more than the past five years Mr. Siegel has been a Vice President
and director of Great American Electronics, a distribution company,
which he founded. Mr. Siegel is also a director of Micronetics Corp.
and Surge Components Corp. Mr. Siegel previously served on our Board of
Directors from September 1991 to October 1996.
Page 16
ITEM 11. EXECUTIVE COMPENSATION:
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer and each of the three other executive
officers for the years ended February 28, 2002, February 28, 2001 and
February 29, 2000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation (1) Compensation
---------------------- ------------
Securities
Name of Principal Fiscal Underlying All other (3)
and Position Year Salary Bonus Options (2) Compensation
---------------- ---- ------ ----- ----------- ------------
Irving Lubman 2002 $ 263,040 $ 120,981 0 $ 41,313
COO, Chairman 2001 258,700 1,560,860 82,500 39,500
of the Board 2000 251,210 520,087 336,498 21,552
Arthur Nadata 2002 $ 263,040 $ 172,702 0 $ 39,605
President and 2001 258,700 2,229,791 112,500 39,047
CEO 2000 251,210 742,983 375,875 20,514
Richard Schuster 2002 $ 263,040 $ 172,702 0 $ 36,154
Vice President 2001 258,700 2,229,791 97,500 34,432
and Secretary and 2000 251,210 742,983 336,498 18,330
President, NIC
Components
Corp.
Paul Durando 2002 $ 180,000 $ 12,953 0 $ 1,800
Vice President, 2001 180,000 187,400 15,000 1,550
Finance and 2000 155,000 80,724 35,438 1,500
Treasurer
SUMMARY COMPENSATION TABLE - Footnotes
(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) Number of shares have been adjusted to reflect the Company's 3-for
-2 stock split in October 2000.
(3) 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 and, for Messrs.
Lubman, Nadata and Schuster contributions to life insurance
policies where the Company is not the beneficiary, and the cost to
the Company of the non-business use of Company automobiles used by
executive officers.
Page 17
ITEM 11. EXECUTIVE COMPENSATION (Continued):
Employment Contracts
On September 13, 1996, the Company signed employment contracts (the
"Contracts"), as amended, with three of its senior executives for a
continually renewing five-year term. The Contracts specify a base
salary of $226,545 for each officer in 1997, which shall be increased
each year by the change in the consumer price index, and also entitle
two of the three officers to an annual bonus equal to 3.33%, and the
third officer to 2.33% (9% 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. Each Contract also provides for certain payments
of the executive salary, 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.
No stock options were granted to the officers named in the Summary
Compensation Table during the fiscal year ended February 28, 2001.
The following table sets forth certain information as to each exercise
of stock options during the fiscal year ended February 28, 2002 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
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY End at FY End
------------- -------------
Shares Acquired Exercisable/ Exercisable/
on Exercise Value Realized (1) Unexercisable Unexercisable
--------------- ------------------ -------------- -------------
Irving Lubman 0 $ 0 388,956 $ 1,662,894
41,250 0
Arthur Nadata 0 $ 0 553,959 2,393,558
56,250 0
Richard Schuster 0 $ 0 466,708 2,003,616
48,750 0
Paul Durando 5,905 $ 28,757 25,218 87,350
7,500 0
(1) Market value less exercise price, before payment of applicable
federal or state taxes.
Page 18
ITEM 11. EXECUTIVE COMPENSATION (Continued):
Directors who are not employees of the Company receive an annual fee of
$3,000 for Board Membership and $500 for each Board of Directors or
Committee meeting attended. There were four meetings of the Board of
Directors and no meetings of the Compensation Committee during the
fiscal year ended February 28, 2002. One director attended or
participated in all of the meetings of the Board of Directors, two
directors attended three meetings and one director attended two
meetings.
For the fiscal year ended February 28, 2002, there were four meetings
of the Audit 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
2002, the Company had no standing Nominating Committee or any committee
performing similar functions.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee consisted during fiscal 2002 of
Messrs. Gardner (Chairman), Polimeni, Blau and Siegel. 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. Mr. Blau
resigned as a member of the Compensation Committee in May 2002.
