<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 September 30, 1994. Commission file number 1-7899
BELL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2039211
- -------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11812 San Vicente Blvd., Suite 300 Los Angeles, California 90049
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
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 October 28, 1994: 6,479,258 shares.
<PAGE> 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Bell Industries, Inc.
Consolidated Statement of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
September 30
---------------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $127,092 $106,718
-------- --------
Cost and expenses
Cost of products sold 98,638 82,560
Selling, general and
administrative expenses 22,589 19,368
Interest expense 966 1,198
-------- --------
122,193 103,126
-------- --------
Income from continuing operations
before income taxes 4,899 3,592
Income tax provision 2,058 1,527
-------- --------
Income from continuing operations 2,841 2,065
Discontinued operations reserve
recovery, net of taxes 310 -
-------- --------
Net income $ 3,151 $ 2,065
======== ========
Share and per share data:
- ------------------------
Income from continuing operations $ 0.43 $ 0.31
Discontinued operations reserve
recovery, net of taxes 0.05 -
--------- --------
Net income $ 0.48 $ 0.31
========= ========
Weighted average common
shares outstanding 6,603 6,538
========= ========
</TABLE>
<PAGE> 3
-2-
Bell Industries, Inc.
Consolidated Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30 June 30 September 30
1994 1994 1993
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,880 $ 4,370 $ 13,370
Accounts receivable, less
allowance for doubtful
accounts of $916, $884
and $1,069 67,672 65,835 51,511
Inventories 87,596 80,179 74,254
Prepaid expenses and other 6,241 6,259 6,706
--------- --------- ---------
Total current assets 163,389 156,643 145,841
--------- --------- ---------
Properties, at cost:
Land 443 443 443
Buildings and improvements 8,737 8,750 8,719
Equipment 31,490 31,269 32,012
--------- --------- ---------
40,670 40,462 41,174
Less accumulated depreciation (25,046) (24,284) (23,525)
--------- --------- ---------
Total properties 15,624 16,178 17,649
Other assets 11,344 11,892 11,507
--------- --------- ---------
$ 190,357 $ 184,713 $ 174,997
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,041 $ 28,885 $ 20,768
Accrued payroll 5,507 6,114 4,201
Accrued liabilities 6,120 5,254 6,974
Current portion of long-term
liabilities 6,639 7,616 7,492
Income taxes payable 3,110 1,319 1,652
--------- --------- ---------
Total current liabilities 54,417 49,188 41,087
--------- --------- ---------
Long-term liabilities:
Notes payable 29,857 32,857 38,000
Obligations under capital leases 2,851 3,234 4,266
Deferred compensation and other 4,202 3,881 3,228
--------- --------- ---------
Total long-term liabilities 36,910 39,972 45,494
--------- --------- ---------
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 - 6,478,412,
6,453,412 and 6,443,113 1,620 1,537 1,534
Other paid-in capital 53,810 47,167 47,112
Reinvested earnings 43,600 46,849 39,770
--------- --------- ---------
Total shareholders' equity 99,030 95,553 88,416
Commitments and contingencies
--------- --------- ---------
$ 190,357 $ 184,713 $ 174,997
========= ========= =========
</TABLE>
<PAGE> 4
-3-
Bell Industries, Inc.
Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three months ended
September 30
--------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 124,962 $ 105,096
Cash paid to suppliers and employees (123,014) (101,201)
Interest paid (1,896) (2,473)
Income taxes paid (267) (611)
--------- ---------
Net cash provided by (used in)
operating activities (215) 811
--------- ---------
Cash flows from investing activities:
Net cash proceeds from disposition of
discontinued operations 2,490 8,272
Additions to properties and other (731) (523)
--------- ---------
Net cash provided by investing
activities 1,759 7,749
--------- ---------
Cash flows from financing activities:
Payments on notes payable and bank
borrowings (4,000) (5,600)
Payments on capital lease obligations (360) (307)
Employee stock plans 326
--------- ---------
Net cash used in financing
activities (4,034) (5,907)
--------- ---------
Net increase (decrease) in cash and
cash equivalents (2,490) 2,653
Cash and cash equivalents at beginning
of period 4,370 10,717
--------- ---------
Cash and cash equivalents at end
of period $ 1,880 $ 13,370
========= =========
Reconciliation of net income to net cash
used in operating activities:
Net income $ 3,151 $ 2,065
Discontinued operations reserve
recovery (310) -
Depreciation and amortization 1,302 1,211
Amortization of intangibles 138 135
Provision for losses on accounts
receivable 294 368
Changes in assets and liabilities
Accounts receivable (2,130) (1,622)
Inventories (7,417) (2,711)
Accounts payable 4,156 303
Other liabilities (1,190) 146
Income taxes payable 1,791 916
--------- ---------
$ (215) $ 811
========= =========
</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 on Form 10-K filed with the Securities and Exchange Commission
for the year ended June 30, 1994.
