-----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, Khu+Mvdw6H3kS5Oj6Gb/OU1ViNQuS+0WtTT8IpWLqBUs2tLYCIxxC8DWxBhidRA8 aELhmuDXKIYZeU/s26lBCA== 0000950150-98-001322.txt : 19980807 0000950150-98-001322.hdr.sgml : 19980807 ACCESSION NUMBER: 0000950150-98-001322 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL INDUSTRIES INC /NEW/ 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: SEC FILE NUMBER: 001-11471 FILM NUMBER: 98678733 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 JUNE 30, 1998 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 June 30, 1998 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.) 2201 East El Segundo Blvd., El Segundo, California 90245-4608 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 563-2355 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 July 24, 1998: 9,430,854 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 Six months ended June 30 June 30 -------------------- -------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net sales $210,336 $233,779 $423,751 $452,282 -------- -------- -------- -------- Costs and expenses Cost of products sold 168,243 184,787 338,058 355,607 Selling and administrative expenses 32,528 36,940 65,491 73,747 Depreciation and amortization 2,742 2,593 5,345 5,160 Interest expense 3,215 2,908 6,675 5,589 Integration charge 4,100 -------- -------- -------- -------- 206,728 227,228 415,569 444,203 -------- -------- -------- -------- Income before income taxes and extraordinary loss 3,608 6,551 8,182 8,079 Income tax provision 1,697 3,082 3,830 3,781 -------- -------- -------- -------- Income before extraordinary loss 1,911 3,469 4,352 4,298 Loss on early retirement of debt, net of tax 675 -------- -------- -------- -------- Net income $ 1,911 $ 3,469 $ 4,352 $ 3,623 ======== ======== ======== ======== Share and Per Share Data BASIC Income before extraordinary loss $ 0.20 $ 0.38 $ 0.47 $ 0.47 Loss on early retirement of debt, net of tax 0.07 -------- -------- -------- -------- Net income $ 0.20 $ 0.38 $ 0.47 $ 0.40 ======== ======== ======== ======== Weighted average common shares 9,383 9,113 9,357 9,091 ======== ======== ======== ======== DILUTED Income before extraordinary loss $ 0.20 $ 0.37 $ 0.46 $ 0.46 Loss on early retirement of debt, net of tax 0.07 -------- -------- -------- -------- Net income $ 0.20 $ 0.37 $ 0.46 $ 0.39 ======== ======== ======== ======== Weighted average common shares 9,475 9,321 9,460 9,355 ======== ======== ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements. 3 -2- Bell Industries, Inc. Condensed Consolidated Balance Sheet (Dollars in thousands)
June 30 December 31 1998 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 10,629 $ 5,377 Accounts receivable, less allowance for doubtful accounts of $2,199 and $2,673 115,072 120,900 Inventories 157,111 173,801 Prepaid expenses and other 9,015 8,990 -------- -------- Total current assets 291,827 309,068 -------- -------- Properties, net 44,374 42,079 Goodwill 71,248 72,758 Other assets 8,542 7,328 -------- -------- $415,991 $431,233 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 71,302 $ 67,121 Accrued liabilities and payroll 24,073 26,435 Current portion of long-term liabilities 8,750 7,500 -------- -------- Total current liabilities 104,125 101,056 -------- -------- Long-term debt 147,418 172,330 Deferred compensation and other 7,937 6,495 Shareholders' equity: Preferred stock Authorized - 1,000,000 shares Outstanding - none Common stock Authorized - 35,000,000 shares Outstanding -9,407,300 and 9,326,391 shares 101,217 100,410 Reinvested earnings 55,294 50,942 -------- -------- Total shareholders' equity 156,511 151,352 Commitments and contingencies -------- -------- $415,991 $431,233 ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements. 4 -3- Bell Industries, Inc. Consolidated Statement of Cash Flows (In thousands)
Six months ended June 30 ----------------------- 1998 1997 --------- --------- Cash flows from operating activities: Net income $ 4,352 $ 3,623 Depreciation and amortization 3,422 3,299 Amortization of intangibles 1,923 1,861 Provision for losses on accounts receivable 754 1,137 Integration charge 4,100 Loss on early retirement of debt 675 Changes in assets and liabilities, net of acquisitions 23,373 (8,003) --------- --------- Net cash provided by operating activities 33,824 6,692 --------- --------- Cash flows from investing activities: Purchases of properties (5,717) (6,279) Purchase of business (100,404) --------- --------- Net cash used in investing activities (5,717) (106,683) --------- --------- Cash flows from financing activities: Bank borrowings (payments), net (23,662) 118,892 Employee stock plans and other 807 1,282 Payments on Senior Notes (24,700) --------- --------- Net cash provided by (used in) financing activities (22,855) 95,474 --------- --------- Net increase (decrease) in cash and cash equivalents 5,252 (4,517) Cash and cash equivalents at beginning of period 5,377 12,097 --------- --------- Cash and cash equivalents at end of period $ 10,629 $ 7,580 ========= ========= Changes in assets and liabilities, net of acquisitions: Accounts receivable $ 5,074 $ (12,356) Inventories 16,690 (4,989) Accounts payable 4,181 13,590 Accrued liabilities (920) (3,955) Other (1,652) (293) --------- --------- Net change $ 23,373 $ (8,003) ========= ========= Supplemental cash flow information: Interest paid $ 6,157 $ 5,155 Income taxes paid $ $ 2,992