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 Committee of the Board of Directors generally
determines the compensation of the Company's executive officers. 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 2002 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 interest of
the Company's stockholders.
Page 19
ITEM 11. EXECUTIVE COMPENSATION (Continued):
Relationship of Compensation to Performance
The Compensation Committee annually establishes, subject to any
applicable employment agreements, the salaries that 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.
The Compensation Committee of the Board of Directors under the Plans
grants stock options to key employees, including the Company's
executive officers. Among the Company's executive officers, the number
of shares subject to options granted to each individual generally
depends upon his or her base salary and the level of that officer's
management responsibility. During fiscal 2002, no options were granted
to the Company's executive officer.
During fiscal 2002, 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 $226,545, adjusted for
CPI index increases, and an incentive bonus equal to three and
thirty-three one-hundredths 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.
The Compensation Committee
Herbert Gardner
Dominic Polimeni
David Siegel
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 report 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.
Compliance with Section 16(a) of the Securities Exchange Act (continued)
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 2002.
Page 20
ITEM 11. EXECUTIVE COMPENSATION (Continued):
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, 1997 to February 28, 2002) 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.
COMPARE 5 -YEAR CUMULATIVE TOTAL RETURN
AMONG NU-HORIZONS ELECTRONICS CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
Measurement Period Nu Horizons NASDAQ
(Fiscal Year Covered) Electronics Corp. Market Index Peer Group
- ------------------------------------------------------------------------------------------------
FYB 3/01/97 $100.00 $100.00 $100.00
FYE 2/28/98 68.24 136.00 109.81
FYE 2/28/99 47.30 175.74 56.95
FYE 2/29/00 193.76 341.39 109.57
FYE 2/28/01 174.51 159.78 91.16
FYE 2/28/02 148.80 130.47 91.32
ASSUMES $100 INVESTED ON MARCH 1, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING FEBRUARY 28, 2002
Peer group includes All American Semiconductor, Arrow Electronics Inc.,
Avnet Inc., Bell Microproducts Inc., Jaco Electronics Inc., Pioneer
Standard Electronics and Reptron Electronics Inc.
1994 Stock Option Plan:
In September 1994, the Company's stockholders approved the 1994 Stock
Option Plan (the "1994 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 1,732,500
shares of the Company's Common Stock, as adjusted for a 5% stock
dividend and a three for two stock split. The
Page 21
ITEM 11. EXECUTIVE COMPENSATION (Continued):
Compensation Committee, consisting of at least two members of the Board of
Directors, administers the 1994 Plan. The Compensation Committee, subject
to provisions in the 1994 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 1994 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 to 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. Options are currently outstanding for 537,743 shares and
no options are currently available for grant.
The Compensation Committee of the Board of Directors has the responsibility
and authority to administer and interpret the provisions of the 1994 Plan.
The Compensation Committee shall appropriately adjust the number of shares
for which awards may be granted pursuant to the 1994 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 1994 Plan,
provided that, without the participant's approval, no change may be made
which would prevent an ISO granted under the 1994 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)
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 nor 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 Plan) the total number of shares
or other securities reserved for issuance under the 1994 Plan; (iii)
decreases the minimum option prices stated in Section 2.2 of the 1994 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 Plan, or the
limit on the maximum term of options; or (v) withdraws the administration
of the 1994 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 Plan.
1998 Stock Option Plan:
In May 1998, the Board of Directors adopted the Nu Horizons Electronics
Corp. 1998 Stock Option Plan (the "1998 Option Plan"), as amended, under
which any director, officer, employee or consultant of the Company, a
subsidiary or an affiliate may be granted options to purchase an aggregate
1,653,750 shares of the Company's Common Stock, as adjusted for a 5%
dividend and a 3-for-2 stock split. The 1998 Option Plan may be
administered by the Board of Directors of the Company or by a committee
consisting of two or more non-employee Directors, as defined by Rule 16b
under the Securities Exchange Act of 1934. The Compensation Committee
administers the 1998 Option Plan. Subject to the terms of the 1998 Option
Plan, the Board of Directors or the Committee may determine and designate
those directors, officers, employees and consultants who are to be granted
stock options under the 1998 Option Plan and the number of shares to be
subject to such options and the term of the options to be granted, which
term may not exceed ten years. The Board of Directors of the Committee
also, subject to the express provisions of the 1998 Option Plan, has the
authority to interpret the 1998 Option Plan and to prescribe, amend and
rescind the rules and regulations relating to the 1998 Option Plan. Only
non-qualified stock options may be granted under the terms of the 1998
Option Plan. The exercise price of the options granted under the 1998
Option Plan would not be less than such fair market value at the date of
grant. The option price, as well as the number of shares subject to such
option, shall be appropriately adjusted by the Committee in the event of
stock splits, stock dividends, recapitalizations, and certain other events
involving a change in the Company's capital. During fiscal 2002, no options
were granted under the 1998 Option Plan. Options are currently outstanding
for 1,308,219 shares and 32,409 options are currently available for grant.
