-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VbuFmHpzujupEKy4bTIvJANLx3bZP8itM6ibLeM/x+WAM42z5yDJH2VV7QqPPC82 /M0ZzqtAOlFuAmUIP47r2w== 0000950150-97-000739.txt : 19970513 0000950150-97-000739.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950150-97-000739 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL INDUSTRIES INC CENTRAL INDEX KEY: 0000945489 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 954530889 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11471 FILM NUMBER: 97601307 BUSINESS ADDRESS: STREET 1: 11812 SAN VICENTE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90049-5069 BUSINESS PHONE: 3108262355 MAIL ADDRESS: STREET 1: 11812 SAN VICENTE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90049-5069 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA BELL INDUSTRIES INC DATE OF NAME CHANGE: 19950519 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarter ended March 31, 1997 Commission file number 1-11471 BELL INDUSTRIES, INC. --------------------- (Exact name of Registrant as specified in its charter) California 95-2039211 ---------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 11812 San Vicente Blvd., Los Angeles, California 90049-5069 ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 826-2355 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 the number of shares outstanding of the Registrant's class of common stock, as of May 1, 1997: 7,615,189 shares. 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements Bell Industries, Inc. Consolidated Statement of Income (In thousands, except per share data)
Three months ended --------------------- March 31 --------------------- 1997 1996 -------- -------- Net sales $218,503 $143,050 -------- -------- Costs and expenses Cost of products sold 170,820 110,511 Selling and administrative expenses 39,374 26,039 Integration charge 4,100 Interest expense 2,681 959 -------- -------- 216,975 137,509 -------- -------- Income before income taxes and extraordinary loss 1,528 5,541 Income tax provision 699 2,329 -------- -------- Income before extraordinary loss 829 3,212 Loss on early retirement of debt, net of tax 675 -------- -------- Net income $ 154 $ 3,212 ======== ======== Share and Per Share Data Income before extraordinary loss $ 0.11 $ 0.43 Loss on early retirement of debt, net of tax 0.09 -------- -------- Net income $ 0.02 $ 0.43 ======== ======== Weighted average common shares outstanding 7,824 7,544 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 -2- Bell Industries, Inc. Consolidated Condensed Balance Sheet (Dollars in thousands)
March 31 December 31 1997 1996 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 9,607 $ 12,097 Accounts receivable, less allowance for doubtful accounts of $2,090 and $1,626 123,036 83,155 Inventories 154,777 104,049 Prepaid expenses and other 11,816 5,820 -------- -------- Total current assets 299,236 205,121 -------- -------- Properties, net 32,627 22,049 Goodwill 72,025 8,795 Other assets 7,971 5,345 -------- -------- $411,859 $241,310 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 75,478 $ 43,839 Accrued liabilities and payroll 32,059 20,350 Current portion of long-term liabilities 7,971 8,076 -------- -------- Total current liabilities 115,508 72,265 -------- -------- Long-term liabilities: Long-term debt 151,850 24,571 Deferred compensation and other 5,080 6,013 -------- -------- Total long-term liabilities 156,930 30,584 -------- -------- Shareholders' equity: Preferred stock Authorized - 1,000,000 shares Outstanding - none Common stock Authorized - 35,000,000 shares Outstanding - 7,580,286 and 7,518,277 shares 76,473 75,666 Reinvested earnings 62,948 62,795 -------- -------- Total shareholders' equity 139,421 138,461 Commitments and contingencies -------- -------- $411,859 $241,310 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 -3- Bell Industries, Inc. Consolidated Statement of Cash Flows (In thousands)
Three months ended March 31 --------------------- 1997 1996 --------- --------- Cash flows from operating activities: Net income $ 154 $ 3,212 Depreciation and amortization 1,647 1,399 Amortization of intangibles 920 160 Provision for losses on accounts receivable 579 521 Integration charge 4,100 Loss on early retirement of debt 675 Changes in assets and liabilities, net of acquisitions 1,804 3,970 --------- --------- Net cash provided by operating activities 9,879 9,262 --------- --------- Cash flows from investing activities: Purchase of business (100,404) (386) Purchases of equipment and improvements (2,270) (915) --------- --------- Net cash used in investing activities (102,674) (1,301) --------- --------- Cash flows from financing activities: Payments on Senior Notes (24,700) (5,143) Bank borrowings, net 114,200 2,681 Employee stock plans and other 805 488 --------- --------- Net cash provided by (used in) financing activities 90,305 (1,974) --------- --------- Net increase (decrease) in cash and cash equivalents (2,490) 5,987 Cash and cash equivalents at beginning of period 12,097 4,819 --------- --------- Cash and cash equivalents at end of period $ 9,607 $ 10,806 ========= ========= Changes in assets and liabilities, net of acquisitions: Accounts receivable $ (2,311) $ (2,603) Inventories 1,447 5,863 Accounts payable 5,184 1,115 Accrued liabilities and deferred compensation (2,312) (1,558) Other (204) 1,153 --------- --------- Net change $ 1,804 $ 3,970 ========= ========= Supplemental cash flow information: Interest paid $ 2,656 $ 1,874 Income taxes paid $ 539 $ 921
