70 Maxess Road ▪ Melville, NY 11747
631-396-5000 ▪ Fax: 631-396-3016
UFOR IMMEDIATE RELEASE
0BNU HORIZONS’ 2009 THIRD QUARTER RESULTS IMPACTED BY GLOBAL DECLINE IN
DEMAND BUT COMPANY’S FINANCIAL CONDITION REMAINS STRONG
UTo manage costs in response to the difficult economic environment, the company
Ureduces workforce and implements salary reductions.
MELVILLE, NY, January 8, 2009 - --- Nu Horizons Electronics Corp. (Nasdaq/NM: NUHC), a leading distributor of active and passive electronic components today reported financial and operating results for the third quarter and nine months ended November 30, 2008.
Net sales for the quarter ended November 30, 2008, decreased 2.4 percent to $188,219,000 as compared to $192,886,000 for the comparable period last year. Sequentially, net sales between the second and third quarters of fiscal 2009 declined by 11.1 percent, or $23,594,000, due to softness in demand worldwide associated with the current economic slowdown, as well as a $13,800,000 non-recurring systems order in the second quarter of fiscal 2009 for discontinued Sun Microsystems products.
Net income for the quarter was $150,000, or $0.01 per diluted share, as compared to a net loss of ($373,000) or ($0.02) per diluted share for the third quarter of the prior year. The net income in the third quarter of 2009 included an income tax benefit of $1,127,000, or $0.06 per diluted share, based on a domestic loss in the third quarter and tax adjustments related to the fiscal 2008 Federal tax filing, partially offset by foreign income tax.
For the nine months ended November 30, 2008, net sales increased to $600,184,000 from $553,487,000 in the comparable period last year, an increase of 8.4 percent. Net income for the first nine months of fiscal 2009 was $1,497,000, or $0.08 per diluted share, compared to net income of $2,098,000, or $0.11 per diluted share in the same period last year.
For the third quarter ended November 30, 2008, operating expenses as a percentage of sales decreased to 15.2 percent from 15.7 percent in the prior year and year-to-date was 14.3 percent, compared to 15.1 percent in the prior comparable period.
On an adjusted basis, excluding unusual items such as professional fees related to the SEC investigation entitled, "In the Matter of Vitesse Semiconductor Corp." and the related internal investigation being conducted by the company's audit committee, warehouse consolidation charges, tax benefits and other one-time charges, diluted earnings per share were $0.01 and $0.18 for the three and nine months ended November 30, 2008, respectively, compared to $0.07 and $0.27 per diluted share in the comparable periods in the prior fiscal year (see Exhibit B).
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 2 |
| in Demand But Company’s Financial Condition Remains Strong |
According to Arthur Nadata, Nu Horizons’ chairman of the board and chief executive officer, "during the third quarter of fiscal 2009, the decline in global demand resulting from current worldwide economic conditions had an impact on the company’s sales in every geographic region," Nadata said.
Sales in Asia, which were less negatively impacted during the quarter than other regions, increased approximately 11 percent compared to the third quarter of fiscal 2008, but declined approximately 4 percent sequentially. Sales in North America declined approximately 6 percent compared to the prior year period and approximately 14 percent sequentially. Excluding the non-recurring systems sales of $13,800,000 reported in the second quarter of fiscal 2009, North American sales declined approximately 5 percent sequentially during the third quarter of fiscal 2009. Sales in Europe declined approximately 12 percent, compared to the same period in 2008, and approximately 6 percent sequentially, driven by the major softness in the demand environment throughout this region. While demand was particularly weak in the UK, sales in Germany were significantly higher year-over-year due to increased marketshare, although these sales also declined sequentially. A comparison of sales by geographic area is included as Exhibit A below.
"Sales from our systems business," Nadata said, "declined year-over-year for the three month period as well as sequentially, with the decline between the second and third quarters of fiscal 2009 driven, in part, by the end-of-life non-recurring sales in the second quarter mentioned above. However, notwithstanding these lower sales, we are pleased with the dramatic increase in profitability that has resulted from concentrating on more profitable opportunities with mid-tier customers."
