-----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, LjwlwqCr6JfBwW7REv7vY0gFZydvdUpEJtCy5WFsJp7C4EUB+4Ays5A2aaeR9GLR RH4XAb1T9kDR8NWxNj6F2Q== 0000950150-99-000110.txt : 19990209 0000950150-99-000110.hdr.sgml : 19990209 ACCESSION NUMBER: 0000950150-99-000110 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990208 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: 952039211 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-11471 FILM NUMBER: 99523597 BUSINESS ADDRESS: STREET 1: 2201 E EL SEGUDON BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3105632355 MAIL ADDRESS: STREET 1: 2201 E EL SEGUDON BLVD CITY: EL SEGUDON STATE: CA ZIP: 90245 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA BELL INDUSTRIES INC DATE OF NAME CHANGE: 19950519 10-Q/A 1 AMENDMENT TO 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarter ended September 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 November 9, 1998: 9,488,306 shares. 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements Bell Industries, Inc. Consolidated Statement of Operations (In thousands, except per share data)
Three months ended Nine months ended September 30 September 30 --------------------------------- ---------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales $ 168,895 $ 185,734 $ 521,172 $ 559,523 --------------- --------------- ---------------- --------------- Costs and expenses Cost of products sold 136,766 144,713 414,982 434,502 Selling and administrative 26,741 29,539 83,745 93,255 Depreciation and amortization 2,141 2,177 6,995 6,937 Interest expense 2,992 3,221 9,667 8,810 Business system and corporate resizing charges 13,800 13,800 Integration charge 4,100 --------------- --------------- ---------------- --------------- 182,440 179,650 529,189 547,604 --------------- --------------- ---------------- --------------- Income(loss)from continuing operations before income taxes and extraordinary loss (13,545) 6,084 (8,017) 11,919 Income tax provision (benefit) (4,475) 2,876 (1,732) 5,715 --------------- --------------- ---------------- --------------- Income(loss)from continuing operations before extraordinary loss (9,070) 3,208 (6,285) 6,204 Income from discontinued operations, net of tax 330 600 1,897 1,902 Gain on sale of discontinued operations, net of tax 1,748 1,748 Loss on early retirement of debt, net of tax (675) --------------- --------------- ---------------- --------------- Net income (loss) $ (6,992) $ 3,808 $ (2,640) $ 7,431 =============== =============== ================ =============== Share and Per Share Data BASIC Income (loss) from continuing operations before extraordinary loss $ (0.96) $ 0.35 $ (0.67) $ 0.68 Income from discontinued operations 0.03 0.07 0.20 0.21 Gain on sale of discontinued operations 0.19 0.19 Loss on early retirement of debt (0.07) --------------- --------------- ---------------- --------------- Net income (loss) $ (0.74) $ 0.42 $ (0.28) $ 0.82 =============== =============== ================ =============== Weighted average common shares 9,442 9,171 9,385 9,118 =============== =============== ================ =============== DILUTED Income (loss) from continuing operations before extraordinary loss $ (0.96) $ 0.34 $ (0.67) $ 0.66 Income from discontinued operations 0.03 0.06 0.20 0.20 Gain on sale of discontinued operations 0.19 0.19 Loss on early retirement of debt (0.07) --------------- --------------- ---------------- --------------- Net income (loss) $ (0.74) $ 0.40 $ (0.28) $ 0.79 =============== =============== ================ =============== Weighted average common shares 9,442 9,494 9,385 9,401 =============== =============== ================ ===============
See accompanying Notes to Condensed Consolidated Financial Statements. 3 -2- Bell Industries, Inc. Condensed Consolidated Balance Sheet (Dollars in thousands)
September 30 December 31 1998 1997 --------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 4,957 $ 5,377 Accounts receivable, less allowance for doubtful accounts of $2,009 and $2,673 89,033 120,900 Net receivable from sale of Graphics 12,257 Inventories 131,064 173,801 Prepaid expenses and other 11,052 8,990 --------------- --------------- Total current assets 248,363 309,068 --------------- --------------- Properties, net 35,215 42,079 Goodwill 67,540 72,758 Other assets 9,411 7,328 --------------- --------------- $ 360,529 $ 431,233 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 51,799 $ 67,121 Accrued liabilities and payroll 27,315 26,435 Current portion of long-term liabilities 9,375 7,500 --------------- --------------- Total current liabilities 88,489 101,056 --------------- --------------- Long-term debt 114,710 172,330 Deferred compensation and other 7,105 6,495 Shareholders' equity: Preferred stock Authorized - 1,000,000 shares Outstanding - none Common stock Authorized - 35,000,000 shares Outstanding -9,488,306 and 9,326,391 shares 101,925 100,410 Reinvested earnings 48,300 50,942 --------------- --------------- Total shareholders' equity 150,225 151,352 --------------- --------------- Commitments and contingencies $ 360,529 $ 431,233 =============== ===============
See accompanying Notes to Condensed Consolidated Financial Statements. 4 -3- Bell Industries, Inc. Consolidated Statement of Cash Flows (In thousands)