See accompanying Notes to Consolidated Condensed Financial Statements. 5 -4- Bell Industries, Inc. Notes to Consolidated Financial Statements Accounting Principles The financial information included herein has been prepared in conformity with the accounting principles reflected in the financial statements included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. The operating results for the interim periods presented are not necessarily indicative of results for the full year. Per Share Data Operating results data per share is based upon the weighted average number of common and common equivalent shares outstanding. Common equivalent shares represent the net number of shares which would be issued assuming the exercise of dilutive stock options and stock warrants, reduced by the number of shares which could be repurchased from the proceeds of such exercises. Earnings Per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which revises the computation and disclosure of earnings per share (EPS). SFAS 128 becomes effective for the year ending December 15, 1997 but is not effective for interim periods. The adoption of this standard will not have a material effect on the Company's earnings per share. 6 -5- Acquisition of Milgray Electronics - ---------------------------------- In January 1997, Bell completed the acquisition of Milgray Electronics, Inc., ("Milgray") a publicly-traded distributor of electronic components. Under the terms of the acquisition, shareholders of Milgray received $14.77 per share for an aggregate purchase price of approximately $100 million. The acquisition was accounted for under the purchase method of accounting and operating results of Milgray are included from the acquisition date in the financial statements of the Company for the first quarter of 1997. The fair value of non-cash assets acquired, including goodwill, was approximately $167 million and liabilities assumed totaled approximately $65 million. Goodwill of $64 million will be amortized over 25 years on a straight-line basis. On a pro forma basis, assuming the Milgray acquisition had occurred on January 1, 1996, the combined revenues, net income and net income per share for the three months ended March 31, 1996 were $214.2 million, $3.7 million and $.49 per share. Non-cash Investing and Financing Activities - ------------------------------------------- Non-cash investing and financing activities included the acquisition of a 265,000 square foot electronics distribution center in Ontario, California, which was financed through the assumption of Adjustable Tender Industrial Revenue Bonds due in 2015. The distribution center and related bonds were recorded at estimated fair market value of $6.2 million. 7 -6- Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. In January 1997, Bell completed the acquisition of Milgray Electronics, Inc., a publicly traded distributor of electronic components. During the first quarter of 1997 the Company initiated plans to integrate the operations of Milgray into the Electronics Group of Bell. Accordingly, the results of operations of the Company for the first quarter of 1997 include the results of Milgray. Results of operations by business segment for the three months ended March 31, 1997 and 1996 were as follows (in thousands):
Three months ended March 31 Pro forma (1) ------------------------ ------------- 1997 1996 1996 --------- --------- --------- Net sales Electronics $ 170,770 $ 113,748 $ 184,889 Graphics and Electronic Imaging 38,334 20,777 20,777 Recreational Products 9,399 8,525 8,525 --------- --------- --------- $ 218,503 $ 143,050 $ 214,191 ========= ========= ========= Operating income Electronics (2) $ 5,437 $ 7,560 $ 10,801 Graphics and Electronic Imaging 1,232 928 928 Recreational Products 210 314 314 --------- --------- --------- 6,879 8,802 $ 12,043 ========= Corporate costs (2,670) (2,302) Interest expense (2,681) (959) Income tax provision (699) (2,329) --------- --------- Income before extraordinary loss 829 3,212 Loss on early retirement of debt, net of tax (675) --------- --------- Net income $ 154 $ 3,212 $ 3,725 ========= ========= =========
Notes (1) Pro forma operating results are presented as if Bell and Milgray were combined at January 1, 1996 and include estimates for goodwill amortization and increased interest expense. (2) Includes before-tax special charge of $4.1 million (after-tax $2.2 million or $.28 per share) for costs associated with the integration of Bell and Milgray. 8 -7- For the three months ended March 31, 1997, the Company's net sales increased 53% to $218.5 million from $143.1 million in 1996 and increased 2% when compared to the prior year on a pro forma basis including Milgray. Operating income decreased 22% to $6.9 million as compared to the prior year quarter and decreased 43% when compared to the prior year on a pro forma basis. In the first quarter of 1997, the Company finalized its plans for the integration of Milgray and recorded a special before-tax charge totaling $4.1 million for costs associated with the integration, including provisions for employee severance, lease commitments, and costs related to supplier terminations. In addition, the Company recorded an extraordinary loss of $675,000, net of tax, as a result of the early retirement of Bell's 9.70% Senior Notes, which were replaced under Bell's new credit facility. After the special charge, Bell's income before extraordinary item was $829,000, or $.11 per share and net