Continuing, Nadata said, "management believes Nu Horizons is financially strong with $187,206,000 in working capital and $61,600,000 additional borrowing capacity available under the company’s credit agreements as of November 30, 2008. Current economic forecasts indicate a continuation of the worldwide economic slowdown and for electronics-related businesses to weaken. In such an environment, the company will have reduced working capital requirements which will increase cash from operations that can be utilized to reduce borrowings under the bank credit agreements. At November 30, 2008, the outstanding borrowing under the credit agreements was approximately $61,253,000. The company believes that it has favorable relationships with the consortium of banks that participate in its credit agreements despite the nation's credit crisis.”
"In addition," he said, "we are focusing on managing our costs and reducing expenses where we can in response to the difficult economic conditions. Our goal has been to implement cost reductions without compromising our competitive position in the market or our ability to add value for our OEM customers and technology suppliers. Toward this end, in the past 60 days, we have reduced our workforce and also implemented a salary and commission reduction program which becomes effective January 19, 2009. Together these actions are expected to create an annual savings of $6,500,000 to $7,500,000.”
"Despite the impact of the unfavorable economic conditions of the past several months, we believe that our determination to expand our global presence both in Asia and Europe positions us well for continued growth as the global market improves. In the months ahead, we expect to face ongoing obstacles due to unfavorable global economic conditions. Nevertheless, we continue to believe that we can navigate this unpredictable business environment and benefit in the longer term from our strong competitive position in the global marketplace," Nadata said.
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 3 |
| in Demand But Company’s Financial Condition Remains Strong |
UCertain Non-GAAP Financial Information
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles ("GAAP"), the company provides certain non-GAAP financial information relating to net income and net income per diluted share, each as adjusted for certain expenses and other items that the company believes impact the comparability of its results of operations. These expenses and other items arise from professional fees related to the SEC investigation entitled, "In the Matter of Vitesse Semiconductor Corp." and the related internal investigation being conducted by the company's audit committee, costs related to the company's warehouse consolidation, severance, and in fiscal 2007 the restatement of our financial statements previously reported, as well as tax benefits. A reconciliation of the company's non-GAAP financial information to GAAP is set forth in Exhibit B.
The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company's operating performance and underlying trends in the company's business because management considers the expenses referred to above to be outside the company's normal operating results. This non-GAAP financial information is among the indicators management uses as a basis for evaluating the company's financial and operating performance.
The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, operating income, net income and net income per diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.
A conference call to further discuss earnings will be held today at 4:30 pm Eastern time. The call can be accessed by dialing 1-888-481-2871, (international, dial 1-719-325-2331) The teleconference ID number is 4865977. A rebroadcast of the call will be available beginning at 7:30 pm Eastern time at 1-888-203-1112 (international, dial 1-719-457-0820) The replay passcode is 4865977. A webcast of the call will also be available, online (both live and after the call), at HUwww.nuhorizons.comUH.
About Nu Horizons Electronics Corp.
Nu Horizons Electronics Corp. is a leading global distributor of advanced technology semiconductor, display, illumination, power and system solutions to a wide variety of commercial original equipment manufacturers (OEMs) and Electronic Manufacturing Services providers (EMS). With sales facilities in 54 locations across North America, Europe and Asia and regional logistics centers throughout the globe, Nu Horizons partners with a limited number of best-in-class suppliers to provide in-depth product development, custom logistics and life-cycle support to its customers. Information on Nu Horizons and its services is available at http://www.nuhorizons.com
Cautionary Statement Regarding Forward-Looking Statements
Except for historical information contained herein, the matters set forth in this news release are forward looking statements. When used in this press release, words such as "anticipate,""believe,""estimate,""expect,""intend" and similar expressions, as they relate to Nu Horizons or its management, identify forward-looking statements. Such forward-looking statements are based on the current beliefs of Nu Horizons’ management, as well as assumptions made by and information currently available to its management. Forward-looking statements 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 current economic and credit crisis, 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 financial strength of the Company’s customers and suppliers and risks and costs related to the pending Vitesse-related SEC investigation and class action litigation. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission. Such statements reflect our current view with respect to the future and are subject to these and other risks, uncertainties and assumptions relating to Nu Horizons’ financial condition, results of operations, growth strategy and liquidity. The Company does not undertake any obligation to update its forward-looking statements.
