<PAGE> 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, 1994 Commission file number 1-7899
BELL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-2039211
- - ----------------------------------------------------------------------------------------------
(State of incorporation) (I.R.S. Identification No.)
11812 San Vicente Blvd., Suite 300 Los Angeles, California 90049
- - ----------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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 each of the issuer's classes of
common stock, as of April 29, 1994: 6,144,791 shares.
<PAGE> 2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - ----------------------------
BELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
--------------------- --------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 113,507 $ 90,724 $ 322,466 $ 269,385
--------- --------- --------- ---------
Cost and expenses
Cost of products sold 88,064 68,527 249,962 203,245
Selling, general and
administrative expenses 20,721 18,449 59,476 56,839
Interest expense 1,099 1,383 3,424 4,216
--------- --------- --------- ---------
109,884 88,359 312,862 264,300
--------- --------- --------- ---------
Income from continuing
operations before
income taxes 3,623 2,365 9,604 5,085
Income tax provision 1,540 990 4,082 2,135
--------- --------- --------- ---------
Income from continuing operations 2,083 1,375 5,522 2,950
Discontinued operations
Loss from operations,
net of taxes - (581) - (1,100)
Loss on disposal,
net of taxes - (8,100) - (8,100)
Cumulative effect of accounting change,
net of taxes - - - (830)
--------- --------- --------- ---------
Net income (loss) $ 2,083 $ (7,306) $ 5,522 $ (7,080)
========= ========= ========= =========
Share and per share data:
Income from continuing operations $ 0.33 $ 0.23 $ 0.88 $ 0.48
Discontinued operations
Loss from operations,
net of taxes - (0.10) - (0.18)
Loss on disposal,
net of taxes - (1.31) - (1.31)
Cumulative effect of accounting
change, net of taxes - - - (0.13)
--------- --------- --------- ---------
Net income (loss) $ 0.33 $ (1.18) $ 0.88 $ (1.14)
========= ========= ========= =========
Cash dividends $ - $ - $ - $ 0.20
========= ========= ========= =========
Weighted average common
shares outstanding 6,284 6,174 6,263 6,174
========= ========= ========= =========
</TABLE>
<PAGE> 3
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BELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31 June 30 March 31
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,171 $ 10,717 $ 6,040
Accounts receivable, less
allowance for doubtful
accounts of $1,085, $1,271
and $1,471 60,086 50,215 49,891
Inventories 88,047 71,543 72,906
Prepaid expenses and other 7,630 6,650 5,175
-------- -------- --------
Total current assets 159,934 139,125 134,012
-------- -------- --------
Properties, at cost:
Land 443 443 443
Buildings and improvements 8,973 8,767 7,999
Equipment 31,572 30,224 30,325
-------- -------- --------
40,988 39,434 38,767
Less accumulated depreciation 24,088 22,733 22,018
-------- -------- --------
Total properties 16,900 16,701 16,749
Net assets of discontinued operations - 7,752 8,563
Other assets 11,572 11,694 13,085
-------- -------- --------
$188,406 $175,272 $172,409
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 7,143 $ 8,600 $ 7,600
Accounts payable 32,301 20,465 19,529
Accrued payroll and liabilities 9,445 8,525 10,085
Accrued interest 631 1,986 915
Current obligations under capital leases 1,450 1,103 1,087
Income taxes payable 1,532 736 825
-------- -------- --------
Total current liabilities 52,502 41,415 40,041
-------- -------- --------
Long-term liabilities:
Notes payable 36,857 41,000 42,800
Obligations under capital leases 3,611 3,364 3,624
Deferred compensation and other 3,450 3,205 1,725
-------- -------- --------
Total long-term liabilities 43,918 47,569 48,149
-------- -------- --------
Shareholders' equity:
Preferred stock - $1 par value -
Authorized - 1,000,000 shares
Outstanding - None
Common stock - $.25 par value -
Authorized - 10,000,000 shares
Outstanding - 6,144,791,
6,130,422 and 5,893,387 1,536 1,533 1,473