Page 22
ITEM 11. EXECUTIVE COMPENSATION (Continued):
2000 Stock Option Plan:
In July 2000, the Board of Directors adopted the Nu Horizons
Electronics Corp. 2000 Stock Option Plan, under which any of the
Company's employees or consultants, or those of its subsidiaries or
affiliates, may be granted options to purchase an aggregate 300,000
shares of Common Stock, as adjusted for a 3-for-2 stock split. The
Company's executive officers and directors are not eligible to
participate in the 2000 Option Plan. The 2000 Option Plan may be
administered by the Board of Directors or a committee consisting of two
or more Non-Employee Directors, as defined by Rule 16b of the
Securities Exchange Act of 1934. The Compensation Committee administers
the 2000 Option Plan. Subject to the terms of the 2000 Option Plan, the
Board of Directors or the Committee may determine and designate those
employees and consultants who are to be granted stock options under the
2000 Option Plan, the number of shares to be subject to such options
and the term of the options to be granted, which term may not exceed
ten years. The Board of Directors or the Committee also, subject to the
express provisions of the 2000 Option Plan, has the authority to
interpret the 2000 Option Plan and to prescribe, amend and rescind the
rules and regulations relating to the 2000 Option Plan. Only
non-qualified stock options may be granted under the terms of the 2000
Option Plan. The exercise price for the options granted under the 2000
Option Plan will not be less than fair market value at the date of
grant. The option price, as well as the number of shares subject to
such option, shall be appropriately adjusted by the Committee in the
event of stock splits, stock dividends, recapitalizations and certain
other events involving a change in the Company's capital. During fiscal
2002, 39,000 options were granted under the plan with exercise prices
of $7.31, $7.53 and $8.68 and 144,750 options remain available for
grant.
2000 Key Employee Stock Option Plan:
In November 2000, the Company's stockholders approved the 2000 Key
Employee Stock Option Plan (the "2000 Key Employee Plan") under which
key employees and officers of the Company, its subsidiaries and
affiliates may be granted options to purchase an aggregate of 600,000
shares of the Company's Common Stock, as adjusted for a three for two
stock split. The 2000 Key Employee Plan may be administered by the
Board of Directors or a committee, consisting of two or more members of
the Board of Directors who are Non-Employee Directors, as defined by
Rule 16b of the Securities Exchange Act of 1934. Our Compensation
Committee administers the 2000 Key Employee Plan. Subject to the terms
of the 2000 Key Employee Plan, the Board of Directors or the Committee
may determine and designate those employees and consultants who are to
be granted stock options under the 2000 Key Employee Plan and the
number of shares to be subject to such options and the term of the
options to be granted, which term may not exceed ten years. The Board
of Directors or the Committee shall also, subject to the express
provisions of the 2000 Key Employee Plan, have the authority to
interpret the 2000 Key Employee Plan and to prescribe, amend and
rescind the rules and regulations relating to the 2000 Key Employee
Plan. Only non-qualified stock options may be granted under the terms
of the 2000 Key Employee Plan. The exercise price for the options
granted under the 2000 Key Employee Plan will not be less than fair
market value at the date of grant. The Committee in the event of stock
splits, stock dividends, recapitalizations and certain other events
involving a change in our capital shall, appropriately adjust the
option price, as well as the number of shares subject to such option.
