10-Q 1 a72719e10-q.txt FORM 10-Q FOR PERIOD ENDED MARCH 31, 2001 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, 2001 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.) 1960 E. Grand Avenue, Suite 560, El Segundo, California 90245 ------------------------------------------------------- --------- (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 May 5, 2001: 8,858,637 shares. 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements Bell Industries, Inc. Consolidated Statement of Income (Unaudited, in thousands, except per share data)
Three months ended March 31 ------------------------- 2001 2000 -------- -------- Net sales $ 52,986 $ 54,927 Costs and expenses Cost of sales 44,622 46,729 Selling and administrative 8,350 7,774 Interest, net (164) (43) -------- -------- 52,808 54,460 -------- -------- Income before income taxes 178 467 Income tax provision 70 185 -------- -------- Net income $ 108 $ 282 ======== ======== Share and Per Share Data BASIC Net income $ 0.01 $ 0.03 ======== ======== Weighted average common shares 8,823 9,529 ======== ======== DILUTED Net income $ 0.01 $ 0.03 ======== ======== Weighted average common shares 8,879 9,631 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 -2- Bell Industries, Inc. Consolidated Condensed Balance Sheet (Dollars in thousands)
March 31 December 31 2001 2000 -------- ----------- ASSETS Unaudited Current assets: Cash and cash equivalents $ 9,365 $ 14,433 Accounts receivable, less allowance for doubtful accounts of $1,204 and $1,222 29,422 31,701 Inventories 15,505 15,065 Prepaid expenses and other 4,033 4,012 -------- -------- Total current assets 58,325 65,211 -------- -------- Fixed assets, net 5,154 4,238 Goodwill 2,206 1,540 Other assets 3,122 3,437 -------- -------- $ 68,807 $ 74,426 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 21,114 $ 24,492 Accrued liabilities and payroll 13,775 16,041 -------- -------- Total current liabilities 34,889 40,533 -------- -------- Deferred compensation and other 3,182 3,411 Shareholders' equity: Preferred stock Authorized - 1,000,000 shares Outstanding - none Common stock Authorized - 35,000,000 shares Outstanding - 8,838,806 and 8,790,936 shares 33,263 33,117 Accumulated deficit (2,527) (2,635) -------- -------- Total shareholders' equity 30,736 30,482 Commitments and contingencies -------- -------- $ 68,807 $ 74,426 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 -3- Bell Industries, Inc. Consolidated Statement of Cash Flows (Unaudited, in thousands)
Three months ended March 31 ------------------------- 2001 2000 -------- -------- Cash flows from operating activities: Net income $ 108 $ 282 Depreciation and amortization 449 389 Provision for losses on accounts receivable 42 42 Changes in assets and liabilities (3,820) (5,102) -------- -------- Net cash used in operating activities (3,221) (4,389) -------- -------- Cash flows from investing activities: Proceeds received on note receivable 45 165 Purchases of fixed assets and other (1,638) (647) Purchase of business (400) -------- -------- Net cash used in investing activities (1,993) (482) -------- -------- Cash flows from financing activities: Employee stock plans and other 146 216 Purchases of company's common stock (2,283) -------- -------- Net cash provided by (used in) financing activities 146 (2,067) -------- -------- Net decrease in cash and cash equivalents (5,068) (6,938) Cash and cash equivalents at beginning of period 14,433 8,550 -------- -------- Cash and cash equivalents at end of period $ 9,365 $ 1,612 ======== ======== Changes in assets and liabilities: Accounts receivable $ 2,297 $ (5,225) Inventories (440) 3,343 Accounts payable (3,378) (909) Accrued liabilities and other (2,299) (2,311) -------- -------- Net change $ (3,820) $ (5,102) ======== ======== Supplemental cash flow information: Interest paid $ 2 $ 21 Income taxes paid $ -- $ 558
See accompanying Notes to Consolidated Condensed Financial Statements. 5 -4- Bell Industries, Inc. Notes to Consolidated Financial Statements Accounting Principles The accompanying consolidated financial statements for the three months ended March 31, 2001 and 2000 have been prepared in accordance with generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements have not been audited by independent public accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. The accompanying consolidated balance sheet as of December 31, 2000 has been derived from the audited financial statements, but does not include all disclosures required by GAAP. Certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been omitted pursuant to requirements of the Securities and Exchange Commission (the "SEC"). Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. 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. Stock Repurchase Program In February 2000, the Board of Directors authorized a stock repurchase program of up to 1,000,000 shares of the Company's outstanding common stock during the year 2000. The common stock could be repurchased in the open market at varying prices depending on market conditions and other factors. During the quarter ended March 31, 2000, the Company repurchased 625,600 shares at an average price of $3.65 per share under the repurchase program. During 2000, the Company repurchased 859,900 shares at an average price of $3.43 per share. The repurchase program expired on December 31, 2000. Warrants At December 31, 2000, warrants to purchase 526,556 shares at an exercise price of $3.06 per share were outstanding. On February 1, 2001, 47,870 warrants were exercised, and the remaining 478,686 of unexercised warrants expired. 6 -5- Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. This analysis contains forward looking comments which are based on current trends. Actual results in the future may differ materially. Results of operations by business segment were as follows (in thousands):