Other paid-in capital 47,154 46,981 43,814
Reinvested earnings 43,296 37,774 38,932
-------- -------- --------
Total shareholders' equity 91,986 86,288 84,219
-------- -------- --------
Commitments and contingencies
$188,406 $175,272 $172,409
======== ======== ========
</TABLE>
<PAGE> 4
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BELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
March 31
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 314,162 $ 307,428
Cash paid to suppliers and employees (306,798) (303,758)
Interest paid (4,779) (5,413)
Income taxes paid (3,280) (1,811)
--------- ---------
Net cash used in operating activities (695) (3,554)
--------- ---------
Cash flows from investing activities:
Purchase of business (net of cash received) (5,864) -
Net cash proceeds from disposition of
discontinued operations 8,140 -
Additions to properties and other (1,493) (5,160)
--------- ---------
Net cash provided by (used in)
investing activities 783 (5,160)
--------- ---------
Cash flows from financing activities:
Borrowings on line of credit 5,000 -
Payments on Senior Notes (10,600) (2,000)
Proceeds from capital lease arrangements - 5,188
Payments on capital lease obligations
and other (1,034) (1,277)
Dividends paid - (1,766)
--------- ---------
Net cash provided by (used in)
financing activities (6,634) 145
--------- ---------
Net decrease in cash and cash equivalents (6,546) (8,569)
Cash and cash equivalents at beginning
of period 10,717 14,609
--------- ---------
Cash and cash equivalents at end of period $ 4,171 $ 6,040
========= =========
Reconciliation of net income (loss) to net cash
used in operating activities:
Net income (loss) $ 5,522 $ (7,080)
Loss on disposal of discontinued operations 8,100
Cumulative effect of accounting change 830
Depreciation 3,732 3,873
Amortization of intangible assets 420 564
Provision for losses on accounts
receivable 788 1,512
Changes in assets and liabilities,
net of effects of discontinued operations:
Accounts receivable (8,304) 1,225
Inventories (14,252) (303)
Accounts payable 11,584 (5,731)
Accrued payroll,
liabilities and interest (1,160) (4,258)
Income taxes payable 802 (406)
Other, net 173 (1,880)
--------- ---------
$ (695) $ (3,554)
========= =========
</TABLE>
<PAGE> 5
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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 filed with the Securities and Exchange Commission for the year
ended June 30, 1993.
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, after adjustment to reflect
the 4% stock dividend declared in July 1993. Common equivalent shares
represent the net number 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.
Financing Arrangement
During the quarter ended March 31, 1994, the Company arranged an increase in
the amount available under its revolving bank line of credit from $5 million to
$25 million. Borrowings under the line of credit, bearing interest at 4.9% (1%
above LIBOR), totaled $5 million at March 31, 1994.
<PAGE> 6
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BELL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Discontinued Operations
In April 1993, the Company's Board of Directors adopted a plan to dispose of
its Building Products Group. Accordingly, the operating results of
discontinued operations have been segregated as a separate item in the
statement of operations through the measurement date of March 31, 1993.
Operating results of discontinued operations for the interim periods in fiscal
1993 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, 1993 March 31, 1993
---------------- -----------------
<S> <C> <C>
Net sales $ 9,384 $36,818
------- -------
Cost of products sold 7,446 29,468
Selling, general and
administrative expenses 2,783 9,089
------- -------
10,229 38,557
------- -------
Loss before income tax benefit (845) (1,739)
Income tax benefit 264 639
------- -------
Loss from discontinued operations $ (581) $(1,100)
======= =======
</TABLE>
At March 31, 1994, operating losses of discontinued operations subsequent to
measurement date totaled approximately $0.6 million.