During fiscal 2002, no options were granted under the plan and 600,000
options remain available for grant.
Outside Director Stock Option Plan:
In September 1994, the Company's stockholders approved the Outside
Directors Stock Option Plan (the "Director Plan") which covers 236,250
shares of the Company's Common Stock, as adjusted for a 5% stock
dividend and a 3-for-2 stock split. 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. At
February 28, 2002, there are 79,500 director options outstanding and no
options remain available for grant.
All directors of the Company who are not employees of the Company were
eligible to participate in the Director Plan.
Page 23
ITEM 11. EXECUTIVE COMPENSATION (Continued):
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 then serving, on
June 1 of each year from 1994 through 1999, received options to
purchase 10,000 shares of Common Stock (as adjusted for stock splits
and stock dividends) 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 vested 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.
2000 Outside Directors' Stock Option Plan:
In November 2000, the Company's stockholders approved the 2000 Outside
Directors' Stock Option Plan (the "2000 Director Plan") which covers
210,000 shares of the Company's Common Stock, as adjusted for a 3-for-2
stock split. The primary purposes of the 2000 Director Plan are to
attract and retain highly skilled individuals as directors of the
Company, to provide additional incentive to such outside directors to
serve as directors and to encourage their continued service on the
Board of Directors. At February 28, 2002, there are 120,000 director
options outstanding and 90,000 options remain available for grant.
All directors of the Company who are not employees of the Company, of
which there are four, are eligible to participate in the Director Plan.
The Board of Directors has the responsibility and authority to
administer and interpret the provisions of the 2000 Director Plan. The
Board of Directors of the Company may at any time amend, suspend or
discontinue the 2000 Director Plan but no such action shall adversely
affect any outstanding option without the consent of the optionee that
holds such option. 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 of the Company, the number of shares covered
by each outstanding option, the number of shares authorized under the
2000 Director Plan as well as the exercise price of each outstanding
option shall be appropriately adjusted
Under the Director Plan, on November 9, 2000 each non-employee
Director then serving received options to purchase 15,000 shares of
Common Stock at a price of $14.62 per share (the price of shares of
Common Stock on November 9, 2000) and on the June 1 of each subsequent
year each non-employee director then serving will be granted options to
purchase 15,000 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.
Summary of Fiscal 2002 Stock Option Grants:
During fiscal 2002, pursuant to the 2000 Director Plan, the Company
granted options to purchase 15,000 shares to each of Messrs. Blau,
Gardner, Polimeni and Siegel at a price of $11.40 per share.
Page 24
ITEM 11. EXECUTIVE COMPENSATION (Continued):
Employee Stock Ownership Plan:
In January 1987, the Company adopted an Employee Stock Ownership
Plan ("ESOP" or "Plan") that 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 thereunder)
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 inure 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, with
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 October 1999, the Company, on behalf of the ESOP, entered into a
revolving credit agreement with its bank, which provides for a
$3,000,000 revolving line of credit at the bank's prime rate until
October 2004. 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, 2002, there
were no amounts outstanding under this line of credit. At February
28, 2002, the ESOP owned 550,789 shares at an average price of
approximately $1.71 per share.
401(k) Savings Plan
The Company sponsors a retirement plan intended to be qualified
under Section 401(k) of the Internal Revenue 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 ($10,500 in calendar 2001). Company contributions are
discretionary. Effective with the plan year ended February 28, 2002,
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 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, 2002 approximately 250 employees had elected to
participate in the plan. For the fiscal year ended February 28, 2002,
the Company contributed approximately $145,947 to the plan, of which
$7,893 was a matching contribution of $2,631 for each of Mr. Lubman,
Mr. Nadata, Mr. Schuster and $1,800 for Mr. Durando.
Page 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The following table sets forth, as of May 1, 2002, certain
information with regard to the record and beneficial ownership of the
Company's Common Stock by (i) all persons known to the Company to be
beneficial owners of more than 5% of the company's outstanding Common
Stock, based solely on filings with the Commission; (ii) each
Director, (iii) the Company's Chief Executive Officer and the three
other most highly compensated executive officers of the Company; and
(iv) all executive officers and Directors as a group.