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 5% stock dividend declared in October 1994. 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-
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations by business segment for the three months
ended September 30, 1994 and 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
September 30
------------------------
1994 1993
---- ----
<S> <C> <C>
NET SALES:
Electronics $101,257 $ 83,855
Graphic Arts 15,438 14,799
Recreational Products 10,397 8,064
-------- --------
$127,092 $106,718
======== ========
OPERATING INCOME:
Electronics $ 6,876 $ 5,922
Graphic Arts 486 261
Recreational Products 760 580
-------- --------
Operating income 8,122 6,763
Corporate costs (2,257) (1,973)
Interest expense (966) (1,198)
Income tax provision (2,058) (1,527)
-------- --------
Income from continuing
operations 2,841 2,065
Discontinued operations reserve
recovery, net of taxes 310 -
-------- --------
Net income $ 3,151 $ 2,065
======== ========
</TABLE>
<PAGE> 7
-6-
For the quarter ended September 30, 1994, the Company's net sales increased 19%
to $127.1 million and operating income increased 20% to $8.1 million over the
comparable quarter in the prior year. The Company recorded income from
continuing operations of $2.8 million, or $.43 per share, compared to $2.1
million, or $.31 per share, in the prior year quarter. After including an
after-tax gain from discontinued operations of $310,000, net income for the
current quarter totaled $3.2 million, or $.48 per share. Share and per share
amounts have been adjusted to reflect the Company's recently announced 5% stock
dividend payable on November 9, 1994 to shareholders of record on October 28,
1994.
Sales of the Electronics Group increased 21% to $101.3 million and operating
income increased 16% to $6.9 million. The improved performance was attributed
to stronger shipments of electronic components. In addition, the group
recorded increased sales of microcomputer systems and services. Operating
income improvement was largely attributed to stronger sales offset slightly by
reductions in gross margins arising from product mix changes, primarily sales
of lower margin memory and microprocessor products. While products from IBM
Microelectronics contributed to the group's excellent performance for the
quarter, the longer term impact of this line on the Company's electronics
business is difficult to judge given IBM's recent entry in the electronic
component merchant market.
Graphic Arts Group sales increased 4% to $15.4 million and operating income
increased 86% to $0.5 million. The operating income improvement was primarily
attributed to programs to reduce operating expenses implemented during the last
half of fiscal 1994. Recreational Products Group sales increased 29% to
$10.4 million and operating income increased 31% to $0.8 million as a result of
continued efforts to penetrate the recreational vehicle, snowmobile and marine
markets served by this group.
Cost of products sold as a percentage of sales increased slightly to 77.6% from
77.4% as a result of product mix changes noted above while selling, general and
administrative expenses decreased to 17.8% of sales from 18.1% due to ongoing
cost control efforts. Corporate costs increased over the prior year quarter
primarily as a result of deferred compensation and information system expenses.
The decrease in interest expense was attributed to reductions in long-term
debt. The Company's income tax rate decreased slightly to 42% from 42.5%.
<PAGE> 8
-7-
During the current quarter, the Company completed the disposition of
substantially all net assets attributed to the discontinued Building Products
Group for cash and notes totaling approximately $4.5 million. The Company
recorded a gain of $310,000 (net of taxes totaling $225,000) which represented
residual reserves no longer considered necessary. Remaining assets and
liabilities attributed to discontinued operations were not material.
The Company's financial position continued to be strong at September 30, 1994
as set forth in the table below (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
September 30
-----------------------------
1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents $ 1,880 $ 13,370
Working capital $108,972 $104,754
Current ratio 3.0:1 3.5:1
Ratio of long-term liabilities
to total capitalization 27% 34%
Shareholders' equity per share $ 15.29 $ 13.72
Days' sales in receivables 49 45
Days' sales in inventories 81 82
</TABLE>
Cash used by operating activities totaled $0.2 million compared to cash
provided by operating activities of $0.8 million in the prior year quarter. The
change in operating cash flows was primarily attributed to increased investment
in inventories and receivables to support sales growth offset by increased
profits during the current quarter. Cash provided by investing activities for
both periods included the net cash proceeds from the disposition of
discontinued operations. Cash used in financing activities included scheduled
and optional repayments on the Company's Senior Notes, bank borrowings and
capital lease obligations.
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.
<PAGE> 9
-8-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(10) Material Contract.
Amendment to Employment and Deferred
Compensation Agreement between Bell
Industries, Inc. and Mr. Theodore Williams.
(99) Additional Exhibit.
Bell Industries, Inc. Director's Retirement
Plan for Non-Employees.
(b) Reports on Form 8-K:
Current Report on Form 8-K dated September 16, 1994,
regarding a change in the Company's fiscal year end
from June 30 to December 31.
<PAGE> 10
-9-
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: November 3, 1994 Theodore Williams
---------------- ----------------------------
Theodore Williams,
President and
Chief Executive Officer
DATE: November 3, 1994 Bruce M. Jaffe
---------------- ----------------------------
Bruce M. Jaffe,
Executive Vice President and
Chief Operating Officer
DATE: November 3, 1994 Tracy A. Edwards
---------------- ----------------------------
Tracy A. Edwards,
Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit (10)
AMENDMENT TO EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENT
This is an Amendment to that certain Employment and Deferred
Compensation Agreement dated as of January 1, 1979, as amended on August 8,
1979 (the "Agreement"), by and between BELL INDUSTRIES, INC., a Delaware
corporation (the "Company"), and THEODORE E. WILLIAMS ("Employee").