Net assets (liabilities) of discontinued operations included the following (in
thousands):
<TABLE>
<CAPTION>
March 31, 1994 June 30, 1993
-------------- -------------
<S> <C> <C>
Accounts receivable, net $ 2,313 $ 5,661
Inventories 1,829 9,061
Properties and other assets 2,590 2,738
Accounts payable and accrued liabilities (7,120) (9,708)
------- -------
$ (388) $ 7,752
======= =======
</TABLE>
Net liabilities of discontinued operations at March 31, 1994 were included with
accrued liabilities. In July 1993, the Company sold approximately 60% of the
assets of the discontinued operations for approximately $11 million in cash.
Accrued liabilities related to discontinued operations include future operating
costs during the phase-out period, primarily lease commitments of approximately
$2 million.
<PAGE> 7
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Acquisition
On January 12, 1994, the Company acquired LMB Microcomputers, Inc. ("LMB") for
approximately $5.9 million in cash. LMB is engaged in the business of selling
microcomputer hardware and software systems and providing related computer
support services.
The acquisition was accounted for as a purchase with future operating results
of LMB to be included from the acquisition date. The fair value of noncash
assets acquired, including goodwill, was approximately $6.5 million and
liabilities assumed totaled approximately $0.6 million. Goodwill of $1.6
million will be amortized over 25 years on a straight-line basis.
The pro forma results listed below reflect purchase price accounting
adjustments assuming the acquisition occurred at the beginning of the earliest
period presented.
<TABLE>
<CAPTION>
Nine months ended
March 31
-------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales $333,896 $290,076
======== ========
Income from continuing operations $ 6,032 $ 3,822
======== ========
Net income (loss) $ 6,032 $ (6,209)
======== ========
Per share data:
Income from continuing operations $ 0.96 $ 0.62
======== ========
Net income (loss) $ 0.96 $ (1.01)
======== ========
</TABLE>
<PAGE> 8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net sales by business segment for the three and nine months ended
March 31, 1994 and 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
------------------------ ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Electronics $ 91,854 $71,450 $255,806 $210,046
Graphic Arts 13,840 12,953 43,292 40,681
Recreational Products 7,813 6,321 23,368 18,658
-------- ------- -------- --------
$113,507 $90,724 $322,466 $269,385
======== ======= ======== ========
</TABLE>
Operating income by business segment for the three and nine months ended
March 31, 1994 and 1993 was as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
----------------------- -----------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Electronics $ 5,909 $ 4,833 $16,565 $12,327
Graphic Arts 366 498 845 1,772
Recreational Products 468 401 1,524 1,273
------- ------- ------- -------
Operating income 6,743 5,732 18,934 15,372
Corporate costs (2,021) (1,984) (5,906) (6,071)
Interest expense (1,099) (1,383) (3,424) (4,216)
Income tax provision (1,540) (990) (4,082) (2,135)
------- ------- ------- -------
Income from continuing
operations 2,083 1,375 5,522 2,950
Discontinued operations
Loss from operations,
net of taxes - (581) - (1,100)
Loss on disposal,
net of taxes - (8,100) - (8,100)
Cumulative effect of
accounting change,
net of taxes - - - (830)
------- ------- ------- -------
Net income (loss) $ 2,083 $(7,306) $ 5,522 $(7,080)
======= ======= ======= =======
</TABLE>
<PAGE> 9
-8-
For the nine months of fiscal 1994, the Company's net sales increased 20% to
$322.5 million and operating income increased 23% to $18.9 million over the
comparable period in the prior year. The Company recorded income from
continuing operations of $5.5 million, or $.88 per share, compared to $2.9
million, or $.48 per share, in the prior year nine months. A net loss for the
nine months last year totaled $7.1 million, or $1.14 per share, and included
the effects of an accounting change to provide for postretirement benefits
($0.8 million or $.13 per share) and losses from operations and disposal of
discontinued operations ($9.2 million or $1.49 per share).
For the three months ended March 31, 1994, net sales increased 25% to a record
$113.5 million, compared to $90.7 million for the corresponding quarter in the
prior year. Operating income increased 18% to $6.7 million. Income from
continuing operations, as well as net income, totaled $2.1 million, or $.33 per
share, compared to $1.4 million, or $.23 per share, in the corresponding prior
year quarter. In the prior year quarter, the Company recorded a net loss of
$7.3 million, or $1.18 per share, which included losses relating to
discontinued operations.