NAME SHARES PERCENT
------------------------------------------------ ---------------- -----------
Paul Durando 35,125 (1)(2 *
Herbert M. Gardner 135,711 (3)(4) *
Harvey R. Blau 20,642 (3) *
Dominic Polimeni 20,000 (3) *
David Siegel 36,804 (3) *
Irving Lubman 464,098 (5)(6) 2.7%
Arthur Nadata 964,262 (5)(6) 5.6%
Richard S. Schuster 925,663 (5)(6) 5.4%
Merrill Lynch Investment Managers 1,785,860 (7) 10.8%
Dimensional Fund Advisors 917,255 (8) 5.5%
FMR Corp. 1,654,700 (9) 10.0%
All officers and directors as a group (8 persons) 2,602,305 14.7%
NOTES:
------
(*) Less than 1% of the Company's outstanding stock.
(1) Includes options exercisable within 60 days for 25,218 shares of
Common Stock under the Company's 1998 Stock Option Plan and the 1994
Stock Option Plan.
(2) Includes 9,907 shares of fully vested Common Stock owned through the
Employee's Stock Ownership Plan, which include voting power.
(3) Includes options exercisable within 60 days for 99,500 shares of
common stock for Mr. Gardner, 20,000 for Mr. Blau, 20,000 shares for
Mr. Polimeni and 20,000 shares for Mr. Siegel under the Company's
Outside Director Stock Option Plan.
(4) Includes 4,330 shares owned by Mr. Gardner's spouse, as to which he
disclaims beneficial ownership, 5,775 shares held in the Gardner
Family Foundation, of which he is President, 13,623 shares owned by
Mr. Gardner's qualified plan and 5,587 shares held by his IRA.
(5) Includes options exercisable within 60 days for 388,956 shares of
common stock for Mr. Lubman, 466,708 for Mr. Schuster and 553,959
Nadata under the Company's 1998 Stock shares for Mr. Option Plan and
the 1994 Stock Option Plan.
(6) Includes 25,471 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.
(7) World Fin. Ctr., North Tower, 250 Vessey St., N.Y., N.Y. 10381
(8) 1299 Ocean Ave, 11/th/ Fl., Santa Monica, CA 90401
(9) 82 Devonshire Street, Boston, MA 02109
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Harvey R. Blau, a Director of the Company, is a member of Blau,
Kramer, Wactlar & Lieberman, P.C., general counsel to the Company. For
the fiscal year ended February 28, 2002, the Company paid $291,638 in
legal fees to Blau, Kramer, Wactlar & Lieberman, P.C.
For the fiscal year ended February 28, 2002, the Company received
an aggregate $282,174 in respect of 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, 2002, the Company received
an aggregate $465,404 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.
Page 26
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTON FORM 8K:
(a) (1) The following consolidated financial statements of the registrant and
its subsidiaries are filed as a part of this report:
Page
----
Independent Auditors' Report F-1
Consolidated Balance Sheets as of February 28, 2002 and February 28, 2001 F-2
Consolidated Statements of Income for the three years in the period ended
February 28, 2002 F-3
Consolidated Statements of Changes in Shareholders' Equity for the three
years in the period ended February 28, 2002 F-4
Consolidated Statements of Cash Flows for the three years in the period
ended February 28, 2002 F-5
Notes to Consolidated Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts and Reserves 35
(a) (3) See exhibits required - Item (c) below
(b) No reports were filed by the Company on Form 8-K during the last
quarter of the fiscal year.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------------------------------------------------------------------------
3.1 Certificate of Incorporation, as amended(Incorporated by
Reference to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the Quarter ended November 30, 2000).
3.2 By-laws, as amended (Incorporated by Reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended
February 29, 1988)
4.1 Specimen Common Stock Certificate (Incorporated by Reference as
Exhibit 4.1 to the Company's Registration Statement on Form
S-1, Registration No. 2-89176).
10.1 Agreement between the Company and Trustees relating to the
Company's Employee Stock Ownership Plan (Incorporated by
Reference to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended February 28, 1987).