Nine months ended September 30 ------------------------------ 1998 1997 ---- ---- Cash flows from operating activities: Net income (loss) $ (2,640) $ 7,431 Depreciation and amortization 4,835 4,750 Amortization of intangibles 2,850 2,795 Provision for losses on accounts receivable 1,221 1,541 Gain on sale of discontinued operations (1,748) Business system charge 8,000 Integration charge 4,100 Loss on early retirement of debt 675 Changes in assets and liabilities, net of acquisitions and discontinued operations 17,722 (22,302) ------------ ----------- Net cash provided by (used in) operating activities 30,240 (1,010) ------------ ----------- Cash flows from investing activities: Proceeds from sale of discontinued operations 30,148 Purchases of properties (6,596) (12,970) Purchase of business (100,404) ------------ ----------- Net cash provided by (used in) investing activities 23,552 (113,374) ------------ ----------- Cash flows from financing activities: Bank borrowings (payments), net (55,745) 130,807 Employee stock plans and other 1,533 2,439 Payments on Senior Notes (24,700) ------------ ----------- Net cash provided by (used in) financing activities (54,212) 108,546 ------------ ----------- Net decrease in cash and cash equivalents (420) (5,838) Cash and cash equivalents at beginning of period 5,377 12,097 ------------ ----------- Cash and cash equivalents at end of period $ 4,957 $ 6,259 ============ =========== Changes in assets and liabilities, net of acquisitions and discontinued operations: Accounts receivable $ 6,420 $ (12,969) Inventories 20,393 (12,718) Accounts payable (2,975) 4,533 Accrued liabilities and other (6,116) (1,148) ------------ ------------ Net change $ 17,722 $ (22,302) ============ =========== Supplemental cash flow information: Interest paid $ 9,834 $ 8,524 Income taxes paid $ -0- $ 3,673
See accompanying Notes to Condensed Consolidated Financial Statements. 5 -4- Bell Industries, Inc. Notes to Condensed Consolidated Financial Statements Accounting Policies 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. For the three and nine month periods ended September 30, 1998 potentially dilutive securities were not included in the computation of the weighted average number of shares, as inclusion of such amounts would be antidilutive. Proposed Sale of Electronics Distribution Group On October 1, 1998, the Company agreed to sell its Electronics Distribution Group ("EDG"). The purchase price is approximately $185 million in cash and the assumption of substantially all of the liabilities of EDG, subject to post closing adjustments. The sale requires the approval of the Company's shareholders, along with customary regulatory review and is expected to close in early 1999. Sale of Graphics Imaging Group On September 14, 1998, the Company sold substantially all of the assets of its Graphics Imaging Group ("Graphics"). The net purchase price is approximately $40 million, subject to post closing adjustments and results in a $3.0 million pre-tax gain ($1.7 million net of tax). The results of Graphics have been classified as discontinued operations in the accompanying financial statements. For the nine months ended September 30, 1998 and 1997, Graphics had sales of $99.6 million and $118.2 million, respectively. For 1998, sales are included through the date of sale. Non-cash Investing and Financing Activities For the nine months ended September 30, 1998 and in connection with the sale of Graphics, non-cash investing activities included the recording of a net receivable, totaling $12,257 at September 30, 1998, collectible over the 90 day period following the sale. During the nine months ended September 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 their estimated fair market values of $6.2 million. 6 -5- Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. In September 1998, Bell completed the disposition of its Graphics Imaging Group ("Graphics"). Accordingly, the results of Graphics have been classified as discontinued operations in the accompanying financial statements. The Electronics segment set forth below includes the Company's Electronics Distribution Group, computer integration business, and electronics manufacturing business. On October 1, 1998, the Company entered into an agreement to sell its Electronics Distribution Group ("EDG") to Arrow Electronics, Inc. The sale requires the approval of the Company's shareholders, along with customary regulatory review and is expected to close in early 1999. Results of operations by business segment for the three months and nine months ended September 30, 1998 and 1997 were as follows (in thousands):
Three months ended Nine months ended September 30 September 30 --------------------------------- --------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales Electronics(1) $ 155,851 $ 172,355 $ 483,275 $ 523,134 Recreational Products 13,044 13,379 37,897 36,389 ---------------- --------------- ---------------- --------------- $ 168,895 $ 185,734 $ 521,172 $ 559,523 ================ =============== ================ =============== Operating income Electronics (1, 2) $ 649 $ 11,259 $ 17,243 $ 26,857 Recreational Products 809 1,031 2,717 2,452 ---------------- --------------- ---------------- --------------- 1,458 12,290 19,960 29,309 Corporate costs (2,111) (2,985) (8,410) (8,580) Interest expense (2,992) (3,221) (9,667) (8,810) Business system and corporate resizing charges (3) (9,900) (9,900) Income tax provision (benefit) (4,475) 2,876 (1,732) 5,715 ---------------- --------------- ---------------- --------------- Income (loss) from continuing operations before extraordinary loss (9,070) 3,208 (6,285) 6,204 Income from discontinued operations, net of tax 330 600 1,897 1,902 Gain on sale of discontinued operations, net of tax 1,748 1,748 Loss on early retirement of debt, net of tax (675) ---------------- --------------- ---------------- --------------- Net income (loss) $ (6,992) $ 3,808 $ (2,640) $ 7,431 ================ =============== ================ ===============