See accompanying Notes to Condensed Consolidated Financial Statements. 5 -4- Bell Industries, Inc. Notes to Condensed 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, 1997. 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 Basic earnings per share data is based upon the weighted average number of common shares outstanding. Diluted earnings per share data is based upon the weighted average number of common shares outstanding plus the number of common shares potentially issuable for dilutive securities such as stock options and warrants. Non-cash Investing and Financing Activities During the six months ended June 30, 1997, 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. Proposed Sale of Graphics Imaging Group In July 1998, the Company signed a letter of intent to sell its Graphics Imaging Group to PrimeSource Corporation, a New Jersey based distributor and systems integrator serving the printing, publishing and graphic arts industries. The transaction is subject to customary due diligence and is anticipated to close during the Company's third quarter ending September 30, 1998. The Company expects to record a gain on the transaction. 6 -5- Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Results of operations by business segment for the three months and six months ended June 30, 1998 and 1997 were as follows (in thousands):
Three months ended Six months ended June 30 June 30 ----------------------- ----------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net sales Electronics $ 158,933 $ 180,009 $ 327,424 $ 350,779 Graphics Imaging 36,343 40,160 71,474 78,494 Recreational Products 15,060 13,610 24,853 23,009 --------- --------- --------- --------- $ 210,336 $ 233,779 $ 423,751 $ 452,282 ========= ========= ========= ========= Operating income Electronics (1) $ 6,773 $ 10,161 $ 16,594 $ 15,598 Graphics Imaging 1,643 1,012 2,654 2,244 Recreational Products 1,504 1,211 1,908 1,421 --------- --------- --------- --------- 9,920 12,384 21,156 19,263 Corporate costs (3,097) (2,925) (6,299) (5,595) Interest expense (3,215) (2,908) (6,675) (5,589) Income tax provision (1,697) (3,082) (3,830) (3,781) --------- --------- --------- --------- Income before extraordinary loss 1,911 3,469 4,352 4,298 Loss on early retirement of debt, net of tax 675 --------- --------- --------- --------- Net income $ 1,911 $ 3,469 $ 4,352 $ 3,623 ========= ========= ========= =========
Note: (1) Includes before-tax special charge of $4.1 million recorded in first quarter of 1997. Net sales for the six months ended June 30, 1998, decreased approximately 6% to $423.8 million from $452.3 million in 1997, while operating income increased to $21.2 million as compared to $19.3 million in the comparable 1997 period. For the three months ended June 30, 1998, the Company's net sales decreased to $210.3 million from $233.8 million in 1997. Operating income decreased to $9.9 million as compared to $12.4 million in the 1997 period. Operating income for the six months ended June 30, 1997 included a special charge of $4.1 million recorded during the first quarter. The Company's profitability, excluding special and extraordinary charges incurred in the prior year, was negatively impacted by softness in its core electronics distribution business, reduced gross profit margins caused by competitive market conditions and higher interest costs. Partially offsetting these factors were generally lower operating expenses. 7 -6- In the first quarter of 1997 the Company completed the acquisition of Milgray Electronics, Inc. In connection with the acquisition, the Company recorded a special before-tax charge of $4.1 million for costs associated with the integration of Milgray, including provision for severance costs, related exit costs, and costs related to supplier terminations. In addition, the Company recorded an extraordinary charge of $675,000 ($.07 per share), net of taxes, relating to the early retirement of Senior notes, which were replaced under the Company's new credit facility. Sales of the Electronics Group for the six months ended June 30, 1998, decreased to $327.4 million as compared to $350.8 million in the comparable 1997 period while operating income increased to $16.6 million from $15.6 million in the 1997 period. For the three months ended June 30, 1998, Electronics Group sales decreased to $158.9 million as compared to $180.0 million in the comparable 1997 period and operating income decreased to $6.8 million from $10.2 million in the 1997 period. Sales for the three and six