Page 27
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTSON FORM 8K
(c) Exhibits (continued):
EXHIBIT
NUMBER DESCRIPTION
------------------------------------------------------------------------
10.2 Note Agreement dated August 15, 1994 between the Company and
Massachusetts Mutual Life Insurance Company (Incorporated by
Reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1994).
10.3 1994 Stock Option Plan (Incorporated by Reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1994).
10.4 Outside Director Stock Option Plan (Incorporated by Reference
to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1994).
10.5 Agreement dated September 22, 1995 between the Company and Paul
Durando (Incorporated by Reference to Exhibit 10.13 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995).
10.6 Employment and Change of Control Agreements dated September 13,
1996, between and Company and Irving Lubman. (Incorporated by
Reference to Exhibit 10.15 to the Company's Quarterly Report on
Form 10Q for the quarter ended August 31, 1996).
10.7 Employment and Change of Control Agreements dated September 13,
1996, between and Company and Arthur Nadata. (Incorporated by
Reference to Exhibit 10.16 to the Company's Quarterly Report on
Form 10Q for the quarter ended August 31, 1996).
10.8 Employment and Change of Control Agreements dated September 13,
1996, between and Company and Richard Schuster. (Incorporated
by Reference to Exhibit 10.17 to the Company's Quarterly Report
on Form 10Q for the quarter ended August 31, 1996).
10.9 Indemnity Agreements Dated May 23, 1997 between the Company and
Messrs. Blau, Durando, Gardner, Lubman, Nadata and Schuster
(incorporated by reference to Exhibit 10.19 to Form 10-Q for
the quarter ended May 31, 1997)
10.10 Revolving Credit Agreement dated October 18,2000 between the
Company and six banks: Mellon Bank, N.A., European American
Bank, HSBC Bank USA, Fleet Bank, The Chase Manhattan Bank and
The Bank of New York (Incorporated by reference to Exhibit
10.13 to form 10Q for the quarter ended November 30,2000).
10.11 1998 Stock Option Plan, as amended (Incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form
S-8, No.333-82805).
10.12 2000 Stock Option Plan (Incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-8,
No.333-51188).
10.13 2000 Key Employee Stock Option Plan (Incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form
S-8 No. 333-51192).
10.14 2000 Outside Directors' Stock Option Plan (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8 No.333-51190).
Page 28
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTSON FORM 8K
(d) Exhibits (continued):
EXHIBIT
NUMBER DESCRIPTION
-----------------------------------------------------------------------
11. Computation of Per Share Earnings
22. The following is a list of the Company's subsidiaries:
State or
Country of
Name Incorporation
-------------------------------------- ---------------
NIC Components Corp. New York
NIC Eurotech Limited United Kingdom
Nu Horizons International Corp. New York
NUV, Inc. Massachusetts
Nu Horizons/Merit Electronics Corp. Delaware
Nu Horizons Eurotech Limited United Kingdom
Titan Logistics Corp. New York
NIC Components Asia PTE.LTD. Singapore
Nu Horizons Asia PTE.LTD. Singapore
23. Accountants' Consent
99. Additional Exhibit
Page 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NU HORIZONS ELECTRONICS CORP.
(Registrant)
By: /s/ ARTHUR NADATA
----------------------------------------
Arthur Nadata,
President (Principal Operating Officer)
By: /s/ PAUL DURANDO
----------------------------------------
Paul Durando
Vice President, Finance
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the date indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
By: /s/ IRVING LUBMAN Chairman of The Board, May 23, 2002
--------------------------- Chief Operating Officer
Irving Lubman
By: /s/ ARTHUR NADATA President, Chief Executive May 23, 2002
--------------------------- Officer and Director
Arthur Nadata
By: /s/ RICHARD SCHUSTER Vice President, Secretary May 23, 2002
--------------------------- and Director
Richard Schuster
By: /s/ PAUL DURANDO Vice President, Finance, May 23, 2002
--------------------------- Treasurer and Director
Paul Durando
By: ___________________________ Director
Harvey R. Blau
By: /s/ HERBERT M. GARDNER Director May 23, 2002
---------------------------
Herbert M. Gardner
By: /s/ DOMINIC A. POLIMENI Director May 23, 2002
---------------------------
Dominic A. Polimeni
By: /s/ DAVID SIEGEL Director May 23, 2002
---------------------------
David Siegel
Page 30
Accountant's Consent
--------------------
We consent to the incorporation by reference in Registration Statement
numbers 333-79561, 333-82805, 33-88952, 33-88958, 333-51188, 333-51190
and 333-51192 on Form S-8 of our opinion dated May 3, 2002 on the
consolidated financial statements of Nu Horizons Electronics Corp. and
subsidiaries included in the Corporation's annual report on Form 10-K
for the fiscal year ended February 28, 2002.
