<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 December 31, 1993 Commission file number 1-7899
BELL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <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 January 31, 1994: 6,143,534 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 Six months ended
December 31 December 31
---------------------------- --------------------------
1993 1992 1993 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $102,241 $ 86,182 $208,959 $178,661
-------- -------- -------- --------
Cost and expenses -
Cost of products sold 79,338 65,211 161,898 134,718
Selling, general and
administrative expenses 19,387 19,016 38,755 38,390
Interest expense 1,127 1,412 2,325 2,833
-------- -------- -------- --------
99,852 85,639 202,978 175,941
-------- -------- -------- --------
Income from continuing
operations before
income taxes 2,389 543 5,981 2,720
Income tax provision 1,015 231 2,542 1,145
-------- -------- -------- --------
Income from
continuing operations 1,374 312 3,439 1,575
Loss from discontinued
operations, net of taxes - (443) - (519)
Cumulative effect of account-
ing change, net of taxes - - - (830)
-------- -------- -------- --------
Net income (loss) $ 1,374 $ (131) $ 3,439 $ 226
======== ======== ======== ========
Share and per share data:
Income from continuing operations $ 0.22 $ 0.05 $ 0.55 0.25
Loss from discontinued
operations, net of taxes - (0.07) - (0.08)
Cumulative effect of account-
ing change, net of taxes - - - (0.13)
-------- -------- -------- --------
Net income (loss) $ 0.22 $ (0. 02) $ 0.55 $ 0.04
======== ======== ======== ========
Cash dividends $ - $ 0.10 $ - $ 0.20
======== ======== ======== ========
Weighted average common
shares outstanding 6,278 6,174 6,253 6,174
======== ======== ======== ========
</TABLE>
<PAGE> 3
-2-
BELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30 DECEMBER 31
1993 1993 1992
----------- ------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,146 $ 10,717 $ 10,550
Accounts receivable, less
allowance for doubtful
accounts of $1,139, $1,271
and $1,901 51,310 50,215 52,503
Inventories 82,839 71,543 83,854
Prepaid expenses and other 8,003 6,650 3,507
-------- -------- --------
Total current assets 148,298 139,125 150,414
-------- -------- --------
Properties, at cost:
Land 443 443 1,760
Buildings and improvements 8,792 8,767 11,324
Equipment 32,194 30,224 38,154
-------- -------- --------
41,429 39,434 51,238
Less accumulated depreciation 24,250 22,733 29,694
-------- -------- --------
Total properties 17,179 16,701 21,544
Net assets of discontinued operations 7 7,752 -
Other assets 10,182 11,694 11,633
-------- -------- --------
$175,666 $175,272 $183,591
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 6,000 $ 8,600 $ 3,600
Accounts payable 25,179 20,465 18,392
Accrued payroll and liabilities 8,184 8,525 10,816
Accrued interest 1,698 1,986 2,090
Current obligations under
capital leases 1,515 1,103 1,072
Dividends payable - - 589
Income taxes payable 82 736 384
-------- -------- --------
Total current liabilities 42,658 41,415 36,943
-------- -------- --------
Long-term liabilities:
Notes payable 36,000 41,000 48,800
Obligations under capital leases 3,901 3,364 3,879
Deferred compensation and other 3,265 3,205 1,701
-------- -------- --------
Total long-term liabilities 43,166 47,569 54,380
-------- -------- --------
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 - 6,141,298,
6,130,422 and 5,887,387 1,535 1,533 1,472
Other paid-in capital 47,165 46,981 43,728
Reinvested earnings 41,142 37,774 47,068
-------- -------- --------
Total shareholders' equity 89,842 86,288 92,268
Commitments and contingencies
-------- -------- --------
$175,666 $175,272 $183,591
======== ======== ========
</TABLE>
<PAGE> 4
-3-
BELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
-------------------------
1993 1992
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 207,289 $ 210,939