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 4 |
| in Demand But Company’s Financial Condition Remains Strong |
Company Contacts:
Kurt Freudenberg, Chief Financial Officer
Nu Horizons Electronics Corp.
HUkurt.freudenberg@nuhorizons.comU
631-396-5000
Connie Chandler, Investor Relations
Nu Horizons Electronics Corp.
HUconnie.chandler@nuhorizons.comU
212-842-4698
(Tables Follow)
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 5 |
| in Demand But Company’s Financial Condition Remains Strong |
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
November 30, 2008 | November 30, 2007 | November 30, 2008 | November 30, 2007 | |||||||||||||
4BNET SALES | $ | 188,219,000 | $ | 192,886,000 | $ | 600,184,000 | $ | 553,487,000 | ||||||||
| COSTS AND EXPENSES: | ||||||||||||||||
| Cost of sales | 159,709,000 | 161,049,000 | 509,904,000 | 460,951,000 | ||||||||||||
| Operating expenses | 28,653,000 | 30,271,000 | 86,077,000 | 83,816,000 | ||||||||||||
188,362,000 | 191,320,000 | 595,981,000 | 544,767,000 | |||||||||||||
| OPERATING INCOME (LOSS) | (143,000 | ) | 1,566,000 | 4,203,000 | 8,720,000 | |||||||||||
| OTHER (INCOME) EXPENSE | ||||||||||||||||
| Interest expense | 747,000 | 1,175,000 | 2,563,000 | 3,150,000 | ||||||||||||
| Interest income | (7,000 | ) | (14,000 | ) | (11,000 | ) | (34,000 | ) | ||||||||
| 740,000 | 1,161,000 | 2,552,000 | 3,116,000 | |||||||||||||
| INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND MINORITY INTERESTS | (883,000 | ) | 405,000 | 1,651,000 | 5,604,000 | |||||||||||
| Provision (benefit) for income taxes | (1,127,000 | ) | 653,000 | (151,000 | ) | 3,189,000 | ||||||||||
| INCOME (LOSS) BEFORE MINORITY INTERESTS | 244,000 | (248,000 | ) | 1,802,000 | 2,415,000 | |||||||||||
| Minority interest in earnings of subsidiaries | 94,000 | 125,000 | 305,000 | 317,000 | ||||||||||||
| NET INCOME (LOSS) | $ | 150,000 | $ | (373,000 | ) | $ | 1,497,000 | $ | 2,098,000 | |||||||
NET INCOME (LOSS) PER COMMON SHARE: | ||||||||||||||||
| Basic | $ | .01 | $ | (.02 | ) | $ | .08 | $ | .11 | |||||||
| Diluted | $ | .01 | $ | (.02) | $ | .08 | $ | .11 | ||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
| Basic | 18,067,795 | 18,377,582 | 18,035,460 | 18,322,489 | ||||||||||||
| Diluted | 18,067,795 | 18,377,582 | 18,137,584 | 19,047,418 | ||||||||||||
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 6 |
| in Demand But Company’s Financial Condition Remains Strong |
CONSOLIDATED CONDENSED BALANCE SHEETS
November 30, 2008 | February 29, 2008 | |||||||
| (unaudited) | ||||||||
| - ASSETS - | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 5,840,000 | $ | 3,886,000 | ||||
| Accounts receivable - net of allowance for doubtful accounts of $4,075,000 and $4,269,000 as of November 30, 2008 and February 29, 2008, respectively | 141,406,000 | 150,270,000 | ||||||
| Inventories | 117,465,000 | 122,761,000 | ||||||
| Deferred tax asset | 3,135,000 | 3,135,000 | ||||||
| Prepaid expenses and other current assets | 4,053,000 | 4,306,000 | ||||||