/s/ LAZAR LEVINE & FELIX LLP
--------------------------------
LAZAR LEVINE & FELIX LLP
Certified Public Accountants
New York, New York
May 21, 2002
Page 31
99. Additional Exhibit:
------------------
The following undertakings are incorporated by reference into the
Company's Registration Statements on Form S-8 (Registration Nos.
33-88952, 33-88958, 333-79561, 333-82805, 333-51188, 333-51190 and
333-51192).
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to the registration
statement:
(i) To include any prospectus required by section 10(a)
(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a) (1) (i) and (a) (1)
(ii) do not apply if the registration statement is on Form
S-3 or Form S-8, and the information required to be included
in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant
pursuant to section 13 periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered, which remain,
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
Page 32
99. Additional Exhibit (Continued):
------------------
(f) (1) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus to each employee to whom the
prospectus is sent or given a copy of the registrant's annual report
to stockholders for its last fiscal year, unless such employee
otherwise has received a copy of such report, in which case the
registrant shall state in the prospectus that it will promptly
furnish, without charge, a copy of such report on written request of
the employee. If the last fiscal year of the registrant has ended with
120 days prior to the use of the prospectus, the annual report for the
fiscal year will be furnished to each such employee.
(2) The undersigned registrant hereby undertakes to transmit or
cause to be transmitted to all employees participating in the plan
who do not otherwise receive such material as stockholders of the
registrant, at the time and in the matter such material is sent to
its stockholders, copies of all reports, proxy statements and
other communications distributed to its stockholders generally.
(3) Where interests in a plan are registered herewith, the
undersigned registrant and plan hereby undertake to transmit or
cause to be transmitted promptly, without charge, to any
participant annual report of the plan filed pursuant to section
15(d) of the Securities Exchange Act of 1934 (Form 11-K). If such
report is filed separately on Form 11-K, such form shall be
delivered upon written request. If such report is filed as a part
of the registrant's annual report to stockholders delivered
pursuant to paragraph (1) or (2) of this undertaking, additional
delivery shall not be required.
(4) If the registrant is a foreign private issuer, eligible to use
Form 20-F, then the registrant shall undertake to deliver or cause
to be delivered with the prospectus to each employee to whom the
prospectus is sent or given, a copy of the registrant's latest
filing on Form 20-F in lieu of the annual report to stockholders.
(i) Insofar as indemnification for liabilities arising under
the Securities Act of 1933, may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the act and will be
governed by the final adjudication of such issue.
Page 33
SCHEDULE II
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
SCHEDULE II--VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
Three Years Ended February 28, 2002
Balance at Additions
Beginning charged to costs Balance at end
Description of period and expenses Deductions (A) of period
----------- --------- ------------ -------------- ---------
Valuation account
deducted in the
balance sheet from
the asset to which
it applies:
Allowance for
doubtful accounts-
accounts receivable
2002 $5,590,675 $ 0 $ 1,144,774 $4,445,901
========== ============ =========== ==========
2001 $3,447,072 $ 2,452,602 $ 308,999 $5,590,675
========== ============ =========== ==========
2000 $2,630,984 $ 1,097,337 $ 281,249 $3,447,072
========== ============ =========== ==========
(A) Accounts written off.
Page 34
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
EXHIBIT INDEX
to
FORM 10-K
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2002
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________
NU HORIZONS ELECTONICS CORP.
(Exact Name of Registrant as Specified in Its Charter)
EXHIBIT
NUMBER DESCRIPTION
-----------------------------------------------------------------------------
11 Computation of Per Share Earnings