Cash paid to suppliers and employees (204,292) (209,265)
Interest paid (2,613) (2,855)
Income taxes paid (3,196) (1,449)
--------- ---------
Net cash used in operating activities (2,812) (2,630)
--------- ---------
Cash flows from investing activities:
Net cash proceeds from disposition of
discontinued operations 7,745 -
Additions to properties and other (1,298) (4,403)
--------- ---------
Net cash provided by (used in)
investing activities 6,447 (4,403)
--------- ---------
Cash flows from financing activities:
Payments on Senior Notes (7,600) -
Proceeds from capital lease arrangements - 5,188
Payments on capital lease obligations
and other (606) (1,037)
Dividends paid - (1,177)
--------- ---------
Net cash provided by (used in)
financing activities (8,206) 2,974
--------- ---------
Net increase in cash and cash equivalents (4,571) (4,059)
Cash and cash equivalents at beginning
of period 10,717 14,609
--------- ---------
Cash and cash equivalents at end of period $ 6,146 $ 10,550
========= =========
Reconciliation of net income to net cash
used in operating activities:
Net income $ 3,439 $ 226
Cumulative effect of accounting change - 830
Depreciation 2,461 2,506
Amortization of intangibles 270 376
Provision for losses on accounts
receivable 617 911
Changes in assets and liabilities,
net of effects of
discontinued operations:
Accounts receivable (1,670) 4,844
Inventories (11,296) 647
Accounts payable 4,714 (8,037)
Accrued payroll,
liabilities and interest (629) (2,041)
Income taxes payable (654) (679)
Other, net (64) (2,213)
--------- ---------
$ (2,812) $ (2,630)
========= =========
</TABLE>
<PAGE> 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 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.
<PAGE> 6
-5-
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 Six months ended
December 31, 1992 December 31, 1992
------------------ -----------------
<S> <C> <C>
Net sales $12,032 $27,434
------- -------
Cost of products sold 9,703 22,022
Selling, general and
administrative expenses 3,098 6,306
------- -------
12,801 28,328
------- -------
Loss before income taxes (769) (894)
Income tax benefit 326 375
------- -------
Loss from discontinued operations $ (443) $ (519)
======= =======
</TABLE>
At December 31, 1993, operating losses of discontinued operations subsequent to
the measurement date totaled approximately $0.6 million.
Net assets of discontinued operations included the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 June 30, 1993
----------------- -------------
<S> <C> <C>
Accounts receivable, net $ 2,332 $ 5,661
Inventories 1,997 9,061
Properties and other assets 2,496 2,738
Accounts payable and accrued liabilties (6,818) (9,708)
------- -------
$ 7 $ 7,752
======= =======
</TABLE>
In July 1993, the Company sold approximately 60% of the assets of the
discontinued operations for approximately $11 million in cash. The sale price
is subject to adjustment based on the final realization of receivables and
certain other assets. The Company retained liabilities totaling approximately
$2 million, primarily accounts payable and accrued payroll costs, in connection
with the asset sale. Accrued liabilities related to discontinued operations
include future operating costs during the phase-out period, primarily lease
commitments of approximately $2 million.
<PAGE> 7
-6-
BELL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Subsequent Event - Acquisition
On January 12, 1994, the Company acquired LMB Microcomputers, Inc. ("LMB") for
approximately $5.8 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 assets
acquired, including goodwill, was approximately $6.3 million and liabilities
assumed totaled approximately $0.5 million. Goodwill of $1.3 million will be
amortized over 25 years on a straight-line basis. The purchase price is
subject to adjustment after final determination of closing asset and liability
balances on January 12, 1994.