NOTES:(1) Includes the results of the Company's computer integration and electronics manufacturing businesses which had net sales and operating income of $122.9 million and $6.8 million, for the nine months ended September 30, 1998, and $113.8 million and $7.9 million for the corresponding period in 1997. (2) Includes $3.9 million of employee separation and related exit costs in the third quarter 1998 and $4.1 million integration charge in the first quarter of 1997. (3) Includes $8.0 million charge for discontinuance of business system and $1.9 million of employee separation and related exit costs in the third quarter of 1998. 7 -6- For the three months ended September 30, 1998, the Company's net sales decreased to $168.9 million from $185.7 million in the prior year. Operating income, excluding a special charge of $3.9 million for employee separation costs in the electronics group, was $5.4 million, compared with $12.3 million last year. Excluding special charges, pretax income from continuing operations was $255,000, compared with $6.1 million last year. Net sales for the nine months ended September 30, 1998, decreased to $521.2 million from $559.5 million in 1997, while operating income excluding special charges decreased to $23.9 million as compared to $33.4 million in the comparable 1997 period. Excluding special charges, pretax income from continuing operations was $5.8 million, compared with $16.0 million for the prior year period. The Company's operating results from continuing operations, before special and extraordinary charges, were negatively impacted by continued softness in the electronics distribution business and reduced gross profit margins caused by competitive market conditions. Partially offsetting these factors were generally lower operating expenses. In the third quarter of 1998, the Company incurred a pretax charge of $8.0 million to write off the investment and provide for related commitments for the discontinuance of the use and development of the SAP business system. In addition, the Company recorded a special pretax charge of $5.8 million for employee separation and related exit costs associated with a resizing program for electronics ($3.9 million) and corporate ($1.9 million) operations. Also, in the third quarter of 1998, the Company completed the sale of its Graphics business for a net purchase price of approximately $40 million, resulting in a pretax gain of approximately $3.0 million (after-tax $1.7 million, or $.19 per share). The final purchase price is subject to certain post closing adjustments which are not expected to be material. 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. 8 -7- Sales of the Electronics Group for the three months ended September 30, 1998, decreased to $155.9 million as compared to $172.4 million in the comparable 1997 period and operating income, before the special charges discussed above, decreased to $4.5 million from $12.3 million in the 1997 period. For the nine months ended September 30, 1998, sales decreased to $483.3 million as compared to $523.1 million in the comparable 1997 period while operating income before the special charges discussed above, decreased to $21.1 million from $31.0 million in the 1997 period. Sales for the three and nine month periods ended September 30, 1998 were impacted by industry-wide market weakness resulting in reduced shipments of electronic components. Excluding the special charges noted above, operating income declined for the three and nine month periods reflecting lower gross profit margins caused by intensified competitive pricing pressures. Recreational Products Group sales for the three months ended September 30, 1998 decreased to $13.0 million from $13.4 million for the comparable 1997 period and operating income decreased to $0.8 million from $1.0 million in the 1997 period. Operating results in the third quarter of 1998 were negatively impacted by the effect of warmer weather conditions on winter product shipments. For the nine months ended September 30, 1998 sales increased to $37.9 million from $36.4 million in the comparable 1997 period and operating income increased to $2.7 million from $2.5 million in the 1997 period. Growth for the nine month period is primarily attributable to the Company's expansion to Michigan. As a percentage of sales, cost of products sold for the nine months ended September 30, 1998 increased to 79.6% from 77.7%, while selling and administrative expenses, as a percent of sales, decreased to 16.1% from 16.7%. Lower operating expenses reflected the Company's cost reduction efforts and resizing programs. In 1998, the Company recorded a 21.6% tax benefit compared to a 47.9% tax provision for the comparable 1997 period. The effective tax rates differ from the combined statutory rate of approximately 40% due primarily to the effect of non-deductible goodwill relative to accounting income or loss for the period. Selected financial position data is set forth in the following table (dollars in thousands, except per share amounts):
September 30 December 31 1998 1997 ---- ---- Cash and cash equivalents $ 4,957 $ 5,377 Working capital $ 159,874 $ 208,012 Current ratio 2.8:1 3.1:1 Long-term liabilities to total capitalization 45% 54% Shareholders' equity per share $ 15.83 $ 16.23 Days' sales in receivables 50 53 Days' sales in inventories 88 93