2BTOTAL CURRENT ASSETS | 271,899,000 | 284,358,000 | ||||||
| PROPERTY, PLANT AND EQUIPMENT – NET | 4,944,000 | 4,529,000 | ||||||
| OTHER ASSETS: | ||||||||
| Cost in excess of net assets acquired | 13,967,000 | 9,925,000 | ||||||
| Intangibles – net | 2,347,000 | 2,500,000 | ||||||
| Other assets | 5,106,000 | 5,101,000 | ||||||
| TOTAL ASSETS | $ | 298,263,000 | $ | 306,413,000 | ||||
| - LIABILITIES AND SHAREHOLDERS’ EQUITY - | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 66,559,000 | $ | 67,306,000 | ||||
| Accrued expenses | 8,388,000 | 8,615,000 | ||||||
| Due to seller | 293,000 | 3,245,000 | ||||||
| Revolving credit line | 5,000,000 | - | ||||||
| Bank credit lines | 4,453,000 | 603,000 | ||||||
| Income taxes payable | - | 133,000 | ||||||
3BTOTAL CURRENT LIABILITIES | 84,693,000 | 79,902,000 | ||||||
| LONG TERM LIABILITIES | ||||||||
| Revolving credit lines | 51,800,000 | 69,300,000 | ||||||
| Executive retirement plan | 2,221,000 | 1,684,000 | ||||||
| Due to seller | 188,000 | - | ||||||
| Deferred tax liability | 2,085,000 | 2,072,000 | ||||||
| TOTAL LONG TERM LIABILITIES | 56,294,000 | 73,056,000 | ||||||
| MINORITY INTEREST IN SUBSIDIARIES | 2,568,000 | 2,261,000 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $1 par value, 1,000,000 shares authorized; none issued or outstanding | - | - | ||||||
Common stock, $.0066 par value, 50,000,000 shares authorized; 18,584,306 and 18,392,457 shares issued and outstanding as of November 30, 2008 and February 29, 2008, respectively | 122,000 | 121,000 | ||||||
| Additional paid-in capital | 56,091,000 | 54,979,000 | ||||||
| Retained earnings | 98,118,000 | 96,621,000 | ||||||
| Other accumulated comprehensive income (loss) | 377,000 | (527,000 | ) | |||||
5BTOTAL SHAREHOLDERS’ EQUITY | 154,708,000 | 151,194,000 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 298,263,000 | $ | 306,413,000 | ||||
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 7 |
| in Demand But Company’s Financial Condition Remains Strong |
UEXHIBIT A
Quarterly Analysis of Sales
($ in Thousands)
| FY 2009 | ||||||||||||||||||||||||||||
| % of | % of | % of | % of | |||||||||||||||||||||||||
| YTD | Total | Q3 | Total | Q2 | Total | Q1 | Total | |||||||||||||||||||||
| Sales by Geographic Area: | ||||||||||||||||||||||||||||
| North America | $ | 388,097 | 64.7% | $ | 118,813 | 63.1% | $ | 138,927 | 65.6% | $ | 130,357 | 65.1% | ||||||||||||||||
| Asia | 163,308 | 27.2% | 53,976 | 28.7% | 56,385 | 26.6% | 52,947 | 26.5% | ||||||||||||||||||||
| Europe | 48,779 | 8.1% | 15,430 | 8.2% | 16,501 | 7.8% | 16,848 | 8.4% | ||||||||||||||||||||
| $ | 600,184 | 100.0% | $ | 188,219 | 100.0% | $ | 211,813 | 100.0% | $ | 200,152 | 100.0% | |||||||||||||||||
| FY 2008 | ||||||||||||||||||||||||||||
| % of | % of | % of | % of | |||||||||||||||||||||||||
| YTD | Total | Q3 | Total | Q2 | Total | Q1 | Total | |||||||||||||||||||||
| Sales by Geographic Area: | ||||||||||||||||||||||||||||
| North America | $ | 387,542 | 70.0% | $ | 126,941 | 65.8% | $ | 128,891 | 69.5% | $ | 131,710 | 75.2% | ||||||||||||||||