Three months ended March 31 ------------------------- 2001 2000 -------- -------- Net sales Systems Integration $ 39,628 $ 40,704 Recreational Products 10,925 11,888 Electronics Manufacturing 2,433 2,335 -------- -------- $ 52,986 $ 54,927 ======== ======== Operating income Systems Integration $ 101 $ 117 Recreational Products 142 438 Electronics Manufacturing 559 581 Corporate costs (788) (712) -------- -------- 14 424 Interest, net 164 43 Income tax provision (70) (185) -------- -------- Net income $ 108 $ 282 ======== ========
Net sales for the first quarter decreased 3.5% to $53.0 million from $54.9 million in 2000 and operating income decreased to $14,000 from $424,000 in 2000. Operating results for 2001 were impacted primarily by softening economic conditions resulting in diminished customer spending in the Company's core business markets. Corporate costs increased 10.7% to $788,000 from $712,000 in the previous year. Corporate costs in 2001 include costs associated with the Company's strategic change initiatives that commenced during the second quarter last year. In addition, the Company recorded net interest income of $164,000 in 2001 compared with $43,000 in the first quarter last year based on the Company's strong cash position throughout the first quarter of 2001. Systems Integration sales for the first quarter decreased 2.6% to $39.6 million as operating income was approximately $100,000 for both periods. The operating results for the first quarter were impacted by the general economic weakness in the technology sector. Recreational Products sales decreased 8.1% to $10.9 million during the first quarter, and operating income decreased to $142,000 from $438,000 in the prior year. Results were impacted by shifts in gross margin on sales mix, escalating fuel costs, and reduced consumer spending in this sector. Electronics Manufacturing sales for the first quarter increased slightly to $2.4 million from $2.3 million, while operating income decreased slightly to $559,000 from $581,000 in the prior year. The decrease in operating income is attributable to shifts in gross margin on sales mix. 7 -6- As a percentage of sales, cost of sales for 2001 decreased to 84.2% from 85.1% in the comparable quarter of 2000. Selling and administrative expenses, as a percentage of sales, increased to 15.8% from 14.2% in the prior year primarily due to increases in information systems, payroll, training, advertising and other related costs associated with the Company's strategic change initiatives. The Company's effective tax rate was 39.5% for both years. Selected financial data is set forth in the following table (dollars in thousands, except per share amounts):
March 31 December 31 2001 2000 -------- ----------- Cash and cash equivalents $ 9,365 $14,433 Working capital $23,436 $24,678 Current ratio 1.7:1 1.6:1 Shareholders' equity per share $ 3.48 $ 3.47 Days' sales in receivables 56 54 Days' sales in inventories 32 26
Net cash used in operating activities was $3.2 million in the first quarter of 2001 compared with net cash used in operating activities of $4.4 million in 2000. In the first quarter of 2001, cash used in investing activities totaling $2.0 million included expenditures on information technology, including client contact center investments, and the purchase of a business. In the first quarter of 2000, cash was utilized to repurchase stock in the aggregate amount of $2.3 million in connection with the Company's 2000 stock repurchase program. The Company believes that sufficient cash resources exist to support requirements for its operations and commitments through available cash, bank borrowings and cash generated from operations. The Company has a line of credit in the amount of $20 million to finance its working capital needs to operate and grow its businesses. Management believes that it has access to additional financing as required. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable PART II - OTHER INFORMATION Items 1 through 5. Not applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: None (b) Reports on Form 8-K: None 8 -7- 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 14, 2001 /s/ Tracy A. Edwards ----- ------------ -------------------------------------------- Tracy A. Edwards, President and Chief Executive Officer DATE: May 14, 2001 /s/ Russell A. Doll ----- ------------ -------------------------------------------- Russell A. Doll, Senior Vice President and Chief Financial Officer