Sales of the Electronics Group for the nine months increased 22% to $255.8
million and operating income increased 34% to $16.6 million. Sales for the
quarter increased 29% over the prior year third quarter to $91.9 million and
operating income increased 22% to $5.9 million. The improved performance was
primarily attributed to strong electronic component shipments, including the
sales arising from the Company's franchise agreement with IBM Microelectronics.
Operating income improvement was primarily attributed to stronger sales with a
marginal increase in operating expenses due to the Company's restructuring and
cost control programs. This improvement was partially offset by reductions
in gross margins in electronics components sales due to product mix changes.
Graphic Arts Group sales for the nine months increased 6% to $43.3 million
while operating income decreased 52% to $0.8 million. Sales for the quarter
increased 7% to $13.8 million; operating income declined 27% to $0.4 million.
The operating margin decline was primarily attributed to competitive pricing
pressures in the current year periods.
Recreational Products Group sales increased 25% for the nine months to $23.4
million and operating income increased 20% to $1.5 million. For the quarter,
sales increased 24% to $7.8 million and operating income increased 17% to $0.5
million. Sales and income growth resulted from enhanced efforts to penetrate
winter product markets and the expansion of certain product offerings.
Cost of products sold as a percentage of sales for the nine months increased
to 77.5% which reflected the product mix changes and margin pressures noted
above. Selling, general and administrative expenses decreased to 18.4% of
sales from 21.1% last year as a result of increased sales and cost control
efforts primarily in the Electronics Group and corporate administration. The
decrease in interest expense was attributed to reductions in long-term debt.
The Company's income tax rate increased slightly to 42.5% from 42%.
<PAGE> 10
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The Company's financial position continued to be strong at March 31, 1994 as
set forth in the table below (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
March 31
--------------------
1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents $ 4,171 $ 6,040
Working capital $ 107,432 $ 93,971
Current ratio 3.0:1 3.3:1
Ratio of long-term liabilities
to total capitalization 32% 36%
Shareholders' equity per share $ 14.97 $ 14.29
Days' sales in receivables 49 52
Days' sales in inventories 91 97
</TABLE>
For the nine months of fiscal 1994, cash used in operating activities totaled
$0.7 million, compared to $3.6 million in the nine months of the prior year.
Cash provided by investing activities included the proceeds from the sale of
approximately 60% of the assets of discontinued operations for approximately
$11 million. Offsetting these proceeds were payments for accounts payable and
other obligations relating to the discontinued operations. In addition, the
Company invested $5.9 million to acquire a microcomputer distribution and
services business during the quarter ended March 31, 1994. Investing activity
cash flows in the prior year included the addition of peripheral equipment for
the Company's computer system, and the addition of leasehold improvements and
related equipment at the Company's corporate offices. Cash used in financing
activities included scheduled and optional repayments on the Company's Senior
Notes and capital lease obligations. The Company borrowed $5 million under its
revolving bank line of credit during the quarter ended March 31, 1994.
Noncash investing and financing activities included a $1.6 million equipment
addition which was financed through a capital lease.
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, cash expected to be realized on
the disposition of the remaining discontinued operations or cash generated from
continuing operations.
<PAGE> 11
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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:
Current report on Form 8-K dated January 12, 1994, as amended,
filed in connection with the acquisition of LMB Microcomputers, Inc.
<PAGE> 12
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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 5, 1994 Theodore Williams
----------------------------
Theodore Williams, President
and Chief Executive Officer
DATE: May 5, 1994 Bruce M. Jaffe
----------------------------
Bruce M. Jaffe, Executive
Vice President and Chief
Operating Officer
DATE: May 5, 1994 Tracy A. Edwards
----------------------------
Tracy A. Edwards, Vice
President and Chief Financial
Officer