| Asia | 120,959 | 21.9% | 48,510 | 25.2% | 40,021 | 21.6% | 32,428 | 18.5% | ||||||||||||||||||||
| Europe | 44,986 | 8.1% | 17,435 | 9.0% | 16,457 | 8.9% | 11,094 | 6.3% | ||||||||||||||||||||
| $ | 553,487 | 100.0% | $ | 192,886 | 100.0% | $ | 185,369 | 100.0% | $ | 175,232 | 100.0% | |||||||||||||||||
* * * *
| Nu Horizons’ 2009 Third Quarter Results Impacted by Global Decline | Page 8 |
| in Demand But Company’s Financial Condition Remains Strong |
UEXHIBIT B
UAdjusted Effect of Unusual Items:
The table below presents adjusted net income and adjusted diluted earnings per share which gives effect to the core operating results, excluding material unusual items:
Effect of Unusual Items on Net Income (Loss) UAnd Diluted Earnings Per ShareU |
Quarter Ended November 30, 2008 | Quarter Ended November 30, 2007 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Reported actual net income (loss) | $ | 150,000 | $ | (373,000 | ) | |||
| Add: Unusual items net of tax: | ||||||||
Professional fees(1) | 466,000 | 1,379,000 | ||||||
Interest and penalties related to tax restatement(2) | -- | 238,000 | ||||||
Severance(3) | -- | 160,000 | ||||||
Warehouse consolidation charges(4) | 183,000 | -- | ||||||
Tax benefit – permanent items(5) | (586,000 | ) | -- | |||||
| Adjusted net income | $ | 213,000 | $ | 1,404,000 | ||||
| Adjusted diluted earnings per share | $ | 0.01 | $ | 0.07 | ||||
| Diluted shares outstanding | 18,067,795 | 18,896,611 | ||||||
Nine Months Ended November 30, 2008 | Nine Months Ended November 30, 2007 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Reported actual net income | $ | 1,497,000 | $ | 2,098,000 | ||||
| Add: Unusual items net of tax: | ||||||||
Professional fees(1) | 1,913,000 | 1,772,000 | ||||||
Interest and penalties related to tax restatement(2) | -- | 1,035,000 | ||||||
Severance(3) | -- | 160,000 | ||||||
Warehouse consolidation charges(4) | 366,000 | -- | ||||||
Tax benefit – permanent items(5) | (586,000 | ) | -- | |||||
| Adjusted net income | $ | 3,190,000 | $ | 5,065,000 | ||||
| Adjusted diluted earnings per share | $ | 0.18 | $ | 0.27 | ||||
| Diluted shares outstanding | 18,137,584 | 19,047,418 | ||||||
UNotes:U | |
| (1) | Professional fees related to the SEC inquiry related to "In the matter of Vitesse Semiconductor" and in FY 2008 only, the restatement of our financial statements previously reported. |
| (2) | Interest and penalties related to income taxes associated with the previously announced restatement of our financial statements. |
| (3) | Severance cost associated with the domestic reduction in workforce previously announced November 29, 2007. |
| (4) | Severance costs and accelerated depreciation associated with the warehouse consolidation project previously announced July 9, 2008. |
| (5) | Permanent items noted in preparing the fiscal 2008 Federal tax return which give rise to $586,000 of tax benefits for the three and nine months ended November 30, 2008. |
* * * * *