income was $154,000, or $.02 per share as compared to $3.2 million or $.43 per share for the same period in 1996. On a pro forma basis, Bell and Milgray combined net income was $3.7 million, or $.49 per share, in the prior year period. Sales of the Electronics Group increased 50% to $170.8 million as compared to the first quarter of 1996. Sales decreased 8% when compared to the pro forma sales of Bell-Milgray combined for the corresponding quarter last year. Operating income, before the integration charge discussed above, increased 26% to $9.5 million. When compared to the pro forma combined amounts last year, operating income decreased 12%. Increased sales and operating income over historical amounts reflected the Milgray acquisition, partially offset by lower sales of electronic components. When compared to pro forma amounts, operating results also reflected reduced shipments of memory products. The trend of reduced shipments of electronic components, primarily memory and other semiconductor products, is expected to continue through the second quarter of 1997. Graphics and Electronic Imaging Group sales increased 85% to $38.3 million and operating income increased 33% to $1.2 million. Increased sales and operating income were primarily attributed to the contribution from recently acquired operations and stronger market conditions in California. Recreational Products Group sales increased 10% to $9.4 million while operating income decreased 33% to $.2 million. Operating results were effected by the group's recent expansion in Michigan and difficult weather conditions in the northern Midwest. 9 -8- Cost of products sold as a percentage of sales increased to 78.2% from 77.3%, while selling and administrative expenses decreased to 18% of sales from 18.2%. The Company's income tax rate was approximately 46% for the first quarter of 1997 compared to 42% in 1996 due to the impact of non deductible goodwill for income tax purposes. Since acquiring Milgray in January, Bell has devoted considerable effort into integrating the electronics distribution operations. The objective is to establish a unified selling organization by the time Bell's computer system is accessible to all Milgray operations, which is expected in the second half this year. The Company also plans to consolidate three distribution facilities at its new distribution center in Southern California, which is scheduled for occupancy in late 1997. Selected financial position data is set forth in the following table (dollars in thousands, except per share amounts):
March 31 December 31 1997 1996 -------- -------- Cash and cash equivalents $ 9,607 $ 12,097 Working capital $183,728 $132,856 Current ratio 2.6:1 2.8:1 Long-term liabilities to total capitalization 53% 18% Shareholders' equity per share $ 18.39 $ 18.42 Days' sales in receivables 53 48 Days' sales in inventories 82 76
Net cash provided by operating activities was $9.9 million in the first quarter of 1997, a slight increase over $9.3 million for the comparable period in 1996. Concurrent with the acquisition of Milgray, the Company entered into a five-year $250 million secured revolving credit facility with a syndicate of banks to finance the Milgray purchase, retire all existing debt of both companies and provide for ongoing working capital requirements. The new facility, which replaced the Company's $50 million line of credit, includes a $50 million term loan, payable quarterly over five years, and a revolving credit line. In connection with the placement of the credit facility in early 1997, the Company redeemed its outstanding 9.70% Senior Notes for $24.7 million, including related make-whole premiums. In addition to the Milgray acquisition, cash flows were used to fund equipment and improvement purchases, including continued investment in information systems. Non-cash investing and financing activities included the acquisition of a 265,000 square foot electronics distribution center in Ontario, California, which was financed through the assumption of Adjustable Tender Industrial Revenue Bonds due in 2015. The distribution center and related bonds were recorded at estimated fair market value of $6.2 million. The Company believes that sufficient cash resources exist to support short-term requirements, including debt and lease payments, and longer term objectives, either through available cash, bank borrowings, or cash generated from operations. 10 -9- PART II - OTHER INFORMATION Items 1 through 5. Not applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 27. Financial Data Schedule. (b) Reports on Form 8-K: Form 8-K dated January 22 1997, filed in connection with the acquisition of Milgray Electronics, Inc. Form 8-K/A dated March 24, 1997, filed in connection with the acquisition of Milgray Electronics, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BELL INDUSTRIES, INC. By: DATE: May 12, 1997 /s/ THEODORE WILLIAMS ------------------------------- Theodore Williams, Chairman and Chief Executive Officer DATE: May 12, 1997 /s/ GORDON M. GRAHAM ------------------------------- Gordon M. Graham, President and Chief Operating Officer DATE: May 12, 1997 /s/ TRACY A. EDWARDS ------------------------------- Tracy A. Edwards, Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 9,607 0 127,036 4,000 154,777 299,236 61,366 28,739 411,859 115,508 156,930 0 0 76,473 62,948 411,859 218,503 218,503 170,820 170,820 43,474 579 2,681 1,528 699 829 0 675 0 154 .02 .02
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