WHEREAS, the Company and Employee desire to amend in certain respects
the Agreement which sets forth the terms and conditions of employment and
retirement benefits of Employee.
IT IS THEREFORE AGREED:
A. AMENDMENTS
1. Section 3 of the Agreement shall be deleted in its
entirety and, in lieu thereof, the following Section shall be
added:
"3. SEVERANCE BENEFIT
Within sixty days of the earlier of Employee's retirement as a
full time employee of the Company or his death, the Company
shall pay to Employee or his estate the sum of two million,
one hundred and eighty seven thousand dollars ($2,187,000)."
2. The first sentence of Section 4 of the Agreement
shall be deleted in its entirety and, in lieu thereof, the
following sentence shall be added:
"The term of employment shall be for the period beginning
January 1, 1979 and ending upon Employee's retirement."
B. OTHER PROVISIONS IN FULL FORCE AND EFFECT
All other terms and provisions of the Agreement shall remain
in full force and effect and shall not be deemed amended or
modified hereby except to the extent such terms and
provisions may be inconsistent with this Amendment.
IN WITNESS WHEREOF, the undersigned have executed this Amendment this
14th day of September, 1994.
BELL INDUSTRIES, INC.
By /s/ Tracy A. Edwards, Vice President
----------------------------------------
THEODORE WILLIAMS
By /s/ Theodore Williams
----------------------------------------
<PAGE> 1
Exhibit (99)
Page 1 of 2
BELL INDUSTRIES, INC.
DIRECTORS' RETIREMENT PLAN
FOR NON-EMPLOYEES
ELIGIBILITY:
Service as a non-employee director for ten continuous years.
Retirement benefits will commence at age 65 or date of retirement,
whichever is later. Years served prior to adoption of the Plan count
for vesting and payment purposes.
PERIOD OF PAYMENTS:
Retirement benefits payable for the lesser of (a) death or (b) number
of years of continued service as a director. If death occurs prior to
expiration of period calculated under clause (b), then a surviving
spouse will receive the retirement benefit for the lesser of her
death, five years or expiration of the period under clause (b).
AMOUNT OF ANNUAL RETIREMENT BENEFIT:
50% of highest annual retainer paid during any of the three years
preceding retirement, increasing 10% per year for each year of
continuous service after the tenth year. Thus after 15 years as a
director, the annual benefit would be 100% of annual retainer. The
annual benefit is payable monthly, in advance. In the event of a
change in control (hereafter defined), a participant may elect to
receive a lump sum payment equal to the discounted present value of
his retirement benefits, accrued through the date of the event
constituting a change in control, calculated on an actuarial basis.
Such lump sum payment is payable regardless of the participant's age.
VESTING PRIOR TO AGE 65:
Should any participant resign from the Board of Directors at the
request of the Board or not be nominated to stand for re-election to
the Board or not be elected to the Board by the shareholders, then
such participant is entitled to commence receiving accrued retirement
benefits as if such participant were age 65 as of the date of his
resignation or the shareholders' meeting, as the case may be.
<PAGE> 2
Exhibit (99)
Page 2 of 2
CHANGE OF CONTROL:
For purposes of this Plan, a Change in Control of the Company shall be
deemed to have occurred if (i) there shall be consummated (x) any
consolidation or merger of the Company, other than a merger of the
Company in which the holders of the Company's Common Stock immediately
prior to the merger have at least seventy-five percent (75%) ownership
of the voting capital stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the
shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company, or (iii) any person (as
such term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall become
the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of thirty percent (30%) or more of the Company's
outstanding Common Stock, or (iv) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
entire Board of Directors shall cease for any reason (except death) to
constitute a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of the period. For
purposes of this section, the occurrence of two or more of the events
constituting a Change in Control which are the result of the same of
related transaction(s) shall be deemed a single Change in Control and
its date shall be the date the first such event occurred. For
example, a merger in which former shareholders of the Company received
less than 75% of the voting capital stock of the surviving corporation
followed by a change in the Company's Board of Directors falling
within clause (iv) above and contemplated by said merger shall be
deemed a single change in control.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 1,880
<SECURITIES> 0
<RECEIVABLES> 68,588
<ALLOWANCES> 916
<INVENTORY> 87,596
<CURRENT-ASSETS> 163,389
<PP&E> 40,670
<DEPRECIATION> 25,046
<TOTAL-ASSETS> 190,357
<CURRENT-LIABILITIES> 54,417
<BONDS> 36,910
<COMMON> 1,620
0
0
<OTHER-SE> 97,410
<TOTAL-LIABILITY-AND-EQUITY> 190,357
<SALES> 127,092
<TOTAL-REVENUES> 127,092
<CGS> 98,638
<TOTAL-COSTS> 98,638
<OTHER-EXPENSES> 22,589
<LOSS-PROVISION> 294
<INTEREST-EXPENSE> 966
<INCOME-PRETAX> 4,899
<INCOME-TAX> 2,058
<INCOME-CONTINUING> 2,841
<DISCONTINUED> 310
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,151
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