9 -8- Net cash provided by operating activities was $30.2 million for the nine months ended September 30, 1998, compared to net cash used in operating activities of $1.0 million for the comparable 1997 period. Increased operating cash flows resulted from working capital reductions, primarily inventory. Operating cash flows were used to reduce borrowings under the Company's line of credit and to fund property additions, including improvements to the Company's electronics distribution center in Ontario, California. In 1998, investing cash flows included proceeds from the sale of Graphics which were used to reduce borrowings under the Company's line of credit. In 1997, financing cash flows included bank borrowings used to fund the acquisition of Milgray and the retirement of senior notes. In October 1998, the Company agreed to sell its Electronics Distribution Group. The transaction is subject to shareholder approval, along with customary regulatory review and is anticipated to close early in 1999. The Company will use a portion of the net proceeds from the sale to pay off its indebtedness under its credit facility. In addition, the Company intends to make a cash distribution to shareholders ranging between $50 million to $60 million approximately 90 days after the closing. The Company expects to record a significant accounting loss on the transaction of approximately $60 to $65 million before tax effects. 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. In 1997, the Company initiated a project to ensure all its business systems as well as non-informational systems, such as HVAC systems, building security, elevators, phone systems and other related systems are Year 2000 compliant. The Year 2000 project encompasses three major phases: Inventory - taking stock of the various applications and systems in use by the Company; Assessment - analyzing the exposure of Year 2000 issues in the various applications and systems; and Renovation - taking action to correct Year 2000 deficiencies noted in the assessment phases. The Company anticipates achieving Year 2000 compliance over 1998 and 1999 by converting certain of its business systems to Year 2000 hardware and software platforms and by reprogramming other business systems. To date, the Inventory and Assessment phases of critical systems and support functions are complete and renovation is underway. Implementation of Year 2000 compliant business systems has begun and is anticipated to be completed by the second quarter of 1999. As a contingency plan, the Company has completed the reprogramming of significant existing business systems for Year 2000 compliance in the event that new business systems are not operational by 2000. The Company does not have any other contingency plans at this time. In addition, the Company has identified and prioritized and is communicating with its material suppliers and third party providers ("Material Third Parties") to determine their Year 2000 status and any probable impact on Bell. Bell will continue to track and evaluate its long-term relationship with Material Third Parties based on the responses it receives and on information learned from other sources. If any of Bell's Material Third Parties are not Year 2000 ready and their non-compliance causes a material disruption to any of their respective businesses, Bell's business could be materially adversely affected. Bell will continue to evaluate the nature of these risks, but at this time Bell is unable to determine the probability that any such risk will occur, or if it does occur, what the nature, length or other effects, if any, it may have on Bell. If a significant number of Material Third Parties experience failures in their computer systems or operations due to not being Year 2000 compliant, it could affect Bell's ability to process transactions or otherwise engage in similar normal business activities. While this risk is outside of Bell's control, Bell has instituted the program mentioned above to identify Material Third Parties and to address any non-compliance issues. The estimated cost of the Year 2000 project has not been and is not expected to be material to the Company's financial position or results of operations. Although Bell believes its business systems will be Year 2000 compliant on or before December 31, 1999, the Company makes no assurances regarding the success of this program, or that third party systems will be Year 2000 compliant. The Company cannot be assured that failure to achieve Year 2000 compliance will not have a material impact on the Company's business. Certain matters discussed herein contain forward looking information that involves risks and uncertainties that could cause actual results to differ materially from current trends. These include, but are not limited to, consummating the sale of the electronics distribution business, the proposed cash distributions to shareholders, and other risks. 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 omitted as previously filed with 10-Q dated September 30, 1998. (b) Reports on Form 8-K: Form 8-K/A, event date: September 14, 1998, filed in connection with the sale of the Graphics Imaging Group. Form 8-K/A, event date: October 1, 1998, filed in connection with the sale of the Electronics Distribution Group. 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: February 5, 1999 /s/ TRACY A. EDWARDS - ----- ----------------- ---------------------- Tracy A. Edwards, President and Chief Executive Officer DATE: February 5, 1999 /s/ RUSSELL A. DOLL - ----- ----------------- ---------------------- Russell A. Doll, Vice President- Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----