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>
Six months ended
December 31
-------------------
1993 1992
-------- --------
<S> <C> <C>
Net sales $220,389 $192,455
======== ========
Income from continuing operations $ 3,949 $ 2,156
======== ========
Net income $ 3,949 $ 807
======== ========
Per share data:
- ---------------
Income from continuing operations $ 0.63 $ 0.35
======== ========
Net income $ 0.63 $ 0.13
======== ========
</TABLE>
<PAGE> 8
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net sales by business segment for the three and six months ended December 31,
1993 and 1992 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
------------------- --------------------
<S> <C> <C> <C> <C>
1993 1992 1993 1992
-------- -------- -------- --------
Electronics $ 80,097 $ 67,100 $163,952 $138,596
Graphic Arts 14,653 13,434 29,452 27,728
Recreational Products 7,491 5,648 15,555 12,337
-------- -------- -------- --------
$102,241 $ 86,182 $208,959 $178,661
======== ======== ======== ========
</TABLE>
Operating income by business segment for the three and six months ended
December 31, 1993 and 1992 was as follows (in thousands):
<TABLE>
Three months ended Six months ended
December 31 December 31
------------------- --------------------
<S> <C> <C> <C> <C>
1993 1992 1993 1992
-------- -------- -------- --------
Electronics $ 4,734 $ 2,721 $ 10,656 $ 7,494
Graphic Arts 218 738 479 1,274
Recreational Products 476 369 1,056 872
-------- -------- -------- --------
Operating income 5,428 3,828 12,191 9,640
Corporate costs (1,912) (1,873) (3,885) (4,087)
Interest expense (1,127) (1,412) (2,325) (2,833)
Income tax provision (1,015) (231) (2,542) (1,145)
-------- -------- -------- --------
Income from continuing
operations 1,374 312 3,439 1,575
Loss from discontinued
operations, net of taxes - (443) - (519)
Cumulative effect of
accounting change,
net of taxes - - - (830)
-------- -------- -------- --------
Net income (loss) $ 1,374 $ (131) $ 3,439 $ 226
======== ======== ======== ========
</TABLE>
<PAGE> 9
-8-
For the first six months of fiscal 1994, the Company's net sales increased 17%
to $209 million and operating income increased 26% to $12.2 million over the
comparable period in the prior year. The Company recorded income from
continuing operations of $3.4 million, or $.55 per share, compared to $1.6
million, or $.25 per share, in the prior year six months. Net income for the
first six months last year totaled $0.2 million, or $.04 per share, and
included the effects of an accounting change to provide for postretirement
benefits ($0.8 million or $.13 per share) and a loss from discontinued
operations ($0.5 million or $.08 per share).
For the three months ended December 31, 1993, net sales increased 19% to $102.2
million compared to $86.2 million for the corresponding quarter in the prior
year. Operating income increased 42% to $5.4 million. Income from continuing
operations totaled $1.4 million, or $.22 per share, compared to $0.3 million,
or $.05 per share, in the corresponding prior year quarter. In the prior year
quarter, the Company recorded a net loss of $0.1 million, or $.02 per share,
which included a loss on discontinued operations of $0.4 million, or $.07 per
share.
Sales of the Electronics Group for the first six months increased 18% to $164
million and operating income increased 42% to $10.7 million. Sales for the
quarter increased 19% over the prior year second quarter to $80.1 million and
operating income increased 74% to $4.7 million. The improved performance was
primarily attributed to strong electronic component shipments, including the
first significant sales arising from the Company's franchise agreement with IBM
Microelectronics. Subject to product availability, the Electronics Group is
expected to continue to benefit from the IBM franchise and increases in other
electronics shipments throughout 1994. Operating income improvement was
primarily attributed to stronger sales while operating expenses remained
relatively unchanged due to the Company's restructuring and cost reduction
programs. These improvements were partially offset by reductions in gross
margins in electronics components sales due to product mix changes.
Graphic Arts Group sales for the six months increased 6% to $29.5 million while
operating income decreased 62% to $0.5 million. Sales for the quarter
increased 9% to $14.7 million; operating income declined 70% to $0.2 million.
The operating margin decline was primarily attributed to competitive pricing
pressures in the current year periods.