month periods ended June 30, 1998 were impacted by softness in shipments of electronic components caused by fundamental changes in customer buying patterns and worldwide market conditions. Excluding the special charge noted above, operating income declined for the three and six month periods reflecting lower gross profit margins caused by industry-wide competitive pressures. Graphics Imaging Group sales for the six months ended June 30, 1998 decreased to $71.5 million from $78.5 million in the comparable 1997 period, while operating income increased to $2.7 million from $2.2 million in the 1997 period. For the three months ended June 30, 1998, sales decreased to $36.3 million from $40.2 million for the comparable 1997 period while operating income increased to $1.6 million from $1.0 million in the 1997 period. Increased operating income was primarily attributable to reduced operating expenses, particularly at more recently acquired locations. Recreational Products Group sales for the six months ended June 30, 1998 increased to $24.9 million from $23.0 million in the comparable 1997 period and operating income increased to $1.9 million from $1.4 million in the 1997 period. For the three months ended June 30, 1998, sales increased to $15.1 million from $13.6 million for the comparable 1997 period and operating income increased to $1.5 million from $1.2 million in the 1997 period. Increased sales and operating income reflected strong performance from recently expanded operations in Michigan and favorable weather conditions. As a percentage of sales, cost of products sold for the six months ended June 30, 1998 increased to 79.8% from 78.6%, while selling and administrative expenses as a percent of sales decreased to 15.5% from 16.3%. Lower operating expenses reflected the Company's cost containment efforts. The Company's income tax rate was 46.8% for both six month periods presented. 8 -7- Selected financial position data is set forth in the following table (dollars in thousands, except per share amounts):
June 30 December 31 1998 1997 -------- ----------- Cash and cash equivalents $ 10,629 $ 5,377 Working capital $187,702 $208,012 Current ratio 2.8:1 3.1:1 Long-term liabilities to total capitalization 50% 54% Shareholders' equity per share $ 16.64 $ 16.23 Days' sales in receivables 51 53 Days' sales in inventories 85 93
Net cash provided by operating activities was $33.8 million for the six months ended June 30, 1998, compared to $6.7 million for the comparable 1997 period. Increased operating cash flows resulted primarily from working capital reductions. Operating cash flows were used to reduce borrowings under the Company's line of credit and to fund property additions, including improvements to the new electronics distribution center in Ontario, California. In 1997, financing cash flows included bank borrowings used to fund the acquisition of Milgray and the retirement of Senior notes. In July 1998, the Company signed a letter of intent to sell its Graphics Imaging Group. The transaction is subject to customary due diligence and is anticipated to close during the Company's third quarter. Anticipated net proceeds from the sale will be used to reduce borrowings under the Company's line of credit and for general corporate purposes. 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. 9 -8- PART II - OTHER INFORMATION Items 1 through 3. Not applicable Item 4. Submission of Matters to a Vote of Security Holders. The Annual Meeting of Shareholders of Bell Industries was held on May 5, 1998 to act on the following matters. 1. Election of Directors. The six incumbent directors - John J. Cost, Anthony L. Craig, Gordon Graham, Milton Rosenberg, Herbert S. Davidson and Theodore Williams - were re-elected. Directors will serve until the next Annual Meeting of Shareholders and until their successors are elected and have qualified. The vote was as follows:
Votes Votes Directors Votes for against withheld --------- --------- ------- -------- John J. Cost 8,181,583 -0- 90,273 Anthony L. Craig 8,187,854 -0- 84,002 Herbert S. Davidson 8,175,337 -0- 96,519 Gordon Graham 8,207,282 -0- 64,574 Milton Rosenberg 8,208,157 -0- 63,699 Theodore Williams 8,206,588 -0- 65,268
10 -9- Item 5. Other Information. Not applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 27. Financial Data Schedule. (b) Reports on Form 8-K: None 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: August 5, 1998 /s/GORDON GRAHAM ------------------------------ Gordon Graham, President and Chief Executive Officer DATE: August 5, 1998 /s/ TRACY A. EDWARDS ------------------------------ Tracy A. Edwards, Executive Vice President-Finance and Operations, and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JUN-30-1998 10,629 0 117,271 2,199 157,111 291,827 70,028 25,654 415,991 104,125 155,355 0 0 101,217 55,294 415,991 423,751 423,751 338,058 338,058 70,836 754 6,675 8,182 3,830 4,352 0 0 0 4,352 .47 .46
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