Recreational Products Group sales increased 26% for the first six months to
$15.6 million and operating income increased 21% to $1.1 million. For the
quarter, sales increased 33% to $7.5 million and operating income increased 29%
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 first half increased to
77.4% which reflected the product mix changes and margin pressures noted above.
Selling, general and administrative expenses decreased to 18.5% of sales from
21.5% last year as a result of increased sales and the restructuring and cost
reduction efforts 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% as a result
of recently enacted tax legislation.
<PAGE> 10
-9-
The Company's financial position continued to be strong at December 31, 1993 as
set forth in the table below. Balances, ratios and calculations for the prior
year include amounts related to discontinued operations (dollars in thousands
except per share amounts).
<TABLE>
<CAPTION>
December 31
---------------------
1993 1992
-------- --------
<S> <C> <C>
Cash and cash equivalents $ 6,146 $ 10,550
Working capital $105,640 $113,471
Current ratio 3.5:1 4.1:1
Ratio of long-term liabilities
to total capitalization 32% 37%
Shareholders' equity per share $ 14.63 $ 15.67
Days' sales in receivables 47 50
Days' sales in inventories 95 102
</TABLE>
For the first six months of fiscal 1994, cash used in operating activities
totaled $2.8 million compared to $2.6 million in the first six 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.
Investing activity cash flows in the prior year included the addition of
peripheral equipment for the Company's computer system. Cash used in financing
activities included scheduled and optional repayments on the Company's Senior
Notes and capital lease obligations. 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, short-term bank borrowings, cash expected to be
realized on the disposition of the remaining discontinued operations or cash
generated from continuing operations.
<PAGE> 11
-10-
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
November 2, 1993. The following matters were acted upon at the
meeting.
1. Election of Directors.
Shareholders elected three new directors: Anthony L. Craig, Stanley S.
Fine and Charles S. Troy. Incumbent directors re-elected were
Theodore Williams, Bruce M. Jaffe, John J. Cost and Milton Rosenberg.
Directors elected will serve until the next Annual Meeting of
Shareholders and until their successors are elected and have
qualified. The vote was as follows:
<TABLE>
<CAPTION>
VOTES WITHHOLD
DIRECTORS VOTES FOR AGAINST AUTHORITY
--------- --------- ------- ---------
<S> <C> <C> <C>
John J. Cost 4,273,041 -0- 12,868
Anthony L. Craig 4,270,541 -0- 15,368
Stanley S. Fine 4,269,594 -0- 16,315
Bruce M. Jaffe 4,273,029 -0- 12,880
Charles S. Troy 4,270,645 -0- 15,264
Milton Rosenberg 4,273,041 -0- 12,868
Theodore Williams 4,272,281 -0- 13,628
</TABLE>
In late November 1993, Mr. Fine passed away following a sudden heart
attack. On January 4, 1994, the Board elected Gordon M. Graham,
Senior Vice President of the Company, to fill the vacancy resulting
from the death of Mr. Fine.
2. The Adoption of the Employees' Stock Purchase Plan, which received the
following vote:
<TABLE>
<CAPTION>
VOTES WITHHOLD
VOTES FOR AGAINST AUTHORITY
--------- ------- ---------
<S> <C> <C> <C>
Employees' Stock Purchase Plan 3,457,538 53,893 774,478
</TABLE>
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits:
None
b. Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
for which this report is filed.
<PAGE> 12
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:
<TABLE>
<S> <C> <C>
DATE: February 11, 1994 Theodore Williams
- ----- ----------------- -------------------------------------
Theodore Williams,
President and Chief Executive Officer
DATE: February 11, 1994 Bruce M. Jaffe
- ----- ----------------- -------------------------------------
Bruce M. Jaffe,
Executive Vice President and
Chief Operating Officer
DATE: February 11, 1994 Tracy A. Edwards
- ----- ----------------- -------------------------------------
Tracy A. Edwards,
Vice President and
Chief Financial Officer
</TABLE>
